WT/DS464/ARB  
 
8 February 2019 
(19-0743) Page: 1/70 
  Original: English  
 
  
UNITED STATES – ANTI -DUMPING AND COUNTER VAILING MEASURES 
ON LARGE RESIDENTIAL  WASHERS FROM KOREA  
RECOURSE TO ARTICLE 22.6 OF THE DSU BY T HE UNITED STATES  
DECISION BY THE ARBI TRATOR  
 
 
 
 
 WT/DS464/ARB  
 
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  TABLE OF CONTENTS  
 
1   INTRODUCTION  ................................ ................................ ................................ .........  9 
1.1   Initial proceedings  ................................ ................................ ................................ ...... 9 
1.2   Request for arbitration and arbitration proceedings  ................................ .........................  9 
1.3   Mandate of the Arbitrator  ................................ ................................ ..........................  10 
1.4   Order of analysis  ................................ ................................ ................................ ...... 11 
2   PROCEDURAL MATTERS  ................................ ................................ ............................  11 
2.1   Working procedures on Business Confidential Information (BCI)  ................................ ..... 12 
2.2   The United States' request for an open meeting of the Arbitrator with the parties  .............  12 
3   KOREA'S REQUEST PERTAINING TO LRWS ( "AS APPLIED" FINDING S) ....................  12 
3.1   Introduction  ................................ ................................ ................................ .............  12 
3.2   Determination of the counterfactual and appropriate time -frame  ................................ .... 14 
3.2.1    Introduction  ................................ ................................ ................................ ..........  14 
3.2.2    Counterfactual for anti -dumping measures  ................................ ................................  15 
3.2.2.1    Assessment of Korea's proposed counterfactual  ................................ ......................  15 
3.2.2.2    Alternative counterfactual  ................................ ................................ ....................  18 
3.2.3    Counterfactual for countervailing duty measures  ................................ .......................  20 
3.2.3.1    The parties' positions ................................ ................................ ...........................  20 
3.2.3.2    Assessment  ................................ ................................ ................................ ........  21 
3.2.4    The appropriate time -frame  ................................ ................................ ....................  22 
3.3   Proposed models for assessing the level of nullification or impairment .............................  22 
3.3.1    Introduction  ................................ ................................ ................................ ..........  22 
3.3.2    Whether the Arbitrator should conclude that the level of nullifica tion or  
impairment is zero  ................................ ................................ ................................ ...........  23 
3.3.3    Models  ................................ ................................ ................................ .................  24 
3.3.3.1    Korea's proposed model  ................................ ................................ .......................  24 
3.3.3.2    United States' proposed model  ................................ ................................ .............  27 
3.3.3.3    Assessment of the models proposed by the parties  ................................ .................  28 
3.3.3.3.1    Whether LRWs are homogenous goods and characteristics of the  
United States' LRW market  ................................ ................................ ................................  29 
3.3.3.3.2    Formula for calculating the level of nullification or impairment in the perfect 
substitutes model  ................................ ................................ ................................ ............  30 
3.3.3.3.3    Sensitivity of the model calculations to the values of the elasticities  .......................  30 
3.3.3.3.4    Economic models used in previous WTO arbitrations  ................................ .............  30 
3.3.3.3.5    Evidence on the elasticity of substitution  ................................ .............................  31 
3.3.3.4    Arbitrator's conclusion on t he economic model  ................................ ........................  33 
3.3.4    Values of the parameters and data to be used in the model  ................................ ........  33 
3.3.4.1    Introduction  ................................ ................................ ................................ ....... 33 
3.3.4. 2   Demand elasticity  ................................ ................................ ...............................  34 
3.3.4.3    Supply elasticity  ................................ ................................ ................................ . 34 
3.3.4.4    Elasticity of substitution  ................................ ................................ .......................  34 WT/DS464/ARB  
 
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  3.3.4.5    Size of the LRW market  ................................ ................................ .......................  34 
3.3.4.6    Amount of LRW imports  ................................ ................................ .......................  35 
3.4   The Arbitrator's own determination of the level of nullification or impairment  ...................  38 
3.5   Korea's request to adjust the level of suspension annually  ................................ .............  39 
3.5.1    Introduction  ................................ ................................ ................................ ..........  39 
3.5.2    Annual adjustment of the level of nullification or impairment based on  
the inflation rate  ................................ ................................ ................................ ..............  41 
3.6   Conclusion  ................................ ................................ ................................ ...............  43 
4   KOREA'S REQUEST PERTAINING TO NON -LRWS ("AS SUCH" FINDIN GS) .................  43 
4.1   Introduction  ................................ ................................ ................................ .............  43 
4.2   The appropriate counterfactual and time -frame for Korea's request pertaining  
to non -LRWs  ................................ ................................ ................................ ...................  43 
4.2.1    Counterfactual  ................................ ................................ ................................ ....... 43 
4.2.1. 1   The parties' positions ................................ ................................ ...........................  43 
4.2.1.2    Assessment of Korea's proposed counterfactual  ................................ ......................  44 
4.2.1.3    Alternative counterfactual  ................................ ................................ ....................  46 
4.2.2    The appropriate time -frame  ................................ ................................ ....................  48 
4.3   Korea's proposed formula to assess the level of nullification or impairment  ......................  48 
4.3.1    Introduction  ................................ ................................ ................................ ..........  48 
4.3.2    Description of Korea's proposed formula  ................................ ................................ ... 48 
4.3.3    The United States' arguments regarding Korea's proposed formula  ..............................  49 
4.3.4    Arbitrator's assessment of Korea's proposed formula  ................................ ..................  50 
4.4   The Arbitrator's own determination of the level of nullification or impairment  
for non -LRWs  ................................ ................................ ................................ ..................  52 
4.4.1    Introducti on ................................ ................................ ................................ ..........  52 
4.4.2    Guiding considerations for calculating the level of nullification or impairment  
for non -LRWs  ................................ ................................ ................................ ..................  52 
4.4.3    Formula to calculate the level of nullification or impairment  ................................ ........  54 
4.4.3.1    Description  ................................ ................................ ................................ .........  54 
4.4.3.2    Theoretical basis  ................................ ................................ ................................ . 54 
4.4.3.3    Determination of coefficient, c  ................................ ................................ ..............  56 
4.4.3.3.1    Introduction  ................................ ................................ ................................ .... 56 
4.4.3.3.2   Substitution elasticity, σ  ................................ ................................ ....................  56 
4.4.3.3.3    Price elasticity of demand, ε  ................................ ................................ ..............  57 
4.4.3.3.4    Price elasticity of supply, η  ................................ ................................ ................  58 
4.4.3.3.5    Market share of Korea in total sales in the United States, sh  ................................ .. 58 
4.4.3.4    Value of imports  ................................ ................................ ................................ . 59 
4.4.3.4.1    Possible data sources  ................................ ................................ ........................  59 
4.4.3.4.1.1    "Company -specific" data  ................................ ................................ ................  60 
4.4.3.4.1.2    HTS 10 -digit level data  ................................ ................................ ...................  61 
4.4.3.4.2    Procedure to determine the value of imports  ................................ .......................  63 
4.4.3.5    Level and change of the WTO -inconsistent duty, Δt  ................................ .................  64 WT/DS464/ARB  
 
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  4.5   Conclusion  ................................ ................................ ................................ ...............  65 
4.6   Korea's request to adjust the level of suspension annually  ................................ .............  66 
4.6.1    Approach of the Arbitrator  ................................ ................................ ......................  66 
4.6.2    Annual adjustment of the level of nullification or impairment of non -LRWs  
based on the inflation rate  ................................ ................................ ................................  67 
5   OVERAL L AWARD OF THE ARBIT RATOR  ................................ ................................ .... 68 
6   CONCLUDING OBSER VATIONS  ................................ ................................ .................  68 
 
 WT/DS464/ARB  
 
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  LIST OF ANNEXES  
ANNEX  A 
WORKING PROCEDURES O F THE ARBITRATOR  
Contents  Page  
Annex  A-1 Working Procedures of the Arbitrator  4 
Annex  A-2 Additional Workin g Procedures of the Arbitrator Concerning Business 
Confidential Information  9 
ANNEX B  
ARGUMENTS OF THE PAR TIES 
Contents  Page  
Annex  B-1 Integrated Executive Summary of the A rguments of the United States  12 
Annex  B-2 Integrated Executive Summary of the A rguments of Korea  23 
ANNEX C  
CALCULATIONS  OF THE ARBITRATOR  
Contents  Page  
Annex  C-1 Level of Nullification or I mpairment for LRWs : Calculations  34 
Annex  C-2 Level of Nullific ation or Impairment for Non -LRWs : Derivation of Formula  46 
 
ANNEX  D 
DECISION OF THE ARBI TRATOR CONCERNING A PARTIALLY OPEN HEARI NG 
Contents  Page 
Annex  D-1 Decision of the Arbitrator on the United States' Request for an Open Hearing  60 
 
 WT/DS464/ARB  
 
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  CASES CITED IN THIS REPORT  
Short Title  Full Case Title and Citation  
Canada – Aircraft Credits  
and Guarantees (Article  
22.6 – Canada)  Decision by the Arbitrator, Canada – Export Credits and Loan Guarantees for  
Regional Aircraft – Recourse to Arbitration by Canada under Article 22.6 of the  
DSU and Article 4.11 of the SCM Agreement , WT/DS222/ARB, 17 February  
2003, DSR 2003:III, p . 1187  
EC – Bananas III (Article 
21.5 – US) Panel Report, European Communities – Regime for the Importation, Sale and 
Distribution of Bananas – Recourse to Article 21.5 of the DSU by the United 
States , WT/DS27/RW/USA and Corr.1, adopted 22 December 2008, upheld by 
Appellate Body Report WT/DS27/AB/RW/USA, DSR 2008:XIX, p. 7761  
EC – Bananas III (US)  
(Article 22.6 – EC) Decision by the Arbitrator , European Communities – Regime for the  
Importation, Sale and Distribution of Bananas – Recourse to Arbitration by  the 
European Communities under Article 22.6 of the DSU , WT/DS27/ARB, 9 April  
1999, DSR 1999:II, p. 725  
EC – Bananas III (Ecuador) 
(Article 22.6 – EC) Decision by the Arbitrator, European Communities – Regime for the Importation, 
Sale and Distribution of Bananas – Recourse to Arbitration by the European 
Communities under Article 22.6 of the DSU , WT/DS27/ARB/ECU, 24 March 2000, 
DSR 2000:V, p. 2237  
EC – Hormones (US)  
(Article 22.6 – EC) Decision by the Arbitrators, European Communities – Measures Concerning  
Meat and Meat Products (Hormones), Original Complaint by the United States – 
Recourse to Arbitration by the European Communities under Article 22.6 of the  
DSU, WT/DS26/ARB, 12 July 1999, DSR 1999:III, p. 1105  
Japan – DRAMs (Korea)  Appellate Body Report, Japan – Countervailing Duties on Dynamic Random  
Access Memories from Korea , WT/DS336/AB/R and Corr.1, adopted 17  
December 2007, DSR 2007:VII, p. 2703  
US – 1916 Act (EC) (Article  
22.6 – US) Decision by the Arbitrators, United States – Anti-Dumping Act of 1 916, Original  
Complaint by the European Communities – Recourse to Arbitration by the  
United States under Article 22.6 of the DSU , WT/DS136/ARB, 24 February  
2004, DSR 2004:IX, p. 4269  
US – Section 110(5) 
Copyright Act (Article 25)  Award of the Arbitrator, United States – Section 110(5) of the US Copyright Act 
– Recourse to Arbitration under Article 25 of the DSU , WT/DS160/ARB25/1, 9 
November 2001, DSR 2001:II, p. 667  
US – COOL (Article 22.6 – 
United States) Decisions by the Arbitrator, United States – Certain Country of Origin Labelling  
(COOL) Requirements – Recourse to Article 22.6 of the DSU the United States , 
WT/DS384/ARB and Add.1 / WT/DS386/ARB and Add.1, circulated to WTO  
Members 7 December 2015  
US – Gambling (Article 22.6  
– US) Decision by the A rbitrator, United States – Measures Affecting the Cross -Border  
Supply of Gambling and Betting Services – Recourse to Arbitration by the  
United States under Article 22.6 of the DSU , WT/DS285/ARB, 21 December  
2007, DSR 2007:X, p. 4163  
US – Offset Act (Byrd  
Amendment) ( EC) 
(Article 22.6 – US) Decision by the Arbitrator, United States – Continued Dumping and Subsidy 
Offset Act of 2000, Original Complaint by the European Communities – Recourse 
to Arbitration by the United States under Article 22.6 of the DSU , 
WT/DS217/ARB/EEC, 31 August 2004, DSR 2004:IX, p. 4591  
US – Offset Act (Byrd 
Amendment) (Brazil) 
(Article 22.6 – US) Decision by the Arbitrator, United States – Continued Dumping and Subsidy 
Offset Act of 2000, Original Complaint by Brazil – Recourse to Arbitration by the 
United States under Article 22.6 of the DSU , WT/DS217/ARB/BRA, 31 August 
2004, DSR 2004:IX, p. 4341  
US – Tuna II (Mexico)  
(Article 2 1.5 – US) Appellate Body Report, United States – Measures Concerning the Importation, 
Marketing and Sale  of Tuna and Tuna Products – Recourse to Article 21.5 of the 
DSU by Mexico , WT/DS381/AB/RW and Add.1, adopted 3 December 2015, DSR 
2015:X, p. 5133  
US – Tuna II (Mexico) 
(Article 22.6 – US) Decision by the Arbitrator, United States – Measures Concerning th e Importation, 
Marketing and Sale of Tuna and Tuna Products – Recourse to Article 22.6 of the 
DSU by the United States, WT/DS381/ARB, 25 April 2017  
US – Upland Cotton (Article  
22.6 – US I) Decision by the Arbitrator, United States – Subsidies on Upland Co tton – 
Recourse to Arbitration by the United States under Article 22.6 of the DSU and  
Article 4.11 of the SCM Agreement , WT/DS267/ARB/1, 31 August 2009, DSR  
2009:IX, p. 3871  
US – Upland Cotton (Article  
22.6 – US II)  Decision by the Arbitrator, United States – Subsidies on Upland Cotton – 
Recourse to Arbitration by the United States under Article 22.6 of the DSU and  
Article 7.10 of the SCM Agreement , WT/DS267/ARB/2 and Corr.1, 31 August  
2009, DSR 2009:IX, p. 4083  
 
 WT/DS464/ARB  
 
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  MAIN  EXHIBITS REFERRED T O IN THIS RE PORT  
Panel Exhibit  Title 
KOR-5 Notice of Final Determination of Sales at Less Than Fair Value: Large Residential 
Washers from the Republic of Korea , 77 Fed. Reg. 75988 (Dec. 26, 2012)  
KOR-7 AHAM Data Summary (2011 -2017)  
KOR-8 USITC Dataweb Annual Customs Value Query Screenshot  
KOR-9 Notice of Preliminary Determination of Sales at Less Than Fair Value and 
Postponement of Final Determination: Large Residential Washers From the 
Republic of Korea , 77 Fed. Reg. 46391 (Aug. 3, 2012)  
KOR-15 R. Hallren and D. Riker, An Introduction to Partial Equilibrium Modeling of Trade 
Policy , Economic Working Paper Series (Working Paper 2017 -07-B), U.S. 
International Trade Commission, July 2017  
KOR-17 C. Bown and M. Ruta (2008), "The Economics of Permissible WTO Ret aliation", 
in The Law, Economics and Politics of Retaliation in WTO Dispute Settlement 
(eds. by C. Bown & J. Pauwelyn; 2010)  
KOR-25 Large Residential Washers , Investigation No. TA -201-076 (Safeguard), USITC 
Publication 4745 (December 2017)  
KOR-29 India – Measures Concerning the Importation of Certain Agricultural Products: 
Recourse to Article 22.6 of the DSU by India  (DS430) – Methodology Paper of 
the United States of America  
KOR-52 Impact of Armington Elasticities Based on Exhibit USA -19 
KOR-69 Feenstr a, Robert C., et al. "In Search of the Armington Elasticity", The Review 
of Economics and Statistics, 100(1), March 2018  
KOR-70 Calculation of Exporters Subject to W -T Comparison Method  
USA-2 Large Residential Washers from Korea and Mexico Inv. Nos. TA-701-488 & 731 -
TA-1199-1200 (1st Review), Samsung 's Substantive Response to ITC Notice of 
Institution (February 1, 2018)  
USA-4 LG Electronics' Notice of Intent to Participate and Substantive Response to 
Notice of Initiation of Sunset Review – Large Resi dential Washe rs from Korea 
(February 5, 2018)  
USA-18 Linda Calvin and Barry Krisoff, "Technical Barriers to Trade: A Case Study of 
Phytosanitary Barriers and U.S. -Japanese Apple Trade ", Journal of Agricultural 
and Resource Economics, 23(2):351 -366 (1998)  
USA-21 (BCI)  U.S. Customs and Border Protection Data on the Value of Imports from Korea 
that Were Subject to the U.S. Antidumping and Countervailing Duty Measures 
on LRWs from Korea for Each Year from 2011 to 2017, as Requested by the 
Arbitrator  
USA-24 (BCI)  Memorandum to the File from David Goldberger and Rebecca Trainor re: 
Antidumping Duty Investigation of Large Residential Washers (Washing 
Machines) from Korea, Preliminary Determination Margin Calculation for LG 
Electronics Inc. and LG Electronics USA, Inc. (collectively, "LG")  (July 27, 2012)  
USA-28 (BCI)  Memorandum to the File from David Goldberger and Rebecca Trainor re: 
Antidumping Duty Investigation of Large Residential Washers from Korea, Final 
Determination Margin Calculation for LG Electro nics Inc. (LGE) and LG 
Electronics USA, Inc. (LGEUS; collectively, "LG")  (December 18, 2012)  
USA-29 (BCI)  Memorandum to the File from Henry Almond and Kate Johnson re: Antidumping 
Duty Investigation of Large Residential Washers (Washing Machines) from 
Korea, Preliminary Determination Margin Calculation for Samsung Electronics 
Co., Ltd. and Samsung Electronics America, Inc. (collectively, "Samsung")  (July 
27, 2012)  
USA-33 (BCI)  Memorandum to the File from Henry Almond and Kate Johnson re: Antidumping 
Duty Investigation of Large Residential Washers (Washing Machines) from 
Korea, Samsung Final Determination Calculation Memorandum  (December 18, 
2012)  
USA-35 Memorandum to Paul Piquado from Gary Tavernman re: Issues and Decision 
Memorandum for the Antidumping D uty Investigation of Large Residential 
Washers from the Republic of Korea  (December 18, 2012)  
 
 WT/DS464/ARB  
 
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  ABBREVIATIONS USED I N THIS REPORT  
Abbreviation  Description  
AHAM  Association of Home Appliance Manufacturers  
Anti-Dumping Agreement  Agreement on Implementation of Article VI of the General Agreement on Tariffs 
and Trade 1994  
Appellate Body Report  Appellate Body Report, United States – Anti-Dumping and Countervailing 
Measures on Large Residential Washers from Korea , WT/DS464/AB/R  
BCI Business Conf idential Information  
BEA Bureau of Economic Analysis  
CIF Cost, Insurance , and Freight  
CGE Computable general equilibrium  
DSB Dispute Settlement Body  
DPM Differential Pricing Methodology  
DSU Understanding on Rules and Procedures Governing the Settlement of Disputes  
GATT 1994  General Agreement on Tariffs and Trade 1994  
GTAP  Global Trade Analysis Project  
HS Harmonized System  
HTS Harmonized Tariff Schedule  of the United States  
LG LG Electronics Inc.  
LRWs  Large residential washers  
non-LRWs  All products other than LRWs  
Panel Report  Panel Report, United States – Anti-Dumping and Countervailing Measures on 
Large Residential Washers from Korea , WT/DS464/R  
RPT reasonable period of time  
Samsung  Samsung Electronics Co., Ltd.  
SCM Agreement  Agreement on Subsidies and Countervailing Measures  
Section 129 proceeding  Proceeding pursuant to Section 129(b) of the Uruguay Round Agreements Act, 
Public Law No. 103 -465, 108 Stat. 4837, codified as United States Code, Title 
19, Section 3538(b)  
T-T transaction -to-transaction  
USCBP  United States Customs Border Protection  
USDOC  United States Department of Commerce  
USITC  United States International Trade Commission  
Washers  anti-dumping 
investigation  USDOC [A -580-868] Antidumping Duty Investigation of Large Residential 
Washers from the Republic of Korea  
Washers  countervailing 
duty investigation  USDOC [C -580-869] Countervailing Duty Investigation of Large Residential 
Washers from the Republic of Korea  
WTO World Trade Organization  
W-T weighted avera ge-to-transaction  
W-W weighted average -to-weighted average  
WITS  World Integrated Trade Solution  
 WT/DS464/ARB  
 
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  1  INTRODUCTION  
1.1  Initial proceedings  
The present arbitration proceedings arise in the dispute initiated by Korea concerning certain 
methodologies used by the United States in anti -dumping investigations and administrative reviews, 
as well as certain  anti-dumping and countervailing measures imposed by the United States on 
imports of  large residential washers from Korea.  
On 26 September 2016, the Dispute Settleme nt Body (DSB) of the World Trade Organization 
(WTO) adopted the Appellate Body Report in this dispute together with the Report of the original 
Panel as modified by the Appellate Body.1 The Panel and the Appellate Body found the measures at 
issue to be inco nsistent with various provisions of the Agreement on Implementation of Article VI of 
the General Agreement on Tariffs and Trade 1994 (Anti -Dumping Agreement), the Agreement on 
Subsidies and Countervailing Measures (SCM Agreement), and the General Agreement  on Tariffs 
and Trade 1994 (GATT 1994) .2 
On 13 April 2017, following referral to arbitration under Article 21.3(c) of the Understanding 
on Rules and Procedures Governing the Settlement of Disputes (DSU), an arbitrator determined that 
the reasonable period of time  (RPT)  for the United States to implement the DSB's recommendations 
and rulings would expire on  26 December 2017.3 
Considering that the United States had failed to comply with the recommendations and rulings 
of the DSB within the RPT,  Korea requeste d authorization from the DSB , on 11 January 2018 , to 
suspend concessions or other obligations in the goods sector under the GATT 1994 pursuant to 
Article 22.2 of the DSU. In its request, Korea sought to suspend "concessions and related obligations 
at an annual amount of USD  711 million with respect to the United States' non -compliance with ' as 
applied ' recommendations and rulings on the washing machines  from Korea ." Korea further  
requested th at this  amount should be "adjusted by applying the annual gr owth rate of the washing 
machine s market  of the United States ."4  
In addition, Korea requested  authorization "to suspend concessions and related obligations at 
an annual level based on a formula  commensurate with the trade effects to be caused to  exports 
from Korea other than washing machines  by the United States' non -compliance with  'as such ' 
recommendations and rulings. " According to Korea, this request "is to reflect the possible nullification 
or impairment Korea will suffer if the 'as such' violation co ntinues to exist and apply to other exports 
from Korea in the future."5 
1.2  Request for arbitration and arbitration proceedings  
On 19 January 2018 , the United States communicated to the DSB its objection to Korea 's 
proposed level of suspension of co ncessions or other obligations.  At its meeting of 22 January 2018 , 
the DSB took note that the matter raised by the United States had been referred to arbitration, as 
required by Article 22.6 of the DSU.6 
The arbitration was undertaken by the original panelists, name ly: 
Chairperson:  Ms Claudia Orozco   
Members:   Mr Mazhar Bangash  
   Mr Hanspeter Tschaeni  
 
An organizational meeting was held on 14 February 2018  to discuss procedural aspect s of the 
arbitration proceeding . After consulting with the parties, the Arbitrator adopted its Working 
                                                
1 Appellate Body Report a nd Panel Report , Action by the Dispute Settlement Body , WT/DS464/12.  
2 See Panel Report , US – Washing Machines , para. 8.1; and Appellate Body Report,  US – Washing 
Machines , paras. 6.1 -6.16. 
3 Award of the Arbitrator, US – Washing Machines (Article 21.3(c)) , para. 4.1.  
4 Recourse to Article 22.2 of the DSU by Korea, WT/DS464/18.  
5 Recourse to Article 22.2 of the DSU by Korea, WT/DS464/18.  
6 Recourse to Article 22.6 of the DSU by the United S tates, WT/DS464/19.  WT/DS464/ARB  
 
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  Procedures  and a timetable for the proceedings  on 21 February 2018 .7 The United States requested 
that working procedures be adopted for the protection of Business Confidential Informat ion (BCI) , 
and Korea agreed to the inclusion of BCI working procedures. The Arbitrator adopted  Additional 
Working Procedures concerning BCI on 23 February 2018.8 The United States also requested that 
the Arbitrator's meeting with the parties be opened to o ther Members and the public.9 
In accordance with the timetable and Working Procedures adopted by the Arbitrator, Korea 
submitted a communication explaining its methodology for calculating the proposed level of 
suspension (Korea's methodology paper)  on 23 F ebruary 2018 . The United States filed its written 
submission on 23 March 2018. Korea filed its written submission on 13 April 2018. The Arbitrator 
sent questions to the parties on 27 April 2018 , and the parties provided written responses  to these 
questions  on 14 May 2018. The Arbitrator sent additional questions to the parties on 18 May 2018 , 
to which the parties provided written respon ses on 25 May 2018 . 
The Arbitrator held its substantive meeting with the parties on 5 and 6 June 2018. Following 
a request by the parties  to facilitate preparation for the meeting , the Arbitrator  sent questions to 
the parties  on 30 May 2018, to which the parties responded orally at the meeting . On 8 June 2018, 
the Arbitrator sent additional questions to the parties. The partie s provided written responses to 
these questions on 21 J une 2018 and submitted comments on each other's responses on 28 June 
2018.  The Arbitrator sent further questions to the parties on 20 August 2018 and requested the 
parties to provide their responses on  27 August 2018 and to comment on each other's responses by 
29 August 2018. Following a request by Korea, the Arbitrator granted an extension time to the 
parties, and the parties  submit ted their responses on 29 August 2018 and provide d comments on 
each oth er's responses on 3 September 2018.  
1.3  Mandate of the Arbitrator  
The United States objects to Korea's proposed  level of suspension of concessions and related 
obligations , contending that the level  is not equivalent to the nullification or impairment caused by  
the inconsistent measures.10  
We begin by recalling that , pursuant to Article 22.4 of the DSU , "[t]he level of the suspension 
of concessions or other obligations authorized by the DSB shall be equivalent  to the level of the 
nullification or impairment" (emphasis added). The mandate of the Arbitrator, as set out in 
Article  22.7 of the DSU, is as follows:  
The arbitrator acting pursuant to paragraph 6 shall not examine the nature of the 
concessions or other obligations to be suspended but shall determine whether the level 
of such suspension is equivalent to the level of nullification or impairment . (emphasis 
added)  
The meaning of the word "equivalen ce" "connotes a correspondence, identity or bala nce 
between t wo related levels , i.e. between the level of the concessions to be suspended, on the one 
hand, and the level of the nullification or impairment, on the other ."11  
Thus, our task in these proceedings is to examine whether the level of suspension proposed 
by Korea is equivalent to the level of nullification or impairment sustained by Korea "as a result of 
the failure of the responding party to bring its WTO -inconsistent measures into compliance".12 The 
burden of proving that the requirements of the DSU have not  been met rests on the party challenging 
the proposed level of suspension.13 We also recall  that "it is for each party to bring forward the 
                                                
7 See the Arbitrator's Working Procedures in Annex A -1; a clerical error in the Working Procedures was 
corrected on 13 Marc h 2018.  
8 See Procedures of the Arbitrator C oncerning Business Confidential Information , Annex A -2. 
9 See below section 2.2 and Decision of the Arbitrator on the United States' Request for an Open 
Hearing, Annex D -1. 
10 Recourse to Article 22.6 of the DSU b y the United States, WT/DS464/19. This Arbitration does not 
involve any claim under Article 22.3 of the DSU.  
11 Decision by the Arbitrator, EC – Bananas III (US) (Article 22.6 – EC), para. 4.1 . 
12 Decision by the Arbitrator, US – 1916 Act (EC) (Article 22.6  – US), para. 4.5.  
13 See, for instance, Decisions by the Arbitrators, EC – Hormones (US) (Article 22.6 – EC), para.  9; US – 
1916 Act (EC) (Article 22.6 – US), para. 3.2; US – Gambling (Article  22.6 – US), para.  2.22;  and US – COOL 
(Article 22.6 – United St ates), para. 4.7.  WT/DS464/ARB  
 
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  elements to sustain the factual assertions it makes, and … each party has a duty to collaborate in 
the establishments  of facts".14 
There is, however, "a difference between our task here and the task given to a panel".15 
Should we f ind that Korea's determination  of the level of suspension  is not consistent with the DSU , 
our mandate  would  require us to go further and to make  our own determination  of the level of 
suspension we consider to be equivalent to the impairment suffered. We concur with a previous 
arbitrator that "[t]his is the essential task and responsibility conferred on the arbitrators in order to 
settle the disput e."16  
In determining the level of nullification or impairment, previous arbitrators developed their 
own appropriate methodologies17, based  either  on elements of methodologies proposed by the 
parties18, or on an altogether different approach.19 Any determinati on of nullification or impairment, 
because it is based on assumptions, is necessarily a "reasoned estimate" relying on "credible, factual, 
and verifiable information".20  
Finally, it should be kept in mind that , pursuant to Article 22.8 of the DSU , the suspension of 
concessions or other obligations shall be "temporary" pending full implementation of the DSB 's 
recommendations and rulings , or a mutually agreed solution. On this basis, previous arbitrators 
considered that the suspension of concessions or other obligations is to "induce compliance" .21 Other 
arbitrators also observed that the concept of equivalence in Article  22.4 of the DSU means that 
obligations cannot be suspended in a "punitive " manner.22 
1.4  Order of analysis  
This Decision is struct ured as  follows. We address procedural matters in Section 2 . We then 
turn to Korea's request  for authorization to suspend concessions and other obligations. Korea divided 
its request  between , on the one hand,  the "as applied" measures , which relate to large resid ential 
washers (LRWs) from Korea, and, on the other hand, the possible future application of the "as such" 
measures on any product  other  than large residential  washers  (non-LRWs) .23 Mirroring Korea's 
request , we shall address these two  parts of the  request in turn, starting with LRWs in Section 3, 
followed by non -LRWs in Section 4. Our overall conclusion and decisions on the level of suspension 
of con cessions or other obligations are  contained in Section 5. Finally, we provide some concluding 
observ ations  in Section 6 . 
2  PROCEDURAL MATTERS  
In this section, the Arbitrator addresses two procedural matters arising in these proceedings.  
First, we briefly explain our treatment of BCI. Second, we address the United States' request that 
the substantive meeting be conducted as an open hearing.  
                                                
14 Decision by the Arbitrator, US – Gambling (Article 22.6 – US), para. 2.24. See also Decisions by the 
Arbitrators, US – 1916 Act  (EC) (Article 22.6 – US), para. 3.2; and US – COOL (Article 22.6 – United States) , 
para. 4.9.  
15 Decision by the Arbitrator,  EC – Hormones (US) (Article 22.6 – EC), para. 12.  
16 Decision by the Arbitrator,  EC – Hormones (US) (Article 22.6 – EC), para. 12.  
17 See Decision by the Arbitrator,  US – Offset Act (Byrd Amendment) (EC) (Article  22.6 – US), 
para. 3.115.  
18 See Decision by the Arbitrator,  US – Gambling (Article  22.6 – US), para. 3.174.  
19 Decision by the Arbitrator,  US – Offset Act (Byrd Amendment) (EC) (Article  22.6 – US), paras. 3.69- 
3.79. 
20 Decision by the Arbitrator , US – 1916 Act (EC ) (Article  22.6 – US), para. 5.54. See also Decision by 
the Arbitrator,  EC – Hormones (US) (Article 22.6 – EC), para. 41. 
21 Decisions by the Arbitrators , EC – Hormones (US) (Article 22.6 – EC), para. 6.3; and US – 1916 Act 
(EC) (Article 22.6 – US), para. 5.7.  
22 Decisions by the Arbitrators, US – 1916 Act ( EC) (Article 22.6 – US), para . 5.8; and US – Upland 
Cotton (Article 22.6 – US I), para. 4.109, referring to Decision by the Arbitrator, EC – Bananas III (Article 22.6 
– EC), para. 6.3.  
23 Recourse to Article 22. 2 of the DSU by Korea, WT/DS464/18.  WT/DS464/ARB  
 
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  2.1  Working procedures on Business Confidential Information (BCI)  
As indicated above, the United States requested that working procedures be adopted for the 
protection of BCI, and Korea agreed to the inclusion of BCI wo rking procedures. The Arbitrator 
adopted Additional Working Procedures Concerning BCI (Additional Working Procedures)  on 
23 February 2018.24 
The Additional Working Procedures (i) define BCI for th e purposes of these proceedings ; (ii) 
provide that each party  shall clearly indicate the pre sence of BCI in its submissions ; and ( iii) limit 
access to, and permissible use of, BCI submitted during  the proceedings.25 
Paragraph 8  of the Additional Working Procedures provi des that "[t]he Arbitrator will not 
disclose BCI , in its d ecision or in any other way, to persons not authorized under these procedures 
to have access to BCI".  However, the Arbitrator may "make statements of conclusi on drawn from 
such information". T he parties shall be given  an opportunity to ensure tha t all BCI has been redacted 
from the Decision prior to its circulation to the WTO Membership . This paragraph forms the "legal 
basis"26 on which the Arbitrator has redacted statements of BCI from the public version of this 
Decision. Moreover, in order to prevent indirect disclosure of information identified as BCI by the 
parties, the Arbitrator  does not disclose, in the public version of the Decision, certain figures in  its 
calculation s. 
Accordingly, the text of the version circulated to Members is identic al to the text of the 
confidential version issued to the parties, with the exception of passages that are redacted to protect 
BCI. Such passages have been  replaced by "[[ *** ]]". In drafting and redacting this Decision, the 
Arbitrator has striven  to "ensu re that the public version of [our Decision] circulated to all Members  
of the WTO is understandable".27 
2.2  The United States'  request for an open meeting of the Arbitrator with the parties  
At the organizational meeting held on 14 February 2018, the United Stat es requested that 
paragraph 10 of the draft Working Procedures of the Arbitrator be modified to accommodate 
observation by other WTO Members and the public of the Arbitrator's meeting with the parties. In 
written comments submitted on 15 February 2018, the  United States reiterated its request to open 
the meeting and Korea stated its opposition. On 16 February 2018, each party commented on the 
comments submitted by the other party. To seek further clarification on the parties' positions, the 
Arbitrator posed  several questions on 8 March 2018, to which the parties responded on 13 March 
2018. The parties were also invited to comment on t he responses of the other party.  The United 
States submitted written comments on 15 March 2018, while Korea declined to do so.28 On 19  March 
2018, the Arbitrator asked Korea an additional question that Korea answered on 21  March 2018.  
On 5 April 2018 , the Arbitrator communicated  to the parties  its decision declining the United 
States' request  and confirm ed that the Arbitrat or's me eting with the parties  would be conducted in 
closed session.  The full decision of the Arbitrator, including the reasons, is contained in Annex D-1. 
3  KOREA'S REQUEST PERT AINING TO LRW S ("AS APPLIED" FINDIN GS) 
3.1  Introduction  
Our task under Article 22.7 of the D SU is to determine whether the level of suspension 
requested by Korea is equivalent to the level of nullification or impairment caused by the United 
States' continued non -compliance with the "as applied" recommendations and rulings concerning  
LRWs from Kor ea. To do so, we shall begin by determin ing an appropriate counterfactual , with regard 
to the anti -dumping and countervailing measures29 that were the subject of the "as applied" findings , 
                                                
24 See Procedures of the Arbitrator C oncerning Business Confidential Information , Annex A -2. 
25 Procedures  of the Arbitrator  Concerning Business Confidential  Information, Annex A -2, paras. 1-6. 
26 Appellate Body Report, US – Tuna II (Mexico) (Article 21.5 – Mexico) , para. 5.4. 
27 Appellate Body Report, Japan – DRAMS (Korea) , para. 279.  
28 Korea's communication to the Arbitrator (15 March 2018).  
29 The original dispute "concern[ed] the definitive  anti-dumping  and countervailing duties applied by the 
United States as a result of anti -dumping and countervailing duty investigations conducted by the USDOC 
concerning imports of LRWs from Korea." Korea challenged the following measures: the issues and decision WT/DS464/ARB  
 
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  and also the time-frame , which form the  basis of a calculation of nullification or impairment . We 
shall then calculate this level of  nullification or impairment , which involves selecting  an appropriate 
economic model and related data inputs . 
Before turning to Korea's propos ed level of suspension , we wi ll address a request by the United 
States . Specifically, t he United States requests the Arbitrator to  make separate finding s on the level 
of nullification or impairment resulting from the anti -dumping and countervailing duty measures.  
For the United States, doing so "would inform and provide clarity to the parties in the case the 
United States achieves partial compliance prior to achieving full compliance, and possibly could result 
in the avoidance of some additional dispute settlement proceedings" .30 Korea ob jects, since there is 
no reason, in its view, to separate the amounts, as "[t]he impact of the anti -dumping and 
countervailing duty measures is cumulative".31 Further, Korea asserts that granting the United 
States' request "would be inconsistent with the ob jective of the Article 22.6 Arbitration, which is to 
induce the United States to bring its measures into compliance" .32  
Having considered the parties' views, we have decide d to separate the amounts of suspension 
for the anti -dumping and countervailing dut y measures  for the following reasons.  
A single awarded amount  – especially when Korea itself recognizes that the United States would 
undertake separate processes to reform the inconsistent anti -dumping and countervailing duty 
measures33 – would risk a result  contrary to the DSU. Article 22.8 of the DSU requires suspension 
to be "temporary", limiting application "until such time as the measure found to be inconsistent with 
a covered agreement has been removed, or the Member … provides a solution to the nullifi cation or 
impairment of benefits". Separating the awarded amount does not, as Korea implies, mean that the 
United States has achieved "partial compliance".34 We make no such judgment – our mandate is to 
determine "equivalence". In this regard, we must ensur e that the level of suspension is equivalent 
to the level of nullification or impairment without future knowledge of when the United States will 
reform its measures. Korea is, and will remain, entitled "to suspend concessions in the amount of 
nullification  of impairment caused by the United States' non -compliance as it existed as of the end 
of the RPT", unless and until the United States  complies with its WTO obligations .35 Should the United 
States bring one or more of its measures into conformity, Korea wou ld be entitled to continue to 
suspend concessions to the extent the remaining non -compliant measure  nullifies and impairs 
benefits accruing to Korea.  We also observe that Korea challenged the anti -dumping determinations 
and orders as well as the countervailing duty determinations and orders as separate measures.36 An 
amount divided in two parts would maintain equivalence37, provide guidance to the parties on the 
authority to suspend and the obligation to comply, and may limit the need for future rec ourse to 
dispute settlement proceedings.38 
                                                
memor anda for the anti -dumping and countervailing duty investigations; the final anti -dumping and 
countervailing duty determinations on LRWs; the anti -dumping and countervailing duty orders on LRWs; any 
other determination in the LRW anti -dumping and countervai ling duty proceedings; and, the use of "zeroing" in 
the W -T comparison methodology as well as the Nails II  methodology and DPM to determine the applicability of 
Article 2.4.2 of the  Anti-Dumping Agreement . See Panel Report, US – Washing Machines , para s. 2.1 and 2.4. 
30 United States' comments on Korea's response to Arbitrator question No. 53, para. 7. 
31 Korea's response to Arbitrator question No. 74(a), para. 60.  
32 Korea's response to Arbitrator question No. 74(a), para. 60.  
33 Korea's response to Arbitrator question No. 54, para. 10.  
34 Korea's response to Arbitrator question No. 74 (a), para. 60. 
35 Korea's response to Arbitrator question No. 74 (b), para. 62. See also Article 22.8 of the DSU.  
36 See Request for  the Establishment of a Panel by  the Republic of Korea, WT/DS464/4.  
37 There is no mechanism in the DSU to adjust the level of suspension after the award has been made. 
Article 22.7 of the DSU requires the parties "to accept the arbitrator's decision as final" and precludes "a 
second arbi tration ". 
38 We further note that, at the time of these Arbitration proceedings, the USDOC issu ed a final 
determination under S ection 129 of the Uruguay Round Agreements Act  with respect to the countervailing duty 
measures at issue in the underlying dispute . See United States' response to Arbitrator question No. 53, 
paras.  14-18; and Korea's response to Arbitrator question No. 53, paras. 1 -3. Should that determination be 
examined in the context of an Article 21.5 proceeding and be found a "measure taken to c omply", Korea's right 
to suspend with respect to the countervailing duty measures would lapse. Therefore, we consider separating 
the amounts of suspension would resolve potential ambiguities on the level of suspension, following an 
Article  21.5 determinati on, and diminish the need for future proceedings.  WT/DS464/ARB  
 
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Therefore, we will separate the amounts of suspension authorized for the anti -dumping and 
countervailing duty measures in the award to Korea. Nonetheless, we emphasize that the obligation 
remains for the United Sta tes to come fully into compliance with all the recommendations and rulings  
adopted by the DSB.  
3.2  Determination of the counterfactual and appropriate time-frame  
3.2.1   Introduction  
A counterfactual "refers to a hypothetical scenario that describes what would have h appened 
in terms of trade flows had the responding party implemented the DSB recommendations and 
rulings" .39 This hypothetical is compared with the actual situation, as of the end of the  RPT – where 
the Member has yet to come into compliance – in order to q uantify the trade effect40 caused by that 
Member's failure to comply.41 Not all Article 22.6 arbitrations have applied a counterfactual42, but, 
when one has been proposed, the parties have generally agreed on what it should be.43  
In this Arbitration,  both Korea and the United States request to use a counterfactual as the 
basis for a calculation of the level of nullification or impairment  for LRWs .44 However, the parties 
disagree on what that counterfactual should be.  
At this juncture, we recall that prior dispu te settlement practice establishes that it is for the 
responding party  – the United States – to determine how to implement the recommendations and 
rulings  adopted by the DSB in order to come into compliance.45 A counterfactual, by contrast, reflects 
a hypothetical compliance scenario: the arbitrator neither presumes which exact compliance scenario 
the responding party would take nor speculates which is the "most likely".46  
In assessing a counterfactual, the arb itrator in US – Gambling  (Article 22.6 – US) explained 
that it should "reflect at least a plausible or 'reasonable' compliance scenario".47 That arbitrator 
elaborated that the considerations of plausibility and reasonableness are connected to the nature 
and scope of benefits that are nullified or impaired by the measure at issue:  
[T]o the extent that the estimation of the level of nullification or impairment requires 
certain assumptions to be made as to what benefits would have accrued, in a situation 
where compliance would have taken place, such assumptions should be reasonable, 
taking into account the circumstances of the dispute, in order for the proposed level of 
suspension to accurately reflect the benefits accruing to the complaining party that have 
actually been nullified or impaired.48 
                                                
39 Decision by the Arbitrator, US – Tuna II (Mexico) (Article 22.6 – US), para. 4.4.  
40 Generally, arbitrations carried out under Article 22.6 have relied on the "trade effect" of the 
inconsistent measure to assess the resulting level of nullification or impairment. However, in US – 1916 Act 
(EC), the arbitrator looked to the measures' "economic effect", since no trade had occurred. See Decision by 
the Arbitrator, US – 1916 Act  (EC) (Article 22.6 –US), paras. 5.58-5.63. 
41 For example, in US – Tuna II  (Mexico) , the Arbitrator assessed the level of nullification or impairment 
as "the difference between the value of trade (if any) in Mexican tuna products that occurred despite the WTO -
inconsistent US measure … and  the value of trade that would have occurred … had the United States 
complied". Decision by the Arbitrator, US – Tuna II  (Mexico)  (Article 22.6 – US), para. 4. 3. 
42 Counterfactuals have been used as a tool to determine the level of nullification or impairme nt in a 
number of 22.6 arbitrations to date. See , for example,  Decisions by the Arbitrators, EC – Bananas III (US) 
(Article 22.6 – EC), para. 7.1; EC – Hormones (US) (Article 22.6 – EC), para. 38; Canada – Aircraft Credits and 
Guarantees (Article 22.6 – Canada) , paras. 3.21-3.22; US – Offset Act (Byrd Amendment) (EC) (Article 22.6 – 
US), para.  3.80; US – Gambling (Article 22.6 – US), para. 3.61; US – Upland Cotton (Article 22.6 – US I), 
para. 4.114; US – Upland Cotton (Article 22.6 – US II), paras. 4.231 -4.233; US – COOL (Article 22.6 – United 
States), para.  6.32; and US – Tuna II (Mexico) (Article 22.6 – US), para. 4.9.  
43 In US – Gambling , the parties did not agree on the counterfactual to be used. The arbitrator 
examined which of the count erfactuals proposed by the parties, if either, was appropriate. Decision by the 
Arbitrator, US – Gambling (Article 22.6 – US), paras. 3.16 -3.19. 
44 See Korea's methodology paper, para. 4; United States' written submission, para. 23.  
45 Decision by the Arbitrator, US – Tuna II  (Mexico)  (Article 22.6  - US), para. 4.4.  
46 Decision by the Arbitrator, US – Gambling (Article 22.6 – US), para. 3.26.  
47 Decision by the Arbitrator, US – Gambling (Article 22.6 – US), para. 3.27 . See also Decision by  the 
Arbitrator, US – Tuna II  (Mexico)  (Article 22.6 – US), para. 4.5.  
48 Decision by the Arbitrator, US – Gambling (Article 22.6 – US), para. 3.30.  WT/DS464/ARB  
 
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This approach, as the arbitrator in US – Gambling described, was followed in other 
arbitrations.49 In this Arbitration, both parties acknowledge that the level of nullification or 
impairment is to be measured in reference to "benefits".50 Accordingly, a counterfactual that results 
in suspension in excess of the benefits  that are nullified or impaired by the WTO -inconsistent 
measures would not be plausible or reasonable.51 
Against this background, and in light of the parties' arguments, we will evaluate , in turn,  
Korea's proposed counterfactual s for the anti -dumping and countervailing measures at issue in the 
underlying dispute . If we find that Korea's proposed counterfactual s are not appropriate, we will 
determine alternative s.52  
3.2.2   Counterfactual for anti -dumping measures  
3.2.2.1   Assessment of Korea's proposed counterfactual  
According to Korea's proposed counterfactual, the United States would come into compliance 
when "the WTO -inconsistent measures are removed".53 Korea clarifies that this scenario entails 
"termination"54 or "withdrawal of the anti -dumping order that was issued as a result of the 
application of the W -T comparison methodology", one of the measures found to be inconsistent with 
the Anti -Dumping Agreem ent in the original proceeding.55  
The United States  disagrees with Korea's proposed counterfactual  because "termination of 
the measures goes beyond what the United States is obligated to do under the WTO Agreement ".56 
According to t he United States,  the mar gin of dumping assigned to Daewoo  in the LRW investigation  
is not the subj ect of any DSB recommendations,  and, consequently, the United States is not required 
to terminate the anti -dumping measures on LRWs from Korea.57 The United States considers that  
Korea's proposed counterfactual is not reasonable and could lead to a level of suspension that is in 
excess of the level of nullification or impairment.58 For the United States, modification of the anti -
dumping measures  on LRWs , rather than termination of the measures , is the appropriate 
counterfactual in this dispute.59  
As the parties disagree on whether Korea's proposed counterfactual is a suitable means by 
which to measure the level of nullification or impairment , we must analyse whether withdrawal of 
the LRWs  anti-dumping order, issued as a result of the application of the weighted average -to-
transaction  (W-T) comparison methodology,  corresponds to the nature and scope of benefits that 
have been nullified or impaired by the anti -dumping measures found to b e WTO -inconsistent "as 
applied".60 We begin our analysis by identifying the benefits that have been nullified or impaired.61  
We recall that the term "benefit" constitutes "an 'advantage' that is received (or legitimately 
expected), and it is this advantage that is being nullified or impaired."62 Not all "negative result[s]" 
                                                
49 Decision by the Arbitrator, US – Gambling (Article 22.6 – US), para. 3.30, referring to Award of the 
Arbitrator, US – Section 110(5) Copyright Act (Article 25)  and Decision by the Arbitrator, EC – Bananas III 
(US) (Article 22.6 – EC).  
50 United States' written submission, para. 18; Korea's written submission, para. 79. 
51 Decision by the Arbitrator, US – Gambling (Article 22.6 – US), para. 3.27. For that reason, the 
arbitrator in US – Gambling , rejected a counterfactual that assumed Antigua would have access to all forms of 
remote gambling and betting services, becaus e, in light of the circumstances of the dispute, such an assumed 
benefit was not reasonable. See ibid., para. 3.49.  
52 We follow the order of analysis in US – Gambling , the only prior Article 22.6 arbitration in which the 
parties disagreed on the appropriat e counterfactual for the purpose of calculating the level of nullification or 
impairment. Decision by the Arbitrator, US – Gambling (Article 22.6 – US), para. 3.19.  
53 Korea's methodology paper, para. 23.  
54 Korea's written submission, para. 23.  
55 Korea's re sponse to Arbitrator question No. 65, para. 44; see also fn 29 above for a brief overview of 
the challenged measures.  
56 United States opening statement, para. 37.  
57 United States' written submission, para. 26.  
58 United States' response to Arbitrator question No. 2, para. 16.  
59 United States' written submission, paras. 26 -27. 
60 See Award of the Arbitrator, US – Section 110(5) Copyright Act (Article 25) , para. 3.45.  
61 Decisions by the Arbitrators, US – COOL (Article 22.6 – United States ), para. 5.27; US – Offset Act 
(Byrd Amendment) (EC) (Article 22.6 – US), para. 3.35; US – Gambling (Article 22.6 – US), para. 3.25.  
62 Decision by the Arbitrators, US – COOL (Article 22 .6 – United States), paras. 5.15 and 5.16.  WT/DS464/ARB  
 
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  of an inconsistent measure are nullified or impaired benefits.63 Echoing the arbitrator in US – Section 
110(5) Copyright Act (Article 25) , "it is necessary to proceed with caution" and cons ider only the 
benefits that Korea could have expected, "in good faith and taking account of all relevant 
circumstances".64 Those circumstances include the recommendations and rulings  adopted by the 
DSB in the underlying dispute, which we consider "to the ex tent relevant to our assessment of 
whether [the complainant's] counterfactual accurately reflects the benefits accruing to it in this 
dispute" .65  
As context, the first sentence of Article 2.4.2 of the Anti-Dumping Agreement  provides that 
investigating auth orities "shall normally" use one of two symmetrical comparison methodologies, 
either the weighted -average  to weighted -average  (W-W) or transaction -to-transaction ( T-T) 
comparison methodology, to establish margins of dumping; otherwise, the second sentence provide s 
that, when certain conditions are met, investigating authorities may resort to the "exception[al]"66 
asymmetric comparison methodology, the  W-T comparison methodology.67 In the underlying 
dispute, the USDOC in the anti -dumping investigation applied this  W-T comparison methodology on 
the basis of a methodology (the Nails II  methodology)68, which the Appellate Body determined was 
not consistent with that subparagraph.69 Speci fically, the Appellate Body found that the USDOC did 
not properly establish the existence of a "pattern" of dumped prices and failed to provide a sufficient 
"explanation" that the standard comparison methodologies could not appropriately take into account 
the targeted dumping.  The Appellate Body further found that the United States, having improperly 
resorted to a W -T comparison  methodology, incorrectly conducted the W -T comparison itself by 
using zeroing.70 The United States is under an obligation to bring these aspects, "as applied" in the 
Washers  determination and connected proceedings, into conformity with Articles  2.4 and 2.4.2. 
However, by failing to do so by the expiry of the RPT, the United States' anti-dumping measures 
nullify and impair benefits tha t flow  to Korea  from Articles  2.4 and 2.4.2 of the  Anti-Dumping 
Agreement .71 
The Appellate Body has explained that the concepts of "dumping " and "margin of dumping " 
are "exporter -specific concepts" and that dumping itself is "product -related … in the sense that an 
anti-dumping duty is a levy in respect of the product that is investigated and found to be dumped".72 
Anti-dumping  duties have both a trade effect on the Member concerned and a direct impact on the 
company subject to the duty. Indeed, the parties ha ve extensively debated such effects of the anti -
                                                
63 Korea reads "nullification or impairment" to "cover[] any negative result of the WTO -inconsistent 
measure." And, for this reason, a counterfactual "should hypothesize elimination of the negative result". See 
Korea's comments on the United States' response to Arbitrator question No. 61, para. 32. We find this view 
incorrect, because it is nullification or impairment of a benefit – not any negative result of an inconsistent 
measure – for which a Member may seek sus pension of concessions under Article 22 of the DSU. For this 
reason, prior arbitrators have declined to account for negative trade or economic effects in a calculation of 
nullification or impairment that did not flow from the nullified or impaired benefit.  See, for example,  Decisions 
by the Arbitrators, US – 1916 Act  (EC) (Article 22.6 – US), paras. 5.73 -5.77 (declining to include litigation 
costs incurred by EC entities under the 1916 Act); US – COOL (Article 22.6 – United States), para. 5.27 
(omitted Cana da's and Mexico's losses from domestic price suppression in the calculation of nullification or 
impairment); and EC – Bananas III  (US) (Article 22.6 – EC), paras. 6.8 and 6.17 -6.18 (excluded good and 
service inputs, in the production of bananas, in setting  the level of suspension).  
64 Award of the Arbitrator, US – Section 110(5) Copyright Act  (Article 25 ), fn 43. While this arbitration 
was constituted under Article 25 of the DSU, the arbitrator was called to "determine the level of nullification or 
impairmen t of benefits", and, for that reason, we, like prior Article 22.6 arbitrators, consider this award 
relevant.  Ibid. para. 1.1. See also Decisions by the Arbitrators, US – 1916 Act  (EC) (Article 22.6 – US), 
para. 5.26; and US – Gambling (Article 22.6 – US), fn 9. 
65 Decision by the Arbitrator, US – Gambling (Article 22.6 – US), para. 3.37. In addition, both parties 
consider the relevant recommendations and rulings  adopted by the DSB to provide relevant guidance in the 
selection of a counterfactual. See Korea's  response to Arbitrator question No. 4, para. 28; United States' 
response to Arbitrator question No. 4, para. 18.  
66 Appellate Body Report, US – Washing Machines , para. 5.18.  
67 Appellate Body Report, US – Washing Machines , para. 5.16.  
68 As the Appellate Bod y explained, the Nails II  methodology is a methodology "to determine whether 
'targeted dumping' was occurring and whether to use the W -T comparison methodology to determine dumping 
margins". Appellate Body Report, US – Washing Machines , para.  5.2. 
69 See Ap pellate Body Report, US – Washing Machines , para. 6.4.  
70 Appellate Body Report, US – Washing Machines , paras. 6.3 -6.6 and 6.9.  
71 See Decision by the Arbitrators, US – COOL (Article 22.6 – United States), para. 5.11.  
72 Appellate Body Report, US – Stainless Steel (Mexico) , para. 94.  WT/DS464/ARB  
 
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  dumping measures on LG's and Samsung's LRW exports to the United States73, and, consequently, 
propose d methodologies using the dumping margins assigned to these Korean companies  to 
calculate the value of Korean LRW exports, had the United States come into compliance  with the 
DSB recommendations and rulings  before the end of the RPT. Therefore, we consider that the denied 
benefits accruing to Korea may be measured by reference to Korea n exporters of  LRWs , namely LG 
and Samsung, which were assigned inappropriately established  anti-dumping duty rates in the LRW 
final determinat ion.74  
We observe that a similar approach  was taken  in US – Section 11 0(5) Copyright Act . The 
arbitrator, in  that proceeding, first examined the nature of benefits that would have accrued to the 
European Communities had the United States brought its measures into conformity with certain 
provisions of the Agreement on Trade -Related Aspects of Intellectual Propert y Rights , concluding 
that the United States was obliged to make exclusive rights available to EC copyright holders.75 For 
this reason, the arbitrator determined the relevant benefit to be realizable licensing royalties and, 
consequently, measured the level of EC benefits in terms of royalty income foregone by those EC 
right holders.76  
We note that the benefits accruing to Korea are not, as Korea seems to imply with its proposed 
counterfactual of withdrawal, that the USDOC would not assign an anti -dumping dut y to any Korean 
exporter, but that the USDOC would calculate  the margin underlying the duty for  LG and Samsung  
in a manner consistent with Articles 2.4 and 2.4.2 of the  Anti-Dumping Agreement . Korea neither  
challenge d the finding of injury in connection wi th the LRWs  determination s nor the dumping margins 
established on other bases  for other exporters .77 
Accordingly, we do not consider Korea's counterfactual scenario of withdrawal of the anti-
dumping order to accurately reflect the nature of nullification or impairment of benefits accruing to 
Korea under the Anti -Dumping Agreement. Korea's proposal implies that no anti-dumping duty 
would be applied to any Korean exporter of LRW s. In our view, however, Korea could not reasonably 
expect that the benefits accruing under Articles 2.4 and 2.4.2 of the Anti-Dumping Agreement  – 
which concern the calculation of dumping margins for specific exporters – amount to termination of 
the entire anti -dumping order and d uties assigned to all Korean exporters. Korea's position clearly 
exceeds the scope of those benefits.78 In this regard , we agree with the United States that adopting 
Korea's counterfactual "could appear to assume that the Member concerned has obligations be yond 
what is reflected in the recommendations adopted by the DSB, which is for the Member to comply 
with WTO rules."79  
Relatedly, adopting Korea's approach of "withdrawal" of the entire order would risk 
determining a level of suspension in excess of the le vel of nullification or impairment, one that may 
be "punitive", as the United States observes.80 Withdrawal of the anti -dumping order implies 
termination of duties imposed on all Korean exporters of LRW s81, regardless of whether the relevant 
                                                
73 See Korea's methodology paper, para. 27; United States' written submission, paras. 39 -51; Korea's 
response to Arbitrator question No. 64, paras. 38 -40; and United States' comments on Korea's response to 
Arbitrator question No. 6 4, paras. 34 -36. 
74 See Notice of Final Determination of Sales at Less Than Fair Value: Large Residential Washers from 
the Republic of Korea, 77 Fed. Reg. 75988 (Dec. 26, 2012) , (Exhibit KOR -5). 
75 Award of the Arbitrator, US – Section 110(5) Copyright Act  (Article 25) , paras. 3.11 -3.15. 
76 Award of the Arbitrator, US – Section 110(5) Copyright Act  (Article 25) , paras. 3.18 -3.19. 
77 United States' comments on Korea's response to Arbitrator question No. 55, para. 14.  
78 While we agree with Korea that the right to impose anti -dumping duties "is not absolute", we are not 
examining the United States' rights and obligations under the Anti -Dumping Agreement but the benefits 
accruing to Korea under that Agreement, for the narrow purpose of determining an appropriate c ounterfactual 
scenario. See Korea's response to Arbitrator question No. 65, para. 44.  
79 United States' response to Arbitrator question No. 2(c), para. 13.  
80 United States' response to Arbitrator question No. 2(c), para. 13. In US – Gambling , the Arbitrator  
emphasized "[i]n determining whether this proposed level is 'equivalent', we must take care to ensure that the 
proposed level of suspension is neither reduced to a level lower than the level of nullification or impairment of 
benefits accruing to the compl aining party, such as to adversely affect that parties' rights, nor exceeds the 
level of nullification or impairment, such that it would become punitive." Decision by the Arbitrator, US – 
Gambling (Article 22.6 – US), para. 3.24.  
81 Nonetheless, Korea exclu des Daewoo's margin, calculated on the basis of "adverse facts available", 
from its calculation of nullification or impairment. See Korea's methodology paper, para. 42. While the 
determination of the counterfactual and the calculation of nullification or i mpairment are analytically separate WT/DS464/ARB  
 
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  margins are calc ulated under the W -W, T-T, or W -T comparison methodologies or under adverse 
facts available, as was the case with Daewoo.82 Daewoo was not subject to the DSB 
recommendations and rulings , as Korea notes, and should not be de facto  subsumed in those 
recommend ations and rulings  by virtue of termination of Samsung's and LG's  duties .83 Therefore, a 
counterfactual scenario assuming that Daewoo's duty should be terminated with the withdrawal of 
the anti-dumping order would not be reasonable.  
In addition, while in al l, but one, prior Article 22.6 proceedings, the arbitrators determined 
termination of the measure to be the appropriate counterfactual, this practice does not dictate the 
result in this Arbitration, as Korea implies.84 Like the arbitrator in US – Gambling , we do not consider 
that Article 3.7 of the DSU – which provides  that the objective of dispute settlement proceedings is 
"usually" the withdrawal of the inconsistent measure – means that this is the only possible 
outcome.85 In this case, "withdrawal" of the anti-dumping order would be a WTO -consistent 
outcome, but it is not one that reasonably reflects the scope of nullified or impaired benefits accruing 
to Korea and its LRW exporters.  
To fulfil our mandate, we must ensure that the level of nullification or impairment is equivalent  
to the level of suspension. This is necessarily a fact -dependent exercise, where we "take account of 
the specific circumstances of this case."86 We agree with the United States that it is not "reasonable" 
to assume that a Member wou ld "take no action to address dumped imports", when Article VI of the 
GATT 1994 provides that dumping "is to be condemned if it causes or threatens material injury".87 
However, that action must be consistent with the Anti -Dumping  Agreement , which, as the findings 
adopted by the DSB make clear, the United States' measures were not. Hence, the question we 
consider next is what alternative counterfactual would be plausible or reasonable.  
3.2.2.2   Alternative counterfactual  
The United States contends "that modification  – not termination – of the U.S. antidumping 
duty measures of LRWs from Korea" is a plausible and reasonable counterfactual.88 For the reasons 
explained above, we agree that a counterfactual of withdrawal of the anti -dumping dut y measure  is 
not appropriate.  In this section, we will evaluate the United States ' proposed alternative 
counterfactual , in which , applying  a W-W comparison methodology , LG's margin is reduced from 
13.02 % to [[*** ]] and Samsung 's margin is reduced to zero percent89, resulting in a weigh ted-
average anti -dumping duty of [[*** ]].90  
                                                
steps, the former serves as the basis of the latter. As such, Korea's calculation appears to be incongruous with 
a counterfactual approach of termination of the entire anti -dumping order.  
82 See Notice of Final Determina tion of Sales at Less Than Fair Value: Large Residential Washers from 
the Republic of Korea , 77 Fed. Reg. 75988 (Dec. 26, 2012), ( Exhibit KOR-05). 
83 Korea does not consider Daewoo to have a "role in determining the plausibility or reasonableness of 
the cou nterfactual", since it " was not subject to the Panel or Appellate Body proceedings ". We disagree. 
Korea's comments on the United States' response to Arbitrator question No.  59(a), para. 30.  
84 See Korea's written submission, para. 23; Korea's response to Ar bitrator question No. 2(c), para. 22. 
85 Decision by the Arbitrator, US – Gambling (Article 22.6 – US), para. 3.46. We note that under 
Article  3.7 of the DSU the preference, above all, is for a "solution mutually acceptable to the parties and 
consistent wit h the covered agreements".  
86 Decision by the Arbitrator, US – Gambling (Article 22.6 – US), para. 3.41.  
87 United States' comments on Korea's response to Arbitrator question No. 65, para. 40.  
88 United States' opening statement, para. 21. See also United States ' written submission, paras.  24-30. 
89 United States' written submission, fn 24 and paras. 27 -28; and United States' response to Arbitrator 
question No. 66(b), para. 51. The margins of dumping calculated for LG and Samsung under the W -W and W -T 
compar ison methodologies appear in the final anti-dumping determination . See Memorandum to the File from 
David Goldberger and Rebecca Trainor re: Antidumping Duty Investigation of Large Residential Washers from 
Korea, Final Determination Margin Calculation for L G Electronics Inc. (LGE) and LG Electronics USA, Inc. 
(LGEUS; collectively, "LG") (December 18, 2012), (Exhibit USA -28) (BCI), p. 127; and Memorandum to the File 
from Henry Almond and Kate Johnson re: Antidumping Duty Investigation of Large Residential Was hers 
(Washing Machines) from Korea, Samsung Final Determination Calculation Memorandum (December 18, 
2012), (Exhibit USA -33) (BCI), p. 125.  
90 This [[*** ]] rate is a constructed figure that does not appear in any underlying investigation or 
determination. T he United States derived this anti -dumping margin based on the W -W rate of [[*** ]] for LG, 
initially calculated by the USDOC in its preliminary determination, on the basis of "the calculation presented in 
Korea's methodology paper". The United States expla ined: "[t]hus, if Samsung's dumping margin changes to 
zero% and LG's dumping margin change s to [[***]], then 0 x 0.31 + [[***]] x (1 -0.31) = [[*** ]]." See 
United States' written submission, fn  24. WT/DS464/ARB  
 
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As in the previous section  for Korea , we now consider the United States ' counterfactual in 
terms of plausibility and reasonableness, for the purpose of calculating the level of nullification or 
impairment of bene fits accruing to Korea.91  
We observe that the USDOC calculated dumping margins for LG and Samsung using the W -W 
comparison methodology during the LRW investigation as part of its consideration whether to use 
the W -T comparison methodology.92 Thus, these counterfactual W-W margins  proposed by the 
United States  pre-existed and were not calculated for this Arbitration. Further, in the underlying 
dispute, the Panel and Appellate Body findings relat ed exclusively to the  invocation and  application 
of the  exceptional  W-T comparison methodology.93 Therefore, in the  circumstances of this dispute, 
it would not be unreasonable or implausible to assume that compliance may have been achieved 
through the application of a normal comparison methodology, which would remove the source of 
inconsistenc y related to invoking and applying the exceptional comparison methodology.  
To Korea, however, "replacing LG 's calculated margin with a different margin that purportedly 
relies on the first sentence of Article 2.4.2 cannot b e 'plausible' or 'reasonable' because it would 
require the Arbitrator to examine the WTO -consistency of a hypothetical scenario".94 Korea also 
argues that "it cannot be assumed that the United States' application of the first sentence of 
Article  2.4.2 would  be done in a WTO -consistent manner", requiring, instead, "a substantive 
determination that [the] hypothetical compliance measure would be WTO -consistent."95 Korea 
further contends that it would not be legally possible to recalculate the dumping margins und er the 
first sentence of Article 2.4.2 without first reforming the "as such" measures, citing the United States' 
explanation of its process to domestically implement the DSB's recommendations and rulings  during 
the Article  21.3(c) proceedings.96  
We agree with Korea that our mandate precludes a substantive examination of a measure 
taken to comply  with the DSB recommendations and rulings97 – an issue for  an Article 21.5 
compliance proceeding .98 We are not assessing  the WTO -compatibility of compliance measures ; 
rather, we  are considering  the reasonableness  or plausibility of certain hypothetical counterfactual 
scenarios. Korea, however, appears to conflate this role of an Article 22.6 arbitrator with that of 
other WTO adjudicators. Moreover, o ur review, unlike that of an Article  21.3(c) arbitrator  that 
concerns  the establishment of the RPT , is necessarily divorced from actual implementation.99 We 
decline "to make any specific finding or determination as to the exact circumstances … and … specific 
conditions"100 on how the USDOC would come to apply a "normal []" comparison methodology under 
the first sentence of Article  2.4.2 of the  Anti-Dumping Agreement .101 A plausible or reasonable 
counterfactual scenario may or may not reflect the implementation options debated in t he context 
of an Article  21.3(c) proceeding.102 We echo Korea's statement of caution that "what the United 
States could have done to implement the DSB's recommendations and rulings should not be 
                                                
91 Decision by the Arbitrator, US – Gambling (Article 22.6 – US), para. 3.27. See also Decision by the 
Arbitrator, US – Tuna II  (Mexico)  (Article 22.6 – US), para. 4.5.  
92 See Panel Report , US – Washing Machines , paras. 7.54-7.56. 
93 Specifically, the Panel and Appellate Body found that the USDOC did not properly est ablish the 
conditions for using the "exception [al]" W-T comparison methodology and, further, that the United States 
improperly applied that W -T comparison methodology by applying the methodology to non -pattern transactions 
and using zeroing. See Panel Repo rt, US – Washing Machines , paras. 8.1.a.i, iii, xiv, and xv; and Appellate 
Body Report, paras. 6.2 -6.11. Korea does not appear to disagree with this interpretation of the findings.  
94 Korea's response to Arbitrator question No. 55, para. 19. See also Korea' s response to Arbitrator 
question No. 2(a), para. 14.  
95 Korea's response to Arbitrator question No. 55, para. 16. 
96 Korea's response to Arbitrator question No. 54, paras. 6-8. 
97 See, for example, Decision by the Arbitrator, US – 1916 Act  (EC) (Article 22.6  – US), para. 7.4.  
98 Korea's response to Arbitrator question No. 60(b), para. 30. 
99 An Article 21.3(c) arbitrator, by contrast, must determine "the period of time that is reasonable in 
light of the particular circumstances of a dispute", which "requires co nsideration of how that Member proposes 
to implement under its municipal law." Award of the Arbitrator, US – Washing Machines (Article 21.3(c)) , 
paras.  3.7 and 3.8.  
100 Decision by the Arbitrator, US – Gambling (Article 22.6 – US), para. 3.59.  
101 Korea sugges ts that for an arbitrator to accept the United States' counterfactual, it would have to 
assume that the USDOC had revisited its decision to apply the W -T comparison methodology, based on the 
application of rules (i.e. the Nails II  test or DPM) that may hav e changed since the final anti-dumping  
determination, and reached a different decision. Korea's response to Arbitrator question No. 55, para. 18.  
102 Assumptions made by the Article 21.3(c) arbitrator may  inform , but do not drive,  the choice of a 
counterfact ual. See Decision by the Arbitrator, US – Gambling (Article 22.6 – US), para. 3.60.  WT/DS464/ARB  
 
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  conflated with the appropriate counterfactual for the purposes of calculating the level of nullification 
or impairment."103 
Hence, we consider  that the application of a "normal []" comparison methodology, under the 
first sentence of Article 2.4.2 of the  Anti-Dumping Agreement , is a reasonable and plausible scenario  
– reflecting the benefits expected to accrue to Korea. We turn, next, to whether the W -W margins , 
determined for LG and Samsung in the original underlying  investigation – and, consequently, the 
weighted -average a nti-dumping duty rate of [[*** ]] – represent a su itable proxy for the duties that 
would exist if a "normal[]" comparison methodology had been applied and thus may be used to 
calculate the level of nullification or impairment. To do so, we clarify that we are not assessing the 
WTO-consistency of a measure  but determining the appropriateness of a figure by "rely[ing], as 
much as possible, on credible, factual and verifiable information."104  
In the course of the anti-dumping investigation  on LRWs from Korea , the W -W margins were 
disclosed to LG and Samsung.105 While the Government of Korea  did not receive such disclosure 
during the anti -dumping investigation , it had an opportunity to comment on th ose rates in this 
Arbitration proceeding, following the United States' submission of the underlying calculation 
memor anda, for the preliminary and final determinations, as exhibits.106 The Arbitrator posed several 
questions to Korea regarding th ose rates in relation to the United States' proposed counterfactual  
involving the  use of the W-W comparison methodology . However, Korea did not bring any issues to 
the Arbitrator 's attention that would indicate that the figures submitted by the United States are not 
credible or factual.107 Given these factual circumstances, and recalling that the W -W dumping 
margins were calculated for  reasons unrelated to this Arbitration, we consider the W -W margins to 
be "credible, factual, and verifiable" to base a calculation of the level of nullification or impairment.  
In light of the foregoing, we consider that a counterfactual scenario in which the USDOC 
applied a "normal []" comparison methodology, under the first sentence of Article 2.4.2 of the  Anti-
Dumping Agreement , would reflect a reasonable scenario in which the United States complied with 
the recommendations and rulings  of the DSB and that  the weighted -average anti -dumping duty rate, 
calculated under the W -W comparison methodology, of [[*** ]] is a credible, factual, and verifiable 
figure to base our calculation of nullification or impairment.  
Having analysed and determined the appropriate c ounterfactual for the anti -dumping 
measures, subject to the "as applied" recommendations and rulings , we turn now to do the same 
for the countervailing duty measures.  
3.2.3   Counterfactual for countervailing duty measures  
3.2.3.1   The parties' positions  
Korea seeks to apply a counterfactual scenario whereby the United States terminates the 
countervailing duty measures to comply with the recommendations and rulings  adopted by the DSB 
– the same counterfactual Korea proposes with regard to the anti -dumping measures.108 For Korea, 
                                                
103 Korea's response to Arbitrator question No. 55, para. 19. 
104 Decision by the Arbitrator, US – 1916 Act (EC) (Article 22.6 – US), para. 5.54.  
105 Both parties confirmed that LG and Samsung received various disclosure materials during the anti-
dumping investigation . See United States' response to Arbitrator question No. 70(b), paras. 60 -63; and Korea's 
response to Arbitrator question No. 70(a), para s. 49 and 51.  
106 See Memorandum to the File from David Goldberger and Rebecca Trainor re: Antidumping Duty 
Investigation of Large Residential Washers (Washing Machines) from Korea, Preliminary Determination Margin 
Calculation for LG Electronics Inc. and LG E lectronics USA, Inc. (collectively, "LG") (July 27, 2012), (Exhibit 
USA-24) (BCI); United States' response to Arbitrator question No. 70(b), para. 68. See also Memorandum to 
the File from David Goldberger and Rebecca Trainor re: Antidumping Duty Investigat ion of Large Residential 
Washers from Korea, Final Determination Margin Calculation for LG Electronics Inc. (LGE) and LG Electronics 
USA, Inc. (LGEUS; collectively, "LG") (December 18, 2012), (Exhibit USA -28) (BCI); Memorandum to the File 
from Henry Almond  and Kate Johnson re: Antidumping Duty Investigation of Large Residential Washers  
(Washing Machines) from Korea, Preliminary Determination Margin Calculation for Samsung Electronics Co., 
Ltd. and Samsung Electronics America, Inc. (collectively, "Samsung") (July 27, 2012), (Exhibit USA -29) (BCI); 
and Memorandum to the File from Henry Almond and Kate Johnson re: Antidumping Duty Investigation of 
Large Residential Washers (Washing Machines) from Korea, Samsung Final Determination Calculation 
Memorandum (Decemb er 18, 2012), (Exhibit USA -33) (BCI).  
107 See, for example, Korea 's response to Arbitrator question Nos. 15 and 70.  
108 Korea's methodology paper, para. 4; Korea's written submission, para. 23.  WT/DS464/ARB  
 
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  only this scenario would leave "no doubt" that the WTO -inconsistent measures have been brought 
into conformity.109 Korea further considers this counterfactual to be consistent with Article 3.7 of the 
DSU, which provides for withdrawal a s the "'first objective' short of a mutually agreed solution", and 
also with past Article 22.6 proceedings, "where arbitrators have found that an appropriate 
counterfactual is one where the WTO -inconsistent measure is removed as of the expiration date of 
the RPT."110 For these reasons, Korea contends that its counterfactual "is both reasonable and 
plausible."111 Korea proposes the reduction of the countervailing duty to 0.00% for Samsung.112 
The United States agrees to a "conservative" 0.00% duty "for the purpose s of this analysis" 
but not to a counterfactual of termination, since "a variety of potential measures could be taken to 
comply with the DSB's recommendations relating to certain aspects of the U.S. countervailing duty 
measure [s]".113 Further, the United Sta tes observes that Daewoo was assigned a countervailing duty 
rate based on the application of facts available, which was not subject to the recommendations and 
rulings adopted by the DSB.114 This suggests that "termination … is not required."115 However, the 
United States only implies that, in its view, an appropriate alternative counterfactual would be 
"Samsung's countervailing duty rate being re -determined and changed to zero".116 
3.2.3.2   Assessment  
Korea and the United States consider that an appropriate counterfactual  would result in 
a 0.00% countervailing duty rate applied to Samsung, but disagree on what hypothetical scenario 
would generate such an outcome. We are guided by  considerations of plausibility and 
reasonableness, which connect to the benefits that have bee n nullified or impaired by the 
countervailing duty measures determined to be inconsistent "as applied". We therefore begin our 
analysis by identifying those benefits that Korea would have expected, "in good faith and taking 
account of all relevant circumst ances", with reference to the recommendations and rulings  adopted 
by the DSB.117 
In brief, the Panel found certain aspects of the USDOC's determinations  – namely, that certain 
Korean tax programmes benefiting Samsung constituted specific subsidies  – to be in consistent with 
Article  2.1(c) of the SCM Agreement. That provision enables an investigating authority "to find that 
subsidies are de facto  specific when they result in the 'granting of disproportionally large amounts 
of subsidy to certain enterprises'"118; however, the USDOC failed to conduct "the required relational 
analysis of the amount of subsidy received by Samsung" and to account for two mandatory factors 
referred to in Article 2.1(c).119 In addition, the Appellate Body determined that how  the USDOC 
calculated the amount of subsidy to Samsung under those programmes was inconsistent with the 
United States' obligations under Article 19.4 of the SCM Agreement and Article VI:3 of the 
GATT  1994.120 
Based on the foregoing, we understand that the relevant benefits  accruing to Korea under 
Articles 19.4 and 2.1(c) of the SCM Agreement and Article VI:3 of the GATT 1994 relate to the way 
subsidization was determined to exist and the calculation of the amount of subsidization. In this 
sense – and as the Appellate Body i ndicated – the USDOC's determinations resulted in the imposition 
of a countervailing duty on Samsung that was "in excess" of the subsidy found to exist.121 However, 
there were no claims raised, before the Panel, or findings, adopted by the DSB, related to  LG and 
Daewoo. Korea, therefore, could only reasonably expect the United States to have fulfilled its 
obligations under the SCM Agreement and GATT 1994 in a scenario wherein these inconsistencies, 
                                                
109 Korea's written submission, para. 23.  
110 Korea's written submissi on, para. 23.  
111 Korea's written submission, para. 23.  
112 Korea's methodology paper, paras. 35, 39, 43, and 44. See also Korea's written submission, 
para. 27; and Korea's response to Arbitrator question No. 59 (b), para. 25.  
113 United States' written submissio n, para. 30.  
114 United States' written submission, para. 30.  
115 United States' written submission, para. 30.  
116 The United States implies that the counterfactual should entail  the reduction  of the countervailing 
duty rate to zero only for Samsung. United Stat es' response to Arbitrator question No. 59(a)(i), para. 32.  
117 See Award of the Arbitrator, US – Section 110(5) Copyright Act (Article 25) , fn 43. 
118 Panel Report, US – Washing Machines , para. 7.233.  
119 Panel Report, US – Washing Machines , paras. 7.244, 7.250, and 7.255.  
120 Appellate Body Report, US – Washing Machines , paras . 6.14 -6.16. 
121 Appellate Body Report, US – Washing Machines , paras. 5.253 and 5.284.  WT/DS464/ARB  
 
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  regarding the determination and calculation of the rate of  subsidization, were removed for Samsung.  
Hence, we consider it appropriate to measure the benefit accruing to Korea by reference to Korean 
exporters of LRWs.  
We agree with the United States that an appropriate counterfactual would not be termination 
of the entire LRW countervailing duty order  because this  would involve termination of the order  in 
respect to LG and Daewoo, in addition to Samsung. The WTO -inconsistencies identified by the Panel 
and Appellate Body did not relate to the USDOC's determinations for the former two companies. 
Thus, Korea's counterfactual would exceed the scope of benefits accruing to it under the SCM 
Agreement and the GATT 1994. In this regard, we refer to our reasoning on the anti -dumping 
measures, which we consider to be equally relevant.   
Instead, a counterfactual in which Samsung's rate is re-determined consistently with 
Articles  19.4 and 2.1(c) of the SCM Agreement and Article VI:3 of the GATT 1994 would be 
reasonable and plausible, reflecting the scope of benefits that accrue to Korea under those 
provisions.122 We note that  the parties  agree that a 0.00%  rate assigned to Samsung would be  an 
appropriate counterfactual rate . We, like the parties, accept that the rate assigned to Samsung 
should be 0.00% for the calculation of nullif ication or impairment in this Arbitration.123  
In light of the foregoing, and f or the purpose of the counterfactual, which assumes a WTO -
compliant determination of the subsidization amount, we consider the value of zero to be a 
reasonable proxy in the calcul ation of the level of nullification or impairment.124 
3.2.4   The appropriate  time-frame  
We now examine the time -frame that forms the basis of the calculation of the level of 
nullification or impairment.  
There is no rule in the DSU prescribing the time -frame to determine the level of nullification 
or impairment . Past Article 22.6 arbitrations  which  were preceded by  Article 21.5 proceeding s have 
used the one -year period immediately following the expiry of the RPT as a basis for the calculation.125 
The parties in thi s Arbitration agree that 2017 – the year in which the RPT ended – should be the 
time period to calculate the level of nullification or impairment126 and propose the use of data inputs 
prior to the expiry of the RPT.127 We agree and will calculate the level of nullification of impairment 
with reference to 2017, except as explained further in section 3.3.4  below .  
3.3  Proposed models for assessing the level of nullification or impairment  
3.3.1   Introduction  
In the preceding sections, we i dentified the appropriate counterfactual s for, respectively , the 
anti-dumping and the countervailing measures at issue in the underlying dispute , as well as the 
                                                
122 United States' response to Arbitrator question No. 59(a)(ii), para. 34.  
123 In this regard, we note that, for one of the two measures countervailed, the inconsistency related not 
to the amount of subsidy but to the failure of the United States to properly determine whether the subsidy was 
specific and, hence, countervailable at all. With respect to the o ther subsidy, the United States has not 
proffered, and we do not otherwise have any basis to consider, what rate of subsidization might have been 
found to exist had the United States properly allocated the subsidy. See Appellate Body Report, US – Washing 
Machines , paras. 6.14 -6.16. 
124 We find further confirmation for our conclusion in the recommendations and rulings  adopted by the 
DSB. In the underlying dispute, the challenged countervailing duty measures related to whether certain 
subsidies were specific, i .e. whether they were countervailable, and to the application of the countervailing 
duty, not to the calculation  of the rate of subsidization. See Appellate Body Report, US – Washing Machines , 
paras. 6.12 -6.16. Hence, just as these recommendations and ruli ngs adopted by the DSB differ with respect to 
the "as applied" findings for the countervailing duty and anti -dumping measures, so do the counterfactual 
approaches.  
125 See Decisions by the Arbitrators, EC – Hormones (US) (Article 22.6 – EC), para. 37 ; US – Upland 
Cotton (Article 22.6 – US II) , para. 4.118; and US – COOL (Article 22.6 – United States) , para. 6.32.  
126 See Korea's written submission, para. 23; United States' written submission, para. 23; Korea's 
response to Arbitrator question No. 6, para. 36; and United States' response to Arbitrator question No. 6, 
para. 25. 
127 See, for instance, Korea's methodology paper, Appendix A; United States' written submission, 
paras.  55 and 122; and United States' response to Arbitrator question No. 75, para. 79.  WT/DS464/ARB  
 
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  time-frame, which together form the basis for the calculation of the level of nullification or 
impairment  with respect to  LRWs . We now turn to that calculation . 
Both parties propose to quantify the level of nullification or impairment by using an economic 
model.128 In broad terms, a n economic model is a system of equations that represents complex 
processes in a simplified form .129 This mathematical expression can , inter alia , predict  or simulate, 
the effects on trade flows that result from a change in an aspect of trade policy.130 Prior arbitrators 
have accepted, with or without modification, economic models to calculate the level of nullification 
of impairment.131 We will do the same.  
We will first describe  the parties' proposed models and the objections raised by the parties 
before determining, whether either model is suited to this dispute  and should be used as the basis 
for our calculations. Finally, we will resolve  issues  affecting the calculations on which the parties 
differ significantly.  These include the magnitude of the demand, supply , and substitution elasticities, 
the size of the LRW market , and the amount of United States'  LRW imports from Korea.  
However, we first address an issue raised by the United States  on the level of nullification or 
impairment.  
3.3.2   Whether the Arbitrator should conclude that the level of  nullification or impairment  
is zero 
While the United States has proposed a n economic  model to calculate the level of nullification 
or impairment, it nonetheless argues that "the correct level of nullification or impairment is zero" . 
According to the United States, "reducing or terminating  the U.S. antidumping and countervailing 
duty measures on LRWs from Korea following the expiration of the RPT would not result in any 
increase in the value of exports of LRWs from Korea to the United States".132 The United States cites 
evidence "in the form of numerous public statements made by Samsung and LG" that those 
companies discontinued and shifted production from Korea to other countries133 – decisions that 
"were not made in response to the imposition of the U.S. antidumping and countervailing duty 
meas ures."134 Korea contests this evidence and the conclusions  that may be drawn therefrom.135 In 
Korea's view, the United States "provides no credible basis to argue that Korea's level of nullification 
or impairment is zero" .136 We consider that  the United States h as not provide d sufficient  evidence 
that permits the Arbitrator to quantify the level of nullification or impairment as zero as explained 
below . 
First, and despite a specific request from the Arbitrator, the United States declined to submit 
any empirical  (or econometric) evidence, relying instead  entirely on Samsung's and LG's 
statements.137 According t o the United States, such evidence "is not necessary."138 We, however, 
have to "estimate the nullification and impairment caused by [the inconsistent measure] (and 
                                                
128 See K orea's methodology paper, para. 24; and United States' written submission, para. 67.  
129 See R. Hallren and D. Riker, An Introduction to Partial Equilibrium Modelling of Trade Policy, 
Economic Working Paper Series (Working Paper 2017 -07-B), U.S. Internationa l Trade Commission, July 2017, 
(Exhibit KOR -15), p. 3.  
130 See R. Hallren and D. Riker, An Introduction to Partial Equilibrium Modelling of Trade Policy, 
Economic Working Paper Series (Working Paper 2017 -07-B), U.S. International Trade Commission, July 2017,  
(Exhibit KOR -15), p. 3.  
131 We, like the arbitrator in US – Offset Act (Byrd Amendment)  (EC) (Article 22.6 – US), "see the option 
of using economic models in Article 22.6 arbitrations as creating an opportunity to ensure full cooperation 
from, the parties and, hence, more precise and credible results where the alternative may be to choose 
between simplistic and perh aps irreconcilable approaches." Decision by the Arbitrator, US – Offset Act (Byrd 
Amendment) (EC) (Article 22.6 – US), para. 3.79.  
132 United States' written submission, para. 31.  
133 United States' written submission, paras. 39 -40. 
134 United States' response to Arbitrator question No. 5, para. 19.  
135 See Korea's written submission, paras. 38 -40. 
136 Korea's written submission, para. 41.  
137 United States' response to Arbitrator question No. 20, para. 65.  
138 Specifically, the United States di d not consider empirical or econometric evidence to be necessary, 
since the statements made by Samsung and LG, alone, "indicated clearly their investor -based decisions and 
future intentions to move production to the United States, which reflect that the co mpanies lack both the 
interest and the ability to resume production of LRWs in Korea for export to the U.S. market." United States' 
response to Arbitrator question No. 20, para. 65.  WT/DS464/ARB  
 
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  presumed to exist pursuant to Article 3.8 of the DSU)" by "focus[ing] on trade flows" to "estimate 
trade foregone" .139 We cannot undertake such an estimate without a "meaningfully quantified" 
amount of nullification or impairment, even if that amount is  allegedly zero.140 As in US – 1916 Act  
(EC) (Article 22.6 – US), where the European Communities only provided examples of litigation costs 
to include in the level of nullification or impairment, the United States has similarly only provided 
unsubstantiated statements.141 We decline to infer from a selection of private companies' statements 
the entire trade effect of the United States' measures  as this would be speculative . Consequently, 
on the basis of this evidence alone, we cannot conclude that the level of nullification or impairment 
is zero.142 
Second, the United States refers to findings by the  United States International Trade 
Commission  (USITC ), in the context of a safeguard investigation, that LG and Samsung will "replace 
most of their imports of LRWs wit h domestically produced LRWs" as support that those companies 
shifted production for reasons other than the imposition of anti -dumping and countervailing 
duties .143 However, Korea argues  that, in that same exhibit, the USITC also noted that "[d]uring the 
period of investigation, LG and Samsung shifted production of LRWs for the U.S. market from Korea 
and Mexico to China around the time that Commerce imposed antidumping and countervailing duty 
orders on LRWs from Korea and Mexico".144 
Finally, we note that th e United States  itself has submitted a calculation of nullification or 
impairment, using 2017 data, the result of which is not an insignificant sum and certainly not zero.145  
For these reasons, we disagree with the United States that the level of nullificat ion or 
impairment of benefits accruing to Korea is zero.  Accordingly,  we now determine the appropriate 
model to calculate the level of nullification or impairment . 
3.3.3   Models  
3.3.3.1   Korea's proposed model  
To calculat e the level of nullification or impairment, Korea,  drawing upon work by Bown and 
Ruta (2009) , propos es to use a static partial equilibrium model , which assumes that LRW s are perfect 
substitutes and that there are only two LRW suppliers to the United States market, namely Korea 
and the United States.146 As applied in this case, a static partial equilibrium model refers to an 
economic (simulation) model that analyses  a single market, ignoring linkages with other markets 
                                                
139 Decision by the Arbitrator, EC – Hormones (Canada) (Article 22.6 – EC), para. 42.  
140 Decision by the Arbitrator, US – 1916 Act (EC) (Article 22.6 – US), para. 5.77.  
141 Decision by the Arbitrator, US – 1916 Act (EC) (Article 22.6 – US), paras. 5.75 and 5.77.  
142 The United States also argues that Article 3.8 of the DSU "plainly pro vides for the possibility that the 
Member concerned may rebut the presumption of the existence  of nullification or impairment". United States' 
written submission, para. 33. While the United States is correct in observing that the level of nullification or 
impairment "can be addressed in an Article 22.6 proceeding", it is not correct to also assert that the 
presumption of nullification or impairment itself may be rebutted in the manner it advocates . Ibid. There is a 
difference between no nullification or imp airment and a level of nullification or impairment of zero. Rather, " the 
presumption, under Article 3.8 of the DSU, that a breach of an obligation under a WTO covered agreement 
constitutes a case of nullification or impairment of trade benefits, is differe nt from the determination of the 
precise level of such nullification or impairment, which is an exercise conducted under Article 22 of the DSU, in 
cases when a complaining party has requested authorization to suspend concessions or other obligations."  
Panel Report, EC – Bananas III (Article 21.5 – US), para. 8.11. It is a panel that "deals with the establishment 
of the existence of nullification or impairment". Decision by the Arbitrator, US – Offset Act (Byrd Amendment) 
(EC) (Article 22.6 – US), para. 3.24 . The United States appears to conflate the two – the existence  of and the 
level of nullification or impairment – in its reasoning.   
143 United States' response to Arbitrator question No. 16, para. 43, citing Large Residential Washers , 
Investigation No. TA-201-076 (Safeguard), USITC Publication 4745 (December 2017), (Exhibit KOR -25), p. 78.  
144 Large Residential Washers , Investigation No. TA -201-076 ( Safeguard), USITC Publication 4745 
(December 2017), (Exhibit KOR -25), fn 349. See Korea's written submission , para. 39.  
145 See below, section 3.4. 
146 Korea's methodology paper, paras. 22 and 29, referring to C. Bown and M. Ruta (2008), "The 
Economics of Permissible WTO Reta liation ", in The Law, Economics and Politics of Retaliation in WTO Dispute 
Settlement (eds. by C. Bown & J. Pauwelyn; 2010) , (Exhibit KOR -17); Korea's written submission, paras.  43 
and 46; and Korea's response to Arbitrator question No. 89, para. 103.  WT/DS464/ARB  
 
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  because those linkages  are presumed to be negligible . In this model , the response is  assumed to 
occur instantaneously or to not affect subsequent periods , as may  be the case in other models .  
In Korea's perfect substitutes model , demand for United States'  and Korean LRWs depend s 
on the price of the product.147 The higher the price of LRWs, th e lower the demand for LRWs , where 
the elasticity of demand measures the responsiveness of demand to a change in price. LRWs are 
supplied by both United States'  manufacturers and Korean exporters. The higher the price of LRWs 
the greater  the supply , where  the elasticity of supply measures the responsiveness of supply to a 
change in price. Further, in th at model , WTO-inconsistent anti -dumping and countervailing duties 
are applied to Korean LRWs.148  
Based on its model, Korea derives the following formula to calculat e the level of nullification 
or impairment at the end of the RPT149: 
Level of nullification or impairment at the end of RPT =  
(price changes by terminating the application of the second sentence of Article 2.4.2 
and CVD) x  
(the import share of washin g machines from Korea to the United States in 2011) x  
(price elasticity of demand + price elasticity of supply) x  
(the entire import value of washing machines to the United States in 2017)  x 
(1 + growth rate)t 
t = number of years from the year of USDOC’s  investigation /review  based on non -
compliance  
Korea justifie s the use of the perfect substitutes model  by noting that it is based on academic 
literature , was used in prior arbitrat ions to calculate the level of nullification or impairment150, and 
was proposed by the United States itself in  the DSU Article 22.6 arbitration in  India – Agricultural 
Products .151 Applying this model, Korea calculates that the level of nullification or impairment  with 
respect to Korea's imports of LRWs into the United States , at the expiry of the RPT, amounts to 
USD 711 million.152 
The United States challenges Korea's justifications for the model – as well as the 
appropriateness of the model itself. In this regard, the United States considers that Korea uses "the 
wrong type of partial equilibrium model"153 because it is "based on two flawed assumptions" : (i) the 
United States and Korea are the only two countries that produce and sell LRWs in the U nited States'  
market , and ( ii) there is perfect substitution between LRWs imported from Korea and United States'  
LRWs and, implicitly, no substitution at all between imports from Korea and non -subject imports.154 
With respect to the first assumption, the United States submits that Korea 's proposed perfect 
substitutes model, which "'assume[s] that the world is composed of … two countries only' and that 
'export  supply  and import demand are entirely determined by the domestic conditions in the 
                                                
147 Korea's methodology paper, para. 33.  
148 Korea's methodology paper, para. 35.  
149 Korea's methodology paper, para. 34.  
150 Korea's methodology paper, para. 28  and fn 23 . Korea referred in particular to US – Upland Cotton II 
and US – Tuna II (Mexico) . With respect  to the latter, Korea claimed that in US – Tuna II (Mexico) , the United 
States itself proposed a partial equilibrium perfect substitutes model .  
151 See Korea's responses to Arbitrator question No. 77(a), para. 68; and India – Measures Concerning 
the Importation of Certain Agricultural Products: Recourse to Article 22.6 of the DSU by India (DS430) – 
Methodology Paper of the United States of America , (Exhibit KOR -29). 
152 Korea's methodology paper, paras. 5, 25, 39, 40.  
153 United States' written submission , para. 7.  
154 United States' response to Arbitrator question No. 22, para. 70.  WT/DS464/ARB  
 
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  respondent's and the complainant's markets'" , is incorrect .155 Referring to Korea's methodology 
paper, the United States contends  that "LRWs are imported into the United States from more than  
a dozen countries ".156 
As to the second  assumption , the United States  argues that the assumption of perfect 
substit utability is contradicted by public submissions made by Korean producers of LRWs and by the 
findings of United States' authorities in a global safeguard investigation conducted in 2017 , which 
reported that consumers view import ed and domestic LRW s as imper fect substitutes.157  
Further, the United States criticiz es the robustness of Korea 's perfect substitutes model , 
which, according to the United States,  is sensitive to variations in the values of demand and supply 
elasticities. In its comments on Korea's response to a question by the Arbitrator, the United States 
explain s that it conducted a sensitivity test on Korea's  model , presenting different calculations of the 
level of nullification or impairment that would result by incorp orating the low, median, and high 
estimates of supply and demand elasticities put forward by Korea.158 The United States showed that 
these  changes in the values of the elasticities  resulted in changes in the calculated level of 
nullification or impairment ra nging from 16.5% to 19.9%.159 
The United States also criticizes Korea's formula  to calculat e the level of nullification or 
impairment using the perfect substitutes model. It characterizes the formula proposed by Korea as 
"incorrectly specified or simply [] not founded on any theoretical basis".160 The United States also 
observes that the formula it proposed in its methodology paper in India – Agricultural Products  
differs from Korea's formula . This is because , according to the United States,  the economic model 
in that arbitration estimates "the change in consumer demand due to a change in price (when the 
measure is removed) plus the change in domestic producer supply due to a change in price (when 
the measure is removed) " and "[t] he sum of th ese two changes in demand and supply is equivalent 
to the change in imports".161 The United States argues that Korea' s proposed formula , instead,  
"purports to estimate the change in  consumer demand based on Korea' s imports" which "is not 
equivalent to estima ting the change in consumer demand based  on the level of consumption".162 
Similarly, Korea' s model "purports to estimate the change in domestic producer supply base d on 
Korea’s imports" which the United States argues "is not equivalent to estimating the chan ge in 
domestic supply based on the level of production.163  
Korea responds  to each of the United States'  argument s as follows .164 First, as a justification 
for examining only the trading relationship between Korea and the United States, Korea  argues that 
"this dispute addresses the impact of  the U.S. measures on its trade in LRWs with Korea and , while 
there may be imports from other countries, these factors are of no consequence to the dispute. "165 
Second, as to the United States' criticism about Korea's model as suming perfect substitutability, 
Korea responds  that a simulation is not required to account  for all external factors that could impact 
its results.166 Korea submits  that the USITC found "that domestic and imported LRWs were in fact 
substitutable, and made a n affirmative injury determination on that basis."167 Finally, Korea  
reiterates  that the formula in its perfect substitutes model is similar to that proposed by the United 
States  in India – Agricultural Products .168  
                                                
155 United States' written submission, para. 59, citing C. Bown and M. Ruta (2008), "The Economics of 
Permissible WTO Retaliation," in The Law, Economics and Politics of Retaliatio n in WTO Dispute Settlement 
(eds. By C. Bown & J. Pauwelyn; 2010), (Exhibit KOR -17), p. 157.  
156 United States' written submission, para. 59.  
157 United States' written submission, paras. 60 -61. 
158 United States ' comments on Korea response  to Arbitrator questio n No. 78(a) , para. 67.  
159 United States ' comments on Korea response  to Arbitrator question No. 78(a) , para. 67.  
160 United States' response to Arbitrator question No. 28 (a), para. 102.  
161 United States' comments on Korea's response to Arbitrator question No, 76, para. 53.  
162 United States' comments on Korea's response to Arbitrator question No, 76, para. 54.  
163 United States' comments on Korea's response to Arbitrator question No, 76, para. 54. See India – 
Measures Concerning the Importation of Certain Agricultu ral Products: Recourse to Article 22.6 of the DSU by 
India (DS430)  – Methodology Paper of the United States of America,  (Exhibit KOR -29).  
164 Korea's written submission, paras . 46-49. 
165 Korea's written submission, para . 46. 
166 Korea's written submission, para. 46. 
167 Korea's written submission, para . 48. 
168 Korea's response to Arbitrator question No. 28 (a), paras. 90-91. WT/DS464/ARB  
 
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  3.3.3.2   United States' proposed model  
 The United States submits that the correct approach to calculate the level of nullification or 
impairment would be to use an Armington model , in which products are differentiated by source 
countries and where consumers view products from different countries  as imperfect substitutes .169 
For the United States, the level of nullification or impairment suffered by Korea as a result of the 
WTO-inconsistent anti-dumping and countervailing duty measures  "would be no more than [[*** ]]" 
and "$2.32 million" per year, re spectively.170 
The Armington  model , proposed by the United States,  account s for imports from countries 
other than Korea171, and, as  the United States notes , the effect of the reduction or removal of the 
WTO-inconsistent anti -dumping and countervailing duties applied to LRWs will depend on the 
substitutability between ( i) the domestic like product (LRWs from the United States), ( ii) subject 
imports (LRWs imported from Korea that are subject to the anti -dumping and countervailing duties), 
and ( iii) non -subject i mports (LRWs imported from countries other than Korea).172 Consumers, 
according to the United States, "substitute between each variety at a constant rate … [by] the 
'Armington elasticity', which tells us how sensitive consumers are to changes in the prices o f the 
three varieties" .173 
The United States  refers to the global safeguard investigation conducted by the USITC in 2017  
as evidence that consumers view LRWs as imperfect substitutes . This study  reported that 
"[c]onsumers view imports and the domestic produc t as imperfect substitutes ", and further found 
that "there is a moderately high degree of substitutability between domestically produced LRWs and 
imported LRWs ".174 The United States  also refer s to public submissions made to the USITC by Korean 
producers of LRWs , which state that all LRWs are sold under brand names in the U nited States'  
market, and brand perception is but one of several important non -price factors that drive purchasing 
decisions.175 
In the United States ' model, aggregate demand for LRWs depend s on the price index for 
LRWs.176 The price index of LRWs can be considered a weighted average price of the different LRWs 
that make up the United States market. The higher the price index of LRWs, the lower the aggregate 
demand for LRWs. The elasticity of ag gregate demand  measure s the responsiveness of aggregate 
demand to a change in the price index  by one percent . In the model, a ggregate demand for LRWs 
breaks down  into demand for United States LRWs, Korean LRWs, and other foreign LRWs. Demand 
for each depends on the ratio of LRW price to the price index. United States'  consumers consider 
these LRWs as imperfect substitutes , where the elasticity of substitution meas ures the degree of 
substitutability. The supply of each  category  of LRWs depends on the ratio of the LRW price to the 
price index , where  the elasticity of supply measures the responsiveness of supply to a change in 
price. Finally, the United States' model assumes that only Korean imports are subject to anti -
dumping and countervailing duties.177  
Korea criticizes the use of the Armington model for "rel[ying] on several extreme 
assumptions" .178 Korea notes that t he model "assumes that, in any one country, each in dustry 
produces only one product and that this product is distinctly differentiated from the product of the 
same industry in any other country ".179 It argues that , "since there is no comparative advantage in 
an Armington model, gains from trade cannot be due  to increasing specialization ", which is a 
standard source of gains in international trade.180 Further, Korea claims that the standard Armington 
assumption — that the number of varieties of a product is fixed — ignores one of the possible benefits 
of trade liberalization, namely, an increase in product variety and in consumer and producer 
                                                
169 United States' written submission, para s. 6-7. 
170 United States' written submission, paras. 7, 123,  and 125-126. 
171 United States' written submission, para. 62. 
172 United States' written submission, para. 62.  
173 United States' written submission, para. 68.  
174 United States ' written submission, para. 60.  
175 United States ' written submission, para. 61.  
176 United States' written submission, paras . 68-73. 
177 United States' written submission, para. 70.  
178 Korea's written submission, para. 51.  
179 Korea's written submission, para. 53.  
180 Korea's written submission, para. 51.  WT/DS464/ARB  
 
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  choice.181 Korea explains that t he small  country assumption , i.e. the assumption that changes in the 
demand for and supply of a product in a country will not have an impact on the world market price 
of the product , cannot be made in an Armington model .182 According to Korea,  in an Armington 
model , "[e]ach country is large in the sense that its demand and supply affect prices of the goods it 
trades ".183 Consequently, "unilateral reductions in trade barriers by one country lead to a troublingly 
large worsening in its terms of trade ".184 Furthermore, Kore a argues that the Armington model has 
never been applied in previous Article 22.6  arbitrations .185  
Korea also question s the robustness of the Armington model proposed by the United States. 
Korea calculated the level of nullification or impairment under this model for various scenarios and 
showed that increasing the elasticity of substitution from the low value 3 to the median value  4, 
increases the calculated level of nullification or impairment by 37 %, and, further,  chang ing the 
elasticity of subs titution from the median 4 to the high value 5 results in a 23 % increase in the 
calculated level of nullification or impairment.186 Korea contends that  the level of nullification or 
impairment can fluctuate by 60 % depending on the value of the  elasticity.187  
The United States provides  a number of counter -arguments  to Korea's  criticisms.188 It notes 
that the Armington assumption that each country produces only one good is used i n many other 
computable general equilibrium ( CGE) models with international trade.189 The United States submits 
that whether there is comparative advantage and gains from trade through increased specialization 
is not relevant, since "Korea has not demonstrated that  Korea has a comparative advantage over 
the United States in the production o f LRWs".190 The United States explains  that its model account s 
for "different varieties of the product by incorporating the elasticity of substitution ".191 It 
acknowledges  that in the Armington model, a country always has market power . However, t he United 
States also points out that Korea is not a small country in the  United States' LRW  market, so it is 
correct to assume that it has market power.192 
3.3.3.3   Assessment of  the models proposed by the parties  
 The parties have proposed different partial equilibrium models to  calculate the level of 
nullification or impairment – a perfect substitutes model by Korea and an Armington model by the 
United States. While  we observe that  the perfect substitutes model could be considered a special 
case of the Armington model193, the two differ in respect of the assumption of "substitutability" of 
products – whether or not products of different origin may be viewed as perfect substitutes for one 
another. Specifically, the perfect substitutes model assumes that goods are perfectly su bstitutable 
and the elasticity of substitution approaches infinity. By contrast, in the Armington model, products 
are not assumed perfect substitutes, and the degree of substitutability is quantified by the elasticity 
of substitution. In examining these tw o models, we will consider whether this assumption , along 
with other features of the models , fits the circumstances of this case .194 
We shall address  (i) whether LRWs are homogenous goods and  characteristics of the United 
States ' LRW market; (ii) the formula  for calculating the level of nullification or impairment in the 
perfect substitutes model ; (iii) the sensitivity of the model calculations to the values of the 
elasticities; (iv) the modelling approach followed in previous WTO arbitrations; and , (v) the evidence 
on the elasticity of substitution provided by the parties.  
                                                
181 Korea's written submiss ion, para. 53 . 
182 Korea's written submission, para. 53.  
183 Korea's written submission, para. 53.  
184 Korea's written submission, para. 53.  
185 Korea's written submission, para. 55. 
186 Korea's response to Arbitrator question No. 78(b) , para. 77.  
187 Korea 's response to Arbitrator question No. 78 (b), para. 77, referring to Impact of Armington 
Elasticities Based on Exhibit USA -19, (Exhibit KOR -52). 
188 United States' response to Arbitrator question No. 23 (a), paras. 76 -85. 
189 United States' response to Arbitrator question No. 23 (a), para. 77.  
190 United States' response to Arbitrator question No. 23 (a), para. 81. 
191 United States' response to Arbitrator question No. 23 (a), para. 82.  
192 United States' response to Arbitrator question No. 23 (a), para. 83.  
193 See Arbitrator question No. 26.  
194 We follow t he approach of prior arbitrations . See, e.g. Decision by the Arbitrator, US – Tuna II 
(Mexico) (Article 22.6 – US), para. 5.2.  WT/DS464/ARB  
 
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  3.3.3.3.1   Whether  LRWs  are homogenous goods  and characteristics of the  Unite d States ' 
LRW market  
We observe that the parties have differing views on whether LRWs may be considered 
homogenous goods (i.e. goods that may be considered perfect substitutes ). Korea justifies the 
assumption of perfect substitutability of Korean and United States' LRWs by arguing that a simulation 
is not required to take into account all external factors that could impact the results.195 Korea  claim s 
that the United States'  investigation authorities found that United States'  and Korean LRWs were 
substitutable and made affirmative injury determination s on that basis.196 Korea  maintains that the 
degree of substitutability is suffi ciently high to "support the use of the perfect substitutes model over 
the Armington model ".197 The Arbitrator agree s with Korea that , if there is evidence to support 
Korea's claim of a sufficiently high level of substitutability between Korean and United St ates' LRWs, 
one can defend the use of a perfect substitutes modelling framework , since a simulation cannot take 
into account all external factors. We shall return to this matter when we discuss the issue of the 
elasticity of substitution  (see section 3.3.3.3.5   below) .  
We note that the United States' LRW market  appears imperfectly competitive, with a small 
number of firms supplying the market , as shown  in the overview of market shares in Appendix C to 
Korea's Methodology Paper.198 For example, i n 2017,  the year in which the RPT ended,  the four 
biggest companies  (Whirlpool, Samsung, LG , and GE) collectively held more than 83% of United 
States'  market.199 Furthermore , the LRWs supplied by those firms are  highly differentiated,  branded  
consumer  product s.200 Korea acknowledges that  it is not aware of evidence to support the claim that 
"all LRWs sold in the United States are homogeneous products that are considered perfect  substitutes 
by consumers ".201 
In addition , we observe that a nother feature of the United States' LRW market is that there 
are other countries besides Korea that supply LRWs. Korea supports  confining its analysis to two 
countries by arguing that this proceed ing addresses the impact of the United States'  measures on 
LRW trade, and specifically, the demand in the United States'  market and supply in the Korean 
market. While "[t]here may be imports from other countries that influence the demand structure in 
the U.S. market, … these external factors are of no consequence in th is proceeding. "202 According 
to Korea, "[t]he Arbitrator cannot be tasked with determining the impact of all outside variables that 
may impact the results of the simulation. "203 Korea also submits  that, "[g]iven that the proceeding 
does not involve LRWs from other countries, it is plausible and reasonable that the model used to 
calculate the level of nullification and impairment only examines the relationship between the two 
markets. "204 
On these aspects, t he Arbitrator agrees with Korea. The Arbitrator did, in fact, pursue this 
issue with the United States in the context of its proposed Armington model.205 In the model, United 
States'  LRW producers and other LRW exporters have the same supply and su bstitution elasticities . 
Therefore,  it would not matter when  calculating the level of nullification or impairment if other foreign 
LRW exporters were treated as a separate region or taken  together with United States'  producers. 
The United States agree s that, "in this situation, treating the United States and third countries as 
separate regions or treating them as one combined region leads to the same outcome for Korea, 
given a reduction of anti -dumping and countervailing duties for Korea in the U.S. market for 
LRWs. "206 Thus, the fact that Korea confines its model to the trade relationship only between itself 
and the United States does not render the  use of the  perfect substitutes model inappropriate in this 
proceeding.   
                                                
195 Korea's written submission, para. 48.  
196 Korea's written submission, para. 48. 
197 Korea's response to Arbitrator question No. 27( a)(b), para. 88. 
198 Korea's methodology paper, Appendix C.  
199 Korea's methodology paper, Appendix C.  
200 Korea's methodology paper, Appendix C.  
201 Korea's response to Arbitrator question No. 27 (a)(b) , para. 87. 
202 Korea's written submission, para. 46.  
203 Korea's written submission, para. 46.  
204 Korea's written submission, para. 46.  
205 Arbitrator question No. 24.  
206 United States' response to Arbitrator question No. 24, para. 88.  WT/DS464/ARB  
 
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  3.3.3.3.2   Formula for calculating the level of nu llification or impairment in the perfect 
substitutes model  
We concur  with the United States that the correct formula under the assumption of perfect 
substitutability , which envisages just two suppliers to the United States'  LRW market  and an infinite 
export supply , would be  as follows :  
Level of nullification or impairment (change in imports) = Percentage change price x 
Price elasticity of demand x Value of demand for washing machines in the United States 
– Percentage change price x Price elasticity of  supply x Value of domestic supply207 
We observe  that this formula is also documented in  academic literature.208 By definition, the 
demand elasticity measures the responsiveness of demand to the change in price and the supply 
elasticity measures the responsive ness of supply to the change in price. Hence, to determine the 
change i n demand for LRWs that arises from a change in duty, the demand  elasticity must be 
multiplied with the demand for LRWs and the change in price. Similarly, to determine the change in 
the supply of LRWs  in the United States  arising from a change in duty, the supply elasticity must be 
multiplied with the supply of LRWs and the change in price. The sum of these two changes in demand 
and supply is equivalent to the change in imports.  
In contr ast, Korea's proposed formula calculates the change in imports resulting from the 
removal of the WTO -inconsistent duty  by multipl ying the sum of the demand elasticity and supply 
elasticity with imports of LRWs and the change in price.  Korea's approach is n ot supported by 
academic literature or practice in applying  the perfect substitutes model.  
3.3.3.3.3   Sensitivity of the model calculations to the values of the elasticities  
The parties test ed the sensitivity of the models with respect to value s of the elasticit ies.209 
This testing involve d changing the value of a given  elasticity  (or elasticit ies) used in the model by a 
small amount  to see how much the model's calculation of the level of nullification or impairment 
would change as a result.  Such testing is useful when evaluating an economic model as one is never 
certain about the values of the elasticities used therein. Given this possible imprecision in the values 
of the elasticities, one would favour an economic model that does not generate  large differences in 
calculation results to small changes in assumption about the value of an elasticity , all things being 
the same. Thus, a model in which the calculated level of nullification or impairment varies far less 
would be considered more robust  and therefore better than the other model.  
Korea showed that the level of nullification or impairment of the Armington model can 
fluctuate by 60 % depending on the value of the elasticity of substitution  used, within the range of 3 
to 5.210 The United State s, for its part , showed changes in the calculated level of nullification or 
impairment ranging from 16.5% to 19.9% in the perfect substitutes model.211 We note that , using 
the yardstick of robustness, neither the perfect substitutes nor the Armington model a ppear s to do 
very well, although the Armington model seems to show greater sensitivity  in calculation results .  
3.3.3.3.4   Economic  models used in previous WTO arbitrations  
We next turn to the use of economic models in previous  WTO arbitrations. Korea asserts  that 
a partial equilibrium model was employed in US – Upland Cotton (Article 22.6 – US II)212, US – Tuna 
II (Mexico) , and US – COOL , and that the United States proposed the same model in India – 
                                                
207 United States' response to Arbitrator question No.  28(b), para . 109.  
208 See Un ited States' response to Arbitrator question No. 28 (a), para. 102, referring to Linda Calvin and 
Barry Krisoff, "Technical Barriers to Trade: A Case Study of Phytosanitary Barriers and U.S. -Japanese Apple 
Trade" , Journal of Agricultural and Resource Econom ics, 23(2):351 -366 (1998) , (Exhibit USA -18). 
209 See Korea's response to Arbitrator question No. 78; and United States' comments on Korea's 
response to Arbitrator question No. 78. 
210 Korea 's response to Arbitrator question No. 78 (b), para. 77. 
211 United States' comments on Korea's response to Arbitrator question No. 78(a), para. 67.  
212 Korea 's methodology paper, fn  22; Korea 's written submission, fn  51. WT/DS464/ARB  
 
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  Agricultural Products.213 Korea  also notes that the Armington mo del has not been employed in 
previous arbitrations.214  
While it is a fact that the Armington model has not yet been employed in an Article  22.6 
arbitration, we observe  that the choice of the model was driven by the circumstances of each case. 
Arbitrator s in previous disputes  chose and adapted  models  to accommodate the characteristics of 
the market or product(s) at issue and the nature of the WTO -inconsistent measure.  For example,  as 
noted by Korea, in the US – Upland Cotton (Article 22.6 – US II)  case, th e arbitrator used a partial 
equilibrium mode l.215 However, i n US – Tuna II (Mexico) , the arbitrator employed a model  which  
reflected the assum ption that the relevant product was differentiated into canned yellowfin tuna and 
canned generic tuna , and that cons umers were willing to pay a price premium for canned yellowfin 
tuna.216 Similarly, in US – COOL , the arbitrator s employed a multi -market econometric model, in 
which different segments of the livestock market were distinguished ( i.e. feeder cattle, fed cattle , 
feeder pigs, and fed hogs) and in which the parameters used to calculate the level of nullification or 
impairment had to be estimated.217 Accordingly, w e disagree with Korea's  assertion that the same 
partial equilibrium perfect substitutes model it propos es in this proceeding was also used in US – 
Tuna II (Mexico) and US – COOL . In the current Arbitration, if the evidence before the Arbitrator 
suggests that LRWs are imperfectly substitutable products, then the Arbitrator must choose an 
economic model that best reflects these product and market characteristics.  
Finally, we fail to see how the model proposed by the United States in a nother  Article 22.6 
arbitration , in and of itself, is relevant to the Arbitrator's selection of t he appropriate model in the 
current proceeding.218 We also disagree with Korea 's related  argument that because , to date , no 
Article 22.6 arbitrator has applied  the Armington model , this model  is not applicable in the current 
dispute.  
3.3.3.3.5   Evidence on the elastic ity of substitution  
The final issue before us is the evidence  the parties  provided on the elasticity of substitution , 
which  can be defined  in the circumstances of this case  as the percentage change in the ratio of 
demand for Korean LRWs and United States'  LRWs given a one percentage change in the ratio of 
those products'  prices. This metric reflects how easily consumers  would  switch from a Korean LRW 
to a United States'  LRW (or vice versa) when price change s. The substitutability between United 
States'  and Korean LRWs – and hence the size of the elasticity of substitution  – has an important 
bearing on the calculated level of the nullification or impairment . This is  because, f or a given level 
of tariff, the more United States'  and Korean LRWs  are substitutab le, the larger the adverse impact 
on Korean exports  becomes,  and, hence , the higher the level nullification or impairment to Korea .  
Perfect substitutes model could be considered one end of a continuum (in which the elasticity 
of substitution approaches in finity and the products are perfect substitutes ) and zero substitutability 
(in which the elasticity of substitution is zero  and there is no substitution between the products ) at 
the other end  – with most goods falling in between (elasticity of substitution between 0 and infinity).  
The United States proposed a value of 4 for the elasticity of substitution. It based this estimate 
on a USITC  study  concerning a  global safeguard investigation of LRWs , which found that the elasticity 
of substitution was likely to be in the range of 3 to 5.219 The United States selected  the median of 
this range, 4, for the value of the elasticity of substitution.  
                                                
213 India – Measures Concerning the Importation of Certain Agricultural Products: Recourse to 
Article 22.6 of the DSU by India (DS430) – Methodology Paper of the United States of America, (Exhibit 
KOR-29). 
214 Korea's written submission, para. 55.  
215 Korea's methodology paper, para. 28, referring to Decision by the arbitrator in US – Upland Cotton 
(Articl e 22.6 – US II) , paras. 4.2, and 4.124 -4.130.  
216 Decision by the Arbitrator, US – Tuna II (Mexico) (Article 22.6 – US), paras. 6.6 -6.12. 
217 Decision by the Arbitrator, US – COOL (Article 22.6 – United States) , para. 5.62.  
218 We also observe that the decision of the arbitrator in India – Agricultural Products (Article 22.6 – 
India)  had not been circulated at the time this Decision was drafted.  
219 United States' written submission, para. 110 , referring to  Large Residential Washers, Investigation 
No. TA -201-076 (Safeguard), USITC Publication 4745 (December 2017), (Exhibit KOR -25). WT/DS464/ARB  
 
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The Arbitrator asked  the United States whether it had econ ometric evidence to underpin this 
value of  4.220 The United States clarified that the estimates in the USITC report were not based on 
any econometric estimates  but on responses by purchasers, producers, and importers to 
questionnaires concerning the LRW mark et, as well as arguments made by interested parties.221 The 
Arbitrator also noted the previous academic work by Broda and Weinstein  (2006) that estimat ed 
elasticities of substitution for a wide range of United States'  products and inquired how the United 
States' proposed value of the substitution elasticity compared with estimates from Broda and 
Weinstein .222 The United States explained that its proposed value of the elasticity of substitution was 
from a very recent USITC study and for the specific product at issue.223 In contrast, the estimates 
available from this academic work were several decades old and covered  a product category broader 
than the specific product at issue. Thus, "it is preferable, and more reasonable ", in the United States'  
view, to use the v alue from the USITC report.224  
The Arbitrator compared the value of the elasticity of substitution from Broda and Weinstein  
to the value proposed by the United States. The estimate for subheading 8450.20.0090 from this 
academic study was 1.63, which is lowe r than the United States' proposed value of 4 and would 
suggest even more limited substitutability than that claimed by the United States. If this estimate 
from the literature were used in an Armington model instead of the value of 4, all other things bein g 
held constant , the resulting level of nullification or impairment would be lower than the United States ' 
calculat ion.  
For its part, as Korea maintains that its partial equilibrium model is appropriate , it did not 
provide an  estimate of  the elasticity of  substitution.225 Notwithstanding Korea's objection to the use 
of the Armington model, the Arbitrator requested Korea to provide the Arbitrator with alternative 
estimates of the elasticity of substitution for LRWs.226 In its reply, Korea informed the Arbitrato r that 
"[t]his information is not readily available, nor is Korea  aware of any agency or institution that 
conducts this type of analysis "; rather,  "to obtain this information, Korea must likely seek assistance 
from an economic consulting agency ".227 At the same time , in its comments to Korea's answers to 
the same question, the United States identif ied a recent academic study that provided estimates for 
the substitution elasticity of LRWs ranging from 2.2 to 4.3.228 The United States argues that these 
estimates  of the substitution elasticity are lower  than,  or within the range of , the substitution 
elasticity of 4 initially  proposed.229  
As we have noted before, the perfect substitutes model is a special case of the Armington 
model , with an elasticity of substituti on that approaches infinity. Any evidence that Korea c ould 
provide to show that the elasticity of substitution of LRWs is a very large number or , at least, is 
significantly greater than 4 would speak in favour of the perfect substitutes model. As we observ ed 
above, one c ould defend the use of a perfect substitutes modelling framework if Korea could have  
provide d evidence to support its claim of a sufficiently high level of substitutability between Korean 
and United States'  LRWs  since a simulation cannot acc ount for all external factors.  However, Korea 
has been unable to cite any studies or provide any other evidence to support such a finding.  
 Instead, the Arbitrator finds that the United States has provide d various sources of 
information  on the elasticity of substitution  that support  a value of  4. For this reason, we determine 
that the weight of the evidence provided by the parties on the elasticity of substitution supports the 
United States'  claim that the Arbitrator should use the  Armingto n model  for LRWs  in this proceeding .  
                                                
220 Arbitrator question No. 39.  
221 United States' response to Arbitrator question No. 39, para. 129. 
222 See Arbitrator question No. 39. The previous academic work that the Arbitrator referr ed to was C. 
Broda, and D . Weinstein, "Globaliza tion and the Gains from Variety ", The Quarterly Journal of Economics, 
2006, 121, pp. 541-585. 
223 United States ' response to Arbitrator question No. 39, para . 131. 
224 United States ' response to Arbitrator question No. 39, para . 131. 
225 Korea's written submission, para. 73. 
226 Arbitrator question No. 78.  
227 Korea's response to Arbitrator question No. 78 (a), para. 74. 
228 United States comments on Korea's response to Arbitrator question No.  78(a), para . 68. The recent 
study is A. Soderbery, "Estimating Import Supply and Demand Elasticities: Analysis and Implications ", Journal 
of International Economics, 96(1), May 2015: pp . 1-17. 
229 United States comments on Korea's response to Arbitrator que stion No. 78 (a), para . 68. WT/DS464/ARB  
 
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  3.3.3.4    Arbitrator's c onclusion  on the economic model  
Our analysis of the aforementioned issues lead s us to conclude  that the Armington model  is 
more appropriate in this Arbitration for the following reasons.  
First, Korea has not demonstrated that LRWs are homogenous products. Further, the fact  that 
LRWs are branded products recognized worldwide and that the United States'  market for LRWs is 
dominated by a handful of companies weighs in favour of the use of an Armingt on model , rather  
than a perfect substitutes model. Consumers are likely to have brand loyalty and may not be willing 
to switch to a competitor unless there is a sufficiently large reduction in the price charge d by that 
competitor . If products were perfect substitutes, consumers would only be  loyal to the lowest -priced 
product and would switch immediately to a competing product offer ed at a better price. Second, 
Korea 's formula in the perfect substitutes model is incorrectly specified and would not result in  the 
calculation of the correct level of nullification or impairment. Third, the fact that the Armington model 
has not been employed thus far in Article 22.6 proceedings does not preclude its use in the current 
Arbitration if, as is the case here,  the evidence before the Arbitrator suggests that LRWs are 
imperfectly substitutable products. Finally, the empirical evidence provided by the United States 
points to an elasticity of substitution of 4  – and not a larger value  – further confirming the 
appropriateness of the Armington model.  Korea did not  provide any evidence to show that the 
elasticity of substitution of LRWs is significantly greater than  4. 
In sum, we agree with the United States  and conclude  that the Armington model is the most 
appropriat e choice to calculate the level of nullification or impairment in this  Arbitration . The 
following set of equilibrium equations defines the Armington model:  
 E =κP1+ε   (1) 
 P = 


 
i=1J
 ω−σ
i ( )pi ()1+t1−σ 1
1−σ
   (2) 
 mi =ω−σ
i ( )pi ()1+t−σ
Pσ−1E   (3) 
 xi =λipη
i   (4) 
 mi =xi   (5) 
Equation ( 1) represents total demand in the importing country with E expenditures and P the 
price index. P is defined in equation ( 2) as a weighted sum over the prices from the different sources. 
Equation ( 3) is the import demand equation , with mi the quantity imported, pi the export price and 
t the ad -valorem duty rate. Equation ( 4) is the export supply equation and equation ( 5) is market 
equilibrium , with export supply equal to import demand. ε is the demand elasticity in the domest ic 
market, η is the export supply elasticity, and σ is the substitution elasticity between goods from 
different sources.  
3.3.4   Values of the parameters  and data to be used in the model  
3.3.4.1   Introduction  
In this section, we will discuss  the inputs required for the Arm ington model  and the data 
sources appropriate to derive the values of these inputs. We note that t he Armington model require s 
information about the size of the LRW market in the United States and the value of LRW imports 
from Korea,  as well as demand , supply and substitution elasticities of LRWs  to calculate the level of 
nullification or impairment .  WT/DS464/ARB  
 
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  3.3.4.2   Demand elasticity  
Both Korea and the United States have proposed the value of -0.55 for  the demand elasticity 
for LRWs in the United States'  market. Korea refers to a report  published by the USITC in the 2017 
Large Residential Washers from China Investigation , as its source for this estimate , as does the 
United States ; the -0.55 figure is the mid -point or average of the range of -0.3 to -0.8 reported  in 
that USITC determination .230 The United States cites the same report  and similarly takes the mid -
point of the estimated range.231 
In light of the foregoing, w e agree with the parties that a value of -0.55 for demand elasticity 
is appropriate . 
3.3.4.3   Supply elasticity  
In addition to the demand elasticity, the Armington model require s information on the 
magnitude of the supply elasticity. Korea uses an estimate of 7 for the supply elasticity for LRWs, 
which is the median of the range of 6 to 8 found in the January 2017 U SITC Large Residential 
Washers from China Investigation .232 The United States argues for a supply elasticity of 6, the 
median of the range of 4 to 8, which comes from the December 2017 report published at the 
conclusion of the USITC's global safeguard invest igation of LRWs.233  
Both parties have relied on the reports of USITC trade remedy investigations of LRW imports 
for their proposed values of the supply elasticity. However, the United States relies on a more recent 
report of the USITC for its proposed value  of 6 for the supply elasticity .234 Thus,  as this estimate 
relies on more recent information collected by the USITC , we find the value proposed by the United 
States more appropriate and, therefore, will use it in our determination of  the level of nullificati on 
or impairment.  
3.3.4.4   Elasticity of substitution  
In section  3.3.3.3.5 , we examined the evidence provided by the parties on the value of the 
elasticity of substitution . We note that w hile Korea did not provide any  estimate , the United States 
provide d various sources of  information on the elasticity of substitution  that support a  value of  4. 
We will therefore employ the value of 4 for the elasticity of substitution in the Armington model for 
calculating the level of nullif ication or impairment.  
3.3.4.5   Size of the LRW market  
The parties agree that the data provided by the AHAM235 could be used to estimate the size 
of the LRW market , but disagree on how to break down  the market into  LRW and non -LRW 
segments.236 Korea claims that the AHAM data on the United States'  "clothes washers " industry as 
a whole represents  the size of the LRW market.237 Based on this information, Korea claims  the size 
of the LRW market to be USD 4.648 billion in 20 17.238 The United States argues that "clothes 
washers" may capture more than "LRWs" , therefore  it would be necessary to adjust the AHAM data 
so that it is a better estimate of the size of the LRW market.239 The United States  proposes that a 
                                                
230 Korea's methodology paper, para. 36, referring to Large Residential Washers from China , 
Investigation No. 731 -TA-1306 (Final), USITC Publication 4666 (January 2017), (Exhibit KOR -18). 
231 United States' written submission, para. 111. 
232 Korea's methodology paper, para. 36.  
233 United States' written submission, para. 108 ; and Large Residential Washers, Investigation No. 
TA-201-076 (Safeguard), USITC Publication 4745 (December 2017), (Exhibit KOR -25). 
234 United States' written submissi on, para. 108.  
235 AHAM describes itself as "the leading voice for the home appliance industry" which "helps 
manufacturers bring efficient, high -performing home appliances into the homes of consumers in the United 
States, Canada and around the world." Among its members are LG Electronics, Samsung Electronics America, 
Inc. and Whirlpool Corporation. See Association  of Home Appliance Manufacturers, 
<https://www.aham.org/AHAM/AuxAboutAHAM> and <https://www. aham.org/AHAM/AuxCurrentMembers >, 
accessed on 15 October  2018.  
236 Korea's methodology paper, para. 17; and United States' written submission, para. 102.  
237 Korea's methodology paper, paras. 17, 37, and 46.  
238 Korea's methodology paper, paras. 17 , 37, and 46.  
239 United States' written submission, para. 102.  WT/DS464/ARB  
 
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  lower estimate, suc h as 70% or 60% of the AHAM total "clothes washers"  market value, should be 
used for the size of the LRW market to ensure that the level of suspension does not exceed the level 
of nullification or impairment.240  
To assist the Arbitrator in determining the s ize of the LRW market, the parties agreed to 
submit a joint request to AHAM for a breakdown of the "clothes washers " market into the LRW and 
non-LRW segments. The United States subsequently reported to the Arbitrator that AHAM had stated 
that it did not ha ve the data with the breakdowns specified by th e United States and Korea, i.e.  the 
definition of LRWs  for the purposes of the U nited States'  anti-dumping and countervailing duty 
measures.241  
The Arbitrator asked  the parties  what criteria could be used to adjust the AHAM data to 
reflect only the value of the LRW market.242 Korea responded that "[t]he portion of imports that are 
subject to the anti -dumping and countervailing duties among total imports of washing machines can 
be used as a proxy to adjust AHAM data to reflect the size of the LRW market ".243 Specifically, Korea 
proposed to adjust the AHAM data by "using the 10 -digit HTS subheadings that were subject to the 
anti-dumping and countervailing duties as identified in Exhibi t USA -21".244 Using this criterion and 
applying it to data from 2011 to 2017, Korea calculates the size of the LRW segment to be 96 % of 
the total washing machines market as reflected in the AHAM data.245 The United States propose d as 
a criterion the share of U nited States' imports of LRWs out of the total value of all United States' 
imports of washing machines. Based on this criterion, the United States estimates that relevant 
LRWs account for no more than 80 % of the total value of the washing machines market a s reported 
by AHAM .246  
We find the criterion proposed by the United States more convincing. First, the United States'  
proposed  criterion is more comprehensive as it takes imports of LRWs and washing machines from 
all countries into account, while Korea's cr iterion only takes imports from Korea into account. 
Second , and in our view  more importantly, the United States' proposed  criterion is more suitable to 
the question at hand , as it calculates the share of imports of LRWs out of total value of washing 
machin es imports. At best, Korea's proposed  criterion suggests that a large portion of Korea's 
washing machine exports to the U nited States are LRW s, but the criterion offers little or no useful 
information about other foreign exporters  of washing machines to th e United States, let alone the 
entire washing machine market in the United States . Thus, we shall use the criterion proposed by 
the United States to adjust the AHAM data , and we determin e the size of the LRW market to be USD 
3,718.4 million (which is 80% of the total value of the washing machines market as reported by 
AHAM ).  
3.3.4.6   Amount of LRW imports  
There are three main differences in how the parties calculate the amount of LRW imports 
from Korea based on the Harmonized Tariff Schedule  (HTS) subheadings in t he "Scope of the 
Investigation" section of the LRW final determination.247 These difference  relate to (i) the 
identification of  LRWs at the 6 -digit or 10 -digit HTS248 subheading ; (ii) whether certain tariff 
subheadings, under which products subject to the anti-dumping and countervailing duty measures  
may also enter , are to be included ; and (iii) Korea's claim that , for the purpose of calculating the 
level of nullification or impairment , one should apply  Korea's share of United States' LRW imports in 
2011, the y ear before the WTO -inconsistent duties were adopted, to the total amount of United 
States' imports of LRWs in 2017.  
                                                
240 United  States' written submission, para. 102. 
241 United States' response to Arbitrator question No. 87.  
242 Arbitrator question No. 81.  
243 Korea's response to Arbitrator question No. 81, para. 83. 
244 Korea's response to Arbitrator question No. 81, para. 83. 
245 See Arbitrat or question No. 81.  
246 United States' comments on Korea's response to question No. 81, para. 79.  
247 Notice of Final Determination of Sales at Less Than Fair Value: Large Residential Washers from the 
Republic of Korea , 77 Fed. Reg. 75988 (Dec. 26, 20 12), (Exhibit KOR -5), p. 75989.  
248 The Harmonized System (HS) classifies goods by six -digit codes. The United States classifies imports 
on the basis of a 10 -digit classification system, the Harmonized Tariff Schedule (HTS) . Notably, an HTS code 
shares the same beginning six digits as an HS code. As the United States' investigating authorities' final 
determinations contain inputs to calculate the level of suspension, we will refer to HTS codes.  WT/DS464/ARB  
 
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With respect to the first issue, Korea calculates the value of United States' imports of LRWs 
from Korea in 2017 by first determining the to tal value of United States' imports of LRWs from all 
sources a t the HTS 6-digit subheading.249 The United States  uses data at the HTS 10-digit 
subheading ( i.e. subheading 8450.20.0090 for 2011 -2014 and subheading s 8450.20.0040 and 
8450.20.0080 for 2015 -2017) instead of the 6 -digit subheading.250 Korea notes that the difference 
between using the 6 -digit and 10 -digit subheading s is not significant, amounting to only a 2.1% 
difference  in the volume of imports  in 2017. Thus, Korea would not oppose reverting to the 10 -digit 
subheading , should the Arbitrator seek to use 10 -digit subheadings to determine import volume.251 
Hence, we  shall use 10 -digit, rather than 6 -digit, subheadings.  
With respect to the second issue, Korea an d the United States disagree on whether  to include 
the HTS  subheadings 8450.11.0040, 8450.11.0080, 8450.90.2000, and 8450.90.6000. While the 
United States acknowledges that products subject to the United States'  anti-dumping and 
countervailing duty measure s may enter under these subheadings, they primarily cover products 
outside the scope of the measures  at issue in the underlying dispute .252 In particular, the United 
States  claims that HTS subheadings 8450.11.0040 and 8450.11.0080 generally cover "Machines, 
each of a dry linen capacity not exceeding 10 kg" and are smaller residential washing machines, 
which would be outside the scope of the measures.253 The United States further notes that HTS 
subheadings 8450.90.2000 and 8450.90.6000 generally cover "Parts: Tu bs and tub assemblies" and 
"Other".254 The United States submits that the scope of its anti -dumping and countervailing duty 
measures includes "certain subassemblies used in large residential washers," not all "parts" are 
included in the scope.255 While the United States acknowledges that "it is possible that some LRWs 
or subassemblies subject to the measures may be entered into the United States under these 
subheadings ", the United States  considers that "it would not be appropriate to include the entire 
value of goods entered under these subheadings in the value of U.S. imports of LRWs. "256 
Korea notes that the USDOC's determination identified subheadings 8450.11.0040, 
8450.11.0080, and 8450.90 as possible subheadings under which LRWs can enter.257 Korea argues 
that it is not unreasonable to include these subheadings in the calculation of import value since 
excluding these subheadings would understate the amount of LRW  imports .258  
Given that the United States' authorities are responsible for applying ant i-dumping and 
countervailing duties, and for collecting data on the value of imports, the Arbitrator requested the 
United States to provide data on the value of imports from Korea with respect to  the tariff lines on 
which anti -dumping duties were collected  each year from 2011 to 2017.259 This would allow the 
Arbitrator to determine what the appropriate tariff subheadings should be for the purpose of 
calcul ating the amount of LRW imports . The United States provided the requested data to the 
Arbitrator  in Exhib it USA -21.260 This data, collected by the United States Customs and Border 
Protection (USCBP) , is on a fiscal year basis , from 1 October of the previous year to 30 September 
of the current year.261 The document shows that , during fiscal years 2011 to 2017, anti -dumping 
and countervailing  duties  were collected by United States authorities from Korean companies (LG 
and Samsung) on the following tariff subheadings: 8450110040, 8450110080, 8450200040, 
8450200080, 8450200090, 84 50902000 and 8450906000.   
                                                
249 See Korea's methodology pape r, Appendix D and USITC Dataweb Annual Customs Value Query 
Screenshot , (Exhibit KOR -8). 
250 United States' written submission, para. 80.  
251 Korea's written submission, para. 61.  
252 United States' written submission, para. 83.  
253 United States' written submissio n, para. 8 4. 
254 United States' written submission, para. 8 6. 
255 United States' written submission, para. 8 6. 
256 United States' written submission, para. 8 6.  
257 Korea's written submission, para. 62.  
258 Korea's written submission, para. 62.  
259 See Arbitrator ques tion No. 33.  
260 The United States submitted the data as business confidential information, as the data include 
company -specific import statistics.  See United States' response to Arbitrator question No. 33, para. 116, 
referring to U.S. Customs and Border Protection Data on the Value of Imports from Korea that Were Subject to 
the U.S. Antidumping and Countervailing Duty Measures on LRWs from Korea for Each Year from 2011 to 
2017, as Requested by the Arbitrator , (Exhibit USA -21) (BCI).  
261 For example, fiscal year 2011 correspond s to the period from 1 October 2010 to 30 September 2011.  WT/DS464/ARB  
 
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On the basis of th is document , the Arbitrator finds that these seven tariff subheadings are 
the appropriate subheadings to determine the amount of United States'  imports of LRWs from Korea .  
The Arbitrator notes that the data in E xhibit USA -21 is on a fiscal year basis while the 
reference period is based on a calendar year. Thus, the Arbitrator cannot use th is data for  calculating 
the level of nullification or impairment. Instead, the Arbitrator will obtain quarterly trade data on 
these tariff subheadings from USITC Dataweb and then construct an estimate of LRW imports for 
the corresponding calendar year. Furthermore, mindful of the United States' comment  that it would 
not be appropriate to include the entire value of goods entered under these subheadings to 
determine the value of United States'  imports of LRWs, the Arbitrator shall apply a correction factor 
to the import data from USITC Dataweb. For each tariff subheading, the correction factor is 
calculated by taking the ratio of L RW imports reflected in Exhibit USA -21 to the value of imports 
obtained from USITC Dataweb. The detailed calculations are described in Annex C-1.  
The Arbitrator further notes that the import data provided by Korea and the United States 
do not reflect the CIF (cost, insurance and freight) value.262 The data from USITC Dataweb used by 
the parties reflect  "General Imports"  (General Customs Value )263 rather than "General CIF Imports 
Value ".264 To calculat e the level of nullification or impairment, it is necessary to take the CIF  value 
of imports  as the price faced by consumers of imported LRWs includes no t only the anti -dumping 
and countervailing duties  but also the cost of landing thes e products in the United States . 
The third, and only remaining , issue is whether to use Korea's 2011 or 2017 import share to 
determine the value of LRW imports from Korea in 2017 to calculat e the level of nullification or 
impairment. As discussed above, we recall that the appropriate reference period to determine 
nullificat ion or impairment is, as Korea agrees , the year in which the RPT ended . For this reason, 
the United States proposes to u se the actual LRW imports from Korea in  calendar year  2017.265 
However , Korea proposes to use  as a starting point its share of U nited States imports of LRWs in 
2011 as this figure reflects trade that is "untainted" by the WTO-inconsistent measures.266  
The Arbitrator agrees with Korea that the calculation should take into account "the impact 
of the WTO -inconsistent measure on the market that h as led to the market taking on characteristics 
as they exist at the end of the RPT".267 The imposition of  higher duties or more trade -restrictive 
measures , or the maintena nce of  these measures for a prolonged period of time , is likely to cause 
trade to fall more severely. Using this diminished level of trade in the calculation may lead to a 
severely reduced estimate of the level of nullification or impairment. It would appear to be 
counterintuitive that Members imposing higher d uties or more trade restrictive measures would be 
subject to a lower level of suspension of concessions. Further, in the circumstances of this 
proceeding, relying exclusively on data at the end of the RPT could lead to the perverse effect that 
the longer a n inconsistent measure affects the trade of a Member, the lower the resulting calculated 
level of suspension of concessions  would be . For this reason, the Arbitrator rejects the United States' 
proposal to use the actual LRW imports from Korea in calendar y ear 2017 . 
                                                
262 CIF means the value of the goods imported, and includes the costs of freight and insurance up to the 
port or place of entry into the country of importation. The valuation shall  be made in accordance with Article 
VII of GATT 1994 and the Agreement on the Implementation of Article VII of GATT 1994 as contained in Annex 
1A to the WTO Agreement. For more information, see World Customs Organization, 
<http://www.wcoomd.org/en/Topics/O rigin/Instrument%20and%20Tools/Comparative%20Study%20on%20Pr
eferential%20Rules%20of%20Origin/Specific%20Topics/Study%20Topics/DEF>, accessed 18 October 2018.  
263 General customs value is the value of general imports as appraised by the U.S. Customs Service. 
This value is the price actually paid or payable for merchandise when sold for exportation, excluding U.S. 
import duties, freight, insurance, and other charges incurred.  The value  of General I mports measure s the total 
physical arrivals of merchandise from foreign countries, whether such merchandise enters consumption 
channels immediately or is entered into bonded warehouses or Foreign Trade Zones under Customs custody. 
See United States International Trade Commission Dataweb, <https://dataweb.usitc.gov/scri pts/prepro.asp>, 
accessed 30 October 2018 . 
264 The general CIF value represents the landed value of the merchandise. It is computed by adding 
"Import Charges" to the "Customs Value" and excludes U.S. import duties. United States International Trade 
Commissio n Dataweb, <https://dataweb.usitc.gov/scripts/prepro.asp>, accessed 30 October 2018.  
265 United States' written submission, paras. 88 and 89. See also Correct U.S. Import Value of LRWs, 
Queried by the United States Using USITC DataWeb, by Country and by HTS Code, (Exhibit USA -9). 
266 Korea's response to Arbitrator question No. 30, para. 100.  
267 Korea's response to Arbi trator question No. 6, para. 36. WT/DS464/ARB  
 
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However , the Arbitrator does not  accept Korea's proposed use of the 2011 import share for 
the calculati on of the level of nullification or impairment. This is because  Korea's proposed use of 
the 2011 import share  as an input into a model that sim ulates the trade flow response to a change 
in tariff  gives rise to a double counting problem . This improperly inflate s the calculated level of 
nullification or impairment. In its methodology paper, Korea projected the 2011 import share onto 
the level of to tal United States imports of LRWs in 2017, assuming that Korea 's 2011 share  would 
have remained  constant , were it not for the WTO -inconsistent anti -dumping and countervailing  
measures . Korea  argues that its proposed adjustment follows the arbitrator's appr oach in EC – 
Hormones  (US) (Article 22.6 – EC).268 There is , however,  a crucial difference in the approach followed 
in that arbitration with what Korea is proposing  in the current proceeding . In EC – Hormones  (US), 
the projected level of imports served as  the arbitrator's calculation of the counterfactual level of 
imports by the E uropean Communities . In the current Arbitration, Korea proposes to use its 
projected  value of what its  imports  would have been  in 2017  absent the WTO -inconsistent measure s, 
as a further input into an economic model that would then calculate how LRW imports from Korea 
would increase if the WTO -inconsistent measures were removed. As the United States has argued , 
such an approach leads to a double counting of the level of nullificatio n or impairment.269  
In light of the foregoing, we have developed a third alternative approach, which  is described  
in the next section.  
3.4  The Arbitrator's own determination of the level of nullification or impairment   
Following our discussion above, w e shall calculate the level of nullification or impairment 
using the Armington model, with an elasticity of substitution of 4. For the other parameters of the 
model, we will use a demand elasticity of -0.55 and a supply elasticity of 6. The size of the LRW  
market in 2017 is estimated to be 80% of the figure provided by AHAM for that year, which comes 
to USD 3,718.4 million.  We recall that  the counterfactual rates of the anti -dumping and 
countervailing duties are [[***]] and 0% , respectively.270 As explained  in the previous section, the 
Arbitrator declines to use both the actual level of LRW imports from Korea in 2017  as proposed by 
the United States , and Korea's proposal to construct a market share fo r 2017 based on  Korea's  2011 
import share . Instead, the Arbi trator will calculate a trade figure for 2017 that account s for the 
depressing effect of the WTO -inconsistent duties applied in 2012 on Korea's share of the United 
States'  LRW market .  
The Arbitrator , thus, proceeds along the following lines. First, the Arbitrator uses the 
Armington model to calculate what LRW imports from Korea and the market share of Korea in the 
United States'  LRW market would have been when the WTO -inconsistent anti -dumping and 
counterva iling rates of , respectively,  11.86% and 0.58% were applied in 2012.  The Arbitrator uses 
this adjusted market share, which reflects the effect of the WTO -inconsistent duties, and applies it 
to the total United States'  market of LRWs in 2017.  The second and  final step involves applying the 
Armington model to determine the level of imports of Korean LRWs if duties were reduced to the 
counterfactual rates of [[***]] for the anti -dumping duty and 0% for the countervailing duty , both 
of which correspond  to the c ounterfactual scenario determined by the Arbitrator .  
Applying th is procedure  to the WTO -inconsistent anti -dumping duties, we obtain the 
following results:  
i. In the first step, t he calculation shows that U nited States'  imports of Korean LRWs fall 
from USD [[***]] million in 2011 to USD [[***]] million in 2012 as a result of the 
WTO-inconsistent anti -dumping duties. Correcting t he share of Korean LRWs in the 
United States'  LRW market results in  a decrease in market share  from [[***]] in 2011 
to [[***]] in 2012.  Projecting this 2012 market share to  the 2017 market share  gives 
an estimated amount of imports of Korean LRWs of USD [[***]]. 
ii. In the second step, t he model calculation shows that imports of Korean LRWs rise by 
USD 74.40 million , from USD [[***]] million to USD [[***]] million at the end of the 
                                                
268 Korea's written submission, para. 66.  
269 United States' comments on Korea's response to Arbitrato r question No. 63, para. 28.  
270 See paras. 3.32 and 3.41 above.  WT/DS464/ARB  
 
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  RPT, assuming that the United States ha s come into compliance with the rulings and 
recommendations of the DSB , as in the counterfactual scenario.  
Turning now t o the case of the WTO -inconsistent countervailing  duties, and applying the 
same procedure, we obtain the following results:  
i. In the first step, the calculation shows that U nited States'  imports of Korean LRWs fall 
from USD [[***]] million in 2011 to USD [[***]]  million in 2012 as a result of  the 
WTO-inconsistent countervailing  duties. Correcting t he share of Korean L RWs in the 
United States'  LRW market  results in a decrease in market share  from [[***]] in 2011 
to [[***]]  in 2012 . Projecting this 2012 market share to 2017  market share  gives an  
estimated amount of imports of Korean LRWs of USD [[***]]  million . 
ii. In the second  step, the model calculation shows that imports of Korean LRWs rise by 
USD 10.41 million , from USD [[***]]  million to USD [[***]]  million at the end of the 
RPT, assuming that the United States had come into compliance  with the rulings and 
recommendations of the DSB as in the counterfactual scenario . 
On the basis of the Arbitrator's findings on the appropriate economic model to use for LRWs, 
reference period, counterfactual anti -dumping and countervailing duties, values of the elasticities 
and other relevant economic variables , the Arbitrator determines that the level of nullification or 
impairment caused by the WTO-inconsistent anti -dumping and countervailing duty measures  at the 
end of the RPT  amounts to  USD 74.40 million and USD 10.41 million , respectively . The calculations 
are set out in Annex C-1. 
3.5  Korea's request to adjust the level of suspension annually  
3.5.1   Introduction  
Korea requests the inclusion of a "growth rate" to adjust the level of suspension annually. 
According to Korea, the level of nullification or impairment it suffers will "increase in proportion to 
the growth in the U.S. washing machines market."271 For this purpose, Korea initially proposed that 
the Arbitrator use a  fixed growth rate of 5.8%272 but, in response to questions, clarified that it "does 
not object to the use of the actual growth rate to calculate the level of future suspension".273 The 
United States opposes any inclusion of a "growth rate", because imports of  LRWs from Korea to the 
United States are expected to decline "irrespective of the growth rate of the U.S. washing machines 
market".274 In response to a question by the Arbitrator, the United States contends that a growth 
rate, if at all relevant to the dete rmination of the level of nullification or impairment, would need to 
be based on actual growth projections rather than an average of prior years' growth rates.275 
According to the United States, however, "an approach to the application of a variable level of  
nullification or impairment that takes into account actual updated data" and is calculated annually 
by applying the Armington model "would be far more accurate than the approach proposed by 
Korea".276 Both parties acknowledge that the level of nullification  or impairment may be adjusted in 
the future. However, the parties do not agree on a mechanism to adjust the level of suspension.  
Our task in this Arbitration is to determine a level of suspension that is "equivalent" to the 
level of nullification or impa irment sustained by Korea. Yet, as the arbitrator in US – Offset Act (Byrd 
Amendment) (EC) (Article 22.6 – US) observed, "the requirement of Article 22.4 is simply that the 
                                                
271 Korea's methodology paper, para. 6. 
272 Korea 's methodology paper, paras. 25 and  46. Korea used the statistics published  by AHAM as a 
measure of the  total market size of LRWs in the United States. The AHAM statistics for the years 2011 to 2017 
suggest that the market has been growing by 5.8% on average, although growth in any given year has varied 
between 0.4% and 14.3%.  
273 Korea's response to Arbitrator ques tion Nos. 42 and 44, paras. 114 and  116-117. 
274 United States' written submission, paras. 116  and 121. 
275 United States' written submission, para. 120.  
276 United States' response to Arbitrator question Nos. 43, 44 and 45, paras. 137, 139,  and 144. WT/DS464/ARB  
 
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  two levels be equivalent" and, as long as the two levels are equivalent, it is poss ible to adjust these 
levels "provided such adjustments are justified and unpredictability is not increased as a result".277  
With these criteria in mind, we turn to examine whether the circumstances of the present 
Arbitration justify the inclusion of a growt h rate to adjust the future level of suspension, as proposed 
by Korea, or whether annually re -running the economic model with updated data, as suggested by 
the United States, is appropriate.  
We note, first, that there is no exact precedent for the adjustm ent of the future level of 
suspension based on a growth rate, as Korea proposes. Korea cites to the decisions by the arbitrators 
in US – Gambling and EC – Bananas III (Ecuador)  (Article 22.6 – EC) as precedential support for its 
proposal to incorporate a g rowth rate.278 Neither case, however, applied a growth rate in the manner 
Korea suggests in this Arbitration. The growth rate, in US – Gambling and EC – Bananas  III 
(Ecuador) , accounted for anticipated market size or volume of exports, respectively, to calcu late, in 
both arbitrations, a single fixed level of nullification or impairment.279 In contrast, in this Arbitration, 
the level of nullification or impairment as of the end of the RPT is known and serves as the baseline 
for which future adjustment is being r equested by Korea.  
We also recall that, as explained by the arbitrator in US – 1916 Act  (EC), "it is necessary to 
rely only on credible, verifiable information, and not on speculation"  in calculating the level of 
nullification or impairment.280 In our view,  Korea has not demonstrated whether or how growth in 
the United States' LRW market can be used as a proxy for Korea's share of imports in this market. 
Rather, the evidence submitted by Korea demonstrates that Korea is not the only exporter of LRWs 
to the U nited States.281 We see no basis to infer whether growth in the United States'  LRW market 
necessarily predicts growth in Korea's share in this market and, relatedly, whether market growth 
would be in proportion to the level of imports  from Korea .282  
Moreover,  the evidence submitted by Korea does not support its proposal to incorporate a 
fixed growth rate of 5.8% for the adjustment of nullification or impairment  for each year thereafter . 
Based on the evidence on record, it is neither clear nor verifiable whether using the AHAM data  (if 
made available ) to derive a fixed  growth  rate of the United States' LRW market  would , in fact,  predict 
growth of Korea's export share in the United States LRW market. A fixed growth rate assumes that 
the state of the United States' LRW market will remain constant; however, the evidence provided by 
Korea demonstrates that the growth rate of the United States' LRW market has varied each year 
during 2011 -2017.283 In this regard, we observe that it would be equally unavailing to ac count for 
growth with "actual updated data", since it is not certain whether such data  for the United States' 
LRW market  would be publicly available each year (be it from AHAM  or another source) , and whether 
this actual  growth rate would be  an appropriate predictor for, or is in proportion to, Korea's share of 
imports in the United States'  LRW market.  
Based on the foregoing, we find that the circumstances in the present Arbitration do not 
merit the inclusion of a growth rate , whether fixed or actual,  in the United States' LRW market in 
the calculation of nullification or impairment . 
We now turn to the United States' proposal according to which a "variable level of 
suspension" would be possible if the Arbitrator employed the United States' proposed economic 
                                                
277 Decision by the Arbitrator, US – Offset Act (Byrd Amendment)  (EC) (Article 22.6 – US), para. 4.20. 
That arbitrator also observed that maintaining equivalency between the level of suspension and the level of 
nullification or impairment serves to ensure that the "cost of the violation" remains that same and, thus, that 
the "incentive to comp ly" does not decrease. Ibid., para. 4.25. Similarly, in US – 1916 Act (EC), the arbitrator 
awarded a variable level of suspension, since the monetary value of judgments or settlement agreements 
under the 1916 Act, which constituted nullification or impairm ent suffered by the EC, could vary each year. 
Decision by the Arbitrator, US – 1916 Act (EC) (Article 22.6 – US), paras. 5.58 -5.63. 
278 Korea's response to Arbitrator question No. 40, paras. 109-110. 
279 See Decisions by the Arbitrators, US – Gambling (Article  22.6 – US), paras . 3.186 -3.189 ; EC – 
Bananas III (Ecuador) (Article 22.6 – EC), paras. 169  and 173. 
280 Decision by the Arbitrator, US – 1916 Act (EC) (Article 22.6 – US), para . 5.63.  
281 See Notice of Preliminary Determination of Sales at Less Than Fair Valu e and Postponement of Final 
Determination: Large Residential Washers From the Republic of Korea, 77 Fed. Reg. 46391 (Aug. 3, 2012), 
(Exhibit KOR -9). See also Korea's methodology paper, Appendix 4.  
282 Korea's methodology paper, para. 6.  
283 AHAM Data Summary ( 2011-2017), (Exhibit KOR -7). WT/DS464/ARB  
 
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  model and applied it each year with updated data.284 While we have largely  accepted the United 
States' model, re-running the model each year with updated data may have the effect that the longer 
a Member delays implementation, the lower the level of nullific ation or impairment, and the lower 
the value of suspension. This would diminish the incentive for the United States to implement, 
therefore, not inducing compliance.285 On this basis, we do not agree with the United States' proposal  
for the adjustment of the level of suspension.  
In light of the foregoing, we find that neither party's approach provides for an appropriate 
mechanism to adjust the level of suspension in this Arbitration.  
In our view, one way to ensure th at the real value  of the level of suspension  is maintained 
over time is by adjusting for inflation. When asked by the Arbitrator about its views on adjustment 
using the inflation rate, Korea state d that it "does not object to the Arbitrator's proposal of using the 
rate of inflation", and notes that this alternative does not "correlate to the actual growth rate of the 
industry".286 In contrast, the United States oppose d such an approach , submitt ing that "there is no 
connection between the size of the LRWs market (or changes in  level of imports of LRWs) and the 
rate of inflation".287  
In our view, adjustment based on inflation is not a mechanism to adjust the size of the LRW 
market or the level of imports but a means to maintain the real value of the annual level of 
suspension aut horized by the Arbitrator in this case. Moreover, adjustment based on inflation does 
not increase unpredictability, as maintaining the real monetary value of the amount of suspension 
is different from updating the level of suspension based on changes in th e size of the LRW market 
in the future, which neither the Arbitrator nor the parties can predict.  
In light of the foregoing, we conclude that the initial level of suspension of concessions 
authorized to Korea, m ay be adjusted for inflation on an annual ba sis. 
3.5.2   Annual adjustment of the level of nullification or impairment based on the inflation 
rate 
Following from our discussion and conclusion  above , we turn to determine (i) the price index  
to be used to calculate the rate of inflation for the purpose of mak ing the annual adjustment of the 
level of nullification or impairment , and (ii) how to implement  this adjustment.   
The price index should be one whose product coverage matches  LRWs  as closely as possible 
and which also corresponds to prices received by pro ducers. We note that t he United States 
government agency responsible for measuring price changes in the economy is the Bureau of Labor 
Statistics. Among other indices, it maintains the producer price index which measures the average 
change over time of the selling prices domestic producers receive for their output. Based on these 
data, the Federal Reserve Bank of St Louis288 has developed a subindex of the producer price index 
for household appliance manufacturing. This subindex includes household laundry equipment and 
would therefore fit the requirements for a price index measuring prices received by producers and 
whose product coverage matches as closely as possible LRWs.289  
Thus, for the purpose of making annual adjustments to the level of nullification o r 
impairment, Korea shall use the producer price index for household appliance manufacturing 
published by the Federal Reserve Bank of St Louis.290 The exact title and ID of this data series are: 
                                                
284 United States' response to Arbitrator question No. 43, para. 137.  
285 Decision s by the Arbitrators, EC – Bananas III (US) (Article 22.6 – EC), para. 6.3; EC – Bananas III 
(Ecuador) (Article 22.6 – EC), para. 76; Canada – Aircra ft Credits and Guarantees (Article 22.6 – Canada) , 
para. 3.105; US – 1916 Act (EC) (Article 22.6 – US), paras. 5.4, 5.7 -5.8; US – Offset Act (Byrd Amendment) 
(EC) (Article 22.6 – US), para. 3.74 ; and  EC – Hormones (US) (Article 22.6 – EC), para. 39.  
286 Korea's response to Arbitrator question No. 80, para. 82. 
287 United States' response to Arbitrator question No. 80, paras. 85 -86. 
288 The Federal Reserve Bank of St. Louis is a part of the United States Federal Reserve central bank 
system that  is composed of 12 independent regional Reserve banks and the Board of Governors in Washington, 
D.C.  
289 Federal Reserve Bank of St Louis, <https://fred.stlouisfed.org/series/PCU33523352>, accessed 
15 October 2018.  
290 The Federal  Reserve  Bank of St Louis maint ains one of the most comprehensive online economic 
databases known as "FRED" for Federal Reserve Economic Data.  WT/DS464/ARB  
 
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  "Producer Price Index by Industry: Household Appliance Manufact uring" and "PCU33523352", 
respectively.291  
The Arbitrator finds that the level of nullification or impairment suffered by Korea because 
of the United States' WTO -inconsistent measures in a particular year can be determined by a formula 
based on the level of  nullification or impairment at the end of the RPT, as noted  above, plus the 
changes in the inflation rate for the relevant year:  
NOI t+1 =  NOI t* (1+ inflation t),   where t = 1, 2, …  
    USD 74.40 million for the WTO -inconsistent anti -dumping duties ; and 
NOI 1 = 
USD 10.41 million for the WTO -inconsistent countervailing duties  
Here the variable NOI t+1 refers to the level of nullification or impairment in year t + 1; NOI t 
is the level of nullification or impairment in year t, the previous year; inflation t is the rate of inflation 
in calendar year t as measured by the producer price index for household appliance manufacturing. 
The time period "1" refers to the first year that the suspension of concessions would be  applied and 
must be equal to USD 74.40 million for the WTO -inconsistent anti -dumping dut y measures  and USD 
10.41 million for the WTO -inconsistent countervailing dut y measures , which are the level s of 
nullification or impairment at the end of the RPT  calculated by the Arbitrator . 
Korea shall be enti tled to impose suspension of concessions or other obligations in the 
amount of USD 74.40 million for the WTO -inconsistent anti -dumping dut y measures  and 
USD 10.41 million for the WTO -inconsistent countervailing dut y measures  during the first year 
following  the date of DSB authorization ("t=1"). In subsequent years following the date of DSB 
authorization , and if the United States has not fully complied with the DSB recommendations and 
rulings, Korea shall be entitled to increase the value of its level of sus pension by a percentage 
corresponding to the United States' price inflation rate from the preceding calendar year.  This is to 
be calculated by comparing the value of the index in December of year t with its value in December 
of the previous year.292  
The fol lowing example illustrates how  to implement  this adjustment. Assume that Korea 
obtains DSB authorization to impose suspension of concessions or other obligations on the United 
States at a level of (i) USD 74.40 million  for the WTO -inconsistent anti -dumping dut y measures  and 
(ii) USD 10.41 million  for the WTO -inconsistent countervailing dut y measures , beginning in August 
2019. Korea may, therefore , impose this level of suspension of concessions or other obligations from 
August  2019 until July 2020. For the subsequent period, from August 2020 to July 2021, Korea may 
increase the level of suspension by a percentage corresponding to the change in the producer price 
index for household appliance manufacturing during the preceding calendar year ( i.e. 2019). This is 
to be calculated by comparing the value of the index in December 2019 with its value in December 
2018.293 For the purpose of making this calculation, t he latest version of this index published as of 
July 2020 shall be used. If the index changed by 5% in calendar year 201 9, then Korea may impose 
a level of suspens ion of concessions or other obligations equivalent to (i) USD 78.12 million  for the 
WTO-inconsistent anti -dumping dut y measures  and (ii) USD 10.93 million  for the WTO -inconsistent 
countervailing dut y measures , 5% more than the amount authorized in 201 9. 
Accordingly, the level of suspension of concessions by Korea to the United States must not 
exceed , in US dollars, the amount resulting from the yearly application of this formula.  
                                                
291 Federal Reserve Bank of St Louis, <https://fred.stlouisfed.org/series/PCU33523352>, accessed 15 
October 2018.  
292 The rate of inflation in calen dar year t is to be calculated as follows: (Value of the producer price 
index for household appliance manufacturing in December of year t - Value of the producer price index for 
household appliance manufacturing  in December of year t-1)/ Value of the produ cer price index for household 
appliance manufacturing  in December of year t-1.  
293 The rate of inflation in calendar 2018 is to be calculated as follows: (Value of the producer price 
index for household appliance  manufacturing  in December 2019 - Value of th e producer price index for 
household appliance  manufacturing  in December 2018)/  Value of the producer price index for household 
appliance  manufacturing  in December 2018.  WT/DS464/ARB  
 
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  3.6  Conclusion  
The Arbitrator determines that the level of nullification or imp airment caused by the 
measures at issue on Korea at the end of the RPT  is (i) USD 74.40 million  for the WTO -inconsistent 
anti-dumping dut y measures  and (ii) USD 10.41 million  for the  WTO-inconsistent countervailing dut y 
measures .  
In the years following the date of DSB authorization, Korea shall be entitled to increase the 
value of its level of suspension by a percentage corresponding to the United States' rate of price 
inflation from the preceding calendar year.  
4  KOREA'S REQUEST PERT AININ G TO NON -LRWS ("AS SUCH" FINDINGS ) 
4.1  Introduction  
We now address Korea's request pertain ing to the suspension of concessions or other 
obligations for products from Korea other than LRWs  (non-LRWs) . Korea has requested authorization 
for a formula, to annually  estimate the level of suspension of concessions with respect to the DSB's 
"as such" recommendations  and rulings .294 
Korea considers that the United States' failure to implement the rulings and recommendations 
adopted by the DSB encompasses "all Korean impor ts that are subject to U.S. anti -dumping 
proceedings in which the comparison methodologies found to be 'as such' inconsistent with the [Anti -
Dumping Agreement] continue to be used"295, and, consequently, has requested authorization to 
suspend concessions bas ed on an annual level of nullification or impairment caused by the United 
States' application, in future administrative reviews and investigations, of the differential -pricing 
methodology (DPM) and use of zeroing in the W -T comparison methodology on non -LRWs, 
subsequent to the expiration of the RPT.296 To suspend concessions and related obligations, Korea 
proposes to use a formula – the same applied to estimate the level of nullification or impairment for 
LRWs – albeit the precise data inputs remain undefined .297 
We examine Korea's request by first determining the appropriate counterfactual and time -
frame that form the basis of the calculation of the level of nullification or impairment, before turning 
to the calculation itself.  
4.2  The appropriate counterfactual an d time -frame for Korea's request pertaining to 
non-LRWs  
4.2.1   Counterfactual  
4.2.1.1   The parties' positions  
Korea proposes a counterfactual whereby the United States "ceased to use" the WTO -
inconsistent "as such" measures in future anti -dumping proceedings.298 While the United States 
originally did not propose a counterfactual for the "as such" measures299, during the substantive 
meeting, and in its responses to questions thereafter, it concurred with Korea that the appropriate 
counterfactual would be a scenario in which the United States "ceased to use  DPM and zeroing when 
applying the W -T comparison methodology ".300  
                                                
294 Korea's methodology paper, paras. 49 -51. 
295 Korea's methodology paper, para. 7.  
296 Korea's methodology paper, para. 49.  
297 Korea's methodology paper, paras. 49 and 93.  
298 Korea's methodology paper, para. 23.  
299 In its written submission, the United States argued that Korea's propose d suspension for non -LRWs 
"is contrary to the DSU." United States' written submission, para. 130. The United States further declined to 
provide "additional views … concerning what would be the correct manner to assess the level of nullification or 
impairment for the 'as such' inconsistent measures at issue in this  dispute." United States' response to 
Arbitrator question No. 51(b), para. 161.  
300 See United States' opening statement, para. 19; and United States' response to Arbitrator question 
No. 66 (b), paras. 49 -50.  WT/DS464/ARB  
 
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However, the parties' views differ on the meaning of "ceased to use".  According to Korea, this 
would amount to "removal" of the inconsistent measures, after the expiry of the RPT.301 Therefore, 
if the USDOC were to use "DPM and zeroing when applying the W -T comparison methodology in a 
proceeding", Korea notes that this "would invalidate the dumping margins calculated in that 
proceeding, regardles s of whether the USDOC applies the WTO -consistent methodology to one or 
more of the examined companies."302 The United States, by contrast, considers it "reasonable and 
plausible to assume that the USDOC would apply the 'normal[]' W -W comparison methodology" .303 
Hence, the parties disagree, in fact, on the appropriate counterfactual. Their positions are the same 
as for the counterfactual applicable to calculate the level of nullification or impairment for LRW s, as 
are their supporting arguments and counterargum ents. We therefore refer to our discussion in  
section 3.2 above . 
The parties raise additional issues, specific to the "as such" measures, which we address in the  
following sections. We will follow the same order of analysis as we undertook  to evaluate an 
appropriate counterfactual with respect to LRWs. We will first examine Korea's proposed 
counterfactual of "removal", and, if we find that this proposed counterfac tual by Korea is not 
appropriate, we will then determine an alternative.  
4.2.1.2   Assessment of Korea's proposed counterfactual  
We first evaluate whether Korea's counterfactual accurately reflects the level of nullification or 
impairment of benefits accruing to Kor ea. As discussed above, we must identify those benefits by 
reference to the DSB's recommendations and rulings .304  
In this regard, the Appellate Body determined that the DPM was "as such" inconsistent with 
Article 2.4.2 of the A nti-Dumping Agreement305 and the  application of the W -T comparison 
methodology with zeroing was "as such" inconsistent with Articles 2.4 and 2.4.2, for reasons similar 
with respect to the "as applied" findings. Accordingly, we recall our analysis of the benefits accruing 
to Korea in the counterfactual section pertaining to LRW s, in paragraph  3.30, and the reasoning 
developed, above, related to Articles 2.4 and 2 .4.2 of the Anti-Dumping Agreement . There, we stated 
that Korea would expect the USDOC to appropriately identify and address targeted dumping in a 
WTO-consistent manner. In "taking account of all relevant circumstances"306, we consider that 
Korea's expectation of benefits accruin g under Article 2.4.2 of the Anti-Dumping Agreement  would 
be the same for the DPM307, which is the analyt ical framework for deciding whether  the application 
of the exceptional W -T comparison methodology is valid, and with regard to the future application 
of the W -T comparison methodology.308  
We do not agree that a counterfactual of removal of an entire anti -dumping order, in each 
instance of the application of DPM, would accurately reflect the scope of benefits that accrue to 
Korea under A rticles 2.4 and 2.4.2 of the Anti-Dumping Agreement . We refer  to our reasoning above 
in section 3.2.2, which applies equally here, but respond to arguments raised by the parties with 
respect to the "as such" measures.  
First, we note that Korea considers that the very use of the DPM, irrespective of whether the 
USDOC ultimately applies the W -T or W -W comparison  methodolog y for the determination of a 
dumping margin , would result in an "as such" violation and entitle Korea  to suspend concessions.309 
The United States counters that the calc ulation of a W -W margin does not become  WTO-inconsistent 
                                                
301 Korea's methodology paper, para. 23.  
302 Korea's response to Arbitrator question No. 58, para. 22. 
303 United States' response to Arbitrator question No. 69, para. 58.  
304 See section  3.2 above.  
305 The Appellate Bo dy confirmed the panel's conclusions that the DPM was "as such" inconsistent with 
Articles 2.4 and 2.4.2 for taking into account non -pattern transactions and failing to consider whether the T -T 
methodology could account for relevant price differences. Appe llate Body Report, US – Washing Machines , 
paras. 6.2, 6.4 -6.6. 
306 Award of the Arbitrator, US – Section 110(5) Copyright Act  (Article 25) , fn 43. See para.  3.16 above.  
307 The Appellate Body concluded that the use of the W -T methodology was "as such" inconsistent with 
Articles 2.4 and 2.4.2 of the Anti-Dumping Agreement  for essentially the same  reasons as its application ( "as 
applied" ) in the underlying  investigation and connected proceedings  on LRWs . Appellate Body Report, US – 
Washing Machines , paras. 6.9 -6.10. 
308 Panel Report, US – Washing Machines , para. 7.101.  
309 Korea's response to Arbitrato r question No. 73, paras. 56-57. WT/DS464/ARB  
 
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  by virtue of the USDOC's use of the  DPM, since the ultimate result – the W -W margin – would be 
the same.310 We agree with the United States that a W-W margin, calculated under the first sentence 
of Art icle 2.4.2 of the Anti-Dumping Agreement , would not constitute nullification or impairment of 
benefits, for which Korea would be entitled to seek suspension. We recall, in that regard, that the 
Appellate Body found the DPM to be "as such" inconsistent  with Article 2.4.2 of the Anti -Dumping 
Agreement  to the extent that it results in the  application of  the W -T comparison methodology to 
non-pattern transactions , because the DPM  fails to explain why the W-W or T-T comparison 
methodology could not also appropria tely account for relevant price differences , and because the 
use of the W-T comparison methodology included zeroing .311 The operation of the DPM, in and of 
itself, does not render the W -W margin WTO -inconsistent; rather, the W -W margin is a comparator , 
applied in the last step of the DPM framework.312 Only following an affirmative determination that 
the W -W comparison methodology cannot appropriately account for the observed pattern of 
significant price differences does the DPM trigger the application of t he W -T comparison 
methodology. At that point, the operation of the DPM results in nullification or impairment of 
benefits. Hence, the nullification or impairment arising from the use of DPM does not relate to the 
W-W margin. Korea cannot legitimately expec t, in these circumstances, that a W -W margin, by mere 
operation of the DPM, would be invalid and would entitle Korea to retaliate with respect to an anti -
dumping duty rate established on that basis .313 
Second, Korea,  consider ing that a W -W margin is also inc onsistent , further  argues that  any 
dumping margin is not valid, since  "the use of the WTO -inconsistent method means that the United 
States has not met the conditions to permit application of anti -dumping duties ".314 Consequently, 
the anti -dumping duty in "an y instance where the United States applies the DPM and zeroing should 
be 0.00 percent."315 In the United States' view, it is not reasonable or plausible to assume 
termination of the anti -dumping measure, in general, or an anti -dumping duty rate  of 0.00%.316 
Further, according to the United States, " modelling  a tariff reduction to zero for all margins of 
dumping" would "overstate the level of nullification or impairment by including margins that are not 
inconsistent with the recommendations adopted by the DSB".317 We agree with the United States 
that the removal of an entire anti -dumping order as a counterfactual scenario, wherein all W -W or 
W-T dumping margins are reduced to zero, is not reasonable. An anti -dumping order may include 
margins of dumping assigned to Korean producers, calculated using the W -W, W -T, or, even, the T -
T comparison methodologies. Modelling a tariff reduction to zero for the "all others rate" would also 
imply reduction of all constituent rates to zero, which may overstate the level of nullif ication or 
impairment.318 
Moreover, as w ith the LRWs anti -dumping  determination, it is possible for a margin to be 
calculated on the basis of "adverse facts available." Korea state s that it "intends to exclude from the 
calculation … margins calculated based on total adverse facts available rates"319, but at the same 
time maintains  that the counterfactual should be termination of the entire order, whether or not the 
USDOC applies the inconsistent DPM framework and W -T comparison methodology to one or more 
compan ies.320 We find these statements difficult to reconcile with each other. This, in our view, 
further points to the implausibility of Korea's counterfactual.   
For the foregoing reasons, we conclude that Korea's counterfactual of "ceased to use the DPM 
and zeroing in the calculation of W -T margins", to the extent that it is premised on termination of 
an entire anti -dumping order, is not an accurate reflection of benefits accruing to Korea  under 
Articles 2.4 and 2.4.2 of the Anti-Dumping Agreement  and cannot be considered a reasonable or 
plausible counterfactual for the "as such" measures.  
                                                
310 United States' comments on Korea's response to Arbitrator question No. 71(a), para. 45.  
311 Appellate Body Report, US – Washing Machines , paras. 6.2 and 6.4-6.6. 
312 The W -W margin is compared with the W -T margin to ultimatel y decide whether or not to apply a W -
T margin. See Appellate Body Report, US – Washing Machines , para. 5.12.  
313 However, should Korea consider that a W -W margin, in a future anti -dumping determination, is 
inconsistent with the Anti -Dumping Agreement, it could have recourse to dispute settlement proceedings.  
314 Korea's response to Arbitrator question No. 71(a), para. 52.  
315 Korea's response to Arbitrator question No. 71(a), para. 52. 
316 United States' comments on Korea's response to Arbitrator question No. 71(a) , para. 43.  
317 United States' comments on Korea's response to Arbitrator question No. 58, para. 18.  
318 See United States' comments on Korea's response to Arbitrator question No. 58, para. 18. 
319 Korea's response to Arbitrator question No. 58, para. 22.  
320 Korea's response to Arbitrator question No. 58, para. 21. WT/DS464/ARB  
 
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  4.2.1.3   Alternative counterfactual  
Since Korea's proposed counterfactual does not r eflect the nature and scope of benefits that 
are nullified or impaired due to the "as such" measures, we must establish the appropriate 
counterfactual with respect to non -LRWs. One alternative we consider is the United States' proposal 
of applying a duty i n the amount of the W-W margin , which we assess in terms of plausibility or 
reasonableness. If we do not consider the United States' counterfactual to reflect those 
considerations, then our mandate directs us to determine a counterfactual  ourselves . 
Specif ically, the United States considers that "a margin of dumping determined using the W -
W comparison methodology, without zeroing, could be used here for the purpose of the hypothetical 
counterfactual".321 According to the United States, using the W -W compariso n methodology would 
"be presumed consistent with the [Anti-Dumping]  Agreement."322 Korea disagrees and argues that 
accepting the United States' counterfactual would require the Arbitrator to either "examine how the 
United States calculated the margin based o n the first sentence of Article 2.4.2" or to "simply accept 
that the U.S. calculations would be correct and WTO -consistent" .323  
 We do not consider it necessary to decide whether, in each future instance of application, a 
W-W margin  would be WTO -consistent324 – doing so would surpass our mandate, which directs us, 
at this point, to assess whether the United States' proposal is reasonable or plausible.  
However, as noted above, we consider it plausible and reasonable for the United States  to 
calculate  some dump ing margin, should it find injurious dumping,  and, further, that the United States 
would resort to a "normal []" comparison methodology under the first sentence of Article 2.4.2 of the 
Anti-Dumping Agreement  in situations where it would have otherwise appli ed the DPM and ultimately 
applied the W -T comparison methodology.325 This counterfactual reflects th e approach  we have 
taken with respect to LRW s.  
Yet, it is not reasonable, in our view, to go so far as to assume that the "normal []" rate, in all 
future anti -dumping determinations, would necessarily be calculated using  the W -W, as opposed to 
the T -T, comparison methodology under the first sentence of Article 2.4.2 of the Anti-Dumping 
Agreement , and, moreover, that such a rate will al ways be available to Korea to calculate the level 
of suspension.  
Importantly, we do not believe that a key parameter for determining the level of suspension 
should necessarily be left to the party subject to that suspension. By this, we note, first, that there 
is nothing in the Anti -Dumping Agreement or under United States' law326 that would  mandate public 
disclosure of W -W margin s calculated as part of the DPM analysis  in future anti -dumping 
proceeding s. We observe, in this regard, that the United States in dicates that such a W -W rate only 
"may exist on the USDOC's administrative record",327 even though, in undertaking the DPM, the 
USDOC must calculate a margin of dumping using the W -W comparison methodology.328 Taking the 
                                                
321 United States' response to Arbitrator question No. 71 (b), para. 74. (emphasis omitted)  
322 United States' response to Arbitrator question No. 66 (b), para. 50.  
323 Korea's comments on the United States ' response to Arbitrator question No. 69, para. 43. See also 
Korea's comments on the United States' response to Arbitrator question No. 71(b), para. 50.  
324 Korea's position appears contradictory insofar as it argues, on the one hand, that a counterfactual 
must be WTO -consistent, while, on the other hand, the Arbitrator is precluded from examining the WTO -
consistency of that counterfactual. This argument suggests that only withdrawal of the measure is possible. 
See Korea's comments on the United States' respo nse to Arbitrator question No. 71(b), paras. 49 -52. 
However, we disagree with this view. See fn 81 above . 
325 See section 3.2.2.2  above.  
326 The United States explained, in response to a question on the public availability of certain 
information related to an anti -dumping investigations and determinations, tha t "the governing statutes do not 
specify in greater detail" that USDOC and USITC are required to notify the petitioner and parties to the 
investigation and describe the facts and conclusions on which the determination is based. In addition, the 
United Stat es noted that company specific business confidential information "cannot be disclosed in the 
determinations". United States' response to Arbitrator question No. 89, paras. 109 -113. 
327 United States' response to Arbitrator question No. 71(a), para. 70.  
328 In response to a question by the Arbitrator, the United States observed that the "USDOC always 
calculates a margin of dumping using the W -W comparison methodology, either because the USDOC does not 
find a pattern of price differences to support consideration of an alternative to the W -W comparison 
methodology, or because, upon finding a pattern of price differences that supports consideration of an 
alternative to the W -W comparison methodology, the USDOC examines whether using only the W -W WT/DS464/ARB  
 
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  LRWs anti -dumping  investigation as an e xample, the USDOC did not publicly disclose the W -W 
dumping margins; rather, the United States submitted the confidential calculation and decision 
memoranda, containing the margins calculated for LG and Samsung, as exhibits in this proceeding. 
Korea confir med that, while its exporters received such disclosure material, it did not.329 
Consequently, i t cannot be  ensured  that W -W margins  will be available to Korea in all future 
investigations for purposes of calculating the level of nullification or impairment.330 This means that 
Korea may  lack the information required to calculat e the level of suspension on the basis of a W -W 
margin , if it is not disclosed – and, for that reason, we cannot select, as a counterfactual, a situation 
in which one of the essential inputs to calculate the level of suspension is potentially unavailable to 
the requesting Member. Doing so might leave Korea wi thout recourse to suspension and the United 
States without incentive to bring its measures into compliance.  
Second, a counterfactual based on W -W margin s would be grounded on the assumption that 
the United States would maintain the same practice, by, inter alia, continuing to compare the results 
of the W -W and W -T comparison methodologies. However, as the United States itself indicated, the 
DPM is not mandatory331, and the USDOC could, at any point in the future, change its practice. This 
creates further unc ertainty that a W -W margin would be an alternative for Korea to use as a basis 
for suspending concessions, in all applicable future anti -dumping orders.  
For these reasons, we conclude that a calculation of the level of nullification or impairment 
premised on the application of a  duty rate calculated by using the  W-W comparison methodology  
would not be practicable, given the particular circumstances related to the "as such", as opposed to 
the "as applied", measures.332 There is necessarily no information on th e record as to the dumping 
margins that would be obtained for a number of unidentified future products  based upon a W -W 
comparison methodology to be performed by the USDOC at some future date . Consequently, in a 
calculation of nullification or impairment, we consider it reasonable to use the value of zero to take 
the place of a W -T margin , ultimately assigned through the WTO -inconsistent DPM. 
To be clear, a zero anti -dumping duty rate is a proxy fig ure for what would have been a 
dumping margin calculated co nsistently with  Article 2.4, as w ell as Article 2.4.2, of the Anti-Dumping 
Agreement . In the absence of information, we cannot speculate on what the exact anti -dumping 
duty rate, between zero and the inconsistent rate  based on a W -T margin, would be . Impor tantly, 
setting the WTO -inconsistent rate to zero, for the purpose of the calculation, does not transform this 
                                                
comparison methodolo gy can appropriately account for price differences identified in the first stage of a 
differential pricing analysis (i.e., application of the Cohen's d test and the ratio test)." United States' response 
to Arbitrator question No. 68, para. 55; Korea's resp onse to Arbitrator question Nos. 66(b), 70, and 73, 
paras.  48-49, and 57.  
329 Korea's response to Arbitrator question No. 70(a), paras. 49-51. 
330 It might be expected that Korean exporters, subject to an anti -dumping duty calculated on the basis 
of the WTO-inconsistent methodologies, would normally be incentivized to share with Korea the memoranda 
and other administrative records containing the W -W rate. However, it would be speculative to assume that 
Korea will always receive such information. In our vi ew, a Member should not be obliged to rely  exclusively  on 
private actors disclosing potentially confidential information to calculate the level of suspension of concessions 
or other obligations pursuant to the DSU. See United States' comments on Korea's re sponse to Arbitrator 
question No.  58, para. 19. For example, in US – 1916 Act (EC), the arbitrator noted that European 
Communities entities had entered into settlement agreements, but neither the European Communities nor the 
United States were able to obta in the text of settlement agreements, since the companies involved refused to 
disclose them. The arbitrator found that only "to the extent that the European Communities can obtain credible 
information about existing settlement agreements – in other words, to the extent that it can obtain disclosure  
of such settlement agreements – it can include in any calculation of  the level of  nullification or impairment  the 
amounts payable by EC entities in settlements under the 1916 Act ". Thereby, the arbitrator declin ed to rely on 
the actions of private actors to supply information that formed the basis of suspension. Decision by the 
Arbitrator, US – 1916 Act (EC) (Article 22.6 – US), paras. 6.8 -6.12. 
331 See United States' response to Arbitrator question No. 66(a), para . 48. 
332 We also recall that should the United States decide to apply a W -W rate instead of a WTO -
inconsistent W -T rate in future anti -dumping orders, nothing in the Anti -Dumping Agreement would prevent it 
from doing so. Indeed, the United States acknowledg es that it would be "possible" for the USDOC to apply the 
W-W comparison methodology with respect to LG's and Samsung's margins, following a S ection 129 
proceeding. United States' response to Arbitrator question No. 67, para. 54. As a consequence, there wo uld be 
no need for retaliation. The United States would, thereby, "control the levers to make the actual level of 
suspension of concessions or other obligations  go down ". Decision by the Arbitrator, US – Offset Act (Byrd 
Amendment) (EC) (Article  22.6 – US), para. 4.24. See also Korea's response to Arbitrator question No. 49(c), 
para. 139.  WT/DS464/ARB  
 
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  counterfactual scenario into one of termination of an anti-dumping order.333 Rather, any future 
investigation  or administrative review  in which the USDOC invokes the DPM and ultimately applies 
the inconsistent W -T comparison methodology, reflected in a final determination  or review result , 
would give rise to retaliation only with respect to duties based on the W -T margin s, since margins 
calculated under "adverse facts available" , W-W or T -T comparison methodolog ies do not nullify or 
impair benefits accruing to Korea.  
Based on the foregoing analysis, and taking into account the specific circumstances of this 
case, we shall use the value o f zero, as a proxy figure, to take the place of anti-dumping duty r ates 
based on W -T margins in future anti -dumping orders on non -LRWs.334  
4.2.2   The appropriate  time-frame  
Past arbitrations have normally used  the year following the end of the RPT , as a time -frame  
for their calculation of nullification or impairment . In the current Arbitration, for the reasons 
explained above in section 3.2.4 , the time -frame for the calcula tion of nullification or impairment for 
LRWs is based on 2017, i.e. the year preceding  the end of the RPT. However, neither approach is 
appropriate for Korea's request with respect to non -LRWs.  
Korea seeks to suspend concessions with respect to any  not-yet-identified product (i.e. non -
LRW) subject to the WTO -inconsistent "as such" measures  in years subsequent to the end of the 
RPT. The prospective nature of Korea's request makes it impossible to determine ex ante a single 
time-frame for non -LRWs potentiall y subject to WTO -inconsistent measures in the future. The year 
in which the RPT ended, i.e. 2017, cannot necessarily be used to calculate the level of nullification 
or impairment  for all such products . An appropriate time -frame must be related to the time at which 
a WTO-inconsistent measure would be  applied in the future. In recognition of th e specific 
circumstances of this case , we shall address th e issue of the appropriate time -frame in further detail 
in section  4.4 below,  when dealing with the calculation of the level of nullification or impairment.  
4.3  Korea's proposed formula to assess the level of nullification or impairment  
4.3.1   Introduction  
Korea has requested authorization for a formula, to annually estimate the level of suspension 
of concessions with respect to the DSB's "as such" recommendations.335 Korea clarified that it 
considers that "[t] he right to suspend concessions based on non -LRW products arises upon the 
issuance of the USDOC ’s final determination, when the parties can confir m whether the USDOC used 
the WTO -inconsistent method to calculate the dumping margins. "336  
We agree with Korea that it may retaliate only in respect of "final determinations ", issued 
after the expiry of the RPT. We note that such "final determinations " could be related to new 
investigations or to administrative reviews  (where they are referred to as "final results") .  
We now turn to the examination and assessment of Korea's proposed formula.  If we cannot 
accept Korea's  proposal , we will determine the approach we consider compatible.  
4.3.2   Description of Korea's proposed formula  
 As noted above, Korea has requested authorization to suspend concessions for non -LRW 
products based on a formula  and proposes to use the same formula as that submitted for LRWs to 
calculate the level of nullification or impairment.337 
                                                
333 Korea equates a zero anti -dumping margin with termination of the entire anti -dumping order. See 
Korea's response to Arbitrator question No. 71(a), para. 52.  
334 In this re gard, Korea's right to suspend concessions would arise on the issuance of the USDOC's final 
determination. See Korea's response to Arbitrator question No. 73, para. 56.  
335 Korea's methodology paper, paras. 49 -51. 
336 Korea's response to Arbitrator question No. 73, para. 56. 
337 Korea's methodology paper, para s. 49-51. Korea's proposed formula may be found in para. 3.55. WT/DS464/ARB  
 
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To apply this formula, Korea proposes to use the following data -sources to obtain individual 
data for each non -LRW at issue.338 Korea intends to employ data from USITC Dataweb for each HTS 
code included in t he "Scope of the  Investigation "339 section of a final determination to determine a 
product 's import share from Korea and, in turn, the entire import value.340 Korea elaborates that if 
the product scope does not coincide with the HS 10 -digit classification used  in the USITC Dataweb, 
Korea would request Korean companies subject to anti -dumping duties to identify the specific HS 
tariff lines of the imports facing anti -dumping duties.341 According to Korea, the change in price as 
a result of the United States' non -compliance will be equal to the anti -dumping duty rate calculated 
on the basis of WTO -inconsistent DPM and the use of zeroing.342 Korea proposes to obtain the 
demand and supply elasticities from USITC reports that are part of the anti -dumping investigations. 
If the demand and supply elasticities are not available in public sources, such as publica tions made 
during anti-dumping investigations, Korea states that it would request information from international 
economic consulting companies.343 Korea also provide s an illustrative list of products that would 
potentially be subject to the application of its proposed calculations.344 
4.3.3   The United States' arguments regarding Korea's proposed formula  
The United States agrees that, as a general matter, neither the DSU nor subse quent arbitrator 
decisions preclude the possibility that the Arbitrator might base the level of suspension of 
concessions on a formula.345 Yet, the United States contends that the Arbitrator should reject Korea's 
request because of the methodological and dat a problems associated with Korea's formula.346  
First, the United States observes that Korea's formula assumes that the world is composed of 
two countries only and that export supply and import demand are entirely determined by the 
domestic conditions in the  respondent's and the complainant's markets.347 To illustrate, the United 
States cites Appendix B of Korea's Methodology Paper, where, it notes, "all but three of the 
antidumping proceedings identified [in the Appendix] involve imports … from countries other  than 
Korea" but an examination of those three "reveals that, for those three products as well, Korea is 
not the only source of imports."348 Consequently, "Korea and the United States are not the only two 
countries that produce and sell in the U.S. market th e products other than LRWs that are identified 
in Appendix  B of Korea's Methodology Paper. "349 
Second, the United States notes that Korea's formula assumes perfect substitutability 
between Korean products and products from the United States and, implicitly, no substitution at all 
between Korean and non -Korean imports.350 The United States contends that all the USITC  reports 
identified in Korea's methodology p aper recommend substitution elasticities for each of the products 
examined.351 Hence, according to the Uni ted States, Korea's assumption of perfect substitutability 
is incorrect.352 
Third, the United States argues that it would not be appropriate to determine the level of 
nullification or impairment using its proposed Armington -based partial equilibrium model.353 This is 
because "[t]he data input issues … would be compounded in the application of such an economic 
                                                
338 Korea's methodology paper, paras . 26-27 and 50-51. 
339 We observe that the "Scope of the Investigation " is a common heading in USDOC final 
determinations, which lists the HTS codes that are subject to that proceeding. See, e.g.  Notice of Final 
Determination of Sales at Less Than Fair Value: Large Residential Washers from the Republic of Korea, 77 Fed. 
Reg. 75988 (Dec. 26, 2012) , (Exhibit KOR -5). 
340 Korea 's methodology paper, para. 51.  
341 Korea's response to Arbitrator question No. 90(a), paras. 109-110. 
342 Korea's methodology paper, para. 51. 
343 Korea's response to Arbitrator question No. 90(d), paras. 113-114. 
344 Korea's methodology paper, Appendix B.  
345 United States' response to Arbitrator question No. 41, para. 133. In support of its argument, the 
United States ref ers to Decisions by the Arbitrators in US – Offset Act (Byrd Amendment)  (Brazil)  (Article 22.6 
– US), para. 4.20  and US – 1916 Act (EC) (Article 22.6 – US), para. 6.14.  
346 United States' written submission, para. 138.  
347 United States' written submission, pa ra. 132.  
348 United States' written submission, para. 132.  
349 United States' written submission, para. 132.  
350 United States' written submission, para. 133.  
351 United States' written submission, para. 133.  
352 United States' written submission, para. 133.  
353 United States' written submission, para. 135.  WT/DS464/ARB  
 
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  model to so many different products. "354 To illustrate this, the United States points to the difficulty 
in identifying appropriate market share data for the  LRW market, identifying the correct tariff lines 
to compile data on imports, and determining the data to calculate the growth rate.355 In the United 
States' view, it is likely that there would be similar challenges in collecting data specific to the 
product s other than LRWs that are ident ified in Appendix B of Korea's methodology p aper.356 
Furthermore, the United States argues that , whereas its proposed  model is appropriate to analyse 
the market for LRWs, the same cannot be said for not -yet-identified non -LRWs .357 Given that these 
products are unknown, it cannot be determined whether it is appropriate to use the United States' 
proposed  model to analyse such products.358  
Fourth, the United States identifies an operational problem to calculate the appropriate level 
of nullification or impairment if the USDOC "were to employ a differential pricing analysis and zeroing 
to determine the antidumping duty rate for one or more Korean exporters, but, in the same 
proceeding, the USDOC determined the antidumping duty rate for  other Korean exporters without 
using a differential pricing analysis and without using zeroing."359 In the United States' view , it is 
not clear what tariff rate reduction should be modelled and what the total value of imports would 
be.360 
4.3.4   Arbitrator's assessm ent of Korea's proposed formula  
The Arbitrator identifies three problems with the formula proposed by Korea. We address each 
in turn below.  
 First, Korea's proposed formula assumes that all markets in which WTO -inconsistent duties 
are imposed can be described by a perfect substitutes partial equilibrium model. In our view, 
however, such  assumption is incorrect . We agree with the United States that substitutability of 
products is a critical factor in the selection of an appropriate economic model.361 We believe that the  
assumption of perfect substitutability is simply not tenable for all markets and non -LRWs coming 
from different firms and differe nt countries. Moreover, this assumption has a significant effect on 
the calculated level of nullification or impairment since, under such an assumption, the imposition 
of a WTO -inconsistent duty is predicted to have a much larger effect on the value of imp orts and 
thus on the level of nullification or impairment than under the assumption of imperfect 
substitutability. This is  because , if products are perfectly substitutable , a reduction in the duty rate 
leads to a higher substitution towards the products fa cing lower duties. Under the assumption of 
perfect substitutability, products are considered identical and consumers would switch immediately 
to the cheaper product.   
Second , to calculate the level of nullification or impairment, the formula Korea proposed  
requires various inputs which should be appropriately selected to ensure that the level of suspension 
of concessions is equivalent to the level of nullification or impairment. Hence, Korea would be 
expected to provide a clearly defined  procedure to identi fy the data sources and to compil e those 
inputs. However, the data sources proposed by Korea to implement its formula are not described in 
a sufficiently detailed manner  making it difficult  to assess them . This is so for two crucial inputs, 
namely the elas ticities and Korea's import share. With respect to the former , Korea proposes to use 
the demand and supply elasticities reported in  publications from the United States'  anti-dumping 
investigations or, if not available, to employ estimates from consultancy firms.362 Yet Korea does not 
provide information about the type of expertise required from a consultancy firm , nor does it indicate 
how those firms would obtain the necessary data.  Korea's  import share is calculated based on data 
from USITC Dataweb for each HS tariff subheading included in the product scope of the anti-dumping 
investigation.363 According to Korea, if the product scope does not coincide with the HS classification 
in USITC Dataweb, Korea would request Korean companies subject to anti -dumping duties to identify 
                                                
354 United States' written submission, para. 135.  
355 United States' written submission, paras. 135 -137. 
356 United States' written submission, para. 135.  
357 United States' response to Arbitrator question No. 91, par a. 116.  
358 United States' response to Arbitrator question No. 91, para . 116. 
359 United States' response to Arbitrator question No. 53, para. 6.  
360 United States' response to Arbitrator question No. 53, para . 6. 
361 United States ' response to Arbitrator question  No. 91, para . 115. 
362 Korea's response to Arbitrator question No. 90(d), paras. 113-114. 
363 Korea's methodology paper, para. 51.  WT/DS464/ARB  
 
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  the specific HS tariff lines of the imports facing anti -dumping duties.364 It is not clear how Korea 
would do so, and we do not consider that such a parameter should be left to the sole determination 
of the requesting party or vested in  Korean  companies.  These problems indicate that, as argued by 
the United States365, Korea's for mula does not provide for a sufficient level of predictability for any 
future calculation of nullification or impairment. Furthermore, not all Korean firms investigated in 
relation to specific products, and thus to specific HS tariff lines, face WTO -incons istent duties. 
Therefore, Korea's approach would likely lead to an overestimation of the level of nullification or 
impairment.  
Finally, Korea's proposed formula does not correctly calculate the change in imports as a 
result of removing a  WTO-inconsistent d uty. We recall that Korea proposes the same formula for 
non-LRWs as for LRWs, based on the perfect substitutes partial equilibrium model. Hence, the 
formula proposed by Korea for non -LRWs suffers from the same shortcomings as those described in 
the context  of LRWs in  section  3.3.3.3 above . In particular, the supply and demand elasticities are 
applied to (multiplied by) the value of imports to calculate the change in imports as a result of the 
change in duty (from a WTO -inconsistent to a WTO -consistent level).  Rather , according to academic 
literature , the demand elasticity should have been multiplied by the value of domestic demand and 
the supply elasticity by the v alue of domestic supply to calculate the changes, respectively, in 
domestic demand and domestic supply. The change in imports could then be calculated by comparing 
the difference between domestic demand and domestic supply under initial and final duty leve ls.366 
Summing up our view of Korea's proposed formula, we observe, first, that not all products 
potentially subject to WTO -inconsistent duties can be described by a perfect substitutes model and 
using such a model in cases where products are not perfect sub stitutes would lead to an 
overestimation of the level of nullification or impairment. Second, the procedure to obtain the inputs 
into the formula is not described in sufficient detail, which  makes it difficult to assess its 
appropriateness , and means that it can potentially become  a source of future disagreement between 
the parties. Finally, even if the product and market concerned could be appropriately described by 
a perfect substitutes model, the way Korea applies its proposed formula has a number of 
shortcomings . To us, Korea's formula  does not provide for a sufficient level of predictability and  can 
lead to an overestimation of the level of nullification or impairment.  
In light of the foregoing, we have decided to reject Korea's proposed formula.  We also observe 
that the United States has not proposed  a formula or any other particular approach to assess 
nullification or impairment with respect to non -LRWs.  We therefore  need to make our own 
determination o f the appropriate approach to calculate the le vel of nullification or impairment with 
respect to non -LRWs.  
However, before considering a n alternative approach, we wi ll address an argument by the 
United States that pertains to our mandate.  The United States acknowledges that previous 
arbitrators deter mined the level of nullification or impairment on their own after finding that the 
level proposed by the requesting party was not equivalent, and contends that such an approach 
"may make sense where a complaining Member has requested suspension at a partic ular numerical 
level".367 For the United States, however, if the Arbitrator concludes that Korea's requested amount 
of suspension is not equivalent to the level of nullification or impairment "without knowing precisely 
what the numerical level of nullificati on or impairment may be", then the Arbitrator "would need to 
go well beyond what is required under Article 22.6 of the D SU" if it were to determine the level of 
nullification or impairment on its own.368 
 In our view, the United States' position does not find support in the DSU.  Unlike the United 
States, we consider that an arbitrator's mandate under Article 22.6 of the DSU is identical, whether 
the requesting party seeks authorization to apply a formula to  calculate future level of nullification 
or impairment, or to suspend concessions at a specified numerical level. We recall that, after 
rejecting the approach proposed by the requesting parties, the arbitrator in US – Offset Act (Byrd 
                                                
364 Korea's response to Arbitrator question No. 90(a), paras. 109-110. 
365 United States' written submission, para. 143.  
366 See for example Linda Calvin and Barry Krisoff, "Technical Barriers to Trade: A Case Study of 
Phytosanitary Barriers and U.S. -Japanese Apple Trade,", Journal of Agricultural and Resource Economics, 
23(2):351 -366 (1998), (Exhibit USA -18). 
367 United States' response to Arbitrator question No. 52, paras. 11 -13. 
368 United States' comments on Korea's response to Arbitrator question No. 52, para. 13.  WT/DS464/ARB  
 
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  Amendment)  found that  "consistent with past arbitrations , it falls to us to determine the approach 
we consider compatible"369 and developed its own formula which the requesting parties would use 
in any future instance of application of the "as such" inconsistent measure. Hence, determining our 
own approach for assessing the level of nullification or impairment with respect to non -LRWs – 
should we disagree with Korea's proposed approach – does not amount to "mak[ing] Korea's case 
for it"370: it is, in fact, our "essential task and r esponsibility".371 
We will therefore proceed with our own determination of the level of nullification or 
impairment for non -LRWs.  
4.4  The Arbitrator's own determination of the level of nullification or impairment for non -
LRWs 
4.4.1   Introduction  
In the previous section , we decided to reject Korea's formula. At the same time, we consider 
that a formula – as opposed to the determination of a fixed level – is an appropriate approach to 
estimate the level of suspension in a situation involving "as such" measures.  
The United  States has clarified that it takes issue with the appropriateness of Korea's proposed 
formula and not with the use of a formula in general to estimate the level of suspension.372 Indeed, 
the United States agrees, as a general matter, that neither the DSU no r subsequent arbitrator 
decisions preclude the possibility that the Arbitrator might base the level of suspension of 
concessions on a formula.373 Thus, in the absence of any disagreement between the parties, and as 
previous arbitrators have, in line with the  DSU, granted requests for future suspension of concessions 
based on a method of calculation that resulted in a variable amount374, we will proceed with 
examining Korea's request to suspen d concessions for non -LRWs on the basis of a formula.  
4.4.2   Guiding considerations for calculating the level of nullification or impairment for 
non-LRWs  
Korea's request concerning the suspension of concessions following the United States' failure 
to implement the "as such" recommendations and rulings raises particular chal lenges since 
nullification or impairment will arise as a consequence of possible future event s, i.e. the application 
of anti -dumping duties to non -LRWs based on a methodology found to be WTO -inconsistent. Only 
three past arbitrations have evaluated a reque st for suspension for the maintenance of WTO -
inconsistent "as such" measures, namely US – 1916 Act (EC) , US – Offset Act (Byrd Amendment) 
(EC), and  US – Upland Cotton (Article 22.6 – US I) . The nature of the measures and the 
circumstances of the arbitratio ns informed those awards.  
Given the difficulty of quantifying the level of nullification or impairment and, consequently , 
assessing an equivalent level of suspension of concessions for future cases for which we have at 
                                                
369 See Decision by the Arbitrator, US – Offset Act (Byrd Amendment) ( EC) (Article 22.6 – US), 
para. 3.69. In that arbitration, the requesting parties were granted authorization to suspend concessions based 
on a formula developed by the arbitrator.  
370 United States' opening statement, para. 51, referring to Appellate Body Report, Japan – Agricultural 
Products II , para. 129, where the Appellate Body, discussing the investigative authority of a panel under 
Article  13 of the DSU and Article 11.2 of the SPS Agreement, stated, inter alia , that a panel is not entitled "to 
make the case for a complaining party". In our view, th is reference is inapposite because the task of an 
arbitrator acting pursuant to Article 22.6 of the DSU is different from the task of a panel. As explained by the 
arbitrator in EC – Hormones (US) (Article 22.6 – EC), "[t]here is a difference between our ta sk here and the 
task given to a panel. In the event we decide that the [requesting party's] proposal is not WTO consistent …, 
we should not end our examination the way panels do… In pursuit of the basic DSU objectives of prompt and 
positive settlement of d isputes, we would have to estimate the level of suspension we consider to be equivalent 
to the impairment suffered" . Decision by the Arbitrator, EC – Hormones (US) (Article 22.6 – EC), para. 12 . 
(emphasis original)  
371 Decision by the Arbitrator, EC – Hormon es (US) (Article 22.6 – EC), para. 12.  
372 United States' response to Arbitrator question No. 51 (a), paras. 155 -156. See also United States' 
opening statement, para. 47.  
373 United States' response to Arbitrator question No. 41, para. 133. In support of its ar gument, the 
United States refers to Decisions by the Arbitrators in US – Offset Act (Byrd Amendment)  (Brazil)  (Article 22.6 
– US), para. 4.20, and US – 1916 Act (EC) (Article 22.6 – US), para. 6.14.  
374 See above, section 3.5.2. WT/DS464/ARB  
 
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  present little or no information, we  have decided to d evise a formula that Korea can use if and when 
the United States applies definitive duties to specific exporters of a given non -LRW, based on margins 
calculated under a W -T comparison methodology, as found to be inconsistent by the Panel and the 
Appellate Body in the underlying dispute ("inconsistent anti -dumping duty measures"). In deciding 
on this approach, we have taken into consideration criteria used by previous arbitrators , as well as 
the circumstances of the current case , as describ ed below . 
First, the calculation of the level of nullification or impairment should result in a "predictable" 
level of suspension.375  
Second, the award should be practical to implement and limit the risk of potential 
controversies between the parties. In th is respect, we observe that in US – 1916 Act (EC) , US – 
Offset Act (Byrd Amendment) (EC) , and US – Upland Cotton I , the arbitrators selected clearly defined 
approaches , based on sound economic theory,  to calculate the level of suspension.  
Third, the data used to calculate the level of nullification or impairment should rely, as much 
as possible, on factual and verifiable information376 that is available to both parties.  
Fourth, acknowledging that a possible future WTO -inconsistent anti -dumping measure may 
refer to any product under the HS classification system, the formula should be sufficiently generic 
to capture any variation in the  types of products and any variation in the types of markets (for 
example, perfect competition or monopolistic competition) on which a given product is traded.  
To sum up, we consider that , in light of the circumstances of this case, an appropriate 
approach is t o devise a formula enabling Korea to calculate, at a future date, the level of nullification 
or impairment that may arise following the application by the United States of an  inconsistent  anti-
dumping duty measure . That formula must (i) result in a predict able level of suspension , (ii) be 
practical to implement, (iii) use inputs that are factual and verifiable by the United States , and (iv) 
be sufficiently generic to capture variation in the type of product s and markets .  
We have endeavoured to limit any fu ture possible controversy between the parties, by fixing 
those parts of the formula that can be fixed, without compromising on the equivalence requirement.  
Elements that cannot be fixed at the outset will be obtained from clearly defined data sources. Our 
approach bears similarities to the approach in US – Offset Act (Byrd Amendment) (EC) . In that 
arbitration, the arbitrator decided that  the European Communities could  suspend concessions based 
on a formula that depended, inter alia , on a fixed coefficient a nd a variable amount of 
disbursements.377 For this reason, we asked the parties  to give  their views on a similar coefficient -
based approach  with both variable and fixed elements .378  
Both Korea and the United States expressed reservations about the use of a co efficient in a 
formula. Korea questioned "whether a coefficient approach would meet the equivalence requirement 
under Article 22.4 of the DSU", because certain elements of that formula "would have to be 
calculated when the value[s] … are not yet known, as it would not be possible to know in advance 
for which products the USDOC would apply the WTO -inconsistent method."379 Korea further contends 
that the formula "in US – Offset Act (Byrd Amendment) (EC)  is inapplicable to the current case" 
because the coefficie nt, in that arbitration, was intended "to quantify trade effect caused by the 
distribution of anti -dumping and countervailing duties, which did not in themselves reflect the trade 
effect of the measure".380 Korea observes, "the problem" – that the measure at  issue "only indirectly 
had a trade effect – is not present here."381 The United States, largely agreeing with Korea's analysis, 
                                                
375 Decision by the Arbitrator, US – Offset Act (Byrd Amendment) (EC) (Article 22.6 – US), 
paras.4.23 -24. 
376 See, in the same sense, Decision by the Arbitrator, US – 1916 Act (EC)  (Article 22.6 – US), 
para. 5.54. 
377 That formula follows: 0.72 x Amount of disbursements under CDSOA (Continued Dumping and 
Subsidies Offset Act of 2000) for the most recent year for which data are available relating to anti -dumping or 
countervailing dutie s paid on imports from the European Communities at that time, as published by the United 
States' authorities. See Decision by the Arbitrator, US — Offset Act (Byrd Amendment) (EC) (Article 22.6 – 
US), para. 5.2. 
378 See Arbitrator question No s. 93 and 94. 
379 Korea's response to Arbitrator question No. 94(a), para. 14.  
380 Korea's response to Arbitrator question No. 94(a), para. 3.  
381 Korea's response to Arbitrator question No. 94(a), para. 4. WT/DS464/ARB  
 
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  also does not consider a coefficient -based approach to be "feasible because it cannot result in a level 
of suspension that is con sistent with the DSU".382 The United States specifies that "[i]t is not feasible" 
to determine whether a coefficient -based approach is appropriate "without first examining the 
characteristics of the different industries that produce those products, and the d ifferent markets in 
which those products are traded, to determine if the assumptions … hold for the different 
products."383 
The parties' concerns are valid and speak to a tension in our mandate. On the one hand, we 
are called to determine equivalence between  the level of nullification or impairment and the level of 
suspension of concession. On the other hand, the request pertaining to non -LRWs is about unknown 
future events, which makes it impossible for Korea to determine these two levels, and for us to 
assess equivalence between them.  
Nevertheless, and a s discussed above in section 4.3.4  above , given that we disagree with 
Korea's proposed approach, our mandate requires us  to identify a methodology that can be applied 
in the future if and when a new WTO -inconsistent W -T anti -dumping duty measure is applied by the 
United States.384 We have therefore developed a formula that reflects the economic context of this 
case and will permit Korea to quantify the trade effect flowing from the possible future imposition of 
inconsistent anti-dumping dut y measures , recognizing the range of products and market s that may 
be covered by such anti -dumping duty measures.   
4.4.3   Formula to calculate the level of nullification or impairment  
4.4.3.1   Description  
Korea is granted authorization to apply the following f ormula to calculate the level of 
nullification or impairment, NI, for non-LRWs: 
   𝑁𝐼𝑖=𝑐𝑠∗𝑣𝑖𝑚 𝑝𝑖∗𝛥𝑡𝑖
1+𝑡𝑖      (6) 
 
The inputs are defined as follows:  𝑁𝐼𝑖 is the level of nullification or impairment of the non -
LRW 𝑖; 𝑐𝑠 is a coefficient  for the HS -chapter s to which non -LRW i belongs, depending on the market 
share of the complaining party and the demand, supply, and substitution elasticities of the product 
under consideration; 𝑣𝑖𝑚𝑝 𝑖 is the value of imports from Korean enterprises (inc lusive of cost, 
insurance and freight but exclusive of duties) subject to WTO inconsistent duties; Δ𝑡𝑖 is the difference 
between the WTO -inconsistent duty rate and zero; and, 𝑡𝑖 is the level of the WTO -inconsistent duty 
rate. Δ𝑡𝑖 and 𝑡𝑖 are ad valo rem duty rates, not measured in percentage terms. Hence, a duty rate of 
for example 0.02 on the value of imports means that the importing firm must pay duties equal to 
2% of the value imported. The mathematical derivation of this formula appears in Annex C-2. 
The following section will explain the theoretical basis of the formula. We will then describe in 
detail how each of the inputs should be obtained starting with the size of the coefficient, followed by 
the value of imports subject to WTO -inconsistent duties, and concluding with the value and change 
of the WTO -inconsistent duties.  
4.4.3.2   Theoretical basis  
To derive the formula in equation (6), the Arbitrator employs the set of equilibrium conditions 
of the Armington model as described in Hallren and Riker (201 7).385 The equilibrium equations of 
the Armington model are written in relative changes and combined to obtain an expression for the 
change in the value of imports as a function of the change in the level of import duties. As a result, 
                                                
382 United States' comments Korea's response to Arbitrator question No. 9 4(a), paras. 2 and 9.  
383 United States' response to Arbitrator question No. 94(a), para. 1.  
384 For the reasons noted above, in section 1.3, we disagre e with the United States view that the 
Arbitrator would "go well beyond what is required under Article 22.6 of the DSU" if we were to determine the 
level of nullification or impairment with respect to non -LRWs; rather, our mandate requires us to do very th at. 
See United States' response to Arbitrator question No. 94(a), para. 3.  
385 See R. Hallren and D. Riker, An Introduction to Partial Equilibrium Modeling of Trade Policy, Economic 
Working Paper Series (Working Paper 2017 -07-B), U.S. International Trade Com mission, July 2017 , (Exhibit 
KOR-15). WT/DS464/ARB  
 
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  the formula can be use d to calculate the level of nullification or impairment arising from the 
imposition of import duties. The fact that the Armington model is written in relative changes means 
that the formula holds exactly only for a marginal change in the duty rate and appr oximates the 
exact change in imports for non -marginal changes in the duty rate. A nnex C-2 contains a detailed 
derivation of the formula. After clarifying the different components of the formula, the Arbitrator will 
explain why it deems it appropriate to us e a formula for non -LRWs and why the formula is based on 
the Armington model.  
The formula in equation (6), with its different components, follows directly from the set of 
equilibrium conditions of the Armington model. The formula calculates the level of nu llification or 
impairment of a WTO -inconsistent duty , as in  the difference between the value of imports with and 
without a WTO -inconsistent duty. Note that if one ignores the denominator 1 + t i, the level of 
nullification or impairment is proportional to t he revenues from the WTO -inconsistent duty, i.e.  
𝑣𝑖𝑚𝑝 𝑖Δ𝑡𝑖, with the constant of proportionality given by the coefficient  𝑐𝑠. Since it is the difference 
between the value of imports with and without a WTO -inconsistent duty which should be calculate d, 
and not just the tariff -revenues of the WTO -inconsistent duty, we multiply the tariff revenues by a 
coefficient,  𝑐𝑠, which captures the trade response to the tariff. This allows calculat ion of  the trade 
effect arising from the imposi tion of  a WTO -inconsistent anti -dumping duty  measure .  
The formula is an approximation and its use is, in our view, appropriate. The alternative to 
the formula would be to solve the set of equilibrium conditions of the economic model exactly. The 
Arbitrator prefers the use of a formula over the alternative for two reasons, which are related to the 
guiding considerations  formulated in the previous subsection. First, a formula is more practical to 
implement. Second, a formula makes the calculation of the level of nullifica tion or impairment more 
predictable, as it reduces the number of decisions that must be taken by the complainant. In 
particular, the use of a formula means that Korea does not have to take a  decision on Korea's market 
share and the substitution, supply, an d demand elasticities, since these inputs are included in the 
coefficient.  
We recall that Korea has proposed us ing a formula based on the perfect substitutes model. 
The perfect substitutes model is a special case of the Armington model with the substitutio n elasticity 
between varieties going to infinity, i.e. products becoming perfectly substitutable. Evidence 
submitted by the United States does not support perfect substitutability for the illustrative list of 
products in Appendix B of Korea's methodology p aper, since the estimated substitution elasticity is 
finite for these products.386 Hence, the level of nullification or impairment cannot be calculated 
correctly with the perfect substitutes model, since trade patterns and the response of trade to 
changes in  duty rates of a priori  unknown products  cannot be modelled correctly with this model. 
Rather than employing a model that assumes from the outset that the value of the elasticity of 
substitution is infinite, it would be more appropriate to employ an Arming ton specification where the 
elasticity of substitution will depend on the features of the product .  
Further, and as mentioned in the discussion on LRWs, governments and research institutions 
examine the economic impact of trade policy changes by mostly emp loying CGE  models that model 
trade according to the Armington assumption of national product differentiation. Therefore, the 
Arbitrator  considers that the formula  should be based  on the set of equilibrium conditions of the 
Armington model. As noted before,  this model assumes that goods are differentiated by country of 
origin and consumers choose between varieties from different countries of origin.387  
There are three variables in the formula that lead to the calculation of the level of nullification 
or impai rment, namely the coefficient, c, the value of imports, vimp, and the level and change of 
                                                
386 United States' written submission, para. 133 and fn 162.  
387 Arkolakis et al. (2012) and Costinot and Rodriguez -Clare (2014) have shown that the set of 
equilibrium conditions of the Armington model is identical to the set of equilibrium conditions in the model of 
Eaton and Kortum (2002) in which consumers choose between many varieties from different countries instead 
of only between one variety per country. The equilibrium equation for import demand is identical in both  
models, since import demand is shaped by differences in comparative advantage in the model of Eaton and 
Kortum. The authors have also shown that , under certain general conditions , the effects of changes in trade 
costs are similar in the Armington model and in the models of imperfect (monopolistic) competition of Krugman 
(1980) and Melitz (2003). As such , the formula based on the Armington model can also describe behaviour in 
imperf ectly competitive markets and for products differentiated by firm rather than by country.  WT/DS464/ARB  
 
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  the WTO -inconsistent anti-dumping duty, Δt. We address each of them in detail in the following 
sections.  
4.4.3.3   Determination of coefficient, c  
4.4.3.3.1   Introduction  
As discussed in the preceding section, the formula devised by the Arbitrator requires a value 
for a coefficient , a fixed term that is multiplied by the value of imports . The coefficient translate s a 
WTO-inconsistent duty into its effect on trade for produc ts with varying characteristics . Specifically, 
as shown in Annex C-2, the coefficient 𝑐𝑠 is represented by the following expression:  
 
 11s s s
s s s s s
s s s s
ss
s s s sc sh         
       (7) 
Equation (7) shows that the coefficient is determined by four parameters, the market sh are 
of Korea in total sales in the United States, 
ssh , the substitution elasticity between varieties from 
different source origin countries, 
s , the price elasticity of supply, 
s  and the price elasticity of 
demand, 
s . In the following paragraphs the Arbitrator will discuss in turn the number of 
coefficients and the data  sources for the four different parameters of the coefficient.  
There is a wide range of options for the number of coefficients to be used. For instance, it 
could be possible to employ just one coefficient for all products, to vary the coefficient by HS -chapter 
level, or to vary the coefficient at the  product level. In answers to the Arbitrato r, Korea expresses a 
preference for the use of multiple coefficients to better account for variation s in individual products 
characteristics.388 The United States does not express a preference for the number of coefficients. 
The United States contends that  "HS chapters are extensive and can include a broad range of 
products ", and that "[i] t would not be possible to determine coefficients for entire HS chapters that 
could be used to calculate accurately the level of nullification or impairment for all of the d ifferent 
products in a given chapter. ".389 
Recalling the considerations formulated in the previous subsection, the formula should both 
be practical, which would call for a single coefficient, and sufficiently generic to accommodate all 
possible product types  and relevant markets, which would call for a large number of coefficients, 
varying at the product level (HS 6 -digit, HS 8 -digit, or even H TS 10-digit). It is impossible to 
calculate, ex ante , a specific coefficient for each currently unknown product that may be subject to 
an anti -dumping order, to which  the United States might apply a n inconsistent anti -dumping duty 
measure . To balance these two considerations, the Arbitrator has decided to calculate 98 coefficients, 
one for each chapter of the harmonized system classification. The use of differen t coefficients for 
each product would make the procedures difficult to implement and, moreover, would make the 
estimated level of nullification or impairment too dependent on estimates of elasticities for a single 
product with the risk of raising the variance of the estimated elasticities and, thus, of under - or 
overestimating the coefficients.  
The appropriate sources of data for each constituent parameter of the coefficient follow.  
4.4.3.3.2   Substitution elasticity, σ 
To generate values for the elasticity of substitution at the HS chapter level, the Arbitrator 
employs estimates by Soderbery (2015).390 This study provides the most disaggregated (at the 10 -
digit tariff line level), recent estimates in academic literature on the  substitution elasticity between 
imports from different sources into the United States. It refines the procedure introduced by Feenstra 
                                                
388 Korea's respons e to Arbitrator question No. 94( b), para . 17. 
389 United States comments to Korea's respons e to Arbitrator question No. 94( b), para . 11. 
390 A. Soderbery  (2015). "Estimating Import Supply and Demand Elasticities: Analysis and Implications." 
Journal of International Economics 96(1): pp . 1-17 WT/DS464/ARB  
 
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  (1994)391 and applied to U nited States'  imports in the earlier work by Broda and Weinstein (2006).392 
We note and address be low the parties' views on this source for the elasticity of substitution.  
Korea proposes that the Arbitrator use substitution elasticities reported in Feenstra et al 
(2018)393 which estimate substitution elasticities for United States imports at the HS 2-digit level. 
Korea is not opposed to the data -sources described below for the other parameters (demand 
elasticity, supply elasticity and market share).394 Feenstra et al (2018) argue that , in one third of 
the sectors , there is a significant difference betwe en the so -called macro -elasticity, the elasticity of 
substitution between domestic and imported varieties, and the micro -elasticity, the elasticity of 
substitution between imported varieties from different sources. Two main arguments, in our view, 
weigh  against the use of the substitution elasticities from Feenstra et al (2018).395 First and 
foremost, Feenstra et al (2018) do not report estimates of the HS 2-digit level elasticities in their 
publication and so the Arbitrator is unable to use this study. Secon d, they report that some of the 
estimated elasticities are negative.396 As we have noted before, the elasticity of substitution takes a 
value between zero and infinity, so the negative values reported by the authors  suggest data 
problems, as they themselves acknowledge.397  
The United States argues that product -specific elasticities reported by USITC in anti -dumping 
investigations should be employed. These estimates are  made after "analysing responses from 
purchasers, producers, and importers to questionnaires concerning the market of the product under 
investigation, as well as arguments made by interested parties."398 According to the United States, 
the use of elasticities estimated by USITC would imply coefficients that vary from case -to-case in 
future anti -dump ing proceedings. Hence, the size of the coefficients could not be included in the 
Arbitrator's decision.399 In line with the considerations noted above, namely that the formula should 
be predictable and practical to implement, the Arbitrator favours an appro ach with pre -determined 
coefficients. This implies that it is not possible to use coefficients determined by the  USITC and, in 
fact, for future cases those estimates do not yet exist.  
In light of the foregoing , the Arbitrator is of the view that Soderbery (2015) remains the most 
practical and appropriate source of estimates of the elasticity of substitution. We shall therefore take 
these substitution elasticities and aggregate them to the HS -chapter level, calculating trade -
weighted averages , using as weigh ts the United States' imports from Korea in 2016, extracted from 
US Census. The average elasticity across the 98 chapters is 4.73, and the value ranges between 
1.40 and 35.83.400  
4.4.3.3.3    Price elasticity of demand, ε 
The Arbitrator determines the price elasticity of demand based on estimates of the price 
elasticity of demand in Reimer and Hertel (2004)401 and reported as part of the Global Trade Analysis 
                                                
391 R.C. Feenstra (1994). "New product varieties and the measurement of international prices."  
American Economic Review  84: pp. 157 –177. 
392 C. Broda, D. Weinstein (2006). "Globalization and the gains from variety." Quarterly. Journal of 
Economics 121: pp. 541 –585. 
393 R.C. Feenstra, P. Luck, M. Obstfeld and K.N. Russ (2018). "In Search of the Armington Elasticity." 
Review of Economics and Statistics 100(1): pp.  135-150. 
394 Korea's response to Arbitrator question No. 94(c), paras. 18-25. 
395 The United States holds the opinion that Feenstra et al is not of assistance to the Arbitrator , but does 
not further support  this position. U nited States ' comments to Korea 's responses to question No. 94( c), para. 
15. 
396 These can be found in f igures 1 and 2 of Feenstra et al (2018) which depict the distribution of the 
estimated elasticities.  
397 R.C. Feenstra et al  write: "We isolated a small number of goods in our data set, however, where the 
estimates of 𝜎𝑔 are most frequently negative (i.e., in more than 75% of the bootstrap estimates), so that we 
conclude that these data are faulty or incompatible with our model. " See p. 144 of  R.C. Feenstra et al. " In 
Search of the Armington Elasticity" , The Review of Economics and Statistics, 100(1), March 2018 , (Exhibit 
KOR-69). 
398 United States' respons e to Arbitrator question No. 94( c), paras . 6-8. 
399 United States' response to Arbit rator question No. 94 (c), paras . 6-8. 
400 These averages can be found in Annex C -2. 
401 J. Reimer and T.W. Hertel (2004). International Cross -Section Estimates of Demand for Use in  the 
GTAP Model. GTAP Technical Paper No. 23. Center for Global Trade Analysis, West Lafayette, Indiana.  WT/DS464/ARB  
 
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  Project (GTAP ) 10 Data Base (GTAP10.2).402 Korea does not object to the use of the demand 
elasticities in Reimer and  Hertel (2004)403, while the United States contends that USITC elasticities 
are preferable to elasticities from other sources.404 As discussed in the previous section on 
substitution elasticity, the Arbitrator favours an approach with pre -determined coefficien ts, which 
implies that it is not possible to use coefficients from USITC for future cases for which those estimates 
do not yet exist.  
As described in Hertel and Van der Mensbrugghe (2014), the estimated income and price 
elasticities for ten aggregate secto rs determine the behavioural parameters of the constant 
difference elasticity utility function, which in turn determine the price and income elasticities for all 
57 sectors (42 commodities and 15 types of services) in the GTAP Data Base.405 The Arbitrator 
employs the price elasticities of demand for the United States of the 42 commodities sectors reported 
in GTAP10.2  and disaggregates these elasticities  into elasticities for the 98 HS -chapters using a 
publicly available concordance  table from HS to GTAP from the World Integrated Trade Solution 
(WITS) portal.406 The average demand elasticity is -0.80, with values ranging between -0.00 
and -0.88.407 
4.4.3.3.4   Price elasticity of supply, η 
 The Arbitrator determines the (import) supply elasticity based on a survey of the liter ature 
by Hillberry and Hummels (2013), who point out that estimates of this parameter are scarce in the 
literature.408 These authors suggest an estimate of 7.7409, which is between other values reported 
in the literature. Korea has not objected to the use of t he supply elasticities as explained in Hillberry 
and Hummels (2013).410 The United States considers  that USITC elasticities are preferable to 
elasticities from other sources.411 The Arbitrator favours an approach with pre -determined 
coefficients, for the reaso ns mentioned in the previous two sections.  Hence, the Arbitrator will 
employ a price elasticity of supply of 7.7.  
4.4.3.3.5   Market share of Korea in total sales in the United States, sh 
The Arbitrator calculates the market share of Korea in total sales in the United  States by 
multiplying two shares, i.e. the share of Korean imports in total imports and the share of total 
imports in total sales in the United States. The first share is calculated based on 2017 import data 
at the HS2 -level from United States Census. The  second share is calculated based on GTAP  10.2 
                                                
402 T.W. Hertel and Dominique van der Mensbrugghe (2017). Behaviorial Parameters. Documentation 
GTAP10. Chapter 14.  
403 Korea's respons e to Arbitrator question No. 94 (c), para . 22. 
404 United States' response to Arbitrator que stion No. 94 (c) , para s. 6-7. 
405 The 10  aggregate sectors are Grains, other crops; Meat, dairy, fish; Processed food, beverages, 
tobacco; Textiles, apparel, footwear; Utilities, housing services; Wholesale/retail trade; 
Manufactures/electronics; Transport Communicati on; Financial and business services; and Housing, education, 
health, public services. The 42 commodities in the GTAP -model can be found at the GTAP website. Global Trade 
Analysis Project, <https://www.gtap.agecon.purdue.edu/databases/v8/v8_sectors.asp >, accessed 15 October 
2018.  
406 World Integrated Trade Solution, < https://wits.worldbank.org >, accessed 15 October 2018. WITS is 
a data  portal developed by the World Bank in collaboration with the United Nations Commission on Trade and 
Development, the United Na tions Statistical Division and the WTO.  
407 Seale and Regmi (2006) report similar estimates for the price elasticity of demand. See J. L.  Seale 
Jr. and A. Regmi (2006). Modeling International Consumption Patterns. Review of Income and Wealth 52(4), 
pp. 603 –624. See also Annex C -2. 
408 R. Hillberry and D. Hummels, David (2013). "Trade Elasticity Parameters for a Computable General 
Equilibrium Model," Handbook of Computable General Equilibrium Modeling, Elsevier.  
409 In a study on trade liberalization in the US, US ITC (2002) employs both values around 7 and values 
of 50. See USITC (2002) "The economic effects of significant US import restraints: third update," USITC 
Publication. On the other hand, Hillberry and Hummels (2013) point out that the Melitz firm heterogen eity 
model gives rise to an elasticity of transformation between domestic sales and exports as first shown by 
Feenstra (2010).  See R.C. Feenstra (2010) "Measuring the gains from trade under monopolistic competition", 
Canadian Journal of Economics,  43, pp. 1-28. As  explained by Hillberry and Hummels (2013), estimates in the 
literature give rise to an elasticity of transformation between 3 and 7, which translates approximately into the 
same value of the supply elasticity. The estimates reported in Hillberry a nd Hummels (2013) therefore indicate 
that 7.7 is a good median value in between other estimates reported in the literature and the Arbitrator will 
use the value of 7.7 for the price elasticity of supply.  
410 Korea's response to Arbitrator question No. 94 (c), para. 22. 
411 United States ' response to Arbitrator question No. 94 (c), para . 7. WT/DS464/ARB  
 
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  data for the 42 commodities sectors and disaggregated into the 98 HS chapters employing a publicly 
available concordance table from WITS also used to disaggregate the price elasticity of demand.412 
Korea has not  objected to the use of data from GTAP,413 whereas the United States argues that the 
GTAP data are too aggregated and should be updated after a new release of GTAP  data becomes 
available.414  
As noted in section  4.4.2 , the formula must be practical to implement and result in predictable 
calculations. Furthermore, as explained in  paragraph 4.67, the use of a coefficient is necessary. For 
purposes of determining the percentage of total imports in total sales in the U nited States, required 
to calculate the coefficients, the Arbitrator deems it appropriate to use the GTAP 10 Data Base  as a 
source of information for the  market share  since it is the last available update of this database. The 
GTAP 10 Data Base is a data source widely used by research institutes, academics, and policy 
makers, whose data can be converted into HS -chapters u sing publicly available concordance 
tables.415 As explained in para graph  4.77, GTAP data are more aggregated than HS chapters. 
However , a procedure applicable to all  products requires a degree of aggregation. The share of total 
imports in total sales in the United States is not available at a higher degree of disaggregation , such 
as HS -10. 
As shown in Annex  C-2, the average share of Korean imports in total imports in the 98 HS 
chapters is equal to 2.45% with values ranging between 0.001% and 20.5%. The average share of 
imports in total United States sales is 23% with values ranging between 1.7% and 75%. Finally, the 
average share of Korean imports in total United State s' sales is equal to 0.51% with values ranging 
between 0.00003% and 5.92%.  
Substituting the parameter values  described above  into equation (7) leads to the values for 
the coefficients at the HS chapter level , as set out in Annex C -2.416 Korea shall use these values for 
the coefficients in implementing the formula in equation (6). On average the coefficient is equal to 
-2.96, with values ranging between -7.15 and -1.34.417 
Finally, t he Arbitrator is aware that, in some cases, a non -LRW may enter the United States 
under different chapter headings. In such cases, the coefficient to be applied shall be the simple  
average of all the  applicable  chapter coefficients, as illustrated with the following example . Assume  
(i) a WTO -inconsistent duty is imposed on a product with tariff subheadings in two different  HS-
chapters, say HS chapters 72 and 73 , and (ii)  the coefficients for HS chapters 72 and 73 are -3.869 
and -2.336 , respectively. In such a case, t he formula should use the simple  average of the two 
coefficients , which is -3.103.  
4.4.3.4   Value of imports  
4.4.3.4.1   Possible data sources  
As noted above, the vimp is a required input in the formula determined by the Arbitrator to 
calculate the level of nullification or impairment. It reflects the value of company -specific imports 
subject to WTO -inconsistent duties. We therefore need to  evaluat e and select possible data sources  
in order to  enable Korea to  obtain the value of imports.  
Although we have ultimately rejected Korea 's proposed formula to calculate the level o f 
suspension for non -LRWs, we note that in  explaining its formula , Korea suggested that it would be 
able to determine the value of imports from company -specific information. The United States did 
not provide an alternative source for the value of imports. W e also recall, as noted in section  3.3.4.6  
in relation  to LRWs, that the parties agreed  that the value of imports to calculate the level of 
                                                
412 Global Trade Analysis Project, < https://www.gtap.agecon.purdue.edu/databases/v10/ >, accessed 
15 October 2018 . This version was released in 2018 and contains data extending up  to 2014.  
413 Korea's response to Arbitrator question No. 94 (c), para. 20 
414 United States' response to Arbitrator question No. 94(c), para. 5.  
415 A potential alternative data source for the share of total imports in total sales could be the supply 
and use tab les of the Bureau of Economic Analysis (BEA), which is available until 2017. However, there is no 
publicly available concordance table to map the sectoral classification employed by BEA, NAICS4 into HS -
chapters. Henceforth, it is better to use import share s from a publicly available and widely employed source 
(by academics, research institutes, and policy makers) that can be mapped into HS -chapters.  
416 The coefficients are listed in Table 1 of Annex C -2. 
417 These statistics are listed in Table 2 of Annex C -2. WT/DS464/ARB  
 
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  nullificati on or impairment for LRW s may be  obtained  by using , based on the HTS codes enumerat ed 
at the 10 -digit level in the LRWs  final anti -dumping determination, total import value from a publicly 
available source (i.e. USITC DataWeb) .  
Hence, there are two possible paths to obtain the value o f imports for any given non -LRW in 
the future. The aggregate amount of exports to the United States by each Korean company  subject 
to a WTO -inconsistent duty  or the total value of imports at the HTS 10 -digit level subject to 
adjustment  to reflect that not all exports are subject to an anti -dumping duty .418 Either path – 
"company -specific" data or "HTS 10 -digit level" data – leads to a n estimated  figure for vimp. 
However, determining the value of imports prospectively presents chal lenges unique to non -LRWs – 
and to the circumstances of this Arbitration – that me rit a practical solution. With this in mind, we 
elaborate on each possible data source.  
4.4.3.4.1.1   "Company -specific" data  
In response to a question from the Arbitrator  on how to obtain the amount of exports of each 
affected firm , Korea stated the following:  
Korea's  customs authorities maintain records regarding the amount of exports of each 
firm. Although this information is confidential, Korea could use the information to 
identify the companies from which it should obtain consent to release the information 
to the U nited States for the purposes of calculating the level of nullification or 
impairment.  
In requesting consent from the affected companies to release the export data to the 
United States, Korea would also request that the companies identify the exports for 
which the companies paid anti -dumping duties pursuant to the anti -dumping order in 
question.419 
Korea also notes that because "the U.S. customs authorities would be in possession of the 
entry forms filed by the exporters, the United States would be able to ve rify the information provided 
by the Korean exporters using its own internal customs data" .420 
The United States, however, finds "no basis for Korea 's optimism that companies will consent 
or cooperate concerning the release  of their business confidential information", when, in this 
proceeding, Samsung and LG declined to disclose certain business confidential information, and casts 
doubt that Korea 's customs data would match the United States' own, given that "[t]rade data 
queried from different sources oft en do not match."421  
Korea's suggested approach of identifying the relevant companies and, in turn, requesting 
those companies to identify actual exports, would result in a precise value of imports for each future 
anti-dumping order or administrative review  in which the USDOC used the DPM and applied the W-
T comparison methodology .422 However, as both parties acknowledge, this information is 
confidential423, meaning that Korea may not be able to obtain it or that the United States may not 
have an opportunity for  verification. Korea has not elaborated on how it would proceed with 
suspension, should Korean companies not consent to release this information. Korea's proposal, as 
the United States observes, "is dependent on exporters being 'fully cooperative'"424 and, e ven 
assuming such cooperation, a "mechanism for both parties to verify any information that was 
                                                
418 We have accepted this approach to determine the input for value of imports in the calculation of the 
level of nullification or impairment for LRWs. See above, section 3.3.4.6 . 
419 Korea's response to Arbitrator question No. 90 (a), paras. 107 and 109. See also Korea's response to 
Arbitrator question No. 95, para. 27.  
420 Korea's response to Arbitrator question No. 90(b ), para. 110. 
421 United States' comments on Korea's response to Arbitrator question No. 90 (a), paras. 104-105. 
422 This further reflects our understanding that the level of nullification or impairment of benefits may be 
appropriately measured by reference to Korean exporters. See section 3.2.2.1 . 
423 As Korea acknowledges, both LG and Samsung "declined to disclose business proprietary 
information" in this  proceeding. We share the United States' concern that Korean companies may "likewise 
decline to disclose their business confidential information in the future." See Korea's response to Arbitrator 
question No. 70(a), para. 50; and United States' comments on  Korea's response to Arbitrator question 
No. 90(b), para. 107.  
424 United States' comments on Korea's response to Arbitrator question No. 90 (b), para. 107.  WT/DS464/ARB  
 
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  provided" would be needed "to provide confidence that any information relied upon was accurate 
and complete".425 
4.4.3.4.1.2   HTS 10 -digit level data  
Alternatively, and reflecting the approach taken by the Arbitr ator with respect to LRW s, it may 
also be possible to permit Korea to query total value of imports on the basis of the particular HTS 
lines listed in a final anti -dumping determination.426 
However, in the non -LRW co ntext both the valu e of imports for non -LRWs and the subject 
companies are unknown , until the United States determines an anti -dumping duty on a given 
product. Further, the prospective nature of Korea's request makes it impossible to determine 
beforehand  how many Korean companies will be assigned a duty based on a WTO -inconsistent W -T 
dumping margin, in any future anti -dumping investigation or administrative review, and also the 
corresponding share of exports from Korea to the United States, affected by tha t duty. Yet, failing 
to adjust such market -level data will likely overstate the level of nullification or impairment, as 
frequently not all imports within the referred HTS 10 -digit codes are affected by the WTO -
inconsistent measure. Some adjustment is ther efore necessary.   
Consequently,  we examine  a "representative period" to observe the incidence of the USDOC's 
application of the W -T comparison methodology to then determine a value for the adjustment.427 
This prompted us to ask the parties to calculate, for the year 2017: ( i) "the percentage share of 
exports from Korea to the United States made by Korean firms, assigned anti -dumping duty rates 
calculated on a W -T basis, in terms of the total amount of exports from Korea to the United States, 
subject to anti -dumping orders"; an d, (ii) "the percentage of Korean firms that exported products, 
subject to anti -dumping duty rates calculated on a W -T basis, into the United States, in terms of the 
total number of Korean firms subject to United States' anti -dumping orders".428 Neither part y was 
able to calculate the first .429 Hence, we turn to the parties' responses with respect to the second.  
Korea calculated the percentage share of Korean firms subject to anti -dumping duties 
calculated on a W -T basis to be 47.6%.430 To arrive at this number: (i) Korea identified preliminary 
and final determinations of dumping in the United States' anti -dumping investigations covering 
imports from Korea in 2017; ( ii) if two determinations were made in 2017 regarding the same 
investigation, Korea eliminated the earlier one to exclude double -counting; ( iii) Korea calculated the 
total number of Korean respondents subject to the determination of  individual dumping margins 
("mandatory respondents") in each investigation it identified; and, ( iv) Korea then calculated the 
number of respondents that received anti -dumping duty rates based on dumping margins calculated 
using the W -T method and divided that figure by the number obtained in step ( iii), above.431 
                                                
425 United States' comments on Korea's response to Arbitrator question No. 90 (b), para. 108.  
426 In that case, the Arbitrator agreed with the parties that the total level of imports could be queried in 
the USITC DataWeb by inputting the products classified under the enumerated HTS 10 -digit codes in the 
"Scope of the Investigation" section of the LRWs anti-dumping  final determination. With this market -level data, 
the parties, and the Arbitrator, agreed that the data should be adjusted to capture only the exports of LG and 
Samsung, the two Korean companies assigned anti -dumping duties on the basis of the  WTO-inconsistent W -T 
comparison methodology. As there were only two relevant companies, the parties could derive the respective 
market shares of Samsung and LG and adjust the market -level data. See  section 3.3.4.6  above.  
427 A similar approach is found in  Decisions by the Arbitrators, US – Offset Act (Byrd Amendment) (EC) 
(Article 22.6 – US), para. 3.150;  and EC – Hormones (US) (Article 22.6 – EC), paras. 57 -58. 
428 See Arbitrator question Nos. 95 and 96.  
429 Korea explained that it could not obtain the necessary information within the time -period to respond 
to the Arbitrator's question, as it would need "to obtain consent of the companies to release this i nformation." 
Instead, Korea "would propose using the total amount of all the identified firms' exports subject to anti -
dumping duty orders, compared to the total amount of exports subject to anti -dumping duty orders, compared 
to the total amount of exports  subject to anti -dumping duty orders exported by those firms that were subject 
to margins calculated on a W -T basis." Korea's response to Arbitrator question No. 95, paras. 26 -28. The 
United States also could not undertake the requested calculation, since "[t]he information necessary to 
respond to this question does not yet exist, because antidumping duty rates have not yet been assigned to all 
exports from Korea to the United States." United States' response to Arbitrator question No. 95, para. 9.  
430 Korea' s response to Arbitrator question No. 96, para. 29. See also Calculation of Exporters Subject to 
W-T Comparison Method , (Exhibit KOR -70), Table 3.  
431 Korea's response to Arbitrator question No. 96, para. 29. WT/DS464/ARB  
 
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The United States, however, considered that "the information nece ssary to respond … does 
not yet exist" and that it "does not know, and cannot know, the total number of Korean firms subject 
to U.S. antidumping orders, because there may have been companies subject to the 'all others' 
antidumping rates that never identifi ed themselves to the United States."432 The United States 
further criticized Korea for "provid[ing] the Arbitrator a percentage that is grossly overstated".433  
The United States challenges Korea's approach on four grounds. It first contends that " the 
informat ion Korea has provided does not cover all exports from Korea to the United States for 2017 
that were subject to anti -dumping measures" , since most of the determinations issued in 2017 cover 
imports made before this period.434 Second, the United States claims  that, owing to the retrospective 
nature of its system, "determinations in original investigations[] do not actually relate to the 
assessment, i.e., collection of antidumping duties" .435 Third, the United States does not accept 
Korea's reliance on preliminar y determinations issued in the year 2017, as the margins "are not final 
and are subject to change".436 Fourth, the United States claims that Korea should have used the 
total number of Korean companies subject to U nited States'  anti-dumping measures, rather t han 
the number of "mandatory" respondents, as the denominator in this equation.437 
In our view, while there could be various ways to determine the relevant estimate, we consider 
Korea's approach to be reasonable, notwithstanding the United States' criticism.  As a general matter, 
we observe that we are not determining the actual amount of Korean exports affected by the United 
States' WTO -inconsistent measures , but estimating an adjustment that would reflect the incidence 
of the United States' WTO -inconsistent behaviour. This is an exercise of estimation, because relevant 
information on future events does not exist.  
Turning to the United States' arguments, we ob serve, first, that while Korea's estimate of the 
number of companies does not cover all exports made to the United States in 2017, we consider the 
approach to nevertheless reasonably reflect the frequency with which the United States applied the 
W-T compar ison methodology  to Korean companies. We are equally not persuaded by the United 
States' criticism in relation to the use of preliminary determinations in the estimate. While it is true 
that preliminary determinations based on WTO -inconsistent methodologie s may ultimately result in 
the application of WTO -consistent duties at the final stage, the reverse is also possible: WTO -
consistent methodologies applied in a preliminary determination could theoretically be replaced by 
WTO-inconsistent ones in the final determination. Again, we believe that an approach which takes a 
view of the United States' behaviour over a time period, with relation to the application of W -T 
comparison methodologies in dumping calculations for Korean companies, regardless of the type o f 
determination in question, is a valid one to estimate the frequency of such behaviour.  
The United States argues  that Korea relie s on individually examined, or mandatory, 
respondents instead of relying  on the total number of exporters identified in the de terminations . In 
this regard , we observe  that, depending on the outcome of the case with respect to the individually 
examined exporters, the calculated weighted average duty rate to other exporters will be based 
either entirely on WTO -consistent methodolog ies (if all individual margins are determined on a W -
W or a T -T basis), or entirely on WTO -inconsistent methodologies (if they are determined on a W-T 
basis), or a combination of the two.438 Therefore, duty rates that are ultimately assigned to exporters 
not examined individually may, at least in part, be affected by the United States'  application of the 
WTO-inconsistent W -T comparison methodology. It would be impossible to surgically remove any 
W-T margins from the "all others" rate assigned to the exporters  not examined individually; and, for 
                                                
432 United States' response to Arbitrator question No. 96, paras. 12 -13. 
433 United States' comments on Korea's response to Arbitrator question No. 96, para. 21.  
434 United States' comments on Korea's response to Arbitrator question No. 96, para. 23.  
435 United States' comments on Korea's response to Arbitrator question No. 96, para. 24.  
436 United States' comments on Korea's response to Arbitrator question No. 96, para. 25.  
437 United States' comments on Korea's response to Arbitrator question No. 96, para. 26.  
438 Pursuant to Article 6.10 o f the Anti -Dumping Agreemen t, investigating authorities, "as a rule, 
determine an individual margin of dumping for each known exporter or producer concerned of the product 
under investigation"; however, in cases where the number of exporters "is so large as to make such a 
determinat ion impracticable, the authorities may limit their examination", thereby determining individual 
margins only with respect to selected expo rters. Article 9.4(i) of the Anti -Dumping Agreement  further directs 
the authorities in such situations to determine an  anti-dumping duty for exporters not included in the 
examination. The determination of this latter duty involves a calculation of a weighted average of the dumping 
margins established with respect to the individually examined respondents, disregarding any zero and de 
minimis  margins and margins established on the basis of facts available.  WT/DS464/ARB  
 
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  the same reason, it would not be logical to account for non -mandatory respondents in the 
denominator, as the United States suggests. We therefore believe that Korea correctly based its 
calculation on individually examin ed exporters, which allowed it to concentrate on the comparison 
between the incidence of WTO -inconsistent behaviour (margins determined on a W -T basis) and a 
priori  WTO-consistent behaviour (margins unaffected by the W -T comparison methodology).  
While the United States criticized Korea's overall approach, it did not raise any issues with 
respect to the 47.6% figure per se . Nor did the United States propose any alternative calculated 
figure. Therefore, we consider that, "in the absence of convincing elements " that would justify the 
use of another figure for adjustment , we should accept Korea's calculated figure of 47.6%.439  
Consequently,  with respect to non -LRWs, we consider that the HTS 10 -digit level data could 
also be used to obtain the value of imports, i. e. vimp, provided such data is adjusted, which will 
account for the fact that, in any specific anti -dumping order, not all Korean companies will be subject 
to the WTO -inconsistent W -T rate. For that adjustment, we consider Korea's proposed figure of 
47.6% to be appropriate.  
4.4.3.4.2   Procedure to determine the value of imports  
In weighing these two potential data sources, we recall that Korea's right to retaliate arises 
only when the United States ultimately applies , after the expiry of the RPT,  definitive duties to 
specific exporters of a given non -LRW, based on margins calculated under a W -T comparison 
methodology, as found to be inconsistent by the Panel and the Appellate Body in the underlying 
dispute (" inconsistent anti -dumping duty measures "), as a result of USD OC's final determinations 
issued. As noted in paragraph 4.27, such final determinations could be related to new investigations 
or to administrative reviews.  Hence, we consider that the value of a Korean company's exports of a 
product subject to an inconsistent anti-dumping duty  measure  should be prioritized to the extent it 
is factual  and verifiable.  
Nonetheless, the Arbitrator acknowledges that such company -specific data is normally 
confidential, and, as such, may not be made available to Korea or may  not be "verifiable" by the 
United States. Although  the Korean customs authority "maintains records regarding the amount of 
exports from each firm on an HS code basis, through which Korea could obtain the specific export 
volumes subject to each anti -dumpin g duty order", that more particularized information is 
confidential440 – as is the information collected by the United States authorities.441 Korea may only 
use such information if it were to secure the necessary authorization from the companies 
concerned.442 Yet, at the same time, Korea should not be deprived from its right to retaliate if it 
cannot secure such authorization from Korean companies. In this regard, the current situation 
presents a largely novel problem, as a required input for Korea to calculate s uspension of concessions 
may not be publicly available443 and readily "verifiable" by the United States.  
                                                
439 See Decision by the Arbitrator, Canada – Aircraft Credits and Guarantees (Article 22.6 – Canada) , 
paras. 3.79 -3.80. In Canada – Aircraft Credits and Guarantees , Canada c alculated a financing rate to be 
applied in the calculation of the level of nullification or impairment. Brazil, however, "argue[d] in general that 
basing countermeasures on the amount of subsidy is inappropriate in this case". The arbitrator observed that  
"Brazil did not submit either any sufficient argument or any evidence to support the use of another rate, 
whereas Canada replied to Brazil's arguments … in a manner which we consider sufficiently credible." We, too, 
invited the United States to comment on  Korea's response, wherein Korea performed the calculation at issue. 
The United States did not and, as noted above, opposed Korea's overall approach.  
440 See Korea's response to Arbitrator question No. 95, para. 27; United States' comments on Korea's 
respons e to Arbitrator question No. 95, para. 19.  
441 In this respect, we recall that the United States submitted, as BCI, information on the value of 
imports, collected by USCBP. See para. 3.109 above . 
442 See Korea's response to Arbitrator question No. 90 (a), para.  107; and United States' comments on 
Korea's response to Arbitrator question No. 90 (a), para. 104.  
443 In US – 1916 Act (EC) , the arbitrator also contended with a confidential data source. The arbitrator 
determined that the level of nullification or impairme nt suffered by the European Communities should be 
measured by reference to the monetary amount of final judgments and settlement awards under the 1916 Act 
entered into by EC entities. While final judgments were publicly available, settlements were not. The  Arbitrator 
therefore determined that the European Communities could include settlement awards "to the extent that it 
can obtain disclosure of such settlement agreements". Even if the European Communities were unable to 
obtain the settlement awards, it non etheless was entitled to include the amount of judgments. See Decision by 
the Arbitrator, US – 1916 Act (EC) (Article 22.6 – US), para. 6.12.  WT/DS464/ARB  
 
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To balance this consideration – the verifiability of otherwise confidential data – against our 
task, which is to determine "equivalence", we have set ou t a mechanism that strives to "provide 
confidence that any information relied upon [is] accurate and complete"444 by enabling Korea to rely 
on confidential information, when it is disclosed, or, if not, to have recourse to a "reasoned 
estimate"445 of the level  of imports, based on HTS 10 -digit level data.  
Accordingly, for the purpose of this Arbitration, Korea shall determine the level of impor ts 
as prescribed below . 
Korea will identify those Korean companies that were assigned an anti -dumping duty rate 
calcul ated on the basis of the WTO -inconsistent W -T comparison methodology in a given final anti-
dumping determination  made by the USDOC , following the expiry of the RPT.446 Having identified 
these  Korean companies, Korea will then request those companies: ( i) to release their export data 
for a given non -LRW for the relevant reference period447; (ii) to give their written permission to the 
Korean government to both use these data for the purpose of calculating nullification or impairment 
and to share the data with th e United States; and, ( iii) to also authorize the relevant United States 
authority to share the import data with the government of Korea for the purpose of consultation.448  
After receiving the  relevant information and the requested authorizations from all relevant 
Korean companies, Korea shall promptly share such information with the United States. Upon 
receipt, the United States will then be entitled to submit written comments or request a meeting to 
discuss these data with Korea, or both.  
If the parties a gree on the relevant trade data, Korea shall use the agreed data to determine 
the total value of imports for a non -LRW for the purpose of calculating nullification or impairment . 
However, if the parties do not reach an agreement on the relevant trade data,  within 45 days of 
Korea 's transmission of the data to the United States, Korea shall be entitled to calculate the level 
of nullification or impairment on the basis of the trade data released to it by affected companies.  
The Arbitrator is mindful that Kore a may not be able to secure the necessary authorization 
and information from all applicable Korean companies . Under circumstances where only some 
companies provide authorization and information, Korea will be entitled to either: (i) follow the 
procedure se t out in paragraphs 4.106  and 4.107 above , based exclusively on the  data for which it 
has secured the necessary authorization , or (ii) proceed on the basis of the HTS 10 -digit level data, 
as explained in paragraph 4.110 below . Should none of the relevant companies provide 
authorization, then Korea shall  calculate the level of nullification or impairment on the basis of HTS 
10-digit leve l data, as explained in paragraph  4.110 . 
When  Korea suspend s on the basis of HTS 10 -digit level data, then it shall, for each  
inconsistent  anti-dumping duty measure , query the total value of imports in USITC DataWeb on the 
basis of the enumerated HTS lines , at the 10 -digit level,  in the relevant final determination. Korea 
shall then apply to this value the adjustment  of 47.6% , as provided in section 4.4.3.4.1.3 .  
4.4.3.5   Level and change of the WTO -inconsistent duty, Δt  
As noted above in section  4.2.1.3  we consider  that the appropriate counterfactual is a 
scenario in which the USDOC calculated dumping margins consistently with Article 2.4, as w ell as 
Article 2.4.2, of the Anti -Dumping Agreem ent. For the purpose of calculating the level of nullification 
                                                
444 United States' comments on Korea's response to Arbitrator question No. 90(b), para. 108.  
445 Decision by the Arbit rator, EC – Hormones (US) (Article 22.6 – EC), para. 41.  
446 The Arbitrator recalls, in that regard, that Korea suggested that it would "use the information [from 
the Korea customs authority] to identify the companies from which it should obtain consent to r elease 
information to the United States for the purposes of calculating the level of nullification or impairment". See 
Korea's response to Arbitr ator question No. 90(a), para. 107 . Korea also "anticipates that the exporters will be 
fully cooperative in pro viding the relevant information" since, according to Korea, as such exporters would be 
subject to anti -dumping duties, "they would have an interest in cooperating with the Korea government in 
efforts to induce the United States to bring its WTO -inconsisten t measures into compliance." Korea's response 
to Arbitrator question No. 90 (b), para. 111.  
447 See above, section 4.2.2. 
448 The Arbitrator notes Korea's statement that "the export data will not be released to private parties, 
and will not subject exporters to the risk of disclosing their confidential business i nformation". Korea's response 
to Arbitrator question No. 90 (b), para. 111.  WT/DS464/ARB  
 
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  or impairment, we recall that Korea is entitled to suspend concessions or other obligations with 
respect to the application of definitive duties to specific exporters of a given non -LRW, based on 
margins calculated under a W -T comparison methodology, as found to be inconsistent by the Panel 
and the Appellate Body in the underlying dispute ("inconsistent anti -dumping duty measures"). 
Mathematically, we recall that this W -T rate, ti, is replaced with the value of zero in the counterfactual 
scenario, and the difference between these two values is the change in the duty rate, or Δ ti. 
To undertake this calculation, we  must make a further distinction between two situations in 
which Korea would be entitled to retaliate, depending on when , in relation to the end of the RPT,  the 
WTO-inconsistent anti-dumping duties were imposed : (i) when the USDOC applies an inconsistent 
methodology in future administrative reviews , (ii) when it conducts new investigations following the 
end of the RPT. In the former scenario, what we call an "old case", an anti -dumping duty was in 
place before the expiry of the RPT449, whereas, in the latter scenario, or in a "new case", the USDOC , 
following the end of the RPT,  conducts an investigation that results in the application of  an 
inconsistent anti -dumping duty measure . This distinction is important because  in old cases the 
imports in the reference y ear have already been affected by an inconsistent anti -dumping duty 
measure, whereas in new cases the value of imports in the reference year has not yet been affected 
by any such measures.  
Hence, in old cases the level of nullification or impairment const itutes the increase  in imports 
that result from eliminating the inconsistent anti-dumping duty measures  under the counterfactual , 
and the reference year is the end of the RPT, i.e. calendar year 2017. In new cases the level of 
nullification or impairment i s the reduction  in imports arising from the introduction of the inconsistent 
anti-dumping duty measure  under the counterfactual , and the reference period to determine the 
value of imports is the calendar year prior to the suspension of concessions. In othe r words, in old 
cases, the change in the duty rate is the elimination of the inconsistent anti-dumping duty measure, 
while, in new cases, the change in the duty rate is the application of the inconsistent anti-dumping 
duty measure.  
This distinction has practical consequences for the formula  as follows. For old cases,  ti is the 
WTO-inconsistent duty rate and the appropriate counterfactual duty is zero. Therefore, the change 
in the level of the duty in the formula, Δ ti, is equal to zero minus the level of the WTO -inconsistent 
duty; and, as such, for old cases, Δ ti would be negative. For new cases, ti is zero since no WTO 
inconsistent rate has been applied yet. Δ ti would be equal to the WTO -inconsistent duty rate minus 
zero and hence would be a positive numb er. In both cases, the same formula applies , where i n old 
cases, imports  would increase under the counterfactual, while, in new cases imports would decrease 
under the same counterfactual . The level of nullification or impairment is equal to the absolute va lue 
resulting from application of the formula in equation (1), as noted in section  3.3.3.4 . 
4.5  Conclusion  
The Arbitrator rejected the formula  proposed  by Korea, because being based on a model of 
perfect substitution, it is not appropriate for all traded products which may or  may not be perfect 
substitutes. In addition, Korea's proposed formula does not find support in academic literature . 
Further,  because  Korea's proposed procedure to obtain the inputs for its formula is not sufficiently 
clear, it makes it  difficult to assess its  appropriateness .  
The Arbitrator  nevertheless  agrees that Korea should be granted authorization to suspend 
concessions e quivalent to the level of nullification or impairment for non-LRWs , in any future instance 
of application of the "as such" inconsistent measure . Therefore, the Arbitrator has devised a formula 
to determine the level of nullification or impairment for non -LRWs that is practical to implement, 
predictable, and sufficiently generic to  take into account the var iations of products and markets.  
Further, the information to undertake th e calculation is factual and verifiable.  
According to the Arbitrator's formula, the level of nullification or impairment is proportional 
to the value of imports from Korea times the change in the anti-dumping duty to make it WTO -
consistent. The constant of proportionality is a coefficient that varies by HS chapter and is a function 
of the market share of Korean imports as well as elasticities of  demand, supply and substitution for 
the product under consideration. With respect to determination of the value of imports, we have set 
out a mechanism for Korea to obtain the required data inp uts and for the United States to verify 
                                                
449 An illustrative list of such cases is found in Appendix B of Korea's methodology paper.  WT/DS464/ARB  
 
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  those data. In sum, the Arbitrator's approach enables Korea to calculate the level of nullification or 
impairment for future WTO -inconsistent measures on any non -LRW in a practical, predictable, and 
verifiable way.  
4.6  Korea's request to adjust the level of suspension annually  
4.6.1   Approach of the Arbitrator  
Korea proposes to include a "growth rate" factor to adjust the level of suspens ion annually 
for non -LRWs450, but does not explain how it would determine the growth rates for  these products.451 
In its response to a question by the Arbitrator, Korea clarifies that the actual growth rate of the 
market "would be the most appropriate way to accurately calculate the level of nullification or 
impairment" for non -LRWs.452 The United States disagrees with Korea's proposed inclusion of a 
"growth rate" for non -LRWs453, and argues that Korea's approach "introduces a high degree of 
uncertainty"454, because of Korea's failure to explain "what would be the source[s] of the market 
size data" used to determine these growth rates.455  
While the United States disagrees with Korea's proposed inclusion of a "growth rate"  with 
respect to non -LRWs, it agrees, in principle, that a variable level of nullification or impairment is 
possible.456 We recall that nothing in the DSU prevents an arbitrator from providing for a mechanism 
to adjust the level of suspension to the level of nullification or impairment as long as the two levels 
remain equivalent.457 Moreover, such adjustment must be justified and u npredictability not increase 
as a result.  
Turning to Korea's proposal, we agree with the United States  that there is a "high degree of 
uncertainty"458 in relation to possible sources of data for growth rates for non -LRWs. This is because, 
at this point in t ime, the Arbitrator and the parties are unable to determine the products that would 
potentially be the subject of inconsistent anti -dumping dut y measures  and, therefore, of suspension. 
As a result, the appropriate sources for growth rates for such products  cannot be determined. 
Accordingly, the circumstances in the present Arbitration do not merit the inclusion of a growth rate 
in the calculation of nullification or impairment, and in turn the level o f suspension for non -LRWs. 
As discussed in paragraph  3.132 above , one way to ensure that the real value of the level 
of suspension is maintained over time is by adjusting for inflation. When asked by the Arbitrator 
about its views on adjustment using the inflation rate, Korea states that it "does not object" to the 
use of the inflation rate for adjustment, and further notes  that this alternative "do[es] not correlate 
to the actual growth rate of the industry".459 The Unit ed States opposes such an approach and notes 
that, in its view, "[u]sing the rate of inflation … as a proxy for a g rowth factor for non -LRWs, would 
not be appropriate, as there is no evidentiary basis for doing so" and because it is "unknowable 
whether imp orts of non -LRWs would increase or decrease in parallel to the rate of inflation".460 The 
United States refers to US – 1916 Act (EC) to support its contention that the Arbitrator's use of the 
inflation rate as a proxy would amount to "speculation".461 
In our v iew, and as noted above, adjustment based on inflation is not a mechanism to adjust  
the level of imports, but a means to maintain the real value of the annual level of suspension that 
would be calculated for non -LRWs based on the formula authorized by the Arbitrator in this case. It 
does not entail speculation about import levels of non -LRWs and, thus, the United States' concern 
regarding the lack of evidence showing a relation between the inflation rate and import levels is 
inapposite.  
                                                
450 Korea's methodology paper, para. 49. 
451 See Korea's methodology paper, paras. 49-51. 
452 Korea's response to Arbitrator question No. 80, para. 81. 
453 United States' written submission, paras. 137.  
454 United States' comments on Korea's response to Arbitrator question No. 92, para. 116.  
455 United States' comments on Korea's response to Arbitrator question No. 92, para. 114.  
456 United States' written submission, par as. 137, 140 -141. See also para . 3.123  above.  
457 See para . 3.124 . 
458 United States' comments on Korea's response to Arbitrator question No. 92, para. 116. 
459 Korea's response to Arbitrator question No. 80, para. 82. 
460 United States' response to Arbitrator question No. 80, para. 87.  
461 United States' response to Arbitrator question No. 80, para. 87.  WT/DS464/ARB  
 
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In light of the for egoing, we conclude that the nullification or impairment, and in turn the 
level of suspension, calculated by Korea  with respect to non -LRWs on which WTO -inconsistent duties 
are applied, may be adjusted for inflation on an annual  basis. In our view, allowing Korea to adjust 
the level o f suspension for non -LRWs to account for inflation is justified and does not increase 
unpredictability.  
4.6.2   Annual adjustment of the level of nullification or impairment of non -LRWs based on 
the inflation rate  
The next issue  to address is the appropriate price index to use to calculate the rate of 
inflation for the purpose of making annual adjust ments to  the level of nullification or impairment. 
The price index  should have a product coverage that corresponds as closely as pos sible to the range 
of non -LRWs. Among the price indices published  by the United States Bureau of Labor Statistics, the 
most appropriate is  the producer price index for total manufacturing. Thus, Korea shall use the 
producer price index for total manufactur ing to make annual adjustments to the level of nullification 
or impairment of non -LRWs. The exact title and ID of this data series are: "PPI industry group data 
for total manufacturing industries, not seasonally adjusted" and "PCUOMFG --OMFG --", 
respectivel y.462 The Bureau of Labor Statistics routinely revises PPI data four months after initial 
publication.463 Thus, calculations shall always use the latest version of this index published as of the 
date for making the annual adjustment of the level of nullificati on or impairment.  
We recall that the Arbitrator has determined that the level of nullification or impairment , 
should the United States apply a WTO -inconsistent measure on a non -LRW in a particular year , can 
be determined by a formula based on the level of nullification or impairment in calendar year 2017, 
plus the changes in the inflation rate for the relevant year:  
NIi,t+1 = NI i,t* (1+ inflation t),  t = 1, 2, …  
NIi,1 = level of nullification or impairment calculated using equation (6)  
Here the variable NI i,t+1 refers to the level of nullification or i mpairment of the non -LRW i in 
year t + 1; NI i,t is the level of nullification or impair ment of the same non -LRW i in year t, the 
previous year; inflation t is the rate of inflation in calendar year t as measured by the producer price 
index for total manufacturing. This is to be calculated by comparing the value of the index in 
December of year t with its value in December of the previous year.464 The time peri od "1" refers to 
the first year that the suspension of concessions is applied and must be equal to the level of 
nullification or impairment calculated using equation (6).  
Korea shall be entitled to impose the suspension of concessions or other obligations equal 
to the level of nullification or impairment calculated using equation (6) during the first year following 
the date of DSB authorization ("t=1"). In subsequent years (following the date of DSB authorization) , 
if the United States has not fully complie d with the DSB recommendations and rulings, Korea shall 
be entitled to adjust  the value of its level of suspension by a percentage corresponding to the United 
States' price inflation rate for total manufacturing from the preceding calendar year.  
The follo wing example illustrates how this adjustment shall be implemented. Let us assume 
that, on 30 November 2019 , Korea  impose s suspension of concessions or other obligations on the 
United States at a level of USD 10 million, determined using the formula describ ed in equation (6). 
Korea  is therefore authorized to impose this level of suspension of concessions or other obligations 
starting from 1 December 2019 until 30 November 2020. For the subsequent period, from 1 
December 2020 to 30 November 2021, Korea is aut horized to increase the level of suspension of 
concessions or other obligations by a percentage corresponding to the change in the producer price 
index for total manufacturing during the preceding calendar year (2019). This is to be calculated by 
                                                
462 Bureau of Labor Statistics, <https://data.bls.gov/timeser ies/PCUOMFG --OMFG -->, accessed 
15 October 2018.  
463 Bureau of Labor Statistics,  <https://www.bls.gov/ppi/ppiescalation.htm >, accessed 
15 October  2018.   
464 The rate of inflation in calendar year t is to be calculated as follows: (Value of the producer price 
index for total manufacturing in December of year t - Value of the producer price index for total manufacturing 
in December of year t-1)/ Value of the producer price index for total manufacturing in D ecember of year t-1.  WT/DS464/ARB  
 
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  comparing  the value of the index in December 2019 with its value in December 2018.465 When  
making this calculation, Korea shall use the latest version of this index published as of 30 November 
2020. If the index changed by 5% in calendar year 2019, then Korea can impose a level of 
suspension of concessions or other obligations equivalent to USD 10.5 million, which is 5% more 
than the amount authorized from 1  December 2019 to 30 November 2020.  
Accordingly, the level of suspension of concessions by Korea to the United S tates must not 
exceed in US  dollars , the amount resulting from the yearly application of this formula.  
5  OVERALL AWARD OF THE  ARBITRATOR  
For Korea's request pertaining to LRWs, based on the reasons set out  in section 3 above , the 
Arbitrator determines that the level of nullification or impairment caused by the WTO -inconsistent 
anti-dumping and countervailing dut y measures  at the end of the RPT amounts to USD 74.4 0 million 
and USD  10.41 million, respectively. These amounts may be adjusted for inflation for the year 2018 
and on an annual basis there after. We suggest that Korea notify the DSB every year of the 
adjustment to the level of suspension.  
For Korea's reques t in relation to non -LRWs, based on the reasons set out above  in section  4, 
we decide that Korea may apply the following formula to calculate the level of nullifica tion or 
impairment on non -LRWs if and when  the United States applies definitive duties to specific exporters 
of a given non -LRW, based on margins calculated under the W -T comparison methodology, as found 
to be WTO -inconsistent by the Panel and the Appellat e Body in the underlying dispute : 
𝑁𝐼𝑖=𝑐𝑠∗𝑣𝑖𝑚 𝑝𝑖∗𝛥𝑡𝑖
1+𝑡𝑖      (6) 
 
The inputs  for the formula  are defined as follows: 𝑁𝐼𝑖 is the level of nullification or i mpairment 
of the non -LRW 𝑖; 𝑐𝑠 is a coefficient depending on the market share of the complaining party and the 
demand, supply, and substitution elasticities of the product under consideration;  𝑣𝑖𝑚𝑝 𝑖 is the value 
of imports from Korean enterprises (inclusive of cost, insurance and freight but exclusive of duties) 
subject to WTO inconsistent duties; Δ𝑡𝑖 is the difference between the WTO -inconsistent duty rate 
and zero; and, 𝑡𝑖 is the level of the WTO -inconsi stent duty rate. Δ𝑡𝑖 and 𝑡𝑖 are ad valorem duty rates, 
not measured i n percentage terms.  Finally, w e suggest that Korea notify the DSB of the level of 
suspension that  it calculates  and of any adjustment on this level of suspension there after "for each 
year during the first quarter of the following year ".466 
6  CONCLUDING OBSERVATIONS  
This is the first arbitration that was  tasked with determining the level of nullification or 
impairment caused by essentially the same measures "as such" and "as applied".  In view of these 
particular circumstances, the Arbitrator has striven  to use  a similar  approach  for both, to the extent  
possible.  However, certain adjustment s were unavoidable. We wish to briefly highlight the main 
similarities and differences characterizing the approaches adopted for LRWs and non -LRWs, in 
particular with res pect to the counterfactuals, the economic model, the data employed, and the 
reference period. We shall then conclude with a few general remarks.  
Our selection of the counterfactuals was driven by the notion of benefits accruing to Korea. 
Against this backg round, and for the reasons explained above, the proper counterfactual could not 
entail withdrawal of the order s. For the "as applied"  measures , the appropriate counterfactual is a 
hypothetical scenario in which the USDOC would  have relied on the normal comparison methodology  
in the first sentence of Article 2.4.2 of the Anti -Dumping Agreement  for the determination of the 
anti-dumping duty . In principle, the same scenario could have been envisioned with respect to non -
LRWs; however, uncertainties related to the availability of information in  future anti-dumping 
investigations and administrative reviews obliged us to use the value of zero , as a proxy  figure, to 
                                                
465 The rate of inflation in calendar 2018 is to be calculated as follows: (Value of the producer price 
index for total manufacturing in December 2018 - Value of the producer price index for total manufacturing in 
December 2017)/ Value of the producer price index for total manufacturing in December 2017.  
466 Korea's response to Arbitrator question No. 73, para. 59.  WT/DS464/ARB  
 
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  take the place of anti -dumping duty rates based  on W-T margins in future anti -dumping orders on 
non-LRWs . 
The Arbitrator  then determined that it would be possible to apply a similar model – the 
Armington model – to calculate the level of nullification or impairmen t for LRWs and non -LRWs . This 
model is flexible, because the elasticity of substitution can vary depending on the nature of the 
product  and the market . In contrast, the perfect substitutes partial equilibrium model assumes that 
the elasticity of substitution is infinite, and we had no evidence, in the LRW context, and necessarily 
no means to obta in evidence, in the non -LRW context, to make that assumption.  
For LRWs, the reason s to use the Armington model are, inter alia , that LRWs are differentiated 
products and evidence provided by the parties support a finite value of 4 for the elasticity of 
substitution of LRWs. In the case of non -LRWs, the Armington model was deemed  flexible to 
accommodate the different types of products and market settings where "as such" violations may 
occur. This flexibility arises from allowing the elasticity of substituti on to vary depending on the 
nature of the non -LRW, instead of assuming, without any evidence, that it is infinite, as would be 
the case in the perfect substitutes model. Consequently, the size of the coefficient also varies, 
depending on the product and ma rket under consideration. This approach ensures that the 
suspension of concessions will be equivalent to the level of nullification or impairment.  
The Armington  model requires data inputs such as the import share and the size of demand, 
supply, and substi tution elasticities. For LRWs the choice of each of these variables and parameters 
was made by the Arbitrator based on extensive submissions, responses to questions, and comments 
on each other's responses by the parties. This type of exchange was not possi ble for the not-yet-
identified non -LRWs. Consequently, a procedure was  required to reduce ambiguity in sources of data 
and calculations as much as possible.  It is for these reasons that we have adopted the use of a 
formula for non -LRWs using the data sourc es and methodology described in section  4.4.3.467 
While t here is no difference in the variables used in the calculations for LRWs and non -LRWs  
the sources of  data used for these variables differ , in particular with respect to (i)  the value of 
imports , and (ii) the import share or size of the market.468 First, the value of imports is at HS 10 -
digit level for LRWs, whereas it is either firm -level or product -level data for non -LRWs. The reason 
for this difference is that in LRWs, the evidence submitted by the parties and the ensuing debate 
between them has allowed the Arbitrator to make the appropriate determinations about the tariff 
lines concerned469, whereas this i s not the case for the not-yet-identified non -LRWs. Second, the 
average import shares for the 98 HS chapters are employed for non -LRWs, whereas precise 
information on the value of sales of LRWs in the United States is used  (i.e. AHAM data) . The reason 
for this difference is that no uniform source of data can be prescribed by the Arbitrator that could 
provide the same level of precision for yet unidentified products.  
The reference period to determine the value of imports that serve as input into the model 
differs for LRWs and non -LRWs. For LRWs the market share in 2011, prior to the imposition of the 
measure, is employed and adjusted based on the economic model to arrive at a hypothetical market 
share in 2017 representing a situation in which the WTO -inconsis tent duties are in place. The level 
of nullification or impairment is calculated in a counterfactual where the WTO -inconsistent duties are 
removed at the end of the RPT in 2017. For non -LRWs  "old cases" , where the reference period is 
also the end of the RP T, we cannot adopt the same approach as for LRWs, because the information 
to undertake this analysis  was not provided  by Korea and the  use of hypothetical import values for 
non-LRWs would be impractical and difficult to implement.  For non -LRWs "new cases",  the reference 
period is the  calendar  year prior to the application of  the inconsistent anti-dumping duty measure .  
                                                
467 More technically, in the case of LRWs,  the Armington model is solved exactly: the system of non -
linear equations defining the Armington model is solved to determine the impact of changes in duties on the 
value of imports. For non -LRWs, the system of equations defining the Armington model is fi rst written in 
relative changes to arrive at one equation (i.e. the formula), which can be employed to determine the impact 
of changes in duties on the value of imports.  
468 For LRWs data on the value of imports and the size of the market are used, whereas f or non -LRWs 
data on the value of imports and the import share are employed. However, combining the value of imports 
with the import share generates the size of the market. Hence, the variables employed for LRWs and non -LRWs 
are equivalent.  
469 See Section 3.3.4.6  above.  WT/DS464/ARB  
 
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Notwithstanding the differences highlighted above , the use of the  Armington model  for both 
LRWs and non -LRWs will result in a similar  approa ch to calculating  the level of nullification or 
impairment. In addition, both approaches "create an opportunity to ensure full cooperation from the 
parties and, hence, more precise and credible results".470 Moreover , with a view to enhancing 
transparency, we  suggested that Korea should notify the DSB every year of the amount of 
suspension resulting from the implementation of our Award.  
Finally, we note that , should the United States consider  that the application of the suspension 
by Korea exceeds the level of  nullification or impairment sustained by Korea, the United States may 
have recourse to the appropriate dispute settlement procedures.471 
__________  
                                                
470 Decision by the Arbitrator, US – Offset Act (Byrd Amendment) (EC) (Article 22.6 – US), para. 3.79.  
471 Decisions by the Arbitrators, EC – Hormones (US ) (Article 22.6 – EC), para. 38; US – Offset Act 
(Byrd Amendment) (EC) (Article 22.6 – US), para. 4.27; US – 1916 Act (EC) (Article 22.6 – US), para. 9.2.