WT/DS48 6/R 
 
6 July 2017  
(17-3595) Page: 1/74 
  Original: English  
 
  EUROPEAN UNION – COUNTERVAILING DUTIE S ON CERTAIN 
POLYETHYLENE TEREPHT HALATE FROM PAKISTAN  
REPORT OF THE PANEL  
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  TABLE OF CONTENTS  
1   INTRODUCTION  ................................ ................................ ................................ ........  12 
1.1   Complaint by Pakistan  ................................ ................................ ................................ .12 
1.2   Panel establishment and composition  ................................ ................................ ............ 12 
1.3   Panel proceedings  ................................ ................................ ................................ .......12 
1.3.1    General  ................................ ................................ ................................ .................. 12 
1.3.2    Working Procedures on Business Confidential Information (BCI)  ................................ ....13 
1.3.3    Request for a preliminary ruling  ................................ ................................ ................. 13 
2   FACTUAL ASPECTS ................................ ................................ ................................ ..... 13 
2.1   The measures at issue  ................................ ................................ ................................ 13 
3   PARTIES' REQUESTS FO R FINDINGS AND RECOM MENDATIONS  ................................  13 
4   ARGUMENTS OF THE PAR TIES  ................................ ................................ ...................  15 
5   ARGUMENTS OF THE THI RD PARTIES  ................................ ................................ ........  15 
6   INTERIM REVIEW  ................................ ................................ ................................ ...... 15 
7   FINDINGS  ................................ ................................ ................................ .................  15 
7.1   General principles regarding treaty interpretation, the applicable standard of review, 
and burden of proof  ................................ ................................ ................................ ........... 15 
7.1.1    Treaty in terpretation  ................................ ................................ ................................ 15 
7.1.2    Standard of review ................................ ................................ ................................ ...16 
7.1.3    Burden of proof  ................................ ................................ ................................ .......16 
7.2   Request for a preliminary ruling  ................................ ................................ ................... 17 
7.2.1    Introduction  ................................ ................................ ................................ ............ 17 
7.2.2    The Termination Request  ................................ ................................ .......................... 17 
7.2.2.1    Main arguments of the parties  ................................ ................................ ................ 17 
7.2.2.2    Evaluation by the Panel  ................................ ................................ ......................... 17 
7.2.3   Article 6.2 of the DSU  ................................ ................................ ............................... 19 
7.2.3.1    Relevant legal considerations  ................................ ................................ ................. 19 
7.2.3.2    Moot objections  ................................ ................................ ................................ ....20 
7.2.3.3    Remaining objections  ................................ ................................ ............................ 20 
7.2.3.3.1    Annex II(II)(1) and/or Annex III(II)(2) of the SCM Agreement  ................................ 20 
7.2.3.3.2    Article 1.1(a)(1) of the SCM Agreement  ................................ ................................ 22 
7.2.3.3.3    Article 12.6 of the SCM Agreement  ................................ ................................ .......22 
7.3   Claims regarding the MBS  ................................ ................................ ............................ 23 
7.3.1    Introduction  ................................ ................................ ................................ ............ 23 
7.3.2    Main arguments of the parties  ................................ ................................ ................... 24 
7.3.3    Evaluation by the Panel  ................................ ................................ ............................ 25 
7.3.3.1    Article 1  ................................ ................................ ................................ ............... 25 
7.3.3.1.1    Legal standard under Artic le 1.1(a)(1)(ii)  ................................ .............................. 25 
7.3.3.1.1.1    Footnote 1 and the term "[i]n accordance with"  ................................ .................. 26 
7.3.3.1.1.2    Article XVI of GATT 1994 (Note  to Article XVI)  ................................ .................... 27 WT/DS486/R  
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  7.3.3.1.1.3    Annex I  ................................ ................................ ................................ .......... 27 
7.3.3.1.1.4    Annex II  ................................ ................................ ................................ ......... 28 
7.3.3.1.1.5    Annex III ................................ ................................ ................................ ........ 30 
7.3.3.1.1.6    Conclusion – legal standard under Article 1.1(a)(1)(ii)  ................................ ......... 31 
7.3.3.1.2    Applicati on of Article 1 to the Commission's MBS subsidy determination  .................... 31 
7.3.3.1.3    Conclusion – Article 1  ................................ ................................ ......................... 32 
7.3.3.2    Other MBS -related claims ................................ ................................ ....................... 33 
7.4   Claims regarding the LTF -EOP ................................ ................................ ...................... 33 
7.4.1    Introduction  ................................ ................................ ................................ ............ 33 
7.4.2    Main arguments of the parties  ................................ ................................ ................... 34 
7.4.3    Relevant legal considerations  ................................ ................................ .................... 35 
7.4.4    Evaluation by the Panel  ................................ ................................ ............................ 36 
7.4.4.1    Article 14(b)  ................................ ................................ ................................ ......... 36 
7.4.4.1.1    Whether Novatex drew down principal before the POI on which it paid interest 
during the P OI ................................ ................................ ................................ ................... 36 
7.4.4.1.1.1    The questionnaire  ................................ ................................ ............................ 37 
7.4.4.1.1.2    The questionnaire response and the Original Spreadsheets  ................................ ...38 
7.4.4.1.1.3    The Second Deficiency Letter and the Revised Spreadsheets  ................................ .40 
7.4.4.1.1.4    The LTF -EOP offer letter  ................................ ................................ ................... 41 
7.4.4.1.1.5    The LTF -EOP Contract  ................................ ................................ ...................... 41 
7.4.4.1.1.6    Novatex annual reports  ................................ ................................ .................... 43 
7.4.4.1.1. 7   Conclusion – timing of drawdowns of principal  ................................ .................... 43 
7.4.4.1.2    The decision to use the SBP Rate: Determinations and disclosure documents  ............ 43 
7.4.4.1.3    Whether Pakistan has made out a prima facie  case and, if so, whether the 
European Union has rebutted it  ................................ ................................ ............................ 45 
7.4.4.1.4    Conclusion – Article 14(b)  ................................ ................................ ................... 47 
7.4.4.2    The chapeau  of Article 14  ................................ ................................ ....................... 48 
7.4.4.3    Other LTF -EOP-related claims  ................................ ................................ ................. 49 
7.5   Pakistan's claims under Article 15.5 of the SCM Agreement  ................................ ............. 49 
7.5.1    Introduction  ................................ ................................ ................................ ............ 49 
7.5.2    The Commission's approach to causation  ................................ ................................ ....49 
7.5.2.1    Main arguments of the parties  ................................ ................................ ................ 50 
7.5.2.2    Relevant legal considerations  ................................ ................................ ................. 50 
7.5.2.3    Evaluation by the Panel  ................................ ................................ ......................... 51 
7.5.2.3.1    Significance of US – Wheat Gluten ................................ ................................ ........ 51 
7.5.2.3 .2   Prejudgment of other known factors  ................................ ................................ .....52 
7.5.2.3.3    The basis on which the finding of the causal link was made  ................................ .....53 
7.5.2.3.4    Conclusion  ................................ ................................ ................................ ........ 54 
7.5.3    The Commission's analysis of "other known factors"  ................................ ..................... 54 
7.5.3.1    Imports from Korea  ................................ ................................ ............................... 55 
7.5.3.1.1    Main arguments of the parties  ................................ ................................ ............. 55 WT/DS486/R  
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  7.5.3.1.2    Evaluation by the Panel  ................................ ................................ ....................... 56 
7.5.3.2    Economic downturn  ................................ ................................ ............................... 56 
7.5.3.2.1    Main arguments of the parties  ................................ ................................ ............. 57 
7.5.3.2.2    Evaluation by the Panel  ................................ ................................ ....................... 57 
7.5.3.3    Competition from non -cooperating producers  ................................ ........................... 60 
7.5.3.3.1    Main arguments of the parties  ................................ ................................ ............. 60 
7.5.3.3.2    Evaluation by the Panel  ................................ ................................ ....................... 60 
7.5.3.4    Oil prices  ................................ ................................ ................................ ............. 62 
7.5.3.4.1    Main arguments of the partie s ................................ ................................ ............. 63 
7.5.3.4.2    Evaluation by the Panel  ................................ ................................ ....................... 63 
7.6   Claims regarding verification visits  ................................ ................................ ................ 64 
7.6.1    Introduction  ................................ ................................ ................................ ............ 64 
7.6.2    Main arguments of the parties  ................................ ................................ ................... 65 
7.6.3    Relevant legal considerations  ................................ ................................ .................... 66 
7.6.4    Evaluation by the Panel  ................................ ................................ ............................ 66 
7.6.4.1    Legal standard under Article 12.6 of the SCM Agreement  ................................ ........... 66 
7.6.4.2    Whether the Commission provided the results of the Novatex verification visit to 
Novatex  ................................ ................................ ................................ ............................ 71 
7.6.4.3    Conclusion  ................................ ................................ ................................ ........... 72 
8   FINDINGS AND CONCLUS IONS  ................................ ................................ ..................  73 
 
 WT/DS486/R  
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  LIST OF ANNEXES  
ANNEX A  
WORKING PROCEDURES O F THE PANEL  
Contents  Page  
Annex  A-1 Working Procedures of the Panel  A-2 
Annex  A-2 Additional Working P rocedures on Business Confidential Information  A-7 
ANNEX B  
ARGUMENTS OF THE EUR OPEAN UNION  
Contents  Page  
Annex  B-1 First Integrated Executive Summary of the European Union  B-2 
Annex  B-2 Second Integrated Executive Summary of the European Union  B-12 
ANNEX C 
ARGUMENTS OF PAKISTA N 
Contents  Page  
Annex  C-1 First Integrated Executive Summary of Pakistan  C-2 
Annex  C-2 Second Integrated Executive Summary of Pakistan  C-18 
 
ANNEX D  
ARGUMENTS OF THE THI RD PARTIES  
Contents  Page  
Annex  D-1 Third Party Oral Statem ent of China  D-2 
Annex  D-2 Executive Summary of United States Third Party written submission  D-4 
 
ANNEX E  
INTERIM REVIEW  
Contents  Page  
Annex  E-1 Interim Review  E-2 
 WT/DS486/R  
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  CASES CITED IN THIS REPORT  
Short title  Full case title and citation  
Argentina – Cerami c Tiles  Panel Report, Argentina – Definitive Anti -Dumping Measures on Imports of 
Ceramic Floor Tiles from Italy , WT/DS189/R , adopted 5 November 2001, 
DSR 2001:XII, p. 6241  
Argentina – Footwear (EC)  Appellat e Body Report, Argentina – Safeguard Measures on Imports of 
Footwear , WT/DS121/AB/R , adopted 12 January 2000, DSR 2000:I, p. 515  
Argentina – Poultry 
Anti-Dumping Duties  Panel Report, Argentina – Definitive Anti -Dumping Duties on Poultry from 
Brazil , WT/DS241/R , adopted 19 May 2003, DSR 2003:V, p. 1727  
Argentina – Textiles and 
Apparel  Panel Report, Argentina – Measures Affecting Imports of Footwear,  Textiles, 
Apparel and Other Items , WT/DS56/R , adopted 22 April 1998, as mod ified 
by Appellate Body Report WT/DS56/AB/R, DSR 1998:III, p. 1033  
Australia – Apples  Appellate Body Report, Australia – Measures Affecting the Importation of 
Apples from New Zealand , WT/DS367/AB/R , adopted 17 December 2010, 
DSR 2010:V, p. 2175  
Brazil – Aircraft  Appellate Body Report, Brazil – Export Financing Programme for Aircraft , 
WT/DS46/AB/R , adopted 20 August 1999, DSR 1999:III, p. 1161  
Brazil – Desiccated Coconut  Appellate Body Report, Brazil – Measures Affecting Desiccated Coconut , 
WT/DS22/AB/R , adopted 20 March 1997, DSR 1997:I, p. 167  
Chile – Price Band System  Appellate Body Report, Chile – Price Band System and Safeguard Measures 
Relating to Certain Agricultural Products , WT/DS207/AB/R , adopted 
23 October 2002, DSR 2002:VIII, p. 3045 (Corr.1, DSR 2006:XII, p. 5473)  
China – Autos (US)  Panel Report, China – Anti-Dumping and Countervailing Duties on Certain 
Automobiles from the United States , WT/DS440/R  and Add.1, adopted 
18 June 2014, DSR 2014:VII, p. 2655  
China – Electronic Payment 
Services  Panel Report, China – Certain Measures Affecting Electronic Payment 
Services , WT/DS413/R  and Add.1, adopted 31 August 2012, DSR 2012:X, 
p. 5305 
China – GOES  Appellate Body Report, China – Countervailing and Anti -Dumping Duties on 
Grain Oriented Flat -Rolled Electrical Steel from the United States , 
WT/DS414/AB/R , adopted 16 November 2012, DSR 2012:XII, p. 6251  
China – GOES (Article 21.5 – 
US) Panel Report, China – Countervailing and Anti -Dumping Duties on Grain 
Oriented Flat -Rolled Electrical Steel from th e United States – Recourse to 
Article 21.5 of the DSU by the United States , WT/DS414/RW  and Add.1, 
adopted 31 August 2015  
China – HP-SSST (Japan) / 
China – HP-SSST (EU)  Panel Reports, China – Measures Imposing Anti -Dumping Duties on High -
Performance Stainless Steel Seamless Tubes ("HP -SSST") from Japan / 
China – Measures Impos ing Anti -Dumping Duties on High -Performance 
Stainless Steel Seamless Tubes ("HP -SSST") from the European Union , 
WT/DS454/R  and Add.1 / WT/DS460/R , Add.1 and Corr.1, adopted 
28 October 2015, as modified by Appellate Body Reports WT/DS454/AB/R / 
WT/DS460/AB/R  
China – Raw Materials  Appellate Body Reports, China – Measures Related to the Exportation of 
Various Raw Materials , WT/DS394/AB/R  / WT/DS395/AB/R  / 
WT/DS398/AB/R , adopted 22 February 2012, DSR 2012:VII, p. 3295  
Dominican Republic – Import 
and Sale of Cigarettes  Panel Report, Dominican Republic – Measures Affecting the Importation and 
Internal Sale of C igarettes , WT/DS302/R , adopted 19 May 2005, as modified 
by Appellate Body R eport WT/DS302/AB/R, DSR 2005:XV, p. 7425  
EC – Approval and Marketing of 
Biotech Products  Panel Reports, European Communities – Measures Affecting the Approval 
and Marketing of Biotech Products , WT/DS291/R , Add.1 to Add.9 and Corr.1 
/ WT/DS292/R , Add.1 to Add.9 and Corr.1 / WT/DS293/R , Add.1 to Add.9 
and Corr.1, adopted 21 November 2006, DSR 2006:III, p. 847  
EC – Bananas III  Appellate Body Report, European Communities – Regime for the 
Importation, Sale and Distribution of  Bananas , WT/DS27/AB/R , adopted 
25 September 1997, DSR 1997:II, p. 591  WT/DS486/R  
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  Short title  Full case title and citation  
EC – Bananas III  
(Article  21.5 – Ecuador II) /  
EC – Bananas III  
(Article  21.5 – US) Appellate Body Reports, European Communities – Regime for the 
Importation, Sale and Distribution of Bananas – Second Recourse to 
Article  21.5 of the DSU by Ecuador , WT/DS27/AB/RW2/ECU , adopted 
11 December 2008, and Corr.1 / European Com munities – Regime for the 
Importation, Sale and Distribution of Bananas – Recourse to Article  21.5 of 
the DSU by the United States , WT/DS27/AB/RW/USA  and Corr.1, adopted 
22 December 2008, DSR 2008:XVIII, p.  7165 
EC – Bed Linen  Panel Report, European Communities – Anti-Dumping Duties on Imports of 
Cotton -Type Bed Linen fr om India, WT/DS141/R , adopted 12 March 2001, as 
modified by Appellate Body Report WT/DS141/AB/R, DSR 2001:VI, p.  2077 
EC – Countervailing Measures 
on DRAM Chips  Panel Report, European Communities – Countervailing Measures on Dynamic 
Random Access Memory Chips from Korea , WT/DS299/R , adopted 
3 August  2005, DSR 2005:XVIII, p. 8671  
EC – Fasteners (China)  Appellate Body Report, European Communities – Definitive Anti -Dumping 
Measures on Certain Iron or Steel Fasteners from China, WT/DS397/AB/R , 
adopted 28 July 2011, DSR 2011:VII, p. 3995  
EC – Fasteners (China)  Panel Report, European Communities – Definitive Anti -Dumping Measures on 
Certain Iron or Steel Fasteners from China , WT/DS397/R  and Corr.1, 
adopted 28 July 2011, as modified by Appellate Body Report 
WT/DS397/AB/R, DSR 2011:VIII, p. 4289  
EC – Hormones  Appellate Body Report, EC Measures Concerning Meat and Meat Products 
(Hormones) , WT/DS26/AB/R , WT/DS48/AB/R , adopted 13 February 1998, 
DSR 1998:I, p. 135  
EC – IT Products  Panel Reports, European Communities and its member States – Tariff 
Treatment of Certain Information Technology Products , WT/DS375/R  / 
WT/DS376/R  / WT/DS377/R , adopted 21 September 2010 , DSR 2010:III, 
p. 933 
EC – Salmon (Norway)  Panel Report, European Communities – Anti-Dumping Measure on Farmed 
Salmon from Norway , WT/DS337/R , adopted 15 January 2008, and Corr.1, 
DSR 2008:I, p. 3  
EC – Selected Customs Matters  Appellate Body Report, European Communities – Selected Customs Matters , 
WT/DS315/AB/R , adopted 11 December 2006, DSR 2006:IX, p. 3791  
EC – Tube or Pipe Fittings  Appellate Body Report, European Communities – Anti-Dumping Duties on 
Malleable Cast Iron Tube or Pipe Fittings from Brazil , WT/DS219/AB/R , 
adopted 18 August 2003, DSR 2003:VI, p. 2613  
EC – Tube or Pipe Fittings  Panel Report, European Communities – Anti-Dumping Duties on Malleable 
Cast Iron Tube or Pipe Fittings from Brazil , WT/DS219/R , adopted 
18 August  2003, as modified by Appellate Body Report WT/DS219/AB/R , 
DSR 2003:VII, p. 2701  
EC and certain member States 
– Large Civil Aircraft  Appellate Body Report, European Communities and Certain Member States – 
Measures Affecting Trade in Large Civil Aircraft , WT/DS316/AB/R , adopted 
1 June 2011, DSR 2011:I, p. 7  
EC and certain member States 
– Large Civil Aircraft 
(Article  21.5 – US) Panel Report, European Communities and Certain Member States – Measures 
Affecting Trade in Large Civil Aircraft – Recourse to Article 21.5 of the DSU 
by the United States, WT/DS316/RW  and Add.1, circulated to WTO Members 
22 September 2016 [appealed by European Union 13 October 2016]  
Egypt – Steel Rebar  Panel Report, Egypt – Definitive Anti -Dumping Measures on Steel Rebar from 
Turkey , WT/DS211/R , adopted  1 October 2002, DSR 2002:VII, p. 2667  
EU – Biodiesel (Argentina)  Appellate Body Report, European Union – Anti-Dumping Measures on 
Biodiesel from Argentina , WT/DS473/AB/R  and Add.1, adopted 
26 October  2016 
EU – Biodiesel (Argentina)  Panel Report, European Union – Anti-Dumping Measures on Biodiesel from 
Argentina , WT/DS473/R  and Add.1, adopted 26 October 2016, as modified 
by Appellate Body Report WT/DS473/AB/R  
EU – Fatty Alcohols (Indonesia)  Panel Report, European Union – Anti-Dumping Measures on Imports of 
Certain Fatty Alcohols from Indonesia , WT/DS442/R  and Add.1, circulated to 
WTO Members 16 December 2016 [appealed by Indonesia 
10 February  2017]  
EU – Footwear (China)  Panel Report, European Union – Anti-Dumping Meas ures on Certain Footwear 
from China , WT/DS405/R , adopted 22 February 2012, DSR 2012:IX, p. 4585  WT/DS486/R  
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  Short title  Full case title and citation  
Guatemala – Cement I  Appellate Body Report, Guatemala – Anti-Dumping Investigation Regarding 
Portland Cement from Mexico, WT/DS60/AB/R , adopted 25 November 1998, 
DSR 1998:IX, p. 3767  
India – Additional Import 
Duties  Panel Report, India – Additional and Extra -Additional Duties on Imports from 
the United St ates, WT/DS360/R , adopted 17 November 2008, as reversed by 
Appellate Body R eport WT/DS360/AB/R, DSR 2008:XX, p. 8317  
India – Patents (US)  Appellate Body Report, India – Patent Protection for Pharmaceutical and 
Agricultural Chemical Products , WT/DS50/AB/R , adopted 16 January 1998, 
DSR 1998:I, p. 9  
Indonesia – Autos  Panel Report, Indonesia – Certain Measures Affecting the Automobile 
Industry , WT/DS54/R , WT/DS55/R , WT/DS59/R , WT/DS64/R , Corr.1 a nd 
Corr.2, adopted 23 July 1998, and Corr.3 and Corr.4, DSR 1998:VI, p. 2201  
Japan – Alcoholic Beverages II  Appellate Body Report, Japan – Taxes on Alcoholic Beverages, 
WT/DS8/AB/R , WT/DS10/AB/R , WT/DS11/AB/R , adopted 1  November 1996, 
DSR 1996:I, p. 97  
Korea – Certain Paper  Panel Report, Korea – Anti-Dumping Duties on Imports of Certain Paper from 
Indonesia , WT/DS312/R , adopted 28 November 2005, DSR 2005:XXII, 
p. 10637  
Korea – Dairy Appellate Body Report, Korea – Definitive Safeguard Measure on Imports of 
Certain Dairy Products , WT/DS98/AB/R , adopted 12 January 2000, 
DSR 2000:I, p. 3  
Mexico – Olive Oil  Panel Repo rt, Mexico – Definitive Countervailing Measures on Olive Oil from 
the European Communities , WT/DS341/R , adopted 21 October 2008, 
DSR 2008:IX, p. 3179  
Mexico – Steel Pipes and Tubes  Panel Report, Mexico – Anti-Dumping Duties on Steel Pipes and Tubes from 
Guatemala , WT/DS331/R , adopted 24 July 2007, DSR 2007:IV, p. 1207  
Mexico – Taxes on Soft Drinks  Appellate Body Report, Mexico – Tax Measures on Soft D rinks and Other 
Beverages , WT/DS308/AB/R , adopted 24 March 2006, DSR 200 6:I, p. 3  
Peru – Agricultural Products  Appellate Body Report, Peru – Additional Duty on Imports of Certain 
Agricultural Products , WT/DS457/AB/R  and Add.1, adopted 31 July 2015  
Russia – Commercial Vehicles  Panel Report, Russia – Anti-Dumping Duties on Light Commercial Vehicles 
from Germany and Italy , WT/DS479/R  and Add.1, circulated to WTO 
Members 27 January 2017 [appealed by Russia 20 Februar y 2017]  
Russia – Tariff Treatment  Panel Report, Russia – Tariff Treatment of Certain Agricultural and 
Manufacturing Products , WT/DS485/R , Corr.1, Corr.2, and Add.1, adopted 
26 September 2016  
Thailand – H-Beams  Appellate Body Report, Thailand – Anti-Dumping Duties on Angles, Shapes 
and Sections of Iron or Non -Alloy Steel and  H-Beams from Poland , 
WT/DS122/AB/R , adopted 5 April 2001, DSR 2001:VII,  p. 2701  
Thailand – H-Beams  Panel Report, Thailand – Anti-Dumping Duties on Angles, Shapes and 
Sections of Iron or Non -Alloy Steel and H -Beams from Poland , WT/DS122/R , 
adopted 5 April 2001, as modified by Appellate Body Report 
WT/DS122/AB/R, DSR 2001:VII, p. 2741  
Turkey – Textiles  Panel Report, Turkey – Restrictions on Imports of Textile and Clothing 
Products , WT/DS34/R , adopted 19 November 1999, as mo dified by 
Appellate  Body Report WT/DS34/AB/R, DSR 1999:VI, p. 2363  
Ukraine – Passenger Cars  Panel Report, Ukraine – Definitive Safeguard Measures on Certain Passenger 
Cars, WT/DS468/R  and Add.1, adopted 20 July 2015  
US – Anti-Dumping and 
Countervailing Duties (China)  Appellate Body Report, United States – Definitive Anti -Dump ing and 
Countervailing Duties on Certain Products from China , WT/DS379/AB /R, 
adopted 25 March 2011, DSR 2011:V, p. 2869  
US – Carbon Steel  Appellate Body Report, United States – Countervailing Duties on Certain 
Corrosion -Resistant Carbon Steel Flat Products from Germany , 
WT/DS213/AB/R  and Corr.1, adopted 19 December 2002, DSR 2002:IX, 
p. 3779 
US – Carbon Steel (India)  Appellate Body Report, United States – Countervailing Measures on Certain 
Hot-Rolled Carbon Steel Flat Products from India , WT/DS436/AB/R , adopted 
19 December 2014, DSR 2014:V, p. 1727  WT/DS486/R  
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  Short title  Full case title and citation  
US – Carbon Steel (India)  Panel Report, United States – Countervailing Measures on Certain Hot -Rolled 
Carbon Steel Flat Products from India , WT/DS436/R  and Add.1, adopted 
19 December 2014, as modified by Appellate Body Report WT/DS436/AB/R, 
DSR 2014:VI, p. 2189  
US – Certain EC Products  Appellate Body Report, United States – Import Measures on Certain Products 
from the European Communities , WT/DS165/AB/R , adopted 
10 January  2001, DSR 2001:I, p. 373  
US – Continued Zeroing  Appellate Body Report, United States – Continued Existence and Application 
of Zeroing Method ology , WT/DS350/AB/R , adopted 19 February 2009, 
DSR 2009:III, p. 1291  
US – Countervailing and Anti -
Dumping Measures (China)  Appellate Body Report, United States – Countervailing and Anti -Dumping 
Measures on Certain Products from China , WT/DS449/AB/R  and Corr.1, 
adopted 22 July 2014, DSR 2014:VIII, p. 3027  
US – Countervailing Duty 
Investigation on DRAMS  Appellate Body Report, United States – Countervailing Duty Investigation on 
Dynamic Random Access Memory Semiconductors (DRAMS) from Korea , 
WT/DS296/AB/R , adopted 20 July 2005, DSR 2005:XVI, p. 8131  
US – Countervailing Measures 
(China)  Appellate Body Report, United States – Countervailing Duty Measures on 
Certain Products from China , WT/DS437/AB/R , adopted 16 January 2015  
US – DRAMS  Panel Report, United States – Anti-Dumping Duty on Dyn amic Random 
Access Memory Semiconductors (DRAMS) of One Megabit or Above from 
Korea , WT/DS99/R , adopted 19 March 1999, DSR 1999:II, p. 521  
US – FSC Panel Report, United States – Tax Treatment for "Foreign Sales 
Corporations" , WT/DS108/R , adopted 20 March 2000, as modified by 
Appellate Body Report WT/DS108/AB/R, DSR 2000:IV, p. 1675  
US – FSC (Article 21.5 – EC) Appellate Body Report, United States – Tax Treatment for "Foreign Sales 
Corporations" – Recourse to Article 21.5 of the DSU by the European 
Communities , WT/DS108/AB/RW , adopted 29 January 2002, DSR 2002:I, 
p. 55 
US – FSC (Article 21.5 – EC) Panel Report, United States – Tax Treatment for "Foreign Sales 
Corporations"  – Recourse to Article 21.5 of the DSU by the Europ ean 
Communities , WT/DS108/RW , adopted 29 January 2002, as modified by 
Appellate Body Report WT/DS108/AB/RW, DSR 2002:I, p. 119  
US – Gasoline  Panel Report, United States – Standards for Reformulated and Conventional 
Gasoline , WT/DS2/R , adopted 20 May 1996, as modified by Appellate Body 
Report WT/DS2/AB/R, DSR 1996:I, p. 29  
US – Hot-Rolled Steel  Appellate Body Report, United States – Anti-Dumping Measure s on Certain 
Hot-Rolled Steel Products from Japan , WT/DS184/AB/R , adopte d 
23 August  2001, DSR 2001:X, p. 4697  
US – Hot-Rolled Steel  Panel Report, United States – Anti-Dumping Measures on Certain Hot -Rolled 
Steel Products from Japan , WT/DS184/R , adopted 23 August 2001 modified 
by Appellate Body Report WT/DS184/AB/R, DSR 2001:X, p. 4769  
US – Lamb  Appellate Body Report, United States – Safeguard Measu res on Imports of 
Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia , 
WT/DS177/AB/R , WT/DS178/AB/R , adopted 16 May 2001, DSR 2001 :IX, 
p. 4051 
US – Large Civil Aircraft (2nd 
complaint)  Appellate Body Report, United States – Measures Affecting Trade in Large 
Civil Aircraft (Second Complaint) , WT/DS353/AB/R , adopted 23 March 2012, 
DSR 2012:I, p. 7  
US – Large Civil Aircraft (2nd 
complaint)  Panel Report, United States – Measures Affecting Trade in Large Ci vil Aircraft 
(Second Complaint) , WT/DS353/R , adopted 23 March 2012, as modi fied by 
Appellate Body Report WT/DS353/AB/R, DSR 2012:II, p. 649  
US – Line Pipe  Appellate Body Report, United States – Definitive Safeguard Measures on 
Imports of Circular Welded Carbon Quality Line Pipe from Korea , 
WT/DS202/AB/R , adopted 8 March 2002, DSR 2002:IV, p. 1403  
US – Oil Country Tubular 
Goods Sunset Reviews  Appell ate Body Report, United States – Sunset Reviews of Anti -Dumping 
Measures on Oil Country Tubular Goods from Argentina , WT/DS268/AB/R , 
adopted 17 December 2004, DSR 2004:VII, p. 3257  
US – Poultry (China)  Panel Report, United States – Certain Measures Affecting Imports of Poultry 
from China , WT/DS392/R , adopted 25 October 2010, DSR 2010:V, p. 1909  WT/DS486/R  
BCI deleted, as indicated [***]  
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  Short title  Full case title and citation  
US – Softwood Lumber IV 
(Article 21.5 – Canada)  Appell ate Body Report, United States – Final Countervailing Duty 
Determination with Respect to Certain Softwood Lumber from Canada – 
Recourse by Canada to Article 21.5 of the DSU , WT/DS257/AB/RW , adopted 
20 December 2005, DSR 2005:XXIII, p. 11357  
US – Steel Safeguards  Appellate Body Report, United States – Definitive Safeguard Mea sures on 
Imports of Certain Steel Products , WT/DS248/AB/R , WT/DS249/AB/R , 
WT/DS251/AB/R , WT/DS252/AB/R , WT/DS253/AB/R , WT/DS254/AB/R , 
WT/DS258/AB/R , WT/DS259/AB/R , adopted 10 December 2003, 
DSR 2003:VII, p. 3117  
US – Tyres (China)  Appellate Body Report, United States – Measures Affecting Imports of 
Certain Passenger V ehicle and Light Truck Tyres from China , 
WT/DS399/AB/R , adopted 5 Octobe r 2011 , DSR 2011:IX, p. 4811  
US – Tyres (China)  Panel Report, United States – Measures Affecting Imports of Certain 
Passenger Vehicle and Light Truck Tyres from China , WT/DS399/R , adopted 
5 October 2011, upheld by Appellate Body Report WT/DS399/AB/R , 
DSR 2011:IX, p. 4945  
US – Wheat Gluten  Appellate Body Report, United States – Definitive Safeguard Measures on 
Imports of Wheat Gluten from the European Communities , WT/DS166/AB/R , 
adopted 19 January 2001, DSR 2001:II, p. 717  
US – Wool Shirts and Blouses  Appellate Body Report, United States – Measure Affecting Imports of Woven 
Wool Shirts and Blouses from India, WT/DS33/AB/R , adopted 23 May 1997, 
and Corr.1, DSR 1997:I, p. 323  
US – Wool Shirts and Blouses  Panel Report, United States – Measure Affecting Imports of Woven Wool 
Shirts and Blouses from India , WT/DS33/R , adopted 23 May 1997, upheld by 
Appellate Body Report WT/DS33/AB/R, DSR 1997:I, p. 343  
US – Zeroing (Japan) 
(Article  21.5 – Japan)  Appellate Body Report, United States – Measures Relating to Zeroing and 
Sunset Reviews – Recourse to Arti cle 21.5 of the DSU by Japan , 
WT/DS322/AB/RW , adopted 31 August 2009, D SR 2009:VIII, p. 3441  WT/DS486/R  
BCI deleted, as indicated [***]  
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  ABBREVIATIONS USED I N THIS REPORT  
Abbreviation  Description  
Anti-Dumping Agreement  Agreement on Implementation of Article VI of the General Agreement on Tariffs 
and Trade 1994  
BCI Business Confidential Information  
CVD  Countervaili ng duty  
Definitive Determination  Council Implementing Regulation (EU) No. 857/2010 of 27 September 2010 
imposing a definitive countervailing duty and collecting definitively the 
provisional duty imposed on imports of certain polyethylene terephthalate 
originating in Iran, Pakistan, and the United Arab Emirates, Official Journal of 
the European Union, L Series, No. 254/10 (29 September 2010), (Exhibit 
PAK-2) 
DSB Dispute Settlement Body  
DSU Understanding on Rules and Procedures Governing the Settlement of Disputes  
EU European Union  
GATT 1994  General Agreement on Tariffs and Trade 1994  
IP Investigation period  
KIBOR  Karachi Inter -Bank Offer Rate  
LTF-EOP Long Term Financing of Export -Oriented Projects  
MBS Manufacturing Bond Scheme  
PET Polyethylene terep hthalate  
PKR Pakistani rupees  
POI Period of investigation  
Provisional Determination  Commission Regulation (EU) No. 473/2010 of 31 May 2010 imposing a 
provisional countervailing duty on imports of certain polyethylene terephthalate 
originating in Iran, P akistan, and the United Arab Emirates, Official Journal of 
the European Union, L Series, No. 134/25 (1 June 2010), (Exhibit PAK -1) 
SBP State Bank of Pakistan  
SCM Agreement  Agreement on Subsidies and Countervailing Measures  
Vienna Convention  Vienna Conv ention on the Law of Treaties, Done at Vienna, 23 May 1969, 1155 
UNTS 331; 8 International Legal Materials 679  
WTO World Trade Organization  
 WT/DS486/R  
BCI deleted, as indicated [***]  
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  1  INTRODUCTION  
1.1  Complaint by Pakistan  
1.1.  On 28 October 2014, Pakistan requested consultations with the European Union pursuant to 
Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes 
(DSU), Article 30 of the Agreement on Subsidies and Countervailing Measures (SCM Agreement), 
and Article XXIII:1 of the General Agreement on Tariffs and  Trade 1994 (GATT 1994).1 
1.2.  Consultations were held on 17 December 2014 but failed to resolve this dispute.  
1.2  Panel establishment and composition  
1.3.  On 12 February 2015, Pakistan requested the establishment of a panel pursuant to Article  6 
of the DSU with standa rd terms of reference.2 At its meeting on 25 March 2015, the Dispute 
Settlement Body (DSB) established a panel pursuant to the request of Pakistan in document 
WT/DS 486/3 , in accordance with Article  6 of the DSU.3 
1.4.  The Panel's terms of reference are the foll owing:  
To examine, in the light of the relevant provisions of the covered agreements cited by 
the parties to the dispute, the matter referred to the DSB by Pakistan in document 
WT/DS486/2 and to make such findings as will assist the DSB in making the 
recom mendations or in giving the rulings provided for in those agreements.4 
1.5.  On 13 May 2015, the parties agreed that the Panel would be composed as follows:  
Chairperson:  Mr William Davey  
 
Members:   Mr Michael Mulgrew  
   Mr Welber Barral  
 
1.6.  The United States and Ch ina notified their interest in participating in the Panel proceedings as 
third parties.  
1.3  Panel proceedings  
1.3.1   General  
1.7.  The Panel began its work on this case later than it would have wished due to staff constraints 
in the WTO Secretariat.5 After consultation wit h the parties, the Panel adopted its Working 
Procedures6 on 15  March  2016 and the timetable on 1 April 2016. The timetable was revised on 
16 June 2016, 1  December 2016 and 20 March 2017.  
1.8.  The Panel held a first substantive meeting with the parties on 21 an d 22 September 2016. A 
session with the third parties took place on 22 September 2016. The Panel held a second 
substantive meeting with the parties on 29 and 30 November 2016. On 27 January 2017, the 
Panel issued the descriptive part of its Report to the p arties. The Panel issued its Interim Report to 
the parties on 24 February 2017. The Panel issued its Final Report to the parties on 
31 March  2017.  
                                                
1 Pakistan's request for consultations, WT/DS486/1.  
2 Pakistan's request for the establishment of a panel, WT/DS486 /2 (Pakistan's panel request).  
3 DSB, Minutes of the meeting held on 25 March 2015, (circulated on 1 May 2015), WT/DSB/M/359.  
4 Constitution note of the Panel, WT/DS486/3.  
5 EU – PET (Pakistan) , communication from the Panel, (issued and circulated on 13 No vember 2015), 
WT/DS486/4.  
6 Working Procedures of the Panel, Annex A -1. WT/DS486/R  
BCI deleted, as indicated [***]  
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  1.3.2   Working Procedures on Business Confidential Information (BCI)  
1.9.  After consultation with the parties, the Panel adopted, on 14 April 2016, Additional Working 
Procedures Concerning Business Confidential Information (BCI).7 
1.3.3   Request for a preliminary ruling  
1.10.   On 3 March 2016, the European Union submitted to the Panel a request for a preliminary 
ruling. The Panel addresse s the European Union's request for a preliminary ruling in its findings 
below.8 
2  FACTUAL ASPECTS  
2.1  The measures at issue  
2.1.  This dispute concerns countervailing measures imposed by the European Union on imports of 
certain polyethylene terephthalate (PET) from Pa kistan pursuant to the Council Implementing 
Regulation (EU) No. 857/2010 of 27 September 2010 imposing a definitive countervailing duty 
(CVD) and collecting definitively the provisional duty imposed on imports of certain polyethylene 
terephthalate originat ing in Iran, Pakistan, and the United Arab Emirates (the Definitive 
Determination). The previously applicable provisional measure challenged by Pakistan had been 
imposed pursuant to Commission Regulation (EU) No. 473/2010 of 31 May 2010 imposing a 
provisio nal countervailing duty on imports of certain polyethylene terephthalate originating in Iran, 
Pakistan, and the United Arab Emirates (the Provisional Determination).  
3  PARTIES' REQUESTS FO R FINDINGS AND RECOM MENDATIONS  
3.1.  Pakistan requests that the Panel find t hat9: 
a. With respect to the Manufacturing Bond Scheme (MBS), which the European Commission 
(the Commission) found to be a countervailable subsidy contingent on export 
performance, the Commission acted inconsistently with its obligations under:  
i. Article 1.1(a )(1)(ii) of the SCM Agreement, because it improperly determined the 
existence of a financial contribution;  
ii. Article 1.1(b) of the SCM Agreement, because it improperly analysed the existence of 
a benefit;  
iii. Article 3.1(a) of the SCM Agreement, because – given its incorrect interpretation and 
application of Article 1 – it incorrectly determined the existence of an export subsidy;  
iv. Article 10 of the SCM Agreement, because it imposed a countervailing duty not in 
accordance with the provisions of Article  VI of the G ATT 1994 and the 
above -mentioned terms of the SCM Agreement;  
v. Article 32 of the SCM Agreement, because it took specific action against a subsidy 
not in accordance with the provisions of the GATT  1994, as interpreted by the 
SCM Agreement, in particular by th e above -mentioned provisions;  
vi. Article 19.1 of the SCM Agreement, because it made a final determination of the 
existence and amount of the subsidy and imposed a countervailing duty not in 
accordance with Article 19;  
vii. Annex I(i) of the SCM Agreement by faili ng to properly determine the existence of an 
export subsidy within the meaning of that provision; and  
                                                
7 Additional Working Procedures of the Panel Concerning Business Confidential Information, Annex A -2.  
8 See below para. 7.9 et seq.  
9 Pakistan's first wri tten submission, paras. 9.3 -9.6.  WT/DS486/R  
BCI deleted, as indicated [***]  
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  viii. Article VI:3 of the GATT 1994, by levying a countervailing duty in excess of an 
amount equal to the estimated bounty or subsidy determined to have been gr anted, 
directly or indirectly, on the manufacture, production, or export of the product at 
issue.  
If the Panel finds that the MBS falls under Annex II of the SCM Agreement, Pakistan also 
requests the Panel to find that the Commission acted inconsistently w ith:  
i. The procedures under Annex II(II) as a whole;  
ii. Annex II(II)(2), because it failed to ensure/provide for the opportunity that an 
investigation be carried out to determine the existence of an excess remission; and  
iii. Annex II(II)(1), because it failed to e xamine the "generally accepted commercial 
principles" prevailing in Pakistan when examining the verification system and 
procedures under the MBS.  
If the Panel finds that the MBS falls under Annex III of the SCM Agreement, Pakistan also 
requests the Panel to find that the Commission acted inconsistently with:  
i. The procedures under Annex III(II) as a whole;  
ii. Annex III(II)(3) because it failed to ensure/provide for the opportunity that an 
investigation be carried out to determine the existence of an excess rem ission; and  
iii. Annex III(II)(2), because it failed to examine the "generally accepted commercial 
principles" prevailing in Pakistan when examining the verification system and 
procedures under the MBS.  
b. With respect to the Long Term Financing of Export -Oriente d Projects (LTF -EOP), which 
the Commission found to be a countervailable subsidy contingent on export 
performance, the Commission acted inconsistently with its obligations under:  
i. Article 1.1(b) of the SCM Agreement by improperly analysing and determining the 
existence of benefit;  
ii. The chapeau  of Article 14 of the SCM Agreement, because the Commission failed to 
adequately explain the application of the method used by the investigating authority 
in calculating the benefit (which is provided for in the nationa l legislation or 
implementing regulations) to the particular case at hand;  
iii. Article 14(b) of the SCM Agreement, because the Commission failed to properly 
calculate any benefit as the difference between the amount that the firm receiving 
the loan pays on the  government loan and the amount the firm would pay on a 
comparable commercial loan which the firm could actually obtain on the market;  
iv. Article 10 of the SCM Agreement, because it failed to impose a countervailing duty in 
accordance with the provisions of Article  VI of GATT  1994 and the above -mentioned 
terms of the SCM Agreement;  
v. Article 19.1 of the SCM Agreement, because it made a final determination of the 
existence and amount of the subsidy and imposed a countervailing duty not in 
accordance with Article  19 (benefit);  
vi. Article 32 of the SCM Agreement, because it failed to take specific action against a 
subsidy in accordance with the provisions of GATT  1994, as interpreted by the 
SCM Agreement, in particular by the above -mentioned provisions; and  
vii. Article V I:3 of the GATT 1994, by levying a countervailing duty in excess of an 
amount equal to the estimated bounty or subsidy determined to have been granted, 
directly or indirectly, on the manufacture, production, or export of the product at 
issue.  WT/DS486/R  
BCI deleted, as indicated [***]  
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  c. With respect  to its non -attribution determinations, the Commission acted inconsistently 
with its obligations under Article 15.5 of the SCM Agreement.  
d. With respect to its obligation to disclose the results of the verification visit to the 
exporting producer in Pakistan , the Commission acted inconsistently with its obligations 
under Article 12.6 of the SCM Agreement.  
3.2.  The European Union requests that the Panel reject Pakistan's claims in this dispute in their 
entirety.10 
4  ARGUMENTS OF THE PAR TIES  
4.1.  The arguments of the partie s are reflected in their executive summaries, provided to the 
Panel in accordance with paragraph 19 of the Working Procedures adopted by the Panel (see 
Annexes B -1 and B -2 and Annexes C -1 and C -2). 
5  ARGUMENTS OF THE THI RD PARTIES  
5.1.  The arguments of the China and the United States are reflected in their executive summaries, 
provided in accordance with paragraph 19 of the Working Procedures adopted by the Panel (see 
Annexes D -1 and D -2). 
6  INTERIM REVIEW  
6.1.  On 24 February 2017, the Panel issued its Interim Report to  the parties. On 8 March 2017, 
the European Union communicated to the Panel that it had no substantial comments on the Panel's 
Interim Report. On 10 March 2017, Pakistan submitted a written request for the Panel to review 
aspects of the Interim Report. Nei ther party requested an interim review meeting. On 
16 March  2017, the European Union submitted comments on Pakistan's requests for review.  
6.2.  The parties' comments made at the interim review stage as well as the Panel's discussion and 
disposition of those re quests are set out in Annex E -1.  
7  FINDINGS  
7.1.  This dispute concerns EU measures imposing CVDs on certain PET from Pakistan. Pakistan's 
claims proceed under various provisions of the SCM Agreement and the GATT  1994. The 
European  Union requests that the Panel r eject each of the claims presented by Pakistan. In the 
request for a preliminary ruling, the European Union also argued that the Panel should terminate 
its work in this dispute because the challenged measures have expired, and, in the alternative, 
that cer tain of Pakistan's claims were outside the Panel's terms of reference under the standards 
set forth in Article 6.2 of the DSU.  
7.2.  We begin by examining the request for a preliminary ruling submitted by the 
European  Union. Thereafter, we consider Pakistan's cl aims concerning the MBS, followed by 
Pakistan's claims concerning the LTF -EOP. We then consider Pakistan's claims under Article 15.5 of 
the SCM Agreement, before turning to Pakistan's claim under Article 12.6 of the SCM Agreement 
pertaining to the results of the verification visit. However, before proceeding to do so, we briefly 
recall the relevant general principles regarding treaty interpretation, the standard of review and 
the burden of proof in World Trade Organization (WTO) dispute settlement proceedin gs, as laid 
down by the Appellate Body.  
7.1  General principles regarding treaty interpretation, the applicable standard of 
review, and burden of proof  
7.1.1   Treaty interpretation  
7.3.  Article 3.2 of the DSU provides that the dispute settlement system serves to clarify t he 
existing provisions of the covered agreements "in accordance with customary rules of 
                                                
10 European Union's first written submission, para. 269.  WT/DS486/R  
BCI deleted, as indicated [***]  
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  interpretation of public international law". It is generally accepted that the principles codified in 
Articles  31 and 32 of the Vienna Convention are such customary rul es.11 
7.1.2   Standard of review  
7.4.  Panels generally are bound by the standard of review set forth in Article  11 of the DSU, which 
provides, in relevant part:  
[A] panel should make an objective assessment of the matter  before it, including an 
objective assessment of t he facts of the case and the applicability of and conformity 
with the relevant covered agreements.12 
7.5.  The Appellate Body has stated that the "objective assessment" to be made by a panel 
reviewing an investigating authority's determination is to be informed b y an examination of 
whether the authority provided a reasoned and adequate explanation as to: (a) how the evidence 
on the record supported its factual findings; and (b) how those factual findings supported the 
overall determination.13 
7.6.  The Appellate Body has  also clarified that a panel reviewing an investigating authority's 
determination may not conduct a de novo  review of the evidence or substitute its judgment for 
that of the investigating authority. At the same time, a panel must not simply defer to the 
conclusions of the investigating authority. A panel's examination of those conclusions must be 
"in-depth" and "critical and searching".14 
7.7.  A panel must limit its examination to the evidence that was before the agency during the 
course of the investigation and must take into account all such evidence submitted by the parties 
to the dispute.15 A panel's examination in that regard is not necessarily limited to the pieces of 
evidence expressly  relied upon by an investigating authority in its establishment and evalua tion of 
the facts in arriving at a particular conclusion.16 Rather, a panel may also take into consideration 
other pieces of evidence that were on the record and that are connected to the explanation 
provided by the investigating authority in its determinat ion. This flows from the principle that 
investigating authorities are not required to cite or discuss every  piece of supporting record 
evidence for each fact in the final determination.17 That notwithstanding, since a panel's review is 
not de novo , ex post  rationalizations unconnected to the investigating authority's explanation – 
even when founded on record evidence – cannot form the basis of a panel's conclusion.18  
7.1.3   Burden of proof  
7.8.  The general principles applicable to the allocation of the burden of proof i n WTO dispute 
settlement require that a party claiming a violation of a provision of a WTO Agreement must assert 
and prove its claim.19 Therefore, Pakistan bears the burden of demonstrating that the 
European  Union's measures are inconsistent with the WTO  Agreement. The Appellate Body has 
stated that a complaining party will satisfy its burden when it establishes a prima facie  case, 
namely a case which, in the absence of effective refutation by the defending party, requires a 
panel, as a matter of law, to rul e in favour of the complaining party.20 Finally, it is generally for 
each party asserting a fact to provide proof thereof.21 
                                                
11 Appellate Body Report, Japan – Alcoholic Beverages II , p. 10, section D.  
12 Emphasis added.  
13 Appellate Body Report, US – Countervailing Duty Investigation on DRAMS , para.  186. 
14 Appellate Body Report, US – Softwood Lumber  VI (Article 21.5 – Canada) , para.  93. 
15 Appellate Body Report, US – Countervailing Duty Investigation on DRAMS , paras. 187 and 188.  
16 See Appellate Body Report, Thailand – H-Beams , paras. 117 -119. 
17 See Appellate Body Report, US – Countervailing Duty Investigation on DRAMS , para. 164.  
18 Appellate Body Report, US – Lamb , paras. 153 -161. See also Appellate Body Reports, US – Steel 
Safeguards , para. 326; and US – Softwood Lumber VI (Article  21.5 – Canada), para. 97; and Panel Reports, 
Argentina – Ceramic Tiles , para. 6.27; and Argentina – Poultry Anti -Dumping Duties , para. 7.48.  
19 Appellate Body Report, US – Wool Shirts and Blouses , p. 14. 
20 Appellate Body Report, EC – Hormones , para.  104. 
21 Appellate B ody Report, US – Wool Shirts and Blouses , p. 14. WT/DS486/R  
BCI deleted, as indicated [***]  
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  7.2  Request for a preliminary ruling  
7.2.1   Introduction  
7.9.  On 3 March 2016, the European Union filed a request for a preliminary ruling. The reque st 
asked the Panel to: (a) cease all work on this dispute because the relevant EU CVD measures on 
certain PET from Pakistan terminated on 30 September 2015 (the Termination Request)22; and (b) 
if the Panel denied the Termination Request, find that certain o f Pakistan's claims are outside the 
Panel's terms of reference under the standards set forth in Article 6.2 of the DSU.23 This Section 
addresses each subject in turn.  
7.2.2   The Termination Request  
7.2.2.1   Main arguments of the parties  
7.10.   The European Union argues that the P anel should terminate its work in this dispute because 
the purpose of these proceedings has already been fulfilled, i.e. to secure the withdrawal of the 
challenged measures.24 The European Union cites Articles 3.4, 3.7, and 11 of the DSU for the 
proposition  that the role of a panel is to make recommendations or rulings when these contribute 
to securing a positive solution to a dispute.25 The European Union asserts that because the 
challenged measures no longer exist, they have been "withdrawn" within the mean ing of 
Article  3.7 of the DSU, and thus a positive solution has been secured.26 The European Union 
further argues that relevant WTO jurisprudence supports its position. As an additional justification 
for terminating this proceeding, the European Union refer s to the backlog of cases in the WTO 
dispute settlement system, cases which could be more rapidly addressed if the Panel were to 
terminate this dispute.27 
7.11.   Pakistan asks the Panel to reject the Termination Request because it "lacks any basis in the 
text of t he DSU or the practice of panels and the Appellate Body".28 Pakistan asserts that, "[f]rom 
a strictly legal perspective … the core issue here is … that the measures were in force on the date 
on which the panel was established. In these circumstances, the Pa nel must rule on Pakistan's 
claims".29 According to Pakistan, the Appellate Body has explained that the expiry of a measure 
does not limit a panel's jurisdiction to issue findings regarding that measure and a panel cannot 
decline to rule on the entirety of the claims over which it has jurisdiction.30 Pakistan notes that 
many GATT and WTO panels have made findings with respect to expired measures, and that no 
panel has declined to exercise its jurisdiction over a measure that expired after the panel's 
establis hment and where the complainant asked the panel to issue findings regarding that 
measure.  
7.2.2.2   Evaluation by the Panel  
7.12.   On 19 May 2016, the Panel sent a communication to the parties denying the Termination 
Request and indicating that "[t]he Panel will provide th e reasons for its decision in due course. This 
                                                
22 Pakistan responded to the Termination Request on 24 March 2016, and the European Union filed 
comments thereon on 4 April 2016. Pakistan filed a reply to the European Union's comments on 8 April 2016.  
23 Pakistan responded to the European Union's objections under Article 6.2 of the DSU in its first written 
submission, and the European Union filed comments thereon on 13 June 2016. In those comments, the 
European Union raised additional objections under Article  6.2 regarding certain claims that Pakistan pursued in 
its first written submission. Pakistan filed a reply to the European Union's comments regarding Article  6.2 
issues on 4 July 2016.  
24 European Union's request for a preliminary ruling, para. 14.  
25 European Union's comments on Pakistan's response to the European Union's preliminary ruling 
request, para. 10.  
26 European Union's request for a preliminary ruling, para. 15.  
27 European Union's request for a preliminary ruling, para. 31.  
28 Pakistan's response to the European Union's preliminary ruling request, para. 1.3.  
29 Pakistan's response to the European Union's preliminary ruling request, para. 4.36.  
30 Pakistan's response to the European Union's preliminary ruling request, para. 4.14 (quoting 
Appellate  Body Report, Mexico – Taxes on Soft Drinks , para. 46).  WT/DS486/R  
BCI deleted, as indicated [***]  
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  preliminary ruling, and the reasons for it, will form an integral part of the Panel's final report."31 
The Panel provides its reasons for denying the Termination Request here.  
7.13.   The challenged measures in this di spute are CVDs on certain PET from Pakistan imposed 
pursuant to the Definitive Determination. The legal effect of the Definitive Determination vis-à-vis 
certain PET from Pakistan expired on 30 September 2015, at which time the associated CVDs on 
certain PE T from Pakistan were removed.32 The challenged measures have thus expired and 
ceased to have legal effect.33 WTO panel and Appellate Body jurisprudence indicates that panels 
have discretion regarding whether to make findings regarding such expired measures.34 We have 
not identified any reason to depart from this current of jurisprudence. We therefore have 
discretion as to whether to make findings with respect to the challenged measures in this dispute. 
In deciding how to exercise our discretion, we note certai n other circumstances surrounding this 
dispute. First, and in particular, the challenged measures expired only  after panel establishment.35 
Second, the complainant has continued to request that we make findings with respect to the 
expired measures.36 Third, we consider it a reasonable possibility that the European Union could 
impose CVDs on Pakistani goods in a manner that may give rise to certain of the same, or 
materially similar, WTO inconsistencies that are alleged in this dispute.37 In particular, we note  
that Pakistan claims, not contested by the European Union, that a wide range of Pakistani exports 
benefit from the MBS38 and that the parties dispute, on a fundamental level, how investigating 
authorities should determine the extent to which duty drawback schemes like the MBS may 
constitute countervailable subsidies within the meaning of the SCM Agreement. Given such 
circumstances, we proceed with this dispute.39 
                                                
31 Panel communication to the parties, 19 May 2016.  
32 On 1 October 2015, the European Union sent a letter to the Panel notifying the Panel that "the 
measures at issue in this dispute no longer exist as of 30 September 2015" and enclosing the notice of expiry. 
(European Union's communication, 1 October 2015).  
33 It is therefore possible neither: (a) for the European Union to "withdraw" the challenged measures 
within the meaning of Article 3.7 of the DSU; nor (b) for the Panel to issue meaningful recommendations under 
Article 19.1 of the DSU that the European Union bring the measures into conformity with the relevant WTO 
agreement(s) if the Panel were to find the measures WTO -inconsistent. (See Appellate Body R eport, US – 
Certain EC Products , paras. 80 -82 (discussing appropriateness of making DSU Article 19.1 recommendations 
vis-à-vis expired measures)). We emphasize the fact -specific nature of these conclusions. Given the array of 
measures subject to WTO disput e settlement, and the many ways measures may operate in 
Members'  municipal law, there may be other cases where it is unclear the extent to which the legal effect of a 
certain measure or group of measures expired in a manner that makes Article 19.1 recommen dations inutile. 
(See Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.831 -6.838 
(observing this phenomenon and discussing related jurisprudence) (appeal pending)).  
34 Appellate Body Reports, EC – Bananas III ( Article  21.5 – Ecuador II) / EC – Bananas III (Article  21.5 
– US), para. 270; and China – Raw Materials , para. 263; and Panel Reports, US – Poultry (China) , para. 7.54; 
and EC – IT Products , para. 7.165. Expiry of the challenged measures does not affect th e jurisdiction of the 
Panel to issue findings with respect to such measures. (Appellate Body Report, EC – Bananas III (Article  21.5 – 
Ecuador II) / EC – Bananas III (Article  21.5 – US), para. 270). 
35 For reports considering this factor, see Panel Reports, Dominican Republic – Import and Sale of 
Cigarettes , para. 7.343; Indonesia – Autos , para. 14.9; China – Electronic Payment Services , para. 7.227; and 
EC – Approval and Marketing of Biotech Products , paras. 7.1307 and 7.1308. See also Panel Reports, US – 
Gasoline , para. 6.19 (declining to make findings with respect to a measure that expired before  panel 
establishment); and Argentina – Textiles and Apparel , paras. 6.4, 6.12, and 6.13 (same). No panel has 
declined to hear the entirety of a dispute due to the e xpiry of the challenged measure(s).  
36 For reports considering this factor, see Panel Reports, US – Wool Shirts and Blouses , para. 6.2; 
Indonesia – Autos , paras. 14.134 and 14.135; and Dominican Republic – Import and Sale of Cigarettes , 
para. 7.343. See als o Appellate Body Report, Peru – Agricultural Products , paras. 5.18 and 5.19 ("Members 
enjoy discretion  in deciding whether to bring a case, and are thus expected to be largely self -regulating in 
deciding whether any such action would be fruitful. The large ly self -regulating nature of a Member's decision to 
bring a dispute is borne out by Article 3.3 [of the DSU]" but also cautioning that "the considerable deference 
accorded to a Member's exercise of its judgment in bringing a dispute is not entirely unbound ed" (emphasis 
original; fns omitted; internal quotation marks omitted)).  
37 For reports considering this factor, see Panel Reports, US – Gasoline , para. 6.19; Argentina – Textiles 
and Apparel , para. 6.14; India – Additional Import Duties , paras. 7.69 and 7. 70; US – Poultry (China) , 
para. 7.55; EC – IT Products , para. 7.1159; China – Electronic Payment Services , para. 7.227; and EC – 
Approval and Marketing of Biotech Products , para. 7.1310.  
38 Pakistan's response to the European Union's preliminary ruling requ est, para. 4.72.  
39 We note that in a different context the Appellate Body suggested a number of reasons why a panel 
should not normally decline to exercise jurisdiction in a case that is properly before it. (Appellate Body Report, 
Mexico – Taxes on Soft Dr inks, paras. 46 -53). We further note the European Union's argument that granting 
the Termination Request would conserve the WTO Secretariat's dispute settlement resources, thus allowing WT/DS486/R  
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  7.2.3   Article 6.2 of the DSU  
7.14.   The European Union's request for a preliminary ruling also asked us to fi nd that certain of 
Pakistan's claims are outside our terms of reference under the standards set forth in Article 6.2 of 
the DSU. The European Union raised additional objections under Article 6.2 in subsequent 
submissions. This Section addresses those objec tions. It proceeds in three parts. First, it examines 
relevant legal considerations. Second, it notes certain EU objections under Article 6.2 of the DSU 
that have become moot. Third, it examines the European Union's remaining objections under 
Article 6.2 o f the DSU.  
7.2.3.1   Relevant legal considerations  
7.15.   Article  6.2 of DSU provides, in relevant part:  
The request for the establishment of a panel shall be made in writing. It shall indicate 
whether consultations were held, identify the specific measures at issue and pr ovide a 
brief summary of the legal basis of the complaint sufficient to present the problem 
clearly.  
7.16.   Identifying the measure(s) at issue and briefly summarizing the legal basis of the complaint 
so as to present the problem clearly are central to the estab lishment of a panel's jurisdiction.40 The 
panel request also serves a due process function, providing the respondent and third parties notice 
as to the nature of the complainant's case41, enabling them to respond accordingly.42 A panel must 
therefore determin e whether the panel request, read as a whole and as it existed at the time of 
filing43, is "sufficiently clear" or "sufficiently precise" on the basis of an "objective examination".44  
7.17.   In order to "provide a brief summary of the legal basis of the complaint sufficient to present 
the problem clearly", the panel request must set out the claims  so as to "present the problem 
clearly".45 A "claim" in this context is an allegation "that the respondent party has violated, or 
nullified or impaired the benefits arising  from, an identified provision of a particular agreement".46 
Further, "the narrative" of panel requests should "explain succinctly how or why the measure at 
                                                                                                                                                  
their reallocation to other matters. Although true, we have trouble ac cepting this as a goal to pursue in 
isolation. Rather, we consider the conservation of judicial resources as a constituent of the larger, and 
legitimate, goal of promoting the efficiency of the WTO dispute settlement system. We are mindful, however, 
that s uch efficiency may be derivative of a variety of factors extending beyond the expediency with which a 
panel may dispose of one particular dispute.  
40 See Appellate  Body Reports, EC and certain member States – Large Civil Aircraft , paras.  639 and 640 
(referr ing to Appellate  Body Reports, Guatemala – Cement I , paras.  72 and 73; and US – Carbon Steel , 
para. 125); US – Continued Zeroing , paras.  160 and 161; US – Zeroing (Japan) (Article  21.5 – Japan) , 
para. 107; Australia – Apples , para.  416; US – Countervailing  and Anti -Dumping Measures (China) , para.  4.6; 
and Brazil – Desiccated Coconut , p. 22.  
41 See Appellate  Body Reports, Brazil – Desiccated Coconut , p. 22; US – Carbon Steel , para.  126; and 
EC and certain member States – Large Civil Aircraft , para.  640. 
42 See Appellate  Body Reports, Brazil – Desiccated Coconut , p. 22; Chile – Price Band System , 
para. 164; US – Continued Zeroing , para.  161; and Thailand – H-Beams , para.  88. 
43 Appellate Body Report, EC and certain member States – Large Civil Aircraft , para. 642.  
44 Appellate  Body Reports, EC – Bananas III , para.  142; EC and certain member States – Large Civil 
Aircraft , para.  641; US – Carbon Steel , para.  127; US – Continued Zeroing , para.  161; US – Countervailing and 
Anti-Dumping Measures (China) , para.  4.8; US – Oil Country Tubular Goods Sunset Reviews , paras.  164 
and 169; and US – Zeroing (Japan) (Article  21.5 – Japan) , para.  108. Parties' subsequent submissions and 
statements, therefore, cannot "cure" defects in panel requests . (Appellate  Body Reports, China – Raw 
Materials , para.  220; EC – Bananas III , para.  143; EC and certain member States – Large Civil Aircraft , 
para. 787; US – Carbon Steel , para.  127; and US – Countervailing and Anti -Dumping Measures (China) , 
para. 4.9). 
45 Appellate Body Report, EC – Selecte d Customs Matters , para.  153. 
46 Appellate Body Report, Korea – Dairy , para.  139. "Identification of the treaty provisions claimed to 
have been violated by the respondent is always necessary." ( Appellate Body Report, Korea – Dairy , para.  124 
(referring to A ppellate Body Reports, Brazil – Desiccated Coconut , p. 22; EC – Bananas III , paras.  145 and 
147; and India – Patents  (US), paras.  89, 92, and 93)).  A panel request need not, however, include arguments 
seeking "to  demonstrate that the responding party's mea sure does indeed infringe upon the identified treaty 
provision". ( Appellate Body Report, Korea – Dairy , para.  139 (referring to Appellate Body Reports, EC –
Bananas  III, para.  141; India – Patents (US) , para.  88; and EC – Hormones , para.  156)).  WT/DS486/R  
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  issue is considered by the complaining Member to be violating the WTO obligation in question".47 
Moreover, a panel request must "plainly connect the challenged measure(s) with the provision(s) 
of the covered agreements claimed to have been infringed".48 "[T]o the extent that a provision 
contains not one single, distinct obligation, but rather multiple obli gations, a panel request might 
need to specify which of the obligations contained in the provision is being challenged."49 "Whether 
such a brief summary is 'sufficient to present the problem clearly' is to be assessed on a 
case-by-case basis, keeping in min d the nature of the measure(s) at issue, and the manner in 
which it is (or they are) described in the panel request, as well as the nature and scope of the 
provision(s) of the covered agreements alleged to have been violated."50 
7.2.3.2   Moot objections  
7.18.   During the c ourse of this proceeding, the following objections raised by the European Union 
under Article 6.2 of the DSU have become moot:  
a. The objections to claims regarding: (i) certain EU "practices" or "methodologies"51; (ii) 
the European Union's imposition of provi sional CVDs52; (iii) the Commission's "allocation 
of the amount of the subsidy" with respect to the LTF -EOP programme53; and (iv) the 
Commission's conduct during verification visits.54 Pakistan does not pursue these claims 
in this dispute.55 
b. The objection to t he claim that the Commission failed to explain adequately the 
application of its method to calculate the benefit conferred by the LTF -EOP programme. 
The European Union has withdrawn this objection.56 
c. Certain other objections relating to claims that we do no t address for other reasons 
described herein.57 
7.2.3.3   Remaining objections  
7.2.3.3.1   Annex II(II)(1) and/or Annex III(II)(2) of the SCM Agreement  
7.19.   Pakistan's first written submission claimed, inter alia , that the Commission acted 
inconsistently with Annex II(II)(1) and/or A nnex III(II)(2) of the SCM Agreement "because it failed 
to examine the 'generally accepted commercial [practices]' prevailing in Pakistan when examining 
the verification system and procedures under the MBS".58 The European Union argues that the 
panel reques t failed to present this problem clearly.59 The panel request, in relevant part, 
provides:  
 The EU determined that the "Manufacturing Bond Scheme" (MBS) is a countervailable 
subsidy that is contingent upon export performance. This determination appears to be  
                                                
47 Appellate Body Reports, China – Raw Materials , para. 226 (emphasis original); and EC – Selected 
Customs Matters , para. 130.  
48 Appellate Body Reports, China – Raw Materials , para.  220; US – Oil Country Tubular Goods Sunset 
Reviews , para.  162; and US – Countervailing and Anti -Dumping Measures (China) , para.  4.8. 
49 Appellate Body Reports, China – Raw Materials , para.  220 (referring to Appellate Body Reports, Korea 
– Dairy , para.  124; and EC – Fasteners (China) , para.  598); and US – Countervailing and Anti -Dumping 
Measur es (China) , para.  4.8. 
50 Appellate Body Report, US – Countervailing Measures (China) , para.  4.9. 
51 European Union's request for a preliminary ruling , paras. 26 -29 and 34.  
52 European Union's request for a preliminary ruling, paras. 35 -38. 
53 European Union's  request for a preliminary ruling , para . 43. 
54 European Union's request for a preliminary ruling , paras. 44 and 45.  
55 See, e.g. Pakistan's response to the European Union's preliminary ruling request, para. 4.86; 
comments on the European Union's comments on  Pakistan's response to the European Union's preliminary 
ruling request, para. 5.1; first written submission, paras. 3.5 -3.7; and response to Panel question No. 10, 
para. 1.49.  
56 European Union's comments on Pakistan's response to section 5.2 of the Europe an Union's 
preliminary ruling request, para. 33; response to Panel question No. 13, para. 5.  
57 See below paras. 7.61 (and fns thereto) and 7.105  (and fns thereto).  
58 Pakistan's first written submiss ion, paras. 5.134, third bullet point, and 5.135, third bullet point.  
59 European Union's comments on Pakistan's response to section 5.2 of the European Union's 
preliminary ruling request, para. 18.  WT/DS486/R  
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  inconsistent with Articles 1 and 3, and Annexes I, II, and III  of the SCM Agreement,  as 
well as Article VI of the GATT 1994. In particular:  
o the EU appears to have acted inconsistently with Articles 1.1(a)(1)(i), 
1.1(a)(1)(ii), and 3.1(a) and Annexes I(h),  I(i), II(I)(1) -(2), II(II)(1) -(2), 
III(I), and III(II)(1) -(3) of the SCM Agreement, as well as Article  VI of the 
GATT 1994, by determining that the MBS constituted a remission or 
drawback of import charges in excess of those levied on imported inputs 
that are consumed in the production of the exported product; and  
o the EU appears to have acted inconsistently with Articles 1.1(a)(1)(i), 
1.1(a)(1)(ii), and 3.1(a) and Annexes I(h), I(i), II(I)(1) -(2), II(II)(1) -(2), 
III(I), and III(II)(1) -(3) of the SCM Agreem ent, as well as Article  VI of the 
GATT 1994, by determining that the entirety of the duty refunds under the 
MBS scheme – rather than just the excess portion of these refunds – 
constituted an export subsidy.60 
7.20.   Pakistan thus presents its MBS claims in two bul let points that reference identical provisions 
of the SCM Agreement and the GATT 1994 but offer different narratives as to why the Commission 
acted inconsistently with the provisions. For present purposes, we assume that both narratives are 
relevant as our  resolution of the European Union's objection is the same under both.  
7.21.   Annex II(II)(1) and Annex III(II)(2) of the SCM Agreement both refer to the obligation that 
Pakistan alleges the Commission failed to fulfil in this context, i.e. to examine "generally a ccepted 
commercial practices in the country of export" under certain relevant circumstances. The panel 
request includes these provisions in its references to "Annexes … II(II)(1) -(2) … and III(II)(1) -(3) 
of the SCM Agreement". But Annex II(II)(1) and Annex  III(II)(2), in our view, contain multiple 
obligations.61 Moreover, the panel request cites additional provisions of the SCM  Agreement, 
including additional provisions of Annexes II and III, and the GATT 1994. Such additional 
provisions contain their own di sciplines, and the nature and scope of such provisions differ 
significantly.62 In the face of such complexity, we look to the panel request's narratives to clarify 
the problem being presented. The commercial -practices issue, however, appears nowhere in the 
narratives. Rather, the narratives present problems focused on the extent to which the 
Commission found import -duty remissions obtained under the MBS to be "excess". We find no 
reasonable way in which such narratives can be read as isolating the commercial -practices issue 
from the content of the numerous provisions cited in the panel request. Read as a whole, 
therefore, the panel request does not "provide a brief summary of the legal basis of the complaint 
sufficient to present the [commercial -practices] pr oblem clearly".63  
7.22.   For these reasons, we find that Pakistan's claim that the Commission acted inconsistently 
with Annex II(II)(1) and/or Annex III(II)(2) of the SCM Agreement "because it failed to examine 
                                                
60 Emphasis added.  
61 We note, therefore, that Annex  II(II)( 1) alone appears to contain the following obligations for 
investigating authorities: (a) " determine whether the government of the exporting Member has in place and 
applies a system or procedure to confirm which inputs are consumed in the production of the exported product 
and in what amounts"; (b) "examine the [verification] system or procedure to see whether it is reasonable, 
effective for the purpose intended"; (c) ascertain whether the system is "based on generally accepted 
commercial practices in the co untry of export"; and (d) if the investigating authority deems it necessary, to 
conduct "certain practical tests" of the verification system "in accordance with paragraph 6 of Article 12". 
Annex III(II)(2) contains similar obligations.  
62 For example, these  provisions reflect obligations relating to, inter alia , identifying a "financial 
contribution" under Articles 1.1(a)(1)(i) and 1.1(a)(1)(ii), determining whether a subsidy is contingent on 
export performance under Article 3.1(a), and others contained in A nnexes II and III. Further, a brief 
examination of the nature of the measures at issue and nature and scope of the provisions cited would reveal 
that certain cited provisions appear facially inapposite to the case at hand. Article 1.1(a)(1)(i) describes a 
financial contribution in the form of "a government practice involv[ing] a direct transfer of funds", which the 
Commission did not find in the investigation regarding the MBS. Annex I(h) addresses situations involving 
indirect taxes, remissions of which we re not at issue in the MBS context. Inclusion of such provisions creates 
further confusion as to the focus of the cited provisions.  
63 The Appellate Body has recognised that "listing general or over -inclusive legal claims in a panel 
request runs the risk of  having such claims excluded from the panel's terms of reference if, as a consequence, 
the panel request fails to present the problem clearly". (Appellate Body Report, US – Countervailing and 
Anti-Dumping Measures (China) , para. 4.46).  WT/DS486/R  
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  the 'generally accepted commercial [practices]' prev ailing in Pakistan when examining the 
verification system and procedures under the MBS" is outside our terms of reference.  
7.2.3.3.2   Article 1.1(a)(1) of the SCM Agreement  
7.23.   The European Union argues that "by omitting provisions in the SCM Agreement directly 
addressi ng the issue of the calculation of benefit or the amount of subsidisation (such as 
Articles  14 or 19.4), Pakistan failed to present the problem clearly as required by Article 6.2 of the 
DSU."64 This is so because, from the European Union's perspective, the only relevant narrated 
claim is contained in the second sub -bullet, i.e. that the Commission "determin[ed] that the 
entirety of the duty refunds under the MBS scheme – rather than just the excess portion of these 
refunds – constituted an export subsidy". I n the European Union's view, under the circumstances 
presented in this dispute, this narrative logically goes to the calculation of the benefit, rather than, 
for example, how the Commission determined the existence of a financial contribution under 
Article  1.1(a)(1)(ii).65 
7.24.   Article 6.2 does not require that all provisions of WTO agreements be cited that may have 
been violated in light of described conduct of a respondent. Thus, insofar as the European Union 
argues that the referenced narrative describes a pro blem that relates to additional provisions of 
the SCM Agreement, we reject the European Union's objection as raising a problem with which 
Article 6.2 is unconcerned. Insofar as the European Union argues that the panel request is unclear 
because the narrati ve describes a problem that does not meaningfully relate to the cited 
provisions, especially Article 1.1(a)(1)(ii)66, we also reject the European Union's objection. Indeed, 
even the European Union has expressly stated that it clearly understood the problem that the 
panel request presented in this context at least with respect to Articles 1.1(a)(1) and 3.1(a) of the 
SCM Agreement.67 The European Union's objection is, rather, that the legal obligations contained 
in the cited provisions do not discipline the des cribed conduct. Viewed as such, the European Union 
essentially asks us to resolve the merits of Pakistan's claim in a preliminary ruling. In our view, the 
panel request presents the problem clearly, and the issue of whether the conduct described by 
Pakista n violates the provisions it cites goes to the merits of the case and not to the issue of 
whether we have jurisdiction to reach the merits.68 
7.2.3.3.3   Article 12.6 of the SCM Agreement  
7.25.   Pakistan's panel request contained, inter alia , a claim that the Commission acted  
inconsistently with "Articles 12.6 and 12.8 of the SCM Agreement by failing to provide the 
Pakistani exporter with the results of the EU's verification visits to that exporter and by failing to 
inform all interested parties of the essential facts under co nsideration."69 Pakistan does not pursue 
a claim under Article 12.8 that the Commission failed to disclose the essential facts of the 
investigation in this dispute. Thus, the relevant language in the panel request is limited to a claim 
that the Commission v iolated Article 12.6 because it failed "to provide the Pakistani exporter with 
the results of the EU's verification visits to that exporter".  
                                                
64 European Union's response to Panel question No. 30, para. 19.  
65 See, e.g. European Union's response to Panel question No. 30, para. 25.  
66 European Union's response to Panel question No. 30, para. 23.  
67 European Union's comments on Pakistan's response to section 5.2 of the  European Union's 
preliminary ruling request, para. 24 (asserting that "the European Union considers that the only claims which 
fall under the Panel's terms of reference are Pakistan's claims under Articles 1.1(a)(1)(ii), and 3.1(a) and 
Annex[] I(i) of the  SCM Agreement. From Pakistan's panel request, it can be understood that Pakistan alleges 
that the EU's determination that the MBS was a countervailable subsidy contingent upon export performance 
was contrary to Articles 1.1(a)(1)(ii) and 3.1(a) and Annex[ ] I(i) of the SCM Agreement, because the 
European  Union found that the entirety of the duty refunds under the MBS programme – rather than just the 
excess portion of these refunds – constituted an export subsidy").  
68 If respondents are allowed to convert ar guments that complainants' claims cannot succeed under a 
given provision into an objection under Article 6.2 of the DSU in this manner, it is difficult to see what 
argument could not be readily converted into an objection under Article 6.2 of the DSU, and thus become 
subject to a request for a preliminary ruling. We further emphasize that even if we were to construe this 
objection as one properly raised under Article 6.2 of the DSU, we would reject it for reasons discussed further 
below when we discuss the substance of Pakistan's MBS claims (i.e. the panel request presents the problem 
clearly under Article 1.1(a)(1)(ii)). (See below Section 7.3.3.1.2  (and fns thereto)).  
69 Panel Request, section B (fourth main bull et).  WT/DS486/R  
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  7.26.   The European Union argues that the panel request failed to present the problem clearly for 
two reasons. First, th e European Union observes that Article 12.6 provides two alternatives for 
investigating authorities in this context, i.e. " the authorities shall make the results of any such 
investigations available or shall provide disclosure thereof pursuant to paragraph  8".70 The 
European Union explains that during the investigation the Commission did not avail itself of the 
first alternative, but rather performed the actions described in the second alternative. Therefore, 
the panel request should have, but did not, speci fically mention a failure to comply with the second 
alternative.71 Second, the European Union argues that the panel request should have specified, but 
did not, what "results" of the verification visit in question were not disclosed.72 
7.27.   We reject both argument s. Regarding the first, we observe that (as explained in more detail 
further below in this Report73) Article 12.6 describes two approaches to satisfy the same obligation 
in this context, i.e. the provision of the "results" of verification visits "to the fir ms to which they 
pertain". The language in the panel request, i.e. the Commission's failure "to provide the Pakistani 
exporter with the results of the EU's verification visits to that exporter", matches the language of 
neither approach , nor does it appear to materially resemble one more than the other. We therefore 
do not consider that the panel request only claims that the Commission failed to properly use one 
such approach. Rather, the panel request describes a failure to satisfy the obligation contained in 
both and thus a failure to comply with either. The panel request therefore clearly presents the 
problem, i.e. a failure to provide the results of verification visits which is precisely what 
Article  12.6, in relevant part, demands.  
7.28.   We thus turn to the Eu ropean Union's second argument. In this context, we observe that a 
claim regarding the failure to provide "results" of verification visits logically depends, of course, on 
certain "results" not being provided. All that is necessary under Article 6.2 of the  DSU, however, is 
a clear, succinct claim explaining how or why the measure at issue is considered by the 
complaining Member to be violating the WTO obligation in question. This is what Pakistan did. 
From the panel request it is clear that Pakistan claims that the Commission failed to provide the 
Pakistani exporter with the results of the Commission's verification visits to that exporter. 
Article  12.6, which the panel request cites, contains the obligation to do precisely this. We further 
note that, in this  context, Article 12.6 contains a relatively specific obligation pertaining to a 
particular body of information relating to a specific event, as opposed to a provision broad in scope 
that applies on "a continuous basis throughout an investigation".74 In light of these considerations, 
the European Union asks for a level of detail in the panel request that is not required.75 
7.3  Claims regarding the MBS  
7.3.1   Introduction  
7.29.   Pakistan's MBS permits licensed companies to import duty -free production input materials if 
such mat erials are consumed in the production of a product that is subsequently exported. Under 
the MBS, when a licensed company imports inputs, it posts securities in the amount of import 
duties due on those inputs.76 Pakistan remits the security to that company u pon export of the 
company's products if the company presents documents indicating that inputs for which remissions 
                                                
70 Emphasis added.  
71 See generally European Union's response to Panel question No. 87 (summarizing arguments on this 
score).  
72 See, e.g. European Union's comments on Pakistan's response to section 5.2 of the European Union's 
preliminary ruling request , para. 38.  
73 See below Section 7.6.4. The European Union's objection in this context appears to implicate the 
interpretation of the substantive legal standard(s) contained in Article 12.6 of the SCM Agreement. Analyses 
under Article 6.2 of the DSU often require panels to consider the nature and scope of legal provisions, and thus 
such analyses may well relate to the substantive content of such provisions. We are somewhat concerned, 
however, that such overlap may  be employed by respondents as a means by which to request the effective 
resolution of the merits of a dispute at a preliminary stage through the use of Article 6.2 of the DSU.  
74 Appellate Body Report, EC – Fasteners (China) , para. 598 (discussing Articles  6.2 and 6.4 of the 
Anti-Dumping Agreement in the context of a DSU Article 6.2 analysis).  
75 If the investigating authority does not disclose any such results, we wonder whether a complainant 
can reasonably be expected to divine and list all such specific results.  
76 See Commission Regulation (EU) No. 473/2010 of 31 May 2010 imposing a provisional countervailing 
duty on imports of certain polyethylene terephthalate originating in Iran, Pakistan, and the 
United  Arab Emirates, Official Journal of the European Union, L Series, No. 134/25 (1 June 2010) ( Provisional 
Determination), (Exhibit PAK -1), para. 63 (describing securities).  WT/DS486/R  
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  are requested were used in its production of the exports. Systems like the MBS (i.e. systems 
allowing domestic producers to obtain reductions  on duties paid on production inputs if they are 
consumed in the production of exports) are commonly referred to as duty drawback schemes.77  
7.30.   A Pakistani PET producer and exporter named Novatex used the MBS to obtain remissions of 
import duties on imported PET production inputs. The Commission considered that all duties 
remitted to Novatex78 – "rather than any purported excess remission"79 – constituted a 
countervailable subsidy, contingent on export performance, in the form of revenue forgone 
otherwise due th at conferred a benefit to Novatex. The Commission considered that it was 
appropriate to countervail all remissions, rather than excess remissions, essentially because 
Pakistan lacked a reliable system to confirm what inputs Novatex used in producing its ex ported 
PET and because Pakistan conducted no further examination regarding that issue.  
7.3.2   Main arguments of the parties  
7.31.   Pakistan argues that the Commission improperly found the existence of a "financial 
contribution" in this context, i.e. "government revenue that is otherwise due [but] forgone" within 
the meaning of Article 1.1(a)(1)(ii) of the SCM Agreement, resulting in an improper subsidy 
determination.80 Pakistan asserts that, with respect to duty drawback schemes like the MBS, 
footnote 1 of the SCM Agreeme nt states a rule that a "financial contribution" for purposes of 
Article  1.1(a)(1)(ii) is limited to excess  remissions.81 Pakistan notes that footnote 1 indicates that 
it is "[i]n accordance with the provisions of Article XVI of GATT 1994 (Note to Article X VI) and the 
provisions of Annexes I through III of this Agreement". Pakistan argues that the meaning of "[i]n 
accordance with" in this context means that the referenced provisions reflect the same rule as 
footnote 1 does.82 Pakistan argues that the text of these provisions supports Pakistan's position. In 
particular, Pakistan argues that, contrary to the European Union's argument, neither Annex II nor 
Annex III provide any basis for departing from the rule stated in footnote 1, but rather confirm its 
validit y.83 Thus, by finding that all remitted duties, rather than excess remissions, constituted a 
financial contribution and thus the countervailable subsidy, the Commission violated, inter alia , 
Articles 1.1(a)(1)(ii) and 3.1(a) of the SCM Agreement.  
7.32.   The Europe an Union first asserts that it is evident from the record of the investigation and 
Pakistan's submissions in this dispute that Novatex received excess remissions under the MBS. 
Thus, the Commission properly found a financial contribution to exist in the in vestigation in the 
form of revenue forgone otherwise due.84 Pakistan, therefore, logically only challenges the amount  
of the subsidy found in the investigation. A subsidy's amount  is determined by measuring the 
"benefit" conferred. Because Pakistan raises n o claim under, for example, Articles 1.1(b), 14, 
and/or 19.4 of the SCM Agreement, which address the concept of benefit and/or amount of the 
subsidy, Pakistan's MBS claims are without a proper legal basis and the Panel must reject them. 
The European Union further argues that footnote 1 and Annexes I -III of the SCM Agreement 
contain no requirement that investigating authorities, with respect to duty drawback schemes, 
always equate excess remissions and the subsidy's amount. The European Union agrees with 
Pakistan that footnote 1 does describe a subsidy in terms of excess  remissions, but the 
European  Union further observes that footnote 1 states that it must be read "[i]n accordance 
with", inter alia, Annexes II and III. If conditions described in Annexes II a nd III are unsatisfied, 
                                                
77 The SCM Agreement and this Report adopt this term in describing such systems in general. We note 
that "substitution" drawback schem es closely relate to duty drawback schemes. Substitution schemes allow 
participants, when requesting drawback, to treat certain domestically sourced inputs that were consumed in 
the production of an exported product as if they had been imported and thus su bject to import duties.  
78 Specifically, such duties were the "import duties forgone (basic custom duties unpaid) in the import of 
raw materials used in the production of [PET] during the investigation period ('IP')". (European Commission, 
Definitive compan y-specific disclosure, 26 July 2010, (Exhibit PAK -33) (BCI), p. 1). This Report describes these 
as "remissions", a term that the European Union also adopts in this context. (See, e.g. European Union's first 
written submission, para. 52 ("The Commission fou nd that, in the absence of permitted duty drawback systems 
or substitution drawback systems, the amount of the benefit conferred consisted in the remission  of total 
import duties normally due upon importation of inputs.") (emphasis added)).  
79 Provisional D etermination, (Exhibit PAK -1), para. 78.  
80 Pakistan's first written submission, para. 5.21.  
81 Pakistan's first written submission, para. 5.3; opening statement at the first meeting of the Panel, 
paras. 3.2 and 3.3.  
82 Pakistan's second written submission, p ara. 2.9.  
83 Pakistan's opening statement at the first meeting of the Panel, paras. 3.11.  
84 European Union's second written submission, para. 34.  WT/DS486/R  
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  therefore, footnote 1 no longer can be interpreted to mean that a subsidy in this context can only 
exist by reason of excess remissions.85 According to the European Union, the condition relevant to 
this dispute is that Pakistan eithe r have a reliable verification system to confirm what inputs 
Novatex used in producing its exported PET or conduct a further examination regarding that issue. 
Because that condition was unsatisfied in the underlying investigation, the Commission was free t o 
apply other principles to calculate the amount of the countervailable subsidy.86 The 
European  Union argues that this result is supported by policy considerations. In particular, in the 
absence of effective verification systems or further examinations by t he exporting Member, 
investigating authorities would have to rely on unverifiable information from companies to 
calculate excess remissions, inviting abuse of duty drawback schemes by companies.87 
7.3.3   Evaluation by the Panel  
7.33.   This Section proceeds in two parts. First, it examines Pakistan's claim under Article 1 of the 
SCM Agreement. Second, it addresses Pakistan's claims under other provisions of the 
SCM Agreement and the GATT 1994.  
7.3.3.1   Article 1  
7.34.   This Section examines Pakistan's claim under Article 1 of the SCM Agre ement. It proceeds in 
three parts. First, it interprets the relevant legal standard under Article 1.1(a)(1)(ii) of the 
SCM Agreement. Second, it applies that legal standard to the Commission's subsidy determination 
vis-à-vis the MBS. Finally, it concludes.  
7.3.3.1.1   Legal standard under Article 1.1(a)(1)(ii)  
7.35.   Article 1 of the SCM Agreement provides, in relevant part:  
1.1 For the purpose of this Agreement, a subsidy shall be deemed to exist if:  
(a)(1)  there is a financial contribution by a government or any public bod y within the 
territory of a Member (referred to in this Agreement as "government"), i.e. where:  
 … 
(ii) government revenue that is otherwise due is foregone or not collected 
(e.g. fiscal incentives such as tax credits)[*];  
 [*fn original]1 In accordance w ith the provisions of Article XVI of GATT 1994 (Note to 
Article  XVI) and the provisions of Annexes I through III of this Agreement, the exemption of an 
exported product from duties or taxes borne by the like product when destined for domestic 
consumption, or the remission of such duties or taxes in amounts not in excess of those which 
have accrued, shall not be deemed to be a subsidy.  
7.36.   Article 1.1(a)(1)(ii) requires a "comparison" "between the challenged measure and a 
'defined, normative benchmark'".88 "The p urpose of this comparison is to distinguish between 
situations where revenue forgone is 'otherwise due' and situations where such revenue is not 
'otherwise due'."89 Article 1.1(a)(1)(ii) is silent regarding what two things should be compared to 
determine wh ether import duty remissions obtained by a company under a duty drawback scheme 
like the MBS constitute revenue forgone otherwise due. Footnote 1, however, attaches to this 
                                                
85 European Union's first written submission, para. 98; second written submission, para. 20.  
86 European Union's first written submission, paras. 60 and 93.  
87 European Union's first written submission, para. 95.  
88 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 808. The Appellate Body 
articulated this standard in cases in which a WTO panel was  determining whether a "subsidy" existed under the 
SCM Agreement in the first instance, rather than reviewing the decision of an investigating authority. We see 
no reason to think, however, that a different analytic framework should apply in this context.  
89 Appellate Body Report, US – FSC (Article 21.5 – EC), para. 89 (emphasis original). See also 
Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para. 812 (discussing this issue). Such 
guidance was mainly formulated in disputes examining tax  systems, rather than duty drawbacks. 
Article  1.1(a)(1)(ii), however, should be interpreted in a flexible fashion so as to adapt to different 
circumstances. (Appellate Body Report, US – FSC (Article 21.5 – EC), fn 66).  WT/DS486/R  
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  provision, and contains crucial guidance90 on this score. Footnote 1 consists of one  sentence with 
two basic parts. The first identifies legal provisions that the remainder of the sentence are "[i]n 
accordance with". The second identifies two situations, i.e. (a) the "exemption of an exported 
product from duties or taxes borne by the like  product when destined for domestic consumption"; 
or (b) "the remission of such duties or taxes in amounts not in excess of those which have 
accrued", that "shall not be deemed to be a subsidy". Attaching footnote 1, which refers to a 
"subsidy", to Article  1.1(a)(1)(ii), which defines a "financial contribution" (i.e. a part of a subsidy) 
in terms of revenue forgone otherwise due, indicates that it should be interpreted vis-à-vis that 
article, and is further an implicit recognition of the close relationship between the concepts of 
revenue forgone otherwise due and a subsidy.91 That is, as panels have observed, where "financial 
contributions" exist in the form of revenue forgone otherwise due, a finding of a "benefit" – and 
hence a "subsidy" – readily follows.92 
7.37.   The language "shall  not be deemed to be a subsidy" in footnote 1 indicates that, in the 
absence of further qualification, the two situations described are never subsidies under Article 1. 
Of the two, the latter appears the more material and contains the t erms at which the parties direct 
their arguments, i.e. "the remission of such duties or taxes in amounts not in excess of those 
which have accrued".93 The parties appear to agree, and we see no reason to doubt, that the 
"duties" that "accrued" in this conte xt are import duties that accrued on imported inputs consumed 
in the production of a subsequently exported product.94 Thus, the comparison under 
Article  1.1(a)(1)(ii) is between remissions  of duties  obtained by a company under a duty drawback 
scheme, on the  one hand, and duties that  accrued  on imported production inputs used by that 
company to produce a subsequently exported product, on the other hand. A subsidy exists insofar 
as the former exceeds the latter, i.e. an "excess" remission occurs representing r evenue forgone 
otherwise due. For ease of reference, this Report refers to this as the Excess Remissions Principle.  
7.38.   The issue thus becomes whether situations exist where the Excess Remissions Principle 
should not be used to analyse remissions obtained unde r duty drawback schemes. The 
European  Union asserts that the first part of footnote 1 prescribes such a situation through its 
explanation that footnote 1 is "[i]n accordance with … Annexes I through III". More specifically, 
the European Union argues that A nnex II(II)(2) and/or Annex III(II)(3) describe certain 
circumstances in which the Excess Remissions Principle is inapplicable. In evaluating this issue, we 
examine the language of footnote 1 and the provisions cited therein.  
7.3.3.1.1.1   Footnote 1 and the term "[i]n accordance with"  
7.39.   The first part of footnote 1 reads: "In accordance with the provisions of Article XVI of 
GATT  1994 (Note to Article XVI) and the provisions of Annexes I through III of this Agreement". 
The word "accordance" means "[a]greement; conformity; harmony".95 Thus, the Excess 
Remissions Principle is "in agreement with", "in conformity with" and/or "in harmony with" the 
cited provisions. The footnote refers to these provisions equally, suggesting that the Excess 
Remissions Principle is equally in agre ement with each.  
                                                
90 Pakistan does not claim a violation  of footnote 1.  
91 A subsidy cannot exist without a financial contribution. Further, the guidance that footnote 1 provides 
appropriately coheres with the analytic framework regarding identification of revenue forgone otherwise due. 
Moreover, as also discuss ed in this paragraph, the identification of a benefit and hence a subsidy follows readily 
from identification of revenue forgone otherwise due.  
92 See, e.g. Panel Reports, US – FSC, paras. 7.41-7.103; US – FSC (Article 21.5 – EC), paras. 8.3-8.48; 
and US – Large Civil Aircraft (2nd complaint) , paras. 7.115 -7.171. We are mindful that a "financial contribution" 
and a "benefit" are still "separate legal elements in Article 1.1". (Appellate Body Report, Brazil – Aircraft , 
para. 157).  
93 Although the two situation s described in footnote 1 may be related, we see no reason why the issues 
at stake in this dispute cannot be effectively resolved with particular reference to the second.  
94 See, e.g. Annex II(I)(2) (explaining that " drawback schemes can constitute an expor t subsidy to the 
extent that they result in a remission or drawback of import charges in excess of those actually levied on 
inputs that are consumed in the production of the exported product"). If the scheme allows for substitution, 
the characterization of  what duties "accrued" may differ to allow for the enhanced complexity of such schemes. 
(See generally Annexes I(i) and III of the SCM Agreement). Pakistan, however, asserts that the MBS is not a 
substitution drawback scheme. (See Pakistan's first written submission, fn 63). The European Union has not 
argued to the contrary. We further find no basis upon which to conclude that the MBS is a "substitution" 
drawback scheme on this record.  
95 Shorter Oxford English Dictionary , 6th edn, A. Stevenson (ed.) (Oxford  University Press, 2007), Vol. 1, 
p. 15.  WT/DS486/R  
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  7.40.   We consider the European Union's argument to be in tension with the language in 
footnote  1.96 Indeed, it appears incongruous to say that a principle is in agreement with a 
provision when the provision potentially eliminates the principle. Moreover, we find no other 
instance in which the SCM  Agreement uses the term "in accordance with", on its own, to create an 
exception to an otherwise stated rule by cross -referencing another provision.97 We nonetheless 
consider the possibility that the term  "in accordance with" signals that the Excess Remissions 
Principle only applies insofar as the cited provisions "agree" that it should, such that the provisions 
limit its application. We examine the cited provisions (i.e. Article XVI of GATT 1994 (Note to 
Article  XVI), and Annexes I -III of the SCM  Agreement) in turn to assess this possibility.98 
7.3.3.1.1.2   Article XVI of GATT 1994 (Note to Article XVI)  
7.41.   Article XVI of GATT 1994 contains the original GATT disciplines on subsidies. The Note to 
Article XVI reads:  
The exemp tion of an exported product from duties or taxes borne by the like product 
when destined for domestic consumption, or the remission of such duties or taxes in 
amounts not in excess of those which have accrued, shall not be deemed to be a 
subsidy.  
7.42.   This is t he predecessor of footnote 1 of the SCM Agreement. Because Article XVI of the 
GATT 1994 applies together with the SCM Agreement to discipline subsidies, we impart some 
weight to this provision.99 We therefore note that it states the Excess Remissions Princi ple vis-à-vis 
GATT subsidy disciplines without qualification.  
7.3.3.1.1.3   Annex I  
7.43.   Annex I is the Illustrative List of Export Subsidies. The examples listed therein describe 
"subsidies" within the meaning of Article 1 of the SCM Agreement that are, additionally, prohib ited 
under Article 3. Parts (g), (h), and (i) address situations that resemble the situations described in 
the second part of footnote 1 of the SCM Agreement in that they describe situations involving 
remissions of taxes or import duties. Under all these p rovisions, remissions are "subsidies" only if 
they are excess. Moreover, one of these provisions, Annex I(i), specifically addresses situations 
involving import duty drawbacks of the type at issue in this dispute100: 
The remission or drawback of import charg es in excess of those levied on imported 
inputs that are consumed in the production of the exported product (making normal 
allowance for waste); provided, however, that in particular cases a firm may use a 
quantity of home market inputs equal to, and havin g the same quality and 
characteristics as, the imported inputs as a substitute for them in order to benefit 
from this provision if the import and the corresponding export operations both occur 
within a reasonable time period, not to exceed two years. This item shall be 
interpreted in accordance with the guidelines on consumption of inputs in the 
                                                
96 It will be recalled that the European Union's argument is that the words "in accordance with" mean 
that the cited provisions in footnote 1 limit the situations in which the Excess Remissions Principle applies.  
97 See SCM Agreement, Articles 1.2, 6.8, 8.3, 10, 11.7, 12.12, 13.3, 17.1, 18.6, 19.1, 25.10, 27.8, 
32.1, Annex I(h) -(i), Annex II(II)(1) -(2), Annex III(II)(2) -(3), Annex V(5), and fns 12, 14, 35, 44, and 45. 
Rather, such exceptions or deviations are generally  achieved by using the word "except". (See SCM 
Agreement, Articles  3.1, 7.1, 11.1, 12.5, 16.1, 20.1, 20.4, 30, Annex IV(2), and fn 49).  
98 The European Union only argues that Annex II(II)(2) and/or Annex III(II)(3) limit the availability of 
the Excess Remis sions Principle in a relevant manner. Nonetheless, to more fully understand footnote 1, we 
examine all provisions it cross -references.  
99 We are mindful that "[t]he relationship between the GATT 1994 and the other goods agreements in 
Annex 1A is complex" a nd "Article[] …  XVI of the GATT 1994  alone do[es] not represent the total rights and 
obligations of WTO Members. The  … SCM Agreement reflect[s] the latest statement of WTO Members as to 
their rights and obligations … [and] represent[s] a substantial elabor ation of the provisions of the GATT 1994". 
(Appellate Body Report,  Brazil – Desiccated Coconut , p. 15). In the event of a conflict between the GATT 1994 
and the SCM Agreement, the latter prevails. (WTO Agreement, General interpretive note to Annex 1A).  
100 Annex I(i) addresses drawbacks of "import charges". It will be recalled that footnote 1 operates with 
respect to "duties or taxes". "Import charges" include import duties. (SCM Agreement, fn 58). The Commission 
found remissions granted under the MBS to be c ontingent upon export performance. (Provisional 
Determination, (Exhibit PAK -1), para. 74). Neither party has provided any reason to suggest that this finding 
was flawed.  WT/DS486/R  
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  production process contained in Annex  II and the guidelines in the determination of 
substitution drawback systems as export subsidies contained in Annex  III.101 
7.44.   Annex  I(i) therefore restates the Excess Remissions Principle.102 
7.3.3.1.1.4   Annex II  
7.45.   Annex II is entitled " Guidelines on Consumption of Inputs in the Production Process". As 
described below, the Annex applies to duty drawback schemes like the MBS.103 It has two parts, 
i.e. Annex II(I) and II(II), which we address in turn.  
7.46.   Annex II(I) provides:  
I 
1. Indirect tax rebate schemes can allow for exemption, remission or deferral of 
prior-stage cumulative indirect taxes levied on inputs that are consumed in the 
production of the expo rted product (making normal allowance for waste). Similarly, 
drawback schemes can allow for the remission or drawback of import charges  levied 
on inputs that are consumed in the production of the exported product (making 
normal allowance for waste).  
2. The Illustrative List of Export Subsidies in Annex I of this Agreement makes 
reference to the term "inputs that are consumed in the production of the exported 
product" in paragraphs  (h) and (i). Pursuant to paragraph  (h), indirect tax rebate 
schemes can const itute an export subsidy to the extent that they result in exemption, 
remission or deferral of prior -stage cumulative indirect taxes in excess of the amount 
of such taxes actually levied on inputs that are consumed in the production of the 
exported product.  Pursuant to paragraph (i), drawback schemes can constitute an 
export subsidy to the extent that they result in a remission or drawback of import 
charges in excess of those actually levied on inputs that are consumed in the 
production of the exported produ ct. Both paragraphs stipulate that normal allowance 
for waste must be made in findings regarding consumption of inputs in the production 
of the exported product. Paragraph (i) also provides for substitution, where 
appropriate.104 
7.47.   Annex II(I) states facts and  associated principles. Paragraph 1, inter alia , acknowledges the 
existence of, and describes, duty drawback schemes. Paragraph  2, in most relevant part, recalls 
circumstances under which Annex I(i) considers such schemes subsidies, i.e. when remissions 
obtained under them are excess. The paragraph neither states nor suggests other circumstances in 
which remissions under drawback schemes may be subsidies, and contains no language restricting 
the application of the Excess Remissions Principle in any relevant  way. We take special note that 
Annex  II(I) is placed at the beginning of Annex  II. This indicates that Annex II(I) is context for 
interpreting Annex II(II), and, more specifically, that Annex II(I) indicates that the scope of the 
second part of the Annex is limited to the context of determining whether remissions under a 
drawback system constitute a subsidy by reason of them being excess. With these observations in 
mind, we turn to examine Annex II(II).  
                                                
101 Fn omitted.  
102 We are mindful that Annex I is an illustrative list, and does not desc ribe all subsides. We note that 
Annex I(i) states that it " shall be interpreted in accordance with" Annexes II and III. We turn next to examine 
those Annexes.  
103 Neither party has questioned the relevance of Annex II vis-à-vis the MBS. The parties, rather, 
dispute the consequences of its guidance as applied to the MBS.  
104 Emphasis added.  WT/DS486/R  
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  7.48.   Annex II(II) provides:  
II 
In examining whether input s are consumed in the production of the exported 
product, as part of a countervailing duty investigation pursuant to this Agreement,  
investigating authorities should proceed on the following basis : 
1. Where it is alleged  that an indirect tax rebate scheme,  or a drawback scheme , 
conveys a subsidy by reason of over -rebate or excess drawback  of indirect taxes or 
import charges  on inputs consumed in the production of the exported product, the 
investigating authorities should first determine whether the governme nt of the 
exporting Member has in place and applies a system or procedure to confirm which 
inputs are consumed in the production of the exported product and in what amounts. 
Where such a system or procedure is determined to be applied, the investigating 
authorities should then examine the system or procedure to see whether it is 
reasonable, effective for the purpose intended, and based on generally accepted 
commercial practices in the country of export. The investigating authorities may deem 
it necessary to  carry out, in accordance with paragraph  6 of Article  12, certain 
practical tests in order to verify information or to satisfy themselves that the system 
or procedure is being effectively applied.  
2. Where there is no such system or procedure, where it is not reasonable, or 
where it is instituted and considered reasonable but is found not to be applied or not 
to be applied effectively, a further examination by the exporting Member based on the 
actual inputs involved would need to be carried out  in the conte xt of determining 
whether an excess payment occurred.  If the investigating authorities deemed it 
necessary, a further examination would be carried out in accordance with 
paragraph  1.105 
7.49.   Annex II(II) provides guidance for investigating authorities. Its introd uction describes the 
issue at which this guidance is directed, i.e. how to determine "whether inputs are consumed in 
the production of the exported product". This is an intermediate, but necessary, factual issue to 
address when determining whether excess p ayments occurred under a drawback scheme.106 
7.50.   Annex II(II)(1) indicates that investigating authorities should essentially: (a) determine 
whether the exporting Member has a system for tracking what inputs were consumed in the 
production of a relevant exported product; and (b) if such a system exists, evaluate its reliability. 
This guidance only applies, however, "[w]here it is alleged that … a drawback scheme, conveys a 
subsidy by reason of … excess drawback". This language appears to assume that the only relev ant 
allegation underlying the inquiry as to whether a drawback scheme conveys a subsidy is that it 
resulted in excess remissions. In other words, it assumes the operation of the Excess Remissions 
Principle. If it were permissible to label all drawn back du ties as a countervailable subsidy, whether 
excess or not, we would expect allowance for an allegation to that effect. Indeed, we would 
consider it odd if the very guidance that could lead to the non -application of the Excess Remissions 
Principle could only  be triggered by an allegation assuming its application.  
7.51.   Annex II(II)(2) addresses the situation in which, pursuant to the inquiries performed under 
Annex II(II)(1), it is determined that the exporting Member has no reliable system of tracking 
inputs consu med in the production of a relevant exported product. In this scenario, "a further 
examination by the exporting Member based on the actual inputs involved would need to be 
carried out in the context of determining whether an excess payment occurred."107 We first note 
that this provision operates "in the context of determining whether an excess payment occurred", 
which reinforces the idea that Annex II is focused on identifying excess remissions. 
Annex  II(II)(2), however, does not indicate what happens if the "further examination" that "would 
                                                
105 Emphasis added.  
106 After establishing what inputs were used in the production of an exported product, it would also have 
to be determined what duties accrued and were remitt ed. 
107 The "further examination" appears to be an ad hoc  process intended to substitute for the presence of 
a verification system that would otherwise have monitored which inputs were used in the production of the 
relevant exported product.  WT/DS486/R  
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  need to be carried out" is not performed. In the European Union's view, this silence means that 
the Excess Remissions Principle ceases to apply, and different principles apply such that an 
investigating authority – like th e Commission in this investigation – may find that the entire sum 
of drawn back duties, rather than excess, is a countervailable subsidy.  
7.52.   We must disagree. We have found nothing in footnote 1, Article XVI of GATT 1994 (Note to 
Article XVI), Annex I, or Ann ex II that materially suggests that the Excess Remissions Principle, as 
stated in footnote 1, is anything but the final word in how remissions under duty drawback 
schemes like the MBS are to be identified as subsidies. We agree that Annex II provides 
incom plete guidance as to how to investigate a particular issue in this context in that it does not 
specify what occurs if something that "need[s] to be carried out" is not. But we see no reasonable 
basis upon which to interpret that silence as a directive to r ead footnote 1 out of the 
SCM Agreement. Indeed, we take special note that this silence in Annex II(II)(2) does not mean 
that other portions of Annex II cease to speak, and we recall that the entirety of Annex II(II)(2) 
only operates in the presence of an allegation that a "drawback scheme[] conveys a subsidy by 
reason of over -rebate or excess drawback".108 Thus, we interpret such silence as just that, leaving 
us to the provisions that the otherwise intact SCM  Agreement provides, including footnote 1.  
7.3.3.1.1.5   Annex I II 
7.53.   Annex III is entitled "Guidelines in the Determination of Substitution Drawback Systems as 
Export Subsidies". As the title indicates, it is applicable to a particular species of duty drawback 
schemes, i.e. substitution drawback schemes. Substitution sch emes allow participants, when 
requesting drawback, to treat certain domestically sourced inputs that were consumed in the 
production of an exported product as if they had been imported and thus subject to import 
duties.109 
7.54.   Although there are certain structur al and textual differences between Annexes II and III due 
to the different issues they address110, these are minor for our purposes. Given the similarities 
between Annexes II and III, therefore, we limit our discussion of Annex III to the following 
observati ons. Like Annex II, Annex III consists of two parts. Annex III(I) states facts and 
principles, acknowledging the existence of and describing substitution drawback schemes, and 
recalls that under Annex I(i) such schemes result in subsidies when remissions o btained under 
them are excess.111 Consistent with this observation, Annex III(II) provides guidance for 
investigating authorities that is designed to allow investigating authorities to identify excess 
remissions .112 We especially note that the issue addressed in Annex III(II)(3) is analogous to that 
addressed in Annex II(II)(2), and the texts of the two are also materially similar. Annex III(II)(3) 
provides:  
Where there are no verification procedures, where they are not reasonable, or where 
such procedures are instituted and considered reasonable but are found not to be 
actually applied or not applied effectively, there may be a subsidy. In such cases a 
further examination by the exporting Member based on the actual transactions 
involved would need to be carried  out to determine whether an excess payment 
occurred.  
7.55.   The European Union argues that because Annex III(II)(3) does not specify what occurs in 
the absence of reliable verification procedures or a "further examination" that "would need to be 
                                                
108 Annex II(II)(1 ). 
109 We have previously noted that we find no basis on this record to conclude that the MBS is a 
substitution drawback scheme. (See above fn 94). 
110 Annex II addresses a prominent but specific factual issue arising in the conte xt of addressing duty 
drawback schemes. Annex III addresses substitution drawback schemes as a whole.  
111 In the context of substitution drawback schemes, the word "excess" has the same basic meaning as 
when used in the context of a non -substitution drawback  scheme, i.e. when remissions exceed duties accrued.  
112 See Annex III(II)(1) (" The existence of a verification system or procedure is important because it 
enables the government of the exporting Member to ensure and demonstrate that the quantity of inputs f or 
which drawback is claimed does not exceed  the quantity of similar products exported, in whatever form, and 
that there is not drawback of import charges in excess  of those originally levied on the imported inputs in 
question" (emphasis added)), and III(I I)(2) (offering guidance regarding determinations of whether the 
exporting member maintains a reliable "verification system or procedure" that guards against excess 
drawbacks).  WT/DS486/R  
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  carried out", as  was the case with Annex II(II)(2), the Excess Remissions Principle ceases to apply 
and investigative authorities may use other principles to identify the subsidy. The crucial point 
again is that even if Annex III provides incomplete guidance as to how to determine whether 
excess payments occurred under substitution drawback schemes, without some relatively clear 
indication to the contrary within Annex III's focus of determining whether excess remissions 
occurred, we see no reasonable basis upon which to in terpret this silence as substantively altering 
what amounts to a "subsidy" in Article 1 of the SCM Agreement. We find no such indication in any 
examined provision, including Annex III.113 
7.3.3.1.1.6   Conclusion – legal standard under Article 1.1(a)(1)(ii)  
7.56.   We conclude th at the Excess Remissions Principle provides the legal standard under which 
to determine whether remissions of import duties obtained under a duty drawback scheme 
constitutes a financial contribution in the form of revenue forgone otherwise due under 
Article 1.1(a)(1)(ii) of the SCM  Agreement114, and reject the European Union's position that 
Annex  II and/or Annex  III provides a relevant reason to depart from the Excess Remissions 
Principle. Thus, even if the exporting Member has no reliable system of tracking inputs consumed 
in the production of a relevant exported product and in the absence of a further examination by 
the exporting Member of that issue, investigating authorities should still determine if an excess 
remission occurred.  
7.3.3.1.2   Application of Article 1 t o the Commission's MBS subsidy determination  
7.57.   In its investigation, the Commission concluded that the MBS was "a[n export] subsidy … in 
the form of forgone government revenue which confers a benefit upon [Novatex]".115 The following 
statements in the Provisio nal Determination clearly explain that the financial contribution, i.e. the 
"forgone government revenue", was not any excess remissions but the total amount of unpaid 
duties, and it was this amount that was to be countervailed116: (a) "the normal rule of 
countervailing of [sic] the amount of (revenue forgone) unpaid duties  applies, rather than any 
purported excess remission "117; and (b) "[t]he subsidy amount  … was calculated on the basis of 
import duties forgone  … on the material imported under the [MBS]".118 
                                                
113 No party has provided reason to believe that different results should be reac hed under 
Annex  II(II)(2) and Annex II(II)(3) in this context, and we see no reason to believe that divergent results 
should occur.  
114 We do not a priori  exclude the possibility that an investigating authority might permissibly reject a 
company's characteri zation of monies obtained from a government as remissions obtained under a duty 
drawback scheme. This is not that case, however. The entirety of the Commission's analysis in its 
Determinations characterized the relevant financial contribution as received u nder the operation of the MBS, no 
suggestion was ever made that Novatex obtained remissions of import duties for which it had never posted 
securities, and the mere application of the revenue -forgone -otherwise -due rubric indicates that remissions of 
governm ent revenue, i.e. customs duties, was at stake.  
115 Provisional Determination, (Exhibit PAK -1), para. 73.  
116 Contrary to the European Union arguments, therefore, the Commission did not simply "tick the box 
of the existence of a financial contribution". Rather  the Commission specified the duties that it considered to be 
the financial contribution. (European Union's response to Panel question No. 89, para. 17).  
117 Provisional Determination, (Exhibit PAK -1), para. 78. (emphasis added)  
118 Provisional Determination,  (Exhibit PAK -1), para. 79 (emphasis added). We recall that the second 
sub-bullet of Pakistan's MBS -related claims in its panel request asserted a violation of Article 1.1(a)(1)(ii) 
because the Commission "determin[ed] that the entirety of the duty refunds  under the MBS scheme – rather 
than just the excess portion of these refunds – constituted an export subsidy" (See above para.  7.19). In light 
of our discussion above, and recalling that the European Union made an objection to Pakistan's 
Article  1.1(a)(1)(ii) claim under Article 6.2 of the DSU, we consider this is a sufficiently clear statement of the 
problem. The Commission's determination that the entirety of remissions under the MBS – rather than just the 
excess portion of these refunds – constituted an export subsidy, was a clear and direct consequence of how the 
Commission identified the financial contribution. Indeed, without providing any additional calculations or 
reasoning, the Commission also explained t hat the financial contribution was also the amount of the benefit: 
"[T]he benefit consists in [ sic] the remission of total import duties normally due upon importation on inputs." 
(Provisional Determination, (Exhibit PAK -1), para. 78). This is consistent wi th the manner in which WTO panels 
and the Appellate Body have treated the relationship between revenue forgone otherwise due and the benefit 
conferred by that particular financial contribution. (See above para. 7.36 et seq. ). We recall that the first sub -
bullet of Pakistan's MBS -related claims in its panel request also asserted a violation of Article  1.1(a)(1)(ii) 
because the Commission "determin[ed] that the MBS constituted a remission or drawback of import charges in 
excess of  those levied on imported inputs that are consumed in the production of the exported product". WT/DS486/R  
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  7.58.   The Commission indicated that this approach was justified because: (a) Pakistan "did not 
effectively apply its verification system or procedure to confirm whether and in what amounts 
inputs were consumed in the production of the exported product"; and (b) Pak istan "did not carry 
out a further examination based on actual inputs involved, although this would normally need to 
be carried out in the absence of an effectively applied verification system".119 The problem with 
this approach is thus clear. That is, as ex plained above, these reasons, even if true, provide no 
basis upon which to depart from the Excess Remissions Principle. The Commission should still have 
determined whether an excess remission occurred. The Commission, therefore, offered no 
reasoned and ade quate explanation for why the entire amount of unpaid duties was a financial 
contribution and that those duties were "in excess of those which have accrued" within the 
meaning of footnote 1 of the SCM Agreement, and thus acted inconsistently with 
Article  1.1(a)(1)(ii) of the SCM Agreement.  
7.59.   In this regard, we note the European Union's concern that our decision would require 
investigating authorities to essentially administer another Member's duty drawback system in the 
event that the system is found to be de ficient under Annex II(II). To be clear, this is not what we 
believe the SCM Agreement requires. If an exporting Member's system is found to be wanting 
under Annex II(II), the amount of the excess remissions would need to be determined on the basis 
of info rmation available to the investigating authority. If an investigating authority lacks 
"necessary information" with respect to a specific issue, it may rely on facts available under 
Article  12.7 of the SCM Agreement.120 In that event, we do not exclude the po ssibility that an 
investigating authority might permissibly determine that all remitted duties under a drawback 
scheme are "excess" in the absence of reliable information with which to calculate the excess 
amount. But that outcome results from the lack of necessary information, not from the 
non-applicability of the Excess Remissions Principle. This is an important distinction because it may 
be possible for an exporter to supply the necessary information in circumstances where the 
exporter's government faile d, for example, to conduct a further examination under Annex II(II). 
Indeed, it was noted in this case that the Commission has in the past used other information to 
determine the extent of excess remissions in circumstances where the Commission determined 
that the exporting Member did not have a reliable verification system with respect to its duty 
drawback scheme and did not conduct a further investigation of the excess remissions matter.121 
7.3.3.1.3   Conclusion – Article 1  
7.60.   In accordance with our reasoning above, we f ind that by failing to provide a reasoned and 
adequate explanation for why the entire amount of remitted duties, which the Commission found 
to be the financial contribution (and, thus, the countervailable subsidy), was "in excess of those 
which have accrue d" within the meaning of footnote 1 of the SCM Agreement, the Commission 
acted inconsistently with Article 1.1(a)(1)(ii) of the SCM Agreement.122 Because the Commission, 
therefore, incorrectly identified the existence of a subsidy, we also find that the Comm ission acted 
inconsistently with Article 3.1(a) by improperly finding the existence of a "subsidy" that was 
contingent on export performance.123 
                                                                                                                                                  
Pakistan has provided no reason for us to believe that resolution of its claims under the two sub -bullets should 
require any sort of separate treatment. We thus exercise judicial economy with respect to the claims in the first 
sub-bullet.  
119 Provisional Determination, (Exhibit PAK -1), para. 76.  
120 See, e.g. Appellate Body Report, US – Countervailing Measures (China) , paras. 4.178 and 4.179 
(explaining that the "eval uation of the 'facts available' that is required, and the form it may take, depend on 
the particular circumstances of a given case, including the nature, quality, and amount of evidence on the 
record and the particular determinations to be made" and that " the nature and extent of the explanation and 
analysis will necessarily vary from determination to determination").  
121 See, e.g. Commission Regulation (EC) No. 1411/2002 of 29 July 2002 imposing a provisional 
countervailing duty on imports of polyester textu red filament yarn originating in India, Official Journal of the 
European Communities, L Series, No. 205/26 (2 August 2002), (Exhibit PAK -42), paras. 65 and 66; and 
Commission Decision No. 284/2000/ECSC of 4 February 2000, Official Journal of the European C ommunities, 
L Series, No. 31/44 (5 February 2002), (Exhibit PAK -43), paras. 30 -34. 
122 See above para. 7.4 et seq.  (setting forth standard of review).  
123 Pakistan has stated that its Article 3.1(a) claim is consequential to the P anel finding a violation of 
Article 1. (Pakistan's first written submission, paras. 5.133 and 9.3; response to Panel question No. 22, 
para. 2.30).  WT/DS486/R  
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  7.3.3.2   Other MBS -related claims  
7.61.   Pakistan also claims that the Commission, in making its MBS subsidy determination:  
a. Failed to investigate whether the duty drawback system verification mechanisms were 
based on generally accepted commercial practices in the country of export . This Report 
has previously found this claim to be outside our terms of reference.  
b. Failed to provide P akistan with the opportunity to assist the Commission's determination 
of the excess amount, failed to take into account evidence regarding the amount of any 
excess drawback, and failed to make normal allowance for waste . Pakistan has indicated 
that if the Panel reaches the conclusion stated in Section 7.3.3.1.3, above, and reaches 
that conclusion in the manner that we did, Pakistan no longer requests findings on these 
claims.124 We therefore do not address them.  
c. Violated Annexes II(II) and III(II) "as a whole ". Pakistan's arguments, in our view, have 
clarified that this claim is predicated on the Panel finding a violation of one of the "steps" 
that Annex I(i), II(II) and/or Annex III(II) prescribe.125 In light of the discussion directly 
above in paragraphs (a) a nd (b), and the fact that we find no relevant violation of 
Annex  I(i) as described in paragraph (d), below, we find no such violations. This claim is 
therefore moot.  
d. Violated Annex I(i) . Pakistan has asserted this claim in two different ways. First, Pakist an 
argues that the Commission violated this provision for the same reasons that it violated 
Article 1. Insofar as this is the case, we exercise judicial economy with respect to this 
claim. Second, Pakistan argues that the Commission violated Annex I(i) as a necessary 
consequence of its violations of Annexes II and/or III.126 Insofar as this is the case, 
because we find no separate violations of Annexes II and III, this claim is moot.  
e. Violated Articles 1.1(b), 10, 19, and 32, and Article VI of the GATT 1994 . Pakistan has 
explained that these claims are consequential to other violations of the 
SCM Agreement.127 Insofar as such claims are premised on claims that we do not 
consider, such claims are moot. Insofar as they are based on violations of 
Article  1.1(a)(1)(i i) and/or Article  3.1(a), we exercise judicial economy with respect to 
them.128 
7.4  Claims regarding the LTF -EOP 
7.4.1   Introduction  
7.62.   Pakistan's LTF -EOP programme provided government -financed loans through pre -approved 
banks for certain qualifying companies. The banks w ere prohibited from charging interest rates 
                                                
124 Pakistan's response to Panel question No. 25, para. 2.35.  
125 See Pakistan's response to Panel question No. 3(b), para. 1.15 (explaining that "the failure to include 
a given step – or the decision to 'skip' one of these obligatory steps – is a violation of the procedures of 
Annex  II(II) as a whole"), No. 3(c), para. 1.18 (explaining that a separate violation of Annex I(i) results in a 
violation of Annex II(II) "as a whole"), and No. 6(a), paras. 1.39 (explaining that "[a] failure to respect a 
particular aspect of th[e] process [in Annex II(II) or Annex III(II)] … results in a violation of that process as a 
whole" ), and 1.40 (explaining that the Commission violated the Annex provisions "as a whole" "because it 
failed to observe the totality of the steps mandated" therein). In the alternative, Pakistan may argue that the 
Commission violated Annex II(II) or Annex III (II) "as a whole" for the same reasons that the Commission 
violated Article 1. (See Pakistan's response to Panel question No. 6(b), para. 1.41 (stating that "by 
countervailing the total amount of the import duty remissions rather than just the excess amoun t, the EU acted 
inconsistent with Article 1, Annex I(i) and the whole of Annexes II(II) and III(II) to the SCM Agreement")). 
Insofar as this is the case, we exercise judicial economy regarding this claim.  
126 See, e.g. Pakistan's response to Panel question N o. 2, paras. 1.6-1.8, No. 3(a), para. 1.11, No. 3(b), 
para. 1.16, and No. 3(c), para. 1.17.  
127 Pakistan's comments on the European Union's comments on Pakistan's response to the 
European  Union's preliminary ruling request, para. 5.13; and response to Panel question No. 7(b), para.  1.43, 
and No.  23, para. 2.32.  
128 The European Union has raised objections under Article 6.2 of the DSU with respect to many of the 
claims discussed immediately above in paragraphs (b) -(e). Because we do not address these claims, how ever, 
we do not address the European Union's related objections under Article 6.2 of the DSU.  WT/DS486/R  
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  above a specified level, which consisted of a base interest rate that was to be determined by the 
State Bank of Pakistan (SBP) on an annual basis, plus a further mark -up of up to three percentage 
points. Novatex concluded a loan under the LTF -EOP with a consortium of five banks in June 2005 
for a maximum of Pakistani rupees (PKR) [***]  (the LTF -EOP Loan). The LTF -EOP Loan was 
structured so that it could be drawn down in tranches over time, and Novatex drew down th e loan 
in this manner. Each tranche had a maturity term of 7.5 years and was assigned an interest rate 
at the time of its drawdown, which was locked in for the duration of its term. That rate was the 
SBP's annual base rate prevailing at the time of drawdow n plus a mark -up of 1.8 percentage 
points. In June 2005, the SBP's annual base rate was 5% and never changed thereafter. Thus, the 
interest rate assigned to all tranches that Novatex drew down ended up being the same, i.e. 6.8%. 
The Commission determined t he LTF -EOP Loan to be a countervailable subsidy in its investigation. 
In doing so, the Commission determined that the LTF -EOP Loan conferred a "benefit" to Novatex 
by comparing the amount of interest Novatex paid on the total outstanding amount of the LTF -EOP 
Loan during the period of investigation  (POI) with the interest that Novatex would have paid if the 
interest rate on the LTF -EOP Loan had not been 6.8%, but a commercial benchmark interest rate 
instead. That benchmark interest rate was a rate taken fro m the website of the SBP that prevailed 
during the POI (the SBP Rate)129, and was 14.44%.  
7.4.2   Main arguments of the parties  
7.63.   Pakistan raises two related claims in this context, one under the chapeau  of Article 14 of the 
SCM Agreement and one under Article 14(b). Pakistan argues that the Commission's determination 
that the LTF -EOP Loan conferred a "benefit" to Novatex within the meaning of Article 1.1(b) of the 
SCM Agreement is inconsistent with the chapeau  of Article 14 because the Commission failed to 
adequately explain the application of its method of calculating the benefit in light of its own 
guidelines on this subject (the EU Guidelines).130 In this context, Pakistan argues that the 
Commission failed to: (a) identify a comparable commercial loan; (b) identify th e interest normally 
payable on a comparable commercial loan to Novatex; (c) identify the interest payable on a 
comparable loan to companies in a similar financial situation in the same sector of the economy; 
(d) identify the interest payable on a comparabl e loan to companies in any sector of the economy; 
(e) reflect in its analysis the particular multi -tranche structure of the LTF -EOP Loan, whereby each 
tranche was assigned an interest rate at the time of its drawdown; (f) explain why the SBP Rate 
was an ap propriate benchmark for a loan of 7.5 years, which the LTF -EOP Loan assigned to each 
tranche drawn down, when the SBP Rate reflects an average of several lending rates for shorter 
loans; and (g) explain why the Commission rejected evidence on the record co ncerning available 
commercial loans to Novatex that Novatex provided during the investigation.131 For essentially the 
same reasons, Pakistan argues that the Commission's method of calculating the "benefit" was 
inconsistent with Article 14(b)132, i.e. "because the application of its method was not 'consistent 
with [the] guidelines [in Article 14(b)]', because the EU failed to identify a comparable commercial 
loan".133 In this context, Pakistan emphasizes that the Commission improperly benchmarked 
interest payments  made on principal drawn down by Novatex under the LTF -EOP Loan before the 
POI with a benchmark (i.e. the SBP Rate) prevailing during the POI. Relying on these arguments 
Pakistan also claims violations of Articles 1.1(b), 10, 19.1, and 32 of the SCM Agreem ent, and 
Article VI:3 of the GATT 1994.134 
7.64.   The European Union argues that the Commission adequately explained its methodology for 
assessing the benefit conferred under the LTF -EOP Loan as required by the chapeau  of Article 14. 
In particular, the European Uni on stresses that Novatex could draw down amounts under the 
LTF-EOP Loan at times of its choosing, and that interest rates were assigned to tranches at the 
time they were drawn down. This flexibility meant that the LTF -EOP Loan was more akin to a line 
of credit than a fixed -term loan where an interest rate is typically assigned to the entire loan 
amount at the time of contracting. Due to such fundamental differences, it was proper to not 
                                                
129 The "SBP Rate" is distinct from the annual base rate that the SBP set with respect to the LTF -EOP 
programme.  
130 Guidelines for the Calculation of the Amount of Subsidy in Countervailing Duty Investigations, 
(98/C  394/04), Official Journal of the European Communities, C Series, No. 394/6 (17 December 1998), 
(Exhibit PAK -5). 
131 Pakistan's first written submission, paras. 6.28 -6.44; opening statement at the second me eting of 
the Panel, para. 3.5.  
132 Pakistan's first written submission, paras. 6.45 -6.100.  
133 Pakistan's first written submission, para. 6.25.  
134 Pakistan's first written submission, para. 6.101.  WT/DS486/R  
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  consider typical fixed -term loans when benchmarking the LTF -EOP Loan, i ncluding the commercial 
loans offered by Novatex in the investigation, and instead the Commission chose a proxy against 
which to benchmark the LTF -EOP Loan, i.e. the SBP Rate. That the LTF -EOP Loan operated like a 
flexible line of credit also meant that it  was proper to benchmark any interest payments made 
during the POI on principal outstanding during the POI against a benchmark prevailing during the 
POI, regardless of whether such principal had been drawn down by Novatex before or during the 
POI.135 The Eur opean Union emphasizes, however, that the record most reasonably reflects that 
the entirety of the countervailed loan amount was drawn down during the POI.136 The 
European  Union asserts that the Commission explained all such issues in its Determinations and 
associated disclosure documents to Novatex. Moreover, the European Union stresses that the 
Commission's explanations on this score were sufficient considering that Novatex and Pakistan 
advocated the use of the SBP Rate during the investigation.137 The Europe an Union submits that 
Pakistan's claim under Article 14(b) is unfounded for essentially the same reasons.138 The 
European Union therefore also argues that the Panel should reject Pakistan's claims under 
Articles  1.1(b), 10, 19.1, and 32 of the SCM  Agreement and with Article VI:3 of the GATT 1994.139 
7.4.3   Relevant legal considerations  
7.65.   Article 14 of the SCM Agreement reads, in relevant part:  
Article 14  
Calculation of the Amount of a Subsidy in Terms  
of the Benefit to the Recipient  
 
For the purpose of Part  V, any metho d used by the investigating authority to calculate 
the benefit to the recipient conferred pursuant to paragraph  1 of Article  1 shall be 
provided for in the national legislation or implementing regulations of the Member 
concerned and its application to each  particular case shall be transparent and 
adequately explained. Furthermore, any such method shall be consistent with the 
following guidelines:  
 … 
(b) a loan by a government shall not be considered as conferring a benefit, unless 
there is a difference betw een the amount that the firm receiving the loan pays on the 
government loan and the amount the firm would pay on a comparable commercial 
loan which the firm could actually obtain on the market. In this case the benefit shall 
be the difference between these  two amounts;  
7.66.   Sub-paragraph (b), therefore, establishes "guidelines" for determining whether a loan 
confers a benefit on a recipient. According to those guidelines, a  benchmark under Article 14(b) is 
a "comparable commercial loan", which "should have as ma ny elements as possible in common 
with the investigated loan to be comparable" such that the comparison is meaningful.140 Selecting 
such a benchmark "involves a progressive search for a comparable commercial loan, starting with 
the commercial loan that is cl osest to the investigated loan (a loan to the same borrower that is 
nearly identical to the investigated loan in terms of timing, structure, maturity, size and currency) 
and moving to less similar commercial loans while adjusting them to ensure comparabili ty with the 
investigated loan".141 In the absence of a commercial loan actually available on the market, a 
proxy may be used.142 The further away a selected benchmark is from the ideal benchmark of a 
materially identical loan, however, the more adjustments mus t be made to ensure the 
benchmark's comparability to the subject loan. Moreover, because a "benefit" analysis depends on 
                                                
135 See generally European Union's first written submission, para s. 132 -159. 
136 See, e.g. European Union's second written submission, para. 127.  
137 See, e.g. European Union's second written submission, para. 78; and response to Panel question 
No. 93, paras. 24 -26. 
138 See generally European Union's first written submission,  paras. 160 -186. 
139 European Union's first written submission, paras. 187 and 188.  
140 Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 476.  
141 Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 4 86. 
142 Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 487.  WT/DS486/R  
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  making a comparison "between the terms and conditions of the [loan] when it is granted with the 
terms and conditions that would have be en offered on the market at that time "143, for purposes of 
Article 14(b) "[t]he comparison is to be performed as though the [actual and benchmark] loans 
were obtained at the same time … [and thus] the assessment  focuses on the moment in time 
when the lender and borrower commit to the transaction".144 Article 14(b) thus allows certain 
flexibility in selecting a benchmark.145 Moreover, according to the chapeau  of Article 14, the 
method employed "shall be provided for in the national legislation or implementing regu lations of 
the Member concerned and its application to each particular case shall be transparent and 
adequately explained".146 
7.4.4   Evaluation by the Panel  
7.67.   This Section evaluates Pakistan's claims under Article 14 of the SCM Agreement. It proceeds 
in two parts. F irst, it examines Pakistan's claim under Article 14(b). Second, it examines Pakistan's 
claim under the chapeau  of Article 14.  
7.4.4.1   Article 14(b)  
7.68.   To succeed in its claim under Article 14(b), Pakistan must make out a prima facie  case that 
the SBP Rate does not re present "the amount [Novatex] would pay on a comparable commercial 
loan which [Novatex] could actually obtain on the market".147 With this in mind, this Section 
proceeds in four parts. First, we address a factual disagreement between the parties regarding 
when Novatex drew down the principal under the LTF -EOP Loan on which it paid interest during 
the POI, i.e. the principal that the Commission countervailed. Addressing this issue will provide 
helpful background for the following two parts. Second, it examines  the portions of the 
Determinations and associated disclosure documents that discuss the selection of the SBP Rate as 
the benchmark interest rate. Third, based the previous two parts, it examines whether Pakistan 
has made out its prima facie case and wheth er the European Union has rebutted it. Finally, it 
concludes.  
7.4.4.1.1   Whether Novatex drew down principal before the POI on which it paid interest 
during the POI  
7.69.   This Section examines when Novatex drew down the principal under the LTF -EOP Loan on 
which it paid int erest during the POI. The parties agree that, in fact, Novatex drew down tranches 
                                                
143 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 706. (emphasis 
original)  
144 Appellate  Body Report, EC and certain member States  – Large Civil Aircraft , paras. 835 and 836. The 
Appellate Body has indicated that in examining this issue vis-à-vis loans, "the assessment of benefit must 
examine the terms and conditions of a loan at the time it is made and compare them to the terms and 
conditions that would have been offered by the market at that time" including the issue of how risk is factored 
into the loan's terms. (Appellate Body Report, EC and certain member States – Large Civil Aircraft , paras. 834 -
838).  
145 See Appellate Body Report , US – Anti-Dumping and Countervailing Duties (China) , paras. 476 
(agreeing with the panel that "ideally, an investigating authority should use as a benchmark a loan to the same 
borrower that has been established around the same time, has the same structur e as, and similar maturity to, 
the government loan, is about the same size, and is denominated in the same currency. … [I]n practice, the 
existence of such an ideal benchmark loan would be extremely rare, and th[us] a comparison should also be 
possible wit h other loans that present a lesser degree of similarity"), 484 (warning against excessive formalism 
in interpreting Article 14(b)), and 489 (explaining that "we are of the view that a certain degree of flexibility 
also applies under Article 14(b) in the s election of benchmarks, so that such selection can ensure a meaningful 
comparison for the determination of benefit"). Whatever benchmarking method an investigating authority uses, 
however, it must be transparent and adequately explained. (See Appellate Bod y Reports, US – Anti-Dumping 
and Countervailing Duties (China) , para. 489; and US – Carbon Steel (India) , para. 4.345).  
146 Prior panel reports have opined that this requirement indicates that such application should be set 
out in a manner that it can be "ea sily understood or discerned" and making clear or intelligible, and giving 
details of how the methodology was applied. (Panel Report, US – Carbon Steel (India) , para. 7.191. See also 
Appellate Body Report, US – Carbon Steel (India) , para. 4.279  (citing thi s standard)).  
147 This prima facie case and the European Union's rebuttal must be based on the European Union's 
Determinations and associated disclosure documents. This follows from the fact that, although we may take 
into account record evidence connected t o the explanations provided by the Commission in its Determinations, 
our review is not de novo  and thus cannot consider ex post  rationalizations unconnected to the Commission's 
explanations, even if such rationalizations are founded on record evidence. (Se e above para. 7.4 et seq.  
(setting forth standard of review)).  WT/DS486/R  
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  of the LTF -EOP Loan before the POI began.148 For ease of reference, this Report will refer to this as 
the Pre -POI Principal. Pakistan claims that the record before the Commissi on reflected that 
Novatex carried over a substantial amount of the Pre -POI Principal into the POI, and thus made 
interest payments on it during the POI. The European Union asserts that the record reflected that 
all principal drawn down under the LTF -EOP Lo an on which Novatex paid interest during the POI 
was drawn down during the POI. We address this factual disagreement here because: (a) all the 
evidence that we discuss in this Section was on the record of the investigation before the issuance 
of the Provis ional Determination, and thus it provides context for understanding the content of the 
Determinations; and (b) it may pertain to an assessment regarding whether Pakistan has made 
out a prima facie case that the SBP Rate represented what Novatex would have paid on a 
"comparable commercial loan".149 
7.70.   In this context, we first recall that during the investigation both Novatex and Pakistan 
argued that the entire amount of the LTF -EOP Loan should have been benchmarked against an 
interest rate prevailing during the time-period in which Novatex negotiated and concluded the 
LTF-EOP Loan, i.e. 2004 -2005.150 Under this argument, when Novatex drew down tranches under 
the LTF -EOP Loan was immaterial. As an apparent result, neither party ever explicitly told the 
Commission th at Novatex drew down principal under the LTF -EOP Loan before the POI. 
Pakistan's  position now, therefore, is not that the Commission ignored any particular argument by 
a relevant party to the investigation, but that the record at large reflected that Novat ex paid 
interest on Pre -POI Principal during the POI.  
7.71.   We therefore examine the evidence that was before the Commission during the 
investigation that went to the issue of when Novatex drew down the LTF -EOP Loan principal upon 
which it paid interest during t he POI. Based on the parties' arguments and our own review of the 
record, the material pieces of evidence in this context are: (a) the questionnaire sent to Novatex; 
(b) Novatex's questionnaire response; (c) the Second Deficiency Letter and Novatex's respo nse 
thereto; (d) the LTF -EOP offer letter; (e) the LTF -EOP Contract; and (f) Novatex's 2007 -2008 and 
2008-2009 annual reports. We examine each in turn.  
7.4.4.1.1.1   The questionnaire  
7.72.   At the outset of the investigation, the Commission sent a questionnaire to Novatex 
requesting, inter alia , information on "[s]chemes of export credit".151 Under this heading, the 
questionnaire queried whether Novatex had availed itself of the LTF -EOP, and, if the answer was 
affirmative, to "provide … [certain] information in relation to expor t credits used during the IP".152 
This requested information included the "[a]mount of credit granted" under the scheme, the 
"[d]ate of grant", the "[r]epayment period", the [i]nterest rate payable", and the "[n]ormal 
commercial interest rate".153 The question naire indicated that this "information [should] be 
presented in" an attached Excel spreadsheet (the Spreadsheet Template).154 The Spreadsheet 
Template contained a number of columns with headings the names of which generally 
                                                
148 See, e.g. European Union's response to Panel question No. 91, para. 19; and Pakistan's comments 
on the European Union's response to Panel question No. 91.  
149 More specifically, this issue may pertain to an examination as to whether the SBP Rate that prevailed 
during the POI  represented what Novatex would have paid on a comparable loan in terms of timing . We note 
that, as discussed further below, the manner in which  the Commission identified timing comparability is highly 
ambiguous, and thus addressing this factual issue may not be necessary. (See below Section 7.4.4.1.3 ). We 
address this factual issue, however, in the int erest in providing a record allowing for most effective appellate 
review.  
150 See Council Implementing Regulation (EU) No. 857/2010 of 27 September 2010 imposing a 
definitive countervailing duty and collecting definitively the provisional duty imposed on imp orts of certain 
polyethylene terephthalate originating in Iran, Pakistan, and the United Arab Emirates, Official Journal of the 
European Union, L Series, No. 254/10 (29 September 2010) ( Definitive Determination), (Exhibit PAK -2), 
para. 72. 
151 European Commi ssion, Directorate -General for Trade, Novatex's Original Questionnaire Response, 
including Annexes F.V.1.b.a and F.VIII.1.d, 20 October 2009, (Exhibit EU -9) (BCI), p. 30.  
152 European Commission, Directorate -General for Trade, Novatex's Original Questionnair e Response, 
including Annexes F.V.1.b.a and F.VIII.1.d, 20 October 2009, (Exhibit EU -9) (BCI), p. 30.  
153 European Commission, Directorate -General for Trade, Novatex's Original Questionnaire Response, 
including Annexes F.V.1.b.a and F.VIII.1.d, 20 October 20 09, (Exhibit EU -9) (BCI), p. 30.  
154 European Commission, Directorate -General for Trade, Novatex's Original Questionnaire Response, 
including Annexes F.V.1.b.a and F.VIII.1.d, 20 October 2009, (Exhibit EU -9) (BCI), p. 30.  WT/DS486/R  
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  corresponded to the types of infor mation requested.155 We take special note, however, that the 
template contains no heading for the "date of grant" of any amounts. Given the context in which it 
was provided, therefore, the purpose of the completed Spreadsheet Template was to provide 
informat ion on Novatex's interest payments on "export credit[s] used during the IP", and allow a 
comparison of such payments to what Novatex would have paid under a commercial interest rate. 
In other words, the Spreadsheet Template asked Novatex to compare its int erest payments made 
under the LTF -EOP Loan to an applicable commercial benchmark, thereby assisting the 
Commission in determining whether, and in what amount, the loan conferred a "benefit" to 
Novatex.  
7.73.   Two aspects of this questionnaire warrant emphasis. Fi rst, the questionnaire requested 
"information in relation to export credits used during  the IP ".156 This phrase indicates, and the 
parties agree, that the questionnaire requested information on interest payments made during the 
POI on amounts of any relevant  LTF-EOP loan that were outstanding during the POI.157 It was 
therefore foreseeable that Novatex might provide information on payments made on principal 
received by Novatex under an LTF -EOP loan before the POI. Second, the Commission would have 
expected Nova tex's response to reasonably reflect the "date of grant" of any such export credits, 
at least in a manner relevant for purposes of calculating the benefit the loan may have conferred 
upon Novatex. However, given that the template contained no section for t he "date of grant", it 
was foreseeable that the provision of such information would be subject to the judgment of 
Novatex158, and thus may require interpretation by the Commission.  
7.4.4.1.1.2   The questionnaire response and the Original Spreadsheets  
7.74.   On 20 October 2009, Novatex responded to the questionnaire.159 In that response, Novatex 
indicated that it had availed itself of the LTF -EOP.160 Novatex provided certain background 
information concerning the LTF -EOP Loan, including that it had been "approved … in April 2005", 
the total amount of the loan, the identity of the five -bank lending consortium, the PKR amounts to 
which Novatex was entitled from each bank, and the interest rate of 6.8%.161 Moreover, Novatex 
attached Excel spreadsheets laying out Novatex's interest payments on the LTF -EOP Loan during 
the POI (the Original Spreadsheets).162 A group of spreadsheets was assigned to each of the five 
lending consortium banks. The Original Spreadsheets contained all the columns and headings that 
the Spreadsheet Template contained, bu t also added columns, marking them with an asterisk that 
indicated their addition.163 In particular, the Original Spreadsheets added columns entitled: 
"Opening"; "Received/(Payments)"; "Outstanding balance"; "Period"; and "Date of Payment". 
Generally, each r ow of the spreadsheets was dedicated to a "Period" of time within the POI over 
which a specific and static "Outstanding balance" of principal under the loan prevailed. Thus, every 
                                                
155 Excel file F -V.1 of the Commission 's questionnaire,  (Exhibit EU -14). This was labelled as "Excel file 
F-V.1" in the questionnaire. (European Commission, Directorate -General for Trade, Novatex's Original 
Questionnaire Response, including Annexes F.V.1.b.a and F.VIII.1.d, 20 October 2009, (E xhibit EU -9) (BCI), 
p. 30). 
156 Emphasis added.  
157 European Union's response to Panel question No. 67, para. 100; and Pakistan's response to Panel 
question No. 67, para. 3.47.  
158 As noted further above, Novatex argued that the entirety of the LTF -EOP Loan shou ld have been 
benchmarked against a single interest rate prevailing at the time of the loan's negotiation and conclusion, 
i.e. 2004-2005. Under this line of argument, the timing of tranche drawdowns did not matter. Thus, this may 
have provided reason to sus pect that Novatex would not have been overly concerned with how it presented 
"date of grant" information in the spreadsheets.  
159 European Commission, Directorate -General for Trade, Novatex's Original Questionnaire Response, 
including Annexes F.V.1.b.a and F.VIII.1.d, 20 October 2009, (Exhibit EU -9) (BCI); and European Union's first 
written submission, para. 117 (identifying the date of return). Pakistan has not disputed the accuracy of this 
date. 
160 European Commission, Directorate -General for Trade, Novatex 's Original Questionnaire Response, 
including Annexes F.V.1.b.a and F.VIII.1.d, 20 October 2009, (Exhibit EU -9) (BCI), p. 30.  
161 European Commission, Directorate -General for Trade, Novatex's Original Questionnaire Response, 
including Annexes F.V.1.b.a and F .VIII.1.d, 20 October 2009, (Exhibit EU -9) (BCI), pp. 31 and 32. In 
June 2005, the SBP's annual base rate was 5% and never changed thereafter. (Pakistan's first written 
submission, paras. 6.14 and 6.15).  
162 European Commission, Directorate -General for Trade , Novatex's Original Questionnaire Response, 
including Annexes F.V.1.b.a and F.VIII.1.d, 20 October 2009, (Exhibit EU -9) (BCI), p. 31. This was attached to 
the questionnaire as "Annex F -V.1.b.a".  
163 See generally European Commission, Directorate -General for  Trade, Novatex's Original Questionnaire 
Response, including Annexes F.V.1.b.a and F.VIII.1.d, 20 October 2009, (Exhibit EU -9) (BCI), annex F -V.1.b.a.  WT/DS486/R  
BCI deleted, as indicated [***]  
- 39 - 
 
  time that outstanding amount changed (i.e. when Novatex "Received" principal  during the POI, 
evidenced by a non -parenthesized amount in this column, or executed a "Payment" of principal 
back to the banks during the POI, evidenced by a parenthesized amount in this column) a new row 
in the spreadsheet appears with the re -adjusted "O utstanding balance". For each "Period", 
Novatex indicated the amount of interest that it had paid on the outstanding principal present 
during that period and the "Date of [such] Payment". Each row compared that amount of interest 
paid to what Novatex would  have paid under a commercial interest rate of [***] .  
7.75.   Six aspects of the Original Spreadsheets warrant emphasis. First, in each group of 
spreadsheets applying to each of the five consortium banks, only one numeric entry164 appears 
under the column "Opening" . This indicates this entry's uniqueness.  
7.76.   Second, the amount in each "Opening" entry corresponds exactly to the "Outstanding 
balance" entry in the same row. Moreover, each such row corresponds to a "Period" that begins on 
the first day of the POI. This in dicates that Novatex received this "Opening" amount either before 
the POI or on the first day of the POI. We consider the word "Opening", however, as too 
ambiguous on its own to signal which was the case.165 
7.77.   Third, for each "Opening" amount, there is no corr esponding entry for principal "Received". 
This contrasts with every other instance in which Novatex drew down principal under the loan 
during the POI, reflected by a positive entry in the "Received / (Payments)" column.166 In our 
view, this strongly suggests  that the "Opening" amounts were not received on the first day of the 
POI, but beforehand.  
7.78.   Fourth, given the logic of the spreadsheets' structure, it would appear that in each row that 
reflects principal being "Received", the corresponding "Period" reflec ted in that same row will begin 
on the date of the drawdown. Novatex drew down amounts from each bank in the lending 
consortium [***]  or [***]  times during the POI (excluding the "Opening" amounts), depending 
on the bank. Drawdowns were, therefore, rare ev ents during the year -long POI. It would thus 
appear a remarkable coincidence that Novatex would have drawn down amounts from all five 
banks on what happened to be the first day of the POI.167 In our view, this made the notion that 
the "Opening" amounts were drawn down during the POI highly questionable.  
7.79.   Fifth, we note the magnitude of the "Opening" amounts. The aggregate value of the five 
"Opening" amounts is PKR [***] .168 This is roughly [***]  of the total amount to which Novatex 
was entitled under the LTF -EOP Loan, i.e. PKR [***] . The drawdowns during the POI reflected by 
entries in the "Received / (Payments)" column were much smaller, totalling PKR  [***]169, or 
approximately [***]  of the amount to which Novatex was entitled under the loan. It will be 
recalled that in its questionnaire response, Novatex indicated that Novatex's PKR [***] LTF-EOP 
                                                
164 For three banks the spreadsheets contain duplicate entries for the same amounts. This would not 
appear to alter the conclusions regarding how such amounts warrant interpretation, however.  
165 Pakistan has argued that the term "opening" should be understood to be synonymous with "opening 
balance", and has submitted evidence indicating that the term "opening b alance" is "the balance brought 
forward at the beginning of an accounting period". (Pakistan's comments on the European Union's response to 
Panel question No. 92, paras. 4.10 and 4.11). But, according to the same source, this definition applies not 
only to  a balance carried forward from a previous time into a new period, but can also apply to "when a 
company is first starting up its accounts". (Debitoor Dictionary, definition of "opening balance" 
<https://debitoor.com/dictionary/opening -balance >, (Exhibit PAK -57)). 
166 Payments of principal are parenthesized in this column. We note that each "Opening" amount has a 
corresponding identical entry made in the column for "TOTAL" "Amount of Credit gran ted". Thus, although this 
column may indicate the opening amounts were "granted", it appears to shed no material light on when such 
amounts were granted.  
167 When Novatex drew down an amount from one bank during the POI, it tended to be accompanied by 
drawdo wns from other banks as well at or around the same date. Pakistan has explained that this was because 
"[w]hen Novatex drew down any amount, it turned first to [an] agent, who then in turn coordinated the 
drawdown with the remaining banks. All five banks co ntributed to the draw -down amount in proportion to their 
participation in the agreement." (Pakistan's response to Panel question No. 45(f), para. 3.20). Due to 
differences in when the SBP provided refinancing for the banks in connection with the loan, howe ver, 
drawdowns sometimes resulted on different dates across the five banks. (Pakistan's response to Panel question 
No. 45(f), para. 3.21).  
168 Calculated by the Secretariat.  
169 Calculated by the Secretariat.  WT/DS486/R  
BCI deleted, as indicated [***]  
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  Loan had been "approved … in April 2005".170 It would appear a rather extraordinary coincidence, 
therefore, that, of a loan approved in April 2005, [***]  would be drawn do wn in one day that 
happened to be 1 July 2008, i.e. the first day of the POI in this particular investigation. In our 
view, this indicates that it was highly unlikely that the "Opening" amounts were drawn down 
during the POI.  
7.80.   Sixth, in its questionnaire re sponse, Novatex stated that it "has made total drawdowns of 
PKR [***] ", (i.e. the last day of the POI).171 The spreadsheets indicate, however, that during the 
POI Novatex drew down less than PKR [***]  (even assuming the "Opening" amounts were 
drawdowns), and  the parties agree that the spreadsheets indicate that Novatex had paid back less 
than PKR [***] .172 These data demonstrate that pre -POI principal drawdowns and pre -POI 
principal repayments had occurred. Although detecting these differences would have requir ed 
some calculation, at least summing the drawdown amounts in the spreadsheets would not appear 
overly complex. We thus find such differences indicative that the "Opening" amounts could very 
well represent drawdowns occurring before the POI, as Novatex cou ld have well carried over Pre -
POI Principal into the POI.  
7.4.4.1.1.3   The Second Deficiency Letter and the Revised Spreadsheets  
7.81.   As indicated in the above Section, the Original Spreadsheets claimed that the commercial 
benchmark interest rate to apply to the LTF -EOP Loa n was [***] . This interest rate was lower 
than the interest rate Novatex indicated that it paid on the LTF -EOP Loan, i.e. 6.8%. This 
apparently begged the question as to why Novatex would have opted for the LTF -EOP Loan in the 
first place. Apparently recog nizing this, on 13 November 2009, the Commission sent a letter to 
Novatex (the Second Deficiency Letter). The letter, inter alia , asked Novatex to clarify whether the 
provision of the [***]  figure was in error, and asked Pakistan to provide the contract fo r 
Novatex's LTF -EOP Loan from the five -bank consortium.173 
7.82.   On 24 November 2009, Novatex responded to the Second Deficiency Letter. In the 
response, Novatex provided the Commission with "[t]he facility offer letter [(Offer Letter)] signed 
by the consortium ba nks and the final contract executed between Novatex Limited and consortium 
of five banks" (the LTF -EOP Contract ).174 Novatex also confirmed that the [***] figure in the 
Original Spreadsheets had been provided in error, and indicated that the relevant commerc ial 
interest benchmark was instead [***] .175 Novatex provided revised versions of the Original 
Spreadsheets (the Revised Spreadsheets) that reflected this correction in the "Commercial Interest 
rate for loans and guarantees" column, and resultant changes in the "Interest payable for 
Commercial Interest Rate" columns (i.e. the interest that Novatex would have paid on the LTF -EOP 
Loan had the interest rate been [***]  instead of 6.8%). Aside from those revisions, the Revised 
Spreadsheets were almost identical to  the Original Spreadsheets.176  
7.83.   One further change was significant, however. To the left of the "Opening" column, Novatex 
added a column entitled "Date of grant of Principal LTF -EOP". Entries in this new column appear in 
each row representing a drawdown of p rincipal during the POI reflected by a non -parenthesized 
                                                
170 European Commission, Directorate -General for Tra de, Novatex's Original Questionnaire Response, 
including Annexes F.V.1.b.a and F.VIII.1.d, 20 October 2009, (Exhibit EU -9) (BCI), p. 31. At this point in time, 
the Commission did not yet have Novatex's LTF -EOP Loan contract that indicated the LTF -EOP Loan had 
actually been concluded in June 2005. The April 2005 date appeared to come from the LTF -EOP offer letter, 
discussed further below.  
171 European Commission, Directorate -General for Trade, Novatex's Original Questionnaire Response, 
including Annexes F.V.1. b.a and F.VIII.1.d, 20 October 2009, (Exhibit EU -9) (BCI), p. 32.  
172 See European Union's response to Panel question No. 91, para. 19 (stating that Novatex only had 
paid back roughly PKR [***]  during the POI); and Pakistan's comments on the European Union's  response to 
Panel question No. 91, para. 4.2 (stating that Novatex only had paid back roughly PKR 220 million during the 
POI).  
173 Second Deficiency Letter dated 13 November 2009 from the Commission to Novatex, 
(Exhibit  PAK-12) (BCI), p. 2.  
174 Letter dated 24 November 2009 from Novatex to the Commission as response to the Commission's 
Second Deficiency Letter (excerpts only), (Exhibit PAK -3-A) (BCI), p. 3.  
175 Letter dated 24 November 2009 from Novatex to the Commission as response to the Commission's 
Second D eficiency Letter (excerpts only), (Exhibit PAK -3-A) (BCI), p. 3.  
176 Letter dated 24 November 2009 from Novatex to the Commission as response to the Commission's 
Second Deficiency Letter, including Revised Annex F -V.1.b.a of Novatex's questionnaire response , 
(Exhibit  EU-7) (BCI), annex F -V.1.b.a.  WT/DS486/R  
BCI deleted, as indicated [***]  
- 41 - 
 
  entry in the "Received / (Payments)" column. Pakistan has explained that the addition of this 
column "was intended to help the investigating authority to identify more quickly those entries in 
the 'R eceived/(Payments)' column that reflect drawdowns actually made during the [POI]".177 The 
problem with this revision, however, was that this column also included a date next to each of the 
"Opening" amounts in the Revised Spreadsheets, i.e. the first day of the POI. On its face, this 
indicated that the "Opening" amounts had been "granted" on the first day of the POI. The 
"Opening" amounts, however, still had no associated entries in the "Received" column, which 
continued to contrast with every other instance in which Novatex drew down principal under the 
loan during the POI, reflected by a non -parenthesized entry in the "Received / (Payments)" 
column. Thus, there continued to appear something different about the "Opening" amounts from 
other entries indicating drawdowns during the POI.  
7.84.   We note that the Revised Spreadsheets were particularly noteworthy in the investigation. 
This was so because the Commission used them as the basis on which to calculate the benefit 
conferred by the LTF -EOP Loan. The Commission did  this by apparently replacing the [***]  
interest rate provided by Novatex with its chosen benchmark rate, i.e. 14.44%.178 Thus, in this 
dispute, the European Union emphasizes the importance of the fact that the Revised Spreadsheets 
indicated that the "Date o f grant" of the "Opening" amounts was the first day of the POI.  
7.4.4.1.1.4   The LTF -EOP offer letter  
7.85.   Novatex attached the Offer Letter to its response to the Second Deficiency Letter. The Offer 
Letter is dated 30 April 2005 and contains terms of a proposed loan. The Offer Letter identifies 
Novatex as the borrower in a facility that was to be " [***] ".179 It further identifies a consortium of 
[***]  banks as the lenders; five of these banks became the lending consortium reflected in the 
LTF-EOP Contract (discussed in the f ollowing Section of this Report).180 The Offer Letter, therefore, 
was the predecessor, and eventually formed the basis, of the LTF -EOP Contract. Its terms are 
non-binding.181 Nevertheless, given that it provided the basis for negotiations between Novatex 
and t he banks for what eventually became the LTF -EOP Contract, and was on the record of the 
investigation, we believe that it carries some probative weight.  
7.86.   The Offer Letter contains an " [***] " of proposed terms of what became the LTF -EOP Loan. 
Regarding the " [***] " of the facility, the Offer Letter specifies that " [***] " and that " [***] " and 
that such drawdowns could only occur until " [***] ". The Facility Effective Date is " [***] ".182 The 
"[***] " of the loan was to be 7.5 years.183  
7.4.4.1.1.5   The LTF -EOP Contract  
7.87.   Novatex als o attached the LTF -EOP Contract to the Second Deficiency Letter.184 The 
LTF-EOP Contract is dated 9 June 2005, and was thus concluded roughly six weeks after the 
conclusion of the Offer Letter. The LTF -EOP Contract describes a loan very similar to that descr ibed 
in the Offer Letter.  
7.88.   Under the LTF -EOP Contract, a consortium of five banks would make a loan of up to PKR 
[***]  available to Novatex under the LTF -EOP programme.185 The loan was structured such that it 
                                                
177 Pakistan's response to Panel question No. 45(a), para. 3.3.  
178 See generally Novatex Provisional Subsidy Calculation, (Exhibit EU -8) (BCI).  
179 Offer Letter, (Exhibit PAK -31) (BCI), p. 3. The circular generally desc ribed the terms of the LTF -EOP 
programme. (See Banking Policy Department, Circular No. 14 (18 May 2004), (Exhibit PAK -60)). 
180 Only [***]  did not participate in the eventual lending consortium. The removal of this bank 
apparently caused a decrease in the pr oposed amount of the loan, which was PKR  [***]  in the Offer Letter but 
PKR [***]  in the LTF -EOP Contract.  
181 Its terms " [***] ". (Offer Letter, (Exhibit PAK -31) (BCI), p. 1).  
182 Offer Letter, (Exhibit PAK -31) (BCI), p. 3.  
183 Offer Letter, (Exhibit PAK -31) (B CI), p. 3.  
184 See Exhibit PAK -29 (BCI) containing the [***]  and the [***] . Pakistan has explained that [***] 
concluded a separate agreement  as to operate under Islamic banking principles. As it appears the case that the 
two agreements' relevant terms operat ed similarly, this Report does not, therefore address the two separately. 
Rather, it generally refers to them, taken together, as the "LTF -EOP Contract". (See Pakistan's response to 
Panel question No. 44, paras. 3.1 and 3.2).  
185 See Syndicate Agreement, (Ex hibit PAK -29) (BCI), clause 1.1(ai) (providing [***] ) and Murabaha 
Agreement, (Exhibit PAK -29) (BCI), clause 1.01 (providing [***] ). The LTF -EOP Contract also states that the WT/DS486/R  
BCI deleted, as indicated [***]  
- 42 - 
 
  could be drawn down in tranches. Novatex was requi red to draw down [***]  of the total loan 
amount within [***]  of the signing of the LTF -EOP Contract, and Novatex could only draw down 
the remaining amounts within [***]  of the signing of the LTF -EOP Contract.186 There is nothing on 
the record specifically in dicating that the [***]  deadline had ever been extended.187 It is 
undisputed that the [***] deadline was extended, which accounted for Novatex's drawdowns 
during the POI, which began roughly three years following the conclusion of the LTF -EOP 
Contract.188 The interest rate for a particular tranche would be set when it was drawn down and 
remained locked in until the tranche was paid back; that interest rate comprised of the SBP annual 
base rate that prevailed at the time of drawdown, plus a mark -up of 1.8 percen tage points.189 At 
the time of its drawdown, each tranche was assigned its own 7.5 -year repayment period. Further, 
when read together with the government circular describing the LTF -EOP programme, the parties 
further agree, and we see no reason to doubt, tha t the LTF -EOP Loan had an initial eighteen -
month  grace period on principal repayment.190  
7.89.   We therefore note that the LTF -EOP Contract clarifies: (a) that the LTF -EOP Loan was 
concluded in June 2005  (i.e. roughly three  years  before the beginning of the POI); (b) each 
tranche of principal drawn down thereunder had its own 7.5-year repayment period assigned to it; 
(c) the LTF -EOP Loan had an initial eighteen -month grace period on principal repayment; and (d) 
Novatex had to draw down at least [***]  of the loan by  roughly [***] . Given that there is no 
material evidence on the record that the [***]  deadline was not respected, and the European 
                                                                                                                                                  
consortium has agreed to provide the loan pursuant to the LTF -EOP scheme. (Syndic ate Agreement, (Exhibit 
PAK-29) (BCI), clause 1.1(w) and p. 5/61 (item ii); and Murabaha  Agreement, (Exhibit PAK -29) (BCI), clause 
1.02 and p. 42/61 (definition of "LTF -EOP Scheme").  
186 Consistent with the terms of the Offer Letter, [***]  could have been ad ded to the [***]  and [***] 
drawdown deadlines stated above. (Syndicate Agreement, (Exhibit PAK -29) (BCI), clauses 1.1(i), 1.1(j), 
1.1(o), 1.1(p), and 2.3; and Murabaha Agreement, (Exhibit PAK -29) (BCI), clause 2.03 and definitions of 
[***]  p. 41/61).  
187 We recall that the balances in the "Opening" columns in the Original and Revised Spreadsheets was 
well over [***]  of the total amount of the LTF -EOP Loan. The LTF -EOP Contract appeared to provide for 
additional payments to the bank consortium by Novatex if No vatex drew down less than [***]  of the loan 
amount before the [***]  deadline, but there is no evidence that such payments occurred. (Syndicate 
Agreement, (Exhibit PAK -29) (BCI), clause 5.5; and Murabaha Agreement, (Exhibit PAK -29) (BCI), 
clause  4.06). The LTF-EOP Contract also contained repayment schedules that indicated that significant 
amounts of Pre -POI Principal would be drawn down and would still be outstanding as of the first day of the POI. 
(Syndicate Agreement, (Exhibit PAK -29) (BCI), schedule C (en visioning payments years beyond July 2008); 
and Murabaha Agreement, (Exhibit PAK -29) (BCI), schedule E (same)).  
188 At least the Syndicate Agreement appeared to allow for extension of the [***]  deadline subject to 
agreement among the parties. (Syndicate Agr eement, (Exhibit PAK -29) (BCI), clause 2.4(b)).  
189 The parties agree that the record reflected this "lock -in" structure. (European Union's response to 
Panel question No. 96, para. 30; and Pakistan's response to Panel question No. 96, para. 3.20. See also 
Syndicate Agreement, (Exhibit PAK -29) (BCI), p. 36/61). Pakistan has explained that under the Murabaha 
Agreement (under which Novatex was entitled to only about [***]  of the total loan amount), "this explicit 
statement is lacking, due to the adherence to str ict Islamic banking principles which do not utilize the concept 
of 'interest rate'". (Pakistan's response to Panel question No. 44, fn 116). We note, however, that the 
Murabaha Agreement indicates that the loan is " [***] " which is " [***] ". (Murabaha Agreem ent, (Exhibit PAK -
29) (BCI), clause 1.02 and the definition of " [***] " on p. 42/61). The referenced circular references this "lock -
in" structure. (See Banking Policy Department Circular No. 14 (18 May 2004), (Exhibit PAK -60), para. 4). The 
circular also at taches more detailed terms and conditions of the LTF -EOP scheme, some of which also appear to 
reference this structure. (See Banking Policy Department Circular No. 14 (18 May 2004), (Exhibit PAK -60), p. 
20, para. 9(a)). The Provisional Determination refers  to the LTF -EOP as set out in this circular. (Provisional 
Determination, (Exhibit PAK -1), para. 118).  
190 See Pakistan's second written submission, para. 3.53 (explaining eighteen -month grace period). The 
European Union claims the grace period was even longe r, amounting to over two years, in which case it would 
appear even less likely that Pre -POI Principal would have been paid back in its entirety by the first day of the 
POI. (European Union's second written submission, table in para. 100 and para. 108 (refe rencing two -year 
grace period); and opening statement at the second meeting of the Panel, para. 52 (same). But see 
European  Union's comments on Pakistan's response to Panel question No. 93, para. 6 (referencing eighteen -
month grace period)). It is not enti rely clear to us whether the grace period applied to the loan as a whole or 
to each individual tranche, although this appears immaterial for our purposes. We also note that the parties 
agree that each tranche was assigned its own 7.5 -year repayment term. ( Pakistan's response to Panel question 
No. 70, para. 3.52; European Union's response to Panel question No. 70, para. 104. See also Pakistan's 
opening statement at the first meeting of the Panel, para. 4.8 (explaining that drawdowns occurred in 2005 
and the LTF-EOP Loan was "repaid (ahead of schedule) by 2015", i.e. roughly ten years following the 
conclusion of the LTF -EOP Contract and the first drawdowns); Syndicate Agreement, (Exhibit PAK -29) (BCI), 
p. 3/61 (item (i); and Murabaha Agreement, (Exhibit PAK -29) (BCI), clause 1.02). We see no reason to 
disagree with this interpretation.  WT/DS486/R  
BCI deleted, as indicated [***]  
- 43 - 
 
  Union has provided us no particular reason to believe that it would have been reasonable to 
assume that Novatex would not ava il itself of the full 7.5 -year repayment term per tranche, we 
consider that this combination of facts means that it was a near certainty that Novatex would have 
drawn down Pre -POI Principal and carried over at least some of that principal into the POI, and  
thus that the "Opening" amounts in the Original and Revised Spreadsheets represented, or at least 
contained significant amounts of, Pre -POI Principal.191 
7.4.4.1.1.6   Novatex annual reports  
7.90.   Pakistan asserts that the Commission also should have been on notice that the "O pening" 
amounts in the Original and Revised Spreadsheets represented Pre -POI Principal because 
Novatex's 2007 -2008 and 2008 -2009 annual reports, which included financial statements, both 
indicated that on 30 June 2008 (i.e. the last day preceding the POI) Novatex had large sums 
outstanding from all five of the lending consortium banks under the LTF -EOP Loan. The statements 
do indeed reflect this192, and were on the record of the investigation before the Provisional 
Determination was issued.193 The financial sta tements clearly list Novatex's outstanding balances 
under the LTF -EOP Loan bank -by-bank in the notes to the financial statements. When one 
compares these bank -specific outstanding balances on 30 June 2008 to the bank -specific 
"Opening" amounts in the Origi nal and Revised Spreadsheets for the first day of the POI (i.e. 
1 July 2008), we observe that those two amounts are identical for three of the five lending banks 
([***] ) and almost identical for two of the banks ( [***] ). These data, on their own, prove tha t 
the "Opening" balances were indeed Pre -POI Principal, not drawdowns that occurred on the first 
day of the POI. We note that even though these reports may have been examined by the 
Commission for purposes other than examining the LTF -EOP, and contain many  types of 
information beyond the LTF -EOP Loan balances, they were still on the record before the 
Commission, and the outstanding balance data were, in our view, plain enough that we would 
expect a reasonable investigating authority to detect it and take it  into account, especially given 
the evidence (discussed above) calling into question the nature of the "Opening" balances in the 
Original and Revised Spreadsheets.194 
7.4.4.1.1.7   Conclusion – timing of drawdowns of principal  
7.91.   We conclude that the evidence discussed above , taken together, would clearly suggest to a 
reasonable investigating authority that the amounts in the "Opening" balances in the Original and 
Revised Spreadsheets represented Pre -POI Principal.195 This is not to say, however, that the 
manner in which Novate x presented its data in the Original and, in particular, the Revised 
Spreadsheets, to the Commission in this context was a model of clarity. Indeed, assigning the date 
of the first day of the POI to the "Date of grant" column next to the "Opening" amounts in the 
Revised Spreadsheets appeared confusing at best.  
7.4.4.1.2   The decision to use the SBP Rate: Determinations and disclosure documents  
7.92.   In this Section, we examine the portions of the Determinations and associated disclosure 
documents provided to Novatex discuss ing how the Commission determined the LTF -EOP Loan to 
                                                
191 We recall that the Offer Letter also referenced the [***]  deadline and 7.5 -year repayment term. 
Even though its terms were non -binding, it basically repeated certain key inform ation contained in the LTF -EOP 
Contract, and thus should have further drawn the Commission's attention to such facts.  
192 See Novatex' audited Annual Report 2007 -2008, (Exhibit PAK -40) (BCI), p. 16 Nos. 17 and 17.1; and 
Novatex' audited Annual Report 2008 -2009, (Exhibit PAK -41) (BCI), p. 17 Nos. 18 and 18.1.  
193 See generally European Union's response to Panel question No. 95, para. 28; and Pakistan's 
response to Panel question No. 95, para. 3.13.  
194 In the Second Deficiency Letter, the Commission asked Pakistan  to provide details regarding a 
short-term borrowing facility referenced in the notes to the financial statements in the Novatex 2007 -2008 
annual report. (Second Deficiency Letter dated 13 November 2009 from the Commission to Novatex, 
(Exhibit  PAK-12) (BCI ), p. 2). The LTF -EOP loan amounts are listed just two pages before this reference in the 
notes to the financial statements concerning long term borrowing. (Novatex' audited Annual Report 
2007-2008, (Exhibit PAK -40) (BCI), pp. 16 and 18). This indicates th at the Commission reviewed the notes to 
the financial statements in some detail.  
195 See, e.g. European Union's second written submission, para. 129 (advocating the following standard 
in this context: "whether a reasonable investigating authority would have concluded, on the basis of the 
evidence before it and in view of all factual circumstances surrounding the submission of the evidence, that the 
spreadsheets submitted by Novatex showed amounts that were drawn down during the IP").  WT/DS486/R  
BCI deleted, as indicated [***]  
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  be a subsidy, and, more specifically, how it chose to benchmark Novatex's interest payments 
under the loan during the POI against the SBP Rate.  
7.93.   In the Provisional Determination, the Commission found th e LTF -EOP Loan to be a 
countervailable subsidy. In so finding, the Commission first discussed the LTF -EOP scheme, 
demonstrating an understanding of its legislative basis, eligibility requirements, and 
implementation procedures. With respect to such procedu res, the Provisional Determination 
indicated that: (a) the maximum period of financing was 7.5 years; (b) "[b]anks are allowed to 
charge the borrower up to 3% over and above the rates notified by the SBP. Interest rates for 
financing under [the] LTF -EOP sc heme are benchmarked with the weighted average yields of 12 
months Treasury Bills and three and five years Pakistan Investment Bond, depending on the 
period of financing"; (c) "[u]nder this scheme, the SBP mandatorily sets maximum ceiling interest 
rates ap plicable to long -term loans"; and (d) Novatex's loan under the LTF -EOP was "a long -term 
financing and the benefit was availed of in April 2005 for a period of 7 -1/2 years".196 The 
Commission then considered that "Pursuant to Article 6(b) of the basic Regulat ion, the benefit to 
the recipient is calculated by taking the difference between the [SBP] imposed credit ceiling and 
the applicable commercial credit rates."197 
7.94.   The provisional company -specific disclosure sent to Novatex198 revealed what this 
"applicable comm ercial credit rate" was in its subsidy calculation regarding the LTF -EOP Loan. The 
document explained that, vis-à-vis the LTF -EOP Loan, "[t]he normal interest rate was found at an 
average of 14,44% (source Statistic on monthly average of interest rate - outstanding loans - from 
SBP" (i.e. the SBP Rate).199 An associated table in the disclosure also indicated that this monthly 
average rate was "Interest normally payable (based on average for the IP; Outstanding loan; 
excluding zero Markup".200 The table provided  this rate for each month of the POI, and then 
averaged them, yielding the 14.44% figure. The following note appears below this table: "all banks 
- source: Statistics DWH Department - sbp.org.pk)".201 It is undisputed that the Commission then 
calculated the subsidy amount by taking the difference between Novatex's actual interest 
payments on the LTF -EOP Loan (pursuant to the loan's 6.8% interest rate) made during the POI 
and the interest that Novatex would have paid on the LTF -EOP Loan had the interest rate b een 
14.44% instead.202 
7.95.   The definitive general disclosure document (which was a draft of the Definitive 
Determination) provided the following relevant discussion:  
Both parties claimed that the interest rate used to calculate the subsidy margin of this 
financi ng scheme has to be the interest rate available at the time the exporting 
producer was negotiating the fixed rate financing, namely the rate in the year 
2004-2005. …  
These claims had to be rejected. First of all, it should be clarified that the rate used i n 
the calculation is the commercial interest rate applied during the IP in Pakistan, as 
sourced from the website of the [SBP]. When calculating the subsidy amount the 
amount of credit for the IP, as reported by the cooperating exporting producer, was 
used.  It is the normal practise [ sic] when examining the benefit availed by a party 
                                                
196 See generally Provision al Determination, (Exhibit PAK -1), paras. 117 -126. We note that the technical 
accuracy of these descriptions is not at issue.  
197 Provisional Determination, (Exhibit PAK -1), para. 131. It should be noted that, in calculating the 
subsidy amount, the Commissio n in fact took the difference between the rate actually charged  by the bank 
consortium on the Novatex loan (i.e. 6.8%) and the "applicable commercial credit rates". (See generally 
Novatex Provisional Subsidy Calculation, (Exhibit EU -8) (BCI)).  
198 These disc losure documents were sent to Novatex along with a copy of the Provisional 
Determination.  
199 Novatex Provisional Subsidy Calculation, (Exhibit EU -8) (BCI), second text box under item 4. See 
also European Commission, Provisional company -specific disclosure, 1 June 2010, (Exhibit PAK -32) (BCI) 
(containing same content).  
200 Novatex Provisional Subsidy Calculation, (Exhibit EU -8) (BCI), table on p. 5 of PDF.  
201 Novatex Provisional Subsidy Calculation, (Exhibit EU -8) (BCI), table on p. 6 of PDF.  
202 Novatex Provision al Subsidy Calculation, (Exhibit EU -8) (BCI).  WT/DS486/R  
BCI deleted, as indicated [***]  
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  during a specific IP to take the applicable commercial credit rate prevailing in the 
market during the corresponding IP.203 
7.96.   The definitive company -specific disclosure document pro vided the following relevant 
discussion:  
The subsidy amount obtained under the LTF -EOP … was derived from the difference 
between the … [SBP] imposed credit ceiling under the LTF -EOP credit facilities and the 
interest payable under the normal commercial int erest (i.e. interest rate of 14,44% 
found from the [SBP]: Statistic on monthly average interest rate – outstanding 
loans).204 
7.97.   The Definitive Determination provided the following relevant discussion:  
Both parties claimed that the interest rate used to calcul ate the subsidy margin of this 
financing scheme has to be the interest rate available at the time the exporting 
producer was negotiating the fixed rate financing, namely the rate in the 
year 2004-2005. …  
These claims had to be rejected. First of all, it sh ould be clarified that the rate used in 
the calculation is the commercial interest rate which prevailed during the IP in 
Pakistan, as sourced from the website of the [SBP]. The financing negotiated 
in 2004/2005 was drawn down in tranches by the exporter co ncerned. When 
calculating the subsidy amount the amount of credit drawn down for the IP, as 
reported by the cooperating exporting producer, was used. When examining the 
benefit received by a party during a specific IP the applicable commercial credit rate 
prevailing in the market during the IP is normally compared to the rate paid on the 
loan received during the IP, and this was done here.205 
7.98.   The Definitive Determination then confirmed the relevant findings in the Provisional 
Determination, discussed above.206 
7.4.4.1.3   Whether Pakistan has made out a prima facie  case and, if so, whether the 
European Union has rebutted it  
7.99.   It will be recalled that to succeed in its claim under Article 14(b), Pakistan must make out a 
prima facie  case that the SBP Rate does not represent "th e amount [Novatex] would pay on a 
comparable commercial loan which [Novatex] could actually obtain on the market". Based on the 
evidence discussed above, we conclude that Pakistan has done so and that the European Union 
has not rebutted it.207 The key issue in this context is whether the SBP Rate is associated with a 
"comparable commercial loan". Through its arguments highlighting the lack of discussions in the 
Determinations and associated disclosure documents surrounding the choice of the SBP Rate as a 
benchmark, Pakistan, in our view, has demonstrated that the Determinations and associated 
                                                
203 European Commission, General Definitive Disclosure, (Exhibit PAK -36), paras. 71 -72. 
204 European Commission, Definitive company -specific disclosure, 26 July 2010, (Exhibits PAK -33 and 
EU-6) (exhibited twice) (B CI), section 1.5.  
205 Definitive Determination, (Exhibit PAK -2), paras. 72 and 73.  
206 Definitive Determination, (Exhibit PAK -2), para. 74.  
207 We dismiss the following European Union arguments as ex post rationalizations for choosing the SBP 
Rate, as the Commis sion did not include them in its Determinations: (a) an obstacle for identifying a 
comparable commercial loan for a company in a similar financial situation as Novatex in the same sector of the 
economy was the influence of "different subsidy schemes" (Euro pean Union's response to Panel question 
No. 59, para.  90); (b) the application of the SBP Rate to the LTF -EOP Loan was beneficial to Novatex because 
the duration of the LTF -EOP Loan was 7.5 years (and perhaps as long as 10 years if viewed as a whole) 
where as the Karachi Inter -Bank Offer Rate (KIBOR) (discussed more below in this Section) pertains to loans of 
shorter durations, which usually carry lower interest rates (See European Union's response to Panel question 
No. 55, para. 80, and No. 61, para. 93); ( c) the KIBOR was beneficial to Novatex because it did not include 
"the amount of benefit enjoyed by Novatex for not having to bear the cost of having borrowed the total 
amount at once (cost borne by the banks at issue)" (European Union's response to Panel question No. 62, 
para. 94); and (d) the KIBOR was an appropriate benchmark interest rate in light of the fact that one of the 
private loans, specifically an [***] , that Novatex offered the Commission to demonstrate the benchmark 
interest rate (we note that  the Commission did not use the loan to do so) had a [***]  KIBOR rate 
incorporated into it. (European Union's response to Panel question No. 57, para.  86). WT/DS486/R  
BCI deleted, as indicated [***]  
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  disclosure documents leave serious and systemic doubts regarding comparability in terms of 
timing, structure, maturity, size, and the identities of relevant borrowers.  
7.100.   We first consider timing. A "benefit" analysis depends on making a "comparison … to be 
performed as though the [subject and benchmark] loans were obtained at the same time … [and 
thus] the assessment  focuses on the moment in time when the lender and borrowe r commit to the 
transaction".208 We perceive three dates that could, in our view, plausibly reference the moment 
that Novatex and the bank consortium committed to the LTF -EOP Loan (or any portion thereof): (i) 
the conclusion of the LTF -EOP Contract in June 2 005; (ii) the moment each tranche was drawn 
down and therefore the time at which an interest rate was assigned to that tranche; and/or (iii) 
the time at which Novatex and the bank consortium extended drawdown deadlines under the loan, 
thus allowing tranche s to be drawn down later than originally planned or allowed under the LTF -
EOP Contract. We need not decide which date(s) would be proper to use because the 
Determinations offer no demonstration that the SBP Rate is meaningfully connected to any of 
them.209 We recall that the Determinations revealed that the SBP Rate was based on monthly rates 
for "interest normally payable" on "outstanding loans", i.e. the "commercial interest rate applied 
during the IP in Pakistan". Such descriptions, however, do not in our view reveal whether this 
means that the monthly rates were: (a) rates (or averages thereof) that banks intended to, and 
perhaps did in fact, assign to loans during each month; and/or (b) rates (or averages thereof) that 
banks had assigned to then -outstandi ng loans when such loans had been concluded at unknown 
points in the past (which may have included some loans concluded during the POI). In the 
presence of such ambiguity, we cannot determine to what extent the SBP Rate is a rate taken from 
a time that is comparable to the time at which the parties committed to the LTF -EOP Loan (or any 
portion thereof). Moreover, even if we assume that (a) represents the correct interpretation210, the 
SBP Rate during the POI would appear to have no meaningful connection to th e time at which the 
parties committed to the transaction vis-à-vis principal drawn down before the POI (it will be 
recalled that the record suggested that this  represented the great majority of the principal on 
which Novatex paid interest during the POI) a nd ambiguous connections at best vis-à-vis principal 
drawn down during the POI.211 If we assume that (b) represents the correct interpretation, this 
would not avail the European Union because of the ambiguity surrounding when the relevant loans 
underlying th e SBP Rate were concluded and how such times meaningfully coincide with any of the 
plausible reference dates identified above in this paragraph. The Determinations, therefore, leave 
serious and systemic doubts as to whether the SBP Rate is associated with comparable commercial 
loans in terms of timing. The European Union has pointed to nothing that materially mitigates such 
doubts.  
7.101.   We therefore turn to consider comparability issues regarding structure, maturity, size, and 
the identity of borrowers. The Dete rminations and associated disclosure documents reveal that the 
                                                
208 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , paras. 835 and 836.  
209 We therefore also do not consider it necessary to identify which (if any) of these three dates the 
Commission used as the proper reference date in its Determinations, although we note that only option (ii) 
appears plausible. (See Definitive Determination, (Exhibit PAK -2), para. 73 (rejecting the use of a 2004 -2005 
reference date, never discussing drawdown extensions, but discussing "the amount of credit drawn down for 
the IP " and "the loan received  during the IP") (emphasis added)). We note that we find no support for the 
European Union's apparent argument in this dispute that the time during which a borrower  "effectively uses" or 
"enjoys" a loan can represent the moment in time when the lender and borrower  commit to a loan transaction. 
(See, e.g. European  Union's second written submission, para. 106). If the Determinations used the time during 
which Novatex was "using" the LTF -EOP Loan as the time at which the parties committed to the LTF -EOP Loan 
(or any portion thereof), therefore, the Commission misidenti fied a fundamental aspect of the LTF -EOP Loan, 
logically pre -empting that aspect's proper comparison with any benchmark with respect to timing, and leaving 
serious and systemic doubts as to whether the SBP Rate is associated with comparable commercial loan s in 
terms of timing.  
210 In our view, the parties' arguments in this dispute have appeared to reflect the assumption that this 
is the correct interpretation of the SBP Rate, or, perhaps more precisely, the rates that were averaged to 
calculate the SBP Rate.   
211 No evidence indicates that either the Pre -POI Principal drawdown dates or the dates of any 
drawdown extension agreements were on the record. We further note that drawdowns only occurred during 
certain months of the year -long POI, whereas the monthly ra tes that were averaged to produce the SBP Rate 
of 14.44% were taken from all POI months. Further, insofar as the monthly rates represented averaged KIBOR 
rates prevailing during each month (a possibility discussed in the next paragraph), KIBOR rates are pr oduced 
daily, not monthly, and drawdowns occurred on certain days, not over months. Even assuming that the 
LTF-EOP Loan (or any portion thereof) was comparable in terms of timing to the SBP Rate, however, we could 
not find that such limited comparability s ufficient to satisfy Article  14(b) due to the other comparability 
problems that exist with respect to structure, duration, size and identify of the borrowers, discussed below.  WT/DS486/R  
BCI deleted, as indicated [***]  
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  SBP Rate is a rate that reflected "interest normally payable" on "outstanding loans" from "all 
[presumably Pakistani] banks" that can be expressed as a monthly average, and that it 
"exclud[ed] zero Markup". But for the fact that such descriptions indicate that the SBP Rate is 
associated with "loans" that "exclude[ed] zero Markup", this yields no meaningful insight into the 
structure, maturity, or size of such loans, and provides no indication of  the character of 
borrowers.212 We note that the European Union has stated that the SBP Rate is "synonymous" with 
the Karachi Inter -Bank Offer Rate (KIBOR). Even assuming arguendo that it was discernible from 
the Determinations that the SBP Rate represented averaged KIBOR rates prevailing over each 
month of the POI (the record reflects that KIBOR rates are produced daily)213, and that such rates 
were on the record of the investigation, the same basic problems with the SBP Rate persist. The 
European Union points  to nothing on the record revealing the size or structure of the loans with 
which the KIBOR from any particular time was associated.214 Moreover, the European Union agrees 
that the KIBOR is associated with loans of much shorter durations than the LTF -EOP Loa n.215 
Further, the European Union points to nothing on the record indicating that the borrowers of the 
loans associated with the KIBOR in any material way resemble Novatex.216 The Determinations, 
therefore, leave serious and systemic doubts as to whether the S BP Rate is associated with 
comparable commercial loans in terms of structure, maturity, and size, and the identities of 
borrowers.217 The European Union has pointed to nothing that materially mitigates such doubts.  
7.4.4.1.4   Conclusion – Article 14(b)  
7.102.   In accordance wi th our reasoning above, we find that the Commission, in calculating the 
benefit conferred by the LTF -EOP Loan, acted inconsistently with Article 14(b) of the 
SCM Agreement by failing to properly identify what Novatex would have paid on a "comparable 
                                                
212 Given that it is provided by the SBP, we assume arguendo  that the loans associ ated with the SBP 
Rate occur in the same currency as the LTF -EOP Loan, i.e. PKR.  
213 See, e.g. KIBOR rate for 2 July 2008, (Exhibit EU -16). See also Pakistan's response to Panel question 
No. 93, para. 3.6 (indicating that KIBOR rates are daily).  
214 The Europe an Union itself notes the importance of size comparability. (European Union's first written 
submission, para. 124 (explaining that it could not use one of the loans offered by Novatex during the 
investigation to evidence the relevant benchmark because, inter alia , it was "for a much smaller amount")). 
Throughout this dispute, the European Union has also stressed the importance of comparability in terms of 
structure, indicating that the "flexible" multi -tranche structure of the LTF -EOP Loan where interest ra tes are 
assigned to tranches as they are drawn down must be considered in picking a benchmark to apply to the 
LTF-EOP Loan. (See, e.g. European Union's first written submission, para. 115).  
215 The KIBOR is associated with lending rates for the following du rations: weeks, months, and one to 
three years. ( KIBOR rate for 2 July 2008, (Exhibit EU -16). See also European Union's response to Panel 
question No. 55, para. 81 (discussing KIBOR terms), and No. 61, para. 93 (same); and Pakistan's first written 
submissi on, para. 6.17 (same)). The European Union itself notes that shorter duration loans could lead to 
comparability problems. (See, e.g. European Union's first written submission, para. 125 (explaining that it 
could not use one of the loans offered by Novatex during the investigation to evidence the relevant benchmark 
because, inter alia , it was "for a much shorter duration")).  
216 The KIBOR is an inter -bank lending rate, although both parties indicate at times that it is also a basis 
upon which banks formulate l ending rates to other customers, perhaps including corporate customers. We 
note, however, that while the European Union appears to suggest that the KIBOR rates themselves were 
extended to a variety of customers, Pakistan is of the view that KIBOR rates wou ld serve as the benchmark for 
rates given to at least corporate customers, which would include a mark -up above and beyond KIBOR the 
magnitude of which would depend on the customer. (See European Union's response to Panel question No. 59, 
para. 90 and No. 9 3, para.  22; Pakistan's response to Panel question No. 93, para. 3.6; and comments on the 
European Union's response to Panel question No. 93). Whatever the case may be, however, such 
considerations simply underline that the recipients of the loans associat ed with SBP Rate would be either 
markedly different than Novatex (e.g. banks) and/or comprise an unknown group of borrowers (at best, an 
unknown mix of corporate customers).  
217 This conclusion holds with respect to the LTF -EOP Loan as a whole or any portion  thereof.  We further 
note that Novatex offered into the record of the investigation certain commercial loans that it claimed were 
comparable commercial loans. (Letter dated 24 November 2009 from Novatex to the Commission as response 
to the Commission's Sec ond Deficiency Letter (excerpts only), (Exhibit PAK -3-A) (BCI), p. 3). Pakistan claims 
that the Commission should have explained why it did not use these loans as a basis on which to calculate the 
benchmark interest rate. We find it sufficient to note that  the Determinations did not specifically explain why 
these loans did not evidence an acceptable benchmark interest rate. Thus, that the Commission did not depend 
on them yields no meaningful insight into the appropriateness of the SBP Rate as a benchmark i n terms of 
structure, maturity, size, or with respect to the identity of the borrowers.  WT/DS486/R  
BCI deleted, as indicated [***]  
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  commer cial loan".218 As a consequence of this violation, we further find that the Commission acted 
inconsistently with Article 1.1(b) of the SCM Agreement.219 
7.4.4.2   The chapeau  of Article 14  
7.103.   Pakistan also claims that the Commission failed to explain its method of benchmar king the 
LTF-EOP Loan in a transparent and adequate manner vis-à-vis the European Union's national 
legislation or implementing regulations that provide for such method, as required by the chapeau  
of Article 14 of the SCM Agreement. In its Determinations, t he Commission applied Article 6(b) of 
its Basic Regulation220 to calculate the subsidy amount with respect to the LTF -EOP Loan.221 The 
European Union has explained that "[t]he process for the identification of a comparable loan is 
explained in more detail in s ub-paragraph E(b) of the EU Guidelines".222 The European Union has 
further explained that Article 6(b) of the Basic Regulation223 and sub -paragraph E(b) of the EU 
Guidelines require that a benefit be calculated with reference to a "comparable commercial 
loan".224 
7.104.   In the preceding Section of this Report, we found that Pakistan has made out a prima facie  
case that the Commission acted inconsistently with Article 14(b) of the SCM Agreement because it 
failed to properly identify what Novatex would have paid on a comp arable commercial loan, and 
the European Union had failed to rebut that prima facie  case. This failure mainly stemmed from 
the fact that the Determinations are virtually silent as to why the SBP Rate is associated with a 
comparable commercial loan. As alre ady noted, the European Union has explained that both the 
Basic Regulation and EU Guidelines require the identification of a comparable loan. Thus, an 
explanation of how the Commission identified a comparable loan must be part of the "application" 
in this particular case of the "method" called for in the Basic Regulation, which includes 
                                                
218 In assessing Pakistan's Article 14(b) claim, the European Union has argued that we must take into 
account the facts that Pakistan and Novatex understood the SBP Rate/ KIBOR during the investigation, provided 
such rates to the Commission, and advocated the use of such rates as the benchmark interest rate. (See,  e.g. 
European Union's second written submission, para. 78; and response to Panel question No. 93, paras. 24 -26). 
Even if true, these considerations are immaterial on this record. While parties' understanding, provision, and/or 
advocacy of a benchmark during an investigation may affect the rigor with which an investigating authority 
addresses the appropriateness of a chosen benchmark, they cannot remove the investigating authority's 
obligation to demonstrate the comparability of that benchmark to the subject loan to some minimum threshold 
that demonstrates that the comparison is meaningful. We also note that the Euro pean Union has consistently 
argued in this dispute that the LTF -EOP Loan was more similar to a "line of credit" rather than a traditional 
loan, and requiring it to be benchmarked to a "proxy", i.e. the SBP Rate. Attaching the moniker "line of credit" 
to the LTF -EOP Loan and/or the moniker "proxy" to the SBP Rate (neither moniker appears in the 
SCM Agreement) does not assist the European Union on this record. A comparison that satisfies Article 14(b) 
must be meaningful . Even if it were true that other types of loans were not comparable to the LTF -EOP Loan, 
this does not mean that the SBP Rate was or should be presumed to be out of convenience. We further note 
that the Commission made no adjustments to the SBP Rate. (European  Union's response to Panel question  
No. 62, para. 94).  
219 The European Union suggests that certain of Pakistan's arguments on comparability raise due 
process concerns because the European Union was limited to responding to them in its comments on Pakistan's 
responses to the second set of que stions from the Panel. (European Union's comments on Pakistan's response 
to Panel question No. 93, para. 5). We emphasize that the comparability of a benchmark loan with a subject 
loan is at the heart of the discipline imposed by Article 14(b), and that ou r decision in this context in no way 
depends on evidence or arguments to which the European Union has been unable to respond. We more 
specifically note that we do not rely on exhibits submitted by Pakistan in its comments on the European Union's 
responses to the second set of questions by the Panel, nor must we do so to reach our above conclusions.  
220 Council Regulation (EC) No. 597/2009 of 11 June 2009 on protection against subsidized imports from 
countries not members of the European Community, Official Jo urnal of the European Union, L Series, 
No. 188/93 (18 July 2009) (Basic Regulation). See Provisional Determination, (Exhibit PAK -1), preamble.  
221 Provisional Determination, (Exhibit PAK -1), para. 131. This provision is very similar to Article 14(b) 
of the S CM Agreement. (See European Union's first written submission, fn 87 (quoting Article 6(b) of the Basic 
Regulation)).  
222 European Union's first written submission, para. 143 (quoting EU Guidelines). This is the part of the 
EU Guidelines on which Pakistan re lies in this context. (See generally Pakistan's first written submission, 
section 6.3.1.1).  
223 The European Union at times argues that Pakistan's claims under the chapeau of Article 14 must be 
rejected because they represent claims under Article 22.3 of the  SCM Agreement. (See, e.g. European Union's 
comments on Pakistan's response to Panel question No. 93, para. 4). We note that our resolution of Pakistan's 
claims under Article 14(b) and the chapeau  of Article 14 is in accordance with proper legal standards.  
224 Pakistan does not claim that the European Union's relevant national legislation or implementing 
regulations are contrary to the principles stated in Article 14(b) in any relevant manner.  WT/DS486/R  
BCI deleted, as indicated [***]  
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  identification of a comparable loan, within the meaning of the chapeau of Article 14(b) of the 
SCM Agreement, that the Commission used to benchmark the LTF -EOP Loan. In the absence of 
any meaningful explanations in the Determinations as to why the loans with which the SBP Rate 
was associated were comparable to the LTF -EOP Loan, we conclude that the Commission acted 
inconsistently with the chapeau  of Article 14 of the SCM Agre ement.  
7.4.4.3   Other LTF -EOP-related claims  
7.105.   Pakistan also asserts that, as a consequence of violating Article 14(b) and the chapeau  of 
Article 14 of the SCM Agreement, the Commission also violated Articles 10, 19, and 32, and 
Article  VI of the GATT 1994. Such clai ms are consequential to other alleged violations of the 
SCM Agreement, and we exercise judicial economy with respect to them.225 
7.5  Pakistan's claims under Article 15.5 of the SCM Agreement  
7.5.1   Introduction  
7.106.   In this Section of our Report, we address Pakistan's claim s concerning Article 15.5 of the 
SCM Agreement. During the investigation, certain parties argued that any injury the domestic 
industry226 experienced during the period considered227 was not due to subject imports, but other 
factors. The Commission rejected the se arguments, finding that although certain other factors may 
have also caused injury to the domestic industry, no other factor broke the causal link that existed 
between subject imports and the injury the domestic industry experienced. In this context, 
Pakistan advances a "twofold" claim. First, Pakistan argues that the Commission's "approach to 
causation", whereby the Commission made a finding of the existence of a causal link between 
subject imports and the injury to the domestic industry prior to the as sessment of other known 
factors, is inconsistent with Article 15.5 of the SCM Agreement. Second, Pakistan claims that the 
Commission failed to properly "separate and distinguish" the effects of certain other known factors 
from those of subject imports. Thi s Section addresses each in turn.  
7.5.2   The Commission's approach to causation  
7.107.   In the Provisional Determination, the Commission began its causation analysis with the 
assessment of the "[e]ffect of the subsidized imports", pursuant to which it "considered" that a  
causal link existed between the subject imports and the observed injury to the domestic 
industry.228 The Commission then assessed the "effect of other factors".229 None of these factors 
was found to "break the causal link" between subject imports and the obse rved injury to the 
domestic industry. Thereafter, the Commission "concluded that the imports from the countries 
concerned have caused material injury to the Union industry".230 In the Definitive Determination, 
                                                
225 We therefore do not address the European Union's objections to a ny such claims under Article 6.2 of 
the DSU.  
226 We use the term "domestic industry" for the purpose of this Report to describe what the Commission 
referred to as the "Union industry" in its Determinations, i.e. the EU producers that cooperated with the 
investigation. The Commission further relied on a sample of those cooperating producers to ascertain the 
situation of the domestic industry in certain respects. (See Provisional Determination, (Exhibit PAK -1), 
paras.  8, 201 -204, and 219). We note, therefore, that the Commission found that a causal link existed 
between subject imports and the observed injury to the domestic industry . (Provisional Determination, (Exhibit 
PAK-1), para. 245). We further note that in assessing whether the domestic industry suffered  injury, the 
Commission at times presented data (e.g. market share and price data) that was derived from all EU producers 
(i.e. the domestic industry and, additionally, non -cooperating producers). (Provisional Determination, (Exhibit 
PAK-1), para. 219). We  use the term "domestic producers" to refer to all EU producers, which the 
Determinations referred to as "Union producers".  
227 Paragraph 15 of the Provisional Determination explains: "The investigation of subsidisation and injury 
covered the period from 1 J uly 2008 to 30 June 2009 ('investigation period' or 'IP'). The examination of trends 
relevant for the assessment of injury covered the period from 1 January 2006 to the end of the investigation 
period ('period considered')." We equate the term "IP" with "P OI" (i.e. period of investigation), and adopt the 
term "period considered" as referring to 1 January 2006 through the end of the POI.  
228 Provisional Determination, (Exhibit PAK -1), para. 245.  
229 Provisional Determination, (Exhibit PAK -1), paras. 246 -261. 
230 Provisional Determination, (Exhibit PAK -1), para. 264.  WT/DS486/R  
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  the Commission addressed certain additional argu ments raised by interested parties and 
"confirmed" its findings on causation made in the Provisional Determination.231 
7.5.2.1   Main arguments of the parties  
7.108.   Pakistan presents three main arguments in this context. First, Pakistan argues that the 
Commission's "break t he causal link" approach is contrary to the "three -step analysis" laid down 
by the Appellate Body in US – Wheat Gluten .232 Second, Pakistan argues that the Commission's 
approach prejudged its analysis of other known factors.233 Third, Pakistan argues that the 
Commission's basis for finding a causal link between subject imports and observed injury to the 
domestic industry was flawed because: (a) it equated its findings of price undercutting by subject 
imports with the existence of a causal link between the subje ct imports and the injury234; and 
(b) it assumed the existence of a causal link based on temporal coincidence between increase in 
volume of imports and deterioration of the domestic industry.235 
7.109.   The European Union rejects all of Pakistan's arguments. The Europ ean Union argues that 
investigating authorities are free to choose the methodology they use to separate and distinguish 
the effects of other known factors from the effects of the subsidized imports.236 The 
European  Union asserts that the challenged approach allows the Commission to conclude that the 
other factors "break the causal link" if such other factors are the true cause of injury.237 The 
European  Union further submits that the Commission's finding of the causal link between 
subsidized imports and the inj ury to the domestic industry was based on both volume and price 
effects of subsidized imports, and not on price undercutting alone as Pakistan contends.238 
7.5.2.2   Relevant legal considerations  
7.110.   Article 15.5 of the SCM agreement provides:  
It must be demonstrated tha t the subsidized imports are, through the effects[*] of 
subsidies, causing injury within the meaning of this Agreement. The demonstration of 
a causal relationship between the subsidized imports and the injury to the domestic 
industry shall be based on an e xamination of all relevant evidence before the 
authorities. The authorities shall also examine any known factors other than the 
subsidized imports which at the same time are injuring the domestic industry, and the 
injuries caused by these other factors mus t not be attributed to the subsidized 
imports. Factors which may be relevant in this respect include, inter alia, the volumes 
and prices of non -subsidized imports of the product in question, contraction in 
demand or changes in the patterns of consumption, trade restrictive practices of and 
competition between the foreign and domestic producers, developments in technology 
and the export performance and productivity of the domestic industry.  
[*fn original]47 As set forth in paragraphs 2 and 4.  
7.111.   It is well -established that Article 15.5 requires an investigating authority to demonstrate 
the existence of a causal link between subject imports and the injury to the domestic industry. 
This causal link must involve a "genuine and substantial relationship of cause and effect" between 
these two elements. The third sentence of Article 15.5 calls for a "non -attribution" analysis which 
requires the authorities to ensure that the injury caused by "known factors other than the 
subsidized imports" is not attributed to subsidiz ed imports under investigation. The non -attribution 
language in Article 15.5 calls for an assessment that involves separating and distinguishing the 
injurious effects of the other factors from the injurious effects of the subsidized imports and 
                                                
231 Definitive Determination, (Exhibit PAK -2), para. 126.  
232 Pakistan's second written submission, paras. 4.6 and 4.7.  
233 Pakistan's response to Panel question No. 74, para. 4.22.  
234 Pakistan's response to Panel question No. 74, paras. 4.12 -4.20. 
235 Pakistan's opening statement at the second meeting of the Panel, para. 4.7.  
236 European Union's second written submission, para. 155.  
237 European Union's response to Panel question No. 78, para. 111.  
238 European U nion's second written submission, para. 178.  WT/DS486/R  
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  requires a satisfactory explanation of the nature and extent of the injurious effects of the other 
factors, as distinguished from the injurious effects of the subsidized imports.239  
7.112.   We note that in accordance with the guidance laid down by previous panels and the 
Appellate Body, we consider the jurisprudence on causation analysis developed under 
Article  4.2(b) of the Agreement on Safeguards and Article 3.5 of the Agreement on 
Implementation of Article  VI of the General Agreement on Tariffs and Trade 1994  
(Anti-Dumping  Agreement) to be instructive in our evaluation of Pakistan's claims under 
Article  15.5 of the SCM  Agreement.240 The following Section will draw upon such guidance when 
discussing Pakistan's claims.  
7.5.2.3   Evaluation by the Panel  
7.113.   This Section proceeds in three parts . First, we address Pakistan's argument that the 
Commission's "break the causal link" approach is contrary to the three -step analysis laid down by 
the Appellate Body in US – Wheat Gluten . Second, we address whether the Commission's approach 
prejudged its a nalysis of other known factors. Third, we address certain arguments by Pakistan 
concerning the basis on which the Commission found a causal link to exist between subject 
imports and the injury to the domestic industry.  
7.5.2.3.1   Significance of US – Wheat Gluten  
7.114.   Pakistan argues that the Commission improperly failed to adhere to a prescribed 
methodology for causation analysis outlined by the Appellate Body in US – Wheat Gluten . Pakistan 
relies on the following observation of the Appellate Body in US – Wheat Gluten :  
[A]s a first step  in the competent authorities' examination of causation, … the 
injurious effects caused to the domestic industry by increased imports are 
distinguished from  the injurious effects caused by other factors. The competent 
authorities can then, as a second step  in their examination, attribute to increased 
imports, on the one hand, and, by implication, to other relevant factors, on the other 
hand, "injury" caused by all of these different factors, including increased imports. 
Through this two stag e process, the competent authorities comply with Article 4.2(b) 
[of the Agreement on Safeguards] by ensuring that any injury to the domestic 
industry that was actually  caused by factors other than increased imports is not 
"attributed" to increased imports and is, therefore, not treated as if it were injury 
caused by increased imports, when it is not. In this way, the competent authorities 
determine, as a final step, whether "the causal link" exists between increased imports 
and serious injury, and whether t his causal link involves a genuine and substantial 
relationship of cause and effect between these two elements, as required by the 
Agreement on Safeguards .241 
7.115.   In US – Lamb , the Appellate Body clarified that the "three steps" identified in US – Wheat 
Gluten "simply describe a logical process for complying with the obligations relating to causation", 
and "are not legal 'tests' mandated by the text of the Agreement on Safeguards".242 The 
Appellate  Body stressed that "the method and approach WTO Members choose to c arry out the 
process of separating the effects of increased imports and the effects of the other causal factors is 
not specified" in the Agreement on Safeguards, but that whatever methodology is followed "the 
final identification of the injurious effects c aused by increased imports must follow a prior 
separation of the injurious effects of the different causal factors".243 Moreover, later cases 
concerning Article 4.2(b) of the Agreement on Safeguards244, Article 3.5 of the 
                                                
239 Appellate Body Report, EU – Biodiesel (Argentina) , para. 6.125 (quotation marks and citations 
omitted).  
240 See Appellate Body Reports, US – Hot-Rolled Steel , para. 230; and US – Line Pipe , para. 214; and 
Panel Report, China – GOES (Article 21.5 – US), para. 7.119.  
241 Appellate Body Report, US – Wheat Gluten , para. 69. (emphasis original)  
242 Appellate Body Report, US – Lamb , para. 178. (emphasis added)  
243 Appellate Body Report, US – Lamb , paras. 178 -181. As discusse d further below, the Commission 
reached its final conclusion as to the existence of a causal link only after performing the non -attribution 
analysis. (See below para. 7.118 ). 
244 Panel Report, Ukraine – Passenger Cars , para. 7.29 6. WT/DS486/R  
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  Anti-Dumping  Agreement245 and Article 15 .5 of the SCM Agreement246 have established that no 
method is prescribed in these provisions for satisfying the requirements of the causation analysis 
of the type contained in Article  15.5 of the SCM Agreement.247 We find nothing in either the 
SCM Agreement or  jurisprudence indicating that the three -step methodology described in US – 
Wheat Gluten  is mandatory in any circumstances presented in this case.  
7.116.   We therefore reject Pakistan's argument that the Appellate Body report in US – Wheat 
Gluten  prescribes a met hodology regarding causation analysis to which the Commission improperly 
failed to adhere.  
7.5.2.3.2   Prejudgment of other known factors  
7.117.   Pakistan argues that the Commission's "break the causal link" approach prejudged its 
non-attribution analysis. In particular, the  approach led to the disregard of "the correct legal 
standard, … [i.e.] whether the injurious effects of … other factors were such as to render the 
causal link between the subject imports and the alleged injury too distant, remote or insubstantial" 
and bec ause the existence of the causal link was "used to dismiss the significance of the 
non-attribution factors the Commission purported to analyse".248 
7.118.   The Introduction to the Provisional Determination's "Causation" section indicates that the 
Commission performe d a non -attribution analysis to ensure that only injurious effects attributable 
to subject imports would be considered in establishing a causal link between subject imports and 
injury to the domestic industry.249 In paragraph 245 of the Provisional Determina tion, the 
Commission then "considered" that a causal link existed between the subject imports and the 
observed injury to the domestic industry. Thereafter, the Commission examined whether other 
factors "broke the causal link".250 It was only after the analys is of other known factors revealed 
that they did not do so did the Commission "conclude[] that the imports from the countries 
concerned … caused material injury to the Union industry".251 It is therefore evident that the 
Commission allowed for the possibilit y that the analysis of other known factors could have negated 
its initial consideration that a causal link existed between subject imports and the observed injury 
to the domestic industry, as the Commission only made its final identification of the injurio us 
effects caused by subject imports after separating and distinguishing the injurious effects of the 
other known factors.  
7.119.   We do not see how this approach, in this case252, led to the disregard of a relevant legal 
standard. The Commission's analysis indicate s that the Commission's finding that subject imports 
                                                
245 See, e.g. Appellate Body Report, EC – Tube or Pipe Fittings , para. 189; and Panel Report, EC – 
Salmon (Norway) , para. 7.656.  
246 Panel Reports, EC – Countervailing Measures on DRAM Chips , para. 7.405; and Mexico – Olive Oil , 
para. 7.303.  
247 We also note  the following observation of the Appellate Body, albeit not made in the context of a 
discussion on the methodology to be followed in causation analysis:  
Article 4.2(b) of the Agreement on Safeguards establishes two distinct legal 
requirements for competen t authorities in the application of a safeguard measure. 
First, there must be a demonstration of the "existence of the causal link between 
increased imports of the product concerned and serious injury or threat thereof ". 
Second , the injury caused by facto rs other than the increased imports must not be 
attributed to increased imports.  
(Appellate Body Report, US – Line Pipe , para. 208 (emphasis added))  
248 Pakistan's opening statement at the second meeting of the Panel, para. 4.4.  
249 Provisional Determination,  (Exhibit PAK -1), para. 241.  
250 We note that in the Definitive Determination, the Commission confirmed its findings on causation 
made in paragraphs 242 through 264 of the Provisional Determination (Definitive Determination, (Exhibit 
PAK-2), paras. 117 and 1 26). The Commission's "approach" to causation is, therefore, best reflected in the 
Provisional Determination.  
251 Provisional Determination, (Exhibit PAK -1), para. 264.  
252 The "appropriateness of a particular method [to establish causation] may have to be d etermined on a 
case specific basis, depending on a number of factors and factual circumstances". (Appellate Body Report, US – 
Tyres (China) , para. 191 (quoting Appellate Body Report, EC and certain member States – Large Civil Aircraft , 
para. 1376) (square bracketing original)). (See also Panel Report, EU – Footwear (China) , para. 7.489 (making 
similar remarks)). We therefore reject as immaterial Pakistan's discussions concerning other circumstances in 
which the "break the causal link" approach might be prob lematic or did not appear to have been followed by 
the Commission. (See, e.g.  Pakistan's response to Panel question No. 74, paras. 4.34 -4.38; and second written 
submission, paras. 4.7 and 4.24 -4-38).  WT/DS486/R  
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  caused material injury to the domestic industry would be based on effects attributable to subject 
imports, and not on effects attributable to other known factors. We also do not see how the 
Commission's approach precluded the Commission from separating and distinguishing the injurious 
effects of any other known factors from those of the subject imports and from providing a 
satisfactory explanation of the nature and extent of the injurious effects of other  known factors, as 
distinguished from the injurious effects of the subject imports, in accordance with the 
non-attribution requirement of Article 15.5 of the SCM  Agreement.253 Pakistan does identify certain 
purported deficiencies in the Commission's analysis  of specific other known factors, discussed 
below254, and we agree that certain such deficiencies exist. But we see no reason to think that the 
use of the overall "break the causal link" framework necessarily compelled their occurrence or 
would preclude thei r remedy. Indeed, we find further below that the Commission sufficiently 
separated and distinguished the effects of two known factors, demonstrating that the Commission 
did not simply "dismiss" the role of other known factors because the Commission had ear lier 
considered that a causal link existed between subject imports and injury to the domestic industry. 
We further note that certain panel reports addressing issues within the context of non -attribution 
and causation – albeit not addressing the specific ty pe of challenge Pakistan asserts here – have 
appeared to accept the "break the causal link" methodology in a variety of circumstances.255  
7.120.   We therefore reject Pakistan's argument that the Commission's "break the causal link" 
approach precluded the Commission  from satisfying the non -attribution requirements of 
Article  15.5 of the SCM Agreement in this case.  
7.5.2.3.3   The basis on which the finding of the causal link was made  
7.121.   In this Section, we examine two arguments put forth by Pakistan concerning the basis on 
which th e Commission found a causal link to exist between subject imports and the injury to the 
domestic industry. First, Pakistan argues that the Commission conflated the analysis required 
under Article 15.5 of the SCM Agreement with that required under Article 1 5.2 of the 
SCM Agreement by equating its findings on the price effects of the subject imports with the 
existence of a causal link between subject imports and the injury to the domestic industry.256 
Second, Pakistan argues that the Commission found a causal l ink between subject imports and the 
injury based on nothing more than a "coincidence in time" between increase in volume of subject 
imports and the deterioration in the condition of the domestic industry.257 
7.122.   We reproduce below the most relevant findings of t he Commission in the Provisional 
Determination under the heading "Effects of the subsidized imports", which were made within the 
overall framework of determining whether a causal link existed between subject imports and the 
observed injury to the domestic industry:  
Between 2006 and the IP, the volume of the subsidised imports of the product 
concerned increased by more than 5 times to 304 200 tonnes, and their market share 
increased by almost 8 percentage points (from 2,1% to 10,2%). At the same time, 
the Un ion industry lost some 10 percentage points of market share (from 84,9% to 
72,1%). The average price of these imports decreased between 2006 and the IP and 
remained lower than the average price of Union producers.  
                                                
253 Appellate Body Report, EU – Biodiesel (Argentina) , para. 6.125.  
254 See below Section 7.5.3. 
255 See, e.g. Panel Reports, China – HP-SSST (Japan) / China – HP-SSST (EU) , para. 7.200; EU – 
Footwear (China) , para. 7.489; US – Tyres (China) , para. 7.371; and EU – Biodiesel (Argentina) , para. 7.490.  
256 Pakistan's response to Panel question No. 74, paras. 4.12 -4.20; second written submission 
paras.  4.3 and 4.4.  
257 Pakistan's opening statement at the second meeting of the Panel, paras. 4.6 and 4.7. We note that 
the two lines of argument app ear to contradict each other. Insofar as they do so, we treat them as having been 
presented in the alternative. Pakistan also asserts that the Commission improperly attributed greater value to 
the coincidence between subject imports and the injury to the d omestic industry, than to the coincidence 
between several non -attribution factors and the injury to the domestic industry, but does not elaborate further. 
(Pakistan's opening statement at the second meeting of the Panel, paras. 4.8 and 4.9). Article 15.5 o f the 
SCM Agreement does not require subject imports to be the sole cause of injury to the domestic industry. (See 
Appellate Body Reports, US – Wheat Gluten , para. 67; and US – Line Pipe , para. 209. See also Panel Report, 
China – Autos (US) , para. 7.322). We thus do not see a role for this argument that is meaningfully separate 
from that of Pakistan's other arguments regarding why the Commission's non -attribution analysis was flawed. 
We therefore do not address it further.  WT/DS486/R  
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  As indicated above at recital (217), price  undercutting of the subsidised imports was 
on average 3,2%. Even if the price undercutting was below 4%, it cannot be 
considered as insignificant given that PET is a commodity and competition takes place 
mainly via price.  
… 
In view of the undercutting of Union industry's prices by imports from the countries 
concerned, it is considered that these subsidised imports exerted a downward 
pressure on prices, preventing the Union industry from keeping its sales prices to a 
level that would have been necessary to cover its costs and to realise a profit. 
Therefore, it is considered that a causal link exists between those imports and the 
Union industry's injury.258 
7.123.   Further, after discussing the effects of other factors, the Commission stated:  
The coincidence in time be tween, on the one hand, the increase in subsidised imports 
from the countries concerned, the increase in market shares and the undercutting 
found and, on the other hand, the deterioration in the situation of the Union 
producers, leads to the conclusion tha t the subsidised imports caused material injury 
to the Union industry within the meaning of Article 8(5) of the basic Regulation.259 
7.124.   The Final Determination confirmed all such findings.260 
7.125.   Thus, in establishing a causal link between subject imports and the obs erved injury to the 
domestic industry, the Commission considered: (a) the condition of the domestic industry; (b) 
price undercutting by subject imports; (c) the fact that "PET is a commodity and competition takes 
place mainly via price", due to which it at tached special significance to price undercutting by 
subject imports; (d) the observation that subject imports "exerted a downward pressure on prices, 
preventing the Union industry from keeping its sales prices to a level that would have been 
necessary to cover its costs and to realise a profit"; (e) the increase in volume of subject imports; 
and (f) an increase in market shares of subject imports.261  
7.126.   We therefore reject Pakistan's arguments that the Commission, in establishing a causal 
link between subject imports and observed injury to the domestic industry, relied on only the 
presence of price undercutting by subject imports and/or a coincidence in time between an 
increase in volume of subject imports and the injury to the domestic industry.262 
7.5.2.3.4   Conclusion  
7.127.   We thus reject Pakistan's claim that the Commission's use of the "break the causal link" 
methodology in this case was inconsistent with Article 15.5 of the SCM  Agreement.  
7.5.3   The Commission's analysis of "other known factors"  
7.128.   Pakistan argues that the Commission failed to perform a proper non -attribution analysis 
with respect to each of the following four factors:  
                                                
258 Provisional Determination, (Exhi bit PAK -1), paras. 242, 243, and 245.  
259 Provisional Determination, (Exhibit PAK -1), para. 262.  
260 Final Determination, (Exhibit PAK -2), paras. 117 and 126.  
261 We take special note that the Commission considered the increase in market share of subject imports  
both before and after considering the effects of other factors. (Provisional Determination, (Exhibit PAK -1), 
paras. 242 and 262).  
262 In addition, we recall that the finding of the existence of the causal link in paragraph 245 was 
confirmed only in paragrap h 264, after the Commission analysed the effects of other known factors causing 
injury to the domestic industry, which is further consistent with the view that the finding of the causal link 
between subject imports and the injury to the domestic industry w as not based solely on the finding of price 
undercutting by subject imports and/or on the coincidence in time between an increase in volume of subject 
imports and the injury to the domestic industry.  WT/DS486/R  
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  a. imports from Korea263; 
b. economic downturn264; 
c. competition from non -cooperating EU producers265; and  
d. oil prices.266 
7.129.   We recall that Article 15.5 calls for an asse ssment that involves separating and 
distinguishing the injurious effects of the other factors from the injurious effects of the subsidized 
imports and requires a satisfactory explanation of the nature and extent of the injurious effects of 
the other factor s, as distinguished from the injurious effects of the subsidized imports.267 In this 
Section, we examine Pakistan's arguments concerning the Commission's analysis of each of the 
four factors identified above in turn.  
7.5.3.1   Imports from Korea  
7.130.   In its examination of  the factor "[i]mports from third countries – Republic of Korea", the 
Commission addressed, inter alia , the increase in market share and volume of imports from Korea, 
and the price undercutting by such imports.268 However, in light of the fact that "the Kore an prices 
were higher than the average prices from the countries concerned", the Commission concluded 
that the contribution of imports from Korea to the injury suffered by the domestic industry "was 
only limited" and that imports from Korea did not break t he causal link between subsidized imports 
and the injury to the domestic industry.269  
7.5.3.1.1   Main arguments of the parties  
7.131.   Pakistan puts forth certain arguments which, "individually and together", demonstrate that 
the Commission failed to separate and distinguish the effects of imports from Korea from those of 
subject imports within the meaning of Article 15.5 of the SCM Agreement.270 First, Pakistan argues 
that the Commission did not adequately assess the effects of price undercutting by imports from 
Korea.271 Second,  Pakistan argues that the Commission did not properly assess the growth in 
volume and market share of imports from Korea.272 Third, Pakistan submits that the Commission 
failed to assess the correlation between the exemption of certain Korean producers from E U 
anti-dumping duties and the increase in volume and market share of Korean imports.273 Fourth, 
and related to the three arguments above, Pakistan contends that because the price undercutting 
and increasing volumes of Korean imports had the same effects on t he domestic industry as the 
price and volumes of the subject imports, "the Commission's summary conclusion that the effects 
of Korean imports were 'limited' was not reasoned and adequate". Therefore, the Commission 
failed to carry out its duty to separate and distinguish the injurious effects of the Korean 
imports.274 
7.132.   The European Union argues that the Commission's analysis of imports from Korea fully 
conforms to the requirements of Article 15.5 of the SCM Agreement because it recognized imports 
from Korea as  possibly causing injury to domestic industry, separated and distinguished the effects 
                                                
263 Pakistan's first written submission, para. 7.21.  
264 Pakistan's first written submission, para. 7.40.  
265 Pakistan's first written submission, para. 7.53.  
266 Pakistan's first written submission, para. 7.60.  
267 Appellate Body Report, EU – Biodiesel (Argentina) , para. 6.125.  
268 Provisional Determination, (Exhibit P AK-1), para. 248.  
269 Provisional Determination, (Exhibit PAK -1), para. 249.  
270 Pakistan's response to Panel question No. 97, para. 4.7.  
271 Pakistan's first written submission, paras. 7.30 -7.34; response to Panel question No. 97, paras.  4.2 
and 4.3.  
272 Pakist an's first written submission, para. 7.35; response to Panel question No. 97, para. 4.4.  
273 Pakistan's first written submission, para. 7.36; response to Panel question No. 97, para. 4.5.  
274 Pakistan's first written submission, paras. 7.37 and 7.38; response  to Panel question No. 97, 
para. 4.6.  WT/DS486/R  
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  of this factor from the effects of subject imports, and provided a qualitative explanation for that 
conclusion.275 
7.5.3.1.2   Evaluation by the Panel  
7.133.   In the Provisional Determination , the Commission made the following findings with respect 
to imports from Korea:  
The Republic of Korea is subject to anti -dumping duties since 2000. However, two 
Korean companies are subject to a zero duty and the investigation established that 
imports fr om the Republic of Korea remain at a high level and increased significantly 
in the period considered. The Korean imports increased by almost 150% between 
2006 and the IP and their corresponding market share increased from 3,5% in 2006 
to 7,7% in the IP.  
The average price of the Korean imports remained in general slightly below the 
average prices of the Union producers. However, the Korean prices were higher than 
the average prices from the countries concerned. Consequently, although it cannot be 
excluded th at imports from the Republic of Korea contributed to the injury suffered by 
the Union industry, their contribution was only limited and they are considered not to 
have broken the causal link established as regards the subsidised imports from the 
countries concerned.276 
7.134.   We consider that the Commission sufficiently separated and distinguished the effects of 
Korean imports. The Commission expressly noted that Korean imports undercut the prices of the 
domestic like product, and increased their volumes277 and market  share during the period 
considered. The Commission considered, however, that any injury caused by Korean imports "was 
only limited" because subject imports undercut the prices of the domestic like product by more 
than Korean imports did. This appears a re asonable conclusion in light of the uncontested 
assertion stated in the Provisional Determination that the EU PET market is characterized by price 
competition.278 Furthermore, we note that subject imports increased their market share and 
volume more than imp orts from Korea did over the period considered, and that in the POI, subject 
imports had a higher market share (10.2%)279 and volume (304,202 tonnes)280 than the market 
share (7.7%)281 and volume (231,107 tonnes)282 of imports from Korea.  
7.135.   We therefore reject Pakis tan's claim that the Commission's analysis of imports from Korea 
is inconsistent with Article 15.5 of the SCM Agreement.  
7.5.3.2   Economic downturn  
7.136.   In the Provisional Determination, the Commission addressed the effects of the 2008 
economic downturn on the domestic  industry.283 The Commission found that the financial and 
economic crisis of 2008 led to a market growth that was slower than expected, and that there was 
a contraction of demand for PET in 2008, which had an effect on the overall performance of the 
                                                
275 European Union's first written submission, para. 219.  
276 Provisional Determination, (Exhibit PAK -1), paras. 248 and 249.  
277 We note Pakistan's argument that the Commission did not adequately consider the effect of th e 
exemption of certain Korean producers from EU anti -dumping duties on PET imports from Korea, the relevance 
of which was a purported sharp increase in the volume of imports from Korea during the period considered. 
(Pakistan's first written submission, par a. 7.36; response to Panel question No. 97, para. 4.5). However, as 
discussed above, the Commission did consider the growth in volume and market share of imports from Korea. 
Therefore, the Commission effectively addressed the relevance of exemption of cert ain Korean producers from 
EU anti -dumping duties.  
278 Provisional Determination, (Exhibit PAK -1), para. 243.  Indeed, Pakistan's argument in this context 
depends on such price -based competition, or else there would be no reason to suggest that price undercutt ing 
by Korean imports would have been expected to contribute to the domestic industry's observed injury.  
279 Provisional Determination, (Exhibit PAK -1), table 2.  
280 Provisional Determination, (Exhibit PAK -1), para. 211.  
281 Provisional Determination, (Exhibit  PAK-1), table 17.  
282 Provisional Determination, (Exhibit PAK -1), table 17.  
283 Provisional Determination, (Exhibit PAK -1), paras. 253 -256.  WT/DS486/R  
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  domestic  industry.284 However, the Commission reasoned that the negative effects of the economic 
downturn were exacerbated by the low -priced subsidized imports, as unfair competition from such 
imports prevented the domestic industry from maintaining an acceptable le vel of prices.285 The 
Commission concluded that given the global character of the economic downturn, and the fact that 
the economic downturn could be considered as having contributed to the injury suffered by the 
domestic industry only as from the last quart er of 2008, the economic downturn did not break the 
causal link between subject imports and the injury to the domestic industry.286  
7.5.3.2.1   Main arguments of the parties  
7.137.   Pakistan argues that the Commission's analysis of the economic downturn fell short of the 
requirements of Article 15.5 of the SCM Agreement.287 According to Pakistan, since the 
Commission found, on the one hand, that the domestic demand for PET increased by 11% 
between 2006 and the POI, and on the other hand, that the 2008 financial crisis brought abo ut a 
contraction of global demand, the Commission should have sought to ascertain whether, in a 
situation characterized by shrinking global demand and increased domestic demand, it was the 
increased competition from domestic as well as importing competitor s, which caused injury to the 
domestic industry.288 Pakistan submits that the "specific factual circumstances" in the challenged 
investigation warranted a collective analysis of the injurious effects of all other factors.289 Pakistan 
argues that the Commission  did not "separate and distinguish" the injurious effects of the 
economic downturn from the injurious effects of other known factors.290 Pakistan also contends 
that the Commission did not substantiate and/or explain its assertion that material injury to the 
domestic industry occurred before the last quarter of 2008, i.e. the time at which the economic 
downturn began.291  
7.138.   The European Union argues that the Commission properly separated and distinguished the 
effects of this factor from the injury caused by subjec t imports by clearly analysing the extent of 
the injurious impact of the economic downturn, noting how such effects were limited in time, how 
they are less relevant in the domestic market of the European Union, and how the effects of the 
economic downturn interact with the effects of the subject imports.292 The European Union submits 
that there was no need to assess the relevance of imports from Korea and non -cooperating 
domestic producers in context of the economic downturn as these factors had been separate ly 
assessed.293 The European Union submits that Pakistan has not presented any evidence as to why 
there existed special circumstances which required the Commission to carry out a collective 
assessment.294 With respect to Pakistan's claim that the Commission ma de no finding of injury 
prior to the last quarter of 2008, the European Union submits that the Commission found injury for 
the whole period considered, therefore including the period in question.295 
7.5.3.2.2   Evaluation by the Panel  
7.139.   We first address Pakistan's argumen t that in light of certain alleged "particularities of 
global and EU demand" resulting from the economic downturn, the Commission should have 
examined whether it was increased competition from non -subject imports as well as 
non-cooperating EU producers res ulting from such alleged demand conditions in the EU market 
which caused injury to the domestic industry. These particularities consisted of "a decline in the 
global demand and an increase in the EU demand as a result of the 2008 economic downturn".296 
                                                
284 Provisional Determination, (Exhibit PAK -1), para. 253.  
285 Provisional Determination, (Exhibit PAK -1), para. 254.  
286 Provisional Determination, (Exhibit PAK -1), para. 256; and Definitive Determination, (Exhibit PAK -2), 
para. 120.  
287 Pakistan's first written submission, para. 7.52.  
288 Pakistan's first written submission, para. 7.48.  
289 Pakistan's second written submission,  para. 4.52.  
290 Pakistan's first written submission, para. 7.47.  
291 Pakistan's first written submission, paras. 7.51 -7.52. 
292 European Union's first written submission, para. 221.  
293 European Union's response to Panel question No. 79, para. 113.  
294 European U nion's opening statement at the second meeting of the Panel, para. 66.  
295 European Union's opening statement at the first meeting of the Panel, para. 51.  
296 Pakistan's second written submission, para. 4.50. In particular, Pakistan states that "[t]he 
Commissi on first noted that the domestic demand  for the product increased by 11 per cent between 2006 and 
the [POI]. At the same time, the Commission found that the 2008 financial crisis brought about a contraction 
of global demand ". (Pakistan's first written subm ission, para. 7.48 (emphasis original, fn omitted)).  WT/DS486/R  
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  In ou r view, the record does not reasonably reflect these facts. The only portions of the 
Determinations to which Pakistan points in support of its argument indicate that the economic 
downturn caused a decrease in EU demand for PET in 2008, although EU demand a ppeared to 
recover in the first half of 2009, i.e. the latter half of the POI:  
Union consumption of the product under investigation increased between 2006 and 
the IP by 11%. In detail, the apparent demand grew in 2007 by 8%, decreased 
slightly between 2007  and 2008 (by 2 percentage points)  and inc reased by further 5 
percentage points between 2008 and the IP .297  
… 
The financial and economic crisis of 2008 led to a market growth that was slower than 
expected and unusual  as compared to the beginning of the year s 2000 where yearly 
growth rates around 10% could be observed. For the first time, there was a 
contraction of demand for PET in 2008 . This clearly had an effect on the overall 
performance of the Union industry.298  
7.140.   There is no data, however, in the Determina tions evidencing global PET demand. 
Moreover, the only narrative statement that we detect potentially relating to the state of global 
PET demand in the wake of the 2008 economic downturn is that the downturn had a "global 
character".299 This statement sugges ts, however, that the economic downturn had symmetrical 
impacts on demand patterns in the European Union and the rest of the world, not the opposite as 
Pakistan claims.300 Thus, we find that the record does not reasonably reflect the facts upon which 
Pakista n's argument is based, and we reject it accordingly.  
7.141.   We now turn to Pakistan's argument that "'the specific factual circumstances' in the 
challenged investigation warranted a collective analysis of the injurious effects of all other 
factors".301 Pakistan's p osition here appears to be that "as the Commission had found that several 
other factors had contributed to the injury to the domestic industry during the [POI]", the 
Commission was required to perform a collective assessment of all other factors causing in jury to 
the domestic industry.302 In our view, Pakistan has not demonstrated that a collective assessment 
was necessary in this case. Article 15.5 of the SCM Agreement does not mention the need to 
perform such a collective assessment in any particular circum stances. We note, however, the 
following observation by the Appellate Body in EC – Tube or Pipe Fittings  regarding the issue of the 
collective assessment of other known factors in non -attribution analyses under Article 3.5 of the 
Anti-Dumping Agreement:  
[W]e are of the view that Article 3.5 does not compel, in every case , an assessment of 
the collective  effects of other causal factors, because such an assessment is not 
always necessary to conclude that injuries ascribed to dumped imports are actually 
caused  by those imports and not by other factors. … At the same time, we recognize 
                                                
297 Provisional Determination, (Exhibit PAK -1), para. 206. (emphasis added)  
298 Provisional Determination, (Exhibit PAK -1), para. 253 (emphasis added). In our view, the reference 
to a decrease in demand for  PET in 2008 in this paragraph clearly relates to EU demand. Indeed, the only data 
relating to demand for PET in any particular market in the Determinations relates to EU demand. (Provisional 
Determination, (Exhibit PAK -1), table 1). Moreover, even if this  statement could be construed as relating to 
global demand, in light of the data provided in table 1 of the Provisional Determination, it simply means that 
global demand and EU demand both decreased in 2008 as a result of the economic downturn, which does not 
support Pakistan's position . 
299 Provisional Determination, (Exhibit PAK -1), para. 256.  
300 Certain other statements appear in the Determinations regarding decreased demand of PET in 2008. 
Given that the only data in the Determinations regarding demand for  PET relate to the EU market, which 
evidence a demand decrease in 2008, it is clear to us that such discussions relate to a decrease in the EU 
market rather than global demand. (See, e.g. Definitive Determination, (Exhibit PAK -2), para. 120 (referencing 
"shrinking demand")). We also note that the data provided in table 16 shows that export sales of the domestic 
industry dropped in 2008, before recovering in the first half of 2009 (Provisional Determination, (Exhibit 
PAK-1), table 16). This may further sugge st that the economic downturn had symmetrical impacts on global 
demand and EU demand for PET.  
301 Pakistan's second written submission, para. 4.52. In keeping with Pakistan's positioning of this 
argument, we address Pakistan's argument concerning cumulative assessment of other known factors in this 
Section of our Report.  
302 Pakistan's second written submission, para. 4.52.  WT/DS486/R  
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  that there may be cases where, because of the specific factual circumstances therein, 
the failure to undertake an examination of the collective impact of other causal factors 
would result in the investigating authority improperly attributing the effects of other 
causal factors to dumped imports.303  
7.142.   Thus, although there may be circumstances in which a collective assessment is warranted, 
the simple existence of other known factors tha t are found to have contributed to the injury to the 
domestic industry at the same time as subject imports does not on its own amount to such 
circumstances. Pakistan, however, has pointed to nothing more than that in support of its 
argument. We therefore r eject Pakistan's argument that a collective assessment of other known 
factors was needed in this case.  
7.143.   We now recall Pakistan's argument that the Commission failed to "separate and 
distinguish" the injurious effects of the economic downturn from the injuri ous effects of subject 
imports. In that context, the Commission found that the financial and economic crisis of 2008 "led 
to a market growth that was slower than expected" and brought about a "contraction of demand" 
which clearly "had an effect on the over all performance of the [domestic] industry".304 Further, the 
Commission noted that the domestic industry was "in a situation of decreasing sales" and bore 
"negative effects of … decrease in the growth of consumption".305 At the same time, the 
Commission noted that the "increased subsidized imports" "exacerbated" the effects of the 
economic downturn. The Commission explained that despite decreasing sales and decrease in 
growth of consumption caused by the economic downturn, the domestic industry "should be able 
to maintain an acceptable level of prices … but only in the absence of the unfair competition of low 
priced imports in the market".306 In our view, this observation sufficiently separated and 
distinguished the injurious effects of the economic downturn (i.e.  injury through the effect of 
decreased demand) from that of subject imports (i.e. injury through the effects of things other 
than decreased demand307) during the relevant time -period.308 We therefore reject Pakistan's 
argument that the Commission failed to se parate and distinguish the effects of the economic 
downturn from those of subject imports.  
7.144.   We note Pakistan's argument that the Commission's "bald assertion that there existed 
injury prior to the last quarter of 2008 [was] unsubstantiated".309 We reproduce below the portion 
of the Provisional Determination relevant in this context:  
The economic downturn has also no impact whatsoever on the injury suffered and 
observed already before the last quarter of 2008.  
Consequently, the economic downturn must be consi dered as an element contributing 
to the injury suffered by the Union industry as from last quarter of 2008 only and 
given its global character cannot be considered as a possible cause breaking the 
causal link between the injury suffered by the Union indust ry and the subsidised 
imports from the countries concerned.310 
We note that for injury analysis, the Commission made findings regarding the negative 
performance of the domestic industry over the entire period considered, i.e. 2006 to the end of the 
POI.311 In light of these findings, we do not view the statements of the Commission quoted above 
                                                
303 Appellate Body Report, EC – Tube or Pipe Fittings , paras. 191 and 192. (emphasis original)  
304 Provisional Determination, (Exhibit PAK -1), para. 253.  
305 Provisional Determination, (Exhibit PAK -1), para. 254.  
306 Provisional Determination, (Exhibit PAK -1), para. 254. We find it useful to recall in this context that 
the Commission found, in the causation analysis, that the subject imports "exer ted a downward pressure on 
prices, preventing the [domestic] industry from keeping its sales prices to a level that would have been 
necessary to cover its costs and to realize a profit". (Provisional Determination, (Exhibit PAK -1), para. 245).  
307 See Provis ional Determination, (Exhibit PAK -1), paras. 242 -245. 
308 In the Definitive Determination, the Commission further noted the steady increase of the market 
share of subject imports during the period from 2008 through the POI. (Definitive Determination, (Exhibi t 
PAK-2), para. 120).  
309 Pakistan's first written submission, para. 7.51.  
310 Provisional Determination, (Exhibit PAK -1), paras. 255 and 256.  
311 Provisional Determination, (Exhibit PAK -1), paras. 238 -240. We note that in the Provisional 
Determination (para. 2 54) as well as the Definitive Determination (para. 120), the Commission concluded that 
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  as referring to any injury specifically found to exist prior to the last quarter of 2008. Rather, these 
statements simply emphasize that any contribution that the economi c downturn made to the injury 
suffered by the domestic industry could only have occurred after the last quarter of 2008. Hence, 
we reject this argument by Pakistan.312 
 
7.145.   We therefore reject Pakistan's claim that the Commission's analysis of the economic 
downt urn is inconsistent with Article 15.5 of the SCM Agreement.  
7.5.3.3   Competition from non -cooperating producers  
7.146.   Certain interested parties argued before the Commission that the injury suffered by the 
domestic industry was on account of competition from non -cooperat ing EU producers.313 The 
Commission noted that one of the producers stopped production in the POI while two others did so 
shortly thereafter and that these producers lost market share from 20.5% in 2006 to 16% in the 
POI. The Commission thus concluded that t here was no evidence which suggested that "the 
behaviour of these producers has broken the causal link" between the subject imports and the 
injury to the domestic industry.314  
7.5.3.3.1   Main arguments of the parties  
7.147.   Pakistan argues that the Commission failed to condu ct a proper non -attribution analysis 
with respect to the factor "effects of other domestic producers" for two main reasons.315 First, 
Pakistan argues that by conducting an end -point-to-end-point analysis of market share of 
non-cooperating producers, pursuant  to which the Commission found that the market share of 
non-cooperating producers dropped from 20.5% in 2006 to 16% in the POI, the Commission did 
not factor into its analysis that such producers gained market share from 2008 to the end of the 
POI.316 Second , Pakistan argues that the fact that the market share and volumes of 
non-cooperating producers rose between 2008 and the end of POI, while the market share and 
volumes of the domestic industry continued to decline should have triggered an inquiry by the 
Commission into whether other factors such as lack of productivity, or necessary skills, were 
affecting one sector of the domestic industry more than the other.317 
7.148.   The European Union argues that the fact that there was no linear drop in market share in 
every s ingle part of the period considered does not put its conclusion that competition from 
non-cooperating producers did not break the causal link in doubt.318 The European Union also 
submits that, contrary to what Pakistan appears to suggest in making its argume nts in this 
context, the SCM Agreement does not require the Commission to examine whether the subsidized 
imports caused injury to non -cooperating producers.319  
7.5.3.3.2   Evaluation by the Panel  
7.149.   We first address Pakistan's argument that the Commission should have anal ysed the 
non-cooperating producers' market share trends beyond an end -point-to-end-point analysis. We 
recall that with respect to competition from non -cooperating EU producers, the Commission, in 
relevant part, observed that these producers' market share d eclined from 20.5% in 2006 to 16% 
                                                                                                                                                  
keeping in view "the damaging injurious effects of low priced s ubsidised imports in the EU market over the 
whole period considered " (emphasis added). Further, in paragraph 242 of the Provisional Determination, the 
Commission noted that the average price of imports "remained lower than the average price of Union 
produc ers" between 2006 and the end of POI. We also note that Pakistan has not challenged the Commission's 
findings concerning injury to the domestic industry.  
312 We further note that these statements were not in any way essential to the manner in which the 
Commi ssion separated and distinguished the effects of the economic downturn and subject imports during the 
relevant time -period (discussed further above in this Section).  
313 Provisional Determination, (Exhibit PAK -1), para. 252.  
314 Provisional Determination, (Exh ibit PAK -1), para. 252. We note that while the Commission provided 
separate figures for the market share of non -cooperating producers in 2008 and in the POI, the two periods of 
time overlap. We recall that the POI refers to the period from 1 July 2008 to 3 0 June 2009.  
315 Pakistan's first written submission, paras. 7.53 -7.59.  
316 Pakistan's first written submission, paras. 7.58 and 7.59.  
317 Pakistan's first written submission, para. 7.59.  
318 European Union's first written submission, para. 223.  
319 European Union 's first written submission, para. 226.  WT/DS486/R  
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  in the POI.320 The Commission then concluded that the "investigation has not shown any evidence 
that the behaviour of these producers has broken the causal link between the subsidised imports 
and the injury established for t he Union industry".321 Based on this analysis, we consider that the 
Commission dismissed the possibility that competition from non -cooperating EU producers caused 
injury to the domestic industry.322 The end -point-to-end-point analysis of the non -cooperating 
producers' market share clearly formed a significant part of the basis for this conclusion.  
7.150.   In our view, whether an investigating authority has offered a reasoned and adequate 
explanation in concluding that a particular factor could not have caused injury to  the domestic 
industry, when that conclusion is significantly based on an end -point-to-end-point analysis of data 
(in this case, market share data for non -cooperating producers), will depend on the facts of a 
particular case.323 In this case, we recall that the Provisional Determination presented the market 
share of non -cooperating producers for 2006, 2007, 2008, and the POI. Their market share 
decreased during the period considered in every consecutive interval except between 2008 and the 
POI. The Commission  correctly observed that the non -cooperating EU producers lost 4.5 
percentage points of market share during the period considered, i.e. from 20.5% in 2006 to 16% 
in the POI324, but did not note that between 2008 and the POI their market share rose by 3.6 
percentage points, i.e. from 12.4% to 16%.325 We note that the magnitude of the rise in market 
share of non -cooperating producers between 2008 and the POI was, at least in absolute terms, 
similar to the drop in market share the Commission observed pursuant to t he 
end-point-to-end-point analysis. We further note that the rise in market share of non -cooperating 
producers between 2008 and the POI coincided with: (a) a drop of 8.3 percentage points in the 
market share of the domestic industry326; (b) a rise of 2.6 per centage points in the market share 
of subject imports; and (c) a rise in the market shares of non -subject imports (a rise of 1.5 
percentage points in market share of Korean producers and of 0.5 percentage points for other 
imports).327 This indicates that non -cooperating producers, whose market share increased by 3.6 
percentage points between 2008 and the POI, were the largest gainers of market share at the 
                                                
320 Provisional Determination, (Exhibit PAK -1), para. 252.  
321 Provisional Determination, (Exhibit PAK -1), para. 252. The Commission also observed that one of the 
non-cooperating producers stopped production in the POI while two others did so shortly thereafter. This 
statement regarding the cessation of production by certain producers is unaccompanied by any reference as to 
why that cessation diminishes the significance of the increase in the market share of non -cooperat ing 
producers between 2008 and the POI, and we detect no basis upon which to make that inference.  
322 European Union's response to Panel's question No. 100, para. 33 (agreeing with this interpretation of 
the Commission's analysis). Even if we were to interpr et the Commission's reasoning in this context as 
indicating that non -cooperating producers caused injury to the domestic industry, or even allowing for that 
possibility, we would find a violation of Article 15.5 because, on its face, the analysis contains no explanation 
whatsoever of the nature and extent of such injury, as distinguished from injurious effects of subject imports. 
Without such explanation, it is not logically possible to separate and distinguish that injury from that caused by 
subject import s. 
323 See Panel Reports, China – Autos (US) , paras. 7.289 and 7.334; Ukraine – Passenger Cars , 
para. 7.302; and Russia – Commercial Vehicles , para. 7.126 (appeal pending). We also note that the Appellate 
Body has found end -point-to-end-point analysis of dat a to be unsuitable in certain contexts. (See, e.g. 
Appellate Body Report, Argentina – Footwear (EC) , para. 129).  
324 Provisional Determination, (Exhibit PAK -1), para. 252.  
325 We note that merely by presenting the market share held by non -cooperating produce rs in different 
intervals within the period considered in the form a table, the Commission cannot be assumed to have taken 
into account the increase in market share of non -cooperating producers from 2008 through the POI in any 
meaningful fashion. (See Pane l Reports, US – Hot-Rolled Steel , para. 7.232; Egypt – Steel Rebar , paras.  7.42 
and 7.44; and EC – Tube or Pipe Fittings , para. 7.316).  
326 In the Provisional Determination, the Commission presented relevant market share data for: (a) all 
domestic producers  (i.e. cooperating and non -cooperating); and (b) non -cooperating producers. (Provisional 
Determination, (Exhibit PAK -1), para. 219 and tables 7 and 19). It did not specifically break out the market 
share trends for the domestic industry (i.e. cooperating p roducers). However, the aggregate market share data 
reflect a loss of market shares by all domestic producers between 2008 and the POI. Thus, because 
non-cooperating producers gained  market share over this time, it can reasonably be inferred that cooperati ng 
producers must have lost market share over the same period. Indeed, the Provisional Determination notes that 
the decreasing markets share trend of domestic producers "was also found for the sampled Union producers". 
(Provisional Determination, (Exhibit PAK-1), para. 224). We further note that the market share held by the 
domestic industry in any given period for which the Commission presented market share data could be derived 
by subtracting the market share of non -cooperating producers from the market s hare of all domestic producers 
in that period. The domestic industry's market share for 2006, 2007, 2008 and the POI was 64.4%, 66.4%, 
67.4%, and 59.1%, respectively.  
327 Provisional Determination, (Exhibit, PAK -1), tables 2, 7, 17, 18, and 19.  WT/DS486/R  
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  domestic industry's expense between 2008 and the POI.328 Moreover, the domestic industry's loss 
of market share during the period considered was a significant consideration in the Commission's 
finding that the domestic industry had suffered injury.329 We consider that, under these 
circumstances, the increase in market share of the non -cooperating producers betwe en 2008 and 
the POI warranted more specific examination. This increase in market share raises the distinct 
possibility that competition from non -cooperating producers caused injury to the domestic industry 
as between 2008 and the POI, which would seem coun ter to the Commission's unqualified 
conclusion, significantly based on its end -point-to-end-point analysis, that competition from non -
cooperating producers did not cause injury to the domestic industry.330  
7.151.   We now recall Pakistan's argument that because the non-cooperating EU producers gained 
market share while the domestic industry lost market share between 2008 and the POI, the 
Commission should have inquired into whether instead of subject imports being the cause of 
injury, it was other factors, such as la ck of productivity, or necessary skills, which were affecting 
one sector of the EU industry more than the other. To the extent that Pakistan argues that the 
Commission was required to investigate whether and/or why "the alleged injurious effects of the 
subject imports were markedly uneven"331 across various subsets of the domestic producers, we 
disagree. We do not see why a comparative examination of how subject imports impacted the 
cooperating and the non -cooperating parts of the EU industry would be materia l in determining the 
impact of competition from non -cooperating producers on the domestic industry.332 Furthermore, 
insofar as Pakistan argues that there might have been other factors, such as lack of productivity or 
necessary skills, that caused injury to t he domestic industry, Pakistan has not cited evidence 
indicating that such factors were "known" to the Commission within the meaning of Article  15.5 of 
the SCM Agreement.333 
7.152.   For reasons stated above, we conclude that the Commission's analysis of competition from 
non-cooperating producers is inconsistent with Article  15.5 of the SCM Agreement.  
7.5.3.4   Oil prices  
7.153.   Before the Commission, certain parties argued that "the low prices for PET in the EU reflect 
the worldwide cycle of the industry and that from September 2008 until June 2009 the PET prices 
in the EU followed the low prices of crude oil".334 The Commission rejected this argument because, 
according to the Commission, prices for crude oil were not low during the whole POI but volatile, 
                                                
328 We note Pak istan's argument that "the negative effects on EU prices were felt only, or most 
dramatically, from 2008 to the end of the [POI], thus coinciding with the rise of volumes and market share of 
non-cooperating EU producers". (Pakistan's first written submissi on, para. 7.56). There is no data on the 
record regarding the prices of non -cooperating producers, however.  
329 Provisional Determination, (Exhibit PAK -1), para. 238. As the jurisprudence indicates that particular 
importance attaches to developments in the most recent portion of a period of investigation, the timing of the 
increase in the market share of non -cooperating producers also imparted significance to the increase. This is 
especially so given the evolution of the domestic industry's market share as s hown in fn 326. (See 
Appellate  Body Report, US – Steel Safeguards , para. 370 (quoting Appellate Body Report, US – Lamb , 
para. 138 fn 88); and Panel Report, Ukraine – Passenger Cars , para. 7.289). In this context, we note that a 
recent panel report (which is under appeal) observed that "more recent data during the period of consideration 
is likely to be particularly relevant to the determination of material injury during the POI". (Panel Report, 
Russia – Commercial Vehicles , para. 7.152 (appeal pending)).  
330 This does not necessarily mean that the conclusion that the Commission reached in respect of 
competition from non -cooperating producers could not have been sustained had the Commission assessed the 
market share of non -coopera ting producers beyond an end -point-to-end-point analysis.  
331 Pakistan's second written submission, para. 4.56.  
332 We recall that the panel in EC – Fasteners (China)  observed that an analysis of causation, including 
the examination of other factors which ma y be causing injury to the domestic industry at the same time as 
imports, should rest on information related to the industry as defined for the purpose of that investigation, and 
not some other group of producers. (Panel Report, EC – Fasteners (China) , para. 7.437 (referring to Panel 
Report, EC – Bed Linen , para. 6.182)).  
333 Previous panels have found that "known" factors include those factors that were clearly raised before 
an investigating authority by interested parties in the course of an investigation, and that an investigating 
authority is under no obligation to seek out and identify all possible other factors causing injury to the domestic 
industry in a given investigation on its own initiative. (See Panel Reports, Thailand – H-Beams , para. 7.273; 
EC – Tube or Pipe Fittings , para. 7.359; China – Autos (US) , para. 7.323; and  EU – Footwear (China) , 
para. 7.484).  
334 Definitive Determination, (Exhibit PAK -2), para. 118.  WT/DS486/R  
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  and such volatility could not explain why PET imports were subsidized and undercut the EU 
producers' prices.335  
7.5.3.4.1   Main arguments of the parties  
7.154.   Pakistan argues that the Commission failed to separate and distinguish the injurious 
effects of oil prices from those of the subject imports beca use the explanations given by the 
Commission in dismissing this factor were "unsubstantiated and irrelevant".336 Further, Pakistan 
argues that the Commission's finding that the prices of crude oil were "volatile" during the POI was 
not supported by evidence on the record.337 For these reasons, Pakistan submits that the 
Commission's analysis of oil prices falls short of the requirements of Article 15.5 of the 
SCM Agreement.338  
7.155.   The European Union submits that the Commission did not find the effects of this factor so 
significant as to break the causal link between subsidized imports and the observed injury to the 
domestic industry.339 According to the European Union, this was because oil prices were volatile 
through the POI, first falling and then recovering, and beca use prices of crude oil worldwide could 
be expected to have a symmetrical impact on prices worldwide.340 The European Union submits 
that a factor that equally or similarly affects both subsidized imports and domestic producers by 
definition cannot break the causal link.341 
7.5.3.4.2   Evaluation by the Panel  
7.156.   In the Definitive Determination, the Commission offered the following reasoning:  
Some interested parties claimed that any injury found would not be due to subsidised 
imports, but that the low prices for PET in the EU reflect the worldwide cycle of the 
industry and that from September 2008 until June 2009 the PET prices in the EU 
followed the low prices of crude oil. As regards this argument, it is acknowledged that 
the prices of PET depend to some extent on the prices of crude oil, its derivatives 
being the main raw material to produce PET. However, prices for crude oil were not 
low during the whole IP but very volatile, starting with a huge decrease and followed 
by a recovery. This volatility of world prices of crude o il cannot explain why imports of 
PET were subsidised and therefore undercut the Union producers' prices. It was 
precisely this undercutting, made possible due to the subsidies received, that 
depressed the prices of the Union industry, forcing EU producers to sell at a loss in 
order not to loose [ sic] their clients.342 
7.157.   Based on this analysis, we consider that the Commission dismissed the possibility that oil 
prices caused injury to the domestic industry.343 The Definitive Determination offers two reasons 
for thi s dismissal: (a) "prices for crude oil were not low during the whole IP but very volatile, 
starting with a huge decrease and followed by a recovery"; and (b) such volatility "cannot explain 
why imports of PET were subsidised and therefore undercut the Unio n producers' prices".  
                                                
335 Definitive Determination, (Exhibit PAK -2), para. 118.  
336 Pakistan's response to Panel question No. 98, para. 4.13. See also Pakistan's first written 
submission, paras. 7.66 and 7.67.  
337 Pakistan's first written submission, para. 7.65.  
338 Pakistan's first written submission, para. 7.68.  
339 European Union's first written submission, para. 227.  
340 European Union's first written submission, paras. 228 and 229.  
341 European Union's opening statement at the first meeting of the Panel, para. 53.  
342 Definitive Determination, (Exhibit PAK -2), para. 118. Low prices of crude oil were not at issue in the 
Provisional Determination.  
343 European Union's response to Panel question No. 101, para. 36 (agreeing with this characterization 
of the Commission's analysis). Even if we were to interpret the Commission's reasoning in this context as 
indicating that oil pri ces caused injury to the domestic industry, or even allowing for that possibility, we would 
find a violation of Article 15.5 because, on its face, the analysis contains no explanation whatsoever of the 
nature and extent of such injury, as distinguished fro m injurious effects of subject imports. Without such 
explanation, it is not logically possible to separate and distinguish that injury from that caused by subject 
imports.  WT/DS486/R  
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  7.158.   The former reason appears an attempt to reject a factual predicate upon which the parties 
based their argument, i.e. that prices of crude oil were "low" during part of the POI.344 This 
attempt fails for two related reasons. First, the C ommission's assertion that oil prices were not low 
during the whole POI  is not inconsistent with the parties' presented argument. The parties did not 
argue that prices of crude oil were "low during the whole IP", but for only part of it, i.e. from 
Septembe r 2008 to June 2009.345 It was only for this period that the parties argued that "the PET 
prices in the EU followed the low prices of crude oil".346 Thus, the Commission's statement that 
crude oil prices "were not low during the whole  IP"347 accords with the pos ition that prices for 
crude oil were "low" for part of the POI. Second, the Definitive Determination does not specify for 
which part of the POI prices were "not low". Rather, it states that prices during the POI were 
"volatile, starting with a huge decreas e and followed by a recovery". In our view, this statement 
does not necessarily mean that the oil prices were "not low" from September 2008 to 
June 2009.348 The reasoning offered by the Commission did not, therefore, necessarily invalidate 
any factual predic ate upon which the parties' argument was based.  
7.159.   We next consider whether the statement that the "volatility of world prices of crude oil 
cannot explain why imports of PET were subsidised and therefore undercut the Union 
producers'  prices" adequately explai ns why oil prices, which the Commission accepted PET prices 
follow to some degree, were incapable of causing injury to the domestic industry. In our view, it 
does not. Even if crude oil prices could not explain why Pakistani PET imports were subsidized and  
undercut the domestic industry's prices, this has no logical bearing on the ability of oil prices, 
through some other means, to injure the EU domestic PET industry.349 The Commission's analysis 
in this context, therefore, simply addresses the wrong question .350 
7.160.   For reasons stated above, we conclude that the Commission's analysis of oil prices is 
inconsistent with Article 15.5 of the SCM Agreement.351 
7.6  Claims regarding verification visits  
7.6.1   Introduction  
7.161.   On 9 December 2009, the Commission sent a letter to Novatex con firming that the 
Commission would conduct a verification visit at Novatex's premises in Karachi, Pakistan on 
15-17 December 2009.352 The Commission performed this verification visit. Pakistan claims that 
the Commission failed to provide the results of this v erification visit to Novatex in violation of 
Article  12.6 of the SCM Agreement.353  
                                                
344 We note that the Commission acknowledged that "prices of PET depend to some extent  on the prices 
of crude oil". (Definitive Determination, (Exhibit PAK -2), para. 118).  
345 July and August 2008 were also part of the POI.  
346 Definitive Determination, (Exhibit PAK -2), para. 118.  
347 Emphasis added.  
348 It could, for example, have been the case th at the prices of crude oil started "not low" in July 2008 
and August 2008, but then experienced a "huge decrease" to become "low" from September 2008 to 
June 2009. Even if oil prices were in a period of recovery to some unspecified, and perhaps modest, deg ree 
and/or operated within the bounds of some unspecified range of volatility following the "huge decrease", we 
see no reason to think that such prices ceased to be in a range which could be considered "low".  
349 The European Union argued that the "intended meaning" of its analysis in this context was that if 
crude oil prices are low worldwide, one would expect a symmetrical impact on PET prices worldwide. 
(European  Union's first written submission, para. 229). Assuming arguendo  that this explanation is even 
discernible from the wording of the determination, we note that just because a factor can have effects on PET 
prices and/or producers across the world, such effects can still be injurious to the EU domestic industry. (See 
Provisional Determination, (Exhibi t PAK -1), para. 256 (explaining that although the economic downturn had a 
"global character", it was "an element contributing to the injury suffered by the [domestic] industry")).  
350 This does not necessarily mean that the conclusion that the Commission re ached in respect of oil 
prices could not have been sustained had the Commission properly analysed this factor.  
351 We note that Pakistan claims that the finding by the Commission that the prices of crude oil were 
"volatile" during the POI is unsubstantiated.  Having found above that the Commission's analysis of oil prices is, 
even as it stands, inconsistent with Article 15.5 of the SCM Agreement, we decline to address this issue.  
352 Pre-verification Letter dated 9 December 2009 from the Commission to Novatex, (Exhibit PAK -19). 
353 Pakistan's first written submission, para. 8.1; second written submission, para. 5.1.  WT/DS486/R  
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  7.6.2   Main arguments of the parties  
7.162.   Pakistan argues that the Commission violated Article 12.6 of the SCM Agreement because 
it failed to provide the "results" of the verification vi sit by either "mak[ing] the results of 
[verifications] available, or … provid[ing] disclosure thereof pursuant to paragraph  8 [of 
Article  12], to the firms to which they pertain".354 Relying on the dictionary definition of the term 
and certain Appellate Body  jurisprudence, Pakistan asserts that the term "results" are the "effects" 
or "outcomes" of the verification visit, and must be interpreted in light of the conduct, content, and 
purpose of the visit.355 Given the conduct and purpose of the Commission's verif ication visit to 
Novatex, the "results" of that visit would include: (a) descriptions of any additional documents 
collected by the Commission during the visit; (b) how, and the degree to which, the Commission 
satisfied itself of the accuracy of information  contained in Novatex's questionnaire response during 
the visit; (c) corrections or additional explanations regarding information in Novatex's 
questionnaire responses received by the Commission during the visit; (d) descriptions of 
examination and/or verif ication of information contained in Novatex's questionnaire response; and 
(e) any problems the Commission identified with respect to Novatex's questionnaire responses 
during the verification visit.356 Pakistan claims this interpretation has been confirmed in  certain 
prior panel reports.357 Pakistan asserts that disclosure of such "results" is essential to an exporter's 
ability to safeguard its due process rights guaranteed under Article 12.3 of the SCM Agreement in 
a CVD investigation and to seek meaningful jud icial review of such determinations pursuant to 
Article 23 of the SCM Agreement.358 By failing to provide any such "results" in any relevant 
document – aside from certain references made regarding Novatex's procedures related to the 
MBS – the Commission viol ated Article 12.6.  
7.163.   The European Union argues that Pakistan's claim must be rejected. The European Union 
recognizes that Article 12.6 contains two options for providing the results of verification visits, 
i.e. the investigating authority either "shall make  the results of any such investigations available", 
or "shall provide disclosure thereof pursuant to paragraph 8".359 According to the European Union, 
the cross -reference to Article 12.8 means that how "results" of verification visits may be 
communicated to relevant parties should be interpreted in light of the need to disclose "essential 
facts".360 In short, therefore, the term "results" refers to the essential factual outcome of the 
verification visit.361 In more concrete terms, the European Union asserts that the "results" of a 
verification visit "is the summary of the information that was reviewed and checked (verified) 
during the verification visit, whether such information had been submitted by the company prior to 
the visit or was newly obtained by the auth ority during the verification visit". The European Union 
further asserts that the "summary does not have to individually describe each single document 
reviewed but may generically refer to 'bundles' of documents regarding a certain topic". 
Additionally, "[ t]o the extent information regarding the verification visit is indispensable for due 
process purposes (e.g. for the use of facts available), results may also include such additional 
information (e.g. information that was refused access to it [ sic])".362 Thus, although the two are 
not identical, the disclosure of "essential facts" under Article 12.8 will reflect, to a significant 
degree if not completely, the "results" of verification visits. For instance, the European Union 
asserts that insofar as an investig ating authority is unable to verify certain necessary information 
as a result of a verification visit, the investigated firm would learn of this by virtue of the 
investigating authority's reliance on facts available under Article 12.7 of the SCM Agreement,  
reliance that would be reflected in the disclosure of the essential facts under Article  12.8. If the 
investigating authority does not rely on facts available, then this would indicate that such 
                                                
354 Pakistan's first written submission, para. 8.1 (quoting Article 12.6 of the SCM Agreement).  
355 Pakistan's first written submission, paras. 8.21 and 8 .22; second written submission, para. 5.5.  
356 Pakistan's first written submission, para. 8.27.  
357 Pakistan's first written submission, paras. 8.30 and 8.31 (referring to Panel Reports, Korea – Certain 
Paper ; and Mexico – Steel Pipes and Tubes ).  
358 Pakistan's  first written submission, paras. 8.46 and 8.47.  
359 European Union's first written submission, para. 235.  
360 See, e.g. European Union's first written submission, para. 241 (arguing that the cross -reference to 
Article 12.8 in Article 12.6 means that "[t]he re quirement to make available  the results of the verification visit 
is thus related to the need to inform the producers of the essential facts  including any data -related concerns 
relating to the verification visit") (emphasis added)); and response to Panel q uestion No. 87, para. 6 (arguing 
that the "cross -reference [to Article 12.8 in Article 12.6] implies that the scope of the obligation under the 
second alternative  in Article 12.6 should be interpreted in the context of the obligation to disclose essential 
facts under Article 12.8") (emphasis added)).  
361 European Union's first written submission, para. 240.  
362 European Union's second written submission, para. 193.  WT/DS486/R  
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  necessary information had been verified. Through the Article 12.8 disclosure, therefore, relevant 
parties will learn of the "outcomes" of verification visits and allow those parties to structure their 
cases and protect their interests before investigating authorities accordingly.363 The 
European  Union further denies t hat prior jurisprudence supports Pakistan's arguments.  
7.164.   The European Union argues that the Commission complied with its relevant obligations 
here because, as reflected in the record, the Commission disclosed the "essential facts" under 
consideration to Nova tex in the form of the provisional and definitive disclosure documents, and 
allowed Novatex to respond to such disclosures. The European Union also asserts that other means 
exist by which investigated producers like Novatex could become aware of the "outco mes" of 
verification visits. For instance, the European Union asserts that investigated companies, including 
Novatex, have representatives present during verification visits, and at the end of verification 
visits the Commission and verified producers agree  on a list of documents collected during the 
visit, and thus investigated producers will always know what was and what was not checked and 
collected during a visit.364 The European Union also argues that there is nothing to suggest that 
Novatex's ability to defend its interests in the investigation was compromised by any alleged 
failure of the Commission to disclose the results of the verification visit.365 
7.6.3   Relevant legal considerations  
7.165.   Article 12 of the SCM Agreement provides, in relevant part:  
12.6  The inves tigating authorities may carry out investigations in the territory of 
other Members as required, provided that they have notified in good time the Member 
in question and unless that Member objects to the investigation. Further, the 
investigating authoritie s may carry out investigations on the premises of a firm and 
may examine the records of a firm if (a) the firm so agrees and (b) the Member in 
question is notified and does not object. The procedures set forth in Annex VI shall 
apply to investigations on t he premises of a firm. Subject to the requirement to 
protect confidential information, the authorities shall make the results of any such 
investigations available, or shall provide disclosure thereof pursuant to paragraph 8, 
to the firms to which they pert ain and may make such results available to the 
applicants.  
… 
12.8  The authorities shall, before a final determination is made, inform all interested 
Members and interested parties of the essential facts under consideration which form 
the basis for the de cision whether to apply definitive measures. Such disclosure 
should take place in sufficient time for the parties to defend their interests.366  
7.6.4   Evaluation by the Panel  
7.166.   This Section proceeds in three parts. First, it examines the relevant legal standard unde r 
Article 12.6 of the SCM Agreement. Second, it applies that legal standard to the case at hand. 
Finally, it concludes.  
7.6.4.1   Legal standard under Article 12.6 of the SCM Agreement  
7.167.   If an investigating authority conducts a verification visit at a firm during a C VD 
investigation367, Article  12.6, in relevant part, indicates that the authority "shall" do one of two 
things: (a) make the results of the verification visit available to the firm concerned; or (b) disclose 
such results pursuant to Article 12.8 to the firm concerned. Both options, therefore, require the 
                                                
363 European Union's first written submission, paras. 240 -242. 
364 European Union's first written sub mission, para. 244; second written submission, para. 196.  
365 European Union's first written submission, para. 261; opening statement at the first meeting of the 
Panel, para. 57.  
366 Emphasis added.  
367 The SCM Agreement imposes no obligation on investigating au thorities to perform such visits. We 
also note that while the SCM Agreement also envisions verification visits being conducted on the premises of 
entities other than firms, the only visit at issue here is the verification visit to Novatex.  WT/DS486/R  
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  provision of the "results" of verification visits to the investigated firm. This Section, therefore, 
turns to examining the meaning of this term.  
7.168.   Neither Article 12 of the SCM Agreement nor any other provisio n of the SCM Agreement 
defines the "results" of verification visits. Moreover, this term is not defined in a relevant manner 
in any other covered agreement (e.g. the Anti -Dumping Agreement) and has not yet been 
extensively defined in any adopted panel or A ppellate Body report.368 A "result" is defined, 
however, as "[a] consequence, effect, or conclusion", "[t]hat which is achieved, brought about, or 
obtained, esp. by purposeful action"369, and "[t]he effect, consequence … or outcome of some 
action, process, or design".370 We therefore interpret the results of verification visits, for purposes 
of Article 12.6, as referring to what the "outcomes" of verification visits are, i.e. what is achieved, 
brought about, or obtained via the visit. Because such outcomes are ac hieved particularly through 
"purposeful action" and through some "process or design", we further interpret the term "results" 
as used in Article 12.6 in light of the purpose of verification visits.  
7.169.   Regarding that purpose, it will be recalled that Article 1 2.6 of the SCM Agreement indicates 
that "[t]he procedures set forth in Annex VI shall apply to" verification visits. Annex VI is entitled 
"Procedures for on -the-spot Investigations pursuant to Paragraph 6 of Article 12". Paragraph 7 
explains that "the main  purpose of the on -the-spot investigation is to verify  information provided 
or to obtain further details".371 It further explains that " it should be standard practice prior to the 
visit to advise the firms concerned of the general nature of the information t o be verified  and of 
any further information which needs to be provided, though this should not preclude requests to 
be made on the spot for further details to be provided in the light of information obtained."372 The 
word "verify" is defined as " [t]o prove to be true; to confirm or establish the truth or truthfulness 
of; to authenticate"373, "[s]how to be true by demonstration or evidence; confirm the truth or 
authenticity of; substantiate", and "[a]scertain or test the accuracy or correctness of, esp. by 
exam ination or comparison of data … check or establish by investigation".374 The main purpose of 
verification is, therefore, to enable investigating authorities to confirm the accuracy of information 
supplied.375 It follows, therefore, that the "results" of a veri fication visit should reflect the extent to 
which information supplied was ascertained to be accurate.  
7.170.   Other provisions of the SCM Agreement provide contextual support for this interpretation. 
In particular, Article 12.5 of the SCM Agreement, which immedia tely precedes Article 12.6, 
provides that " the authorities shall during the course of an investigation satisfy themselves as to 
the accuracy of the information supplied by interested Members or interested parties upon which 
their findings are based." Verif ication visits appear a means by which to accomplish this general 
obligation vis-à-vis the information supplied.376 We conclude, therefore, that the "results" of a 
verification visit should reflect the "outcomes" of the process of verifying information suppl ied. The 
                                                
368 We note that one panel report – which, at this writing, is subject to appeal – addressed a materially 
similar situation in the context of the Anti -Dumping Agreement. Our analysis herein is substantially in 
accordance with that panel's analysis and conclusions. (Panel R eport, EU – Fatty Alcohols (Indonesia) , 
paras.  7.219 -7.236 (appeal pending)).  
369 Black's Law Dictionary , 10th edn, B. A. Garner (ed.) (Thomson Reuters, 2009), p. 1509.  
370 Shorter Oxford English Dictionary , 6th edn, A. Stevenson (ed.) (Oxford University Pres s, 2007), 
Vol. 2, p. 2554.   
371 Emphasis added.  
372 Emphasis added.  
373 Black's Law Dictionary , 10th edn, B. A. Garner (ed.) (Thomson Reuters, 2009), p. 1793.  
374 Shorter Oxford English Dictionary , 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007), 
Vol. 2, p. 3517.   
375 Because Annex VI(7) states that "the main purpose of the on -the-spot investigation is to verify 
information provided or to obtain further details", it appears that the purpose(s) of a particular 
on-spot-investigation may, to at least some de gree, need to be ascertained on a case -by-case basis. (emphasis 
added)  
376 Previous reports discussing Article 6.6 of the Anti -Dumping Agreement, which is analogous to 
Article  12.5 of the SCM Agreement, are consistent with this proposition. (See, e.g. Panel Reports, US – DRAMS , 
para. 6.78 (discussing Article 6.6 of the Anti -Dumping Agreement and stating that " Members could 'satisfy 
themselves as to the accuracy of the information' in a number of ways");  and Argentina – Ceramic Tiles , 
para. 6.57 (" Article  6.6 of the AD Agreement thus places the burden of satisfying oneself of the accuracy of the 
information on the investigating authority. As a general rule, the exporters are therefore entitled to assume 
that unless otherwise indicated they are not required to a lso automatically and in all cases submit evidence to 
demonstrate the accuracy of the information they are supplying")).  WT/DS486/R  
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  most notable such information in the case of verification visits to an investigated firm will, in our 
view, be information contained in its questionnaire response.  
7.171.   We further note certain statements in previous adopted panel reports discussing Art icle 6.7 
of the Anti -Dumping Agreement, which is analogous to Article 12.6 of the SCM Agreement in this 
context. In particular, although the context in which the issue arose differs somewhat from the 
present dispute, the panel report in Korea – Certain Pap er stated:  
[T]he purpose of … Article  6.7 is to make sure that exporters, and to a certain extent 
other interested parties, are informed of the verification results and can therefore 
structure their cases for the rest of the investigation in light of those  results. It is 
therefore important that such disclosure contain adequate information regarding all 
aspects of the verification, including a description of the information which was not 
verified as well as of information which was verified successfully . This is because, in 
our view, information which was verified successfully, just as information which was 
not verified, could well be relevant to the presentation of the interested 
parties'  cases.377  
7.172.   At this point, we consider it appropriate to recall that the  European Union advocates that 
the Panel interpret the term "results" of verification visits in light of Article 12.8 and its obligation 
to disclose "essential facts". In other words, because Article 12.6 allows communication of results 
of verification vis its "pursuant to" Article 12.8, Article 12.8 should substantively bear on what 
constitutes disclosure of "results" in Article 12.6. We consider that, contrary to the 
European  Union's position, the cross -reference to Article  12.8 in Article 12.6 does not re flect a 
substantive relationship of this nature between the two provisions for four main reasons:  
a. First, the SCM Agreement contains the obligation to communicate results of verification 
visits, on the one hand, and disclose essential facts, on the other ha nd, in different and 
non-sequential provisions (i.e. Article 12.6 and Article 12.8, respectively). This indicates 
the two provisions are substantively distinct.  
b. Second, only the second of the two communication options in Article 12.6 
cross-references Artic le 12.8, but both options require the provision of the same thing, 
i.e. the "results" of verification visits. It thus appears unreasonable to us to interpret 
Article  12.8 as substantively modifying the term "results" in the manner proposed by the 
European Union under either both options, as only one refers to Article 12.8, or only 
under the second option, in which case the concept of a disclosed "result" would 
fundamentally differ in the two instances.378 We believe, rather, the more reasonable 
position is th at the term "result" should be interpreted consistently in Article 12.6.  
c. Third, the only limitation on the scope of "results" in Article 12.6 is that the information 
pertains to a verification visit. In contrast, the scope of disclosure under Article 12.8 is 
limited to "essential facts under consideration which form the basis for the decision 
whether to apply definitive measures".379 This indicates that the results of verification 
                                                
377 Panel Report, Korea – Certain Paper , para. 7.192 (emphasis added) . Based on such reasoning and its 
earlier review of the facts, the p anel found that Korea had insufficiently disclosed the results of a certain 
verification visit in violation of Article 6.7 of the Anti -Dumping Agreement. We note, however, that in that 
dispute the parties did not actively dispute what "results" of verifica tion visits are. This statement, therefore, 
although necessary to the panel's finding that a violation of Article 6.7 occurred, did not appear to be the 
consequence of extensive discussion during the proceedings.  
378 We recall the European Union's position t hat the first communication option in Article  12.6 indicates 
that investigating authorities can provide "detailed reports" (European Union's response to Panel question 
No. 87, para. 6), while the second option basically allows investigating authorities to do what the Commission 
did here, i.e. to disclose essential facts under Article 12.8 and allow their content to reflect the results of 
verification visits.  
379 The "essential facts" contemplated in Article  6.9 of the Anti -Dumping Agreement were described by 
the Appellate  Body in China – GOES  as "those facts that are significant in the process of reaching a decision as 
to whether or not to apply definitive measures". (Appellate Body Report, China – GOES , para. 240).  WT/DS486/R  
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  visits are neither limited to the "essential" results of such investigations no r limited to 
facts that form the basis of  the decision to impose definitive CVDs.380 
d. Fourth, it will be recalled that Article 12.6 provides that the investigating authority "may 
make such results available to the applicants." The "essential facts", however, must be 
disclosed to all interested parties, which include the applicants. It would appear odd, 
therefore, for Article 12.6 to broach the possibility of providing "results" of verification 
visits to applicants if the applicants would receive disclosure the reof upon receipt of the 
"essential facts". This further indicates the substantive separateness of the two 
provisions.  
7.173.   If the connection between Articles 12.6 and 12.8 is not substantive, however, this begs the 
question as to what the cross -reference to Ar ticle 12.8 in Article 12.6 means. We conclude that the 
presence of the two communication options in Article 12.6 clarifies two main procedural aspects 
regarding the provision of results of verification visits:  
a. First, the two communication options in Articl e 12.6 make clear that there is flexibility 
regarding how to communicate the results of verification visits. The first option for 
communicating results of verification visits in Article 12.6 is to "make … available" such 
results. The second option is to " provide disclosure thereof" pursuant to Article 12.8. The 
use of different terms in describing how the "results" of verification visits may be 
communicated suggests that the two reflect different methods in which this may be 
accomplished.381 We therefore note  that it is undisputed that providing a separate 
verification report is a means by which to satisfy the first disclosure option in 
Article  12.6, i.e. to "make … available" the results of verification visits.382 Disclosing such 
results pursuant to Article  12.8, however, suggests that the means used to disclose 
essential facts is also the procedural vehicle by which to communicate such results, 
i.e. the disclosure of the results of verification visits may accompany the disclosure of 
the essential facts. This me thod may well not involve the provision of a separate report.  
b. Second, the two options make clear that there is flexibility regarding when  to 
communicate results of verification visits. If only the first option were present in 
Article  12.6, the question may  arise as to when the results should be made available, 
perhaps leading to an interpretation that communication had to occur relatively soon 
after the visit. If only the second option were present in Article 12.6, it would appear to 
limit the investigating  authority's discretion to communicate the results of verification 
visits before the disclosure of essential facts. Including both options, therefore, indicates 
that investigating authorities might make the results known relatively soon after the 
verificat ion visit occurs, but if it wishes, it could wait as late as the disclosure of essential 
facts to do so.  
7.174.   We conclude, therefore, that the two communication options in Article 12.6 clarify that 
there is flexibility regarding how and when to communicate resu lts of verification visits to relevant 
parties. The task still remains, however, to formulate an understanding of what the term "results" 
of verification visits means such that we may effectively apply this term in the case at hand. We 
formulate this under standing in light of three main considerations:  
a. First, the purpose of verification visits, which, as discussed above, indicates that the 
results should reflect the "outcomes" of the process of verifying information supplied. 
Relatedly, and further regardin g the scope of such "outcomes", we recall that one 
adopted panel report has explained that it is important that  "such disclosure contain 
adequate information regarding all aspects of the verification, including a description of 
                                                
380 We therefore agree with Pakistan that "[t ]he results of the verification visit may include matters that 
are ultimately not essential to the final determination". (Pakistan's response to Panel question No. 84, 
para. 5.15).  
381 Panel Report, Korea – Certain Paper , para. 7.188 (asserting that Article 6.7 of the 
Anti-Dumping  Agreement "requires that the verification results be disclosed to the investigated exporters 
without specifying the format in which such disclosure is to be made").  
382 This is not to say that there may be other ways to "make availab le" the results.  WT/DS486/R  
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  the information which was no t verified as well as of information which was verified 
successfully".383 
b. Second, the pervasive theme in the SCM Agreement of maintaining a record regarding 
interactions between the investigating authority and parties particularly as to the 
exchange of evide nce. In this respect we note that the SCM Agreement places strong 
emphasis on the provision of written information and the reduction of evidence given 
orally to writing384, and also provides that " [a]ny decision of the investigating authorities 
can only be b ased on such information and arguments as were on the written record of 
this authority".385 
c. Third, and relatedly, the rights of the parties to an investigation. As the panel in Korea – 
Certain Paper  indicated, receiving relatively particularized information regarding the 
results of verification visits may bear on parties' due process rights by affecting how the 
parties structure their cases and the effectiveness of judicial review.386 
7.175.   Our analysis indicates a minimum standard under Article 12.6 encompassing the  provision 
of specific enough disclosures as to allow the interested parties to discern387: 
a. the information in the questionnaire response or other information supplied for which 
supporting evidence was requested, and whether such evidence was provided;  
b. whether the investigating authority requested further information at the verification visit, 
and whether such information was provided;  
c. whether the investigating authority collected requested documents, and if so what 
documents388; and  
d. whether the investigating authorities verified the information for which supporting 
evidence was requested. This is not to say, however, that the results of the verification 
visit must necessarily include conclusions as to the ultimate suitability of the data 
checked for use in a f inal determination in the investigation.  
7.176.   It would appear unnecessary, however, for investigating authorities to address all 
arguments and evidence presented during the verification or to prepare minutes of the verification. 
Based on the above discussion, w e must therefore disagree with the European Union that the 
"results" of verification visits are only the essential factual outcomes of the verification.  
                                                
383 Panel Report, Korea – Certain Paper , para. 7.192.  
384 See, e.g. SCM Agreement, Articles 11.1 and 11.2 (providing, inter alia , for a "written application" by 
a domestic industry and the information to be included therein), 12.1 (" Interested  Members and all interested 
parties in a countervailing duty investigation shall be given notice of the information which the authorities 
require and ample opportunity to present in writing all evidence which they consider relevant in respect of the 
invest igation in question"), and 12.2 ("Where such information is provided orally, the interested Members and 
interested parties subsequently shall be required to reduce such submissions to writing").  
385 SCM Agreement, Article 12.2.  
386 Panel Reports, Korea – Certain Paper , para. 7.192 (explaining that " information which was verified 
successfully, just as information which was not verified, could well be relevant to the presentation of the 
interested parties' cases"); and Mexico – Steel Pipes and Tubes , paras. 7.12 4-7.129 (using verification report 
to determine reasonableness of statements made in final anti -dumping determination). It will be recalled that 
Article 12.6 envisions the results of verification visits being supplied not just to the investigated firm, but  also 
to the applicants. It appears plausible that the results of verification visits could have implications for both 
types of parties. W e also take special note that in order to determine whether an investigating authority's 
decision to resort to the use  of facts available under Article 12.7 is consistent with Article 12.7, it must be 
evident from the record of the investigation the extent to which the strictures of Annex II of the Anti -Dumping 
Agreement were adhered.  
387 No qualification exists in Article 12.6 such that the results of verification visits must be provided to 
an investigated firm only if  non-provision would infringe a party's due process rights. It is thus immaterial 
whether or not Novatex's ability to defend itself in the investigation was c ompromised due to the manner in 
which the European Union claims the Commission disclosed the results of the Novatex visit.  
388 We do not mean to suggest that each and every document be individually described. Rather, 
categories of documents could be describe d within a reasonable level of specificity.  WT/DS486/R  
BCI deleted, as indicated [***]  
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  7.177.   With this in mind, we turn to consider whether the Commission complied with its obligation 
to provide t he results of the Novatex verification visit.  
7.6.4.2   Whether the Commission provided the results of the Novatex verification visit to 
Novatex  
7.178.   It will be recalled that the Commission conducted a verification visit at Novatex in Karachi 
on 17 -19 December 2009. Th e European Union argues that it complied with Article 12.6 because it 
disclosed the results of this visit to Novatex via the second communication option in Article 12.6, 
i.e. "in the context of the disclosure of the essential facts".389 We therefore discuss the relevant 
disclosure documents of the investigation below to determine to what degree they contain the 
"results" of the verification visit.  
7.179.   On 1 June 2010, the Commission sent a letter to Novatex that, along with its enclosures, 
"constitute[d] disclosur e of the essential facts and considerations on the basis of which the 
European Commission has imposed provisional countervailing duties".390 The enclosures were: 
(a) a copy of the Provisional Determination; (b) explanations regarding subsidy calculations 
concerning  Novatex; (c) explanations regarding undercutting and underselling calculations 
concerning Novatex; and (d) explanations regarding comments on initiation. In the Provisional 
Determination, the Commission explained that "[t]he Commission sought and v erified all 
information deemed necessary for the determination of subsidisation, resulting injury and Union 
interest", and confirmed that the Commission had conducted the verification visit at Novatex.391 
The Provisional Determination made certain statements  pertaining to the degree to which the 
Commission verified the effectiveness of the procedures relating to Novatex's import -duty 
remissions obtained under the MBS during the visit.392 Pakistan accepts that such discussions 
contain some of the "outcomes" of t he verification visit to Novatex, and we see no reason to 
disagree.393 Beyond such statements, however, the European Union points to, and we discern, no 
other content of the letter and its enclosures that specifically discuss the visit.  
7.180.   On 26 July 2010, the Commission sent a letter to Novatex that, along with its enclosures, 
"constitute[d] disclosure of the essential facts and considerations on the basis of which it is 
intended to recommend the imposition of definitive anti -subsidy duties".394 The enclosures we re: 
(a) explanations of definitive subsidy and injury methodology and calculations; (b) explanations of 
definitive subsidy and undercutting -underselling calculations; and (c) a general disclosure 
                                                
389 European Union's opening statement at the first meeting of the Panel, para. 55. See also 
European  Union's response to Panel question No. 87, para. 5 (restating position). We note the following 
additional two pi eces of evidence in the record that were not part of the disclosure of essential facts but were 
discussed by the parties in this context: (a) the pre -verification letter that the Commission sent to Novatex on 
9 December 2009 (Pre -verification Letter dated 9 December 2009 from the Commission to Novatex, (Exhibit 
PAK-19)); and (b) a document the Commission created containing a list of some but not all of the documents 
reviewed at the Novatex verification visit, and all of the documents collected by the Commis sion at the visit 
(List of Exhibits regarding Novatex's on -spot verification, (Exhibit EU -10)). Regarding the former, because it 
was created before the verification visit, it logically cannot contain the "results" of the visit. Regarding the 
latter, there is no evidence in the record indicating that this document was ever provided to Novatex during the 
investigation, and thus it cannot be a means by which the "results" of the visit were provided to Novatex.  
390 European Commission, Provisional company -specifi c disclosure, 1 June 2010, (Exhibit PAK -32) (BCI), 
p. 1. 
391 Provisional Determination, (Exhibit PAK -1), paras. 12 -14. The Provisional Determination does not 
state how all such information was verified. We note the European Union's statement that verificatio n visits are 
"only one of several ways for investigating authorities to verify information". (European Union's opening 
statement at the first meeting of the Panel, para. 58). We agree. Thus, a simple statement that the 
"Commission sought and verified all i nformation deemed necessary for the determination of subsidisation, 
resulting injury and Union interest" is too ambiguous to meaningfully provide results of verification visits. The 
presence of verified information in the disclosed essential facts, stateme nts that certain information was 
verified as a result of deficiency letters, or that certain information had not been verified at all, cannot convey 
the results of verification visits in a manner to satisfy Article 12.6. Such statements, by their very natu re, 
pertain to a completed verification process. Article 12.6, in this context, is designed to provide details 
regarding a specific stage of that process.  
392 See Provisional Determination, (Exhibit PAK -1), para. 68 et seq.  
393 See, e.g. Pakistan's comments on  the European Union's response to Panel question No. 103, 
para. 6.3 (stating that "paragraphs 68 -72 of the Provisional Determination contain some  results of the 
verification [visit]").  
394 European Commission, Definitive company -specific disclosure, 26 July 2010, (Exhibit PAK -33) (BCI), 
p. 1. WT/DS486/R  
BCI deleted, as indicated [***]  
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  document, i.e. a draft of the Definitive Determination. The general disclosure document again 
made reference to verification of Novatex's procedures relating to the MBS that the Provisional 
Determination had previously indicated occurred at the visit. Again, we accept that such content 
contains "outcomes" of the ve rification visit. Beyond such statements, however, the 
European  Union points to, and we discern, no other content of the letter and its enclosures that 
specifically discuss the visit.395 
7.181.   Thus, the "results" that were provided to Novatex via the disclosure do cuments related 
only to certain observations concerning the MBS. We cannot find that this constituted adequate 
provision of the "results" of the verification visit to Novatex. Such limited discussions fail to 
sufficiently communicate the information in the  questionnaire response or other information 
supplied for which supporting evidence396 was requested (and whether such evidence was 
provided), whether the Commission requested further information at the verification visit (and 
whether such information was pr ovided), what comprised the universe of documents the 
Commission collected, and whether the Commission confirmed the accuracy of the information for 
which supporting evidence was requested.397 
7.6.4.3   Conclusion  
7.182.   In accordance with our reasoning above, we find that t he Commission acted inconsistently 
with Article 12.6 of the SCM  Agreement because it failed to adequately provide the "results" of the 
Novatex verification visit to Novatex.  
                                                
395 See European Commission, General Definitive Disclosure, (Exhibit PAK -36), paras. 43 and 47. The 
European Union appears to suggest at times that because Novatex representatives were present at the 
verification visit, an d allowed access to documents to the Commission at the visit, this process might be a way 
to comply with Article  12.6. (See, e.g. European Union's first written submission, para. 256). First, as this 
process occurs before the disclosure of essential facts,  and the European Union expressly argues that the 
Commission complied with Article  12.6 "in the context of the disclosure of the essential facts", we do not 
consider that the European Union actually argues that this is a way in which the Commission complie d with 
Article 12.6 in this particular case. (European Union's opening statement at the first meeting of the Panel, 
para. 55. See also European Union's response to Panel question No. 87, para. 5 (restating position)). Rather, 
we interpret it as an observat ion as to why Novatex's rights were not compromised due to the absence of more 
specific disclosures regarding the results of the verification visit. Second, we would reject such an argument 
even if it were made. Article 12.6 places the burden of providing the "results" of verification visits squarely on 
the investigating authority. It thus endures regardless of whether circumstances exist through which an 
investigated firm might otherwise become aware of such results. We could not therefore accept that an 
investigated firm's mere participation in the verification visit itself signifies compliance with Article 12.6 in this 
context.  
396 We note that such evidence may not always take the form of documentation. For instance, the 
Commission examined the organizatio n of Novatex's manufacturing facilities during the verification visit. (See 
Provisional Determination, (Exhibit PAK -1), paras. 68 -72; Annex II(II)(1) and III(II)(2) of the SCM  Agreement 
(envisioning on -the-spot investigations being conducted to test the re liability of duty drawback verification 
procedures)). The European Union has explained, however, that the examination essentially informed its 
understanding of whether it could rely on Novatex's documentation purportedly indicating the quantities of 
import ed production inputs that it used to produce exported PET. (European Union's second written 
submission, para. 39). Thus, we interpret the examination of the manufacturing facilities as essentially 
evidence used to attempt to verify other information suppli ed by Novatex.  
397 We note that it would be plainly unreasonable to assume that the limited MBS -related subjects 
discussed in the disclosure documents (identified above) formed the entirety of the subjects investigated at the 
verification visit, and the Euro pean Union never claims that this was so. Indeed, the content of Novatex's 
questionnaire response went beyond such matters, the pre -verification letter that the Commission sent to 
Novatex indicated that documents pertaining to the full scope of data provid ed in the questionnaire response 
were to be made available at the visit (Pre -verification Letter dated 9 December 2009 from the Commission to 
Novatex, (Exhibit PAK -19)), and other evidence indicates that documents were collected at the visit that 
appear to  have little or nothing to do with the MBS. (See, e.g. List of Exhibits regarding Novatex's on -spot 
verification, (Exhibit EU -10), item 1, "Accounts July 2008 to June 2009", referring to, as Pakistan has 
explained, Novatex's annual reports for those years) . We further note that, because we have previously 
observed that results of verification visits are neither limited to the "essential" results of such investigations 
nor limited to facts that form the basis of  the decision to impose definitive CVDs, there is no guarantee that the 
scope of the subject matter addressed by essential facts fully covers that of the results of verification visits.  WT/DS486/R  
BCI deleted, as indicated [***]  
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  8  FINDINGS AND CONCLUS IONS  
8.1.  For the reasons set forth in this Report, the Panel conc ludes as follows:  
a. In respect of the European Union's objections under Article 6.2 of the DSU:  
i. the Panel finds that Pakistan's claim that the Commission acted inconsistently with 
Annex II(II)(1) and/or Annex III(II)(2) of the SCM Agreement "because it fai led to 
examine the 'generally accepted commercial [practices]' prevailing in Pakistan when 
examining the verification system and procedures under the MBS" is outside the 
Panel's terms of reference as the panel request failed to present the problem clearly;   
ii. the Panel rejects the European Union's objection to Pakistan's claim under 
Article  1.1(a)(1)(ii) of the SCM Agreement, and thus finds that this claim is within 
the Panel's terms of reference;  
iii. the Panel rejects the European Union's objection to Pakistan's  claim under 
Article  12.6 of the SCM Agreement, and thus finds that this claim is within the 
Panel's terms of reference; and  
iv. the Panel finds that the remaining objections raised by the European Union have 
become moot and therefore the Panel does not addres s them.  
b. In respect of Pakistan's claims regarding the MBS:  
i. the Panel finds that the Commission acted inconsistently with Article 1.1(a)(1)(ii) of 
the SCM Agreement by failing to provide a reasoned and adequate explanation for 
why the entire amount of remi tted duties was "in excess of those which have 
accrued" within the meaning of footnote 1 of the SCM Agreement;  
ii. the Panel finds that the Commission also acted inconsistently with Article 3.1(a) of 
the SCM Agreement by improperly finding the existence of a " subsidy" that was 
contingent on export performance; and  
iii. the Panel exercises judicial economy or finds that, for other reasons, it need not 
address Pakistan's claims that the Commission: (a) failed to investigate whether 
Pakistan's duty drawback system veri fication mechanisms were based on generally 
accepted commercial practices in Pakistan; (b) failed to provide Pakistan with the 
opportunity to assist the Commission's determination of the excess amount; (c) 
failed to take into account evidence regarding the  amount of any excess drawback; 
(d) failed to make normal allowance for waste; (e) violated Annexes II(II) and III(II) 
"as a whole"; (f) violated Annex I(i); (g) violated Articles 1.1(b), 10, 19, and 32 of 
the SCM Agreement; and (h) violated Article VI of the GATT 1994.  
c. In respect of Pakistan's claims regarding the LTF -EOP: 
i. the Panel finds that the Commission acted inconsistently with Article 14(b) of the 
SCM Agreement by failing to properly identify what Novatex would have paid on a 
"comparable commercial loan" in calculating the benefit conferred by the LTF -EOP 
Loan;  
ii. the Panel finds that the Commission acted inconsistently with Article 1.1(b) of the 
SCM Agreement as a consequence of having acted inconsistently with Article  14(b) of 
the SCM Agreement;  
iii. the Panel finds that the Commission acted inconsistently with the chapeau  of 
Article  14 of the SCM Agreement by failing to transparently and adequately explain 
how it identified a "comparable commercial loan"; and  
iv. the Panel exercises judicial economy in respec t of Pakistan's claims that as a result 
of violating Article 14(b) of the SCM Agreement and/or the chapeau  of Article 14 of WT/DS486/R  
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  the SCM Agreement, the Commission acted inconsistently with Articles 10, 19 and 32 
of the SCM Agreement, and Article VI of the GATT 1994.  
d. In respect of Pakistan's claims under Article 15.5 of the SCM Agreement:  
i. the Panel finds that Pakistan failed to establish that the Commission's use of the 
"break the causal link" methodology in this case was inconsistent with Article  15.5 of 
the SCM  Agreement;  
ii. the Panel finds that Pakistan failed to establish that the Commission acted 
inconsistently with Article 15.5 of the SCM Agreement by failing to conduct a proper 
non-attribution analysis of imports from Korea;  
iii. the Panel finds that Pakistan faile d to establish that the Commission acted 
inconsistently with Article 15.5 of the SCM Agreement by failing to conduct a proper 
non-attribution analysis of the economic downturn;  
iv. the Panel finds that the Commission acted inconsistently with Article 15.5 of the SCM 
Agreement with respect to its analysis of competition from non -cooperating 
producers; and  
v. the Panel finds that the Commission acted inconsistently with Article 15.5 of the SCM 
Agreement with respect to its analysis of oil prices.  
e. In respect of Paki stan's claim under Article 12.6 of the SCM Agreement, the Panel finds 
that the Commission acted inconsistently with Article 12.6 of the SCM Agreement 
because it failed to adequately provide the "results" of the Novatex verification visit to 
Novatex.  
8.2.  Under Article 3.8 of the DSU, in cases where there is an infringement of the obligations 
assumed under a covered agreement, the action is considered prima facie  to constitute a case of 
nullification or impairment. We conclude that, to the extent that the measure s at issue have been 
found to be inconsistent with the SCM Agreement, they have nullified or impaired benefits accruing 
to Pakistan under that agreement. The European Union asserts that because the challenged 
measures in this dispute expired, the measures cannot nullify or impair Pakistan's rights under the 
WTO agreements. The European Union thus considers that it has rebutted the presumption of 
nullification or impairment referenced in Article 3.8 of the DSU.398 We reject the European Union's 
argument. Becau se the expiry of the measures had no retroactive effect, such expiry cannot 
eliminate any nullification or impairment existing at the time of the Panel's establishment.399 
Moreover, the legal status of a measure and the presence of actual impacts resulting f rom its 
WTO-inconsistency are, in our view, conceptually distinct and should not be equated without 
further evidence.400 Further, we do not know what the condition of the EU PET market would be if 
the WTO -inconsistent measures had not been imposed.401 
8.3.  Given th at the measures at issue in this dispute have expired, we make no recommendation 
to the DSB pursuant to Article 19.1 of the DSU.402 
__________  
                                                
398 European  Union's request for a preliminary ruling, paras. 10 and 18.  
399 See, e.g. Panel Report, Russia – Tariff Trea tment , para. 7.125.  
400 See, e.g. Panel Report, US – Poultry (China) , para. 8.6 (finding that an expired measure nullified or 
impaired China's benefits, and refusing to make recommendations under Article 19.1 of the DSU with respect 
to that measure).  
401 See, e.g. Panel Report, Turkey – Textiles , para. 9.204.  
402 See above fn 33.