WT/DS514/1  
G/L/1166  
G/SCM/D112/1  
 
17 November 2016  
(16-6329) Page: 1/5 
  Original: English  
 
  UNITED STATES – COUNTERVAILING MEASU RES ON COLD - AND HOT -ROLLED STEEL 
FLAT PRODUCTS FROM BRAZIL  
REQUEST FOR CONSULTA TIONS BY BRAZIL  
The following communication, dated 11 November 2016 , from the delegation of Brazil  to the 
delegation of the United States  and to the Chairperson of the Dispute Settlement Body, is 
circulated in accordance with Article  4.4 of the DSU.  
 
_______________  
 
 
My authorities have instructed me to request consultations with the Government of the United 
States of America pursuant to Art icle 4 of the Understanding on Rules and Procedures Governing 
the Settlement of Disputes ("DSU"); Article XXII:1 of the General Agreement on Tariffs and Trade 
1994 ("GATT 1994 ") and Article 30 of the Agreement on Subsidies and Countervailing Measures  
("SCM Agreement ") concerning certain countervailing measures adopted by the United States 
Department of Commerce  ("USDOC ") and the United States International Trade Commission 
("USITC ") with respect to Cold- and Hot -Rolled Steel Flat Products from Brazil . 
1. Factual Background  
In 2015, the USDOC received countervailing duty petitions concerning imports of cold1- and 
hot-rolled2 steel from Brazil involving 36 governmental measures. Shortly thereafter3, the USDOC 
initiated countervailing investigations on the exp orts of both products and encompassing all 36 
Brazilian measures.  It is important to remark that, during the consultations in the countervailing 
investigations4, the Brazilian Government provided more than sufficient evidence that the 
assertions made by the petitioners were unfounded.  
In January 2016, despite all the evidence to the contrary, the USDOC issued a preliminary 
determination imposing provisional duties on the exports of the products under investigation, 
which allegedly had benefited from subsid ies granted by Brazil through six governmental 
measures5. Later on, upon the conclusion of the investigation, the USDOC determined that 
countervailable subsidies were being provided to producers and exporters of certain cold6- and 
hot-rolled7 steel flat pr oducts from Brazil, in relation to the following seven Brazilian measures 
(one more than the six measures subjected to the preliminary decision): "IPI for Machines and 
Equipments"; "Ex -Tarifário"; payroll tax exemption; Integrated Drawback Scheme; "Reinteg ra";  
                                                
1 28 July 2015, as per the Decision Memorandum for the Preliminary Determination in the 
Countervailing Duty Investigation of Certain Cold -Rolled Steel Flat Products from Brazil. Pg. 01.  
2 11 August 2015, Decision Memorandum for the Preliminary Determination in the Countervailing Duty 
Investigation of Certain Hot -Rolled Steel Flat Products from Brazil. Pg. 01.  
3 August 2015  
4 September 2015  
5 On August 17, 2015, as per the Decision Memorandum for the Preliminary Determination in the 
Countervailing Duty Investigation of Certain Cold -Rolled Steel Flat Products from Brazil. Pg. 01. On 31 August 
2015, as per the Decision Memorandum for the Prelimi nary Determination in the Countervailing Duty 
Investigation of Certain Hot -Rolled Steel Flat Products from Brazil. Pg. 01.  
6 20 July 2016, as per Issues and Decision Memorandum for the Final Determination in the 
Countervailing Duty Investigation of Certain  Cold-Rolled Steel Flat Products from Brazil. Pg. 01.  
7 4 August 2016, as per Issues and Decision Memorandum for the Final Determination in the 
Countervailing Duty Investigation of Certain Hot -Rolled Steel Flat Products from Brazil. Pg. 01.  WT/DS514/1 • G/L/1166 • G/SCM/D112/1  
 
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  "BNDES -FINAME"; and loans from the "Bahia State Industrial Development and Economic 
Integration Program" ("Desenvolve Bahia").  
Notwithstanding the excessive and unnecessary burden to the Brazilian Government and 
companies caused by the inclusion in the investigation of 36 measures that are clearly not 
countervailable subsidies or did not benefit the sector at issue, Brazil and the concerned Brazilian 
exporters8 provided all the necessary information to assist the investigation. All the questions put 
forward by the USDOC were properly answered on a timely and due manner.   
Despite Brazil 's best efforts to present complete and correct information on the nature and scope 
of the inexplicably large number of Brazilian governmental measures under the purview  of the 
investigation, the USDOC decided to rely, as a rule, on the use of so -called "adverse facts 
available", systematically disregarding the information supplied by the Brazilian Government 
concerning its legislation and public policies.  
By disregarding   the information provided, the United States mischaracterized  the nature of the 
measures investigated  and incorrectly determined that generally applicable import duties like the 
"ex-tarifário" and non -discriminatory internal taxes - such as the IPI rate s applicable for capital 
goods and the so -called "payroll tax exemption" - were countervailable subsidies. The United 
States also calculated an inflated amount of subsidy, by using incorrect benchmarks. As for the 
remaining Brazilian measures determined to  be countervailable, the United States either 
disregarded that they are generally applicable to all industries meeting objective criteria - and, as 
such, could not be considered a specific subsidy under the SCM Agreement - or, in the case of 
"Drawback" and  "REINTEGRA", disregarded that they are completely in line with WTO rules.  
2. The matter at issue  
This request for consultations concerns countervailing measures imposed by the United States in 
relation to Hot- and Cold-Rolled Steel Flat Products from Braz il (Cases Nos. C -351-844 and C -351-
846), that were imposed pursuant to Title VII of the Tariff Act of 1930, as amended. The 
countervailing measures  were imposed based on, but not limited to, the following actions:  
1. The initiation of countervailing duties i nvestigations, checklist, questionnaires, 
verification reports, calculations memoranda, other determinations, memoranda, 
reports and measures related to the investigation  of Countervailing Duty Investigation 
of Certain Hot -Rolled and Cold -Rolled Steel Flat  Products from Brazil.  
2. Certain Cold -Rolled Steel Flat Products From Brazil, India, the People's Republic of 
China, the Republic of Korea, and the Russian Federation: Initiation of Countervailing 
Duty Investigations , 80 FR 51206 (August 24, 2015);  
3. Notice by  the International Trade Commission on Cold -Rolled Steel Flat Products From 
Brazil, China, India, Japan, Korea, Netherlands, Russia, and the United Kingdom 
(Preliminary), 80 FR 55872 (September 17, 2015)  
4. Notice by the International Trade Commission on Hot -Rolled Steel Flat Products From 
Brazil, China, India, Japan, Korea, Netherlands, Russia, and the United Kingdom 
(Preliminary), 80 FR 58787 (September 30, 2015)  
5. Certain Cold -Rolled Steel Flat Products From Brazil, India, the People's Republic of 
China, the Republic of Korea, and the Russian Federation: Postponement of Preliminary 
Determinations in the Countervailing Duty Investigations ,  80 FR 60881 
(October  8, 2015);  
6. Calculations for Preliminary Determination of Critical Circumstances in the Antidumping 
Duty and Countervailing Duty Investigations of Certain Hot -Rolled Steel Flat Products 
from Brazil (December 2, 2015)  
                                                
8 Companhia Sid erúrgica Nacional  ("CSN") and Usinas Siderúrgicas de Minas Gerais S.A.  ("USIMINAS "). WT/DS514/1 • G/L/1166 • G/SCM/D112/1  
 
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  7. Issues and Decision Memorandum for the Preliminary Determination in the 
Countervailing Duty Investigation of Certain Cold -Rolled Steel Flat Pr oducts from 
Brazil , Fed. Reg. (December 15, 2015);  
8. Countervailing Duty Investigation of Certain Cold -Rolled Steel Flat Products From 
Brazil: Preliminary Affirmative Determination and Alignment of Final Determination 
With Final Antidumping Duty Determinati on, 80 FR 79569 (December 22, 2015);  
9. Certain Hot -Rolled Steel Flat Products From Brazil: Affirmative Preliminary 
Determination of Sales at Less Than Fair Value, Postponement of Final Determination, 
and Extension of Provisional Measures , 81 FR 15235 (March 22, 2016).  
10. Issues and Decision Memorandum for the Final Determination in the Countervailing 
Duty Investigation of Certain Cold -Rolled Steel Flat Products from Brazil , Fed. Reg. 
(July 20, 2016);  
11. Countervailing Duty Investigation of Certain Cold -Rolled Steel  Flat Products From 
Brazil: Final Affirmative Determination, 81 FR 49940 (July 29, 2016);  
12. Calculations for the Final Determination for Usinas Siderúrgicas de Minas Gerais SA 
(August 4, 2016);  
13. Calculations for the Final Determination for Companhia Siderúrgi ca Nacional (CSN)  
(August 4, 2016) ; 
14. Countervailing Duty Investigation of Certain Hot -Rolled Steel Flat Products From Brazil: 
Final Affirmative Determination, and Final Determination of Critical Circumstances, in 
Part, 81 FR 53416, (August 12, 2016);  
15. Notice  by the International Trade Commission on Cold -Rolled Steel Flat Products From 
Brazil, China, India, Japan, Korea, Netherlands, Russia, and the United Kingdom 
(Final), 81 FR 63806 (September 16, 2016);  
16. Certain Cold -Rolled Steel Flat Products from Brazil, I ndia, and the Republic of Korea: 
Amended Final Affirmative Countervailing Duty Determination and Countervailing Duty 
Order (the Republic of Korea) and Countervailing Duty Orders (Brazil and India),  
81 FR 64436 (September 20, 2016);  
17. Notice by the Internatio nal Trade Commission on Hot -Rolled Steel Flat Products From 
Brazil, China, India, Japan, Korea, Netherlands, Russia, and the United Kingdom 
(Final), 81 FR 66996 (September 29, 2016);  
18. Certain Hot -Rolled Steel Flat Products from Brazil and the Republic of Ko rea: Amended 
Final Affirmative Countervailing Duty Determinations and Countervailing Duty Orders,  
81 FR 67960 (October 03, 2016);  
The measures at issue in this request also include any and all dete rminations or actions by the 
US Department of Commerce, the  US International Trade Commission, or the US Customs and 
Border Protection relating to the investigation, imposition and collection of countervailing duties on 
Hot-and Cold-Rolled Steel Flat Products from Brazil  (Cases  Nos. C -351-844 and C -351-846).  
These  investigations, the resulting determinations and the application of the corresponding 
countervailing duties constitute measures Brazil deems inconsistent with the United States ' 
obligations under the relevant provisions of the Covered Agreements, includin g, but not limited to: 
Articles 1; 2; 10; 11 ( in particular 11. 2, 11.3, 11. 4 and 11.9); 12 ( in particular 12.3, 12.5 and 
12,7); 14; 15; 16; 17; 19 and 32.1 of the SCM Agreement; as well as Annexes II and III of the 
SCM Agreement and Article VI of the G ATT 1994.  WT/DS514/1 • G/L/1166 • G/SCM/D112/1  
 
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  For the sake of clarity, Brazil claims may be organized in four main groups, as described below:  
a. Claims related to the procedures applied in the countervailing duty 
investigations  
The United States initiated countervailing duty investigations  in the absence of sufficient evidence 
and based on  clearly inaccurate data with respect to the regimes at issue, and did not perform an 
adequate review to establish the "accuracy and adequacy" of the evidence annexed to the initial 
applications. The Unit ed States not only failed to reject the unsubstantiated assertions made in the 
application, but  also decided  not to terminate the investigation  after being informed by the 
Government of Brazil and the concerned industry about the above -mentioned failure s, refusing to 
collect or accept a great deal of relevant information.  
In many instances, the United States drew adverse inferences or relied upon adverse facts 
available in an inappropriate manner, rejecting sound information provided in a timely manner 
from interested parties or failing to request information from interested parties concerning the 
factual issues in question.  
In connection with these issues the United States seems to have violated Articles 11 (in particular 
11. 2, 11.3, 11. 4 and 11.9); 1 2 (in particular 12.3, 12.5 and 12.  7); 17; 19 and 32.1 of the 
SCM Agreement, and Article VI of the GATT.  
b.  Claims related to the determinations of injury and domestic industry  
With regard to the determination of injury, it is not clear from the document ation in the 
procedures that the decision was based on positive evidence or involved an objective examination 
of the facts.  
Moreover, the definition of domestic industry did not refer to the domestic producers as a whole, 
considering that in a universe of  twelve producers, only data related to seven of them were taken 
into account.  
In connection with this item, the United States seems to have violated Article 15 and 16 of the 
SCM Agreement, and Article VI of the GATT.  
c.  Claims related to the characteriz ation of certain governmental measures as 
countervailable subsidies  
The determinations that the Brazilian governmental measures aforementioned are countervailable 
subsidies are contrary to the evidence on the record of the investigations, and do not meet t he 
necessary requirements that allow for the imposition of provisional and final duties.  
With regard to the characterization of a subsidy within the meaning of Article 1 of the 
SCM Agreement, the United States failed to demonstrate that the application of certain 
legislation9, notably related to the level of IPI rates for capital goods, the "integrated drawback 
scheme", the "ex -tarifário", the "REINTEGRA", the so -called "payroll tax exemption, and the 
"Desenvolve Bahia", entailed a financial contribution an d conferred a benefit within the meaning of 
the SCM Agreement. With regard to specificity, the United States did not meet its burden of 
demonstrating that the tax legislation is specific within the meaning of the SCM Agreement.   
With regard to FINAME, the United States failed to demonstrate that the loans provided conferred 
a benefit for Certain Hot -Rolled and Cold -Rolled Steel Flat Producer s within the meaning of 
Article  1 of the SCM Agreement and that they were specific under the SCM Agreement. 
Particular ly, the United States disregarded the methodologies set forth in the SCM Agreement to 
establish a benefit with regard to loans.  
                                                
9 Notably: IPI levels for capital goods, the integrated drawback scheme, the ex-tarifário, the 
REINTEGRA, the so -called payroll tax exemption, FINAME and Desenvolve Bahia.  WT/DS514/1 • G/L/1166 • G/SCM/D112/1  
 
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  The United States thus seems to have violated Articles 1, 2 and 19 of the SCM Agreement, as well 
as Annexes II and III of the S CM Agreement and Article VI of the GATT 1994, and Article VI of the 
GATT.  
d.  Claims related to the calculation and determination of the subsidy margins 
for the tax legislation and loans  
Brazil understands that the amount of countervailable subsidies, if t hey are recognized as such, 
were calculated in excess of the actual "benefit" that was provided, namely because the 
benchmarks used in the investigation were flawed and the margins were, consequently, inflated.  
The United States seems to have applied an a mount of countervailing duties in a manner 
inconsistent with Articles 19.3 and 19.4 of SCM Agreement, and Article VI of the GATT;  
Brazil deems the United States ' measures at issue to have a serious systemic impact, as well as 
adverse effect on the export o f subject goods to the United States. Furthermore, Brazil considers 
that those measures cause nullification or impairment of benefits accruing to the country, directly 
or indirectly, under the cited Agreements.  
Brazil reserves the right to raise additional  claims and measures and address additional legal and 
factual issues under other provisions of the covered agreements during the course of the 
consultations.  
We look forward to receiving United States ' reply to this request in accordance with Article 4.3 o f 
the DSU. Brazil proposes that the date and venue of the consultations be mutually agreed by the 
parties.  
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