WORLD TRADE
ORGANIZATIONWT/DS217/R
WT/DS234/R
16 September 2002
(02-4742)
Original:  English
UNITED STATES – CONTINUED DUMPING AND SUBSIDY
OFFSET ACT OF 2000
Report of the Panel
The report of the Panel on United States – Continued Dumping and Subsidy Offset Act of 2000 is
being circulated to all Members, pursuant to the DSU.  The report is being circulated as an
unrestricted document from 16 September 2002 pursuant to the Procedures for the Circulation andDerestriction of WTO Documents (W T/L/160/Rev.1).  Members are reminded that in accordance with
the DSU only parties to the dispute may appeal a panel report.  An appeal shall be limited to issues of
law covered in the Panel report and legal interpretations developed by the Panel.  There shall be no
ex parte  communications with the Panel or Appellate Body concerning matters under consideration by
the Panel or Appellate Body.
Note by the Secretariat :  This Panel Report shall be adopted by the Dispute Settlement Body (DSB) within
60 days after the date of its circulation unless a party to the dispute decides to appeal or the DSB decides byconsensus not to adopt the report.  If the Panel Report is appealed to the Appellate Body, it shall not beconsidered for adoption by the DSB until after the completion of the appeal.  Information on the current statusof the Panel Report is available from the WTO Secretariat.WT/DS217/R
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TABLE OF CONTENTS
Page
I. INTRO DUCTION ................................................................................................................. ...1
II. FACTUAL ASPECTS ............................................................................................................. .2
III. PARTIES' REQUESTS FOR FINDINGS AND RECO MMENDATIONS ........................4
A. C OMPLAINING PARTIES ...............................................................................................................4
B. U NITED STATES ...........................................................................................................................5
IV. ARGUMENTS OF THE PART IES ........................................................................................5
A. FIRST WRITTEN SUBMISSION OF THE COMPLAINING PARTIES ......................................................6
1. Australia .................................................................................................................... ................6
2. Brazil....................................................................................................................... ...................9
3. Canada ....................................................................................................................... ..............15
4. Chile and Japan .............................................................................................................. ........24
5. European Communities, India, Indonesia and Thailand ....................................................32
6. Korea........................................................................................................................ ................40
7. Mexico....................................................................................................................... ...............45
B. FIRST WRITTEN SUBMISSION OF THE UNITED STATES ................................................................51
C. FIRST ORAL STATEMENTS OF THE COMPLAINING PARTIES ........................................................55
1. Australia .................................................................................................................... ..............55
2. Brazil....................................................................................................................... .................59
3. Canada ....................................................................................................................... ..............64
4. Chile ........................................................................................................................ .................68
5. European Communities......................................................................................................... .71
6. India ........................................................................................................................ .................75
7. Indonesia.................................................................................................................... ..............77
8. Japan........................................................................................................................ ................78
9. Korea........................................................................................................................ ................82
10. Mexico...................................................................................................................... ................84
11. Thailand.................................................................................................................... ...............90
D. FIRST ORAL STATEMENT OF THE UNITED STATES ......................................................................91
E. ANSWERS OF COMPLAINANTS TO QUESTIONS FROM THE PANEL ...............................................96
1. Australia .................................................................................................................... ..............96
2. Brazil....................................................................................................................... ...............102
3. Canada ....................................................................................................................... ............108
4. Chile ........................................................................................................................ ...............116WT/DS217/R
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5. European Communities, India, Indonesia, Thailand.........................................................123
6. Japan........................................................................................................................ ..............132
7. Korea........................................................................................................................ ..............141
8. Mexico....................................................................................................................... .............145
F. A NSWERS OF THE UNITED STATES TO QUESTIONS FROM THE PANEL , CHILE AND THE
EUROPEAN COMMUNITIES ......................................................................................................151
1. Answers of the United States to questions from the Panel................................................151
2. Answers of the United States to questions from Chile.......................................................154
3. Answers of the United States to questions from the European Communities.................156
G. SECOND WRITTEN SUBMISSIONS OF THE COMPLAINING PARTIES ............................................156
1. Australia .................................................................................................................... ............156
2. Brazil....................................................................................................................... ...............164
3. Canada ....................................................................................................................... ............169
4. Chile and Japan .............................................................................................................. ......178
5. European Communities, India, Indonesia and Thailand ..................................................185
6. Korea........................................................................................................................ ..............193
7. Mexico....................................................................................................................... .............198
H. S ECOND WRITTEN SUBMISSION OF THE UNITED STATES .......................................................205
I. SECOND ORAL STATEMENTS OF THE COMPLAINING PARTIES ..................................................213
1. Australia .................................................................................................................... ............213
2. Brazil....................................................................................................................... ...............216
3. Canada ....................................................................................................................... ............220
4. Chile ........................................................................................................................ ...............224
5. European Communities........................................................................................................2 27
6. India ........................................................................................................................ ...............232
7. Indonesia.................................................................................................................... ............233
8. Japan........................................................................................................................ ..............234
9. Korea........................................................................................................................ ..............237
10. Mexico...................................................................................................................... ..............241
11. Thailand.................................................................................................................... .............246
J. SECOND ORAL STATEMENT OF THE UNITED STATES ................................................................247
K. COMPLAINING PARTIES ' ANSWERS TO QUESTIONS FROM THE PANEL AFTER THE
SECOND MEETING ....................................................................................................................251
1. Australia .................................................................................................................... ............251
2. Brazil....................................................................................................................... ...............253
3. Canada ....................................................................................................................... ............257WT/DS217/R
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4. Chile ........................................................................................................................ ...............264
5. European Communities, India, Indonesia and Thailand ..................................................267
6. Japan........................................................................................................................ ..............274
7. Korea........................................................................................................................ ..............279
8. Mexico....................................................................................................................... .............282
L. UNITED STATES ' ANSWERS TO QUESTIONS FROM THE PANEL AFTER THE SECOND
MEETING ............................................................................................................................... ...288
V. ARGUMENTS OF THE THIRD PART IES ......................................................................292
VI. INTERIM REVIEW .............................................................................................................2 93
A. U NITED STATES .......................................................................................................................293
B. M EXICO ............................................................................................................................... ....294
C. C ANADA ............................................................................................................................... ...295
D. A USTRALIA .............................................................................................................................29 5
E. J APAN ............................................................................................................................... .......295
F. E UROPEAN COMMUNITIES ......................................................................................................295
G. K OREA ............................................................................................................................... ......296
VII. FINDINGS................................................................................................................... ..........296
A. PROCEDURAL ISSUES ...............................................................................................................296
1. Submission of new evidence .................................................................................................29 6
2. Issuance of separate reports................................................................................................. 297
B. AD ARTICLE 18.1 AND SCM ARTICLE 32.1, AND PARAGRAPHS 2 AND 3 OF GATT
ARTICLE VI – SPECIFIC ACTION AGAINST DUMPING /SUBSIDY .................................................298
1. Introduction................................................................................................................. ..........298
2. The standard for determining whether or not a measure constitutes a "specific
action against dumping" ......................................................................................................30 0
3. Does the CDSOA act specifically in response to dumping, in the sense that
CDSOA payments may be made only in situations presenting the constituent
elements of dumping?........................................................................................................... 302
4. Is the CDSOA a specific action against dumping?.............................................................303
5. Is the CDSOA permitted by footnotes 24 and 56 of the AD and SCM Agreements
respectively? .................................................................................................................. ........312
6. Conclusion ................................................................................................................... ..........313
C. AD ARTICLE 5.4/ SCM ARTICLE 11.4 - STANDING .....................................................................313
1. Arguments of the parties..................................................................................................... .313
2. Evaluation by the Panel...................................................................................................... ..315
3. Conclusion ................................................................................................................... ..........317
D. AD ARTICLE 8.3/ SCM ARTICLE 18.3 - UNDERTAKINGS ............................................................317WT/DS217/R
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1. Arguments of the parties..................................................................................................... .317
2. Evaluation by the Panel...................................................................................................... ..318
E. DEVELOPING COUNTRY ISSUE – AD ARTICLE 15 .....................................................................321
1. Arguments of the parties..................................................................................................... .321
2. Evaluation by the Panel...................................................................................................... ..321
F. AD ARTICLE 18.4/ SCM ARTICLE 32.5 & WTO ARTICLE XVI :4 - NECESSARY STEPS TO
ENSURE CONFORMITY .............................................................................................................322
1. Arguments of the parties..................................................................................................... .322
2. Evaluation by the Panel...................................................................................................... ..322
G. ADVERSE EFFECTS - SCM ARTICLE 5........................................................................................323
1. Arguments of the parties..................................................................................................... .323
2. Evaluation by the Panel...................................................................................................... ..326
H. SCM ARTICLES 4.10 AND 7.9 ...................................................................................................334
1. Arguments of the parties..................................................................................................... .334
2. Evaluation by the Panel...................................................................................................... ..334
I. GATT ARTICLE X :3(A)..............................................................................................................335
1. Arguments of the parties..................................................................................................... .335
2. Evaluation by the Panel...................................................................................................... ..336
3. Conclusion ................................................................................................................... ..........337
VIII. CONCLUSIONS AND RECOMMENDAT ION................................................................337WT/DS217/R
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LIST OF ANNEXES
ANNEX A
Third Party Submissions and Oral Statements
Contents Page
Annex A-1 Third Party Submission of Argentina A-2
Annex A-2 Third Party Oral Statement of Argentina A-8
Annex A-3 Third Party Submission of Hong Kong, China A-13
Annex A-4 Third Party Oral Statement of Hong Kong, China A-22
Annex A-5 Third Party Submission of Israel A-24
Annex A-6 Third Party Submission of Norway A-27
Annex A-7 Third Party Oral Statement of Norway A-35WT/DS217/R
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I. INTRODUCTION
1.1 On 21 December 2000, Australia, Brazil, Chile, the European Communities, India, Indonesia,
Japan, Korea and Thailand, made a joint request for consultations with the United States of America
under Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes(the “DSU”), Article XXII:1 of the GATT, Artic les 17.2 and 17.3 of the Anti-Dumping Agreement,
and Articles 7.1 and 30 of the Subsidies and Countervailing Measures Agreement (the "SCM
Agreement") regarding the amendment to the Tariff Act of 1930 signed into law by the President on
28 October 2000 with  the title of "Continue d Dumping and Subsidy Offset Act of 2000"
(WT/DS217/1). On 6 February 2001, consultations were held in Geneva, but failed to resolve the
dispute.
1.2 On 21 May 2001, Canada and Mexico requested consultations with the United States pursuant
to Article 4 of the DSU, Article XXII:1 of GAT T 1994, Articles 7.1 and 30 of the SCM Agreement
and Article 17 of the Anti-Dumping Agreement regarding the same matter (WT/DS234/1).
Consultations were held on 29 June 2001 in Geneva, but the parties failed to reach a mutually
satisfactory resolution of the dispute.
1.3 On 12 July 2001, Australia, Brazil, Chile, the European Communities, India, Indonesia,
Japan, Korea and Thailand requested the establishment of a panel pursuant to Articles 4.7 and 6 of the
DSU, Article XXIII of the GATT 1994,  Article 17 of the Anti-Dumping Agreement and Article 30 of
the SCM Agreement, in accordance with the standard terms of reference provided for in Article 7.1 of
the DSU (WT/DS217/5). At its meeting of 23 Augu st 2001, the Dispute Settlement Body (the “DSB”)
established the Panel.
1.4 On 10 August 2001, Canada and Mexico separately requested the establishment of a panel
with respect to the same matter pursuant to Articles 4.7 and 6 of the DSU, Article XXIII of GATT
1994, Article 17 of the Anti-Dumping Agreement and Article 30 of the SCM Agreement
(WT/DS234/12 and WT/DS234/13). At its meeting of 10 September 2001, the DSB agreed to those
requests and, pursuant to Article 9.1 of the DSU, referred the matter to the panel established on23 August 2001 (WT/DS234/14).
1.5 The terms of reference of the Panel are:
“To examine, in the light of the relevant provisions in the covered agreements cited
by Australia, Brazil, Chile, the European Communities, India, Indonesia, Japan,
Korea and Thailand in document WT/DS217/5, by Canada in document
WT/DS234/12 and by Mexico in docume nt WT/DS234/13, the matters referred by
Australia, Brazil, Canada, Chile, the European Communities, India, Indonesia, Japan,Korea, Mexico and Thailand to the DSB in those documents and to make such
findings as will assist the DSB in making the recommendations or in giving the
rulings provided for in those agreements.”
1.6 On 15 October 2001, Australia, Brazil, Canada, Chile, the European Communities, India,
Indonesia, Japan, Korea, Mexico and Thailand requested the Director-General to determine thecomposition of the Panel, pursuant to paragraph 7 of Article 8 of the DSU.  This paragraph provides:
"If there is no agreement on the panelists within 20 days after the date of the
establishment of a panel, at the request of either party, the Director-General, in
consultation with the Chairman of the DSB and the Chairman of the relevant Council
or Committee, shall determine the composition of the panel by appointing thepanellists whom the Director-General considers most appropriate in accordance withWT/DS217/R
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any relevant special or additional rules or procedures of the covered agreement or
covered agreements which are at issue in the dispute, after consulting with the parties
to the dispute.  The Chairman of the DSB shall inform the Members of the
composition of the panel thus formed no later than 10 days after the date theChairman receives such a request."
1.7 On 25 October 2001, the Director-General accordingly composed the panel as follows:
Chairman: H.E. Mr. Luzius Wasescha
Members: Mr. Maamoun Abdel-Fattah
Mr. William Falconer
1.8 Argentina, Canada, Costa Rica, Hong Kong, Chin a, Israel, Mexico and Norway reserved their
third party rights in DS217, and were considered as third parties in the single Panel.  Australia, Brazil,
Canada (in respect of Mexico's complaint), the European Communities, India, Indonesia, Japan,Korea, Mexico (in respect of Canada's complaint) and Thailand reserved their third party rights in
DS234.
1.9 The Panel met with the parties on 5 – 6 February 2002 and 12 March 2002.  It met with the
third parties on 6 February 2002.
1.10 The Panel submitted its interim report to the parties on 17 July 2002.  The Panel submitted its
final report to the parties on 2 September 2002.
II. FACTUAL ASPECTS
2.1 This dispute concerns the Continued Dumping and Subsidy Offset Act of 2000 (the
“CDSOA” or the “Offset Act”), which was enacted on 28 October 2000 as part of the Agriculture,
Rural Development, Food and Drug Administration and Related Agencies Appropriations Act, 2001.
1
The CDSOA amends Title VII  of the Tariff Act of 1930 by adding a new section 754 entitled
Continued Dumping and Subsidy Offset.2 Regulations prescribing administrative procedures under the
Act were brought into effect on September 21, 2001.3
2.2 The CDSOA provides that :
Duties assessed pursuant to a countervailing duty order, an anti-dumping duty order,
or a finding under the Antidumping Act of 1921 shall be distributed on an annual
basis under this section to the affected domestic producers for qualifyingexpenditures. Such distribution shall be known as “the continued dumping and
subsidy offset”.
4
2.3 The term “affected domestic producers” means :5
                                                     
1 Public Law 106-387, 114 Stat. 1549, 28 October 2000, sections 1001-1003.
2 Codified as 19 USC 1675c.
3 Distribution of Continued Dumping and Subsidy Offset to Affected Domestic Producers , 66 Fed. Reg.
48,546 (US Customs Service 21 Sept. 2001) (final rule) (codified at 19 CFR §§ 159.61 – 159.64) (the"Regulations").
4 United States Tariff Act of 1930, Section 754 (a).
5 Ibid., Section 754(b)(1).WT/DS217/R
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a manufacturer, producer, farmer, rancher, or worker representative (including
associations of such persons) that –
(A) was a petitioner or interested party in support of the petition with respect
to which an anti-dumping duty order, a finding under the Antidumping  Act of 1921,or a countervailing duty order has been entered, and
(B) remains in operation.
Companies, business, or persons that have ceased the production of the product
covered by the order or finding or who have been acquired by a company or business
that is related to a company that opposed the investigation shall not be an affected
domestic producer.
6
2.4 In turn, the term “qualifying expe nditure” is defined by the CDSOA  as “expenditure[s]
incurred after the issuance of the anti-dumping duty finding or order or countervailing duty order in
any of the following categories:
(A) Manufacturing facilities.
(B) Equipment.
(C) Research and development.(D) Personnel training.
(E) Acquisition of technology.
(F) Health care benefits to employees paid for by the employer.
(G) Pension benefits to employees paid for by the employer.
(H) Environmental equipment, training or technology.(I) Acquisition of raw materials and other inputs.
(J) Working capital or other funds needed to maintain production.”
7
2.5 The CDSOA provides that the Commissioner of  Customs shall establish in the Treasury of
the United States a special account with respect to each order or finding8 and deposit into such
account all the duties assessed  under that Order.9  The Commissioner of Customs shall distribute all
funds (including all interest earned on the funds) from the assessed duties received in the preceding
fiscal year  to affected domestic producers based on a certification by the affected domestic producer
that he is eligible to receive the distribution and desires to receive a distribution for qualifying
expenditures incurred since the issuance of the order or finding.10 Funds deposited in each special
account during each fiscal year are to be distributed no later than 60 days after the beginning of the
following fiscal year.11 The CDSOA and regulations prescribe that (1) if the total amount of the
certified net claims filed by affected domestic producers does not exceed the amount of the offset
available, the certified net claim for each affected domestic producer will be paid in full, and (2) if the
certified net claims exceed the amount available, the offset will be made on a pro rata  basis based on
each affected domestic producer’s total certified claim.
                                                     
6 The International Trade Commission (the “ITC”) must provide to the US Customs Service
(“Customs”) a list of the affected domestic producers in connection with each order or finding that would
potentially be eligible to receive the offset. See S ection 754 (d) 1 of the United States Tariff Act of 1930.
7 Ibid., § 754(b)(4), 114 Stat. 1549A-73.
8 United States Tariff Act of 1930, Section 754(e)(1).
9 Ibid., Section 754(e)(2)
10 Ibid., Section  754(d)(2) and (3).
11 Ibid., Section 754 (c)WT/DS217/R
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2.6 Special accounts are to be terminated after “(A) the order or finding with respect to which the
account was established has terminated; (B) all entries relating to the order or finding are liquidated
and duties assessed collected; (C) the Commissioner has provided notice and a final opportunity to
obtain distribution pursuant to subsection (c); and (D) 90 days has elapsed from the date of the noticedescribed in subparagraph (C).”  All amounts that remain unclaimed in the Account are to be
permanently deposited into the general fund in the US Treasury.
12
2.7 The CDSOA applies with respect to all anti-dumping and countervailing duty assessments
made on or after 1 October 200013 pursuant to an anti-dumping order or a countervailing order or a
finding under the Antidumping Act of 1921 in effect on 1 January 1999 or issued thereafter.14
III. PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS
A. COMPLAINING PARTIES
3.1 The complaining parties submit that the express purpose of the Offset Act is to remedy the
"continued dumping or subsidisation of imported products after the issuance of anti-dumping orders
or findings or countervailing duty orders". Accordin g to the complaining partie s, with that objective,
the Offset Act mandates the US customs authorities to distribute on an annual basis the duties
assessed pursuant to a countervailing duty order, an anti-dumping order or a finding under theAntidumping Act of 1921 to the "affected domestic producers" for their "qualifying expenses" (these
duties are referred to below as "offsets").
3.2 The complainants submit that the Offset Act constitutes mandatory legislation, which can
itself be subject to WTO dispute settlement procedures since it leaves no discretion to the competent
authorities which must pay the "offsets" whenever the conditions stipulated in the Offset Act are
present.
3.3 The complaining parties argue that the "offsets" constitute a specific action against dumping
and subsidisation that is not contemplated in  the GATT, the Anti-Dumping Agreement (the "AD
Agreement") or the SCM Agreement. Moreover, in the complaining parties' view, the "offsets"
provide a strong incentive to the domestic producers to file or support petitions for anti-dumping oranti-subsidy measures, thereby distorting the application of the standing requirements provided for in
the AD Agreement and the SCM Agreement. In addition, the complaining parties argue that the Offset
Act makes it more difficult for exporters subject to an anti-dumping or countervailing duty order to
secure an undertaking with the competent authorities, since the affected domestic producers will have
a vested interest in opposing such undertakings in favour of the collection of anti-dumping or
countervailing duties. In the view of the complainin g parties this is not a reasonable and impartial
administration of the US laws and regulations implementing the provisions of the AD Agreement andthe SCM Agreement regarding standing determinations and undertakings.
3.4 For the above reasons, Australia
15, Brazil, Canada, Chile, the European Communities, India,
Indonesia, Japan, Korea, Mexico and Thailand consider that the Act is, in several respects, in
violation of the following provisions:
                                                     
12 United States Tariff Act of 1930, § 754(e)(4), CDSOA § 1003(a), 114 Stat. 1549A-75. Regulations,
66 Fed. Reg. 48,546, 48,554 (19 C.F.R. § 159.64(d)).
13 Section 1003 (c) of the CDSOA.
14 United States Tariff Act of 1930, Section 754(d)(1).
15 We note that Australia did not pursue any claims in relation to GATT Article X(3)(a) and Articles 8
AD and 18 SCM Agreement.WT/DS217/R
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- Article  18.1 of the AD Agreement, in conjunction with Article VI:2 of the
GATT and Article 1 of the AD Agreement;
- Article 32.1 of the SCM Agreement, in conjunction with Article VI.3 of the
GATT and Articles 4.10, 7.9 and 10 of the SCM Agreement;16
- Article X (3)(a) of the GATT;
- Article 5.4 of the AD Agreement and Article 11.4 of the SCM Agreement;
- Article 8 of the AD Agreement and Article 18 of the SCM Agreement;  and
- Article XVI.4 of the Marrakesh Agreement establishing the WTO,
Article 18.4 of the AD Agreement and Article 32.5 of the SCM Agreement.
3.5 The complaining parties submit that by being inconsistent with the above provisions, the
Offset Act nullifies or impairs the benefits accruing to them under the cited agreements.
3.6 Furthermore, Mexico considers that the payments made under the Offset Act constitute
specific subsidies within the meaning of Article 1 of the SCM Agreement, which causes "adverse
effects" to its interests, in the sense of Article 5 of the SCM Agreement, in the form of nullification
and impairment of benefits accruing directly or indirectly to Mexico.  For this reason, Mexico
considers that the Act is also in violation of Article 5 of the SCM Agreement.
3.7 India and Indonesia also submit that the CDSOA undermines AD Article 15 on special and
differential treatment for developing country Members.
B. UNITED STATES
3.8 The United States argues that the CDSOA authorizes government payments and that the
distributions made under the Act are consistent with GATT Article VI and the Anti-dumping andSCM Agreements because they are not actionable subsidies and are not “action against” dumping or a
subsidy.
3.9 The United states submits that there is no evidence either that the CDSOA has been or will be
administered in an unreasonable or partial manne r (Art. X:3(a) of GATT 1994) so as to affect
standing and undertaking determinations in anti-dumping and countervailing duty investigations.According to the United States, the complaining parties have failed to establish a prima facie  case of a
WTO violation, and in the absence of a specific violation of another WTO Agreement provision, the
complaining parties’ claims under Article XVI:4 of the Marrakesh Agreement establishing the WTO ,
Article 18.4 of the Antidumping Ag reement, and Article 32.5 of the SCM Agreement must also fail.
IV. ARGUMENTS OF THE PARTIES
4.1 The main arguments, presented by the parties in their written submissions, oral statements and
answers to questions, are summarized below.
                                                     
16 Canada and Mexico claimed a violation of Article 32.1 of the SCM Agreement, in conjunction with
Article VI.3 of the GATT and Article 10 of the SCM Agreement. WT/DS234/12 and WT/DS234/13.WT/DS217/R
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A. FIRST WRITTEN SUBMISSION OF THE COMPLAINING PARTIES
1. Australia
(a) Introduction
4.2 Australia, acting jointly and severally with a number of other Members, brings this dispute
against the United States concerning the Continued Dumping and Subsidy Offset Act  (“the Act”),
which amends Title VII of the Tariff Act of 1930  (“the Tariff Act”) through the insertion of a new
section 754.  The Act was included in Public Law 106-387 (“the Agriculture Appropriations Act”),
and was signed into law by the President of the United States on 28 October 2000.  The Act applies to
all anti-dumping and countervailing duty assessments made on or after 1 October 2000.
4.3 The Act as implemented provides that:
− duties assessed by the United States following the issue of a countervailing duty order, an
anti-dumping duty order or a finding under the Antidumping Act of 1921
− shall be distributed
• to any manufacturer, farmer, rancher, or worker representative (including associations
of such persons) that
• was a petitioner or interested party in support of the petition for that
countervailing duty order, anti-dumping duty order or finding under the
Antidumping Act of 1921; and
• remains in operation;
• for expenditure on approved items incurred in relation to the like product after the
countervailing duty order, anti-dumping duty order or finding under the Antidumping
Act of 1921 was issued.
(b) Legal Argument
(i) The Act is mandatory legislation
4.4 According to Australia, the Act leaves no discre tion with respect to its implementation.  The
Act compels the distribution, by the Commissioner for Customs, of duties assessed pursuant to ananti-dumping order or finding or to a countervaili ng duty order.  When considered in light of the
findings of the Appellate Body in United States – Antidumping Act of 1916  (hereinafter US – 1916 AD
Act), the Act is mandatory legislation within the meaning of the concept of mandatory as distinct from
discretionary legislation as it has been developed and applied in both GATT and WTO jurisprudence.
As such, the Act may be challenged in WTO dispute settlement proceedings.
(ii) The Act is inconsistent with Article 18.1 of the Anti-Dumping Agreement, in conjunction with
Article VI:2 of the GATT 1994 and Arti cle 1 of the Anti-Dumping Agreement
4.5 Australia argues that the scope of GATT Article VI:2 and Articles 1 and 18.1 of the Anti-
Dumping Agreement was examined in detail in US – 1916 AD Act .  According to Australia, in that
case, the Appellate Body found that Article 18.1 of the Anti-Dumping Agreement, in conjunction withWT/DS217/R
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GATT Article VI:2 and Article 1 of the Anti-Dumpin g Agreement, are the only provisions applicable
to a measure that is a specific action against dumping and prohibit any action that is not a definitive
anti-dumping duty, a provisional measure or a price undertaking.  To the extent that a measure
provides for “specific action against dumping” other than those permissible responses, it willnecessarily be inconsistent with Article 18.1 of the Anti-Dumping Agreement, read in conjunction
with GATT Article VI:2 and Article 1 of the Anti-Dumping Agreement.
4.6 In Australia's view, an “anti-dumping duty order” within the meaning of the Act is the
administrative instrument published by the relevant authority establishing the anti-dumping duty that
may be imposed on a dumped product.  It is the formal determination by the United States that there
exists a situation presenting the constituent elements of dumping.
4.7 According to Australia, a finding under the Antidumping Act of 1921 within the meaning of
the Act is the administrative instrument published by the relevant United States authority that
formally determined that there existed a situation presenting the constituent elements of dumping.
Although repealed in 1979, some findings under the Antidumping Act of 1921 continue in effect, and
the United States continues to assess duties pursuant to those findings.
4.8 Australia argues that “Duties assessed pursuant to … an anti-dumping duty order, or a finding
under the Antidumping Act of 1921” under the Act refers to duties that may only be assessed in
response to situations presenting the constituent elements of dumping within the meaning of GATT
Article VI:1, as elaborated by Article 2 of the Anti-Dumping Agreement.  They are thus a “specific
action against dumping of exports from another Me mber” within the meaning of Article 18.1 of the
Anti-Dumping Agreement.
4.9 However, Australia submits, the Act does not mandate either a definitive anti-dumping duty,
a provisional measure or a price undertaking, which are the only permissible responses to dumping
provided by GATT Article VI, and in particular GATT Article VI:2, read in conjunction with the
Anti-Dumping Agreement.  Instead, the Act mandates that if duties are assessed:
- in response to situations presenting the constituent elements of dumping,
- and there exists injury, threat of injury or retardation caused by that dumping
to an industry in the United States,
then those duties must be distributed to the domestic producers affected by the dumping conduct who
supported the application for an anti-dumping duty investigation. According to Australia, by
promulgating the Act, the United States has violated  Article 18.1 of the Anti-Dumping Agreement, in
conjunction with GATT Article VI:2 and Article 1 of the Anti-Dumping Agreement.
(iii) The Act is inconsistent with Article 32.1 of the SCM Agreement, in conjunction with
Article VI:3 of the GATT 1994 and Articles 4.10, 7.9 and 10 of the SCM Agreement
4.10 In Australia's view, the Act mandates a specific action in response to situations presenting the
constituent elements of subsidisation when considered in the light of the reasoning that underpinned
the findings of the Panel and Appellate Body in US – 1916 AD Act .
4.11 Australia argues that the distribution of assessed duties is not simply a subsidy to producers
but is contingent on, and linked to, positive determinations of countervailing duty orders.  The duties
are only distributed to affected producers who have supported the original petition and in situations
where there has been a countervailing duty order issued.  If duties are not collected, i.e., if there is no
countervailing duty order, then the duties are not distributed to affected producers for eligibleWT/DS217/R
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expenditure on the product which has been the subject of a countervailing duty investigation.  The
affected domestic producers will not receive a distribution of duties assessed unless they have
supported the original petition and unless a special account has been established in response to a
countervailing duty order.  When the countervailing duty order is terminated, so too is the specialaccount.  The affected producers are no longer “entitled” or eligible to receive the duties assessed.
4.12 Australia asserts that the Act mandates action in response to situations presenting the
constituent elements of subsidisation and is therefore a specific action against a subsidy within the
meaning of Article 32.1 of the SCM Agreement, in conjunction with GATT Article VI.  However,
Australia notes, the Act does not mandate a countervailing duty, a provisional measure, a voluntary
undertaking, or a countermeasure authorised by the DSB, which are the only responses to a subsidy
permitted by GATT Article VI, read in conjunction with the SCM Agreement.
4.13 According to Australia, the Act ensures that both a countervailing duty and a counter-subsidy
are applied to the benefit of affected domestic producers.  The Act mandates a measure to
counterbalance, or act against, the subsidy over and above the assessed level of subsidisation.  The
Act therefore mandates an additional form of relief contrary to Article 10 of the SCM, which provides
that only one form of relief is available – either a countervailing duty or a countermeasure.  The Actalso imposes countermeasures on products from other Members not subject to the countervailing duty
orders.  The distribution of duties assessed to the affected domestic producers is based on qualifying
expenditure incurred in relation to the product which has been the subject of a countervailing duty
order.  These distributed duties amount to counter-subsidies to affected domestic producers which
affect the products of competing WTO Members other than those subject to the (original)countervailing duty order.  Australia asserts that, as such, the offsets provided under the Act amount
to counter-subsidies which affect the export of products of competing WTO Members not subject to
the original countervailing duty order.
4.14 In Australia's view, the Act also mandates action which is to counterbalance the effects of a
subsidy of another WTO Member without authorisat ion by the DSB.  Australia argues that such
action is only permissible where the subsidising Member has failed to implement a recommendation
of the DSB regarding the challenged subsidy.
4.15 Australia submits that by promulgating the Act, the United States has violated its obligations
under Article 32.1 of the SCM, in conjunction with GATT Article VI and Articles 4.10, 79 and 10 of
the SCM.
(iv) The Act is inconsistent with Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the
SCM Agreement
4.16 Australia argues that the Act provides a direct and tangible financial incentive to domestic
producers of the like product that is alleged to have been dumped or subsidised to support an
application for an anti-dumping or countervailing duty investigation.  According to Australia, the Act
creates a systemic bias in favour of such an application succeeding, making it easier – indeed
providing active encouragement – for the needed levels of industry support to be reached in aparticular case.  In the view of Australia, the Act does not accord either with the principle that the
legal framework of a rules-based system must itself be impartial and objective so as not to encourage
or discourage a particular outcome, or with the principle of good faith that informs the covered
agreements.  Australia submits that by promulgating the Act, the United States distorts, or threatens to
distort, the requirement that an application be made “by or on behalf of the domestic industry”, andhas violated Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement.WT/DS217/R
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(v) The Act is inconsistent with Article XVI:4 of the WTO Agreement, Article 18.4 of the Anti-
Dumping Agreement and Article 32.5 of the SCM Agreement
4.17 Australia argues that by violating the provisions of the Anti-Dumping and SCM Agreements
as outlined in Australia’s submission, the United States has also violated Article XVI:4 of the WTOAgreement, as well as Article 18.4 of the Anti-Dumping Agreement and/or Article 32.5 of the SCM
Agreement, which each require a Member to ensure the conformity of its laws, regulations and
administrative procedures with its WTO obligations.
2. Brazil
(a) Introduction
4.18 Brazil  has brought this dispute against the United States to challenge the consistency of the
Continued Dumping and Subsidy Offset Act of 2000 (hereinafter the “Byrd Amendment”)
17 with
United States obligations under the WTO Agreements.  According to Brazil, this Act requires US
authorities to distribute the proceeds of duties assessed pursuant to anti-dumping and countervailing
duty orders among those domestic producers that supported the requests for the investigations which
ultimately led to the imposition and assessment of such duties.
4.19 Brazil challenges the consistency of the Byrd Amendment with Article X:3(a) of the
GATT 1994, Article VI of the GATT 1994 as interpreted by Articles 18.1, 5.4, 8.1 and 18.4 of the AD
Agreement and Articles 10, 4.10, 7.9, 32.1, 11.4, 18.1 and 32.5 of the SCM Agreement, and
Article XVI of the Agreement Establishing the WTO.
(b) Systemic issues raised by this proceeding
(i) Broadening the remedies available under WTO
4.20 Brazil argues that a finding by the panel that the Byrd Amendment is consistent with US
WTO obligations under the GATT 1994, the AD Agreement and the SCM Agreement has
implications that go far beyond these three agreemen ts.  In essence, such a finding would endorse the
use of two forms of remedies by WTO Members to offset damages to their industries under the
covered agreements: (1) the payment of monetary damages; and (2) the subsidization of injured
industries in the importing country to allegedly offset damages from dumped or subsidized imports.
In Brazil's view, since these are not remedies provided in the relevant agreements, a finding that such
actions are consistent with those agreements is tantamount to a finding that, irrespective of the
remedies available under WTO agreements, a government may unilaterally take whatever steps it
deems appropriate to promote further deterrence of the complained of behaviour or to “offset” any
adverse consequences of the complained of behaviour.  Brazil argues that this is not limited to the
agreements at issue in this proceeding, but would appear applicable to any agreements whichauthorize the use of tariffs as a mechanism to redress grievances.
(ii) Encouraging a proliferation in proceedings under the relevant agreements
4.21 Brazil asserts that there is little question that, if the Byrd Amendment is found to be consistent
with the GATT 1994, the AD Agreement and the SCM Agreement, other countries will quickly
follow the US lead.  Member governments will have difficulty telling their aggrieved industries thatthey can not get Byrd Amendment like monetary damages and extra deterrent effects when industries
                                                     
17 Pub. L. 106-387, 114 Stat. 1549.  Title X of the law, The Continued Dumping and Subsidy Offset
Act of 2000, added section 754(a) to the Tariff Act of 1930. See,  Common Exhibits 1 and 15.WT/DS217/R
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in the largest economy in the world are enjoying th ese additional benefits.  In short, according to
Brazil, the Byrd Amendment provisions, without ever being negotiated by WTO Members or
incorporated into any of the agreements, will become a part of the GATT 1994, the AD Agreement
and the SCM Agreement.
4.22 Brazil argues that the proliferation of monetary damages will increase the incidence of anti-
dumping and countervailing measures both in the United States and, increasingly as this practice
proliferates, in other countries. Monetary damages  make it more attractive for a corporation or trade
association to commit resources to anti-dumping a nd countervailing duty investigations.  According to
Brazil, the additional “deterrent” effect claimed by the bill’s sponsors will also make anti-dumping
and countervailing duty measures more attractive.
(c) The Byrd Amendment remedy provides an additional remedy for dumping and subsidization
like the remedies under the Anti-Dumping Act of 1916 which were found to be inconsistent
with US WTO obligations
(i) The remedies required under the Byrd Amendment are non-discretionary and mandatory and,
therefore, actionable under WTO precedent
4.23 Brazil asserts that it is well established in the jurisprudence of both GATT and WTO panels
that legislation can be challenged independently of its application in specific circumstances where that
legislation is mandatory, leaves no discretion as to its application and implementation, and is
inconsistent with WTO obligations of a Member .  According to Brazil, the Byrd Amendment is
mandatory and does not allow the US authorities to decide whether or not to distribute anti-dumping
and countervailing duties to the parties that support the request for the imposition of such duties.
(ii) The remedy provided by the Byrd Amendment is unquestionably a specific action against
dumping
4.24 Brazil argues that the panel and Appellate Body findings in United States – Anti-dumping Act
of 1916  focused on whether Article VI of the GATT 1994 as interpreted by the AD Agreement limits
specific actions against dumping to those actions provided for in Article VI or the AD Agreement.18
In reaching its conclusion, the Panel was quite explicit in the limitations on actions against dumping,
stating “…that only measures in the form of anti-dumping duties may be applied to counteract
dumping….”19  The Appellate Body reached an identical conclusion.”20
4.25 According to Brazil, the Byrd Amendment is an action which is taken in response to
situations presenting the constituent elements of dumping, precisely the situation addressed by the
Appellate Body in United States – Anti-Dumping Act of 1916.   Entitlement to the Byrd Amendment
remedies is based entirely on a determination of dum ping or subsidization under the relevant US laws
implementing the AD and SCM Agreements.
                                                     
18 Report of the Panel, United States – Anti-Dumping Act of 1916,  WT/DS136/R, 31 March 2000 and
WT/DS162/R, 29 May 2000,  para.6.230.  Report of the Appellate Body, United States – Anti-Dumping Act of
1916 , WT/DS136/AB/R, WT/DS162/AB/R, 28 August 2000,  paras. 127-133.
19 Report of the Panel, United States – Anti-Dumping Act of 1916 ,  para. 6.230.
20 Report of the Appellate Body, United States – Anti-Dumping Act of 1916 ,  para. 126.WT/DS217/R
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(iii) The remedy provided by the Byrd Amendment is an additional remedy, like the remedy at
issue in the Anti-dumping Act of 1916 proceeding
4.26 In the view of Brazil, the objective of anti-dumping measures is clearly articulated in
Article VI:2 of the GATT 1994 when it states that anti-dumping duties are to be imposed “in order to
offset or prevent dumping.”  Thus, Brazil argues, the objective is remedial – the prevention of
dumping or, where measures do not prevent dumpi ng, to offset the dumping.  The AD Agreement
provides two remedies: (1) imposition of anti-dumping duties; and (2) price undertakings.  Neither
Article VI of GATT 1994 nor the AD Agreement cont emplate an additional remedy that compensates
the injured industry in the importing country by awarding damages for the past effects of the
dumping.
4.27 Brazil asserts that in United States – Anti-Dumping Act of 1916 , the panel decision was based
on the fact that the law at issue provided “for other remedies than anti-dumping duties” and that this
was not “in accordance with the provisions of GATT 1994” and “Article 18.1” of the AD
Agreement.21  The imposition of fines or imprisonment and the recovery of damages were available
under the 1916 Act, in addition to the imposition of anti-dumping duties.  Thus, the remedy which the
panel and Appellate Body found to be inconsistent with Article VI of the GATT 1994 andArticle 18.1 of the AD Agreement included the very same remedy which is at issue in this proceeding,
namely the awarding of monetary damages to parties that have been found to be injured by dumping.
In Brazil's view, both the damages awarded by the Byrd Amendment and the damages awarded under
the 1916 Act are based on a demonstration of the constituent elements of dumping.  According to
Brazil, the fact that, under the Byrd Amendment, “damages” are paid out of the revenues of anti-dumping duties collected and that, under the 1916 Act, “damages” are paid directly by the entities
involved in the dumping, is irrelevant.  In both cases, the remedy being applied is a remedy intended
to offset the injury by rewarding damages to the complaining parties.
4.28 Brazil argues that, according to its sponsors, the Byrd Amendment was intended to provide an
additional “deterrent” to dumping and subsidizati on in the form of exporting entities assisting
competitors at their own expense.
22  Also described as a “double hit”23, the objective clearly was to
provide an additional or greater remedy than just anti-dumping or countervailing duties.
(iv) The logic of the Appellate Body finding in United States – Anti-Dumping Act of 1916  applies
equally to the Byrd Amendment’s distribution of the revenues from countervailing duties to
complaining US entities
4.29 Brazil asserts that Article 32.1 of the SCM Agreement is the counterpart of Article 18.1 of the
AD Agreement and prohibits Members from taking “specific action against a subsidy” of anotherMember, unless that action is consistent with Article VI:3 of the GATT 1994, as interpreted by the
SCM Agreement.  Thus, Brazil argues, under the reasoning of United States – Anti-Dumping Act of
1916,  the same limitations apply to subsidy remedies as apply to anti-dumping remedies.
(v) The Byrd Amendment remedies are more available than remedies under the 1916 Act
4.30 According to Brazil, the remedies available under the Anti-Dumping Act of 1916 are not as
easily obtained as the remedies under the Byrd Amendment.  As discussed in the Report of the
                                                     
21 Report of the Panel, United States – Anti-Dumping Act of 1916 ,  paras. 6.204-6.205.
22 144 Cong. Rec. S7883-7884 (daily ed. 9 July 1998) (Statement of Senator DeWine).
Senator DeWine’s bill was introduced as S. 2281 in the Senate on 9 July 1998 and by Representative Regula asH.R. 2509 in the House of Representatives on 18 September 1997.
23 145 Cong. Rec. S497-498 (daily ed. 20 Jan. 1999).WT/DS217/R
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Appellate Body, the 1916 Act imposes certain requir ements, in addition to showing the existence of
injurious dumping, on parties seeking damages and on the government in order to obtain the requested
civil or criminal remedy.24  Indeed, the requirements of the Anti-Dumping Act of 1916 are such that
the act has seldom been used and there have never been court imposed sanctions or remedies.25  In
contrast, Brazil argues, the Byrd Amendment is applicable to every situation where anti-dumping
and/or countervailing duties are imposed and all companies that supported the request for the
investigation which led to the imposition of duties are automatically eligible to receive the monetary
damage payments.
(d) The Byrd Amendment compromises objective assessments in determining whether the
request for an investigation has the minimum level of support required for initiation under
Article 5.4 of the AD agreement and Article 11.4 of the SCM Agreement
(i) Under the Byrd Amendment, it is impossible for US authorities to objectively and impartially
determine whether support is based on the possible monetary rewards or the desire to seek
imposition of anti-dumping and countervailing duties
4.31 Brazil argues that, under Article 17.6 of the AD Agreement, authorities are held to certain
standards in their determinations of the facts, spec ifically whether authorities’ establishment of the
facts was proper and whether their evaluation was unbiased and objective.  Article X:3 of the
GATT 1994, applicable to investigations under either the AD or SCM Agreements, requires that laws,
regulations, decisions and rulings be administered in an “impartial and reasonable manner.”  The
Appellate Body has stated that the notion of “good faith” is incorporated into Article X:3 and
“informs the provisions of the Anti-Dumping Agreement, as well as other covered agreements.”26
Thus, there is clearly a threshold of objectivity, impartiality and good faith in acting under the
relevant agreements.
4.32 According to Brazil, both Article 5.4 of the AD Agreement and 11.4 of the SCM Agreement
require authorities to make determinations rega rding the level of support for the request for
investigations under the AD and SCM Agreements respectively.27  The relevant request is seeking an
investigation that will result in the imposition of remedial measures to offset the effects of any
injurious dumping or subsidization found during th e investigation.  The question under both Articles
is whether there is sufficient industry support for the initiation of investigations to obtain such
remedial measures.
4.33 Brazil submits that the ability of US authorities to make such a determination in light of the
existence of the Byrd Amendment is seriously, ind eed fatally, compromised.  The result of either an
anti-dumping or a countervailing duty investigation under the Byrd Amendment will also affectwhether those parties supporting the request for an investigation are eligible, if the investigation
results in the assessment of either anti-dumping or countervailing duties, for the monetary benefits
provided under the Byrd Amendment.  In Brazil's view, the requesting parties under the Byrd
Amendment no longer have a single interest in pursuing the investigation, namely the imposition of
anti-dumping or countervailing measures.  These parties now have an additional interest, namely
                                                     
24 Report of the Appellate Body, United States – Anti-Dumping Act of 1916,  para. 131-132.
25 Report of the Panel, United States – Anti-Dumping Act of 1916,  para. 6.42.
26 Report of the Appellate Body, United States – Anti-Dumping Measures on Certain Hot-Rolled Flat-
Rolled Carbon-Quality Steel Products from Japan,  WT/DS184/AB/R,  para. 101.
27 Brazil notes that an important concern in the Uruguay Round negotiations, a concern ultimately
reflected in the results, was to ensure that investigations  were only initiated where warranted and, in particular,
where supported by a substantial portion of the industry.  According to Brazil, this, in turn, led to the thresholddeterminations which are being compromised by the Byrd Amendment.  See, T. Stewart (ed.), The GATT
Uruguay Round, A Negotiating History (1986-1992), Vol. II: Commentary, at 1575-88.WT/DS217/R
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qualifying for the monetary benefits provided by the Byrd Amendment.  Logically, Brazil argues,
there is no way that US authorities can distinguish whether support for a request for an investigation is
motivated by the interest in the remedial effects of the anti-dumping and countervailing measures or
by the desire not to forego the possible monetary benefits of an investigation in the form of ByrdAmendment payments.
(ii) Monetary damages will also increase the likelihood of adding respondents in order to
increase the revenues generated by the anti-dumping and/or countervailing duties, usually to
the detriment of smaller suppliers from developing countries
4.34 Brazil asserts that the question of industry support for a request under Article 5.4 of the AD
Agreement and/or Article 11.4 of the SCM Agreement not only relates to the level of industry support
for a request, but also to the scope of that request in terms of the responding countries to be included.Because of the ability of authorities to cumula tively assess the effects of imports from multiple
sources under Article 3.3 and 15.3 of the AD and SC M Agreements respectively, requesting industries
have substantial discretion in determining which countries and how many countries to include within
the scope of the request.  Where anti-dumping and/or countervailing measures are the sole issue,
requesting parties may not wish to expend the additional resources necessary to develop informationon dumping from smaller sources.  The requesting parties may well consider that the costs outweigh
the benefits of pursuing these additional countries.  However, Brazil argues, with the possibility of
now collecting monetary damages on each additional entry of covered merchandise, the evaluation of
the requesting industry may well be altered.  According to Brazil, the question is not solely whether
measures are required on one or more additional suppliers (or groups of negligible suppliers whichtogether account for more than 7 per cent of imports, as permitted under Article 5.8 of the AD
Agreement), but also whether the inclusion of one or more additional suppliers will increase the duty
revenues and, therefore, the amount of monetary damages available for distribution to the industry.  In
Brazil's view, it is thus quite possible that the decision to include specific respondents is as dependent,
if not more dependent, on the prospect of monetary rewards as it is on the need for anti-dumping orcountervailing measures.  Brazil argues that this distortion is most likely to adversely affect smaller
suppliers and developing countries.  Large suppliers are always more likely to be included than small
suppliers simply because of their impact on the market in terms of volume, import penetration and
prices.  Absent a monetary incentive, smaller suppliers are often left out of investigations because the
cost of pursuing duties on these suppliers outweighs the benefits of any duties on such a small volume
of supply.
(e) The Byrd Amendment compromises the ability of  US authorities to terminate or suspend
investigations pursuant to voluntary undertakings under Articles 8.1 and 18.1 of the AD and
SCM Agreements respectively
4.35 Brazil argues that for the same reasons that the Byrd Amendment compromises the ability to
determine the level of support for initiation of an  investigation, it also compromises the ability to
make determinations about  the suspension or termination of investigations under Article 8.1 of theAD Agreement and Article 18.1 of the SCM Agreement.  By virtue of the Byrd Amendment, the
monetary damages awarded from the proceeds of the anti-dumping or countervailing duties collected
have become part of the “remedy” in the United States under its laws implementing the AD and SCM
Agreements respectively.  In becoming a part of the “remedy”, the monetary damages also inevitably
become part of the evaluation of whether the acceptance of voluntary undertakings in lieu of theimposition of duties is an acceptable alternative to address the underlying dumping and/or
subsidization.  According to Brazil, in becoming a part of this evaluation, the issue of monetary
damages becomes an element not contemplated by either the AD or SCM Agreements and, therefore,
compromises the ability of US authorities to evaluate voluntary undertakings in the manner required
by these agreements.WT/DS217/R
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(f) The Byrd Amendment prevents US authorities from administering the US anti-dumping and
countervailing duty laws in a uniform, impartial and reasonable manner as required by
Article X:3(a) of the GATT 1994
4.36 Brazil asserts that while it is clear that the Byrd Amendment violates substantive obligations
of the GATT 1994, the AD Agreement and the SCM Agreement as set forth above, the Byrd
Amendment also leads to the violation of the procedural and due process safeguards of Article X:3(a)
of GATT 1994.  Article X:3(a) imposes an obligation on Members to “administer in a uniform,
impartial and reasonable manner all its laws, regulations, decisions and rulings….”  Furthermore, in
United States – Stainless Steel  the panel affirmed that the anti-dumping laws and regulations were
“laws and regulations” within the meaning of Article X:1 of the GATT 1994 and, therefore, within the
scope of the laws, regulations, decisions and rulings to which Article X:3(a) applies.28
4.37 According to Brazil, the Byrd Amendment fatall y compromises the ability of US authorities
to determine the level of industry support for the imposition of anti-dumping or countervailing
measures.  The issue of support is not limited to the determination of support for the initial requests
under Articles 5.4 and 11.4 of the AD and SCM Agreements respectively.  This issue, Brazil argues,
arises, for example, under Commerce Department regulation 351.222 relating to the revocation ofanti-dumping duty orders.
29  Paragraph (g), for example, provides that the Secretary of Commerce
may revoke an anti-dumping duty order where “producers accounting for substantially all of the
production of the domestic like product to which the order…pertains have expressed a lack of interest
in the order….”30  Similarly, under paragraph (i) of the same regulation, the Secretary may revoke an
order where the “domestic interested parties have provided inadequate response to” the noticeinitiating a 5 year sunset review.  According to Brazil, in these cases, the extent to which the industry
is willing to “express interest” in the continuation of an anti-dumping order or to provide an “adequate
response” in order to avoid the revocation of an ex isting anti-dumping duty order can be crucial to the
outcome.  Indeed, absent the expression of industry interest in a changed circumstances review or an
adequate response in a sunset review, the anti-dumping duty order is automatically revoked.
31  Yet, in
Brazil's view, the industry position is inevitably influenced by the effects of their position – not
opposing a revocation in a changed circumstances revi ew and not providing adequate responses in a
sunset review – on their ability to continue to enjoy monetary damages from the US authorities as
long as the duties remain in place.  According to Brazil, the US authorities in these situations have no
greater ability to make an impartial, objective determ ination regarding the support, or lack thereof, for
the continuation of anti-dumping measures than they have in evaluating the degree of support for the
initial request.  Thus, Brazil argues, how the law is administered in terms of revocations will varydepending on the extent to which a domestic industry is influenced by the desire to continue to obtain
the monetary damage payments.
(g) The Byrd Amendment also violates United States’ obligations to bring its laws into
conformity with the WTO Agreement
4.38 Brazil argues that based on the inconsistencies of the Byrd Amendment with the GATT 1994,
the AD Agreement and the SCM Agreement, the US is in violation of Article XVI:4 of the Marrakesh
Agreement Establishing the World Trade Organization  (WTO Agreement) which requires each
                                                     
28 Report of the Panel, United States - Anti-Dumping Measures on Stainless Steel Plate in Coils and
Stainless Steel Sheet and Strip from Korea - WT/DS179/R, 22 December 2000 (Adopted 1 February 2001)
para. 6.49, n.62.
29 19 CFR 351.222 (2000). See, Common Exhibit 12.
30 19 CFR 351.222(g).
31 19 CFR 351.222(i).WT/DS217/R
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Member to “ensure conformity of its laws, regulations and administrative procedures with its
obligations as provided in” the annexes to that agreement.
(h) Request for findings and recommendations
4.39 Based on the foregoing, Brazil respectfully requests that the Panel find that:
(a) The Byrd Amendment is inconsistent with US obligations under the various
provisions of the GATT 1994, the AD Agreement, the SCM Agreement and the WTO
Agreement;
(b) The specific actions to address dumping and subsidization in the Byrd Amendment
are contrary to Articles VI:2 and VI:3 of the GATT 1994, Article 18.1 of the AD
Agreement, and Articles 10, 4.10, 7.9 and 32.1 of the SCM Agreement;
(c) The financial incentives mandated in the Byrd Amendment and provided to domestic
producers that support requests for anti-dumping and countervailing duty
investigations result in inconsistencies with Articles 5.4 and 11.4 of the AD and SCM
Agreements respectively;
(d) The financial incentives mandated in the Byrd Amendment and provided to domestic
producers prevent US authorities from acting consistently with Articles 8.1 and 18.1of the AD and SCM Agreements respectively;
(e) The Byrd Amendment results in administration of the US anti-dumping and
countervailing duty laws in a manner inconsistent with the procedural safeguards of
Article X:3(a) of the GATT 1994; and
(f) The cumulative violations specified above result in a violation of Article XVI of the
WTO Agreement, Article 18.4 of the AD Agreement, and Article 32.5 of the SCM
Agreement.
4.40 Brazil also requests that the panel recommend th at the United States bring the law at issue
into conformity with its obligations under the ci ted agreements and repeal the Byrd Amendment.
3. Canada
(a) Introduction
4.41 According to Canada, at issue in this dispute is the Continued Dumping and Subsidy Offset
Act of 2000  (CDSOA), a law enacted by the United States to amend Title VII of the Tariff Act of
1930 .
32  The CDSOA requires that duties assessed pu rsuant to anti-dumping or countervailing duty
orders “shall” now be distributed to “affected domestic producers” who qualify for the distribution.
To qualify, producers must file or support an anti-dumping or countervailing duty application (in US
law, a “petition”) that results in the issuance of an order under which duties are collected.  Therefore,Canada argues, in the CDSOA, the US government has enacted law that effectively pays producers to
initiate or support petitions and, because duties can only be paid out if collected, to see that
                                                     
32 Title X (Sections 1001 – 1003) of the Agriculture, Rural Development, Food and Drug
Administration, and Related Agencies Appropriations Act, 2001  (Common Exhibit-1).The CDSOA is also
referred to as the “Byrd Amendment”. The CDSOA adds a new section 754 entitled the “Continued Dumping
and Subsidy Offset.”  (Common Exhibit-15).WT/DS217/R
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undertaking agreements are not entered into.  Canada submits that the CDSOA breaches the
United States’ WTO obligations in the following ways.
4.42 First, according to Canada, the Agreement on Implementation of Article VI of the General
Agreement on Tariffs and Trade 1994 (the Anti-Dumping Agreement) and the Agreement onSubsidies and Countervailing Measures (the SCM Agreement), in conjunction with the General
Agreement on Tariffs and Trade 1994 (GATT 1994) limit the actions Members can take to offset
injurious dumping and subsidization.  In the context of dumping, the Appellate Body confirmed in
United States – Anti-Dumping Act of 1916
33 that these actions are restricted to definitive anti-dumping
duties, provisional measures and undertakings.  In  Canada’s view, the Appellate Body’s findings
apply equally to limit actions that can be taken  under the SCM Agreement and GATT 1994.  The
CDSOA provides for payments meant to offset in jurious dumping or subsidization.  Canada argues
that this is a remedy that is not permitted.  As such, Canada submits, it contravenes Article 18.1 of the
Anti-Dumping Agreement in conjunction with Article VI of GATT 1994 and Article 1 of the Anti-
Dumping Agreement and Article 32.1 of the SCM Agreement in conjunction with Article VI of
GATT 1994 and Article 10 of the SCM Agreement.
4.43 Second, in Canada's view, the Anti-Dumping and SCM Agreements require that an
investigating authority only initiate anti-dumping or countervailing duty investigations if they
determine that the requisite level of industry support for the application exists.  Creating monetary
incentives for domestic producers to either bring or support petitions, in turn makes it more likely that
the Department of Commerce (DOC) will find that a particular petition has sufficient support to
initiate an investigation.  According to Canada, in  distorting the domestic industry support provisions
of the Tariff Act of 1930, the CDSOA therefore, breaches Article 5.4 of the Anti-Dumping Agreement
and Article 11.4 of the SCM Agreement.
4.44 Third, Canada argues that the Anti-Dumping and SCM Agreements provide the means for the
early resolution of anti-dumping and countervailing duty investigations through the acceptance of
undertakings.  Under US law, the acceptance of unde rtakings by the DOC is effectively tied to the
relevant domestic industry consenting to any proposed agreement.  In creating a financial reward that
is only available in cases where duties are assessed, the CDSOA provides US producers with an
incentive to withhold their consent. As a result, the CDSOA undermines the ability of the suspension
agreement provisions of US law to operate in a manner consistent with the United States’ WTO
obligations under Article 8.1 of the Anti-Dumping Agreement and Article 18.1 of the SCM
Agreement.
4.45 Fourth, according to Canada, in addition to the substantive WTO violations identified above,
the CDSOA also makes the administration of US anti-dumping and countervailing duty law unfair,
unreasonable and partial, contrary to Article X:3(a) of GATT 1994.  It creates incentives that make it
more likely that domestic producers will bring or support petitions and thwart undertakings.  This
makes it impossible to have a reasonable and impartial administration of US trade remedy laws in
breach of Article X:3(a) of GATT 1994.
4.46 Finally, Canada argues that for the same reasons identified above, the United States has failed
to ensure that its laws, regulations and administrative procedures are in conformity with its WTO
obligations as required by Article XVI:4 of the Marrakesh Agreement Establishing the World Trade
Organization  (the WTO Agreement), Article 18.4 of the Anti-Dumping Agreement and Article 32.5
of the SCM Agreement.
                                                     
33 United States – Anti-Dumping Act of 1916 , Report of the Appellate Body, WT/DS136/AB/R,
WT/DS162/AB/R, adopted 26 September 2000.WT/DS217/R
WT/DS234/R
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(b) The CDSOA
4.47 According to Canada, before the CDSOA was enacted, anti-dumping and countervailing
duties were part of the general revenue of the United States.  As a result of the CDSOA all duties
assessed pursuant to anti-dumping or countervailin g duty orders or a finding under the Antidumping
Act of 1921, will now be distributed on an annual basis to affected domestic producers for qualifying
expenditures.34  These payments are called “Offsets”.35
4.48 Canada asserts that to obtain an Offset, an applicant must submit a certification to the
Assistant Customs Commissioner indicating it meets the requirements of the CDSOA. Only a
petitioner or those domestic producers or associations who supported a petition (“affected domestic
producers”) that resulted in an order imposing duties and remain in operation are eligible to receive an
Offset.  Affected domestic producers may only receive Offsets for “qualifying expenditures”.  Theseare expenses incurred after an anti-dumping or countervailing duty order is issued that relate to the
production of a product covered by the order
 and fall within an enumerated category.
4.49 Canada is of the view that the CDSOA is structured to ensure that all duties to be paid out to
affected domestic producers are segregated into individual accounts based on individual orders issued
by the DOC.  At least 90 days before the end of a fiscal year, the Commissioner of Customs must
publish in the Federal Register, a Notice of Intention to distribute Offsets.  Affected domestic
producers whose certified claims are accepted will subsequently receive payments from the account
established for the order under which the claim is made.  Any funds remaining in a Special Account
are to be permanently deposited into the general fund of the US Treasury.
4.50 Canada asserts that proponents of the CDSOA have repeatedly explained why it was
necessary to enact the legislation.  Shortly afte r the CDSOA was enacted, Senator Byrd stated that,
even where the DOC and the ITC impose duties to respond to unfair trade practices, such
“compensatory duties are ineffective in providing relief to the domestic industry”, and again that
“current law has simply not been strong enough… ”.  Senator DeWine, who sponsored earlier
versions of the Act, stated that those earlier versions “would take the 1930 Act one step further”beyond imposing duties and that it was “time we impose a heavier price on dumping and
subsidization.”
36
4.51 Canada posits that the substance of the bill and the manner in which it was passed raised
many concerns within Congress and the Administration.  Congressional concerns were best
summarized in the statement by Senator Nickles who called the CDSOA a mistake, and said it was
improper for a trade provision to be added to an agriculture bill, that it could not have passed in the
normal process, and that it was not consistent with WTO rights in “any way, shape or form.”President Clinton himself asked Congress to over ride the CDSOA and the Clinton Administration, in
its Statement of Administration Policy, declared that the CDSOA was unnecessary because “the
purpose of the anti-dumping and countervailing duties themselves” was to restore conditions of fair
trade, and that the Act raised concerns regarding the consistency with US trade policy objectives
including the potential for “trading partners to adopt similar mechanisms.” These statements
                                                     
34 United States Tariff Act of 1930, § 754(a) in CDSOA, § 1003(a), 114 Stat. 1549A-73.  (Common
Exhibit-1).  Canada’s submission will refer to “orders and findings” as “orders”.
35 Regulations detailing procedures for payments under the Act came into effect on 21 September 2001.
66 Fed. Reg. 48,546 (US Customs Service 21 Sept. 2001) (final rule).  (Common Exhibit-3)
36 See paragraphs 27 to 31 of Canada’s First Submission.WT/DS217/R
WT/DS234/R
Page 18
demonstrate that US lawmakers are themselves aware of the trade distorting potential of the CDSOA
as well as the fact that it is WTO inconsistent.37
(c) Legal argument
(i) WTO rules limit the action Members can take against dumping or subsidization
The CDSOA is a “specific action against dumping” that is not in accordance with GATT 1994 and the
Anti-Dumping Agreement
4.52 Canada argues that in United States –  Anti-Dumping Act of 1916 , the Appellate Body found
that to understand the requirements of Article VI it mu st be read together with the provisions of the
Anti-Dumping Agreement.  It also found that the scope of Article VI of GATT 1994 was clarified, in
particular, by Article 18.1 of the Anti-Dumping Agreement.  It stated that Article 18.1 of the Anti-
Dumping Agreement prohibits all “specific action against dumping” that is not “in accordance withthe provisions of the GATT 1994 as interpreted by [the Anti-Dumping] Agreement”.  Moreover, the
ordinary meaning of the phrase "specific action against dumping" is action that is taken in response to
situations presenting the constituent elements of "dumping".  It follows that "specific action against
dumping" must, at a minimum, encompass actions that may be taken only when the constituent
elements of "dumping" are present.
4.53 Canada asserts that the Appellate Body conclude d that, to be permitted, these forms of actions
are limited to definitive anti-dumping duties, provisional measures and price undertakings.
38  As no
other form of “action” is authorized by Article VI:2, as interpreted by the Anti-Dumping Agreement,
any action against dumping taken in any other form will violate Article 18.1 of the Anti-Dumping
Agreement and Article VI:2 of GATT 1994.39
4.54 According to Canada, Offsets will only be paid out after an anti-dumping or countervailing
duty order has been issued and duties collected.  Therefore, action under the CDSOA “is taken in
response to a situation that presents the constituent elements of dumping”.  As such the CDSOA
constitutes a “specific action against dumping”.
4.55 Canada submits that this conclusion is evidenced in a number of ways related to the fact that
the CDSOA segregates and distributes duties on the basis of particular orders.  First, the Act and the
Regulations require that duties under each order are kept in order-specific accounts.  Second, only
petitioners or domestic persons who supported a particular petition can receive payments from these
accounts.  Third, “affected domestic producers” can only receive Offsets for “qualifying
expenditures” incurred after the issuance of a particular order.  These expenditures must relate to the
production of the product covered by that order.  Finally, in situations where funds in a particular
account are insufficient to pay all qualifying expenditures claimed, payments will be made on a prorata basis.
4.56 According to Canada, that the CDSOA constitu tes “specific action against dumping” is also
evident in section 1002, in which Congress effectively declares that it is a “specific action against
dumping” needed to “strengthen US trade laws” because the application of anti-dumping and
countervailing duties fails to ensure that “market prices [return] to fair levels.” Moreover, as reflectedin its title, the “Continued Dumping and Subsidy Offset Act of 2000” was designed to “offset”
dumping or subsidies.  “Offset” means “[a] counterbalance to or compensation for something
                                                     
37 See paragraphs 32 to 35 of Canada’s First Submission.
38 United States – Anti-Dumping Act of 1916 , para. 137.
39 See paragraphs 39 to 47 of Canada’s First Submission.WT/DS217/R
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else…”40  As the drafters of the CDSOA and its predecessors have repeatedly stated, Offsets are
meant to compensate domestic producers for injury caused by continued dumping or subsidization of
imports.
4.57 Canada posits that, having demonstrated that the CDSOA is a “specific action against
dumping”, the question becomes whether the CDSOA is a “specific action against dumping” that is
“in accordance with the provisions of [Article VI:2] of GATT 1994 as interpreted by the [Anti-
Dumping] Agreement.”  The CDSOA is clearly not a definitive anti-dumping duty, a provisional
measure or an undertaking.  Rather, the CDSOA is an action in the form of a payment meant to
“offset” the effects of injurious dumping.41  Accordingly, it is inconsistent with Article 18.1 of the
Anti-Dumping Agreement in conjunction with Article VI:2 of GATT 1994.  The CDSOA also
undermines the importance of the long-standing trade policy objective of Members, reflected in theAgreements, to limit actions against unfair trade practices to those that restore the “level playing
field”, the competitive balance between domestic products and imports.  As Article VI:2 makes clear,
the aim of a duty is to neutralize trade distorting effects caused by dumping through applying a charge
that removes the price differential between such imports and domestic goods.
42
The CDSOA is a “specific action against a subsidy” that is not in accordance with GATT 1994 as
interpreted by the SCM Agreement
4.58 In Canada’s view, the legal reasoning of the Appellate Body in United States - Anti-Dumping
Act of 1916  applies equally to similar provisions regarding measures that can be taken to counteract
injurious subsidization under the SCM Agreement and Article VI:3 of GATT 1994.
4.59 Canada argues that, except for replacing “subsidy” for “dumping of exports”, Article 32.1 of
the SCM Agreement is identical to Article 18.1 of the Anti-Dumping Agreement.  Like Article 18.1 of
the Anti-Dumping Agreement in the context of Article VI:2 of GATT 1994, Article 32.1 of the SCM
Agreement can be said to clarify the scope of app lication of Article VI of GATT 1994 in the context
of subsidies.  It follows that “specific action against a subsidy” should similarly be interpreted as any
action taken “when the constituent elements of [subsidi zation] are present”.  It also follows that, as in
the case with Article 18.1, Article 32.1 can be interpreted to prohibit “specific action against a
subsidy” that does not accord with Article VI of GATT 1994 as interpreted by the SCM Agreement.
4.60 Canada argues that the CDSOA operates in the context of the issuance of countervailing duty
orders and the assessment and distribution of countervailing duties.  As a result, for purposes of this
challenge, the CDSOA raises issues in the context of Part V of the SCM Agreement and Article VI:3
of GATT 1994.  Therefore, in Canada’s view, the issue as to whether the CDSOA might constitute a
“countermeasure” that is an allowable “specific action against a subsidy”, under Parts II or III of theAgreement, is not necessarily raised in this dispute.
43  However, to the extent the Panel considers
these issues, Canada submits that the CDSOA cannot be considered to be a “specific action against a
subsidy” that is in accordance with Parts II or III of the SCM Agreement because, at a minimum, it
has not been authorized as a “countermeasure” by the DSB.
                                                     
40 The New Shorter Oxford English Dictionary , Vol. 2 (Oxford: Clarendon Press, 1993), p. 1985.
(Exhibit CDA-7)
41 According to Canada, the CDSOA does not have anything to do with “offsetting” injury as meant by
Article VI and the Antidumping Agreement.  Payments under the CDSOA  are made in addition to the
application of a definitive final duty directed at injury.  Instead of levelling the playing field between importsand domestic products, the CDSOA goes beyond and in effect prevents this “levelling” by transferring duties toindustry members in the form of compensation for qualifying expenditures.
42 See paragraphs 55 to 59 of Canada’s First Submission.
43 These remedies are not cumulative - see Footnote 35 to Article 10 of the SCM Agreement.WT/DS217/R
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4.61 It is the view of Canada that Part V of the SCM Agreement, in conjunction with Article VI:3
of GATT 1994, provides for remedies similar to those permitted under the Anti-Dumping Agreement,
in conjunction with Article VI:2 of GATT 1994.  More specifically, Articles 10, 17, 18 and 19 of
Part V of the SCM Agreement, in conjunction with Article VI of GATT 1994 allow for three types of“countervailing measures”, namely: countervailing duties, provisional measures and undertakings.
Therefore, any “specific action against a subsidy” taken in the context of a countervailing duty
investigation that is not one of these actions is not in accordance with Article VI of GATT 1994 and
Part V of the SCM Agreement.
44
4.62 Canada asserts that, as provided for in section 1003 of the CDSOA, Offsets will be made with
respect to duties assessed under not only anti-dumping orders but also countervailing duty orders.
Therefore, for the same reasons set out in the context of “specific action against dumping”,45 Canada
submits that the CDSOA constitutes a “specific action against a subsidy”.  As the CDSOA is also
clearly neither a countervailing duty, provisional m easure or an undertaking, it is  a “specific action
against a subsidy” that is not in accordance with Article VI of GATT 1994 as interpreted by the SCM
Agreement.  Accordingly, it violates Article 32.1 of the SCM Agreement in conjunction with
Article VI of GATT 1994.
(ii) The CDSOA prevents the United States  from making domestic industry support
determinations in accordance with the Anti-Dumping or SCM Agreements
4.63 In Canada's view, Article 5.4 of the Anti-D umping Agreement and Article 11.4 of the SCM
Agreement set out the requisite support needed from a domestic industry for a dumping or
countervailing duty investigation to be initiated.  They establish procedural requirements that must becomplied with before an anti-dumping or countervailing duty investigation can be initiated.
46
4.64 Canada submits that in agreeing to the text of Article 5.4 of the Anti-Dumping Agreement
and Article 11.4 of the SCM Agreement, the Members agreed to requirements that mandate
investigating authorities to both examine the support  for an application before initiation and establish
quantitative thresholds by which that examination is to be judged.47  As the United States itself has
acknowledged, these provisions establish a “predictable standard for determining whether an
application is supported by the domestic industry.”48  Therefore, any measure that undermines the
“examination” required to establish the requisite level of industry support under Article 5.4 of the
                                                     
44 This, Canada argues, is supported by the object and purpose of the provisions.  The aim of
countervailing duties is to neutralize trade distortions caused by subsidies in order to re-establish the competitive
balance between foreign and domestic products.  Article VI:3 of GATT 1994 and footnote 36 of the SCMAgreement both define a countervailing duty as a “special duty levied for the purpose of offsetting any subsidy.”
The negotiating history of Article VI clarifies that Member s intended to limit actions to counteract subsidization
to the application of countervailing duties. See United States – Anti-Dumping Act of 1916 (Complaint by Japan) ,
Report of the Panel, WT/DS162/R, adopted 26 September 2000, paras. 6.226 – 6.228.
45 See paragraphs 14 to 16 above and paragraphs 48 to 53 and 68 of Canada’s First Submission.
46 Predecessor provisions of these articles were also co nsidered to be essential procedural requirements.
See Footnote 70 of Canada’s First Submission.
47 During the Uruguay Round negotiations, a number of proposals were tabled that sought to require
investigating authorities to examine the support for an app lication before initiation to en sure that the application
was properly filed “by or on behalf of” the domestic industry.  See for example “Amendments to the Anti-
Dumping Code: Submission by Canada,” MTN.GNG/NG8/W/65, 22 December 1989, Section I(a)(i), p. 1.(Exhibit CDA-9).
48 See “Statement of Administrative Action” in Message from the President of the United States
Transmitting the Uruguay Round Agreements, Texts of  Agreements Implementing Bill, Statement of
Administrative Action and Required Supporting Statements , H.R. Doc. No. 103-316, Vol. 1 at 656 (1994),
p. 812, referring to Article 5.4 of the ADA.  (Exhibit CDA-10)WT/DS217/R
WT/DS234/R
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Anti-Dumping Agreement and Article 11.4 of the SCM Agreement must necessarily result in a
Member being unable to fulfil the obligations imposed by these provisions.
4.65 In Canada's opinion, this conclusion is further supported by Article 17.6(i) of the Anti-
Dumping Agreement.  The Appellate Body has found, that in effect, Article 17.6(i) defines wheninvestigating authorities  can be considered to have acted inconsistently with the Anti-Dumping
Agreement in the course of their “establishment” and “evaluation” of the relevant facts.
49  It follows
that an investigating authority’s determination of industry support levels must be “unbiased and
objective” and “proper”.  The Appellate Body has stated that, to be “objective”, an examination must
conform to “the dictates of the basic principles of good faith and fundamental fairness” and that the
relevant facts must “… be investigated in an unbiased manner, without favouring the interests of any
interested party … .”50  Canada sees no reason why this reasoning  would not apply to a determination
of domestic industry support in a countervailing duty investigation.
4.66 Canada argues that one of the primary conditions for receiving an Offset under the CDSOA is
that an affected domestic producer bring or support a petition.  In other words, it effectively pays
affected domestic producers to either bring or support petitions.  It follows that if a particular US
producer does not do one or the other, such producer not only foregoes receipt of an Offset but it also
faces a situation in which its domestic competitors, who receive Offsets, gain a competitive advantage
over them.  These monetary incentives thus favour the interests of US domestic producers who bring
or support petitions over those who do not and importers.  They make it impossible for the DOC to
determine what level of support a petition actually has because they necessarily distort levels of
support or opposition to a particular petition.
4.67 According to Canada, this conclusion is supported by evidence of circumstances in which the
CDSOA has already been used to garner support for petitions.  For instance, prior to the filing of the
petition in the current anti-dumping and countervailing duty investigations involving Canadian
softwood lumber, a letter was circulated to US softwood lumber companies asking that they support
the petition to commence a countervail investigation.51
4.68 Therefore, Canada submits, as a result of the CDSOA, establishment of the domestic support
thresholds in the United States can no longer be reli ed on to mean what they were intended to mean:
namely that the industry believes itself to be injured by imports and therefore feels that an
investigation is necessary.  In distorting the domestic industry support provisions of the Tariff Act of
1930 in this manner, the CDSOA breaches Article 5.4 of the Anti-Dumping Agreement and
Article 11.4 of the SCM Agreement.
(iii) The CDSOA prevents the United States from considering undertaking proposals in a manner
consistent with the Anti -Dumping and SCM Agreements
4.69 Canada asserts that both the Anti-Dumping Agreement and the SCM Agreement allow
domestic investigating authorities to suspend or terminate anti-dumping and countervailing duty
investigations where exporters (or governments in the case of countervailing duty investigations)
enter into voluntary agreements to stop the unfair trade practices alleged in a petition.
4.70 In Canada's view, by resolving issues raised in investigations through agreement, undertaking
agreements restore competitive relationships between imports and domestic products with minimal
                                                     
49 United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan , Report
of the Appellate Body, WT/DS184/AB/R, adopted 23 August 2001, para. 56.
50 Ibid., para. 193.
51 See Exhibit CDA-11.  For another example, see also CDA-12.WT/DS217/R
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disruption including that caused by the imposition of a duty.  Measures that undermine the ability to
enter into undertaking agreements, therefore, thwart the purpose reflected in the Members’ agreement
to these provisions.
4.71 Canada notes that the ability of the DOC to enter into undertakings, or as they are called
under US law, “suspension agreements”, is found in the  Tariff Act of 1930.52  The DOC can only enter
into such agreements if certain criteria are met.  These criteria include the requirements that the DOC
notify and consult with the petitioner regarding a proposed suspension agreement, provide the
petitioner with a copy of the proposed agreement and allow the petitioner to submit comments on it
and consult with the petitioner on those comments.
4.72 Canada argues that recent US case law makes clear that the DOC can effectively only enter
into suspension agreements with the consent of the petitioner.53 As set out above, under the CDSOA,
only an “affected domestic producer”, i.e., a person who either filed or supported a petition, is eligible
to receive an Offset.  These persons will only receive an Offset if a particular investigation is
completed and an anti-dumping or countervailing dut y order issued.  In other words, these persons
will only receive Offsets if a suspension agreement is not entered into.  Thus, the CDSOA gives these
persons a financial stake in seeing that a suspension agreement is not agreed to.
4.73 According to Canada, if Members were able to  undermine the ability of their investigating
authorities to enter into undertakings, Articles 8 and Article 18 would be rendered meaningless.  As
has been demonstrated, before the CDSOA was enac ted, the DOC, effectively, could only enter into
suspension agreements with the consent of the dom estic industry involved.  Now, with the CDSOA,
not only does the DOC need domestic industry approval to enter into suspension agreements, but theUS government has also enacted a law that will only benefit US producers if they do not provide that
approval.  As a consequence, the CDSOA undermines the ability of the suspension agreement
provisions of US law to operate in a manner consistent with the United States’ WTO obligations
under Article 8.1 of the Anti-Dumping Agreement and Article 18.1 of the SCM Agreement.
(iv) The CDSOA results in the unfair, unreaso nable and partial administration of US anti-
dumping and countervailing duty law
4.74 Canada submits that under WTO rules a Member must not only ensure the conformity of the
substance of its laws with its WTO obligations, but it is also required to administer its laws in  a fair,
reasonable and impartial manner.  This obligation is provided for in Article X:3(a) of GATT 1994.
Article X:3(a) applies to all laws, regulations, decisions and rulings “of the kind described in
[Article X:1].”  Article X:1 refers to all “laws, regulations, judicial decisions and administrative
rulings of general application …”.  As the CDSOA is an amendment to the Tariff Act of 1930 , and the
Tariff Act of 1930  is itself a law of general application, the CDSOA is subject to the requirements of
Article X:3(a).
54
4.75 Canada notes that the Appellate Body has found that the obligation contained in
Article X:3(a) concerns fairness and recognizes that the unfair administration of laws can itself have
                                                     
52 United States Tariff Act of 1930, § 704 with respect to countervailing duty investigations and § 734
for anti-dumping investigations.  (Common Exhibit-15)
53 Bethlehem Steel Corp. v. United States , 146 F. Supp. 2d 927, 930 (Ct. Int’l Trade 2001)
(Exhibit CDA-13, p. 4), citing H. Rep. No. 96-317 at 63, 67.  See paragraphs 86 to 88 of Canada’s FirstSubmission.
54 See the Panel Report in United States – Anti-Dumping Measures on Stainless Steel Plate in Coils and
Stainless Steel Sheet and Strip from Korea, WT/DS179/R, adopted 1 February 2001, footnote 62.WT/DS217/R
WT/DS234/R
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adverse effects.  It noted that “Article X:3 … establishes certain minimum standards for transparency
and procedural fairness in the administration of trade regulations … .”55
4.76 According to Canada, in Argentina – Measures Affecting The Export Of Bovine Hides and
The Import of Finished Leather , the Panel was of the view that Article X:3(a) can involve an
examination of whether there is a possible impact on the competitive situation for traders due to
alleged partiality, unreasonableness or lack of uniformity in the application of customs rules,
regulations, etc.56 In that case, the Panel concluded, in particular, that an inherent danger created by a
conflict of interest in involving domestic industry in the customs clearance process of the hides its
domestic suppliers exported led to an administration of laws that was not “impartial.”57
4.77 Canada is of the opinion that the CDSOA similarly affects the administration of US anti-
dumping and countervail laws.  It leads to the application of those laws, with respect to bothdeterminations of industry support and the acceptance of undertakings, in a manner that is neither
reasonable nor impartial.
4.78 According to Canada, the CDSOA creates incentives that distort the process by which the
DOC establishes domestic industry support, as well as the ability of the DOC to enter into
undertakings.  This has the potential to exacerbate the number of investigations initiated andcontinued against imports where such investigations may be without merit.  By making it profitable to
indicate support for petitions or avoid undertakings, the CDSOA also creates an “inherent danger”
that US anti-dumping and countervailing duty laws will be “applied in a partial manner so as to permit
persons with adverse commercial interests to” thwart the entry of imports.  As a result, imports face
treatment that is not fair, reasonable or impartial.  Accordingly, the CDSOA results in a violation ofArticle X:3(a) of GATT 1994.
(v) The CDSOA also violates the United States’ ob ligation to bring its law into conformity with
the WTO Agreements
4.79 Canada argues that Article XVI:4 of the WTO Agreement, Article 18.4 of the Anti-Dumping
Agreement and Article 32.5 of the SCM Agreement oblige Members to bring their domestic law intoconformity with their obligations under the WTO Agr eements.  The fact that the CDSOA provides for
the application of a remedy that is not a permitted “specific action against dumping” or a permitted
“specific action against a subsidy”, violates the domestic industry support and undertaking provisions
of the Anti-Dumping and SCM Agreements and results in an unfair, unreasonable and partial
administration of US laws, means that the United St ates has failed to ensure the conformity of its
laws, regulations and administrative procedures with its obligations under the WTO Agreements and
thus the United States should also be found in violation of its obligations under Article XVI:4 of theWTO Agreement, Article 18.4 of the Anti-Dumping Agreement and Article 32.5 of the SCM
Agreement.
(d) Request for findings and recommendations
4.80 For these reasons, Canada respectfully requests that the Panel find that the CDSOA is
inconsistent with the specific provisions of the Anti-Dumping Agreement, SCM Agreement,
GATT 1994 and the WTO Agreement as identified above and that the United States has failed to
                                                     
55 United States –  Import Prohibition of Certain Shrimp and Shrimp Products , Report of the Appellate
Body, WT/DS58/AB/R, adopted 12 October 1998, para. 183.
56 Argentina – Measures Affecting The Export Of Bovine Hides and The Import of Finished Leather ,
Report of the Panel, WT/DS155/R, adopted 16 February 2001, para. 11.77.
57 Ibid., paras. 11.99-11.100.WT/DS217/R
WT/DS234/R
Page 24
ensure that its laws are in conformity with the Anti-Dumping Agreement, the SCM Agreement,
GATT 1994 and the WTO Agreement.  Canada also requests that the Panel recommend that the
United States bring its measure into conformity  with the Anti-Dumping Agreement, the SCM
Agreement, GATT 1994 and the WTO Agreement.
4. Chile and Japan
(a) Introduction
4.81 Japan and Chile argue that the Continued Dumping and Subsidy Offset Act of 2000
(hereinafter referred to as the “Act”) is a violation by the United States of its obligations under the
WTO agreements.  The Act is a mandatory, non-discretionary legislation that requires the US
authorities to distribute assessed anti-dumping and countervailing duties among the domestic
producers that support an investigation that ultimately leads to the imposition of those duties.
4.82 Japan and Chile will demonstrate that the Act is inconsistent with the General Agreement on
Tariffs and Trade 1994 (“GATT”), the Agreement on Implementation of Article VI of the General
Agreement on Tariffs and Trade 1994 (“ADA”), the Agreement on Subsidies and Countervailing
Measures (“ASCM”) and the Marrakesh Agreement Establishing the WTO  (the “WTO Agreement”).
(b) Factual aspects
(i) Legislative history of the Act
4.83 According to Japan and Chile, the text that became the Act derives directly from a proposal
introduced by Sen. Michael DeWine in the 105th Congress in 1998.  Sen. DeWine then introduced the
same bill as S.61 in the 106th Congress with Sen. Robert Byrd as one of the co-sponsors.  On
3 October 2000, late in the 106th Congress, Sen. Byrd attached S.61, with some modifications, to theAgriculture and Related Agencies Appropriat ions Act for Fiscal Year 2001 (H.R. 4461).
4.84 Japan and Chile assert that the Act did not proceed through regular legislative channels, such
as House Ways and Means Committee and Senate Finance Committee, due to the lack of support that
would otherwise have enabled it to pass through those channels.  Instead, it was attached to the
FY 2001 agricultural appropriations bill because the appropriations measure was a “must-pass” billand enjoyed broad bipartisan support. The appropriations bill contained many popular provisions,
including funding for agricultural programmes.
4.85 According to Chile and Japan, the Act triggered significant opposition within the
United States.  The Chairman of the Ways and Means Committee (the committee with jurisdiction
over the measure in the House of Representatives) and the Chairman of the Senate Finance
Committee (the committee with jurisdiction over the measure in the Senate) both expressed their
serious concerns and opposition to the Act.  In signing the Agricultural Appropriations measure towhich it was attached, President Clinton voiced his strong opposition to the Act.  In the October 2000
Statement of Administration Policy, the US Administration stated that “there are significant concerns
regarding administrative feasibility and consistency with our trade policy objectives, including the
potential for trading partners to adopt similar mechanisms”.  Early in 1994, the US Administration
had already succeeded in opposing the attempt by petitioner interests to add similar compensationprovisions to the Uruguay Round implementing legi slation.  The Act also triggered significant
criticism from the United States public.  Also, Japan and several other WTO Members expressed their
opposition to the Act to the US Congress and Administration, and formally protested the Act in the
Committee on Anti-Dumping Practices and in the Committee on Subsidies and Countervailing
Measures.WT/DS217/R
WT/DS234/R
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(ii) Factual description of the Act
4.86 Japan and Chile argue that the Act amends the Tariff Act of 1930, which is the principal
statute governing US anti-dumping and countervailing proceedings, by adding a new Section 754.
Section 754(a) provides for the annual distribution of duties assessed pursuant to a countervailingduty order, an anti-dumping duty order, or a finding under the Antidumping Act of 1921, to the
affected domestic producers for qualifying expenditures.
4.87 Chile and Japan note that the Act requires the Commissioner of Customs to establish and
maintain “special accounts” and to deposit into those accounts all anti-dumping or countervailing
duties (including interest earned on such duties) that are assessed under the anti-dumping order or
finding or the countervailing duty order with respect to which the account was established.
4.88 Japan and Chile recall that no later than 60 days after the first day of a fiscal year, the funds
available in a special account will be distributed to “affected domestic producers” who have incurred
“qualifying expenditures” on a pro rata basis. Distributions from a special account to “affected
domestic producers” are referred to as “dumping and subsidy offsets.”
4.89 Japan and Chile further note that each fiscal year, a party seeking dumping and subsidy
offsets is required to certify that it desires and is eligible to receive a distribution.  Section 754(b)(1)defines the term “affected domestic producer” to include “any manufacturer, producer, farmer,
rancher, or worker representative (including associ ations of such persons)” that was a petitioner or an
interested party supporting the original anti-dumping or countervailing petition and that remains in
operation. The Act excludes from the definition of “affected domestic producers” those companies,
businesses or persons that have ceased the production of the product in question or that have beenacquired by a company or business that is related to a company that opposed the investigation.  No
persons other than ‘affected domestic producers’ are entitled to receive the distributions.
4.90 Chile and Japan assert that once the anti-dumping or countervailing duties are imposed, the
subsequent actions mandated by the Act are automatic and must be necessarily performed,
culminating in the distribution of the duties to domestic producers. The design and intended operationof the Act demonstrates a linkage between dumping and subsidization and the distribution of assessed
duties.
(c) Legal arguments
(i) The Act constitutes mandatory, non-discretionary legislation that is actionable as such under
WTO law
4.91 Japan and Chile recall that it is established in GATT and WTO jurisprudence that legislation
that mandates action that is inconsistent with the WTO rules and leaves no discretion to the executivebranch of government, can be challenged as such, i.e., independently from the application of that
legislation in specific instances.  The Act is a mandatory legislation that accords no discretion to the
executive branch of the US government with respect to the distribution of the assessed anti-dumping
and countervailing duties to domestic producers. This is demonstrated by the repeated use of the word
“shall” in several key provisions of the Act (e.g., “[D]uties assessed pursuant to a countervailing dutyorder, an anti-dumping duty order…shall be distributed…to the affected domestic producers”, “[s]uch
distribution shall be made not later than 60 days after the first day of a fiscal year”, “[t]he
Commissioner shall distribute all funds … to affected domestic producers….”).  Therefore, the Panel
clearly has the authority and the mandate to review the consistency of the Act as such with the
provisions of the WTO agreements cited in the request for the establishment of the Panel.WT/DS217/R
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(ii) The Act mandates specific action against dumping  in violation of Article 18.1 of the ADA,
read in conjunction with Article VI:2 of the GATT and Article 1 of the ADA
4.92 Chile and Japan argue that the Appellate Body in United States – Antidumping Act of 1916
stated that Article 18.1 of the ADA prohibits a Member from taking specific action against dumpingof exports from another Member, unless that action is  in accordance with Article VI:2 of the GATT,
as interpreted by the ADA.  The Appellate Body concluded that “[i]f specific action against dumping
is taken in a form other than a form authorized under Article VI of the GATT 1994, as interpreted by
the Anti-Dumping Agreement, such action will violate Article 18.1.” Japan and Chile will
demonstrate that the Act mandates specific action against dumping that is not permissible under
Article VI and is therefore in violation of Article 18.1 of the ADA.
4.93 According to the Appellate Body, the ordinary meaning of the phrase “specific action against
dumping from another Member” in Article 18.1 of the ADA is “action that is taken in response to
situations presenting the constituent elements of dumping.” The Appellate Body also indicated that
“specific action against dumping” is a measure that “encompass[es] action that may be taken only
when the constituent elements of dumping are present.”
4.94 Chile and Japan submit that the specific action required by the Act – offset payments – is
directed against dumping of exports by other Members and thus, by definition, requires that the
constituent elements of dumping be present; the payments authorized by the Act will be distributed to
affected domestic producers only when these elements are present.  This is demonstrated by the fact
that where the constituent elements of dumping are not present, there can be no imposition of an anti-
dumping duty order or anti-dumping duty finding and, evidently, wit hout an anti-dumping duty there
simply are no assessed duties to distribute to the domestic producers under the Act.  This means that
the action mandated by the Act (i.e., the distribution of the assessed duties to the domestic producers)
can only take place if and when the United States determines that the constituent elements of dumping
are present and, accordingly, levies an anti-dumping duty on the importation of the product
concerned.  The Act, therefore, provides for specific action against dumping, as that phrase has beeninterpreted by the Appellate Body.
4.95 Chile and Japan argue that the Act mandates “specific action against dumping” is further
demonstrated by its use of the word “offset” to describe the authorized payments. The Act seeks to
counterbalance or compensate domestic producers for alleged damage suffered from “continued
dumping and subsidization” of products imported into the United States after an anti-dumping or
countervailing duty is imposed on those products. Sponsors of the Act in the US Congress described
the distributions under the Act as a “mechanism to help injured US industries recover from theharmful effects of illegal foreign dumping and subsidies” as a way “to counter the adverse effects of
foreign dumping and subsidization of US industries”
 and as means of “compensation for damages
caused by dumping or subsidization.”  By so doing, the sponsors acknowledge that they are “specific
action against dumping.”
4.96 In Chile and Japan's view, the sponsors intended the distribution of anti-dumping and
countervailing duties as a deterrence mechanism against dumping and subsidization, in addition to the
anti-dumping and countervailing duties levied on the products in question.  Such an intended and
express objective further demonstrates that the distribution mandated by the Act constitutes specific
action against dumping.
4.97 Chile and Japan assert that in the US – Antidumping Act of 1916 case, the Appellate Body
held that Article 18.1 requires that specific action against dumping of exports be in accordance with
Article VI, as interpreted by the ADA, and concluded that “Article VI is applicable to any ‘specific
action against dumping’ of exports. Article VI must also be read in conjunction with Article 1 of theWT/DS217/R
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ADA, which imposes an obligation on Members to act in accordance with Article VI of the GATT
when applying an anti-dumping measure.  It also held that the provisions of the ADA, including
Article 18.1, govern the application of Article VI in so far as anti-dumping is concerned.
4.98 The Appellate Body stated conclusively that paragraph 2 of Article VI limits the permissible
responses to dumping to definitive anti-dumping duties, provisional measures and price undertakings.
Thus, to the extent that a law or regulation mandates specific action against dumping that is neither a
definitive anti-dumping duty, a provisional measure nor a price undertaking, such legislation would be
contrary to Article VI and would, therefore, violate Article 18.1.
4.99 Chile and Japan posit that the distribution of offsets under the Act is neither a definitive anti-
dumping duty, a provisional measure or a price undertaking and is, therefore, not in accordance with
Article VI:2.  It is in fact a distinct and separate  remedy against dumping that is neither contemplated
by nor in accordance with Article VI or the ADA.  Therefore, since the Act mandates specific action
against dumping that is not permissible under Article VI:2, it is contrary to Article 18.1 of the ADA.
(iii) The Act mandates specific action against subsidies in violation of Article 32.1 of the ASCM,
read in conjunction with Article VI:3 of the GATT and Articles 10, 4.10 and 7.9 of the ASCM
4.100  Chile and Japan argue that as the subsidies counterpart to Article 18.1 of the ADA,
Article 32.1 of the ASCM prohibits a Member from  taking “specific action against a subsidy” of
another Member, unless that action is in accordance with Article VI:3 of the GATT, as interpreted by
the ASCM. Apart from the reference to subsidization as opposed to dumping, Article 32.1 of the
ASCM does not differ from Article 18.1 of the ADA.  Therefore, the analysis under Article 18.1 of
the ADA above, including the interpretation developed by the Appellate Body in US – AntidumpingAct of 1916 of the phrase “specific action against”, applies mutatis mutandis to Article 32.1 of the
ASCM.  Thus, “specific action against a subsidy of  another Member” under Article 32.1 of the ASCM
is action taken in response to situations that present the constituent elements of subsidization.  Also, to
qualify as a “specific action against a subsidy” a measure must encompass action that may be taken
only when the importing country determines that the constituent elements of subsidization are present.
4.101  Chile and Japan asserts that where the constituent elements of subsidization are not present,
there can be no imposition of a countervailing duty and without such duty there simply are no
assessed duties to distribute to the domestic producers under the Act.  Thus, the distribution of
“offsets” under the Act is entirely dependent on a determination by the United States that the
constituent elements of subsidization are present.  Moreover, countervailing duties will only be
distributed to domestic producers pursuant to the Act if and when the United States determines that a
subsidized product is being imported into its territory and countervailing duties are collected.  TheAct, therefore, provides for specific action against a subsidy of another Member.  The use of the word
“offset” by the Act to describe the authorized pa yments to domestic producers lends further evidence
that those payments constitute specific action against subsidization. The statements made by the co-
sponsors of the Act further demonstrate that the Act was intended to serve as a deterrence mechanism
against subsidization and that the distribution mandated by the Act constitutes specific action againstsubsidization.
4.102  According to Chile and Japan, Article 32.1 of the ASCM requires that a specific action
against a subsidy of another Member be in accordance with Article VI of the GATT, as interpreted by
the ASCM.  Articles 10, 4.10 and 7.9 of the ASCM interpret and elaborate Article VI:3.  These
provisions, read in conjunction, limit the permissible remedies that a Member may take in response tosubsidization. Footnote 35 to Article 10 of the ASCM provides that only one form of relief shall be
available to a Member to protect against the effects of a particular subsidy in its domestic market, and
specifies that the only possible form of relief is either a countervailing duty or a countermeasureWT/DS217/R
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authorized by the DSB.  The relief conferred by the Act to the domestic producers is neither a
countervailing duty nor a countermeasure authorized by the DSB.  It is a separate form of relief not
contemplated or authorized by the ASCM.
4.103  Chile and Japan submit that Article VI:3 as interpreted by the ASCM establishes that the
permissible remedy to “offset” any subsidy bestowed by another Member is a “countervailing duty”.
The Act, however, counterbalances or compensates affected domestic producers for subsidization
bestowed by another Member by distributing among those producers the assessed countervailing
duties.  In itself, the action mandated by the Act is not a countervailing duty. Nor is the distribution of
duties provided for by the Act the other permissible form of relief authorized by Articles 4.10 or 7.9
of the ASCM: a countermeasure authorized by the DSB. The distribution of countervailing duties is
therefore not one of the available forms of relief against subsidization under the ASCM.
4.104  Chile and Japan are of the view that the Act, therefore, mandates “specific action against a
subsidy” that is not in accordance with Article VI:3 of the GATT, as interpreted by inter alia
footnote 35 of Article 10 and Article 32.1 of the ASCM, read in conjunction with Articles 4.10 and
7.9 of that Agreement.  As such, the Act is contrary to Article 32.1 of the ASCM.
(iv) The Act is inconsistent with the requirements in Article 5.4 of the ADA and Article 11.4 of the
ASCM regarding standing to initiate an investigation
4.105  Chile and Japan argue that by limiting distribution of anti-dumping and countervailing duties
only to those producers that support an application to initiate an anti-dumping or countervailing
investigation, the Act provides a direct financial incentive to domestic producers to support rather
than oppose or express neutrality toward an application.  In this way, the Act undermines,circumvents, and is therefore inconsistent with, the requirements of Article 5.4 of the ADA and 11.4
of the ASCM, both of which set forth the minimum level of producer assent necessary for an
application to be considered as having been made “by or on behalf of the domestic industry.”
4.106  According to Chile and Japan, Articles 5.4 of the ADA and 11.4 of the ASCM require a
positive determination by the authorities, carried out on the basis of an examination of the degree ofsupport for, or opposition to, an application to initiate an anti-dumping or countervailing
investigation.  The examination must show that the application has been made “by or on behalf of the
domestic industry”.  An application is considered to have been made “by or on behalf of the domestic
industry” only where the examination shows that an application passes both positive and negative
tests.  A positive test requires that a majority of those in the industry who express views supports an
application.  A negative test bars initiation of any application that fails to gain the positive support of
producers representing at least 25 per cent of production. This interpretation is confirmed by theUruguay Round negotiating history of Articles 5.4 and 11.4.
4.107  In the view of Chile and Japan, Members must observe the general principle of good faith,
recognized by the Appellate Body as a pervasive principle that informs the covered agreements, in the
application and interpretation of the ADA and the ASCM.  When a treaty provision specifies, as do
Articles 5.4 and 11.4, that actions of private parties are necessary to establish a Member’s right to takecertain action, government provision of a financial incentive for those private parties to act one way
rather than another is inconsistent with the requ irement that Members perform their treaty obligations
in good faith.  The Act is thus inconsistent with  Articles 5.4 of ADA and 11.4 of ASCM and with the
United States’ obligation to perform them in good faith.
4.108  Chile and Japan submit that the Act is further inconsistent with Articles 5.4 of ADA and 11.4
of ASCM because it frustrates the purpose of “examination” under these Articles.  The determination
on the support under Articles 5.4 of ADA and 11.4 of  ASCM must be based on the examination ofWT/DS217/R
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true support for, or opposition to, the application, i.e., a claim that the domestic industry is injured by
allegedly dumped imports.  As expressly stated in Article 4.1 of ADA and Article 16.1 of ASCM, the
ADA and the ASCM contemplate to exclude domes tic parties’ support or opposition from the
examination under  Articles 5.4 of ADA and 11.4 of the ASCM, if such support or opposition isdistorted by other interests.  The prospect of a pa yout from eventual anti-dumping or countervailing
duties induces industry members to change from silence or even opposition to support of a petition,
making it easier to meet the 25 per cent threshold and facilitating initiation of investigations.  The
incentive created by the Act prevents the US investigation authority from distinguishing the true
support by the domestic producers of the investigation from the support of a prospective distribution
of duties.  The Act thus frustrates the purpose of Articles 5.4 of the ADA and 11.4 of the ASCM, and
therefore is inconsistent with these Articles.
4.109  In addition, Chile and Japan assert that the Act impedes Articles 5.4 of ADA and 11.4 of
ASCM from being applied in a neutral and impartial manner to meet their underlying requirements
and conditions contemplated in Articles 5.1 of ADA and 11.1 of ASCM.  The purpose of the “by or
on behalf of ” requirement in Articles 5.1 and 11.1 is to ensure that the investigation is initiated only
when the domestic producers as a whole share a common recognition that they are truly in need oftrade remedies in the form of anti-dumping or countervailing duties against dumped or subsidized
imports.  However, where a Member provides a direct financial incentive to domestic producers to
support the investigation, the quantitative requirement inherent in the thresholds does not perform its
intended function.  It renders Articles 5.4 and 11.4 meaningless, since Members would be allowed to
initiate investigations without having objectively determined if the application has been made “by oron behalf of” the domestic industry.  The Act, therefore, is inconsistent with Article 5.4 of the ADA
and 11.4 of the ASCM and with the United States’ obligation thereunder.
(v) The Act is inconsistent with the undertaking provisions in Articles 8.1 of the ADA and 18.1 of
the ASCM
4.110  Chile and Japan argue that the undertaking provisions in Articles 8.1 of the ADA and 18.1 of
the ASCM provide an alternative to the actual imposition of countervailing duties or anti-dumping
duties.  Those provisions require every Member to make a good faith effort to consider proposed
undertakings and to utilize them where possible.  Such interpretation is also supported by the
provisions of Articles 8.3 of th e ADA and 18.3 of the ASCM, which require authorities to have a
proper reason for rejecting an offered undertaking.
4.111  In the opinion of Chile and Japan, under the United States’ anti-dumping and countervailing
duty laws, petitioners have an effective veto over the decision by the administering authorities toaccept an undertaking or a “suspension agreement.”  All parties to an investigation, including
petitioners, are permitted to comment on a proposed suspension agreement.  The petitioners are also
entitled to exercise considerable control over decisions to terminate a suspension agreement and to re-
start an investigation.  A recent decision by the US Court of International Trade affirms that the US
administering authorities’ normal practice is in fact to seek and obtain “the consent of petitioners”before undertaking a suspension agreement.
4.112  Chile and Japan assert that the Act deters domestic producers from allowing the US
authorities to accept and maintain undertakings pursuant to Articles 8.1 of the ADA and 18.1 of the
ASCM, because acceptance or maintenance of such undertakings would mean that offsets would not
be distributed.  The Act, therefore, effectively decreases the likelihood that the investigating authoritywill be able to accept or maintain undertakings.WT/DS217/R
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4.113  As a result, Chile and Japan submit, the Act undermine the aim of Articles 8.1 of the ADA
and 18.1 of the ASCM, effectively renders them meaningless, and therefore is inconsistent with and
violates these Articles.
(vi) As a result of the Act, the United States’ administration of trade laws is inconsistent with
Article X:3(a) of the GATT
4.114  In the view of Chile and Japan, the Act directs the United States to administer its anti-
dumping and countervailing duty laws in a way that makes it impossible for the United States to
comply with its obligations under Article X:3(a) of the GATT.  As a result of the Act, therefore, the
United States administers its anti-dumping and countervailing duty laws in violation of Article X:3(a)
of the GATT.
4.115  Chile and Japan argue that Article X:3(a) refl ects both the notion of good faith and the notion
of due process.  It establishes certain minimum standards for procedural fairness in the administration
of trade regulations.  The obligations contained in Article X:3(a) may be viewed as a specific
incorporation of the fundamental international legal principle of abus de droit, requiring WTO
Members to refrain from engaging in an abusive exercise of their rights.
4.116  It is Chile and Japan's view that while the United States has the right to administer anti-
dumping and countervailing duty laws, it is under an obligation to administer those  laws in a
reasonable, impartial and uniform manner.  In other words, the United States may not abuse its right
to administer those laws.
4.117  According to Chile and Japan, having in place a law that creates a financial incentive for
affected domestic producers renders the administration of the United States’ anti-dumping andcountervailing duty laws per se unreasonable in violation of Article X:3(a).  The Act will artificially
increase the number of anti-dumping and countervailing duty cases brought in the United States, for
the simple reason that the domestic industry will seek the imposition of anti-dumping and
countervailing duties in the expectation of receiving financial gain in the form of offsets.  The
application of measures similar to the Act by all WTO Members would lead to an intolerablesituation, thus underscoring the unreasonableness of the measure.  The application of a measure that
would lead to an explosion of the number of trade- restricting and trade-distorting measures and that
puts at risk the proper functioning of the international trading system, cannot in any way be seen as a
reasonable administration of anti-dumping and countervailing duty laws.
4.118  Chile and Japan argue that the mandated distribution of duties under the Act also makes an
impartial administration of the US anti-dumping and countervailing duty laws impossible in violation
of Article X:3(a).  The presence of a financial incentive for applying US anti-dumping andcountervailing duty laws create an “inherent danger” that those laws will not be administered in an
impartial manner.  In particular, by giving an incentive to domestic producers the Act will
automatically increase the level of support by the domestic industry for the application expressed by
domestic producers of the like product.  Similarly, the Act will curtail the likelihood that the
United States will accept alternative solutions (such as voluntary undertakings), since the domesticproducers will oppose the acceptance of an undertaking by the authority in the expectation that they
will receive a financial gain from the imposition of anti-dumping or countervailing duties.
Additionally, the Act will encourage the domestic industry to put pressure on the US Department of
Commerce to find higher dumping margins or a higher degree of subsidization because the petitioners
and those who support the petition will gain economically from such higher margins.
4.119  Chile and Japan submit that a Member’s obligation to administer its trade laws in a uniform
manner pursuant to Article X:3(a) requires that Members apply their trade laws in a consistent andWT/DS217/R
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predictable manner.  By distributing the anti-dumping and countervailing duties to domestic producers
based on their support of the investigation, the Act raises the question of “potential frivolous suits”,
distorts the determination of support and undermines the provisions for undertakings, and deters WTO
Members from exporting to the United States.  These significant changes introduced by the Actconsiderably affect exporters from other WTO Members, impeding the predictability they would have
in a normal situation where anti-dumping and countervailing duty laws are administered in a manner
consistent with the WTO rules.  Thus, the Act prevents the United States from administering its anti-
dumping and countervailing laws in a uniform manner.
4.120  Chile and Japan submit that therefore the United States acts inconsistently with Article X:3(a)
of the GATT 1994 because the Act prevents the United States from administering its anti-dumping
and countervailing duty laws in a reasonable, impartial and uniform manner.
(vii) The Act violates the general obligation of the United States to ensure the conformity of its
laws, regulations and administrative procedures with the provisions of the WTO agreements
4.121  Chile and Japan assert that the United States, as a result of its demonstrated violation of the
ADA, the ASCM and the GATT, is also violating its general obligation under Article XVI of the
WTO Agreement, Article 18.4 of the ADA and Article 32.5 of the ASCM to ensure the conformity ofits laws, regulations and administrative procedures with its obligations under the covered agreements.
(d) Conclusion
4.122  For the reasons stated above, Japan and Chile respectfully request the Panel to find that the
Act violates:
- Article 18.1 of the ADA, in conjunction with Article VI:2 of the GATT and
Article 1 of the ADA;
- Article 32.1 of the ASCM, in conjunction with Article VI:3 of the GATT and
Articles 10, 4.10, and 7.9 of the ASCM;
- Article 5.4 of the ADA and Article 11.4 of the ASCM;
- Article 8 of the ADA and Article 18 of the ASCM;
- Article X:3(a) of the GATT
- Article XVI:4 of the WTO Agreement, Article 18.4 of the ADA and
Article 32.5 of the ASCM.
4.123  Japan and Chile also request the Panel to find, pursuant to Article 3.8 of the DSU, that as a
consequence of the infringement of the above cited provisions, the United States has nullified and
impaired the benefits accruing to Japan and Chile under the cited agreements.  Japan and Chile
therefore request the Panel to recommend that the United States bring the Act into conformity withthe corresponding covered agreements.  Furthermore, and pursuant to Articles 3.7 and 19.1, second
sentence, of the DSU, Japan and Chile request that the Panel suggest the withdrawal of the
inconsistent Act as the only possible way for the United States to implement such recommendations.
It is the main features and the basic rationale of the Act that violate the cited provisions.  Therefore,
only by actually repealing the Act could the United States bring it into conformity with the covered
agreements and comply with the recommendations.WT/DS217/R
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5. European Communities, India, Indonesia and Thailand
(a) Introduction
4.124  The European Communities, India, Indonesia and Thailand (the “complainants”) bring this
complaint against the Continued Dumping and Subsidy Offset Act of 2000 (the “CDSOA”), also
known as the Byrd Amendment, which was signed into law by the President of the United States on
28 October 2000.
4.125  According to the European Communities, India, Indonesia and Thailand, the Byrd
Amendment seeks to  provide an additional remedy against dumping and subsidisation which is
neither contemplated nor permitted by the WTO Agreements. Moreover, that additional remedy is
unnecessary.  In addition, the Byrd Amendment affects the application by the United States of other
remedies permitted by the WTO Agreements (duties and undertakings) in a manner which isinconsistent with those agreements. In particular, the Byrd Amendment will increase unnecessarily
the number of investigations initiated by the US authorities and, as a result, the number of anti-
dumping and countervailing duty measures. Moreover, the Byrd Amendment will render more
difficult, if not impossible, the acceptance of undertakings by the US authorities.
(b) The measure in dispute
(i) Description of the Byrd Amendment
4.126  The European Communities, India, Indonesia and Thailand recall that the CDSOA provides
that:
Duties assessed pursuant to a countervailing duty order, an anti-dumping duty order,
or a finding under the Antidumping Act of 1921 shall be distributed on an annualbasis under this section to the affected domestic producers for qualifying
expenditures. Such distribution shall be known as the continued dumping and subsidy
offset.
4.127  The term “affected domestic producers” is defined by the CDSOA as including those
producers that made or supported the petition leading to the finding or order.  In turn, the term“qualifying expenses” includes certain categories of expenses incurred after the issuance of the order
or finding with respect to the production of the same  product that is the subject of the order or finding
concerned
 .
(ii) Legislative history of the Byrd Amendment
4.128  According to the European Communities, India, Indonesia and Thailand, the Byrd
Amendment  was rushed through the US Congress in a rather unusual manner. It was attached by its
sponsors to a totally unrelated, “must-pass” bill, at a late stage of the legislative process and was notthe subject of any proper debate.
4.129  The adoption of the Byrd Amendment was unsuccessfully opposed by the US  Administration.
The Statement of Administration Policy issued on 11 October 2000 states that the “distribution of the
tariffs themselves to producers is not necessary to the restoration of conditions of fair trade”.
Although President Clinton signed the bill including the Byrd Amendment, he criticised it and calledupon Congress to override it or amend it.WT/DS217/R
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(c) Claims
(i) Article 18.1 of the Anti-Dumping Agreemen t and Article 32.1 of the SCM Agreement
4.130  The European Communities, India, Indonesia and Thailand submit that the Byrd Amendment
is inconsistent with Article 18.1 of the Anti-Dumping Agreement and with Article 32.1 of the SCMAgreement because
(a) the offset payments constitute specific action against dumping and subsidisation; and
(b) such action is not in accordance with the provisions of the GATT, as interpreted by
the Anti-Dumping Agreement and the SCM Agreement.
4.131  Furthermore, the European Communities, India, Indonesia and Thailand argue that contrary to
the “findings” asserted by the US Congress in the CDSOA, the offset  payments are not necessary to
remedy the injurious effects of dumping and subsidisation. Rather, the Byrd Amendment gives doubleprotection to the US industry, as acknowledged by the US Administration.
The offset payments constitute specific action against dumping and subsidisation
The structure and design of the Byrd Amendment4.132  The European Communities, India, Indonesia and Thailand assert that the analysis of the
terms of the Byrd Amendment shows  clearly  that the offset  payments operate as specific action
against dumping and subsidisation, as this notion has been interpreted by the Appellate Body in
United States – 1916 Anti-Dumping Act.  In fact, the offset  payments mandated by the Byrd
Amendment are made
- only if an anti-dumping order or findin g or a countervailing duty order has
been issued;
- exclusively to the domestic producers “affected” by the dumping or
subsidisation which is the subject of such order or finding;
- from the monies collected pursuant to such order or finding; and
- in order to compensate the “affected” producers for injuries caused by the
dumping or subsidisation in question.
The purpose of the Byrd Amendment
4.133  In the view of the European Communities, India, Indonesia and Thailand, the Byrd
Amendment  is premised on the mistaken notion that the imposition of anti-dumping and
countervailing duties does not provide a sufficient remedy to the US industry, because dumping and
subsidisation “continue” after the imposition of such measures. The stated purpose of the Byrd
Amendment is to “offset” the effects of such “continued” dumping or subsidisation by making cash
payments to the affected domestic producers.
4.134  These complainants argue that that purpose is highlighted by the title of the Byrd Amendment
(the Continued Dumping and Subsidy Offset Act of  2000), as well as by the name given to the
payments made under the Byrd Amendment (the “continued dumping and subsidy offset”). Moreover,
the purpose to counter “continued” dumping and subsidisation is openly stated in Section 1002 of theWT/DS217/R
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CDSOA, which sets out the “findings” of the US Congress providing the justification for the
enactment of the act.
4.135  According to these complainants, the legislat ive history of the Byrd Amendment provides
further confirmation that it was designed as a specific response against dumping and subsidisation .
According to its main proponents, the purpose of th e Byrd Amendment is to deter foreign exporters
from “continuing” to export dumped or subsidised products and, failing that, to compensate the US
producers for the injury caused by such “continued” dumping or subsidisation.
The offset payments are not in accordance with the GATT provisions, as interpreted by the Anti-
Dumping Agreement and the SCM Agreement
The Anti-Dumping Agreement
4.136  In the view of the European Communities, India, Indonesia and Thailand, as confirmed by the
Appellate Body in United States – 1916 Anti-Dumping Act, Article VI, and, in particular,
Article VI:2, read in conjunction with the Anti-Du mping Agreement, limit the permissible responses
to dumping to definitive anti-dumping duties, provisional measures and price undertakings. The offset
payments mandated by the Byrd Amendment are neither import duties, nor provisional measures in
the form of duties or securities, nor price undertakings given by the exporters. Therefore, they are notaction taken “in accordance with” the provisions of the GATT, as interpreted by the Anti-Dumping
Agreement.
The SCM Agreement
4.137  The European Communities, India, Indonesia and Thailand note that Articles VI and XVI of
the GATT, as interpreted by the SCM Agreement, al low Members to take one of the following three
types of action against subsidisation:
- “countervailing measures” imposed in accordance with Part V of the SCM
Agreement;
- “countermeasures” against a “prohibited subsidy” imposed in accordance
with Part II of the SCM Agreement; or
- “countermeasures” against subsidies that cause “adverse effects” to the
interests of the Member concerned imposed in accordance with Part III of the
SCM Agreement.
4.138  These complainants argue these three remedies are not cumulative, as clarified by
Footnote 35 of the SCM  Agreement.
4.139  The European Communities, India, Indonesia and Thailand posit that Part V of the SCM
Agreement permits the adoption of three types of “countervailing measures”: countervailing duties;provisional measures; or voluntary undertakings given by the subsidising Government or the foreign
exporter. The offset payments do not fall within any of those three types of measures and, therefore,
are not actions “in accordance” with Part V of the SCM Agreement.
4.140  In the view of the European Communities, India, Indonesia and Thailand, the adoption of
“countermeasures” under Parts II or III of the SCM Agreement must be authorised in advance by theDSB. Such authorisation can be granted only if certain conditions are met.  The United States has not
received, nor indeed requested, an authorisation from the DSB to make the offset payments by way ofWT/DS217/R
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“countermeasures”. Moreover, none of the conditions for receiving such an authorisation would be
satisfied.
4.141  Furthermore, these complainants submit, footnote 35 provides that countervailing measures
and countermeasures authorised under Parts II and III cannot be applied cumulatively. Yet, under theByrd  Amendment,  the offset payments can be made only if the subsidy concerned has already been
the subject of a countervailing duty order.  Theref ore, the same subsidy cannot be the subject of a
“countermeasure”.
The offset payments provide double protection to the US industry
4.142  The European Communities, India, Indonesia and Thailand argue that the Byrd Amendment
is based on the specious theory that the “continuation” of dumping and subsidisation after the issuance
of an anti-dumping or a countervailing duty order causes injuries which are not remedied by those
orders. That theory is unfounded. Under US law,  anti-dumping and countervailing duties are, as a
general rule, liquidated on the basis of dumping and subsidisation that occurs after the relevant order
is issued. Thus, it is true that, to the extent that duties are collected, this implies that dumping or
subsidisation have “continued”. However, such “c ontinued” dumping or subsidisation is already
redressed by the collection of the duties themselves. Therefore, the offset  payments are a remedy for
injury which has already been remedied by the collection of anti-dumping duties or countervailing
duties.
4.143  The European Communities, India, Indonesia and Thailand posit that the fallacy underlying
the “findings” of the US Congress was duly exposed by the Statement of Administration Policy of
11 October 2001. The effect of the Byrd Amendment is, in reality, to give a “double hit” to foreignexporters. In President Clinton’s own words, the By rd Amendment “will provide select US industries
with a subsidy above and beyond the protection level needed to counteract foreign subsidies”.
(ii) Article 5.4 of the Anti-Dumping Agreem ent and Article 11.4 of the SCM Agreement
4.144  According to the European Communities, India, Indonesia and Thailand, the Byrd
Amendment provides a financial inducement to domestic producers for making applications for theimposition of anti-dumping or countervailing measures, or for supporting the applications made by
other domestic producers. The provision of that financial inducement is inconsistent with Article 5.4
of the Anti-Dumping Agreement and with Article 11.4 of the SCM Agreement for the following
reasons:
(a) it is incompatible with the obligation of the US authorities to conduct an objective
examination of the relevant facts for establishing whether an application is made “by
or on behalf of the domestic industry”;
(b) it prevents the US authorities from ascertaining whether an application is made “by or
on behalf of the domestic industry” before initiating an investigation; and
(c) it frustrates the object and purpose of those two provisions, which is to limit the
initiation of investigations to those instances where the domestic industry has a
genuine interest in the adoption of anti-dumping or countervailing measures.WT/DS217/R
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The Byrd Amendment provides a financial inducement to file applications or support those made by
other producers
4.145  The European Communities, India, Indonesia and Thailand note that the Byrd Amendment
provides that the offset  is to be paid only to the “affected domestic producers”, a category which is
defined as including the petitioners and those interested parties who support the petition. Accordingly,
no offset  is paid to any domestic producer who either opposes actively or does not support the
application.  As a result, the European Communities, India, Indonesia and Thailand argue, the Byrd
Amendment has the effect of 1) stimulating the fili ng of applications; and 2) making it easier for the
applicants to obtain the support of other domestic producers, so as to meet the quantitative thresholds
laid down in Article 5.4 of the Anti-Dumping Agreement and in Article 11.4 of the SCM Agreement.
The Byrd Amendment is incompatible with the obligat ion of the US authorities to make an objective
examination of the relevant facts for establishing whether an application is made “by or on behalf of
the domestic industry”
4.146  The European Communities, India, Indonesia and Thailand are of the view that like any other
factual “examination” mandated by the Anti-Dumping Agreement or the SCM Agreement, the
“examination” of the relevant facts for establishing whether an application is made “by or on behalf of
the domestic industry” must be conducted in an objective manner. This requirement is not stated
expressly in Article 5.4 of the Anti-Dumping Agreement or in Article 11.4 of the SCM Agreement,
but it  is a corollary of the principle of good faith which informs all the covered agreements. The
Appellate Body has noted that in order to be “objec tive” an examination must conform to “the dictates
of the basic principles of good faith and fundamental fairness”. More precisely, an “objective”examination requires that the relevant facts “be in vestigated in an unbiased manner, without favouring
the interests of any interested party, or group of interested parties in the investigation.”
4.147  The European Communities, India, Indonesia and Thailand submit that the Byrd Amendment
is incompatible with this fundamental requirement. Through the promise of offset payments, the US
Government is unduly influencing the very facts which its authorities are required to “examine”.Moreover, as a result, it becomes more likely that th ose authorities will determine that an application
is made “by or on behalf of the domestic industry”. This is nothing short of an attempt to manipulate
the outcome of the determination required by Article 5.4 of the Anti-Dumping Agreement and
Article 11.4 of the SCM Agreement. Furthermore, by so doing, the US authorities favour the interests
of certain parties (the producers who support genuinely the imposition of measures) over those of
other interested parties (including not only the exporters but also the domestic producers who oppose
the initiation).
The Byrd Amendment makes it impossible for the US authorities to ascertain whether the application
is made “by or on behalf of the domestic industry”
4.148  According to the European Communities, India, Indonesia and Thailand, a domestic producer
cannot be considered to have made an “application”, or to “support” it, within the meaning of
Article 5.4 of the Anti-Dumping Agreement and Ar ticle 11.4 of the SCM Agreement, if it does so
exclusively in order to qualify for the offset pa yments provided under the Byrd Amendment. When
the “support” of a domestic producer is “bought” with the promise of a financial reward, such
“support” cannot be regarded as genuine and cannot be taken into account for the purposes of the
determination required by Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM
Agreement.
4.149  The European Communities, India, Indonesia and Thailand submit that by its very existence,
the Byrd Amendment calls into question the credibility of any application or expression of supportWT/DS217/R
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made by the US producers. In fact, following the adoption of the Byrd Amendment, it has become
impossible for the US authorities to tell whether a domestic producer has made an “application” or
expressed its “support” for an application made by another producer because it is truly interested in
the adoption of anti-dumping or countervailing measur es or, rather, because it wants to share in the
distribution of the offset. As a result, the Byrd Amendment prevents the US authorities from
ascertaining whether an application is genuinely ma de “by or on behalf of the domestic industry” and,
consequently, from making a proper determination to  that effect before initiating an investigation
The Byrd Amendment defeats the object and purpose of Article 5.4 of the Anti-Dumping Agreement
and Article 11.4 of the SCM Agreement
4.150  In the view of the European Communities, India, Indonesia and Thailand, the Anti-Dumping
Agreement and the SCM Agreement  limit the  discretion of Members to impose anti-dumping or
countervailing measures by providing that, except in “special circumstances”, no investigation shall
be initiated unless an application has been made “by or on behalf of the domestic industry”. The
object and purpose of such prohibition is self-evident. If the potential beneficiaries of an anti-dumping
measure or of a countervailing measure do not consider them to be in their interest, there is no good
reason, in the absence of “special circumstances”, for the authorities of the importing Member toimpose a measure which restricts trade among the WTO Members.  Yet, the Byrd Amendment makes
it possible, and indeed encourages, the initiation of investigations and, consequently, the imposition of
anti-dumping and countervailing measures, in cases where the domestic industry has no genuine
interest in the adoption of such measures, thereby defeating the object and purpose of Article 5.4 of
the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement.
(iii) Article 8.3 of the Anti-Dumping Agreem ent and Article 18.3 of the SCM Agreement
4.151  The European Communities, India, Indonesia and Thailand argue that the Byrd Amendment
provides a financial inducement to domestic producers for opposing the acceptance of undertakings.
The provision of that inducement is inconsistent with Article 8.3 of the Anti-Dumping Agreement and
with Article 18.3 of the SCM Agr eement for the following reasons:
(a) it will lead to the rejection of undertakings without a proper “reason”;
(b) it is incompatible with the obligation of the US authorities to conduct an objective
examination of whether the acceptance of an undertaking would be “appropriate”;
and
(c) it undermines the object and purpose of those two provisions, which is to provide an
alternative remedy to the imposition of  duties.
4.152  The European Communities, India, Indonesia and Thailand posit that the authorities of the
importing Member enjoy wide discretion in order to decide whether or not to accept an undertaking.
Nevertheless, such discretion is not unlimited. It is implicit in Article 8.3 of the Anti-Dumping
Agreement and Article 18.3 of the SCM Agreement th at the authorities cannot reject an undertaking
without examining first whether it would be “appropriate” to accept it. For the reasons already
explained, such examination must be “objective”. In other words, it must conform to “the dictates of
the basic principles of good faith and fundamental fairness”.
4.153  Furthermore, the European Communities, India, Indonesia and Thailand argue, Article 8.3 of
the Anti-Dumping Agreement and Article 18.3 of the SCM Agreement make it clear that the
authorities must have a “reason” for rejecting an undertaking. Those two provisions do not limit a
priori the types of “reasons” which can be invoked by the authorities. But this does not mean that theWT/DS217/R
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authorities can invoke all sorts of motives for rejecting an undertaking. The “reasons” alluded in
Article 8.3 of the Anti-Dumping Agreement a nd Article 18.3 of the SCM Agreement must be
pertinent for deciding whether the acceptance of an undertaking is “appropriate”. At a minimum, they
should be related to the specific terms or circumstances of the undertaking under consideration or to aMember’s “general policy” with respect to undertakings.
The Byrd Amendment provides a financial inducement to petitioners for opposing the acceptance of
the undertakings offered by the exporters
4.154  The European Communities, India, Indonesia and Thailand assert that if the US authorities
accept an undertaking, no anti-dumping or countervailing duties will be assessed and, consequently,
no offset  will be distributed to the affected domestic producers. Thus, under the Byrd Amendment, the
petitioners have a pecuniary interest in opposing the acceptance of undertakings by the authorities.
The petitioners’ opposition is given “considerable” weight by the US authorities when deciding
whether to accept an undertaking
4.155  The European Communities, India, Indonesia and Thailand argue that under US law, the
petitioners play an active and privileged role in the procedure leading to the decision whether to
accept an undertaking. Furthermore, the US authorities have stated that the petitioners’ opposition issomething to which they accord “considerable weight” when assessing whether to accept an
undertaking. In fact, undertakings are very rarely, if ever, accepted against the petitioner’s opposition.
The Byrd Amendment will lead to the rejection of undertakings without a valid “reason”
4.156  In the opinion of the European Communities, India, Indonesia and Thailand, following the
adoption of the Byrd Amendment, the petitioners are likely to object systematically to anyundertakings offered by the exporters, not because they consider them less effective than the
imposition of duties, but rather because they have a vested financial interest in the imposition of
duties. Unlike the petitioners’ legitimate concern that an undertaking may be less effective than the
imposition of duties, the pecuniary interest of the petitioners in receiving the offset  is an extraneous
consideration, which has no bearing on whether an undertaking is an “appropriate” remedy.Therefore, following the adoption of the Byrd Amendment, the petitioners’ opposition cannot be
regarded as a proper “reason” for rejecting an undertaking.
The Byrd Amendment is incompatible with the obligat ion of the US authorities to make an objective
examination of whether the acceptance of an undertaking would be appropriate
4.157  The European Communities, India, Indonesia and Thailand submit that through the offset
payments, the US authorities are unduly influencing the outcome of the examination of the
“appropriateness” of accepting an undertaking which they are required to make under Article 8.3 ofthe Anti-Dumping Agreement and Article 18.3 of the SCM Agreement. Moreover, they do it in a way
which favours the interests of the petitioners over those of the exporters.
The Byrd Amendment frustrates the object and purpose of Article 8 of the Anti-Dumping Agreement
and Article 18 of the SCM Agreement
4.158  The European Communities, India, Indonesia and Thailand assert that the object and purpose
of Article 8 of the Anti-Dumping Agreement and Article 18 of the SCM Agreement is to provide an
alternative remedy to injurious dumping and subsidisation which, while giving equivalent protection
to the domestic producers, is more beneficial for the exporters. The Byrd Amendment, together with
the US policy of according “considerable” weight to the petitioners’ opposition, will render veryWT/DS217/R
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difficult, if not impossible, the acceptance of undertakings, thereby defeating the object and purpose
of Article 8 of the Anti-Dumping Agreement and Article 18 of the SCM Agreement.  This
consequence of the Byrd Amendment is particularly pernicious for developing country Members.  By
making virtually impossible the acceptance of undertakings, the purpose of the obligation imposed byArticle 15 of the Anti-Dumping Agreement  will also be defeated by the Byrd Amendment.
(iv) Article X:3 (a) of the GATT
4.159  The European Communities, India, Indonesia and Thailand are of the view that the offset
payments mandated by the Byrd Amendment lead to an unreasonable and partial administration of the
US laws and regulations concerning the initiation of anti-dumping and countervailing duty
investigations and the acceptance of undertakings w ithin the framework of such investigations. For
that reason, the Byrd Amendment is inconsistent with Article X.3(a) of the GATT.
The US anti-dumping and countervailing duty laws and regulations concerning the initiation of
investigations and undertakings fall within the scope of Article X:1
4.160  The European Communities, India, Indonesia and Thailand posit that the “administered
measures” at issue are the provisions concerning the initiation of anti-dumping and countervailing
duty investigations and the acceptance of undertakings which are contained in the Tariff Act of 1930and in the implementing regulations issued by the US Department of Commerce. It is beyond question
that those measures are “laws and regulations” and that they are “of general application”.
Furthermore, those measures “pertain” to “rates of duty, taxes or charges” or to “other requirements,
restrictions or prohibitions on imports”. Therefore, they fall within the purview of Article X:1, with
the consequence that their “administration” is subject to the requirements imposed by Article X :3 (a).
The Byrd Amendment leads to an “unreasonable” administration of the US laws and regulations
concerning the initiation of investigations and the acceptance of undertakings
4.161  In the view of the European Communities, India, Indonesia and Thailand, the Byrd
Amendment leads to an “unreasonable” administration of the US laws and regulations concerning the
initiation of investigations because it provides a strong financial incentive to file or supportapplications. As a result, anti-dumping and countervailing measures will be imposed in cases where
the domestic industry has no genuine interest in the adoption of such measures.
4.162  The European Communities, India, Indonesia and Thailand argue that the Byrd Amendment
also leads to an "unreasonable" administratio n of the US laws and regulations concerning
undertakings. Together with the US policy of according “considerable” weight to the petitioners’
opposition, the Byrd Amendment  will render more difficult, if not impossible, the acceptance of
undertakings. Thus, foreign exporters will be deprived of an alternative, more beneficial, remedy forno other reason than the interest of the domestic producer in securing a windfall financial gain.
The Byrd Amendment leads to the “partial” administration of the US laws and regulations concerning
the initiation of investigations and the acceptance of undertakings
4.163  In the opinion of the European Communities, India, Indonesia and Thailand, the offset
payments result in the "partial" administration of the US laws and regulations concerning theinitiation of investigations because they increase artificially the level of support for the applications.
This favours certain parties at the expense of other interested parties. The offset payments also lead to
a “partial” administration of the US laws and regulations concerning undertakings because, as a result,
the exporters’ interest in obtaining an alternative remedy in lieu  of the imposition of duties is
subordinated to the pecuniary interest of the domestic producers.WT/DS217/R
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(v) Article 18.4 of the Anti-Dumping Agreemen t, Article 32.5 of the SCM Agreement and
Article XVI:4 of the WTO Agreement
4.164  The European Communities, India, Indonesia and Thailand submit that by being inconsistent
with Articles 18.1, 5.4 and 8.3 of the Anti-Dumping Agreement  and with Articles 32.1, 11.4 and 18.3
of the SCM Agreement, the Byrd Amendment is also inconsistent with Article 18.4 of the Anti-
Dumping Agreement and with Article 32.5 of the SCM Agreement, respectively.
4.165  By being inconsistent with Articles 18.1, 5.4 and 8.3 of the Anti-Dumping Agreement, with
Articles 32.1, 11.4 and 18.3 of the SCM Agreement  and with Article X :3 (a) of the GATT, the
European Communities, India, Indonesia and Thailand argue, the Byrd Amendment is also
inconsistent with Article XVI:4 of the WTO Agreement.
6. Korea
(a) Introduction
4.166  Korea argues that the Appellate Body already has adjudicated the primary issue in this
proceeding.  In US – Anti-Dumping Act of 1916 , the Appellate Body affirmed the Panel’s conclusion
that, in the context of an anti-dumping (AD) (o r countervailing duty (CVD)) investigation, Members
may take one and only one action – they may impose duties equal to or less than the margin ofdumping (or the subsidy level).
58  Moreover, a Member may impose AD or CVD duties only after
complying with all applicable provisions of the relevant agreements.59
4.167  Unfortunately, according to Korea, just like the 1916 Act, the Byrd Amendment60 creates a
specific action, other than imposition of AD or CVD duties, to be taken where imports are found to be
dumped or subsidized.  Therefore, just like the 1916 Act, the Byrd Amendment is inconsistent with ahost of US obligations under various WTO agreements, including Article VI of GATT 1994,
Articles 5.4, 8 and 18.1 of the AD Agreement and Ar ticles 11.4, 18 and 32.1 of the SCM Agreement.
(b) Statement of the facts
4.168  Korea posits that the relevant facts are few and quite straightforward.  On 28 October 2000,
the President of the United States signed into law the Byrd Amendment,
61 and simultaneously asked
Congress to repeal the law:
I call on the Congress to override this provision, or amend it to be acceptable, before
they adjourn.62
                                                     
58 WT/DS136/AB/R, WT/DS162/AB/R (28 August 2000) ( 1916 Act ).
59 See Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade
1994, Article 18.1; Agreement on Subsidies and Countervailing Measures, Article 32.1; 1916 Act ,
WT/DS136/AB/R, WT/DS162/AB/R (28 August 2000).
60 The Continued Dumping and Subsidy Offset Act (known as the Byrd Amendment), codified as
Section 754 of Title VII of the Tariff Act of 1930, Public Law 106-387 (28 October 2000), 114 Stat. 1549,
Title X – Continued Dumping and Subsidy Offset (Byrd Amendment).  The text of the Byrd Amendment isprovided in Common Exhibit 1.  The US Customs Service regulations promulgated pursuant to the law, 66 Fed.Reg. 48546-55 (21 September 2001), are provided in Common Exhibit 3.
61 The Byrd Amendment is provided in Common Exhibit 1.
62 28 October 2000 Press Release from the US Mission to the European Union
(http://www.useu.be/ISSUES/clin1028.html) (visited 22 October 2001) ( see Exhibit ROK-2).WT/DS217/R
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4.169  According to Korea, the US Government furt her conceded that the offset provides an
additional measure that is not necessary to restore free trade:
. . . unfair trade laws have as their purpose the restoration of conditions of fair trade.
However, that is the purpose of the anti-dumping and countervailing dutiesthemselves, which accomplish that purpose.  By raising the price of imports they
shield domestic producers from import competition and allow domestic
manufacturers to raise prices, increase production and improve revenues.
Consequently, distribution of the tariffs themselves to producers is not necessary to
the restoration of conditions of fair trade.63
4.170  Korea asserts that the Byrd Amendment is mandatory.  Where the conditions for its
application are met, the US authority must implement the statute’s directive.64  The authority has no
discretion to do otherwise, due to the use of mandatory words in the text of the statute.65  In sum, the
United States has adopted a law mandating that, where an AD or CVD order or finding has been
imposed or made, the US authorities must, in addition to collecting the AD or CVD duties, distribute
the duties to the US producers that requested the investigation.
(c) Argument
(i) The Byrd Amendment is inconsistent with  provisions of GATT 1994, the Anti-Dumping
Agreement and the SCM Agreement because it constitutes an impermissible “specific action”
against imports
4.171  Korea argues that Article 18.1 of the AD Agreement has been interpreted to “limit the anti-
dumping instruments  that may be used by Members to those expressly contained in Article VI and the
Anti-Dumping Agreement.”66  I n  United States - 1916 Act , the Panel found the 1916 Act to be
inconsistent with US WTO obligations, concluding that “[e]xcept for provisional measures and price
undertakings, the only type of remedies foreseen by the Anti-Dumping Agreement is the imposition of
duties.”67
4.172  The Appellate Body affirmed these findings, holding that Article VI:2 of GATT 1994 and
Article 18.1 of the AD Agreement, read together, prohibit Members from taking specific action
against dumping that is not stipulated in Article VI:2 and the AD Agreement, i.e., any measure other
than (or in addition to) provisional remedies, price undertakings and anti-dumping duties applied in
accordance with Article VI:2 and the AD Agreement.68
                                                     
63 Statement of Administrative Policy, distributed by US Office of Management and Budget
(11 October 2000) (http://www.whitehouse.gov/omb/legislative/sap/106-2/hr4461-h.html)
(visited 22 October 2001) (emphasis added) (provided in Common Exhibit 9).
64 See, e.g., 1916 Act , WT/DS136/AB/R, WT/DS162/AB/R (28 August 2000) at paras. 88-91
(upholding the Panel’s finding that the 1916 Act is mandatory and concluding that the discretion of the USDepartment of Justice not to bring actions under the 1916 Act “is not . . . of such a nature or of such breadth” to
make the act discretionary).  Here, the US Executive Branch has no discretion at all regarding whether and when
to implement the Byrd Amendment.
65 See, e.g., Byrd Amendment, Sections 754(a) (“Duties assessed . . . shall be distributed . . . .”) and
754(c) (“The Commissioner [of US Customs] shall prescribe procedures for distribution . . . .  Such distribution
shall be made not later than . . . .”) (emphases added) (Common Exhibit 1).
66 1916 Act , WT/DS162/R at 6.216 (emphasis in original).
67 Id. (emphasis added).  Id. at paras. 6.230-6.231.
68 1916 Act , WT/DS136/AB/R, WT/DS162/AB/R at paras. 137-138.WT/DS217/R
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4.173  Korea asserts that Article 32.1 of the SCM Agreement is the analog provision to Article 18.1
of the AD Agreement.  With the exception of the words “a subsidy of” and “dumping of exports”, the
two provisions are identical.  Because the provisions are nearly identical in text and are identical in
terms of context and purpose, one fairly can draw  on the reports of the panel and Appellate Body in
United States -  1916 Act .
4.174  According to Korea, these reports indirectly indi cate that Article 32.1 (like Article 18.1 of the
AD Agreement) clarifies that a Member may impose on subsidized imports only those remedies (may
take only those “specific actions”) specifically provided for under Article VI and the SCM
Agreement.  When the specified conditions are met, a Member may impose a countervailing duty to
offset a subsidy.  But, due to Article VI of GATT 1994 and Article 32.1 of the SCM Agreement, it
may not take any other specific actions against subsidized imports.69
4.175  In Korea's view, however, the Byrd Amendment imposes on US authorities a requirement to
take an additional mandatory specific action after they have conducted an AD or CVD investigation,
have determined that relief is appropriate and have imposed relief in the form of a duty on imports of
the subject merchandise.  The Amendment requires the US authority to transfer the duties collected
directly to the US companies that supported the petition.70
4.176  Moreover, Korea submits, the transfer of duties collected from imports directly to the
domestic competitors of the affected companies, as well as the law itself which mandates this transfer,
is a “specific action” that is inconsistent with Article VI of GATT 1994, Article 18.1 of the AD
Agreement and Article 32.1 of the SCM Agreement.  Just as with the 1916 Act, which imposed
impermissible “‘specific action against dumping’ in the form of civil and criminal proceedings andpenalties,”
71 the Byrd Amendment imposes a specific action against dumping and subsidized imports
in the form of a direct transfer of assets fr om the affected foreign company to its domestic
competitors.
4.177  It is Korea's opinion that the Byrd Amendment is a specific action against dumping and/or
subsidies because it requires the US Customs Service to take action (administer the offset) “ only when
the constituent elements of ‘dumping’ [or a subsidy] are present.”72  Thus, the offset is available only
when the conditions for imposing an anti-dumping or countervailing duty are satisfied ( i.e., only when
dumping or subsidization causing material injury exists) and only when  a duty is imposed.73
Moreover, the offset is available only to  “affected domestic producers”, which the statute defines as
“any manufacturer, producer, farmer, rancher or worker representative (including associations of such
persons)” that was a petitioner or an interested party in support of the petition and that remains in
operation.74
4.178  Finally, Korea argues that the offset payments to the “affected domestic producer” are
transferred directly from a “special account” that must be created for the duties assessed and collected
under each individual AD or CVD order.75  Thus, the offsets are paid directly from the duties
                                                     
69 See id.; 1916 Act , WT/DS162/R (29 May 2000) at paras. 6.216 and 6.230-6.231.
70 Byrd Amendment, Sections 754(b)(1) and 754(d)(3) (Common Exhibit 1).  Therefore, as discussed
above, the Byrd Amendment is a mandatory law and can be challenged regardless of whether it has been
implemented in a specific case.  See, e.g., 1916 Act , WT/DS136/AB/R, WT/DS162/AB/R (28 August 2000) at
paras. 88-91.
71 Id. at para. 137.
72 Id. at para. 122.
73 See Byrd Amendment, Section 754(a) (Common Exhibit 1).
74 Id. at Sections 754(b)(1)(A) and (B).
75 Id. at Section 754(e).WT/DS217/R
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collected to compensate the “affected domestic producers” for injuries caused by the dumping or
subsidy of which they complained.
4.179  Therefore, Korea posits, the Byrd Amendment mandates an impermissible “specific action”
just as the 1916 Act does.  Indeed, in many ways the Byrd Amendment is far more pernicious andtrade distortive than is the 1916 Act.  The 1916 Act is limited to certain forms of international price
discrimination.  The Byrd Amendment, however, applies not only to dumping but also to subsidies –
it has a far larger scope.  Also, the 1916 Act is rarely invoked.  But, the Byrd Amendment applies to
all AD and CVD proceedings resulting in the imposition of duties.
76  Thus, it profoundly alters the
conditions of competition to favour US producers in all US markets for all  products.
4.180  According to Korea, this analysis is confirme d by the statements of many US Congressmen,
including Senator Byrd (Democrat – West Virginia ), who crafted, introduced and ensured enactment
of the Amendment by the US Congress.
4.181  For the reasons set forth above, Korea urges the Panel to find that the Byrd Amendment
mandates the imposition of an impermissible specific action and, thus, that the United States is in
violation of Article VI of GATT 1994, Article 18.1 of the AD Agreement and Article 32.1 of the
SCM Agreement.
(ii) The Byrd Amendment is inconsistent with Article 5.4 of the Anti-Dumping Agreement and
Article 11.4 of the SCM Agreement because it  impermissibly distorts and undermines the
standing threshold, encouraging abuse of otherwise permissible actions, and rendering these
WTO Provisions meaningless
4.182  Korea argues that Article 5.4 of the AD Agreement sets forth the standard for determining
whether an application for an AD investigation is supported by “the industry,” i.e., whether the
companies that support the requested investigation are sufficient to constitute “the industry.”  If the
support does not exceed the stated threshold, an authority may not initiate the investigation.  Under
Article 5.4, an authority cannot initiate an investigation unless:  (i) the investigation is supported by
producers accounting for more than 50 per cent of the total production of the like product (by volumeor value) produced by that portion of the industry that supports or opposes the petition; and (ii) those
in support account for at least 25 per cent of total domestic production.
4.183  Korea asserts that the threshold established in Article 11.4 of the SCM Agreement is, for all
practical purposes, identical to that set forth in Article 5.4 of the AD Agreement.
4.184  According to Korea, as the negotiating history indicates, these thresholds were designed to
balance carefully a number of competing rights and interests, primarily the right of an industry to seek
relief from unfair trade practices versus the interest in ensuring that it is the industry, and not a sector
of it, or for that matter, an individual company, that is seeking relief.  Indeed, perhaps the most
important concern was that the provision be drafted to ensure that complaints or petitions be filed only
when warranted and only when supported by a substantial enough portion of an industry.77  T h e
balancing took place in a context in which AD or CVD duties were the only possible forms of relief
(apart from negotiated settlements).
                                                     
76 It applies to all assessments made on or after 1 October 2000 in connection with all AD and CVD
orders and findings in effect as of 1 January 1999 or issued thereafter.  66 Fed. Reg. 48546 (third column)(21 September 2001) (Common Exhibit 3).
77 See, e.g., T. Stewart (Ed.), The GATT Uruguay Round, A Negotiating History ( 1986-1992), Vol. II:
Commentary (Kluwer:  1993) at pp. 1452, 1575-88 (explaining that the thresholds were established to address“concern[s] with the possibility that unwarranted complaints would be filed and unwarranted investigations
commenced.”  (p. 1575) (footnote omitted)).WT/DS217/R
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4.185  In Korea's view, the Byrd Amendment distorts and undermines the balancing of interests
agreed upon by the negotiators.  Indeed, this alteration is the purpose of the Amendment.  The
Amendment vastly increases the incentive for co mpanies to support a petition by providing cash
transfers from importers to affected producers, but only to those domestic producers supporting the
petition.78  Producers that oppose a petition are not eligible for the offsets.79
4.186  Korea argues that the Byrd Amendment therefore creates a powerful incentive for every
company in every industry not only to bring petitions without merit, but also to support any petition
that is brought.  The potential of receiving th e offset induces companies that otherwise would be
uninterested to show interest and to support a petition which they otherwise would not support.
Moreover, because the mere initiation of an investigation often distorts trade patterns, regardless of
whether AD or CVD duties eventually are imposed, the Byrd Amendment is trade distortive.  In short,by offering a “cash reward,” the Amendment encourages overuse and abuse of the US AD and CVD
laws.
4.187  Due to the Byrd Amendment, Korea asserts, the standards set forth in Article 5.4 and
Article 11.4 are meaningless as applied in the United States, and the two provisions are reduced to
“inutility.”  By adopting the Byrd Amendment as law, the United States signals that it interpretsArticle 18.1 of the AD Agreement and Article 32.1 of the SCM Agreement as allowing the Byrd
Amendment and action under it.  By doing so, the United States has adopted an interpretation that
reduces to inutility Article 5.4 of the AD Agreement and Article 11.4 of the SCM Agreement.  The
Byrd Amendment therefore is based on a fundamental misreading of these provisions – an
impermissible interpretation.
80
4.188  In the view of Korea, the US government has taken action – in passing the Byrd Amendment
– that improperly influences the very facts that the US authority is supposed to examine in making its
determination.  Thus, the US has violated its obligation to conduct an objective examination81 under
Article 5.4 of the AD Agreement and Article 11.4 of the SCM Agreement.
4.189  Korea submits that the United States has violated this obligation because it has used the Byrd
Amendment to manipulate the situation to bias the process and to increase the likelihood that the US
authority will conclude that the relevant domestic industry supports a given petition.
(iii) The Byrd Amendment is inconsistent with Article 8 of the Anti-Dumping Agreement and
Article 18 of the SCM Agreement because it impermissibly deters agreements on undertakings
4.190  In Korea's view, the Byrd Amendment is inconsistent with WTO provisions regarding
undertakings, in particular, Article 8.1 of the AD Agreement and Article 18.1 of the SCM Agreement.
It reduces these provisions to inutility and renders them useless in the context of US AD and CVD
                                                     
78 Byrd Amendment, Sections 754(a) and (b)(1)(A) and (B) (Common Exhibit 1).
79 Id.
80 “[I]nterpretation must give meaning and effect to a ll the terms of a treaty.  An interpreter is not free
to adopt a reading that would result in reducing whole clauses or paragraphs of a treaty to redundancy orinutility.”  US – Standards for Reformulated and Conventional Gasoline , WT/DS2/AB/R (29 April 1996) at
p. 23.  See also, e.g. , Korea –  Definitive Safeguard Measure on Imports of Certain Dairy Products ,
WT/DS98/AB/R (14 Decembe r 1999) at paras. 80-81.
81 See, e.g., US – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan ,
WT/DS184/AB/R (24 July 2001) at para. 196, regarding Article 3.1 of the AD Agreement:
If an examination is to be “objective”, the investigation and evaluation of the relevant factors must be
even handed.  Thus, investigating authorities are not entitled to conduct the investigation in such a way that itbecomes more likely that, as a result of the fact-finding or evaluation process, they will determine that the
domestic industry is injured.WT/DS217/R
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proceedings.  Under US practice, the US government must consult with the affected industry before
accepting an undertaking.82  But the Byrd Amendment creates an  incentive for the US industry to
oppose undertakings.  This is because a price undertaking can not exceed the amount of the margin or
subsidy.83  By supporting the imposition of duties, the domestic industry may receive not merely the
imposition of the duties as allowed by the WTO agreements and US law (which, in essence, results in
price levels consistent with a price undertaking), but also the direct transfer of the duties collected.
4.191  Korea argues that in this manner, the Byrd Am endment also leads directly to abuse of AD and
CVD measures.  This is because measures are imposed in situations that, absent the Byrd Amendment
and the incentives it creates, would lead to undertakings.
4.192  Korea submits that, similar to the impact of the Byrd Amendment on the standing assessment,
the Byrd Amendment is an action taken by the United States which biases the process by whichundertakings are reached to decrease substantially the likelihood that the domestic industry that
supports the petition (the petitioners) will support an undertaking.  Therefore, by passing the Byrd
Amendment, the United States has violated its obligation to have its authority undertake an objective
examination
84 of whether accepting an undertaking under Article 8.3 of the AD Agreement or
Article 18.3 of the SCM Agreement would be “approp riate” in the circumstances, which include the
views of petitioners.
(d) Conclusion
4.193  For the reasons set forth above, Korea asks th e Panel to find that, by maintaining the Byrd
Amendment, the United States is in violation of Article VI of GATT 1994, Articles 5.4, 8 and 18.1 of
the AD Agreement and Articles 11.4, 18 and 32.1 of the SCM Agreement.  Korea requests the Panelto recommend that the United States bring its laws  into conformity with its obligations under these
WTO provisions.
4.194  Finally, Korea respectfully requests the Panel to suggest that, to meet its WTO obligations,
the United States should repeal the Byrd Amendment.
85
7. Mexico
(a) Introduction
4.195  Mexico argues that at issue in this dispute is whether the Continued Dumping and Subsidy
Offset Act of 2000 (the "Act") is consistent with certain obligations of the United States under the
Agreement on Subsidies and Countervailing Measures ("SCM Agreement"), the Agreement on
Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 ("AD
Agreement"), the General Agreement on Tariffs and Trade 1994 ("GATT 1994"), and the Marrakesh
Agreement Establishing the World Trade Organization  ("WTO Agreement").
4.196  The terms of reference of the Panel are:
                                                     
82 See 19 USC. §§ 1671c(e)(1), 1673c(e)(1); 19 C.F.R. § 351.208(f)(2)(iii).  Moreover, if, within
20 days of the publication of the notice of suspension, the US authority receives a request to continue itsinvestigation from even one single domestic producer that is a party to the investigation, the authority mustcontinue the investigation.  19 USC. §§ 1671c(g)(2), 1673c(g)(2) ( see Exhibit ROK-4 and Common Exhibit 15).
83 See Article 8.1 of the AD Agreement; Article 18.1 of the SCM Agreement.
84 See n. 81 above.
85 See, e.g., 1916 Act , WT/DS162/R at para. 6.292.WT/DS217/R
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"To examine, in the light of the relevant provisions of the covered agreements cited
by Australia, Brazil, Chile, the European Communities, India, Indonesia, Japan,
Korea and Thailand in document WT/DS217/5, by Canada in document
WT/DS234/12 and by Mexico in docume nt WT/DS234/13, the matters referred by
Australia, Brazil, Canada, Chile, the European Communities, India, Indonesia, Japan,
Korea, Mexico and Thailand to the DSB in those documents, and to make such
findings as will assist the DSB in making the recommendations or in giving the
rulings provided for in those agreements."
(b) The facts
4.197  According to Mexico, the relevant fa cts can be summarized as follows:
• On 28 October 2000, the Act was enacted.  It amended Title VII of the Tariff Act of
1930, by adding a new section 754 (codified at 19 USC. 1675c):
• The Act provides that assessed duties received on or after 1 October 2000,
pursuant to a countervailing duty order, an anti-dumping duty order or an
anti-dumping duty finding must be distributed to certain affected domestic
producers for certain qualifying expenditures that these producers incur after
the issuance of such an order or finding;  and
• The distribution is known as the continued dumping and subsidy offset.
• On 29 December 2000, the Chairman of the US International Trade Commission
provided US Customs with a list of qualifying domestic producers who may beeligible to receive a disbursement of anti-dumping or countervailing duty assessments
under the Act (the "ITC List").  The ITC List includes reference to duties applicableto products of Mexico.
• On 3 August 2001, US Customs published in the Federal Register a Notice of Intent
to Distribute Offset indicating Customs’ intention to distribute assessed anti-dumpingor countervailing duties that were collected in fiscal year 2001 (the "Notice of Intent
to Distribute").
• On 21 September 2001, US Customs issued the final rule to amend the Customs
Regulations to implement the provisions of the Act  (the "Final Rule").
• Assessed duties received in fiscal year 2001 had to be distributed to affected domestic
producers by 30 November 2001.
(c) Legal arguments
4.198  It is Mexico's view that the Act mandates the United States authorities to act in a manner that
is inconsistent with the WTO Agreements.  Consequently, Mexico argues that it is entitled to
challenge the Act "as such".
(i) Article 18.1 of the AD Agreement and Article 32.1 of the SCM Agreement
4.199  According to Mexico, on the facts of this disput e, the Act is inconsistent with Article 18.1 of
the AD Agreement and Article 32.1 of the SCM Agreement.WT/DS217/R
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4.200  Mexico asserts that these provisions state that no "specific action" may be taken against
dumping of exports from another Member or a subsidy of another Member except in accordance with
the provisions of the GATT 1994 as interpreted by the two Agreements.   Under these provisions, a
limited set of specifically defined actions are the only remedies available.
4.201  Mexico argues that the Act establishes a regime for the systematic collection of funds
received from anti-dumping and countervailing dut ies on imported products and their distribution to
certain United States producers of like products who were petitioners or in support of a petition
related to the order or finding upon which the duties were levied.  The funds that are distributed are
referred to in the Act as "offsets", and their distribution is mandated.
4.202  Mexico submits that the regime established by the Act is plainly a specific action against
dumping of exports of another Member and subsidies of another Member because the Act directly andsystematically offsets the dumping and subsidizing of exports and, thereby, amounts to a response to
situations presenting the constituent elements of dumping and subsidizing.  The distribution of offsets
under the Act is directly linked to and caused by the imposition of the United States’ anti-dumping
and countervailing duties, the funds that are distributed are created by the existence of dumping and
subsidization, the amount of the funds is equal to the amount of such dumping and subsidization, and
the funds are distributed as offsets to domestic producers of products that are "like" those found to
have been dumped and subsidized.
4.203  In Mexico's view, the specific action taken under the Act is not consistent with the provisions
of the GATT 1994 as interpreted by the AD Agreement and the SCM Agreement.  It effectively
doubles the protection conferred upon United States pr oducers by the application of anti-dumping and
countervailing duties.  This additional remedy distorts trade flows, upsets expected competitive
relationships and provides unreasonable trade protection that cannot, under any reasonable
interpretation, be regarded as "in accordance with th e provisions of the GATT 1994".  Accordingly, it
is inconsistent with Article 18.1 of the AD Agreement and Article 32.1 of the SCM Agreement.
(ii) Article 5 of The SCM Agreement
4.204  Mexico asserts that on the facts of this dispute, the Act is also inconsistent with paragraph (b)
of Article 5 of the SCM Agreement.  That provision disciplines actions by Members that cause,
through the use of any subsidy, adverse effects to the interests of other Members.  "Adverse effects"
include nullification or impairment of benefits accruing directly or indirectly to a Member under the
GATT 1994.
The granting of subsidies by the Act nullifies or impairs benefits accruing to Mexico
4.205  Mexico argues that by virtue of Articles  7.1 and 7.3 of the SCM Agreement, a WTO Member
can invoke the remedy provisions in Part III of the Agreement with respect to the granting of any
actionable subsidy by another Member.
4.206  In Mexico's view, the offsets are subsidies within the meaning of Article 1.1 of the SCM
Agreement in that they constitute a direct transfer of funds in the form of cash grants which
automatically confer a benefit to the recipient.  Th ey are specific within the meaning of Articles 1.2
and 2 of that Agreement, because, by law, access to the subsidies is limited to a defined universe of
recipients.  This universe is comprised of enterprises who produce products that are “like” the
products that generated the offset payments, who were either petitioners or in support of the petition
that gave rise to the duties on those products, who are still in operation and who were not acquired by
a related company that opposed the original invest igation.  Accordingly, they are subject to the
provisions of Part III of the SCM Agreement, which include Article 5.WT/DS217/R
WT/DS234/R
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4.207  Mexico asserts that the distribution of offsets under the Act is explicitly mandated and
amounts to the granting of subsidies which, in turn, amounts to the "use of" subsidies within the
meaning of Article 5 of the SCM Agreement.  Through the use of such subsidies, the Act nullifies or
impairs benefits accruing directly or indirectly to Mexico under the GATT 1994 within the meaningof paragraph (b) of Article 5 of the SCM Agreement.
4.208  Mexico argues that the benefits that are being nullified or impaired accrue to Mexico under
Articles II and VI of the GATT 1994.  With respect to Article II, in cases where anti-dumping and
countervailing duties are in place against imports of Mexican products, Mexico can legitimately
expect that the competitive relationship between Mexican and like United States products will be
defined by a tariff, at most, equal to the United States’ tariff binding under Article II:1 plus
permissible anti-dumping and/or countervailing dut ies as contemplated under Article II:2(b) and no
more.  With respect to Article VI, in cases where anti-dumping and countervailing duties are imposed
on imports of products from Mexico, Mexico can legitimately expect that the competitive relationship
between Mexican and like United States products will be modified by the imposition of the duties by,
at most, the maximum anti-dumping and countervailing duties permitted under Article VI:2 and VI:3
of the GATT 1994 and no more.
4.209  According to Mexico, at the time these benefits accrued to it under Articles II and VI of the
GATT 1994, Mexico could not have reasonably anticipated the introduction of the Act.
4.210  Mexico asserts that upon granting, the subsidies mandated by the Act per se nullify or impair
the above-noted benefits in that they systematically upset the expected competitive relationship
between Mexican and like United States products in cases where anti-dumping and countervailingduties apply.  In addition to the expected tariffs under GATT Article II and duties under GATT
Articles II:2(b), VI:2 and VI:3, the competitive relationship between the imported and like domestic
products is established and, thereby, upset by the subsidies. The nullification or impairment is direct
and systematic and it reflects the explicit objective of the Act - to enhance the remedial effect of
United States’ anti-dumping and countervailing duty laws.
4.211  In the circumstances of this dispute, Mexico submits, the granting of subsidies per se  causes
nullification or impairment within the meaning of Article 5(b) of the SCM Agreement, and thereby
violates that provision.  Since the Act mandates the granting of subsidies it necessarily results in
action that is inconsistent with a WTO provision.
The maintaining of subsidies by the act null ifies or impairs benefits accruing to Mexico
4.212  Mexico is of the view that in addition, by virtue of Articles 7.1 and 7.3 of the SCM
Agreement, a WTO Member can invoke the remedy provisions in Part III of the SCM Agreementwith respect to the maintaining of any actionable subsidy by another Member.
4.213  Mexico posits that the Act provides the means or infrastructure for the granting of the
subsidies and, thereby, "maintains" those subsidies within the meaning of Articles 7.1 and 7.3.
Maintaining subsidies in circumstances where the granting of subsidies is mandated and other actions
have been taken with respect to the subsidies amount s to the "use of" a subs idy within the meaning of
Article 5 of the SCM Agreement.
4.214  According to Mexico, the maintenance of subsidie s in such circumstances nullifies or impairs
benefits accruing to Mexico under the GATT 1994.  The above-noted benefits and Mexico’s
associated legitimate expectations pertain to both current trade and to the creation of predictability
needed to plan future trade.  In the circumstances  of this dispute, the mere existence of the ActWT/DS217/R
WT/DS234/R
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impairs the predictability of the conditions of future trade and, thereby, the ability of Mexican
exporters who face United States’ anti-dumping and countervailing duties to plan for that trade.
4.215  Accordingly, Mexico asserts, the maintenance of subsidies by the Act in the specific
circumstances of this dispute, which amounts to the use of subsidies, causes nullification orimpairment within the meaning of Article 5(b) and thereby violates that provision.
(iii) Article 5.4 of the AD Agreement and Article 11.4 of the SCM Agreement
4.216  Mexico argues that Article 5.4 of the AD Agreement and 11.4 of the SCM Agreement set out
minimum requirements regarding the initiation of an ti-dumping or countervailing duty investigations.
Both provisions state that an investigation cannot be initiated unless the authorities have determined
that an application has been made "by or on behalf of the domestic industry".
4.217  Mexico submits that when the investigating authorities determine whether an application is
made "by or on behalf of the domestic industry", the determination must be conducted in an objective
manner and must conform to the principles of good faith.
4.218  In Mexico's view, the Act creates a financial incentive for domestic producers to file or
support petitions for the initiation of an investigation, rather than abstaining from doing so.  The
incentive distorts the functioning of the thresholds regarding standing and, hence distorts theexamination that the investigating authority is requ ired to make in order to determine whether the
application has been made "by or on behalf of the domestic industry".  This makes it impossible for
the investigating authority to carry out the "obj ective examination" it is obliged to undertake.
4.219  Thus, according to Mexico, the Act violates Article 5.4 of the AD Agreement and Article 11.4
of the SCM Agreement.
(iv) Article 8 of the AD Agreement and Article 18 of the SCM Agreement
4.220  In Mexico's opinion, Article 8 of the AD Agreement and Article 18 of the SCM Agreement
allow domestic investigating authorities to suspend or terminate anti-dumping and countervailing duty
investigations where the exporter (or the government in countervailing duty investigations) provides a
satisfactory voluntary undertaking.
4.221  When investigating authorities determine whet her undertakings should be agreed to, the
determination must be conducted in an objective manner and must conform to the principles of good
faith.
4.222  Mexico argues that the Act creates a financial incentive for the petitioners to oppose the
acceptance of undertakings and, therefore, will lead to the rejection of such undertakings without
proper reason.  This makes it impossible for the investigating authority to conduct an objective
examination of whether undertakings would be appropriate and thereby renders the price undertakingprovisions in the two Agreements inutile.
4.223  Thus, in Mexico's view, the Act violates Article 8 of the AD Agreement and Article 18 of the
SCM Agreement.
(v) Article X:3(a) of the GATT 1994
4.224  Article X:3(a) of the GATT 1994 requires Member s to administer in a uniform, impartial and
reasonable manner all its laws, regulations, decisions and administrative rulings of general applicationWT/DS217/R
WT/DS234/R
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pertaining to the classification or the valuation of products for customs purposes, or to rates of duty,
taxes or other charges, or to requirements, restrictions or prohibitions on imports or exports.  The
United States’ anti-dumping and countervailing duty laws and regulations are subject to this
provision.
4.225  Mexico asserts that by mandating United States authorities to act inconsistently with their
obligations under the AD Agreement and the SCM Agreement regarding standing determinations and
price undertakings, the Act does not lead to a reasonable and impartial administration of the United
States’ laws and regulations implementing those provisions.
4.226  Accordingly, Mexico submits, the Act is inconsistent with Article X:3(a) of the GATT 1994.
(vi) Article XVI:4 of the WTO Agreement, Article 18.4 of the AD Agreement and Article 32.5 of
the SCM Agreement
4.227  Mexico asserts that Article XVI:4 of the WTO Agreement, Article 18.4 of the AD Agreement
and Article 32.5 of the SCM Agreement require the United States to bring its anti-dumping and
countervailing duty laws into conformity with the WTO Agreements including the GATT 1994, the
AD Agreement and the SCM Agreement.
4.228  Mexico is of the opinion that as a consequence of being inconsistent with the above-noted
provisions of the AD Agreement, the SCM Agreement and the GATT 1994, the Act is not in
conformity with those covered Agreements and, is therefore inconsistent with Article XVI:4 of the
WTO Agreement, Article 18.4 of the AD Agreem ent and Article 32.5 of the SCM Agreement.
(d) Findings requested
4.229  For the foregoing reasons, Mexico respectfully requests that the Panel find that the Act is
inconsistent with:
(a) Article 18.1 of the AD Agreement and Article 32.1 of the SCM Agreement on the
grounds that it mandates specific action against dumping of exports from another
Member and subsidies of another Member, which is not in accordance with the
provisions of GATT 1994, as interpreted by the two Agreements.
(b) Paragraph (b) of Article 5 of the SCM Agreement on the grounds that:
(i) It mandates the granting of subsidies in a manner and in circumstances that
will necessarily nullify or impair benefits accruing to Mexico under Articles II
and VI of the GATT 1994;  and
(ii) it maintains subsidies in a manner and in circumstances that nullify or impair
benefits accruing to Mexico under Articles II and VI of the GATT 1994.
(c) Article 5.4 of the AD Agreement and Article 11.4 of the SCM Agreement.
(d) Article 8 of the AD Agreement and Article 18 of the SCM Agreement.
(e) Article X:3(a) of the GATT 1994.(f) Article XVI:4 of the WTO Agreement, Article 18.4 of the AD Agreement and
Article 32.5 of the SCM Agreement.WT/DS217/R
WT/DS234/R
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4.230  Mexico also requests that the Panel find, pursuant to Article 3.8 of the DSU, that as a result of
the infringements of the provisions cited above, the United States has nullified or impaired the
benefits accruing to Mexico under the Anti-Dumping Agreement, the SCM Agreement, the GATT1994 and the WTO Agreement.  Mexico also requests that the Panel recommend that the United
States bring its measure into conformity with its obligations under the AD Agreement, the SCM
Agreement, the GATT 1994 and the WTO Agreement and take appropriate steps to remove the
adverse effects of the subsidies or withdraw the subsidies at issue.   Mexico further requests that, in
the exercise of its powers under Article 19.1 of the DSU, the Panel suggest that the United States
repeal the Act.
B. 
FIRST WRITTEN SUBMISSION OF THE UNITED STATES
(a) Introduction
4.231  The United States asserts that the “Continued Dumping and Subsidy Offset Act of  2000”
(CDSOA) was signed into law on October 28, 2000.  The CDSOA is a government payment
programme administered by the US Customs Servi ce.  The CDSOA instructs Customs to establish
special accounts for funds to be distributed annually to eligible domestic producers.  Because thespecial accounts are sourced with duties collected by Customs on pre-existing anti-dumping (AD) or
countervailing (CVD) duty orders, complainants filed this case alleging that the CDSOA is, on its
face, inconsistent with US obligations under the WTO Agreement.  Complainants, however, have
failed to make a prima facie  case of a WTO violation for the following reasons.
4.232  According to the United States, the complainin g parties are essentially arguing that WTO
members cannot enact a law which permits the distribution of revenues generated from AD/CVD
duties to any recipient other than the national treasury.  No word, phrase, or paragraph in the entire
WTO Agreement, however, supports their argument.  A review of the negotiating history since 1947
confirms that a specific restriction on how Members can spend or distribute moneys received as
AD/CVD duties was not raised or addressed during negotiations.  As the Appellate Body cautioned in
India – Patents, the panel’s role is limited to the words and concepts used in the treaty.  Under the
WTO Agreement, Members retain the right to control their treasury, allocate their resources, and
disburse funds for a wide range of purposes.  A Member’s sovereign right to appropriate lawfully
assessed and collected duties cannot be restricted by this Panel ex aequo et bono .
(b) Article 5 of the SCM Agreement
4.233  The United States argues that Mexico claims that Article 5(b) of the Agreement on Subsidies
and Countervailing Measures  (“SCM Agreement”) limits the ability of the United States to disburse
funds under the CDSOA.  The granting of a subsidy is  not, in and of itself, prohibited under the SCM
Agreement.  On the contrary, a subsidy must be “specific” within the meaning of Article 2.  Mexico,
however, has failed to establish that the CDSOA is “specific” on the basis of positive evidence as
required by Articles 1 and 2 of the SCM Agreement.
4.234  First, according to the United States, there is no question that the CDSOA is not de jure
specific because it does not expressly limit access to certain enterprises, industry, or groups.  It is
potentially applicable to any producer in any industry in the United States that has filed a petition or
supported an anti-dumping or countervailing duty investigation resulting in the collection of duties
and remains in operation.  Consistent with Article 2.1(b), eligibility for the CDSOA distributions is
based on objective criteria, and eligibility is automatic if the criteria are met.  Second, Mexicoprovided no positive evidence that the CDSOA is de facto specific within the terms of Article 2.1(c).
Given that distributions are potentially available to any producer in any industry and recipients willWT/DS217/R
WT/DS234/R
Page 52
change over time, it is doubtful that Mexico could ever show de facto specificity.  Subsidies that are
not “specific” are not actionable under Article 5 of the SCM Agreement.
4.235  The United States argues that Mexico does not even try to make a prima facie  case that the
CDSOA has caused actual adverse effects to its interests as required by Article 5 of the SCMAgreement.  Instead, Mexico claims that the CDSOA as such  causes per se  adverse effects in the form
of nullification or impairment of benefits under Article 5(b).  It is not clear to the United States,
however, that Article 5(b) creates a presumption that a subsidy that violates another WTO provision is
an actionable subsidy without any showing of adverse effects.  Such an interpretation would eliminate
the primary distinction between prohibited subsidies under Article 3 where effects are presumed and
actionable subsidies under Article 5 where the complaining party must demonstrate adverse effects.
Regardless, the CDSOA does not violate any other WTO provision.
4.236  The United States asserts that Mexico’s claim does not satisfy the three requirements
articulated in Japan – Film  to establish a non-violation nullification or impairment either.  First,
Mexico has failed to challenge the application  of the CDSOA.  Second, Mexico has failed to
demonstrate that the competitive relationship between US products and Mexican imports has been
upset by a subsidy, and that the subsidy was not reasonably anticipated by Mexico.
4.237  In the United States' opinion, Mexico has presented no evidence that US producers of
products that compete with Mexican products have actually received a distribution under CDSOA, let
alone a “clear correlation” between the distributions  and any disruption of a competitive relationship.
Without such evidence, the “relevant competitive relationship” has not even been established.
4.238  The United States posits that Mexico’s rela ted argument that distributions under the CDSOA
will per se nullify or impair benefits under Articles II and VI of the General Agreement on Tariffs and
Trade 1994 (“GATT 1994”) is unreasonable and must be rejected.  Not only does it fly in the face of
the notion that a non-violation claim is an exceptional remedy, but such an interpretation would
render the causation requirement meaningless and automatically convert any specific domestic
subsidy programme related to a product on which there is a tariff concession into a non-violationnullification or impairment of benefits.
4.239  Finally, the United States submits that Mexico could have reasonably anticipated, before the
tariff concession negotiated during the Uruguay Round entered into force on 1 January 1995, that
anti-dumping and countervailing duties would be dist ributed to the domestic industry.  In fact, there
was proposed legislation in the US Congress for the distribution of duties in 1988, 1990, 1991, and
1994.  In sum, Mexico has failed to sustain its burden of demonstrating that the CDSOA is a
“specific” subsidy that is actionable within the meaning of Articles 1, 2, and 5 of the SCMAgreement.
(c) GATT Article VI, the Antidumping Agreement and the SCM Agreement
4.240  The United States is of the view that claims that the CDSOA is a specific action against
dumping or a subsidy contrary to GATT 1994 Arti cle VI or the Agreement on the Implementation of
Article VI of the General Agreement on Tariffs and Trade 1994 (“Antidumping Agreement”) andSCM Agreement must also fail.  Assuming that the reasoning of United States – Antidumping Act of
1916 applies to the facts of this case, it is clear that the CDSOA does not constitute a “specific action
against dumping” or a “specific action against a subsidy.”
4.241  First, the United States submits, the distributions are not based upon a test that includes the
constituent elements of dumping or a subsidy.  Rather, the distributions are based upon the applicant’squalification as an “affected domestic producer” who has incurred “qualifying expenditures.”  TheWT/DS217/R
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CDSOA does not provide for the recovery of “damages”:  the amount of the distributions have
nothing to do with measuring the extent to which a US producer has been affected by dumping or
subsidization of imports.
4.242  Second, according to the United States, the CDSOA is not an action “against” dumping or a
subsidy.  Because there was no question in United States – Antidumping Act of 1916  that civil or
criminal penalties under the 1916 Act applied to importers, neither the panels nor the Appellate Body
in that case discussed whether the specific action was “against” dumping.  In contrast, this Panel must
consider the proper interpretation of the term “against” in Articles 18.1 and 32.1 of the Antidumping
and SCM Agreements, respectively.
4.243  The United States asserts that the ordinary meaning of the term “against” suggests that the
specific action must be in “hostile opposition to” dumping/subsidization and must “come into contactwith” dumping/subsidization.  Thus, to consider a specific action “against” dumping or subsidization,
the action must apply to the imported good or the importer, and it must be burdensome.  Unlike the
1916 Act, the CDSOA imposes no burden or liabil ity on imported goods or importers.  The CDSOA
has nothing to do with imported goods or importers; it is a payment programme.  Therefore, this Panel
should find that Article VI of the GATT 1994, Articles 1 and 18 of the Antidumping Agreement, andArticles 10 and 32 of the SCM Agreement do not apply to the CDSOA.
1.244  It is the view of the United States that in th e event that the Panel concludes that the CDSOA is
an action against dumping and a subsidy, footnotes 24 and 56 to the Antidumping and SCM
Agreements, respectively, operate to exclude the CDSOA from the scope of Article VI and the
Antidumping and SCM Agreements.  Footnotes 24 and 56 clarify the meaning of Articles 18.1 of the
Antidumping Agreement and 32.1 of the SCM Agreement,  respectively, by stating that they are “not
intended to preclude action under other relevant provisions of GATT 1994 ….”  The general reference
to “action” in footnotes 24 and 56 is not the same type of focused and directed action which applies to
oppose dumping or subsidies as such  within the meaning of Articles 18.1 and 32.1.  The ordinary
meaning of the phrase “not intended to preclude action” within the context of Articles 18.1 and 32.1 isthat action is permitted.   According to the panel in United States – Antidumping Act of 1916 , Members
are free to address the causes or effects of dumping (and subsidies) through other trade policy
instruments that are consistent with GATT 1994 provisions other than GATT 1994 Article VI.
4.245  The United States argues that the CDSOA is an action consistent with GATT 1994
Article XVI entitled “Subsidies.”  Article XVI  is a “relevant provision of GATT 1994” which
recognizes that Members have the general right to use subsidies and may provide non-export
subsidies to the extent that they do not cause serious prejudice to the interests of other Members.  The
complaining parties do not argue that disbursements under the CDSOA have caused or will cause
serious prejudice to their interests.  Therefore, if the CDSOA is considered to be an action against
dumping, the distributions are otherwise permitted by the footnotes to Articles 18.1 and 32.1 as actionunder another relevant GATT provision.
4.246  The United States posits that the complaining parties also overlook the fact that Articles 4.10
and 7.9 of the SCM Agreement do not contain an obligation or prohibition on Members and,
therefore, cannot form the basis of a violation of the SCM Agreement.  Even if the Panel could
somehow construe Articles 4.10 and 7.9 as containing such an obligation, the CDSOA is not a“countermeasure” within the meaning of Articles 4.10 or 7.9.  The CDSOA is not a specific action
against dumping or a subsidy.  Nor was it enacte d in order to induce another Member to implement
DSB recommendations and rulings:  it has nothing to do with the actions of other Members.  The
CDSOA is a payment programme.WT/DS217/R
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(d) Standing, undertakings and GATT Article X:3
4.247  According to the United States, claims that the CDSOA breaches Article 5.4 of the
Antidumping Agreement and Article 11.4 of the SC M Agreement by compromising the ability of US
authorities to make objective assessments of whether AD and CVD petitions have the supportrequired for initiation are unsupported and must be rejected.  Complaining parties offer no evidence
that the CDSOA in any way affects how US authorities apply the objective criteria set forth in
Articles 5.4 and 11.4 for determining industry support for petitions.  Instead, the complaining parties
engage in speculation on the impact of the CDSOA on the willingness of private companies to support
AD/CVD petition and attempt to read into Article 5.4 and 11.4 a non-existent requirement for
authorities to undertake subjective analyses of the motives of domestic companies.
4.248  Contrary to the complaining parties’ arguments, the United States submits, there is no
requirement in Articles 5.4 and 11.4 that the administering authority determine the reason  for the
domestic industry’s support.  The obligation is to determine whether the quantitative  benchmarks
have been met.  The objective, quantitative nature of the analysis of industry support leaves little or no
scope for an improper analysis:  either the number of companies expressing support for the petition
meet the threshold, or they do not.
4.249  According to the United States, a requirement to determine the subjective motivations of
private parties would be unworkable.  Even if relevant, it is highly unlikely that complaining parties
could ever summon credible evidence that “but for” the distributions, domestic producers would not
otherwise have filed a petition or supported an investigation, and that the participation of those
producers was necessary to establish standing in that investigation.  It is rare for domestic producersin the United States not to have sufficient industry support in filing anti-dumping or countervailing
duty petitions.  Thus, if there is sufficient support anyway , it cannot be said that the CDSOA will
affect the number of cases meeting the thresholds of Articles 5.4 and 11.4, even if such an increase
could constitute a breach of those Articles.
4.250  The United States asserts that claims that the CDSOA breaches Article 8 of the Antidumping
Agreement and Article 18 of the SCM Agreement by making it more difficult for exporters to secure
an undertaking with the competent authorities are likewise unsupported and must be rejected.   There
is no obligation in Articles 8 and 18 to accept a proposed undertaking.  Moreover, and more
importantly, neither Article circumscribes the reasons that may cause an administering authority to
decline to accept a proposed undertaking as “impractical.”  The Articles do not require the
administering authority to determine that the undert aking is “inappropriate” before rejecting it.  The
sentence in Article 8.3 and 18.3 containing the term “inappropriate” addresses the circumstancesunder which the exporter is to be provided the reasons for the rejection.  It does not change the
standard for accepting or rejecting an undertaking.
4.251  The United States is of the view that it is within the complete discretion of the administering
authority to accept or reject an undertaking.  Thus, even assuming arguendo  that the CDSOA renders
it more difficult for exporters to secure price undertakings, there is no WTO violation because there isno obligation  to enter into a price undertaking in the first place.
4.252  The United States argues that again the complaining parties have provided no evidence that
the CDSOA has had or will have any actual effect  on the Commerce Department’s consideration of
proposed undertakings.  Domestic producers do not enjoy an “effective” veto over proposed
undertakings – only the competent authority and the exporters determine whether to agree to anundertaking.  The vast majority of undertakings in the United States since 1996 have been entered into
over the vehement opposition of domestic producers.  Nor is there any reason to believe that the
domestic industry will oppose an undertaking as a result of the CDSOA.  If conditions of fair tradeWT/DS217/R
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can be achieved through an undertaking, domestic producers who file petitions will be supportive of
an agreement.  Even if the CDSOA were to change the position of domestic producers, however, there
is nothing to suggest a change in the Commerce Department’s independent action.
4.253  In the view of the United States, the complaining parties have offered no arguments or
evidence concerning the actual administration of the CDSOA and, therefore, cannot allege a violation
of Article X:3(a) of the GATT 1994.  Consistent with the plain language of Article X:3(a), various
panel and Appellate Body reports have concluded that Article X:3(a) only addresses the
administration of national laws.  The complaining parties, however, have provided no evidence at all
concerning the day-to-day administration of the CDS OA.  Even if it were concluded that the CDSOA
somehow affects the administration of laws relating to the initiation of anti-dumping and
countervailing duty investigations and to price undertakings, this could not conceivably form the basisof an Article X:3(a) finding against the CDSOA.
4.254  Finally, the United States submits, because the CDSOA is not inconsistent with any WTO
Agreement provision, the complaining parties’ claims under Article XVI:4 of the Marrakesh
Agreement Establishing the World Trade Organization , Article 18.4 of the Antidumping Agreement,
and Article 32.5 of the SCM Agreement must also fail.
C. 
FIRST ORAL STATEMENTS OF THE COMPLAINING PARTIES
1. Australia
(a) Introduction
4.255  In its statement, Australia identifies the core legal claims made in this case and addresses
some of the specific arguments made by the United States.  Australia notes that Australia's writtensubmission sets out these claims in greater detail.
(b) First Claim:  Article 18.1 of the Anti-Dumpi ng Agreement in conjunction with GATT Article
VI:2 and Article 1 of the Anti-Dumping Agreement
4.256  The first claim made by Australia is that the United States has violated Article 18.1 of the
Anti-Dumping Agreement, read in conjunction with  GATT Article VI:2 and Article 1 of the Anti-
Dumping Agreement, because the Act constitutes a specific action against dumping in a manner
inconsistent with the Anti-Dumping Agreement.
4.257  In the case United States – Anti-dumping Act of 1916, the Appellate Body found that
“specific action against dumping” of exports within the meaning of Article 18.1 is action that is taken
in response to situations presenting the constituent elements of “dumping”.  The Appellate Body also
found that Article 18.1 of the Anti-Dumping Agreement prohibits the taking of any such action when
it is not in accordance with the provisions of GATT 1994 as interpreted by the Anti-DumpingAgreement.
4.258  According to Australia, it is readily apparent, and indeed confirmed by the United States' first
written submission, that the Act mandates a specific action in response to situations presenting the
constituent elements of dumping, and that this action is not in accordance with the provisions of
GATT 1994 as interpreted by the Anti-Dumping Agreement.
4.259  Australia argues that under the Act, an anti-dumping order is a necessary prerequisite for the
automatic disbursement of collected anti-dumping duties to affected domestic producers.  An anti-WT/DS217/R
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dumping order is also a formal determination by the United States that there exists a situation
presenting the constituent elements of dumping.
4.260  According to Australia, in its first submissi on, the United States confirms that, in order to
make an anti-dumping order, there must have been a petition from the domestic industry, anexamination by the US Commerce Department of the standing requirements, an initiation of an
investigation, a determination of injury, and a determination of dumping.
4.261  Australia posits that there is a clear linkage and contingency between the disbursement under
the Act and the constituent elements of dumping (t hat is, the investigation, finding of injury and
positive determination of dumping and the impositi on of duties).  The US Customs Service has no
discretion in establishing special accounts to disburse the funds collected to affected domestic
producers for qualifying expenditures.
4.262  Australia argues that as a result of the Act, the disbursement of anti-dumping duties to
affected domestic producers is now part and parcel of the process of any successful anti-dumping
application, and as the disbursement does not fall within the specific actions covered by the Anti
Dumping Agreement, it is therefore action that is inconsistent with Article 18.
4.263  Australia asserts that in its first submission, the United States has sought to argue that the
“offsets” are nothing more than a government payment programme, and are simply a distribution of
government monies collected. The United States also claims that the only connection between the
duties collected and the funds paid is that the duties collected cap the amount of payments.
4.264  Australia submits that these arguments are without  merit.  If, as the United States says, the
Act is simply a government payment system based on eligible expenditure, why has the United Statesnot distributed the payments to those who did not support the trade remedy action?  Why are not all
domestic producers of the like product entitled to the payments?  The Act does not simply disburse
revenues or cap payments in any case: it is a clear and systematic extension of the United States'
framework of rules for the imposition of anti-dumping duties.  It is a prohibited specific action against
dumping.
(c) Second Claim:  Article 32.1 of the SCM Agreement in conjunction with GATT Article VI:3
and Articles 4.10, 7.9 and 10 of the SCM Agreement
4.265  Australia’s second claim is that the United States has violated Article 32.1 of the Agreement
on Subsidies and Countervailing Measures (the SCM Agreement), in conjunction with GATT
Article VI:3 and Articles 4.10, 7.9 and 10 of the SCM Agreement, because the Act constitutes a
specific action against subsidisation in a manner inconsistent with the SCM Agreement and
GATT 1994.
4.266  Australia is of the view that the Appellate Body’s reasoning in the United States – Anti-
Dumping Act of 1916 in relation to dumping applies equally to the obligations relating to actions
against subsidisation.  In other words, the Act mandates a prohibited specific action in response to
situations presenting the constituent elements of subsidisation.
4.267  Australia argues that once a countervailing duty order or finding is issued, the Act mandates a
number of subsequent actions that have the effect of providing an additional remedy against the
effects of a subsidy.  That additional remedy is the distribution of assessed duties pursuant to a
countervailing duty order to the affected domestic producers for qualifying expenditures.WT/DS217/R
WT/DS234/R
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4.268  Australia is of the opinion that this distribution of assessed duties is not simply payment of
subsidies to producers as the United States argues.  If that were so, why does the United States not
distribute the payments to those producers who do not support the trade remedy action?  Again, the
Act is a clear and systematic extension of the United States' framework of rules for the imposition ofcountervailing duty orders.  It is an action in response to situations presenting the constituent elements
of subsidisation and it is an action that is not in accordance with the United States' WTO obligations.
4.269  According to Australia, it has shown in its fi rst submission that the Act mandates action not
permitted under the SCM Agreement or GATT Article VI to counteract or offset the effects of a
subsidy.
(i) Article 10 of the SCM Agreement
4.270  Australia asserts that the SCM Agreement expressly provides for specific action to be taken
against subsidies.  However, Article 10 of the SCM Agreement only permits certain forms of relief –
either a countervailing duty or a countermeasure.  Further, footnote 35 to Article 10 makes clear that
relief, whether a countervailing duty or countermeasure, must be in relation to the “effects” of a
particular subsidy in the domestic market of an importing Member.
4.271  Australia posits that in the context of the SCM Agreement, the United States measure is
particularly pernicious because it penalizes non-subsidized exports.  In its first submission, Australia
argues, it has shown that the Act operates as a countermeasure against products from other WTO
Members that were included in the original countervail investigation but were not subjected to the
countervailing duty orders.  The assessed duties distributed under the Act to the affected domestic
producers are based on qualifying expenditure incurred in relation to the product which has been thesubject of a countervailing duty order.  As such, the Act provides counter-subsidies which affect the
competitive relationship between the domestic products and products of other WTO Members not
subject to the original countervailing duty order.
(ii) GATT Article VI:3
4.272  Australia argues that similarly, the only remedy available under GATT Article VI:3 is a
countervailing duty.  Moreover, GATT Article VI:3 determines the level of the countervailing duty
that can be imposed against subsidised imports. Australia considers that it has shown that, contrary to
GATT Article VI:3, the Act provides, indeed ensures,  that there is a remedy to affected domestic
producers that is in addition to the countervailing duties imposed by the United States.  Having
assessed duties pursuant to a countervailing duty order, the Act mandates the provision of additional
measures to counteract or offset a subsidy over and above the level of subsidisation.
4.273  Australia considers that the United States thereby imposes a remedy which exceeds the level
of subsidisation that has been determined by the Commerce Department.  Affected domestic
producers receive a benefit from both the levied countervailing duty and the payment to them of the
assessed duties thereby providing a remedy at a level in excess of the level of subsidy assessed underthe countervailing duty order.
4.274  Australia asserts that the United States always imposes the full margin of duty.  Even if the
United States imposed the lesser duty rule, the payments disbursed to affected domestic producers
would exceed the assessed levels of subsidisation and injury.WT/DS217/R
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(d) Third Claim:  Article 5.4 of the Anti-Dumping Agreement/Article 11.4 of the SCM
Agreement
4.275  The third claim made by Australia is that the Act distorts, or threatens to distort, the degree of
support for, or opposition to, an application for an anti-dumping or countervailing duty investigationamong domestic producers of the like product.  As such it is inconsistent with Article 5.4 of the ADA
and Article 11.4 of the SCM Agreement.
4.276  According to Australia, the Act creates a systemic bias in favour of supporting domestic
producers through the provision of a financial incentive or reward.  It contravenes the fundamental
principle that the legal framework of a rules-based system must itself be established in an impartial
and objective manner.  It frustrates the intent of Articles 5.4/11.4 to establish whether an application is
truly being made by or on behalf of domestic industry.
(e) Fourth Claim:  Article XVI:4 of the WTO Agreement, Article 18.4 of the Anti-Dumping
Agreement and Article 32.4 of the SCM Agreement
4.277  Australia argues that by violating any of the provisions as outlined above, the United States
has also in its view violated Article XVI:4 of the WTO Agreement, as well as Article 18.4 of the Anti-
Dumping Agreement and Article 32.5 of the SCM Agreement.
(f) United States’ arguments
4.278  Australia submits there are some significant flaws in the US arguments, particularly in
misquoting the Appellate Body in the case of United States – Anti-Dumping Act of 1916.
4.279  Australia asserts that the Appellate Body found that “specific action against dumping" of
exports within the meaning of Article 18.1 is action in response to situations presenting theconstituent elements of dumping.  The United States has omitted two key words that formed part of
the Appellate Body’s statement – “situations presenting”.
4.280  In other words, according to Australia, specific action against dumping is any action taken in
response to conduct by which products of one country are introduced into the commerce of another
country at less than the normal value of the products.
4.281  Further, according to Australia, the United States argues that in order for a specific action to
be characterised as action against dumping or subsidisation, the action must apply to the imported
goods or importer and it must be “burdensome”.  The Act, the United States says, imposes no burden
or liability on imported goods and importers.
4.282  Australia rejects these arguments.  The United States in effect argues for an overlay of
conditions and criteria to be read into the Anti-Dumping Agreement and the SCM Agreement and
GATT Article VI which is clearly not there.  The offset payments under the Act alter the competitiverelationship between such goods and the domestically-produced like products in ways not
contemplated by the GATT, the Anti-Dumping Agreem ent or SCM Agreement.  Indeed, it also affects
the competitive position of exporters to the US market for products that have been found not to have
been subsidised or dumped.WT/DS217/R
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(g) Conclusion
4.283  In conclusion, according to Australia, the number of co-complainants, and third parties,
involved in this dispute reflects the breadth of concern by the WTO membership over the actions of
the United States in promulgating this mandatory legislation.
4.284  Australia argues that the WTO Agreements provide the framework for a secure and
predictable multilateral trading system.  They also provide a system of permissible trade remedies
against dumping and subsidisation which respect the rights and benefits of all WTO Members.  The
United States legislation constitutes action which is both inconsistent with those Agreements and
seriously undermines the proper functioning of the multilateral trading system.
4.285  Australia is of the view that, if permitted to stand, the United States legislation would
precipitate an undermining of trade remedy rules and encourage the proliferation of remedy actions.
2. Brazil
(a) Introduction
(i) Systemic concerns
4.286  Brazil believes the panel should consider three systemic concerns in its deliberations.
4.287  First, to what extent does the promise of monetary rewards to the complaining party
encourage the filing of cases which otherwise would never have been filed? Or to what extent does it
promote the pursuing of reviews of the amounts of anti-dumping and countervailing duties in order to
maximize revenues even when the desired protection has been achieved?  Brazil believes that it is
inevitable that monetary rewards will encourage more cases and will encourage domestic industries to
pursue these cases, once filed, more vigorously than in the absence of the potential receipt of thesemonetary rewards.  Brazil submits that these cases already cost the Brazilian industries hundreds of
thousands of dollars to defend.  In addition, each annual review costs a responding company similar
amounts.  With the Byrd Amendment, even if a domestic industry has obtained the measure of relief
necessary to eliminate the injury, there remains th e incentive to pursue reviews in order to increase
revenues.  Thus, according to Brazil, the real costs to exporting industries will increase, both in termsof higher defense costs and higher duties.  In short, according to Brazil, with an incentive to maximize
the duties because it means higher revenues for the domestic industry, the narrow objectives of the
AD and SCM Agreements no longer define the pro cess or the remedy.  An additional objective –
creating the maximum revenue possible for the complaining domestic industry – has been introduced.
4.288  The second concern of Brazil relates to the message that would be conveyed if this panel
endorsed the notion that monetary rewards were an appropriate remedy under the WTO.  Brazil
argues that if this panel endorsed the Byrd Amendment payments, it would be making a finding that,irrespective of restrictions on remedies available under WTO agreements, a government may
unilaterally take whatever additional steps it deems appropriate. The US believes that, so long as it
does not directly increase the financial burden on the offending party, any action should be permitted,
even those linked directly to the WTO authorized remedy, in serving the same objectives.
4.289  Brazil argues that, as pointed out in Brazil’s submission, the US steel industry in a pending
safeguards action has suggested that the revenues from higher duties imposed as safeguard measures
be used to finance the government assumption of liabilities that are responsible for many of the
problems of the industry.  Monetary rewards or “damages” have never been a part of the WTO orWT/DS217/R
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GATT systems for enforcing obligations.  Brazil subm its that this panel should not open the door to
this possibility.
4.290  Finally, Brazil argues that, as a developing country, it has additional concerns about the
disproportionate new burdens created by the Byrd Amendment for developing country exporters.According to Brazil, both the AD and SCM Agreemen ts provide for the cumulative assessment of the
effects of imports from multiple sources on injury to the domestic industry in the importing country.
This approach, commonly referred to as “cumulation”, is permitted under Article 3.3 of the AD
Agreement and Article 15.3 of the SCM Agreement.  In effect, cumulation allows for inclusion of
marginal suppliers in anti-dumping and countervailing measures in circumstances under which these
suppliers alone would not be causing injury to the importing country industry.
4.291  Brazil asserts that the effects of cumulation are felt mostly by developing countries because
industries in these countries tend to be the smaller, newer, marginal suppliers to major markets.  Yet,
the use of the cumulation provisions of the agreemen ts has been tempered by the need to balance the
marginal costs of adding additional suppliers with the marginal benefit of including those suppliers.
However, the Byrd Amendment is likely to encourage the filing of more cases against marginal
suppliers, primarily developing country suppliers, under the cumulation provisions of the agreementsin order to create maximum revenues for distribution to the complaining industries.  As such, the Byrd
Amendment is likely to have a disproportionate impact on developing country industries, exactly the
opposite of the special and differential treatment wh ich is encouraged under Article 27 of the SCM
Agreement and Article 15 of the AD Agreement.
(ii) The United States attempts to mischaracterize the issue in this proceeding as one of sovereign
rights rather than one of sovereign obligations
4.292  Brazil posits that the essence of the US argument in support of the Byrd Amendment is
captured in paragraph 20 of the First Submission of the United States:
While it is true that WTO Members have agreed to exercise their sovereignty
according to their WTO Agreement commitments, the converse is also true.  Acommitment not made cannot be broken.  When the agreement is silent on an issue, a
panel cannot find a violation.
4.293  The US continues in paragraph 25 by claiming:
Members are free to pursue their own domestic goals through spending so long as
they do not do so in a way that violates commitments made in the WTO Agreement.
4.294  Brazil argues that it is clear from these two examples that the US wishes to characterize the
issue in this proceeding as an unwarranted intrusion on the ability of a Member to spend its revenuesas it sees fit, including assisting industries injured by imports.  In fact, Brazil asserts, this is not the
issue.  The issue before the panel is very specific, namely whether the distribution of anti-dumping
and countervailing duty revenues by the US is inconsistent with the limitations on anti-dumping and
countervailing measures specified in the AD and SCM Agreements and, therefore, in violation of US
WTO obligations.
4.295  Brazil is of the view that no one is challengin g the right of the US to choose how its revenues
are disbursed.  The issue is whether in the particular situation of the Byrd Amendment, the US
distribution of anti-dumping and countervailing duty revenues to the requesting parties is consistent
with US WTO obligations.  There is a direct link between the imposition of anti-dumping and
countervailing duties under the Tariff Act of 1930 (the US law authorizing investigation of dumpingWT/DS217/R
WT/DS234/R
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and subsidization and the imposition of anti-dumping and countervailing duties) and the entitlement to
payments under the Byrd Amendment.  Without a finding of dumping and subsidization and the
collection of anti-dumping and countervailing duties, there are no payments under the Byrd
Amendment.  Thus, the question is not whether the US is free to spend the revenues from anti-dumping and countervailing duties as it sees fit, but rather whether there is a direct relationship
between the payments under the Byrd Amendment and US WTO obligations under the AD and SCM
Agreements such that those payments are linked to and become part of the remedies for dumping and
subsidization.
4.296  Brazil argues that one needs to distinguish between payments which benefit domestic parties
injured by imports and payments which are linked directly to and are part of the anti-dumping and
countervailing measures permitted by the agreements.  For example, the US has an extensiveprogramme of so-called Trade Adjustment Assistance intended to help companies and workers that
are injured by import competition.  However, there is no direct linkage between the entitlement to or
the revenues for such assistance and the collection of anti-dumping and countervailing duties, as is the
case with the Byrd Amendment.  Indeed, according to Brazil, that is precisely what distinguishes the
Byrd Amendment, namely the direct relationship between the entitlement and distribution of revenuesand anti-dumping and countervailing measures.
4.297  Brazil asserts that the US takes the position that the language of Articles 18.1 and 32.1,
respectively, of the AD and SCM Agreements – “specific action against” dumping and subsidies –
means that the action must “apply to the imported good or the importer, and it must be
burdensome.”
86  Brazil addresses its  view of the interpretation of this language below, but argues that
even using the US interpretation, the Byrd Amendm ent is specific action against an importer and is
burdensome.  The parties requesting the imposition of anti-dumping and countervailing duties must
be, after all, direct competitors with the imported product and, therefore, with the importers and
exporters of that product.  If they were not direct competitors, then they would not have standing to
request the imposition of duties.  These same parties then receive the proceeds of the duties paid onthe competing imported product and can use these payments in competition with the imported
product, the importers and the exporters.  They can use the funds for a variety of activities which
enhance their competitiveness, including research and development, capital expenditures, and for the
purchase of equipment and raw materials.  Costs that they would otherwise incur are now covered by
the Byrd Amendment payments.  The assumption through the Byrd Amendment payments of some of
the costs of the domestic industry in the importing country necessarily increases their
competitiveness.  The imported product, the importer and the exporter are, therefore, all facing agreater competitive burden, namely domestic competitors in the import market that are more
competitive as a result of the Byrd Amendment pa yments.  As such, there is an additional burden on
imported products, importers and exporters as a result of the Byrd Amendment, precisely the criteria
specified by the US as falling within the language “specific action against.”
(iii) The Byrd Amendment provides remedies to counter dumping and subsidization of imports
which are in addition to remedies authorized by the relevant agreements
4.298  The panel and Appellate Body in United States - Anti-dumping Act of 1916  (“1916 Act”)
87
addressed the parameters of measures permitted under the AD Agreement.  Specifically, two issues
were addressed: (1) whether Article VI of the GATT 1994 as interpreted by the AD Agreement limits
                                                     
86 United States – Continued Dumping and Subsidy Act of 2000, First Written Submission of the
United States of America, DS217 and 234, para.92, 14 January 2002.
87 United States – Anti-Dumping Act of 1916,  Report of the Appellate Body, WT/DS136/AB/R,
WT/DS162/AB/R, adopted 26 September 2000 and Report of the Panel, WT/DS136/R, 31 March 2000 and
WT/DS162/R 29 May 2000.WT/DS217/R
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specific actions against dumping to those actions provided for in Article VI or the AD Agreement;
and (2) whether additional measures targeted at dumping were within the scope of the limitations
imposed by Article VI and the AD Agreement.88
4.299  Brazil argues that the starting point of the analysis of both the panel and Appellate Body was
Article 18.1 of the AD Agreement.  As the panel know s, Article 18.1 prohibits “specific action against
dumping…. except in accordance with the provisions of the GATT 1994, as interpreted by this [AD]
Agreement.”  The Appellate Body defined “specific action against dumping” as “action that is taken
in response to situations presenting the constituent elements of ‘dumping’.”89
4.300  According to Brazil, the first question this panel must address is whether actions under the
Byrd Amendment are actions taken in response to situations presenting the constituent elements of
“dumping.”  The answer to this question in the case of the Byrd Amendment is even clearer than it
was in the case of the 1916 Act.
4.301  Brazil posits that the 1916 Act proceeding involved: (i) a statute that was wholly independent
of the statute under which anti-dumping duties are imposed in the United States (i.e., the anti-
dumping provisions of the Tariff Act of 1930); (ii) standards that were different than the standards
under which anti-dumping duties are determined (for example, the 1916 Act also includes “intent todestroy or injure” as part of the substantive finding on which relief is based, an element not present in
the Tariff Act of 1930 or the AD Agreement); and (iii) remedies which were not dependent on or
linked to actions or determinations related to the imposition of anti-dumping measures under the anti-
dumping provisions of the Tariff Act of 1930.  Notwithstanding the above,
90 the statute was found to
be inconsistent with US obligations under the AD Agreement.
4.302  Brazil asserts that in contrast, the Byrd Amendment only applies in situations where there
have been affirmative determinations of dumping and injury under the anti-dumping provisions of the
Tariff Act of 1930 and an anti-dumping duty order has been issued.  Thus, entitlement to the Byrd
Amendment remedies is directly dependent on establishing the “constituent elements of ‘dumping’”
because the entitlement arises out of the same determination of dumping and injury, made under thesame statute, in the same proceeding, and by the same authorities as do the underlying anti-dumping
measures which give rise to the entitlement.  In short, there are no Byrd Amendment remedies unless
there is an anti-dumping duty order under the provis ions of the Tariff Act of 1930 that implement the
AD Agreement.  The very same elements must be established to obtain anti-dumping measures and
Byrd Amendment remedies.
4.303  Brazil submits that having established that the Byrd Amendment provides remedies based on
the “constituent elements of ‘dumping’”, the second question for the panel is whether the distribution
of the revenues from anti-dumping duties under the Byrd Amendment constitutes “a specific action
against dumping…not in accordance with the AD Agreement.”  In the words of the panel in the 1916
Act proceeding, does the Byrd Amendment provide “for other remedies than anti-dumping duties.”91
4.304  Brazil believes that the statements by the sponsors and supporters of the Byrd Amendment are
quite persuasive on the issue of whether the Byrd Amendment payments are an additional remedy.Senator Byrd stated:
                                                     
88 Id. Report of the Appellate Body at paras. 127-133
89 Id. at para. 126
90 Id. at paras. 127-133.
91 Id. Report of the Panel at paras. 204-205.WT/DS217/R
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The US agriculture and manufacturing sectors have been able to avail themselves of
legal remedies to challenge foreign actions, but have not had adequate means to
recover from the losses resulting from those actions.  Now, such a mechanism will be
in place and US farmers and workers of all trades affected by unfair trade practiceswill be able, in essence, to recover monetarily….
92
4.305  Senator DeWine, who originally conceived of the idea of distributing the revenues of anti-
dumping and countervailing duties to complaining par ties, very specifically stated that the payments
contemplated under the Byrd Amendment are intended to “compensate for damages” and to have the
effect of discouraging “foreign companies from dumping and subsidization, since it would actually
assist US competitors at their expense.”93  Brazil notes that he calls the distribution of duties under the
Byrd Amendment a “double hit.”94
4.306  Brazil is of the opinion that while the intention of the WTO agreements is not to intrude on
the ability of sovereigns to spend their tax revenues as they see fit, there are constraints on spending
tax revenues in a manner which leads to violations or non-violation nullification and impairment of
obligations under those agreements.  There are numerous situations in which WTO obligations,
whether specific limitations or general obligations, affect the freedom of Members to spend or foregorevenues when such actions are inconsistent with WTO obligations.
4.307  Brazil argues that the objective of anti-dumping measures is clearly articulated in Article VI:2
of the GATT 1994.  It is to “offset or prevent” dumping.  Antidumping duties impose a penalty on
products that are dumped; this ultimately discoura ges or prevents dumping.  If anti-dumping duties do
not discourage or prevent dumping, then their assessment in cases where dumping continues offsetsthe effects of dumping.  Similarly, anti-dumping measures in the form of price undertakings prevent
dumping because the exporter agrees to eliminate all of the margin of dumping or at least as much as
is necessary to eliminate the injurious effects of dumping.
4.308  According to Brazil, the AD Agreement authorizes anti-dumping duties and price
undertakings as the only measures to offset or prevent dumping.  Logically, this means that anymeasures other than anti-dumping duties and price undertakings that offset or prevent dumping are
not authorized by the AD Agreement.  Article 18.1 does not qualify the actions that are not permitted;
rather it states “no specific action.”  It does not say that no specific action shall be taken with respect
to the imported product or that no specific action may be taken with respect to the exporter or
importer.  It says “no specific action.”  Thus, any actions which have the effect of offsetting or
preventing dumping, other than anti-dumping dutie s and price undertakings authorized by the AD
Agreement fall within the prohibition of Article 18.1.  It is immaterial whether the action imposes anadditional burden on the export product or the exporter.  What is relevant is whether the actions go
beyond those authorized in the agreement and have the effect of further offsetting or preventing
dumping.
4.309  Clearly, in Brazil's view, the Byrd Amendment payments have the effect of offsetting and
preventing dumping.  First, they provide additional incentive for the exporting entity not to dumpbecause every time an exporter dumps a product the revenues from the anti-dumping duties go to his
competitors in the importing country market.  Second, they provide an additional offset for the
                                                     
92 146 Cong. Rec. S10697 (daily ed. 18 October 2000) (statement by Senator Robert Byrd). See,
Common Exhibit 11.
93 144 Cong. Rec. S7883-7884 (daily ed. 9 July 1998) (Statement of Senator DeWine).
Senator DeWine’s bill was introduced as S. 2281 in the Senate on 9 July 1998 and by Representative Regula asH.R. 2509 in the House of Representatives on 18 September 1997.
94 Id.WT/DS217/R
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industry in the importing country by rewarding that industry with what are, in effect, damages.
Indeed, what motivated the Byrd Amendment was the desire to provide additional penalties for
dumping to discourage dumping and additional “offsets” in the form of damages to the aggrieved
companies in the importing country if the dumping continues.
4.310  Brazil considers that the Byrd Amendment payments are additional actions that prevent and
offset the effects of dumping.  These payments are not authorized by the AD Agreement and, as such,
are inconsistent with the agreement.
(iv) The Byrd Amendment payments are also specific action against subsidies not authorized by
the Agreement on Subsidies and Countervailing Measures
4.311  Brazil asserts that Article 32.1 of the SCM Agreement is the counterpart of Article 18.1 of the
AD Agreement.  It prohibits Members from taking any “specific action against a subsidy” unless thataction is consistent with Article VI:3 of the GATT 1994, as interpreted by the SCM Agreement.  As
such, the arguments that Byrd Amendment payments are inconsistent with the SCM Agreement are
identical to the arguments that these paymen ts are inconsistent with the AD Agreement.
3. Canada
(a) Introduction
4.312  Canada argues that the measure before the Panel is the Continued Dumping and Subsidy
Offset Act of 2000, also known as the Byrd Amendm ent.  Canada’s oral submission addresses four
central substantive issues, but first it sets out what this dispute is not about.
(b) “Request” for adjudication ex aequo et bono
4.313  Canada does not seek adjudication ex aequo et bono , or to establish a “new legal
relationship”.  It asks the Panel to interpret and apply disciplines duly incorporated into the subject
agreements and determine whether those disciplines encompass the measure at issue.  Correctly
interpreted and applied, those disciplines prohibit measures like the Byrd Amendment.  In so finding,
the Panel will not be acting ex aequo et bono  but holding the United States to the legal obligations it
negotiated and undertook.
(c) The Byrd Amendment violates GATT 1994 and the Anti-Dumping and SCM Agreements
4.314  Canada asserts that five elements in the oper ation of the Byrd Amendment are crucial to the
way it should be viewed, and assessed, by the Panel.  None of these elements is contested by the
United States.
- first, anti-dumping and countervailing duties collected must be distributed to
the producers that qualify under a specific order;
- second , all duties collected following an affirmative determination of the
existence of dumping or a subsidy causing injury are distributed to qualifying
producers, and it is only anti-dumping and countervailing duties under a
specific order that are so distributed;
- third , the duties are distributed to only those producers that have brought or
supported a petition for the imposition of those duties;WT/DS217/R
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- fourth , Byrd Amendment payments reimburse expenditures related to the
product that competes with the imported products covered by an order; and
- fifth, the Byrd Amendment “offsets” what it characterises as “continued
dumping or subsidy”.  Duties collected pursuant to a determination aredistributed to producers supporting that particular investigation or
determination, for harm they have suffered because of dumping and
subsidisation of products against which they compete.
4.315  According to Canada, the Byrd Amendment thus adds a new element to the anti-dumping and
countervailing duty regime of the United States.  It is not a general subsidy that could have been
present in any legislation but rather a specific action against dumping or a subsidy in breach of the
obligations of the United States under the WTO Agreement.
4.316  Canada posits that the legal provisions at issue are Articles 18.1 of the Anti-dumping
Agreement, 32.1 of the SCM Agreement and VI of GATT 1994.  Each requires that specific action
against dumping or subsidies accord with Article VI of GATT 1994.
4.317  In Canada's view, in the 1916 Anti-Dumping Act  case the Appellate Body made two findings
that are relevant to this case.  First, it found that a “specific action” against dumping taken in a formother than a form authorized under Article VI of GATT 1994, as interpreted by the Anti-Dumping
Agreement violates Article 18.1.  These forms are limited to definitive anti-dumping duties,
provisional measures, and price undertakings.
4.318  Second, Canada argues, the Appellate Body not ed, “specific action against dumping … at a
minimum encompass[es] action that may be taken only when the constituent elements of ‘dumping’are present.”  The Japan panel findings in the 1916 Anti-Dumping Act  case clarify this point.  It notes
that to the extent that a measure responds to the constituent elements of dumping, it constitutes a
“specific action against dumping.”
4.319  According to Canada, Article 32.1 of the SCM Agreement similarly contains a prohibition on
“specific action against a subsidy of another Member” when such action is not taken in accordancewith Article VI of GATT 1994 as interpreted by the SCM Agreement.
4.320  Canada asserts that the basic operating elements of the measure place it squarely within the
term “specific action against dumping [or a subsidy].”  The United States mentions only two, but in
fact three elements must be present for the Byrd Am endment to operate.  All three relate to and are
dependent on one another:  first, an order imposed after a finding that there is a situation presenting
the constituent elements of dumping or a subsidy; second, an affected domestic producer must have
brought or supported the originating petition; third, a qualifying expenditure must relate to a productcovered by the order .   
4.321  According to Canada, these three elements have  one thing in common: the order.  Payments
under the Byrd Amendment have one purpose: to respond to, counteract, and specifically act against
dumping or a subsidy.  The Byrd Amendment has one object: to further harass goods found to be
dumped or subsidised.  Though a “specific action”, the Byrd Amendment is not an anti-dumping orcountervailing duty, a provisional measure or an unde rtaking and therefore violates Articles VI of the
GATT, 18.1 of the Anti-dumping Agreement and 32.1 of the SCM Agreement.WT/DS217/R
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(d) US arguments are without merit
4.322  Canada argues that the legislative history of the Byrd Amendment simply establishes what
section 1002 of the Byrd Amendment sets out expressly: that its purpose is  to condemn injurious
dumping and to neutralize subsidies that cause injury.  It clarifies the nature of the measure before thePanel.
4.323  Canada asserts that the United States quotes the 1916 Anti-Dumping Act  panel and the
Appellate Body finding that “the scope of Article VI and the Antidumping Agreement extends to
measures that address dumping as such” and states that the Byrd Amendment does not.  Canada
considers it is worthwhile recalling the context in which that particular finding was made.  The
United States had argued that the 1916 Act “did not ‘specifically target’ dumping, but rather predatory
pricing,” and had additional requirements and therefore it was not against dumping “as such”.  TheAppellate Body concluded that Members’ practices should not escape discipline by simply
characterising a practice as something other than dumping or subsidisation, by adding other
requirements.  It went on to find that the ordinary meaning of the phrase “specific action against
dumping” of exports within the meaning of Article 18.1 is action that is taken in response to situations
presenting the constituent elements of “dumping”.
4.324  According to Canada, the Byrd Amendment is action that may only be taken when the
constituent elements of dumping (or a subsidy) are present.  The primary trigger for the application of
the Byrd Amendment is a finding of dumping or subsidy causing injury and the imposition of an
order.  An order is only imposed in US anti-dumpi ng and countervailing duty laws where the elements
of dumping or a subsidy have first been established.  The logical conclusion is inescapable: the ByrdAmendment is an action that takes place only where the constituent elements of dumping or a subsidy
are present.
4.325  Canada posits that the text of the relevant legal provisions also militates against the US
interpretation of the word “against”.  Articles 18.1 and 32.1 describe a “specific action” against a
practice – dumping or a subsidy – rather than a good or an importer.  The terms of the ByrdAmendment as well as its operation show that it is “specific action against dumping” or a subsidy.
Payments – called “offsets” – are, by the express terms of the act, made to “condemn” and
“neutralize” dumping or subsidies; payments are made only to those producers “affected” by dumping
or subsidization; payments must relate directly to harm due to dumping and subsidization; and duties
collected following each determination are segregated to ensure that payments are tied to particular
dumping or subsidy findings.  Byrd Amendment paymen ts are thus a response to, or an action against,
a particular set of practices, dumping and subsidies.
4.326  Finally, Canada submits, the US arguments concerning footnotes 24 and 56 turn Articles 18.1
and 32.1 into logical nonsense.  The United States argues that Articles 18.1 and 32.1 discipline
“specific actions against dumping” or a subsidy ot her than actions consis tent with the GATT 1994.
But if the US argument is correct, the prohibition of Articles 18.1 and 32.1 reaches only those
measures that are already inconsistent with the GATT 1994.  Canada asserts that this makes no sense:if the drafters saw a need to prohibit “specific action against dumping” or a subsidy other than those
set out in “Article VI”, it was to target “actions ” that might otherwise be consistent with the
GATT 1994 – that is, action that is not caught by ot her provisions.  Any other reading of footnotes 24
and 56 would lead to the conclusion that Article 18.1 and 32.1 prohibited only those measures that
were already inconsistent with the GATT 1994.WT/DS217/R
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(e) Standing, undertakings and administration of laws
(i) Standing
4.327  Canada argues that for the obligation in Articles 5.4 and 11.4 to have any meaning,
“examination” and “determination” ought to be objectively verifiable.  It is not enough that theinvestigating authority satisfy itself of the support of the domestic industry.  Rather, at minimum, the
“determination” must be based on an objective “examination” of the “degree of support” of the
domestic industry for an application.
4.328  Canada is of the view that the US arguments do not address the substance of the
complainants’ submissions.  The Byrd Amendment’s monetary rewards render suspect producers’
participation in a petition and, as a result, the real degree of support of the domestic industry.  The
Byrd Amendment in effect makes it impossible for the United States to complete the examination
required of it under Articles 5.4 and 11.4.  An obligation to determine “quantitative” thresholds is
meaningless where the law provides incentives to participants to decide one way or another –
monetary reward for support and the threat of subsidised competition if no support is forthcoming.
4.329  Finally, Canada challenges the Byrd Amendment as such. Canada asserts that the
United States has an obligation to examine and determine in good faith that a petition is supported bythe domestic industry.  Providing a monetary reward for producers to support an anti-dumping or a
countervailing duty petition by its very operation precludes the possibility of an examination in good
faith of industry support under Articles 5.4 and 11.4.
(ii) Undertakings
4.330  Canada  asserts that Articles 8.1 of the Anti-dumping Agreement and 18.1 of the SCM
Agreement require that a Member provide administer ing authorities the ability to enter into “price
undertakings” to facilitate the early termination of investigations. Neither provision requires
investigating authorities to accept undertakin gs, however, a good faith implementation of this
obligation must mean that having granted such an authority, such discretion, Members must not
subsequently undermine it.
4.331  According to Canada, under US law and pursuant  to judicial decisions, views of the injured
domestic industry must be given enormous weight by the authorities in accepting undertakings –
weight that amounts to an effective veto for the industry.  The Byrd Amendment provides a monetary
reward for a domestic industry that sees anti-dumping and countervailing duty investigations taken to
completion.  The prospect of monetary reward does affect the decision of domestic producers to
support an ongoing investigation over an undertaking. The Byrd Amendment renders the discretion to
enter into undertakings meaningless, undermines th e US obligation to consider undertakings in good
faith and therefore violates Articles 8.1 of the Anti-dumping Agreement and 18.1 of the SCM
Agreement.
(iii) The Byrd Amendment violates Article X:3 of the GATT 1994
4.332  Canada argues that Article X:3 of the GATT 1994 requires that Members administer their
laws in a fair, reasonable and impartial manner.  Where, because of certain requirements, theadministration of a measure can be demonstrated to be necessarily unfair or unreasonable, a
complainant does not need to adduce evidence of actual harm.  That is, Members of the WTO should
be permitted to prevent harm to their interests under Article X, rather than complain about it after the
fact.WT/DS217/R
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4.333  Canada is of the opinion that the Byrd Amendment mandates the payment of a monetary
reward for supporting an anti-dumping and countervailing duty petition and penalises those domestic
producers that do not.  It necessarily encourages more petitions and makes it more likely that industry
support will be established.  It encourages domestic industry to thwart undertaking agreements.  A lawcannot be said to be or appear to be reasonable, neutral, fair and objective if there is an incentive that
encourages a particular objective.  The Byrd Amendment is, therefore, in breach of Article X:3(a) of
GATT 1994.
(f) Conclusion
4.334  Canada asks the Panel to find the United States in violation of the specified WTO obligations
and, as a consequence, in violation of Articles XVI:4 of GATT 1994, 18.4 of the Anti-dumping
Agreement and 32.5 of the SCM Agreement.
4. Chile
(a) Introduction
4.335  Chile wishes to reaffirm each and every one of the arguments presented in the first written
submission by Japan and Chile, and reiterates its conviction that the Continued Dumping and Subsidy
Offset Act of 2000, is incompatible with GATT 1994; the Anti-Dumping; the SCM Agreement; and
the WTO Agreement.
4.336  First, Chile argues, the Byrd Amendment is yet another on the long list of measures applied
by the United States Government to restrict imports of certain products on the grounds that they
constitute dumped and/or subsidised imports.
4.337  Chile asserts that according to the Annual Report (2001) of the WTO Dispute Settlement
Body, 34 disputes over anti-dumping and/or counterv ailing measures have been initiated to date, of
which 41 per cent were against the United States – i.e. more than one quarter of the disputes brought
to the WTO against this country.
4.338  Chile considers that there are two reasons for these figures.  The first is the considerable
number of anti-dumping and countervailing measures applied by the United States.  Between 1990and 2000, there was an annual average of more than 30 final determinations of dumping and above six
final determinations of subsidisation.  Statistics  also show that anti-dumping and countervailing
measures affect – or, rather, benefit – only a small number of sectors, i.e. mainly the iron and steel,
chemicals, textiles and agricultural sectors.  I ndeed, 56 per cent of anti-dumping duties in force on
1 December 2001 were being levied on steel or metal products.  The figure for countervailing
measures is even more significant, with 73 per cent of countervailing duties in force on 1 December
last imposed on steel products, most of which are also subject to anti-dumping duty.
4.339  Chile is of the view that the figures indicate that the United States trade defence legislation is
frequently used for purposes extremely different from the original objectives, as enshrined in the
WTO Agreements.  Chile's experience seems to substantiate such a view.  Over the past 20 years,
more than 50 per cent of Chile's exports to the United States have been – and some continue to be –
subject to trade defence investigations, actions and measures.
4.340  Chile argues that the figures issued last week by the United States Customs Service reveal the
perverse impact of this Act not only on international trade but potentially also on the North American
market itself.  61 per cent of the US$206 million distributed during the fiscal year 2001 went to firms
in the iron and steel and metallurgic industries.  And among them, two firms in the same line ofWT/DS217/R
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business received more than US$90 million, that is, almost half of the total amount distributed.  Over
the preceding 12 months, one of those firms had reportedly posted losses in an amount almost
equivalent to the funds received under the Amendment.  In other words, a firm that had incurred
losses is now able to show profits.
4.341  Chile asserts that this raises a whole number of questions.  For example, what is the tax
treatment applicable to funds distributed under the Byrd Amendment?  How are firms required to
account for such funds?  Is the additional income divided among the shareholders?
4.342  According to Chile, competitors must certainly be most concerned to see firms receiving not
inconsiderable amounts – as high as US$60 million in some cases – from the US tax authorities.  This
represents a massive transfer of funds from exporte rs/importers to producers by decision and action of
the government, which, in normal circumstances, w ould have credited such revenues to the Treasury's
general accounts.  This is why Chile finds interesting the analysis conducted by Mexico, which views
this mechanism also as a subsidy incompatible with the WTO.
4.343  Chile believes that another way of quantify ing what the Byrd Amendment implies is to
compare the amount distributed and the WTO budget (US$85 million) as well as the budget of
General Directorate of International Economic Relations of the Chilean Ministry of Foreign Affairs,DIRECON (US$35 million)  The sums distributed during the fiscal year 2001 would be enough to
finance the WTO for a period of almost two and a half years.  Or would finance Chile's entire foreign
trade policy and export promotion programmes, including salaries and maintenance of offices in Chile
and abroad for almost 6 year.
4.344  Chile asserts that the second point that emerges from its analysis is the inconsistency of
certain provisions of US legislation, and the practice of its investigating authorities, with the
obligations undertaken by the United States in the WTO.  A number of panels as well as the Appellate
Body have repeatedly revealed a pattern of inconsistencies in the legislation and practice of the
United States, which interpret and apply the provisions of the Anti-Dumping Agreement in a manner
that is not consistent with the meaning and scope of the provisions, as they were negotiated.
4.345  Chile is of the view that for US firms, the situation is as follows.  Filing anti-dumping and
countervailing duty petitions gives them a twofold advantage, by depriving imports of their
competitive advantage while the firms themselves receive frequently substantial financial
contributions, as evidenced by the figures. Moreover, legislation and practice make it easier – if not
highly likely – to secure a favourable outcome, since even the weak disciplines of the WTO are not
being respected.
4.346  According to Chile, the Byrd Am endment has turned into an easy, speedy and almost certain
way of appropriating federal funds.  Moreover, this is an almost compulsory step if a firm is not to
lose its competitive edge in the domestic market.  It is not therefore a matter of "subjective
motivation", as suggested by the United States, but a quasi-obligation.
4.347  Chile posits that anti-dumping measures in particular constitute interference in decisions
reached on the basis of market forces.  The Byrd Amendment constitutes additional interference.  It islike adding insult to injury.  Instead of using fe deral government funds to help adjust the domestic
industry to the new terms of competition, the Byrd Amendment is an incentive for beneficiaries to
continue producing with less competition and an inv itation or incitement to other firms to follow a
similar course and seek to appropriate federal funds without giving up or providing anything in
exchange.WT/DS217/R
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4.348  Second, Chile argues that the sovereign authority of nations to use the revenues they collect is
restricted by the commitments and obligations undertaken under WTO Agreements.
4.349  Chile has not questioned the sovereign right of the US to freely use the tax revenues it
collects.  Chile's argument is that such a right is  restricted by international commitments, a fact that
the United States itself recognises.  There are commitments expressly undertaken in the field of
taxation or allocation of tax revenues, such as those made under the Agreements on Agriculture,
Trade in Services, Subsidies and Countervailing Measures and the GATT 1994, but others as well, as
Chile states it pointed out in the first written submission with Japan.
4.350  Chile asserts that the sovereign right of the United States to use revenues from the levy of
anti-dumping and countervailing duties is restricted by the commitment not to apply measures against
dumping or subsidies other than those expressly prescribed in the Anti-Dumping and SCMAgreements.  This sovereign right is also restricted by the fact that if funds are used in the manner
contemplated in the Byrd Amendment, the investigat ing authorities will not be able to fulfil, in an
objective and impartial manner, the obligations imposed by the two aforementioned Agreements, inter
alia those set forth in Articles 5.4 and 8.1 of the Anti-Dumping Agreement and Articles 11.4 and 18.1
of the SCM Agreement.
4.351  And third, according to Chile, contrary to what the United States argues, the Byrd
Amendment is indeed an action against dumping and subsidisation.
4.352  The preamble to the Amendment is clear.  It states that continued dumping or subsidisation
after the issuance of anti-dumping orders or countervailing duty orders can frustrate the remedial
purpose of United States trade laws, adding that the purpose of the latter is the restoration ofconditions of fair trade.  This is why Congress deemed it necessary to strengthen trade legislation and
achieve that remedial purpose.
4.353  Chile does not question the fact that the ultimate goal of legislation may not be successfully
achieved.  The issue at stake is, as the United States itself emphasises when it refers to the Report of
the Panel in United States – Anti-Dumping Act of 1916  and the Panel's finding that the purpose of a
law does not exclude the latter from the scope of Article VI and hence from the scope of the WTO
Agreements.  What is more, as case law clearly demonstrates, there is no requirement whatsoever to
prove that a tax measure has a particular impact on trade. Therefore, Chile believes it should not await
the impact the Byrd Amendment in order to dete rmine whether the Amendment is incompatible with
the WTO.
4.354  Chile argues that the object of the Byrd Amendment is to strengthen US trade laws in order to
achieve the remedial purpose contemplated in those laws.
4.355  Chile asserts that according to the Diccionario de la Real Academia de la Lengua Española ,
the term "remedy" means "a measure taken in order to redress an injury or disadvantage".  This is
precisely the purpose stated by the US legislature in the preamble to the Amendment.  And this is
precisely what, according to WTO case law, is limited to anti-dumping duties, provisional measures
and prices undertakings, and hence, in the case of subsidies, to countervailing duties andcountermeasures authorised by the Dispute Settlement Body.
4.356  According to Chile, the United States cleverly  uses a definition of the word "against" that
differs entirely from the meaning given by those who negotiated the Anti-Dumping Agreement.  The
Spanish version of the Agreement uses the expression " en contra de ", which in English means
"against".  In Spanish the term could never be equated with " en contacto con " ("in contact with").
Chile argues that this is not the first time that the United States has used an English-languageWT/DS217/R
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dictionary to make its own interpretation of the provisions of the WTO Agreements.  The Agreements
are in force in three languages, all three versions being equally authentic.  Hence, in order for panels
to determine the meaning and scope of the provisions of the covered Agreements, the intent of those
who negotiated them must be taken into account in a manner that it does not contradict the wording ofthe different versions.
4.357  Chile submits that in this particular case, the wording of the Spanish and English versions is
clear, "against" and "en contra" meaning "in opposition to, contrary to" and " en oposición a , en
contraposición con ".
(b) Conclusion
4.358  Chile asserts that the Continued Dumping and Subsidy Offset Act of 2000  is yet another
example of the inconsistency of the legislation and practice of the United States with thecommitments undertaken in the WTO.  Not only it provides for a perverse incentive to initiate
dumping and countervailing duty investigations but also violates certain provisions of the WTO
Agreements by providing for action against dumping and subsidies which both the Agreements and
case law restrict to specific measures.  Likewise, the Amendment contravenes the obligation of the
United States investigating authorities to apply US anti-dumping and countervailing duty laws in areasonable, impartial and uniform manner, and to proceed in an objective and impartial manner in
determining the domestic industry's degree of support and analysing price undertaking proposals.
Consequently, the United States is also in breach of its obligations to ensure the conformity of its
laws, regulations and administrative procedures with the covered Agreements.
4.359  Chile respectfully requests the Panel to confirm the above violations and inconsistencies and
expressly to recommend that the United States rep eal the Amendment in question.  It thanks the Panel
for the opportunity to express its views.
5. European Communities
(a) A Member’s Right to appropriate anti-dumping and countervailing duties must be exercised
in conformity with its WTO obligations
4.360  According to the European Communities, the United States argues that, since the WTO
Agreement contains no provisions addressing the appropriation of anti-dumping and countervailing
duties, Members have an unrestricted right to spend those funds as they wish.
4.361  The European Communities submits that it is not disputed that the WTO Agreement contains
no such provision. But from this it does not follow that any action financed from “lawfully assessed
and collected” anti-dumping and countervailing duties must be necessarily in conformity with the
WTO Agreement. A measure that constitutes “specific action” against dumping or subsidisation doesnot escape the prohibition contained in Articles 18.1 of the Anti-Dumping Agreement and
Article 32.1 of the SCM Agreement, respectively, simply because it is financed from “lawfully
assessed and collected” anti-dumping or countervailing duties. The US argued unsuccessfully already
in 1916 – Act that, since the Anti-Dumping Agreement did not regulate specifically the type of
measures provided by the 1916 Antidumping Act, such measures were not subject to the Anti-Dumping Agreement.
4.362  The EC agrees that this Panel may not decide this dispute ex aequo et bono. However, since
no complainant has requested the Panel to do so, the arguments to that effect made by the
United States are pointless.WT/DS217/R
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(b) Articles 18.1 of the Anti-Dumping Agreement and 32.1 of the SCM Agreement
4.363  The United States argues that the Byrd Amendment is not “based upon the constituent
elements of dumping or subsidisation”, but instea d upon the applicant’s qualification as an “affected
domestic producer” with “qualifying expenditures”. It is the view of the European Communities thatthe relevant analysis cannot stop at that point but must also take account of the meaning of the notion
of “affected domestic producer”. Under the Byrd Amendment, an “affected domestic producer” is a
producer “affected” by dumping or subsidisation, whic h has been the subject of an anti-dumping or a
countervailing duty order. Thus, it is undeniable that the offset payments are not just “based upon”,
but indeed conditional upon a finding of dumping or subsidisation.
4.364  According to the European Communities, the United States further alleges that the Byrd
Amendment is not action “against” dumping or subsidisation because it does not “apply” directly tothe imported goods or the importers.  In the view of the European Communities, the United States
cites no authority in support of this proposition, other than a dictionary definition, according to which
one of the ordinary meanings of the term “against” is “into contact with”. The same dictionary gives
other meanings of the term “against” which are far more pertinent in this context, but have been
conveniently omitted from the US submission. These include, for example, “in competition with”, “tothe disadvantage of”, “in resistance to” and “as protection from”. These meanings evidence that the
notion of action “against” dumping or subsidisation may include not only action that imposes a direct
“liability” on dumped or subsidised imports (or importers), but also action that affords protection to
the domestic producers by giving them an advantage over the dumped or subsidised imports with
which they compete.
4.365  In the opinion of the European Communities, the reason why distributing duties to a charity
or raising the flag at half-mast are not “specific action against dumping or subsidisation” is because
they are manifestly inapt to have any impact whatsoever on dumping or subsidisation, and not
because they do not “apply” directly to imports or importers.  The same cannot be said of the offset
payments under the Byrd Amendment. Even if the offset payments do not “apply” directly to dumpedor subsidised imports, they are objectively apt to affect such imports. Whether or not they achieve that
result in specific instances is irrelevant because Article 18.1 and 32.1 are not subject to any “actual
effects” test.
4.366  Moreover, according to the European Communiti es, the complainants have shown that the
stated purpose of the Byrd Amendment is to pr ovide an additional remedy against dumping and
subsidisation. The United States argues that the purpose of the Byrd Amendment is “legally
irrelevant” by citing the two panel reports in United States - 1916 Act . Yet those reports do not stand
for the proposition that the purpose of a measure is always irrelevant, but rather for the proposition
that the stated purpose of a measure is not necessarily decisive.
4.367  The European Communities argues that the panels in 1916 Act were concerned that if the
characterisation of a measure as “specific action against dumping” were dependent upon its stated
purpose, it would become extremely easy for Members to escape the prohibition contained inArticle 18.1. This concern does not arise here. There appears to be no disagreement between the
parties regarding the purpose of the Byrd Amendment. The US submission denies the legal relevance
of the purpose of a measure in the abstract, but  does not argue that the Byrd Amendment has a
different purpose from that shown by the complainants. Nor has the United States argued that the
Byrd Amendment is inapt to achieve its stated purpose. Indeed, to argue that would be tantamount toaccusing the US legislators of being either insincere or incompetent.
4.368  The European Communities asserts that the United  States contends that the offset payments
are “permitted” by footnotes 24 and 56 because they  are subsidies allowed by Article XVI of theWT/DS217/R
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GATT. This argument is flawed on several counts. First, the United States appears to have
misunderstood the relationship between Articles 18.1 and 32.1 and their respective footnotes.
Footnotes 24 and 56 are not exceptions to Articles 18.1 and 32.1. Rather, they serve to clarify the
scope of those two provisions. If a measure constitutes specific action against dumping orsubsidisation, it stands prohibited by those Articles and cannot be “permitted” by the footnotes.
Second, the United States disregards that the SCM Agreement does not interpret only the subsidies
provisions of Article VI of the GATT. The SCM Ag reement is also an interpretation of Article XVI.
Therefore, Article XVI cannot be one of the “other relevant provisions of GATT 1994” mentioned in
footnote 56. Third, footnotes 24 and 56 allude to action taken “under other relevant provisions” of the
GATT. This is not the same as action “consistent with some other GATT provision”. The “other
relevant provisions” referred to in footnotes 24 and 56 are those GATT provisions which confer andregulate positively the right to take a certain type of remedial action, such as Article VI, Article XIX,
or Articles XII and XVIII. Article XVI is not one of such “relevant provisions”. Fourth, the United
States disregards that a measure may be consistent with Parts II and III of the SCM Agreement and
still be prohibited, on different grounds, by another WTO provision  (e.g.  with Article III:2 of the
GATT).
4.369  Finally, in the view of the European Communities, the United States misconstrues the
findings of the two panels in 1916 Act. Those pane ls have explained that the purpose of footnote 24 is
to clarify that Article 18.1 does not prevent Members from taking action in response to situations that
involve dumping, where the existence of dumping is not the event that triggers such action. For
example, Article 18.1 does not preclude the adop tion of safeguard measures under Article XIX of
GATT against an increase in imports, even if such increase is the result of dumping, because the
reason for imposing the safeguard measure is the increase in imports as such, and not the existence of
dumping. Unlike safeguard measures, the offset payments are conditional upon a finding or
subsidisation. For that reason, it is indisputable that they constitute specific action against dumping of
subsidisation rather than the type of “non-specific” action envisaged in footnotes 24 and 56.
(c) Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement
4.370  The European Communities posits that the US’s submission nowhere addresses the EC’
argument that the Byrd Amendment is incompatible with the obligation to conduct an objective, good
faith, examination of whether an application is made “by or on behalf of the domestic industry”
because, through the offset payments, the US authorities are unduly influencing the very facts which
they are supposed to examine.
4.371  The EC also argues that, by its very existence, the Byrd Amendment calls into question the
credibility of any applications and expressions of support made by the US producers and, as a result,
makes it impossible for the US authorities to reach a proper determination of support, whether
positive or negative. In response to this second argument, the United States contends that Articles 5.4
and Article 11.4 do not require that the administering authorities assess the “subjective motivations”
of the producers’ expressions of support. The only requirement is “to determine whether thequantitative benchmarks have been met”.
4.372  However, according to the European Communities, those two requirements cannot be
dissociated. A formal declaration of support is not always evidence of “support” within the meaning
of Articles 5.4 and 11.4. The EC is not suggesting that the authorities must seek actively to ascertain
what the United States calls the “subjective motivations” of the domestic producers in each and everyinvestigation. As a general rule, the authorities may legitimately assume that a producer who declares
formally its support for an application does indeed support the application. But if there is evidence
calling into question the credibility of a declaration of support, the administering authorities cannot
ignore such evidence without violating Articles 5.4 and 11.4. The same is true, and indeed a fortiori ,WT/DS217/R
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where, as in the case at hand, the declarations of support have been influenced by the action of the
authorities themselves, which therefore cannot pretend to ignore the effects of those actions.
Therefore, the formalistic position taken by the United States would lead to absurd and unreasonable
results and cannot be correct.
4.373  The European Communities argues that the United  States further contends that, in any event,
the complainants have not provided any evidence showing that, in practice, “producers are supporting
investigations they would have opposed in the absence of the CDSOA and that their support was
necessary to initiate the investigation”. The reason why the complainants cannot provide such
evidence is precisely because, as a result of the Byrd Amendment, it has become impossible, both for
the complainants and for the US authorities, to tell whether a domestic producer supports the
imposition of measures as such or the distribution of the offset. The appropriate consequence to bedrawn from this is not that the Byrd Amendment can have no effects on the level of support, but
rather that the US authorities are no longer in a position to make a proper determination of support,
whether positive or negative, before initiating an investigation, contrary to the requirement imposed
by Articles 5.4 and 11.4.
4.374  In the opinion of the European Communities, the indisputable fact is that the Byrd
Amendment provides a strong financial incentive to file or support applications. It may well be that in
some cases such incentive will be inconsequential because, as argued by the United States, the
domestic producers would have filed or supported the application anyway. But in an indefinite
number of other cases the Byrd Amendment will have a decisive impact on the outcome of the
support determination. Such possibility is enough to conclude that the Byrd Amendment isinconsistent with Articles 5.4 and 11.4.
(d) Article 8.3 of the Anti-Dumping Agreement and Article 18.3 of the SCM Agreement
4.375  The European Communities asserts that the Unit ed States alleges that the Byrd Amendment
cannot violate Article 8 of the Anti-Dumping Agreement and Article 18 of the SCM Agreement
because, in any event, the administering authority enjoys “complete discretion” in order to decidewhether or not to accept an undertaking. The EC disagrees. The first sentence of Articles 8.3 and 18.3
makes it clear that the administering authority must have a “reason” for rejecting an undertaking and,
hence, that such rejection is not within the authority’s “complete discretion”. Although Articles 8.3
and 18.3 do not limit a priori the types of reasons which may be invoked by the authority, this does
not mean that the authority can invoke all sorts of motives. The petitioner’s opposition may be a
pertinent “reason” for rejecting an undertaking where it reflects the legitimate concern that the
undertaking will not provide equivalent protection. On the other hand, the interest of the petitioners insecuring the windfall of the offset payments is an extraneous consideration, which cannot be regarded
as a pertinent “reason” for rejecting an undertaking.
4.376  The United States also argues that the rights afforded to the petitioners in the context of a
proposed undertaking are procedural in nature, not substantive. According to the European
Communities, it remains, nevertheless, that no other party enjoys the same rights. Moreover, theUnited States does not dispute that the stated policy of its authorities is to accord a “considerable
weight” to the petitioners’ opposition. Clearly, this policy goes beyond granting merely procedural
rights.
4.377  The United States further alleges that, in practice, the majority of undertakings accepted by
the US authorities since 1996 were entered into over the opposition of the petitioners. However, in theview of the European Communities, in order to have a complete and meaningful picture of the
relevant US practice, it would be essential to know also how many undertakings were rejected, orWT/DS217/R
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were not offered in the first place, because of the opposition expressed, formally or informally, by the
domestic industry.
4.378  Finally, the United States argues that there is no reason to believe that the domestic industry
will oppose an undertaking as a result of the Byrd Amendment. However, it may well be that, asargued by the United States, the petitioners’ primary main concern is “a return to the conditions of fair
trade”. According to the European  Communities, that objective can be achieved as well through the
imposition of duties. The Byrd Amendment allows the petitioners to have it both ways: they can have
a “return to conditions of fair trade” and, in addition, the windfall of the offset payments.
(e) Article X:3 (a) of the GATT
4.379  The European Communities argues that the reply given by the United States to the
complainants’ claim under Article X:3 (a) suggests that the United States has misunderstood thisclaim. First, this claim is not concerned with the administration of the Byrd Amendment. The EC’s
claim is that the Byrd Amendment results in an unreasonable and partial administration of the
provisions of the US anti-dumping and countervailing duty laws and regulations governing the
initiation of investigations and the acceptance of undertakings. Thus, the “administrative” measure at
issue is the Byrd Amendment, whereas the “administered” measures are the US anti-dumping lawsand regulations. Second, this claim was clearly stated in the request for the establishment of a panel.
4.380  Third, the United States alleges that the complainants have provided no evidence concerning
the “day-to-day administration”. This, the Euro pean Communities asserts, suggests that the
United States has misunderstood also the scope of the obligations imposed by Article X:3 (a). As
explained by the panel in Argentina – Hides and Skins, Article X.3 (a) is not concerned only withindividual acts of enforcement or with “unwritten” administrative practices. It may apply as well with
respect to generally applicable measures. The same panel concluded that the administrative measure
at issue was incompatible with Article X:3(a) because it gave rise to an “inherent danger” that the
administered measures would be applied in a partial manner.
4.381  The European Communities submits that the comp lainants have demonstrated that the Byrd
Amendment creates an “inherent danger” that the US anti-dumping and countervailing duty laws will
be applied in a partial and unreasonable manner. Such “inherent danger” is of itself sufficient to find
that the Byrd Amendment is inconsistent with Article X:3 (a) of the GATT.
(f) Article 5 (b) of the SCM Agreement
4.382  The European Communities argues that the United States argues, among other things, that the
offset payments are not “specific”. This is clea rly incorrect. The Byrd Amendment explicitly limits
access to the offset payments to “certain enterprises”: the “affected domestic producers”, which aredefined as those which have filed or supported an application for the imposition of anti-dumping or
countervailing duties. This condition is not “economic in nature” and, therefore, is not an “objective”
condition or criterion within the meaning of Article 2.1 (b) of the SCM Agreement.
6. India
4.383  In its first submission India along with certain complainants had offered a comprehensive
factual framework and legal arguments establishi ng why the Continued Dumping and Subsidy Offset
Act (CDSOA/Byrd Amendment) violates the obliga tion of US under WTO Agreements. In order to
avoid unnecessary repetition, India in its statement offers some preliminary remarks on some of the
assertions made by the United States in its first written submission.WT/DS217/R
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4.384  The United States asserts that the CDSOA is not an action against dumping or subsidisation
because “it imposes no burden or liability on imports or importers”. However, in India's view, there is
no basis either in the Anti-dumping Agreement or  in the SCM Agreement for this requirement in
order to take specific action against dumping or subsidization. The Appellate Body has in the1916 Anti dumping Act case held that “specific action against dumping” is “action that is taken in
response to situations presenting the constituent elements of dumping”. It is not clear the basis on
which the United States seeks to introduce an additional requirement of an action imposing a burden
or liability on imports or importers for it to be characterized as an action against dumping.
4.385  India is of the view that on the basis of cert ain findings of the Appellate Body in the 1916
Anti dumping Act case the United States argues that the constituent elements of dumping or
subsidization be “built into” the act for a violation to occur. While the Appellate Body had found that
“the constituent elements of dumping are built into the essential elements of civil and criminal
liability under the 1916 Act”, it did not anywhere specify that the constituent elements of dumping
should be built into the Act to arrive at a finding that the Act provides for specific action against
dumping.
4.386  According to India, although there is no requ irement for the constituent elements of dumping
to be built into the Act for a violation to occur, in  fact such elements are built into the CDSOA. Under
the CDSOA the offsets crucially depend upon “duties assessed pursuant to a countervailing duty
order, an anti dumping duty order or a finding unde r the Anti dumping Act of 1921”. Absent any such
order or finding, there will be no duties collected and no offsets granted.  Thus the CDSOA requires
the constituent elements of dumping and subsidization to be present as an absolute condition for thedistribution of the duties. The offsets are clearly contingent on the presence of anti dumping duties or
countervailing duties. The United States cannot deny that the constituent elements of dumping and
subsidization are built into the CDSOA.
4.387  India notes that due to the CDSOA the domestic producers in the United States have a
financial incentive to support anti dumping or countervailing duty investigations as the offset is to bepaid only to the petitioners and those interested parties who support the petition. Thus the CDSOA has
the effect of stimulating the filing of applications and making it easier for the applicants to obtain the
support of other domestic producers so as to meet the threshold requirements in Article 5.4 and 11.4 .
4.388  The United States asserts that “Article 8 and 18 allow the administering authority to reject an
undertaking for any reason”. It is India's submission that Article 8 does not provide such rejections to
be made for any arbitrary reason. The availability of  the offsets gives the petitioners, whose views are
taken, substantial pecuniary incentive to oppose the acceptance of undertakings.  Thus the offsetswould result  in a greater probability of rejection of offer of undertakings, which does not accord with
the test of practicability or appropriateness envisaged in Article 8.3 of the Anti-dumping Agreement.
4.389  India considers that its joint submission has clearly pointed out that the consequence of the
Byrd Amendment would be particularly pernicious for developing country members as the offsets
would virtually make impossible the acceptance or price undertakings, which, as may be recalled,have been recognized as a possible constructive remedy under Article 15 of the Anti-dumping
Agreement.
4.390  India submits that, while the United States has chosen not to respond to this point on the plea
that violation of Article 15 was not included in th e Panel request, the fact remains that the CDSOA
would be particularly detrimental to the interests of developing countries.WT/DS217/R
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7. Indonesia
4.391  Indonesia supports the EC’s statement on various legal issues in which Indonesia together
with the EC and other complainants have previous ly presented joint submissions. Indonesia wishes in
addition to raise some points regarding the effect of the “Continued Dumping and Subsidy Offset Actof 2000” (hereinafter referred to as  “CDSOA”) to developing countries.
4.392  Indonesia considers that the issues raised in the first written submission of the United States
on the Byrd Amendment largely mirrors those covered in the dispute settlement proceeding on the
United States Anti-dumping Act of 1916.   Thes e arguments have already been addressed and
answered by the Panel with the Appellate Body s ubsequently recommending that the DSB request the
United States to bring the 1916 Act into conformity with its obligations under Article VI of the
GATT 1994.
4.393  Bearing in mind the financial, human resources and time involved, Indonesia regrets that a
further dispute settlement procedure is found necessary when most of the issues being raised have
already been the subject of extensive consider ation by a previous Panel and Appellate Body.
4.394  Indonesia wishes also to refer to the multilateral trade context, in which this dispute
settlement procedure is taking place.  In the past few years, one of the most prominent features ofinternational trade has been the increased use of the anti-dumping and subsidies laws as instruments
of trade defence; and in order to ensure that these instruments do not represent a guise for
protectionism, Indonesia considers that it is in the gene ral interest of all members to ensure that their
national laws are consistent with the WTO Agreements concerned.
4.395  Indonesia argues that the CDSOA is obviously protectionist as it offers an incentive for the
US domestic industry to file applications and seek  protection through the application of anti-dumping
duties.  The effect of this amendment will also be  to undermine trade flows to the United States, and
the uncertainty resulting will contribute to the creation of trade harassment, which is often complained
by Indonesian exporters.
4.396  Overall, according to Indonesia, the role model being projected by the US does not bode well
for the future, given that no other Members of the WTO regulate distribution of  duties directly to the
affected domestic industry. The case that was filed by 11 Members of the WTO has significantly
pointed out that concerns over such a Law have already spread out to many WTO members.
4.397  From Indonesia's point of view, the introducti on of the CDSOA serves to detract from the
problems of developing countries to participate more fully in international trade. As Indonesia is
aware, even with normal and fair trade conditions, developing countries have already had many
internal problems to cope with such as  in the area of financial and human resources, as well asinfrastructure. These problems must not be added by unfair practices introduced by Indonesia's
trading partner such as CDSOA.
4.398  Indonesia would like to emphasize that the ef fect of the CDSOA on developing countries is
very detrimental, as the CDSOA further disadvantages developing countries’ products after the
imposition of anti dumping or countervailing duties. Domestic industries in developing countries areclearly being treated unfairly in foreign markets such as the US, if they, then, have to encounter
another difficult problem where their competitors in the US receive such a payment.
4.399  Indonesia argues that, recognizing the different levels of development, the WTO has already
provided the concept of “special and differential treatment” to facilitate participation of developingWT/DS217/R
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countries in the Multilateral Trading System. However, this measure is not sufficient, if not followed
by a conducive trade environment in the markets of Indonesia's trading partners such as United States.
4.400  As has been stated in Indonesia's first written submission, the impact of the CDSOA also
undermines the provisions of Article 15 of the Anti Dumping Agreement on special and differentialtreatment for developing countries. Indonesia considers that the Byrd Amendment not only
undermines price-undertakings as a constructive remedy, but it also severely affects the prospects of
the forthcoming trade negotiations where other possible remedies other than duties might also be
raised.
4.401  According to Indonesia, the need to take eff ective action also reflects the major concern of
developing countries of the importance of implem enting existing commitments. In this respect, the
need to effectively implement the special and differential treatment provisions in the WTO
Agreements has been underscored on several occasions, and the future commitment to do so
underpins the decision reached by the Ministerial Conference in Doha as contained in the documents
on the “ Implementation – Related Issues and Concerns ” (WT/MIN(01)/17), as well as the
“Ministerial Declaration ” (WT/MIN(01)/DEC/1). Taken together, the commitment of all Members is
clear that there is a reaffirmation that the provisions for special and differential treatment are anintegral part of the WTO Agreement, and Article 15 of the Anti Dumping Agreement is a mandatory
provision.
4.402  Indonesia argues that with the CDSOA there is little doubt that the US authorities are unable
to implement the mandatory provisions of Article  15 of the Anti-dumping Agreement, bearing in
mind the offset provisions concerned and the fact that the application of duties is not the constructiveremedy envisaged in the Agreement.
4.403  In conclusion, Indonesia respectfully requests the Panel to recommend that the United States
bring the CDSOA into full conformity with its obligations under the WTO Agreements.
8. Japan
4.404  Japan asserts it has made every effort to present a clear and straightforward case that would
allow this Panel to reach a decision as expeditiously as possible.  In its first written submission, Japan
offered a complete factual framework and legal arguments that demonstrate that the Continued
Dumping and Subsidy Offset Act of 2000 (hereinafter referred to as “the Act”) is a violation by the
United States of its obligations under the WTO Agreements.  Japan is now offering some preliminary
remarks concerning some of the assertions made by the United States in its first written submission.
4.405  According to Japan, the United States argues, at great length, that the complainants request
this Panel to make a finding ex aequo et bono.   At  no time has Japan requested or sought a finding ex
aequo et bono .
4.406  The United States also claims, erroneously Japan argues, that there are no legal provisions in
the WTO agreements that in any way curtail the ab ility of a Member to appropriate funds collected
through import duties.  Japan has pointed to specific and unequivocal treaty language in the
GATT 1994 and the Annex 1 WTO agreements that limit the right of a Member to allocate revenues.As elaborated in Japan’s first submission, Articl e 18.1 and 32.1 are two clear examples of provisions
that circumscribe the ability of a Member to appropriate collected anti-dumping and countervailing
duties. The Panel and the Appellate Body decisions in the US-Foreign Sales Corporation case are the
most recent illustration of the limitation that the WTO rules impose on a Member’s sovereign power
to spend or forego revenue.WT/DS217/R
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4.407  Japan argues that together with the other complaining parties, it has shown that the
distribution of assessed anti-dumping and counterva iling duties mandated by the Act does violate
WTO commitments, including the commitment not to take specific action against dumping or
subsidization that is not in accordance with the GATT or consistent with the Antidumping Agreementand the SCM Agreement.
4.408  Japan also draws the Panel’s attention to the observations made by the United States at
paragraph 75 in the panel report of the Norwegian Salmon anti-dumping case.  The United States
referred to the negotiating history of Article VI, and explicitly noted “that injurious dumping had been
viewed with such concern during the original GATT negotiations that proposals had been considered
to permit imposition of tougher countermeasures than merely offsetting duties.”  The United States
went on to note that, in the end, the negotiators chose to limit the remedy for injurious dumping tooffsetting duties.  With the Act, the United States  unilaterally has reversed, for itself, the consensus
reached by the negotiators of Article VI and resorted to other forms of countermeasures.
4.409  Japan argues that the United States insists on drawing analogies and offering hypothetical
situations that significantly alter the factual framework under which the Panel must conduct its
analysis.  Japan is not challenging the distribution of anti-dumping and countervailing duties in theabstract.  The Act mandates the distribution of duties specifically and exclusively to domestic
producers that supported the petition.  This limitation is not irrelevant or incidental.  The identity of
the recipients of the distribution is crucial.  The argument by the United States that nothing in the
WTO could curtail a Member’s right to apportion collected duties is based on different circumstances
and simply irrelevant to this case.  The Panel must examine the conformity of the measure, in light ofthe existing circumstances.
4.410  In the opinion of Japan, the United States also misrepresents the relevance that the stated
purpose of the Act has in this case.  The statements of the sponsors are evidence of what the Act
actually does and how it operates.  Those statements demonstrate that the Act provides a specific
remedy against dumping and subsidization.  The findings by Congress, contained in Section 1002 ofthe Act, are evidence that the Act is a “response” to dumping or subsidization that in fact “counters”
and “addresses” dumping and subsidization as such.
4.411  Japan asserts that the United States acknowledges the close connection between actions
mandated by the Act and the dumping and subsidization, but goes to great lengths to try to lessen its
importance.  Japan argues that it is clear, however, that there is an intimate and dependent connection
between them.  The degree of proximity and nature of this connection further demonstrate that the Act
indeed addresses and counteracts dumping and subsidization as such, and is therefore within thepurview of GATT Article VI and the Antidumping and the SCM Agreement.
4.412  Japan notes that the United States argues that the Act does not provide for the recovery of
damages, and that a description to the contrary is incorrect.  Japan wishes to recall that the main co-
sponsors of the Act, not the complainants, first described the Act as a means of “compensation for
damages caused by dumping or subsidization”, explicitly declaring before Congress that the Actwould transfer the duties to US companies “to compensate for damages.”  Moreover, whether the
“damages” provided for by the Act cover the entire amount of the injury caused by dumping or
subsidization is not relevant to the issue of whet her the payments provided for by the Act are a form
of damages.  The fact is that the Act provides monetary benefits to injured domestic producers as a
countermeasure against dumping or subsidization.
4.413  Japan recalls that in the 1916 Antidumping Act case, the United States tried to narrow the
scope of Article VI:2.  It failed, both at the Pa nel and at the Appellate Body.  Here again the
United States tries, unsuccessfully, to narrow the scope of Article VI:2 by fabricating a test that has noWT/DS217/R
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legal or textual basis in Article VI and that relies on the presence or causation of a “burden or
liability” to “imports or importers” to determine whether a measure falls within the scope of
Article VI:2.
4.414  According to Japan, the United States also misconstrues the language of Art. 18.1.  Contrary
to the United States assertion, “specific action against dumping” does not require action based on the
constituent elements of dumping, imposing a burden or liability on importers or imports.  There is
simply no textual basis for this interpretation of the phrase “specific action against dumping.”  The
Appellate Body interpreted that phrase in the 1916 Antidumping Act case as “action taken in response
to situations presenting the constituent elements of ‘dumping’.”
4.415  Japan is of the view that the United States’ attempt to extract the word “against” from its
context and re-interpret it are equally grave.  The ordinary meaning of that word in Articles 18.1 and32.1 was made abundantly clear by the Appellate B ody.  According to the Appellate Body and the
Panel in the 1916 Act case, actions that “address” or “counteract” dumping or are taken “in response
to situations that present the constituent elements of dumping,” fall within the scope of Article VI of
the GATT.  Even by the United States own admiss ion “the scope of Article VI and the Antidumping
Agreement extends to measures which address dumping as such.”  In trying to re-interpret that word,the United States also admits that the actions mandated by the Act are indeed a “response” to
dumping.
4.416  Japan argues that nothing requires that the constituent elements of dumping or subsidization
be “built into” the Act in order for a violation to occur, as the United States argues.  The Appellate
Body’s statement quoted by the United States is a description of the 1916 Antidumping Act.  The factthat the 1916 Act had those elements “built in” and that, on that basis the Panel found that it was
specific action against dumping, does not mean that under all circumstances, those elements need to
be built into the measures in order for a violation to be found.
4.417  Notwithstanding the above, Japan and the othe r complainants have demonstrated that the
constituent elements of dumping and subsidization ar e indeed built into the Act.  The Appellate Body
in the 1916 Antidumping Act case interpreted “built in” to mean “required”. Japan recalls that the Act
requires the constituent elements of dumping and subsidization to be present as an absolute condition
to the distribution of the duties.
4.418  In Japan's view, the United States argument that the action against dumping in this case is
permitted or excused under footnote 24 and footnote 56 of the Antidumping and the SCM Agreement,
respectively, should also be rejected.  Footnote 24, as interpreted by the Panel and the Appellate Body
in the 1916 Antidumping Act case, and footnote 56, which parallels footnote 24, allow actions underother provisions of the GATT only where such actions are not taken to counter or address dumping as
such.  As the actions mandated by the Act are clearly taken to address dumping or subsidization as
such, the United States cannot pretend to exempt them from the disciplines laid down in the
Antidumping and the SCM Agreement.
4.419  Japan submits that most of the arguments made with respect to dumping apply as well to
Article 32.1 of the SCM Agreement. Japan asserts that in its written submission, it explains how the
Act mandates specific action that constitutes a form of relief that is neither contemplated nor
authorized by the GATT Article VI:3 or the SCM Agreement and is, therefore, a violation of
Article 32.1 of the SCM Agreement.
4.420  Japan is of the opinion that the misrepresentation by the United States of Japan’s and Chile’s
arguments regarding the parallelism between Articles 18.1 and 32.1, however, should not go
unanswered.  Japan asserts that it has not argued that the interpretation by the Appellate Body ofWT/DS217/R
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Article VI:2 applies or can be extended to Article VI:3.  What Japan did say is that the Appellate
Body’s interpretation of the phrase “specific action against” of Article 18.1 applies to the parallel
phrase in Article 32.1.
4.421  The United States asserts that “GATT Article VI:3 read in conjunction with Article 10 of the
SCM Agreement does not limit the permissible remedies for subsidies to duties.”  According to Japan,
footnote 35 of that provision, however, states that only one form of relief shall be available to a
Member to protect against the effects of a particular subsidy in its domestic market, and specifies that
the only possible form of relief is either a countervailing duty or a countermeasure authorized by the
DSB.  The United States expressly  admits in its submission that the Act “is not a ‘countermeasure’
within the meaning of Articles 4.10 and 7.9.”  The United States also concedes that the Act does not
mandate the imposition of countervailing duties.  It must be concluded, therefore, that the Act is not inaccordance with Article VI:3, for it is a specific action taken in response to subsidization that is
neither a countervailing duty nor a countermeasure.  As such, the distributions mandated by the Act
are specific action against a subsidy, in violation of the SCM Agreement.
4.422  Japan turns to its claims concerning the so-called “standing requirement” and the “voluntary
undertaking” provisions of the Antidumping and the SCM Agreement.
4.423  Japan argues that no matter how the United States wishes to characterize its measure, the fact
is that the United States is offering a financial incentives to domestic producers to support anti-
dumping or countervailing investigations.  Even if the objective numerical benchmarks, carefully
negotiated and inscribed in Articles 5.4 and 11.4, remain unchanged in US statues, the Act has made it
impossible for the United States authorities to apply these benchmarks in a good faith manner.
4.424  According to Japan, the percentages that serve as thresholds in Articles 5.4 and 11.4 are
neither arbitrary nor aleatory.  The Act, however, eliminates the effectiveness of these multilaterally
negotiated benchmarks. They will no longer be an effective protection against frivolous suits.  The
decision by domestic producers to support or oppose a petition must not be distorted by Government-
sponsored financial incentives.  The Act, however, distorts those provisions and is, therefore, aviolation by the United States of its obligations.
4.425  In the view of Japan, the United States arguments addressed Articles 5.4 and 11.4 only
superficially.  It did not rebut the fundamental inconsistencies identified by Japan and the other
complainants.  It avoided responding to the complainant’s arguments concerning the object and
purpose of Articles 5.4 and 11.4.  Those provisions do more than simply establish a meaningless
obligation to count numbers.  Instead, they utilize percentages as tools to protect imports from
unwarranted and unjustified remedial action by determining whether there is true support by domesticproducers for the adoption of trade remedies.  The United States did not respond either to the evidence
presented by Japan and Chile on the level of determination required for the negative and positive tests.
As noted by Japan and Chile, Articles 4.1 and 16.1 inform Articles 5.4 and 11.4.  Consequently,
offering a financial incentive to domestic producers renders meaningless the guarantees established by
the Antidumping and SCM Agreement to protect ag ainst expression of support by biased domestic
producers.
4.426  Japan submits that the Act is also inconsistent with the voluntary undertaking provisions of
Articles 8.1 of the ADA and 18.1 of the ASCM.  The availability of offsets under the Act gives US
petitioners a substantial financial incentive to frustrate the acceptance and maintenance of
undertakings.
4.427  Japan believes it is not necessary for Japan to provide evidence that the Act has already
caused domestic producers to oppose an undertaking that they would otherwise have supported, sinceWT/DS217/R
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Japan challenges the WTO-consistency of the Act as such.  Nevertheless, Japan has provided
evidence that the financial incentive has played a role in the negotiations regarding undertakings in
the case of Canadian exports of softwood lumber.
4.428  Finally, Japan submits it also demonstrated that the United States acts inconsistently with
Article X:3(a) of the GATT 1994 because the Act prevents the United States from administering its
anti-dumping and countervailing duty laws in a reasonable, impartial and uniform manner.
4.429  According to Japan, the United States misrepresents Japan’s claims under Article X:3(a) by
saying that “complaining parties have failed to present any evidence of the actual administration of
the [Act]”.  As Japan made clear in its submission, it is not evidence of the administration of the Act
that needs to be provided, but rather evidence of the administration of the United States anti-dumping
and countervailing duty laws.  That evidence is the Act itself, which prevents the United States fromadministering its anti-dumping and countervailing duty laws in a reasonable, impartial and uniform
manner.
4.430  Japan is of the view that the United States did not address most of claims by Japan and Chile
under Article X:3(a).  Rather, it commented only on the complainant’s claims under Article X:3(a)
that relate to undertakings and standing.  However, Japan’s challenge of the Act’s consistency withArticle X:3(a) is not limited to those two issues.  Neither did the United States rebut the charge that
the Act is inherently unreasonable as demonstrated by the fact that the application of similar measures
by all WTO Members would lead to an intolerable situation in the multilateral trading system and a
spiralling circle of zero-sum “subsidy/countervailing duty” measures.
9. Korea
(a) Introduction
4.431  Korea considers that the Appellate Body in US – Anti-Dumping Act of 1916  already has
adjudicated the primary issue in this proceeding, i.e., Members may take one and only one action
against dumping--they may impose duties equal to or less than the margin of dumping.  This logic
extends without modification to countervailing duty proceedings.
(i) The Byrd Amendment constitutes an impermissible “specific action”
4.432  In Korea's view, just like the 1916 Act, the Continued Dumping and Subsidy Offset Act of
2000 (the CDSOA or Byrd Amendment) creates a specific action, other than imposition of AD or
CVD duties, to be taken where imports are found to be dumped or subsidized.  That action is that the
US authority must transfer the duties collected from imports directly to the US companies that
supported the petition.  This “specific action against dumping” (or subsidy) is inconsistent with
Article VI of GATT 1994, Article 18.1 of the AD Agreement and Article 32.1 of the SCMAgreement.
4.433  According to Korea, the counter-arguments contained in the First Submission of the
United States do not withstand scrutiny and are not supported by the language of the relevant
provisions.
4.434  First, in Korea’s view, the US interpretation of  “[t]he ordinary meaning of the term ‘against’”
is contrary to  the interpretation of “against” in Article 18.1 of the AD and Article 32.1 of the SCM.
Only on the basis of an irrelevant ordinary meaning of “against” does the US argue that “the actual
elements or requirements of the CDSOA do not act ‘against’ dumping or subsidization because they
do not apply to (have any contact with) imported goods or importers.”  The proper interpretation isWT/DS217/R
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that Article 18.1 stipulates “specific action against dumping” , a process, rather than “specific action
against (dumped) imported goods or importers ” as argued by the US.   Thus, the available ordinary
meaning of “against” shows that the CDSOA is a specific action “against” dumping (or subsidy).
This interpretation is confirmed by the  panels and the Appellate Body in US-1916 Act .
4.435  Second, the US claims that the AB report in US- 1916 Act  provides no guidance as to the
meaning of the term “against”.  The US seems to  argue that the CDSOA, even though it is “in
response to” dumping, is not “against” dumping.  The examples presented by the United States do not
support this argument.
4.436  Third, the US argues that constituent elements of dumping are not built into the CDSOA.   
Again, in Korea’s view, the AB’s consideration of this issue in US–1916 Act  shows that the US
argument cannot withstand scrutiny.  In addition, contrary to the US argument, the constituentelements of dumping are “built into” the CDS OA and the amount of the distributions under the
CDSOA is closely related to the extent to which a US producer has been affected by dumping or
subsidization of imports.
4.437  Fourth, the US argues that, if the Panel determined that the CDSOA is an action against
dumping or a subsidy, footnotes 24 and 56 to Articles 18.1 and 32 operate to permit the CDSOA.  InKorea’s view, the US argument would be valid on only one condition, which is if footnotes 24 and 56
provided an exemption for the violation of Articles 18.1 and 32 in the nature of Article XX or
Article XXIV of GATT.  But, there is no textual basi s to argue that footnotes 24 or 56 provide such an
exemption.  Moreover, the US itself inadvertently admits that footnotes 24 and 56 cannot provide a
safe harbour for an action which has already been found to be an action against dumping.
4.438  In short, Korea submits that like the 1916 Act, the Byrd Amendment mandates an
impermissible “specific action.”  It profoundly al ters the conditions of competition to favour US
producers in all US markets for all products.  This analysis is confirmed by the opinions of the
President who signed the Amendment into law and of various other US government officials.
(ii) The Byrd Amendment violates the standing threshold
4.439  Korea argues that the Byrd Amendment is inconsistent with Article 5.4 of the AD Agreement
and Article 11.4 of the SCM Agreement.  It distorts and undermines the standing threshold,
encouraging abuse of otherwise permissible actions, and rendering these WTO provisions
meaningless.  These thresholds were designed to balance carefully a number of competing rights and
interests, primarily the right of an industry to seek relief from unfair trade practices versus the interest
in ensuring that it is the industry, and not a sector of it, or for that matter, an individual company, that
is seeking relief.
4.440  First, Korea asserts, the US argues that the obligation arising under Article 5.4 is limited to
verifying the number of companies expressing support for the petition.  Under Article 26 of the
Vienna Convention on the Law of Treaties and Article X:3(a) of GATT, this cannot be a good faith
implementation of a treaty obligation.
4.441  Second, according to Korea, the US argues that the complaining parties offer no empirical
support for their contention that the CDSOA encour ages domestic companie s to support a petition.
The Appellate Body has repeatedly stated that an “effects test” is irrelevant if the measure has been
found to violate the provisions of the WTO.  The United States also improperly supports its argument
by claiming that it is “generally” irrational for domestic companies to “oppose” relief.  The
quantitative target envisaged in Article 5.4 is not the number of companies “opposing” the petition,WT/DS217/R
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but the number of companies “supporting” the petition.  Moreover, it is not irrational for domestic
companies not to support a petition.
4.442  Korea submits that, by enacting the Byrd Amendment, the US government has improperly
influenced the very facts that the US authority is  supposed to examine in making its determination.
Thus, the US has violated its obligation to conduct an objective examination under Article 5.4 of the
AD Agreement and Article 11.4 of the SCM Agreement.
(iii) The Byrd Amendment violates provisions on undertakings
4.443  Korea is of the view that the Byrd Amendment is inconsistent with Article 8 of the AD
Agreement and Article 18 of the SCM Agreement because it impermissibly deters agreements on
undertakings.  The Byrd Amendment creates an incentive for the US industry to oppose undertakings.
By supporting the imposition of duties, the domestic industry may receive not merely the impositionof the duties as allowed by the WTO agreements and US law (which, in essence, results in price levels
consistent with a price undertaking), but also the direct transfer of the duties collected.
(iv) Violation of Article X:3(a)
4.444  In the opinion of Korea, the US argues that Article X:3(a) addresses only the administration
of national laws and not national laws themselves.  The CDSOA violates Article X:3(a) because itprevents the US from uniform, impartial and reasonable  administration of US laws concerning
standing threshold determinations and the acceptance of undertakings.
(b) Conclusion
4.445  Korea requests the Panel to recommend that the United States bring its laws into conformity
with its obligations under the relevant WTO provisions and to suggest that the United States repealthe Byrd Amendment.
10. Mexico
(a) Introduction
4.446  In its oral statement, Mexico concentrates on the key features of Mexico's claims under
Article 5 of the SCM Agreement.  The other claims made by Mexico have been dealt with in its firstwritten submission and in the other claimants' first written submissions. Mexico agrees with the oral
statements of the other complaining parties with resp ect to those claims and incorporates them into its
arguments.
4.447  Mexico will be providing a detailed elaboration on all of its claims in its written rebuttal
submission.
(b) The negative economic impact of the Act
4.448  Before addressing its claims regarding Article 5, Mexico wishes to comment on the negative
economic impact of the Continued Dumping and Subsidy Offset Act , which Mexico refers to as the
“Act”.
4.449  Mexico argues that when anti-dumping and/or countervailing duties are imposed, the relative
competitive relationship between the affected e xports and competing US products is modified. WTO
Members have agreed to this modification. It requires exporters who remain competitive in the USWT/DS217/R
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market to adjust their pricing practices to either  avoid the duties or to enable continued sales in
situations where the duties are applied  In such circumstances, any additional modifications in the
relative competitive relationship will reduce the abilit y of the exporter to compete and, therefore, its
ability to sell into the US market.
4.450  Mexico is of the view that the subsidies conferred by the Act as so destructive because the
modify further the relative competitive relationship in an adverse and direct manner which was not
agreed to by the WTO Members. The subsidies are generated by the duties collected and are then
granted to the direct competitors of the Mexican exporters. They are used exclusively to subsidize the
production of the like US products. Finally, only those direct competitors that filed or support the
petition for the original investigation receive the subs idies.  This is why the subsidies conferred by the
Act are so destructive.
4.451  In this way, Mexico submits, the subsidies fundamentally and systematically alter the relative
conditions of competition between Mexican exporters and producers of like US products in a manner
that goes beyond the maximum protection permitted under GATT Articles II and VI.
4.452  According to Mexico, since the date of entry into force of the Act, its adverse effects were
manifest because the granting of the subsidies was explicitly mandated and the subsidies would begranted with respect to qualifying expenditures that were made by the recipients on or after the date of
issuance of the order or finding in question.
(c) The legal dimensions of Mexico’s Article 5 claim
4.453  Mexico believes its claim under Article 5 of the SCM Agreement is straight forward.  In order
for it  to prevail, Mexico must demonstrate that, through the use of a subsidy, the Act causes adverseeffects in the form of nullification or impairment of benefits accruing directly or indirectly to Mexico
under the GATT 1994.
4.454  Mexico asserts that it has established all the elements of this claim:
• The offsets distributed under the Act constitute financial contributions that confer
benefits and, therefore, amount to subsidies within the meaning of Article 1 of the
SCM Agreement.
• The Act explicitly limits access to the subsidies to certain enterprises and, therefore,
the subsidies are specific within the meaning of paragraph (a) of Article 2.1 of the
SCM Agreement.  Consequently, the subsidies are actionable under Part III of the
SCM Agreement which includes Article 5.
• By virtue of the fact that Article 7 of the SCM Agreement entitles a WTO Member to
invoke Article 5 where a subsidy is grante d or maintained, the meaning of “use of”
any subsidy in Article 5 includes the granting or maintaining of a subsidy in the
circumstances of this dispute.
• Through the use of the subsidies, the Act causes adverse effects in the form of
nullification or impairment of benefits accruing directly or indirectly to Mexico under
the GATT 1994:
• Nullification or impairment under paragraph (b) of Article 5 can take the form of
“violation” nullification or impairment and “non-violation” nullification orimpairment.  Mexico is pleading both forms of nullification or impairment.WT/DS217/R
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• With respect to violation nullification or impairment, to the extent that the Act
violates provisions of the GATT 1994 and the violation is caused by the “use of” a
subsidy, violation nullification or impairment will occur.
• Mexico’s non-violation nullification or impairment claim consists of two elements:
- By mandating the granting of actionable subsidies in the circumstances of
this dispute, the Act will necessarily cause nullification or impairment. Upon
granting, the subsidies will upset the competitive relationship between
Mexican and like US products that is legitimately expected by Mexico under
GATT Articles II and VI when its products face anti-dumping or
countervailing duties.  The competitive relationship in such circumstancesshould be modified by an amount, at most, equal to the maximum anti-
dumping and countervailing duties allowable under the Articles. The
subsidies alter the competitive relationship in excess of that amount.
- By maintaining actionable subsidies in th e circumstances of this dispute, the
Act also causes nullification or impairment. The Act impairs thepredictability needed to plan for future  trade that is legitimately expected by
Mexico under GATT Articles II and VI in situations when its products face
anti-dumping or countervailing duties. The benefits accruing to Mexico under
these Articles apply to actual trade an d to the predictability needed to plan
future trade. It is that predictability that is being impaired.
4.455  Mexico argues that the United States acknowledges that the offsets distributed under the Act
are subsidies. However, the United States raises several arguments to attempt to rebut Mexico’s claim
under Article 5(b) of the SCM Agreement. I will address each argument in turn.
(i) Specificity
4.456  The US argues that the Act does not confer specific subsidies because the Act does not limit
the subsidies to certain enterprises and that there is no evidence that the subsidies are specific “in
fact”.
4.457  In Mexico's view, the US mischaracterizes Mexico’s arguments regarding specificity.
Mexico’s position is simple – “in law”, the subsidies conferred under the Act are specific. There is no
need for this Panel to examine whether the subsidie s are specific “in fact”.  All of the arguments of
the United States that are based on paragraphs (b) and (c) of Article 2.1 of the SCM Agreement –
which concern specificity “in fact” – are legally irrelevant to this proceeding.
4.458  Mexico submits that the test under paragraph (a) of Article 2.1 of the SCM Agreement is
plain – does “the legislation pursuant to which the granting authority operates, explicitly limit access
to a subsidy to certain enterprises”?
4.459  The answer, according to Mexico, is clearly “yes”.
4.460  The funds that form the “financial contribution” element of each subsidy are deposited and
maintained in separate special accounts that ar e, themselves, limited to the products that are the
subject of each order or finding. Thus, the subsidies are inherently specific from the outset.
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or worker representatives. Finally, access is further restricted to those enterprises that were petitioners
in the original investigation that led to the duties or those enterprises that supported the petition.
4.461  Thus, Mexico asserts, by legal requirement, the Act explicitly limits access to the subsidies it
confers to certain enterprises.
(ii) Adverse effects
4.462  The United States argues that Mexico has failed to demonstrate “adverse effects” within the
meaning of Article 5.
4.463  It seems that the central argument that the US is making in this regard is that that the Act must
be applied before there can be a violation under Article 5 which, in its view, means that subsidies
must be granted under the Act.  This is manifestly incorrect.
4.464  Mexico is raising two types of nullification or impairment claims under its Article 5
challenge: (i) “violation” nullification or impairment; and (ii) “non-violation” nullification or
impairment.
4.465  Since “violation” nullification or impairment presumes that the Panel finds a violation of a
provision of the GATT 1994 in one of the other claims before it and therefore does not give rise to an
independent ground for challenge, Mexico decides to focus on Mexico’s “non-violation” nullificationor impairment claims.
4.466  With respect to non-violation nullification or impairment and the US claims that the Act must
be “applied”, Mexico is presenting two arguments.
Granting of actionable subsidies
4.467  The US argues that the Act must be applied—i.e., that subsidies must be granted under the
Act— before a non-violation nullification or impairment claim can made under paragraph (b) of
Article 5.  This entire line of argument is ba sed on GATT and WTO jurisprudence related to claims
brought under GATT Article XXIII:1(b).
4.468  Mexico is of the view that, in making this argument, the US ignores the substantive nature of
Article 5.  It also misconstrues the “legislation as such” element of Mexico’s Article 5 claim. Finally,it confuses a procedural matter with a substantive one.
4.469  The US argues that footnote 12 to the SCM Agreement prevents Mexico from challenging the
Act on the basis that the existence of nullification or impairment is to be established in accordance
with the practice of application of Article XXIII:1(b).  Mexico argues that, as is clear from the text of
the footnote, it relates to the determination of the existence of nullification or impairment, not the
question of when a challenge can be brought under Article 5.
4.470  Mexico asserts that what is really at issue is the procedural question of when Mexico can
challenge the Act under Article 5. Does Mexico have to wait until a subsidy has been granted?
Clearly, the answer to this question, according to Mexico, is “No”.
4.471  Mexico  argues that Article 5, like any other substantive provision of the WTO Agreements,
is subject to the doctrine governing a legislation as such challenge.  If legislation mandates action that
will necessarily violate a WTO provision, that legislation can be challenged. There is no legal orWT/DS217/R
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logical reason to conclude otherwise. By focusing on GATT Article XXIII:1(b) and excluding any
consideration of the substantive nature of Article 5, the US has failed to recognize this.
4.472  Mexico is of the view that under the legislation as such element of Mexico’s Article 5 claim,
Mexico is simply arguing that the Act mandates the granting of actionable subsidies and that, whengranted, such subsidies will cause nullification or impairment.  In other words, when the subsidies are
granted—an action that even the US acknowledges as amounting to “application”—a violation will
occur.
4.473  Thus, under Article 5, Mexico can challenge the actionable subsidies conferred by the Act
prior to those subsidies being granted.
Maintaining of actionable subsidies
4.474  Mexico is also arguing that the Act is maintaining actionable subsidies and that the
maintenance of those subsidies in the circumstances is nullifying or impairing benefits that accrue to
Mexico under the GATT 1994.
4.475  Subsidies can be challenged under Article 7 of the SCM Agreement (the remedy provision for
Article 5), when a Member maintains a subsidy.  A violation of Article 5 can be found where the
maintenance of a subsidy amounts to the “use of” that subsidy and it causes one of the specifiedadverse effects.
4.476  Mexico asserts that in the circumstances of this dispute, the Act “maintains”  subsidies in that
it provides the means for the creation and conferral of those subsidies. The meaning of “use of”
includes maintaining a subsidy in the circumstances of  this dispute where other actions related to the
subsidies have been taken. These actions include mandating the granting of the subsidies, creating thespecial accounts and depositing funds into them, and establishing a list of eligible recipients.
4.477  In the opinion of Mexico, even before subsidies are granted under the Act, the maintenance of
subsidies under the Act nullified or impaired benefits accruing to Mexico under GATT Articles II and
VI that concerned the creation of predictability need ed to plan future trade.  Given the certainty that
any anti-dumping and countervailing duties that will be collected will be re-distributed to theproducers of directly competitive products and the uncertainty as to the magnitude of the subsidies, it
is impossible for Mexican exporters to predict the relative conditions of competition between their
products and like US products.  This is particularly problematic with respect to products that require
significant lead time between order and delivery.
(iii) Competitive relationship
4.478  The US argues that Mexico has failed to demonstrate that the competitive relationship
between US products and Mexican products has been upset by a subsidy.
4.479  Mexico is of the view that a great part of the US argument on this point is based on its
mistaken belief that subsidies must be granted under the Act before Mexico can bring an Article 5(b)
challenge.
4.480  Mexico posits that it seems that the US is also arguing that Mexico must prove adverse trade
effects in order to establish nullification or impairment, which according to Mexico is not the case. Aswas made clear at paragraph 150 of the report of the Panel in Oilseeds I , the focus is on whether there
has been an adverse change in conditions of competition legitimately expected by Mexico and not on
trade flows or volumes of trade.WT/DS217/R
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4.481  The United States argues the Panel in Oilseeds I  “carefully analyzed” the evidence presented
in making its finding and that, in this dispute, no such evidence has been presented by Mexico.
Mexico argues that this is incorrect.
4.482  In assessing whether there was an adverse change in conditions of competition that led to a
finding of nullification or impairment, the Panels in Oilseeds I  and Oilseeds II  examined the
framework, mechanisms, essential features, characteristics and operations of the schemes in question.
That was the evidence “carefully analyzed” by the panels. In other words, the panels made their
findings based on the structure and architecture of the schemes.
4.483  This is exactly what Mexico has done in this dispute. By virtue of the structure and
architecture of the Act:
- upon granting, the subsidies conferred by the Act will adversely change the
relative conditions of competition that Mexico legitimately expected; and
- prior to the granting of subsidies, the Act per se  interferes with the
predictability related to those relative conditions of competition that was
legitimately expected by Mexico.
(iv) “Floodgates” argument
4.484  The US argues that acceptance of Mexico’s argument would “automatically” convert any
specific domestic subsidy programme which is related to a product on which there is a tariff
concession into a non-violation nullification or  impairment (para. 68, US First Submission).
4.485  According to Mexico, this argument is incorrect. At paragraph 81 of the Panel report in
Oilseeds II , the Panel stated that GATT contracting parties must “be assumed to base their tariff
negotiations on the expectation that the price effect of the tariff concession will not be systematically
offset”.  Thus, the mere fact that a subsidy may offset the effect of a tariff binding or any other benefitaccruing under the GATT is not enough to amount to  nullification or impairment.  The upsetting of
the benefit must be systematic, as it is in this dispute.
4.486  Moreover, Mexico asserts, at paragraph 10.82 of the Panel report in Film , it is stated that a
“clear correlation” between the measure at issue and the adverse effect on the relevant competitive
relationship must be shown.  In order for this to occur, there must be “specific linkages” between the
subsidy and the nullification or impairment of the benefit in question. This will occur only in
exceptional circumstances.
4.487  Mexico argues that the facts of this dispute are exceptional. The benefits accruing to Mexico
under the GATT 1994 are being systematically upset by the subsidies and a clear correlation and
linkages exist. This is exemplified by the fact that the amount of the offsets equals the amount of theduties collected and the beneficiaries of the offsets are the same as the petitioners and supporters who
initiated the investigation that led to those duties.
(v) Reasonable expectations
4.488  Finally, the US argues that Mexico could have reasonably expected the Act on the basis that
compensation proposals had been suggested in the past.
4.489  Mexico is of the view that the evidence cited by the US supports Mexico’s position that it
could not have reasonably anticipated the introduction of the Act. In every case where such a measureWT/DS217/R
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has been proposed in the past, it has been adamantly opposed by the US administration and it has not
been passed into law. In fact, the US administra tion opposed the introduction of the Act. In this
context, Mexico could have assumed and did assume that any attempt to introduce a similar
legislative scheme would, once again, fail.
(d) Conclusion
4.490  For the foregoing reasons, Mexico believes that the US has failed to rebut the prima facie
case presented by Mexico with respect to its Article 5 claim.
11. Thailand
(a) Introduction
4.491  Thailand notes that the following arguments contained in its oral statement are
complementary and supplementary to the arguments made by other complaining parties.
(b) Rebuttal to the Legal Arguments Challenged by the United States
4.492  According to Thailand, it is crystal clear th at Members shall have sovereign rights to
appropriate lawfully assessed and collected duties within the purview of international law. However,
the United States has made an argument from paras. 18 to 35 which concludes that “this panel
proceeding is not the appropriate forum to address these issues ex aequo et bono.”
4.493  In Thailand's view, this argument has no role to play in this dispute because of the following
reasons:
- 1. Nothing is said in Thailand's request about requesting the Panel to make
any rulings on the basis of the notion of ex aequo et bono ;
- 2. The complaining parties merely request the Panel to make rulings and
recommendations that the “Continued Dumping and Subsidy Offset Act of
2000”(hereinafter referred to as “CDSOA”) is inconsistent with US
obligations under the WTO Agreement by clarifying the existing provisions
of the WTO Agreement and any other covered agreement in accordance with
customary rules of interpretation of public international law, as stipulated inArticle 3.2 of the DSU.
4.494  Thailand argues that the United States argues in bullet 2 of paragraph 33 of the first
submission, if read a contrario, that the legislation “may” violate WTO obligations. In fact,
Article XVI.4 of the WTO Agreement or the Marrakesh Agreement as well as Article 18.4 of the
Anti-dumping Agreement and Article 32.5 of the Subsidies and Countervailing Measures Agreement
(hereinafter referred to as “SCM”) clearly requires  Members to ensure the conformity of their laws,
regulations and administrative procedures with their obligations. In this light, the CDSOA may besubjected to interpretation and brought to dispute settlement mechanisms if its application is found to
be in violation of the WTO Agreement.  Moreover, the language used in Article 5 of the SCM that
“[n]o member should cause … adverse effects…” should be construed to mean that any action, be it
legislative or administrative, which “may” cause adverse effects to the interests of other Members
falls within the scope of Article 5 of the SCM.
4.495  In Thailand’s view, paragraph 37 of the US first submission implies, if not indicates, that the
CDSOA is somewhat a subsidy, but argues further that it may or may not be prohibited under theWT/DS217/R
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SCM. Thailand argues that this line of argument made by the United States should be dismissed as
contended by other complaining parties. More important than that, the US Customs Service in its
news release on 30 January 2002 states that “[t]his legislation, also known as the Byrd Amendment,
required US customs to disburse anti-dumping and countervailing (AD/CV) duties to domesticproducers injured by foreign dumping and subsidies.  The claimants have received more than
$200 million to date.”
4.496  Thailand is of the view that paragraphs 77 to 89 of the US first submission underscores the
nature of the CDSOA that it is not based upon the constituent elements of dumping or a subsidy. In
Thailand's view, domestic producers will be affected if there are importations of products which are
priced at prices lower than normal value. If so, the test for the constituent elements are satisfied.
4.497  Thailand asserts that the argument in paragraph 86 that any qualified applicant will be granted
an amount of the distributions which is not the recovery of damages is arguendo in absurdum  because
it goes without saying that when a domestic producer is “affected” , he or she is then considered as
having “adverse” effects referred to in Article 5 of the SCM.
4.498  According to Thailand, even though paragraphs 90 to 100 of the US first submission attempt
to convince the Panel that the CDSOA is not meant to become a specific action “against” dumping ora subsidy within the scope of Article 18 of the Anti-dumping Agreement and Article 32 of  the SCM ,
it is up to the Panel to rule, based on GATT/WTO jurisprudence, whether the term “against” has its
broad or narrow meaning, taking into account the object and purpose of such covered agreements, in
accordance with the general rule of interpretation under international law, and whether any action
attributable to discouragement of dumping or a subsidy is an action against dumping or a subsidy.
(c) Political consideration
4.499  Thailand fully shares the concern expressed by Indonesia that if this kind of legislation is
permitted it would not only set debate-provoking precedent, but also huge burdens for developing
countries to bear when their products are subject to both competition policy and other measures
imposed by the importing Member in question.
(d) Conclusion
4.500  Thailand submits that the arguments appearing in the US first submissions may be valid in
other cases. Yet, they have failed to respond to  many issues raised in the complaining parties’
submission.
D. 
FIRST ORAL STATEMENT OF THE UNITED STATES
(a) Introduction
4.501  The United States considers that at issue in  this case is a law entitled the “Continued
Dumping and Subsidy Offset Act of 2000” or, in short, the CDSOA.  The CDSOA is a government
payment programme.  Like all governments, the US federal government makes payments to
individuals or groups for all sorts of purposes such as health care, public welfare, agriculture, etc.
Other WTO Members, including the complaining pa rties, maintain similar programmes for their
nationals.
4.502  According to the United States, The CDSOA has nothing to do with the administration of the
anti-dumping and countervailing duty laws.  The CDSOA instructs the US Customs Service to
distribute funds in an amount not to exceed the duties collected pursuant to anti-dumping andWT/DS217/R
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countervailing duty orders to eligible domestic producers.  The amount of the distributions have
nothing to do with the injury to the domestic producer or the recovery of “damages” by the domestic
producer.  Rather, the amount depends upon the appli cant’s qualifying expenditures and whether other
applicants also had qualifying expenditures.
4.503  The United States argues that as a subsidy programme, one would expect that the issues in
this case would center on Article 3 or Article 5 of the SCM Agreement.  While the United States has
heard today general assertions of supposed harm th at CDSOA will cause to the complaining parties’
companies that compete with US producers, none of  the complaining parties have backed up their
allegations by pursuing an Article 5(c) claim.  In the view of the United States, this is tantamount to
an admission by the complaining parties that th ey cannot show the harm they complain of.
4.504  Except for Mexico, the complaining parties’ primary argument is that because the source of
the funds for the distributions under CDSOA are AD/CVD duties, the CDSOA is, on its face,
inconsistent with the Antidumping and SCM Agreements.  The reality is that, because money is
fungible, the only real connection between the f unds distributed under CDSOA and the orders is that
the duties collected serve to cap or limit the amount of the annual distributions.
4.505  According to the United States, there is simply no WTO obligation with respect to the uses to
which AD/CVD duties might be put, or to distinguish the use of these funds from any other source of
government revenue.  Other than considering whet her the CDSOA is an impermissible subsidy, a
panel proceeding is simply not the appropriate fo rum to address the complaining parties’ concern
about the use of duties as a source of funds for domestic expenditures.
(i) The CDSOA is not an actionable subsidy
4.506  In the view of the United States, it is elementary that the granting of a subsidy is not, in and of
itself, restricted under the SCM Agreement.  The Appellate Body recently recalled this point in its
report in United States – FSC .  To be actionable, as claimed by Mexico, the complaining party must
demonstrate that the subsidy is “specific” within the meaning of Article 2 of the SCM Agreement.
Mexico, however, has failed to show that the CDSOA is a specific subsidy.  There is no question that
CDSOA is not de jure specific under Article 2.1(a) as its text does not expressly limit access to certain
enterprises, industries, or groups.  Mexico does not even claim de facto  specificity.
4.507  The United States argues that even if Mexico passed the specificity hurdle, Mexico has failed
to establish that the CDSOA has caused adverse effects to its interests as required by Article 5 of the
SCM Agreement.  Instead, Mexico claims that the CDSOA as such causes per se adverse effects in
the form of nullification or impairment of benefits under Article 5(b).  Mexico, however, has not
established that there is a presumption in Article 5(b) that a subsidy that violates another WTOprovision is an actionable subsidy without showing adverse effects.  Regardless, the CDSOA is not
inconsistent with any other WTO provision.
4.508  The United States is of the opinion that Mexico does not satisfy the following requirements to
establish a claim of non-violation nullification or im pairment either:  1) the application of a measure;
2) a benefit accruing under the relevant agreement; and 3) the nullification or impairment of thebenefit as a result of the application of the measure that was not reasonably anticipated.  According to
the United States, Mexico has failed to establish the first and third elements at least.
4.509  First, the United States argues, Mexico’s claim is insufficient on its face as Mexico does not
challenge the application of the CDSOA.  Sec ond, Mexico has failed to demonstrate that the
competitive relationship between any US products and Mexican imports has been upset by a subsidy.
Mexico has presented no evidence that US producers of products that compete with Mexican productsWT/DS217/R
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have actually received a distribution under the CDSOA, let alone a “clear correlation” between the
distributions and any disruption of a competitive relationship.   Indeed, Mexico cannot present such
evidence as it has challenged the CDSOA on its face, not the actual distributions under the CDSOA.
Finally, the United States has shown that Mexico could have reasonably anticipated that AD/CVDduties would be distributed to the domestic industry  given proposed legislation in the US Congress in
1988, 1990, 1991, and 1994.
4.510  According to the United States, Mexico’s argume nt that CDSOA will per se nullify or impair
benefits under GATT Articles II and VI flies in the face of the notion that a non-violation claim is an
exceptional remedy, renders the causation requirement meaningless, and automatically converts any
specific domestic subsidy programme with any connection to a product on which there is a tariff
concession into a non-violation nullification or impairment of benefit.  In sum, Mexico has failed tosustain its burden of demonstrating that the CDSOA is a “specific” subsidy that is causing adverse
effects within the meaning of Articles 2 and 5 of the SCM Agreement.
(ii) CDSOA is not specific action against dumping or a subsidy
4.511  The United States submits that the CDSOA cannot be inconsistent with US obligations under
the Antidumping and SCM Agreements, when read  with Article VI of GATT 1994, because the
statute is not within the scope of those agreements.  The CDSOA does not impose any type of
measure on imports or importers.  The CDSOA is a statute authorizing government payments.   The
United States notes that the it is not challenging the conclusion of the Appellate Body in the  US -
1916 Act dispute that duties, provisional measures and undertakings are the exclusive remedies for
dumping. Thus, the United States is not contradicting the US statements in the Norwegian - Salmon
dispute cited by some of the complaining parties today.  The question is whether the CDSOA is a
specific action against dumping and a subsidy.
4.512  The United States is of the view that the compla ining parties’ entire argument in this regard is
built upon the Appellate Body’s reasoning in United States – Antidumping Act of 1916 .  The
United States notes that most, if not all, of the complaining parties offer only a cursory analysis ofwhether the reasoning of the Appellate Body in US –  1916 Act  is applicable to the SCM Agreement.
For the complaining parties to prevail on their claims under GATT Article VI:3 and the SCM
Agreement, however, this Panel must find that it does.  For the reasons explained in footnote 64 of the
US' written submission, it does not.  Even assuming arguendo  that it does, the CDSOA is not
inconsistent with the SCM Agreement for the same  reason that it is not inconsistent with the
Antidumping Agreement – it does not constitute a specific action against dumping or a subsidy.
4.513  In US – 1916 Act , the Appellate Body concluded that Article 18.1 of the Antidumping
Agreement applies to actions based upon the constituent elements of dumping.  The constituent
elements of dumping are:  (1) products imported and cleared through customs, which are (2) priced
lower than their normal value.
4.514  In the opinion of the United States, the CDS OA, however, simply fails to satisfy the test
articulated in the 1916 Act.  Without question, the CDSOA distributions are not based upon theconstituent elements of dumping or a subsidy.  As explained in the US' written submission, the
distributions are based upon the applicant’s qualification as an “affected domestic producer” who has
incurred “qualifying expenditures.”  The Appellate Body’s conclusion that the 1916 Act was a
specific action against dumping was very clearly based upon the fact that the “constituent elements of
dumping were built into the essential elements of civil and criminal liability under the 1916 Act.”
4.515  The United States argues that the statute at is sue in this dispute, the CDSOA,  is completely
different from the 1916 Act.  The CDSOA is a government payment programme based upon theWT/DS217/R
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definition of “affected domestic producer” and “qualifying expenditures.”  The Act has nothing to do
with measuring the extent to which a US producer has been injured or “damaged” by dumping or
subsidization of imports.  In contrast, the 1916 Act is a statute imposing criminal and civil liability
upon importers for practices that specifically include the constituent elements of dumping.
4.516  The US is perplexed by the complaining partie s’ repeated statements that disbursements
under the CDSOA require the existence of a AD/CVD order.  The complaining parties are simply
restating the obvious.  There is no question that this  is the case - of course AD/CVD duties will not be
collected without an order and presumably the complaining parties would not want it any other way.
Thus, the action against dumping or a subsidy has already been taken.
4.517  According to the United States, the question in this case is whether the Antidumping
Agreement or the SCM Agreement limit what a government can do with these revenues oncecollected.  Nothing in these agreements speaks to this, nor is there any ban on spending this revenue.
Spending this money cannot per se  be action against dumping or a subsidy - otherwise duties once
collected could never be spent.  The complaining parties’ reliance on the existence of AD/CVD orders
is thus misplaced.
4.518  The United States asserts that in addition to not being based upon the constituent elements of
dumping or a subsidy, the  CDSOA is not “against” dumping or subsidies.  This Panel must consider
the proper interpretation of the term “against” as a matter of first impression.  The ordinary meaning
of the word “against” suggests that the specific action must be in hostile opposition to and in contact
with dumping or a subsidy.  Here, the CDSOA imposes no additional liability or burden on imported
goods or importers and, therefore, cannot be cons idered an action “against” dumping or a subsidy.
4.519  The United States notes that some of the comp laining parties have criticized the use of the
New Shorter Oxford English Dictionary’s definition of the term “against.”  They take issue with the
United States’ position that to be considered “against” dumping or a subsidy, the action must impose
or apply a burden or liability on the importer or imported good.  They are amused by the example of
the government flags flying at half-mast.  Yet,  a ccording to the United States, the reality is that under
their test, which is action taken in response to dumping, the fictitious flag law would constitute a
specific action against dumping and a subsidy.
4.520  According to the United States, the sole basis of   the complaining parties’ argument that the
CDSOA is “against” dumping and subsidies is the supposed intent or purpose of the law.  Many
complaining parties refer to statements by various members of the US Congress and the title of the
law itself.   However, this Panel must look to the actual operation of the law.  As emphasized by the
panel in the 1916 Act dispute, the purpose of a measure is not relevant to determining whether it fallswithin the scope of GATT Article VI and the Antidumping Agreement.  A panel must look at what
the measure actually does.  The complaining partie s rely heavily on the reasoning in 1916 Act.  They
should not be permitted to do so in a self-serving selective manner.
4.521  The United States posits that, as explained in paragraphs 101-111 of its written submission, in
the event that the Panel concludes that the CDSOA is an action against dumping or a subsidy,footnotes 24 and 56 to the Antidumping and SCM Agreements, respectively, operate to allow the
CDSOA as an “action” otherwise permitted.  In sum, the complaining parties have failed to establish
that the CDSOA is even within the scope of, let alone violates, Articles 1 and 18 of the Antidumping
Agreement; Articles 4.10, 7.9, 10, and 32 of the SCM Agreement; or Article VI:2 and 3 of the GATT
1994.WT/DS217/R
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(iii) The CDSOA is not inconsistent with any obli gations related to standing, undertakings or
GATT Article X:3
4.522  In the view of the United States, the complain ing parties choose to ignore the fact that the
standing provisions of the Antidumping and SC M Agreements do not include any requirement that
the investigating authorities examine a statement of support to determine the subjective motivation or
reason  that the domestic industry supported the initiation of an anti-dumping or countervailing duty
investigation.  Articles 5.4 and 11.4 simply require authorities to follow certain quantitative
benchmarks in determining whether an investigation sh ould be initiated.  There is no allegation in this
dispute that the US investigating authority is failing to follow those numerical benchmarks.
4.523  Likewise, the United States argues,  the under taking provisions of the Antidumping and SCM
Agreements do not require investigating authorities to accept a proposed undertaking in the first place.Nor do those provisions limit the types of reasons that may cause the administering authority to
decline a proposed undertaking.  The decision to accept or reject a proposed undertaking is within the
complete discretion of the investigating authoritie s.  Thus, even if the CDSOA could be viewed as
distorting the consideration of undertakings, the decision to reject a proposed undertaking cannot form
the basis of a violation of Articles 8 and 18.
4.524  In any event, the United States asserts that, as explained in paragraphs 123-125 of its written
submission, the complaining parties have offered no empirical support for their contention that the
CDSOA has a distorting effect on standing determinations and the consideration of undertakings.  The
complaining parties’ allegations are based on nothing more than mere speculation.
4.525  The United States argues that with regard to GATT Article X:3, the complaining parties have
offered no arguments or evidence concerning the ac tual administration of the CDSOA, which is the
measure at issue in this dispute.  Consistent with  the plain language of Article X:3(a), various panel
and Appellate Body reports have concluded that Article X:3(a) only addresses the administration of
national laws.  Here, the complaining parties do not even argue that the CDSOA is being administered
in an unreasonable, impartial or non-uniform manner.  Nor did they identify the provisions of US law
relating to standing determinations and price undertakings as measures in their panel requests.  Thus,
even if it were concluded that the CDSOA does somehow affect the administration of  US laws
relating to standing and price undertakings, this could not conceivably form the basis of an
Article X:3(a) finding against the CDSOA, which is the only measure at issue in this dispute.
(b) Conclusion
4.526  In closing, the United States submits that there cannot be a breach of an obligation that does
not exist – and such an obligation is not created by virtue of the number of complaining parties.  TheCDSOA simply distributes government revenue.  Contrary to Mexico’s contention, the CDSOA does
not meet the requirements of an actionable subsidy under Article 5(b).  Unlike the 1916 Act, the
CDSOA imposes no liability or burden on imported goods or importers.  Furthermore, it is not based
upon the constituent elements of dumping or a subsidy.  In other words, it does not address dumping
or subsidies as such .  Accordingly, it is not a “specific action against” dumping or subsidies.
Likewise, the CDSOA has nothing to do with standi ng determinations or the consideration of price
undertakings.  As a legal matter, the complaining pa rties have not identified any inconsistency with
the obligations contained in the standing and undertaking provisions.  As a factual matter, the
complaining parties would have this Panel engage in sheer speculation.WT/DS217/R
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E. ANSWERS OF COMPLAINANTS TO QUESTIONS FROM THE PANEL
1. Australia
(a) Questions to complaining parties
1. Please comment on para. 91 of the US firs t written submission.  Do you agree that "it is
clearly possible for an action to be 'in response to' dumping or a subsidy but not be
'against' dumping or a subsidy"?  Please ex plain, taking into account the Appellate
Body's finding that "'specific action agains t dumping' … is action that is taken in
response to situations presenting the cons tituent elements of 'dumping'" (1916 Act,
para. 122).  Does the Appellate Body's finding suggest that "specific action against
dumping" is necessarily a subset of action "in response to" dumping?  Please explain.
4.527  Australia considers that the statement by the United States is unsustainable95:
• it ignores that the Appellate Body’s finding on the meaning of the phrase ‘specific
action against dumping’ gave meaning to the word ‘against’, and did so in a way that
encompasses other ordinary meanings of the word in context;
• it ignores also that, consistent with the requirement of Article 3.2 of the DSU, the
Appellate Body’s finding on the meaning of ‘specific action against dumping’ gave
meaning to the phrase, as well as the word ‘against’, in their context and in light of
the object and purpose of the broader framework of rules governing the imposition of
anti-dumping and countervailing measures  provided by Article VI of GATT 1994 as
interpreted by the Anti-Dumping and SCM Agreements in accordance with the
customary rules of interpretation of public international law.  (See also reply toQuestion 35 below);
• it is premised on a misquotation of the Appellate Body finding in US – 1916 AD Act .
The US statement at issue is preceded by numerous references to the Appellate Bodyhaving said that ‘specific action against dumping’ is ‘action that is taken in response
to the constituent elements of dumping’.
96  In fact, the Appellate Body said that
‘specific action against dumping’ is ‘action that is taken in response to situations
presenting the constituent elements of dumping’.97  The two statements are not
equivalent;
• it is based on selective quotations of the meaning of ‘against’.98  However, the word
‘against’ has other, equally valid, ordinary meanings, including ‘in competition with’,
‘to the disadvantage of’, ‘in resistance to’ and ‘as protection from’99;
• it presupposes a meaning of ‘dumping’ (and ‘a subsidy’) that has no basis in the
relevant texts.100  Article 18.1 proscribes ‘specific action against dumping of exports
from another Member’ not in accordance with GATT 1994.  It does not proscribe
                                                     
95 See also Second Submission of Australia, paragraphs 12-21.
96 See, for example, First Submission of the United States, paragraphs 81, 84, 86, 87 and 89.
97 US – 1916 AD Act , AB Report, paragraph 122.
98 First Submission of the United States, paragraph 92.
99 The New Shorter Oxford English Dictionary , 1993, pp.38-39, (L. Brown ed).
100 See, for example, First Submission of United States, paragraph 92.WT/DS217/R
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specific action ‘against dumped exports’ or specific action ‘against the importers of
dumped exports’ that is not in accordance with the GATT 1994.
4.528  It follows that Australia does not agree that the Appellate Body’s finding suggests that
‘specific action against dumping’ is necessarily a subset of action ‘in response to’ dumping.  In
Australia’s view, the Appellate Body’s findin g equated the meaning of the two expressions.
2. Please explain exactly how you see that th e "constituent elements of dumping" have
been incorporated into the CDSOA.
4.529  For offset payments to be made pursuant to the Act:
- a domestic producer must have supported an application for an anti-dumping
(or countervailing) duty investigation;  and
- there must have been a finding of dumping (or subsidisation), as well as
injury and a causal link, for an anti-dumping (or countervailing) duty order to
have been issued;101  and
- a domestic producer must have incurred qualifying expenditure after the issue
of the anti-dumping duty finding or order (or countervailing duty order).
4.530  In other words, the existence of a situation presenting the ‘constituent elements of dumping’
(or a subsidy) is integral to a domestic producer’s potential entitlement under the Act.  Contrary to US
assertions,102 Australia has not argued that the offset payments under the Act constitute ‘specific
action against dumping/a subsidy’ because they are paid directly from anti-dumping or countervailingduties:  offset payments under the Act are ‘specific action against dumping/a subsidy’ because they
constitute action that may be taken only when the constituent elements of dumping or a subsidy are
present.
3. In your view, would it be inconsistent with Article 18.1 of the AD Agreement and
Article 32.1 of the SCM Agreement for a Member  to provide subsidies in response to a
finding of dumping or subsidization, where that subsidization was in lieu of anti-
dumping or countervailing measures?  If not, please explain in light of your view that
these provisions prohibit any action taken in response to situations presenting the
constituent elements of dumping.
4.531  To the extent that entitlement to the subsidies as described is conditional on the existence of
situations presenting the constituent elements of dumping of subsidisation, such subsidies would beinconsistent with Articles 18.1 and 32.1.
4. Assume that a Member (which has no legal framework for the conduct of anti-dumping/
countervail investigations or imposition of anti-dumping countervailing measures)
implements a domestic subsidy programme with the explicit purpose and design of
                                                     
101 As set out in paragraphs 32-41 of the First Submission of Australia, an anti-dumping duty order or
finding under the Antidumping Act of 1921 within the meaning of the Act are the administrative instruments bywhich the US has formally determined that there exists a situation presenting the constituent elements ofdumping.  (Similarly, a countervailing duty order is the administrative instrument by which the US has formallydetermined that there exists a situation presenting the constituent elements of a subsidy.)
102 See, for example, First Submission of the US, paragraph 19.WT/DS217/R
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offsetting the injurious effects of dump ed or subsidized imports.  Would that
programme constitute a "specific action against dumping" (or subsidy)?
If not, please explain, and provide a reaso ned explanation as to how Article 18.1 of the
AD Agreement (or Article 32.1 of the SCM Agreem ent) can be interpreted to distinguish
between this hypothetical subsid y programme and the CDSOA regime .
4.532  It is not possible to provide a clear answer to this hypothetical question.  The key issue in
determining whether such a measure would be ‘specific action against dumping/a subsidy’ within the
meaning of Articles 18.1 and 32.1 would be whether entitlement is conditional on the existence of
situations presenting the constituent elements of dumping or subsidisation, in other words, whetherthe presence of dumping or subsidisation is a necessary condition.
5. Would a victim compensation scheme (funded  from central treasury resources, rather
than penalties imposed on convicted criminals) constitute a "specific action against"
crime?  Please explain.  Would your answer be any different if the scheme were funded
from penalties imposed on convicted criminals?  Why?
4.533  With respect, Australia questions the relevance of  this scenario to the matter at issue in this
dispute.
6. Assume that a Member enacts legisl ation mandating the payment of $5,000 to
petitioners to compensate them for the cost of making the petition and participating inthe anti-dumping investigation.  Would that payment constitute a "specific action
against dumping of exports" within the meaning of Article 18.1 of the AD Agreement?
Why, or why not?
4.534  See reply to Question 4.
7. Assume that a Member enacts legislatio n requiring that any anti-dumping duties
collected be paid to state retirement homes.   Would such payments constitute "specific
action against dumping of exports" within the meaning of Article 18.1 of the AD
Agreement?  Why, or why not?
4.535  See reply to Question 4.
8. Assume that the US restricted offset payments under the CDSOA to cases where the US
found the existence of dumping, injury and causation but did not impose an anti-
dumping order, and that such payments equalled the amount of anti-dumping duty that
would have been collected had an anti-dumping order been put in place.  Would such
payments constitute "specific action agains t dumping of exports" within the meaning of
Article 18.1 of the AD Agreement, or "action under other relevant provisions ofGATT 1994" within the meaning of note 24?  Why, or why not?
4.536  See reply to Question 4.
9. Would the CDSOA violate AD Article 5.4 if of fset payments were made to all domestic
producers of the product under investigation, and not merely those domestic producerssupporting the petition?  Please explain.
4.537  Yes, because offset payments as described would still make it easier for the needed levels of
industry support to be reached.  The offset payments as described would continue to provide anWT/DS217/R
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incentive to domestic producers to support a petition until such time as the standing thresholds for
initiation of an investigation have been met, thereby distorting, or threatening to distort, the
requirement that the application be made ‘by or on behalf of the domestic industry’.
10. Is a Member not acting in good faith when it provides incentives for the use of a WTO-
consistent remedy?  Please explain.
4.538  While it may be possible in some circumstances for a Member to act in good faith while
providing incentives for the use of a WTO-consistent remedy, the question is incorrectly premised in
the context of the present dispute.  A remedy cannot be WTO-consistent if a Member takes action that
distorts the application of one of the necessary conditions for the availability of that remedy:  in this
case, that an application be made ‘by or on behalf of the domestic industry’.
11. Does support for an anti-dumping petition have to be genuine (i.e., based on the
actuality or expectation of injury) for the purposes of Article 5.4 of the AD Agreement?
If so, how could an investigating authority ensure that support is genuine in all cases?
4.539  The negotiating history of Article 5.4 confirms that its intent was to ensure that an application
was being made ‘by or on behalf of the domestic industry’.103  Moreover, Article 5.4, read in the
context of Article 5 as a whole, provides that support for an anti-dumping investigation be expressed
by the domestic industry on the basis of evidence of dumping, injury and a causal link between the
dumping and injury.  (In that context, Australia notes that the premise of the question, “i.e., based on
the actuality or expectation of injury”, is misleading.)  A variety of factors may of course influence adomestic producer’s decision whether or not to support a petition.  The basis of Australia’s claim in
this dispute, however, is that a Member government may not take action that distorts that decision in
ways not permitted by GATT Article VI and the Anti-Dumping and SCM Agreements.
4.540  Absent evidence to the contrary, an investig ating authority must presume that the views
expressed by domestic producers are genuine.  If, however, an investigating authority has evidence toindicate that the expression of views by domestic producers may not be genuine, the investigating
authority may not ignore that evidence.  By its very existence and nature, the financial incentive
provided by the Act to ‘affected domestic producers’ must be presumed to affect, at least to some
degree, the genuine expression of views by domestic producers in ways not contemplated by the Anti-
Dumping Agreement.  In such circumstances, the investigating authority must either suspend or
nullify the examination of domestic industry views pending further investigation of the possible effect
of the extraneous influence or, if the investigatin g authority is not empowered to take such action, to
bring the matter to the attention of those authorities who are so empowered.
12. Does a domestic producer only "support" an anti-dumping application for the purpose
of Article 5.4 if its support is motivated solely by its desire for the imposition of an anti-
dumping measure?  Please explain.
4.541  See reply to question 11.
13. Is it your view that there is no "support" (within the meaning of Article 5.4) for an
application if such support is motivated - in part, at least - by a domestic producer's
desire to be eligible for CDSOA offset payments?
4.542  See reply to question 11.
                                                     
103 See, for example, First Submission of Japan and Chile, paragraphs 4.51-4.55.WT/DS217/R
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14. Would a Member violate Article 8.3 of the AD Agreement if it decided, as a matter of
general policy, never to accept price undertakings?  Please explain.
4.543  Australia is not pursuing a claim concerning voluntary undertakings under Article 8.1 of the
Anti-Dumping Agreement.
(b) Question to Canada
30. At para. 44 of its oral submission, Canada states that the Offset Act is a "specific action
against dumping" because inter alia "payme nts are made only to those producers
'affected' by dumping".  Does Canada consider that the Offset Act would be a "specific
action against dumping" if payments were made to all domestic producers, and not only
those that had supported the petition?  Please explain.
4.544  Even if eligibility for the offset payments were extended to all domestic producers, including
those who did not support an investigation, they would still be a ‘specific action against dumping’ (or
‘a subsidy’) because the payment would still be conditional on the existence of a finding of dumping
(or subsidisation).
(c) Questions to all parties
32. With reference to footnote 24 of the AD Agreement and footnote 56 to the SCM
Agreement, to what extent can subsidization be considered an action "under"
Article XVI of GATT 1994?
4.545  Footnotes 24 and 56 clarify the scope of Articles  18.1 and 32.1:  they do not create exceptions
to the scope of those provisions.  In the same way that a subsidy may be consistent with GATT
Article XVI but inconsistent with, for example, GATT Article III:2, for so long as the Act constitutes
‘specific action against dumping/a subsidy’ within the meaning of Articles 18.1 and 32.1, that is,
action that may be taken only when the constituent elements of dumping are present, it will beinconsistent with those provisions.
4.546  Moreover, GATT Article XVI is one of the provisions of GATT 1994 interpreted by the SCM
Agreement, in particular in Part III, within the meaning of Article 32.1 of the SCM Agreement.  It
cannot also be an ‘other relevant provision of GAT T 1994’ within the meaning of footnote 56 to the
SCM Agreement.
104
33. Please provide an example of a "n on-specific" action against dumping.
4.547  Australia considers it is unclear what the Panel means by ‘non-specific’ action in the context
of the present dispute.  As indicated in response to Question 1 above, the Appellate Body has clarified
the meaning of the entire phrase ‘specific action against dumping’.  If the Panel means action that
may be taken in a situation where there may or may not be dumping or subsidisation, then such action
could be a tariff or safeguard action, subject to that action being consistent with other relevant WTOprovisions.
34. Please give examples of the sort of "other reasons, including reasons of general policy"
that Members might invoke under Article 8.3 of the AD Agreement.
                                                     
104 See also Second Submission of Australia, paragraphs 22-26.WT/DS217/R
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4.548  Australia is not pursuing a claim concerning voluntary undertakings under Article 8.1 of the
Anti-Dumping Agreement.
35. Does the violation of the international law pr inciple of good faith necessarily constitute a
violation of the WTO Agreement?  Does either the AD Agreement or the WTOAgreement impose an independent obligation on Members to act in good faith?
4.549  Pursuant to Article 3.2 of the DSU,
105 the provisions of the covered agreements are to be
clarified in accordance with customary rules of interpretation of public international law, which the
Appellate Body has found are expressed in Articles 31 and 32 of the Vienna Convention on the Law of
Treaties106.  Article 31.1 provides:
A treaty shall be interpreted in good faith in accordance with the ordinary meaning to
be given to the terms of the treaty in their context and in the light of its object and
purpose.
4.550  Accordingly, Article 3.2 of the DSU requires that the provisions of the covered agreements,
including the Anti-Dumping and the SCM Agreements, are to be interpreted in good faith.
4.551  Moreover, ‘the principle of good faith, which is, at once, a general principle of law and a
principle of general international law, … informs the provisions of the Anti-Dumping Agreement, as
well as the other covered agreements’.107
4.552  Thus, while there is no specific provision dealin g with the principle of good faith, the covered
agreements must be interpreted by Members and in the dispute settlement system in accordance with
that principle.
36. Is there anything in the panel or Appellate Body reports in the 1916 Act case to suggest
that either the panel or the Appellate Body, when addressing the meaning of Article 18.1
of the AD Agreement, had in mind the pure subsidy hypothetical set forth in question 3
above?
4.553  Australia notes that the Appellate Body, at pa ragraph 81 of its Report, expressly stated that
‘specific action against dumping could take a wide variety of forms’.  Australia notes, too, that the
Appellate Body continued to be mindful of the possible variety of possible actions in its subsequent
examination of the scope of GATT Article VI at paragraphs 109-126.  In particular, footnote 66 to
paragraph 122 would seem to indicate that the Appellate Body was concerned that its finding in
relation to the meaning of the phrase “specific action against dumping” might in fact be too limiting.
4.554  However, Australia is not in a position to speculate on what other forms the Appellate Body
may have actually considered that specific action against dumping could take when making its
finding.
                                                     
105 Article 17.6(ii) of the Anti-Dumping Agreement imposes a similar obligation in respect of that
Agreement.
106 Japan – Taxes on Alcoholic Beverages , Report of the Appellate Body, WT/DS8/AB/R,
WT/DS10/AB/R, WT/DS11/AB/R, page 10.
107 United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan , Report
of the Appellate Body, WT/DS184/AB/R, paragraph 101.WT/DS217/R
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2. Brazil
(a) Questions to complaining parties
1. Please comment on para. 91 of the US firs t written submission.  Do you agree that "it is
clearly possible for an action to be 'in response to' dumping or a subsidy but not be'against' dumping or a subsidy"?  Please ex plain, taking into account the Appellate
Body's finding that "'specific action agains t dumping' … is action that is taken in
response to situations presenting the cons tituent elements of 'dumping'" (1916 Act,
para. 122).  Does the Appellate Body's finding suggest that "specific action against
dumping" is necessarily a subset of action "in response to" dumping?  Please explain.
4.555  A “response” is defined as an “answer or reply” in the New Shorter Oxford English
Dictionary .  As an alternative, it defines response as “an action or feeling caused by a stimulus or
influence; a reaction.”  There is a link between the stimulus (i.e. the question or the action) and the
response (i.e. the reply or reaction).  The two are necessarily related.
4.556  The Appellate Body in paragraph 122 of US -  1916 Act describes “specific action against
dumping” as being “action taken in response to situations presenting the constituent elements of
dumping.”  There may, of course, be actions taken in “response” to dumping which are notnecessarily “against” dumping.  As such, “specific action against dumping” is a subset of actions
which may be taken in response to the constituent elements of dumping.  Indeed, “specific action
against dumping” read in the context of Article VI:2 of the GATT 1994 means action “to offset or
prevent dumping.”  An action “in response to the constituent elements of dumping” is an action which
is in reaction to dumping, but not necessarily an action which is “against” dumping.  For example, theflying of flags at half-mast after the issuance of anti-dumping duty order is arguably “in response” to
dumping.  It is a symbolic response.  It is not, however, an action “against” dumping because it
neither offsets nor prevents the dumping.
4.557  Brazil would also distinguish between actions “in response” to dumping and actions which
are “contingent” on dumping.  Here Brazil would refer to the US example of giving anti-dumpingduty revenues to charity.  While providing revenues to charity is “contingent” on the collection of
anti-dumping duties because these are the source of revenues for the charitable giving, this action is
not “in response” to dumping.  Providing the revenues to charity may be “in response” to a high
poverty level in the country or to lack of funding from other sources, but it is not “in response” to the
constituent elements of dumping.  Brazil would concede that this is nothing more than a paymentprogramme which is contingent on the collection of anti-dumping duties.
4.558  Unlike the two examples provided by the United States – flying the flag at half-mast and
giving dumping revenues to charity – the Byrd Amendment is clearly not only “in response” to the
constituent elements of dumping, it is “against” dumping in that it seeks to “offset or prevent
dumping” which are precisely the objectives of anti-dumping measures specified in Article VI:2 of
the GATT 1994.
2. Please explain exactly how you see that th e "constituent elements of dumping" have
been incorporated into the CDSOA.
4.559  The text of the CDSOA itself indicates the linkage between the statute and the constituent
elements of dumping when it states: “duties assessed pursuant to a countervailing duty order, an anti-
dumping duty order, or a finding under the Antidumpi ng Act of 1921 shall be distributed on an annual
basis…to the affected domestic producers for qualifying expenditures.”  The events which trigger
payments under the CDSOA are identical to the events that trigger anti-dumping measures.  As such,WT/DS217/R
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there is no question that the constituent are incorpor ated in the CDSOA.  This is evident from the
following:
- CDSOA payments are directly linked to a determination of dumping and
injury and the subsequent imposition of anti-dumping measures.  Similarly,
they are also directly linked to determination of subsidization and injury.
Thus, without the existence of the constituent elements of dumping (or
subsidization) and injury, the statute provides for no action by the US
Government.
- Payments under the CDSOA are further linked to the determination of
dumping (or subsidization) and injury because they are provided only tothose parties that have requested the imposition of anti-dumping (or
countervailing) measures and have been determined to have been injured by
the dumping (or subsidization).
- Payments under the CDSOA are further linked to the determination of
dumping (or subsidization) and injury because the payments are directed at“qualifying expenses” related to the product which has been found to be
dumped (or subsidized).
4.560  There is a total overlap between the CDSOA and the constituent elements of dumping (or
subsidization).  This includes not only the criteria under which payments become available, but also
eligibility in terms of parties and products.  If the CDSOA does not represent a situation where theconstituent elements of dumping are present, it is difficult to conceive of a situation where they would
be present other than in legislation implementing the terms of the relevant agreements.
4.561  Brazil cautions against confusing the “constituent elements of dumping” with the questions of
whether the subsequent action is “specific action” and is “in response” to or “against” dumping (or
subsidization).  The constituent elements of dumping (or subsidization) are present whenever anaction is based on determinations of dumping (or subsidization) and injury, as is the case with the
CDSOA.  It then remains to be determined whether the action is “specific” and whether it is “against”
dumping.  All three criteria are met in the case of the CDSOA.
3. In your view, would it be inconsistent with Article 18.1 of the AD Agreement and
Article 32.1 of the SCM Agreement  for a Member to provide subsidies in response to a
finding of dumping or subsidization, where that subsidization was in lieu of  anti-
dumping or countervailing measures?  If not, please explain in light of your view thatthese provisions prohibit any action taken in response to situations presenting the
constituent elements of dumping.
4.562  Articles 18.1 and 32.1 are not equivocal.  They clearly specify “no action” except action “in
accordance” with the GATT 1994 and the respective agreements may be taken against dumping andsubsidization.  The GATT 1994 and the respective agreements do not authorize any actions in lieu of
the measures specified in those agreement.  These Articles do not state that, should a member decide
not to impose measures under these agreements, it may impose other measures in lieu of these
measures.  Under Articles 18.1 and 32.1, the question then is a very restricted question: are subsidies
provided in lieu of anti-dumping or countervailing measures specific actions against dumping orsubsidization.  If they are, then these subsidies are inconsistent with the terms of the GATT 1994, the
AD Agreement and the SCM Agreement.WT/DS217/R
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4.563  Article VI:2 of the GATT 1994 informs the meaning of “against” by use of the words “offset
or prevent.”  Thus, measures that offset or prev ent dumping are measures against dumping.  Subsidies
are clearly measures which offset dumping.  In essence, all or a portion of the price advantage gained
by the exporter as a result of the dumping is offset by the subsidy to the industry in the importingcountry.  Rather than forcing the import price upward as is the mechanism of anti-dumping duties to
offset or prevent dumping, subsidizing the domestic industry simply provides the domestic industry
with the ability to offset the dumping by lowe ring its own price and, thereby, becoming more
competitive with the imported dumped (or subsid ized) product. As such, subsidies provided in
situations where the constituent elements of dumping are present (i.e. where there is dumping and
injury) are measures against dumping.
4. Assume that a Member (which has no legal framework for the conduct of anti-
dumping/countervail investigations or imposition of anti-dumping countervailing
measures) implements a domestic subsidy programme with the explicit purpose and
design of offsetting the injurious effects of dumped or subsidized imports.  Would that
programme constitute a “specific action against dumping” (or subsidy)?
If not, please explain, and provide a reaso ned explanation as to how Article 18.1 of the
AD Agreement (or Article 32.1 of the SCM Agreem ent) can be interpreted to distinguish
between this hypothetical subsid y programme and the CDSOA regime .
4.564  Yes.  This situation simply compounds the inconsistencies of the action taken.  In addition to
taking specific action against dumping or subsidization not provided in the GATT 1994, the AD
Agreement or the SCM Agreement, the Member has not followed the procedures for determining
dumping, subsidization, and injury required under the relevant Articles of the agreements.
Consequently, the Member is not only taking action against dumping or subsidization not in
accordance with the action permitted by the agreements, it is also taking action inconsistent with theprocedural and substantive rules of the agreements.  For example, the action being taken is not in
accordance with the required determinations of injury under Article 2 of the AD Agreement and
Article 15 of the SCM Agreement.
4.565  Brazil notes that the fact that a Member has no legal framework for addressing dumping and
subsidization of imports does not alter that Member’s obligations under the AD and SCM Agreements
or under Article XVI of the Marrakesh Agreement.   Simply put, a Member cannot use the absence of
a legal framework for anti-dumping and countervailing measures as an escape from the disciplines ofthe agreements.
5. Would a victim compensation scheme (funded  from central treasury resources, rather
than penalties imposed on convicted crimina ls) constitute a "specific action against"
crime?  Please explain.  Would your answer be any different if the scheme were funded
from penalties imposed on convicted criminals?  Why?
4.566  This question cannot be answered in the abstract.  For example, murder is a very different
situation than, say, insurance fraud or accountin g fraud.  Brazil would note, however, that the
remedies at issue in the 1916 Act  proceeding potentially involved both criminal fines and damages to
the victims.  Both seek to “prevent” a violation.  The latter, damages, also seeks to offset the effects ofthe violation.
6. Assume that a Member enacts legisl ation mandating the payment of $5,000 to
petitioners to compensate them for the cost of making the petition and participating in
the anti-dumping investigation.  Would that payment constitute a "specific actionWT/DS217/R
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against dumping of exports" within the meaning of Article 18.1 of the AD Agreement?
Why, or why not?
4.567  While such legislation might be challenged on other grounds, it is not apparent that it would
constitute specific action against dumping.  Specifically, the payment is not dependent on establishing
the constituent elements of dumping.
7. Assume that a Member enacts legislatio n requiring that any anti-dumping duties
collected be paid to state retirement homes.   Would such payments constitute "specific
action against dumping of exports" within the meaning of Article 18.1 of the AD
Agreement?  Why, or why not?
4.568  No.  As explained in response to question 1, such a payment is neither in response to or
against dumping.  Rather, such a payment is si mply contingent on the collection of anti-dumping
duties, since these duties are established as the source of the funding.
8. Assume that the US restricted offset payments under the CDSOA to cases where the US
found the existence of dumping, injury and causation but did not impose an anti-dumping order, and that such payments equalled the amount of anti-dumping duty that
would have been collected had an anti-dumping order been put in place.  Would such
payments constitute "specific action agains t dumping of exports" within the meaning of
Article 18.1 of the AD Agreement, or "action under other relevant provisions of GATT
1994" within the meaning of note 24?  Why, or why not?
4.569  It is not clear how this situation is different from the in lieu of  situation in question 3.
Members cannot take specific action either in lieu of or in addition to the measures provided in the
relevant agreements.  This would appear to be a measure against dumping in lieu of those measures
set forth in the AD Agreement.
9. Would the CDSOA violate AD Article 5.4 if of fset payments were made to all domestic
producers of the product under investigation, and not merely those domestic producers
supporting the petition?  Please explain.
4.570  Yes.  It would still be impossible to determine the extent to which support of the petition was
motivated by the prospect of anti-dumping measures rather than the prospect of receiving offset
payments.  The prospect of receiving offset payments would still be a factor, perhaps the only factor,influencing supporters of the petition.
10. Is a Member not acting in good faith when it provides incentives for the use of a WTO-
consistent remedy?  Please explain.
4.571  The issue before the panel is not whether  Members are acting in good faith if they provide
incentives for the use of WTO consistent remedies.  The issue is whether the provision of the CDSOA
payments frustrates the objectives of Article 5.4, namely the requirement of determining the level of
support for a request for the imposition of anti-dumping measures.  The CDSOA monetary incentive
for requesting the imposition of anti-dumping measures makes it impossible for the requisite
determination to be made under Article 5.4.
11. Does support for an anti-dumping petition have to be genuine (i.e., based on the
actuality or expectation of injury) for the purposes of Article 5.4 of the AD Agreement?
If so, how could an investigating authority ensure that support is genuine in all cases?WT/DS217/R
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4.572  It is not clear what is meant by “genuine” support.  The issue before the panel  is not whether
the support is or is not genuine, but whether the US authorities can distinguish between the support
contemplated by the AD Agreement, namely suppor t based on the prospects for imposition of anti-
dumping measures, and support not contemplated by  the AD Agreement, namely support based on the
prospects of monetary reward.  Brazil is not asking the panel to decide the broader question of
whether support must be “genuine” and under what  circumstances support may be deemed genuine.
This is a more complex issue and one likely to be resolved by the facts of a particular case.  For
example, if one requesting party bribes other potential requesting parties to support the request for
anti-dumping measures, does that support qualify under Article 5.4?  This issue is not before the
panel.  The only issue before the panel is whethe r the US authorities can distinguish between support
for a petition conditioned on the receipt of CD SOA payments and support that would exist
independent of the prospects for CDSOA payments.
12. Does a domestic producer only "support" an anti-dumping application for the purpose
of Article 5.4 if its support is motivated solely by its desire for the imposition of an anti-
dumping measure?  Please explain.
4.573  As indicated in the response to Question 11 above, this issue is not before the panel.
13. Is it your view that there is no "support" (within the meaning of Article 5.4) for an
application if such support is motivated - in part, at least - by a domestic producer's
desire to be eligible for CDSOA offset payments?
4.574  Again, the issue is being misconstrued.  The question is really a “but for” question.  That is,
would there be sufficient support for the request for the imposition of anti-dumping measures “but
for” the prospect of receiving payments under the CD SOA.  If there is insuff icient support absent the
prospect of receiving payments under the CDSOA, then a determination that support is sufficient
under Article 5.4  is not in accordance with Article 5.4.  Brazil's position is that the prospect ofCDSOA payments makes it impossible for US authoritie s to determine the level of support that would
exist absent the prospect for CDSOA payments.  As a result, the authorities cannot meet their
obligations under Article 5.4.
14. Would a Member violate Article 8.3 of the AD Agreement if it decided, as a matter of
general policy, never to accept price undertakings?  Please explain.
4.575  Yes.  While Article 8 provides authorities with broad discretion in accepting or rejecting price
undertakings, it does impose an obligation on the authorities to allow undertakings to be offered and
to provide a rationale for rejecting such offers.  Br azil contrasts the language in Article 8 with the
language in Article 9:1 which states that whether to impose anti-dumping duties and whether to
impose duties at or below the margin of dumping “are decisions to be made by the authorities.”
Although minimal, there are conditions associated  with the Article 8 decision on whether or not to
accept an undertaking.  In contrast, in Article 9, there are no conditions.
(b) Questions to all parties
32. With reference to footnote 24 of the AD Agreement and footnote 56 to the SCM
Agreement, to what extent can subsidization be considered an action "under"
Article XVI of GATT 1994?
4.576  Footnote 24 of the AD Agreement and 56 of the SCM Agreement are straight forward
clarifications of the limitations of Articles 18.1 and 32.1 respectively.  In essence, they clarify that
while specific actions against dumping of exports or subsidies by members are limited to the actionsWT/DS217/R
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permitted under the Agreements, this does not preclude actions taken based on other provisions of the
GATT 1994.  This provision is necessary so as not to preclude actions which are independently
authorized under other provisions of the GATT, such as Articles XIX, XII, or XVIII, which may
impact the same products or the same Members as are impacted by anti-dumping or countervailingmeasures.  These footnotes, for example, permit the imposition of anti-dumping and countervailing
measures on the same products, or safeguards a nd anti-dumping measures on the same products.
They do not, however, provide the basis for broadening the scope of action against dumping beyond
those specific actions authorized under the AD and SCM Agreements.
33. Please provide an example of a "n on-specific" action against dumping.
4.577  Non-specific action against dumping is action which may have an effect on the competitive
dynamics in situations in which dumping is involved but which are not specifically targeted atoffsetting or preventing dumping.  For example, a country may have a programme which provides
assistance to industries or workers, as does the US, which have been adversely impacted by imports,
irrespective of whether the imports are dumped.  The programme is to facilitate adjustment to imports.
It may incidentally impact the competitive dynamics between products which have been found to be
dumped and the domestic like product, but the action is not specific to these products or to thissituation.
4.578  Another example would be the process of restructuring under the US bankruptcy laws.  Many
US steel mills, for example, are now in the process of such restructuring.  These are the same steel
mills that have filed many anti-dumping and countervailing duty petitions and are currently seeking
safeguards protection.  While they attribute their bankruptcies in large part to dumped and subsidizedimports, this does not mean that the US cannot act to assist these companies through normal legal
processes to restructure and emerge from bankruptcy as competitive entities.  While the restructured
companies will be stronger competitors and the restructuring will have altered the competitive
dynamics, the action of encouraging the restructuring is not specifically a response to dumping.
4.579  Similarly, there has recently been a proposal that a tax be levied on all sales of steel in the
United States and that the revenues from the tax be used to reduce unfunded obligations of US steel
mills to retired workers.  Many believe that these so-called “legacy” costs make the industry
vulnerable to import competition, including competition from dumped imports.  However, neither the
proposed tax nor the distribution of revenues is spec ific to dumping.  Obviously, US competitors will
be in an improved position to compete against imports, including dumped imports, if the programme
is implemented.  However, it is not specific to dumping.
34. Please give examples of the sort of “other reasons, including reasons of general policy”
that Members might invoke under Article 8.3 of the AD Agreement.
4.580  As a general matter, the US is reluctant to ente r into undertakings for two reasons.  First, they
are viewed as being more difficult to administer than anti-dumping duties.  Second, they are viewed
as being less beneficial to the importing industry in terms of protection than are anti-dumping duties.
In fact, the US has rejected consideration of undertakings offered for these reasons in the past.
35. Does the violation of the international law pr inciple of good faith necessarily constitute a
violation of the WTO Agreement?  Does either the AD Agreement or the WTO
Agreement impose an independent obligation on Members to act in good faith?
4.581  The obligation of “good faith” arises out of Article 31(1) of the Vienna Convention on the
Law of Treaties which sets forth the rules of treaty interpretation.  With respect to the ViennaWT/DS217/R
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Convention , the Appellate Body stated in United States - Antidumping Measures on Certain Hot-
Rolled Steel Products from Japan :
We observe that the rules of treaty interpretation in Articles 31 and 32 of the Vienna
Convention  apply to any treaty, in any field of public international law, and not just to
the WTO agreements.  These rules of treaty interpretation impose certain common
disciplines on treaty interpreters, irrespective of the content of the treaty provision
being examined and irrespective of the field of international law concerned. Appellate
Body Report at para. 60.
4.582  As such, the obligation of “good faith” is an obligation related to the interpretation of
substantive obligations contained in a treaty.  It requires that the relevant treaty be interpreted and the
obligations be observed in “good faith.”  It does not create new or additional obligations beyond theunderlying obligations in the treaty.  Rather, it serves to inform those obligations.
4.583  The WTO agreements, including the AD and SCM Agreements, do not impose any
independent “good faith” obligation on Members.  However, as indicated by the Appellate Body in
the language quoted above, the rules of treaty interpretation impose common disciplines on all such
instruments.  Furthermore, Article 3:2 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes  (DSU) specifically refers to the clarification of obligations in the WTO
Agreements “in accordance with customary rules of interpretation of public international law.”  Thus,
the “good faith” obligation is applicable to the interpretation of obligations under the WTO
Agreements.
4.584  A “good faith” obligation in interpreting a treaty provision would be meaningless unless it
carried over into the implementation of the substantive obligations of the treaty.  Whether the
interpretation of a provision is in “good faith” only becomes an issue in the context of actions
implementing the interpretation.  Thus, for example, the obligation to determine the extent of industry
support under Article 5.4 must be interpreted and implemented in “good faith.”
36. Is there anything in the panel or Appellate Body reports in the 1916 Act case to suggest
that either the panel or the Appellate Body, when addressing the meaning of Article 18.1
of the AD Agreement, had in mind the pure subsidy hypothetical set forth in question 3
above?
4.585  The pure subsidy hypothetical does not appear to have been addressed by the Panel or the
Appellate Body in the 1916 Act .
3. Canada
(a) Questions to complaining parties
1. Please comment on para. 91 of the US firs t written submission.  Do you agree that "it is
clearly possible for an action to be 'in response to' dumping or a subsidy but not be
'against' dumping or a subsidy"?  Please ex plain, taking into account the Appellate
Body's finding that "'specific action agains t dumping' … is action that is taken in
response to situations presenting the cons tituent elements of 'dumping'" (1916 Act,
para. 122).  Does the Appellate Body's finding suggest that "specific action against
dumping" is necessarily a subset of action "in response to" dumping?  Please explain.
4.586  The Appellate Body interpreted the phrase “specific action against dumping” to mean “action
taken in response to situations presenting the constituent elements of dumping.”  The interpretation ofWT/DS217/R
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the Appellate Body is not treaty language, but an elaboration of it.  Therefore, the issue of one being a
subset of another does not arise.
4.587  The Appellate Body in fact found that “specific action” was action that operated against, or in
response to, a situation presenting  the presence of those constituent elements.  In this case, the Byrd
Amendment subsidies are paid out to “condemn” dumping and “neutralise” subsidies.108  “Condemn”,
“neutralise” and “offset” denote acting against something.  These subsidies are paid out only where
dumping and/or a subsidy is present and not otherwise.  In this way the Act is a specific action against
dumping or a subsidy.
2. Please explain exactly how you see that th e "constituent elements of dumping" have
been incorporated into the CDSOA.
4.588  Article 18.1 and 32.1 of the Agreements has been interpreted by the Appellate Body as
referring to actions that are taken in response to  situations presenting the constituent elements of
dumping.  This is true of the Byrd Amendment.
4.589  The panels in the United States –  1916 Act challenge clarified that these elements require that
goods enter into the commerce of the United States and are priced below normal value.  The ByrdAmendment is triggered by an order – a finding of injurious dumping or subsidisation – and the
collection of duties when under-priced goods actually enter into the commerce of the United States.
Where the dumped goods do not enter the United States, no offset payments will be available for
distribution.
4.590  Moreover, special accounts segregate funds on the basis of specific situations of the
constituent elements of dumping (represented by the imposition of an order); recipients are those
“affected” by the presence of constituent elements of dumping who participate in investigations.
Qualifying expenditures are those incurred by “affected domestic producers” during the time an order
is in place for costs related to the production of a domestic product that competes with an import that
has been the subject of an order.
4.591  The Byrd Amendment is part and parcel of the US anti-dumping and countervailing duty
regime and is not severable from it.  It is a specific action against dumping  or subsidisation  as
required by the specific terms of Articles 18.1 and 32.1 because it is an action that could not, and
would not, be triggered unless a finding of dumping or a subsidy is made, and it is an action that seeks
to “condemn” dumping and “neutralise” subsidies.
3. In your view, would it be inconsistent with Article 18.1 of the AD Agreement and
Article 32.1 of the SCM Agreement for a Member  to provide subsidies in response to a
finding of dumping or subsidization, where that subsidization was in lieu of  anti-
dumping or countervailing measures?  If not, please explain in light of your view that
these provisions prohibit any action taken in response to situations presenting the
constituent elements of dumping.
4.592  Yes.  The obligation contained in Articles 18.1 and 32.1 of the Agreements is that any action
taken against situations presenting the constituent elements of dumping or subsidies must be in an
authorized form.  These are limited to anti-dumping or countervailing duties, undertakings and
                                                     
108 Continued Dumping and Subsidy Offset Act of 2000 , § 1002 (Title X (Sections 1001 – 1003) of the
Agriculture, Rural Development, Food and Drug Administ ration, and Related Agencies Appropriations Act,
2001 , Pub. L. No. 106-387; 114 Stat. 1549, 1549A-72 (2000)) (Common Exhibit-1).WT/DS217/R
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provisional duties (or countermeasures) in very specific circumstances.  Subsidisation is not an
authorised form of response.  Therefore, such a response is inconsistent with Articles 18.1 and 32.1.
4.593  “Specific action against dumping” and/or a subsidy was thoroughly dealt with in both
Agreements.  Articles 18.1 and 32.1 represent the express intention of the Members of the WTO thatonly certain types of anti-dumping and countervailing measures were to be permitted under the
Agreements, and such actions were to be governed by detailed rules.  In this context, Canada
underlines the importance of maintaining the integrity of the Anti-dumping and SCM Agreements.
There are detailed rules governing the initiation of investigations, imposition of provisional measures,
determination of the level of permissible duties, duration of duties and so on. To suggest that
Members may use subsidies as “specific action against dumping” or a subsidy, is to say that Members
may counteract dumping or subsidies by measures not subject to the disciplines set out in the Anti-dumping or SCM Agreements.
4. Assume that a Member (which has no legal framework for the conduct of anti-dumping/
countervail investigations or imposition of anti-dumping countervailing measures)
implements a domestic subsidy programme with the explicit purpose and design of
offsetting the injurious effects of dump ed or subsidized imports.  Would that
programme constitute a "specific action against dumping" (or subsidy)?
4.594  Yes. Specific action against dumping or subsidies may be taken by a Member only in
accordance with its obligations under the Anti-dumping and SCM Agreements.  Articles 18.1 and
32.1 of the Agreements have been interpreted by the Appellate Body to limit those responses toduties, provisional measures and undertakings.  A domestic subsidy programme is, therefore, not a
permissible response.
4.595  As noted above, Members agreed at the time of the conclusion of the WTO Agreement that
such specific action may be taken only in accordance with detailed anti-dumping and countervailing
duty rules.  If Members had considered counter-subsidies an appropriate “specific action”, they couldhave included this in the SCM Agreement – and negotiated rules for the proper amount and duration
of such counter-subsidies.  They did not do so.  They limited “specific action” to only those measures
for which they had negotiated detailed rules.  Any other interpretation of Articles 18.1 and 32.1 of the
Agreements would mean that the substantive rules negotiated to govern those “specific actions” are
rendered meaningless where a Member decides to counter-subsidise, rather than impose anti-dumping
or countervailing duties.
If not, please explain, and provide a reaso ned explanation as to how Article 18.1 of the
AD Agreement (or Article 32.1 of the SCM Agreem ent) can be interpreted to distinguish
between this hypothetical subsid y programme and the CDSOA regime.
4.596  Not applicable.
5. Would a victim compensation scheme (funded  from central treasury resources, rather
than penalties imposed on convicted criminals) constitute a "specific action against"
crime?  Please explain.  Would your answer be any different if the scheme were funded
from penalties imposed on convicted criminals?  Why?
4.597  The answer to the first part of the question is no.
4.598  Under normal circumstances, a victim compensation scheme funded from the general treasury
is not a specific action against  crime.  Such compensation schemes are not intended to reduce crime,
nor do they in fact do so.  Such schemes are generally not devised to “condemn” or “neutralise”WT/DS217/R
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crime; they compensate  the victim.  In this respect, victim compensation funds may be compared to
general adjustment policies or programmes.
4.599  The answer would be yes in respect of the second part of the question.  A scheme funded by
penalties imposed on criminals would, by contrast, constitute a “specific action against crime.”
“Restitution” is a generally accepted part of the criminal justice system as a measure against crime .
By making payments to the victim, the criminal is reminded of the harm he or she has done and is
required to make good the damage caused.  Indeed, in some jurisdictions, monetary penalties are a
perfectly acceptable “punishment” for most crimes, especially crimes against property and the person.
In these circumstances, it should be noted, the “compensation” in question is imposed in lieu of  rather
than in addition to  incarceration or other punishment.
4.600  In this respect, such a scheme is to be contrasted with the Byrd Amendment.  The
United States first “punishes” the importer by imposing countervailing or anti-dumping duties on its
goods.  In doing this, the United States also, by definition, readjusts the competitive balance between
imported goods and domestic like products.  The Byrd Amendment is a “punishment” in addition to
the duties imposed and collected, to the extent that it subsidises the domestic competitors of the
importer.
6. Assume that a Member enacts legisl ation mandating the payment of $5,000 to
petitioners to compensate them for the cost of making the petition and participating in
the anti-dumping investigation.  Would that payment constitute a "specific action
against dumping of exports" within the meaning of Article 18.1 of the AD Agreement?
Why, or why not?
4.601  This payment does not appear to be trigge red by or depend on a finding of dumping.
Therefore, it would not be “specific action against dumping of exports” within the meaning of
Article 18.1 as articulated by the Appellate Body.
7. Assume that a Member enacts legislatio n requiring that any anti-dumping duties
collected be paid to state retirement homes.   Would such payments constitute "specific
action against dumping of exports" within the meaning of Article 18.1 of the AD
Agreement?  Why, or why not?
4.602  No.  For a measure to fall within Article 18.1, it must be a “specific action against dumping”.
Specific action against dumping is action triggered by situations presenting the constituent elements
of dumping or subsidies and action that is in “response to” such practices.  Payments to retirementhomes do not “respond” to the practice of dumping of exports.  Therefore, the payment of anti-
dumping duties to retirement homes is not an action against  dumping or a subsidy.  Nothing in such
payment intrinsically offsets, counteracts, “condemns” or “neutralises” dumping or a subsidy.
8. Assume that the US restricted offset payments under the CDSOA to cases where the US
found the existence of dumping, injury and causation but did not impose an anti-dumping order, and that such payments equalled the amount of anti-dumping duty that
would have been collected had an anti-dumping order been put in place.  Would such
payments constitute "specific action agains t dumping of exports" within the meaning of
Article 18.1 of the AD Agreement, or "action under other relevant provisions of GATT
1994" within the meaning of note 24?  Why, or why not?
4.603  Yes.  Article 18.1 of the AD Agreement limits responses to situations presenting the
constituent elements of dumping to duties, provisional measures and undertakings.  Offset paymentsWT/DS217/R
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are not a permitted response.  This is regardless of their amount or whether or not they follow an
order.
4.604  First , a finding that the Byrd Amendment  is a specific action against dumping does not
depend on whether anti-dumping duties are otherwise imposed.  As noted above, Members negotiatedand agreed on an extensive and detailed set of rules governing the imposition of those “specific
actions” expressly provided for in the Anti-dumping and SCM Agreements.  They did not
contemplate, and accordingly did not negotiate, rules governing the use of other  measures such as
subsidies as “anti-dumping” or “countervailing” measures.  In this respect, the question of the Panel
contains its own answer: if subsidies were permitted as “anti-dumping” measures, other WTO
Members must depend on the good will of the subsidising Member not to exceed the level of dumping
found to exist, not to grant subsidies retroactively, not to grant them for more than five years, etc.Therefore, it is irrelevant that the United States would not be imposing anti-dumping duties.  If the
measure it does impose is not a contemplated “specific action”, it is not permitted.
4.605  Second , a finding that the Byrd Amendment   is a specific action against dumping or a subsidy
does not depend on these subsidies being funded by anti-dumping or countervailing duties.  That they
are so funded establishes even more clearly the logical and inescapable conclusion that the ByrdAmendment subsidies are “specific action”, but the source of the funds is not a necessary  condition
for the purposes of Articles 18.1 and 32.1.
4.606  (One can speculate that the Byrd Amendment  would never have succeeded legislatively had
the American taxpayer been asked to directly subsidise US industries to the tune of billions of dollars
a year.  One can further speculate that the special accounts for the duties collected were necessary notto limit the amount of the subsidies, as the United States alleges, but to ensure that the duties collected
never show up on the General Accounts of the United States, thus hiding from the American taxpayer
the opportunity costs of the Byrd Amendment.  But such speculations would not be relevant for the
purposes of the Panel’s legal analysis.)
9. Would the CDSOA violate AD Article 5.4 if of fset payments were made to all domestic
producers of the product under investigation, and not merely those domestic producers
supporting the petition?  Please explain.
4.607  Yes.  Such payments would continue to provid e incentives to bring or support petitions in
anticipation of a potential cash payout in addition to the duties imposed. This incentive distorts the
determination of threshold levels. Accordingly, it violates Article 5.4.  This issue is that the payments
distort/undermine the obligation by obscuring the meaning of threshold determinations under Article5.4 and making it more likely that positive determinations will result.
10. Is a Member not acting in good faith when it provides incentives for the use of a WTO-
consistent remedy?  Please explain.
4.608  Article X:(3)(a) of GATT 1994 requires that Members administer their laws, regulations,
decisions and rulings in a “uniform, impartial and reasonable manner”.  The Appellate Body has
stated that this obligation creates minimum standards of procedural fairness in the administration of
trade regulations.  It would follow that incentiv es for any form of remedy against imports could
potentially not result in a fair, neutral administration of laws.
11. Does support for an anti-dumping petition have to be genuine (i.e., based on the
actuality or expectation of injury) for the purposes of Article 5.4 of the AD Agreement?
If so, how could an investigating authority ensure that support is genuine in all cases?WT/DS217/R
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4.609  The question at issue in this dispute – indeed, in any dispute before a WTO Panel – is the
conduct of the Member  in respect of its obligations.  A good faith implementation of an obligation
requires, at the very least, that the implementing Member does not actively undermine the obligation
it purports to implement.  Where a Member is required to determine a level of support, it may not set
that level by, for example, legally requiring support.  Nor may it distort a level of support by
providing for cash payment incentives.  If the thresholds in Articles 5.4 and 11.4 are to mean
anything, they must not be subject to overt or covert manipulation by the Member required to
determine whether they have been met.
12. Does a domestic producer only "support" an anti-dumping application for the purpose
of Article 5.4 if its support is motivated solely by its desire for the imposition of an anti-
dumping measure?  Please explain.
4.610  The question before the Panel is the obligations of the United States under Articles 5.4 and
11.4.  The United States has an obligation to determine the level of support in accordance with
thresholds set out in those Articles.  Where the United States provides a cash incentive for the
industry to support a petition, it moves to distor t its own determination under Article 5.4 and 11.4.
13. Is it your view that there is no "support" (within the meaning of Article 5.4) for an
application if such support is motivated - in part, at least - by a domestic producer's
desire to be eligible for CDSOA offset payments?
4.611  The question before the Panel is the obligations of the United States under Articles 5.4 and
11.4.  The United States has an obligation to determine the level of support in accordance with
thresholds set out in those Articles.  Where the United States provides a cash incentive for the
industry to support a petition, it moves to distor t its own determination under Article 5.4 and 11.4.
14. Would a Member violate Article 8.3 of the AD Agreement if it decided, as a matter of
general policy, never to accept price undertakings?  Please explain.
4.612  Yes.  An interpretation that permitted such a course of action would render the Article 8.3
obligation meaningless.  Members undertook to give their investigating authorities the ability to enter
into undertakings.  An ability to do something must necessarily imply both the legal authority and the
discretion to do so.  To provide for a legal authority and then foreclose the discretion would constitute
a breach of the obligation under Article 8.3.
(b) Questions to Canada
30. At para. 44 of its oral submission, Canada states that the Offset Act is a "specific action
against dumping" because inter alia  "payments are made only to those producers
'affected' by dumping".  Does Canada consider that the Offset Act would be a "specific
action against dumping" if payments were made to all domestic producers, and not only
those that had supported the petition?  Please explain.
4.613  Yes.  The elements set out in paragraph 44 collectively support the conclusion that subsidies
under the Byrd Amendment  constitute a specific action against dumping or a subsidy.  Each
establishes a nexus between the Act and dumping or a subsidy.  None is a necessary  condition for a
finding that Byrd Amendment subsidies are a specific action prohibited by Articles 18.1 and 32.1;though each, in context, could constitute sufficient evidence to establish Canada’s claim.  The Byrd
Amendment  would constitute “specific action” whether all producers under the order received
payments under it or only those that support the petition.  Even if all producers were qualified, no
payments could be made unless the practice of dumping or subsidisation existed and claims wereWT/DS217/R
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limited to qualifying expenditures taken to offset dumping and subsidisation.  Producers would
therefore still be “affected” by dumping or subsidisation.
(c) Questions to all parties
32. With reference to footnote 24 of the AD Agreement and footnote 56 to the SCM
Agreement, to what extent can subsidization be considered an action "under"
Article XVI of GATT 1994?
4.614  Under footnote 56, the answer is straightforw ard.  Subsidisation cannot be “action under”
Article XVI of GATT 1994 that falls within the scope of that footnote because it is not action under
“other relevant provisions of GATT 1994”.  The Appellate Body said “GATT 1994 as interpreted by
the Agreement” with the meaning of Article 18.1 of the AD Agreement (and therefore Article 32.1 ofthe SCM Agreement) meant the specific provisions of GATT 1994 that the Agreement interprets.
Under Article 32.1, the SCM Agreement interprets both GATT Articles VI and XVI.
4.615  Under footnote 24 of the AD Agreement subsidisation cannot be considered “action” if it
responds to dumping or subsidies as such.  Therefore, whether it is a subsidy permitted under
Article XVI is irrelevant if it is a response as such.  Then the test becomes whether that action accordswith Articles 18.1 and 32.1.  It can only constitute action under Article XVI if it responds to
something other than dumping or subsidisation as such.
4.616  Moreover, a subsidy that is in compliance with Article XVI of GATT 1994 is not action per
se.  Article XVI does not provide a right to grant subsidies but merely deals with reporting
requirements and procedural requirements where Members provide subsidies.
33. Please provide an example of a "n on-specific" action against dumping.
4.617  An action “against” dumping that would fall within the scope of footnote 24 is action that
does not respond to dumping as such.  For example, safeguards measures and countervailing measures
can constitute action, that is “non-specific action” within the meaning of footnote 24. If a safeguardmeasure under Article XIX of GATT is applied in the context of a situation where there is an increase
in imports which causes injury, where dumping is in part the cause of the increase, it can be
considered an action in part against dumping because it applies to dumped imports.  It is not specific
action against dumping because the safeguard action is not dependent on a finding of dumping.
Rather, it is contingent on a finding of an increase in imports that cause injury.  The trigger for the
imposition of the measure is therefore not the dumping itself but the increase in imports.
34. Please give examples of the sort of "other reasons, including reasons of general policy"
that Members might invoke under Article 8.3 of the AD Agreement.
4.618  A Member may decide not to accept any undertakings where authorities consider the
undertaking impracticable to administer.  They may also reject undertakings where monitoring is too
difficult or there is reason to believe that exporters or foreign governments will not respect the termsand conditions of the undertaking agreements.
35. Does the violation of the international law pr inciple of good faith necessarily constitute a
violation of the WTO Agreement?  Does either the AD Agreement or the WTO
Agreement impose an independent obligation on Members to act in good faith?
4.619  Article 3.2 of the Understanding on Rules and Procedures Governing the Settlement of
Disputes (the DSU)  states that:WT/DS217/R
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… The Members recognise that it serves to preserve the rights and obligations of
Members under the covered agreements, and to clarify the existing provisions of
those agreements in accordance with customary rules of interpretation of public
international law. …
4.620  The Vienna Convention on the Law of Treaties  forms part of the rules of public international
law that bears on the interpretation of the WTO Agreements.  Article 31(1) requires that
A treaty shall be interpreted in good faith in accordance with the ordinary meaning to
be given to the terms of the treaty in their context and in the light of its object and
purpose.
4.621  Article 26 requires
Every treaty in force is binding upon the parties to it and must be performed by them
in good faith.
4.622  Therefore, while there is no express and independent obligation of good faith in the WTO
Agreements, DSU Article 3.2 and the provisions of th e Vienna Convention require that provisions are
interpreted and performed in good faith.  The Appellate Body has stated that the principle of good
faith is “at once, a general principle of law and a principle of general international law, that informsthe provisions of the Anti-dumping Agreement, as well as the other covered agreements.”
109  I t has
further stated:
This principle, at once a general principle of law and a general principle of
international law, controls the exercise of rights by states.  One application of this
general principle, the application widely known as the doctrine of abus de droit ,
prohibits the abusive exercise of a state’s rights and enjoins that whenever the
assertion of a right “impinges on the field covered by [a] treaty obligation, it must be
exercised bona fide, that is to say reasonably.  An abusive exercise by a Member of
its own treaty right thus results in a breach of the treaty rights of the other Members
and, as well, a violation of the treaty obligation of the Member so acting.
4.623  In the accompanying footnote, the Appellate Body cited B. Cheng, stating:
B. Cheng, General Principles of Law as applied by International Courts and
Tribunals (Stevens and Sons, Ltd., 1953), Chapter 4, in particular, p. 125 elaborates:
“… A reasonable and bona fide exercise of a right in such a case is one which is
appropriate and necessary for the purpose of the right ( i.e., in furtherance of the
interests which the right is intended to protect) …”110
4.624  Therefore, while there is no claim for an independent violation of the principle of good faith
at issue here, it is clear that an obligation of good faith pervades over the manner in which Members
must conduct their affairs. Obligations cannot be fulfilled where the principle of good faith is violated.
36. Is there anything in the panel or Appellate Body reports in the 1916 Act case to suggest
that either the panel or the Appellate Body, when addressing the meaning of Article 18.1
                                                     
109 United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan , Report
of the Appellate Body, WT/DS184/AB/R, adopted 23 August 2001, para. 101.
110 United States – Import Prohibition of Certain Shrimp and Shrimp Products, Report of the Appellate
Body, WT/DS58/AB/R, adopted 6 November 1998, para. 158 and footnote 156.WT/DS217/R
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of the AD Agreement, had in mind the pure subsidy hypothetical set forth in question 3
above?
4.625  That issue was not before the United States –  1916 Act panel or the Appellate Body.  The
question before this Panel is whether the facts as presented – most of which are not contested by the
United States – establish that Byrd Amendment subsidies are “specific actions against dumping” or a
subsidy.  In Canada’s submission, Byrd Amendment subsidies are intended to, and in fact do,
“condemn”, “neutralise” and “offset” dumping or a subsidy.  As such subsidies are not one of the
three responses to dumping or subsidies provided for, and governed by, the Agreements, the Byrd
Amendment is not permitted by Articles 18.1 and 32.1.
4. Chile
(a) Questions to the complaining parties
1. Please comment on para. 91 of the US firs t written submission.  Do you agree that "it is
clearly possible for an action to be 'in response to' dumping or a subsidy but not be
'against' dumping or a subsidy"?  Please ex plain, taking into account the Appellate
Body's finding that "'specific action agains t dumping' … is action that is taken in
response to situations presenting the cons tituent elements of 'dumping'" (1916 Act,
para. 122).  Does the Appellate Body's finding suggest that "specific action against
dumping" is necessarily a subset of action "in response to" dumping?  Please explain.
4.626  In paragraph 122 of its report in United States  – Anti-Dumping Act of 1916,  the Appellate
Body clearly states that "specific action against dumping" … is action that is taken in response to
situations presenting the constituent elements of "d umping". There is nothing in the report to indicate
that an action in response to dumping (or a subsidy) is not an action against dumping (subsidy).
Moreover, the Anti-Dumping Agreement (AD Agreem ent) does not mention the concept of "response
to." It follows that the Appellate Body is plainl y using the concept of "in response to" as a way to
explain what "action against" should be understood to mean.
2. Please explain exactly how you see that th e "constituent elements of dumping" have
been incorporated into the CDSOA.
4.627  As Chile noted in its first joint written submission with Japan, the constituent elements of
dumping are not expressly identified in any WTO Agreement. However, both Article VI of the
GATT 1994 and Article 2.1 of the AD Agreement tell us when there is dumping:
(a) When products from one country are introduced into the commerce of another
country;  and
(b) When these products are introduced at less than their normal value.
A third element should be added here:
(c) When these developments produce injury or the threat of injury.
4.628  The CDSOA provides for the distribution of anti-dumping or countervailing duties assessed
to the "affected domestic producers" for "qualifying expenditures." Both concepts are defined in the
CDSOA, and Chile considers they need not be repeated here.  Accordingly,WT/DS217/R
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(a) The duties distributed under the CDSOA will only be collected pursuant to a petition,
an investigation, and a finding of dumping made by the US authorities. Without a
finding of dumping (or subsidy), there are no duties to be distributed;  and in order for
there to be a finding, the authority must establish (on the basis of credible evidence)the existence of the constituent elements of dumping. It is worth noting that a number
of panel and the Appellate Body reports concluded that not all the constituent
elements of dumping were present in some findings.
(b) Duties will only  be distributed to the affected domestic producers, i.e., to those
producers who filed or supported a petition for an anti-dumping investigation. The
duties are distributed neither to those firms which opposed the investigation, nor to
those producers of goods that are not "like products."
(c) The duties are distributed to offset qualifying expenditures. These, under the
CDSOA, are expenses incurred after the issuance of an anti-dumping (or subsidy)
finding. Here again, in the absence of the constituent elements of dumping – i.e., if no
dumping were found – there would be no expenditures incurred after the imposition
of an anti-dumping or countervailing duty.
3. In your view, would it be inconsistent with Article 18.1 of the AD Agreement and
Article 32.1 of the SCM Agreement   for a Member to provide subsidies in response to a
finding of dumping or subsidization, where that subsidization was in lieu of  anti-
dumping or countervailing measures?  If not, please explain in light of your view that
these provisions prohibit any action taken in response to situations presenting the
constituent elements of dumping.
4.629  The findings of the Appellate Body in United States – Anti-Dumping Act of 1916  are clear
and unequivocal. Actions against dumping (and by analogy against subsidy) are limited. Any other
action that is not an anti-dumping duty, provisiona l measure or price undertaking (and by extension, a
countervailing duty or countermeasure authorized by the DSB) is prohibited. However, footnote 24
indicates that Article 18.1 is not intended to preclude action under other relevant provisions of the
GATT 1994 (footnote 56 of the SCM Agreement says the same thing).  In Chile's opinion, a Member
may take actions other than those specified, when the existence of dumping coincides with the
specific circumstances and limitations that allow for the adoption of another action under the pertinent
WTO Agreement.  For example:  if there are unfores een developments and if imports are taking place
in such increased quantities and under such conditions as to cause, or to threaten to cause seriousinjury to the domestic industry, the authority may adopt a safeguard measure – provided that the strict
and specific requirements of Article XIX of the GATT 1994 and the Agreement on Safeguards are
met – even when such imports may also be dumped, i.e., the authority may decide not to make a
finding and thus refrain from imposing anti-dumping or countervailing duties.
4.630  However, in the case of the CDSOA this situ ation does not arise, because at issue is not
simply a prohibited action against dumping, but an action that is being taken over and above the
anti-dumping or countervailing action. In other words, a twofold remedy is involved; and when a
subsidy is granted subject to an anti-dumping or countervailing finding on top of the anti-dumping
duty or countervailing duty, that subsidy has the effect of removing the injury in full or in part.  In that
case, retention of the anti-dumping or countervail ing duties is contrary to the AD Agreement and the
SCM Agreement.
4. Assume that a Member (which has no legal framework for the conduct of anti-
dumping/countervail investigations or imposition of anti-dumping countervailing
measures) implements a domestic subsidy programme with the explicit purpose andWT/DS217/R
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design of offsetting the injurious effects of dumped or subsidized imports.  Would that
programme constitute a “specific action against dumping” (or subsidy)?
If not, please explain, and provide a reaso ned explanation as to how Article 18.1 of the
AD Agreement (or Article 32.1 of the SCM Agreem ent) can be interpreted to distinguish
between this hypothetical subsid y programme and the CDSOA regime.
4.631  Yes, this would be a "specific action against dumping" as defined by the Appellate Body.
This is because, in contrast to one of the examples given in reply to question 33, the authority has first
made a dumping or subsidy finding, and has accordingly found that the constituent elements of
dumping are present. But because this is not an anti-dumping duty, provisional measure, or priceundertaking, the said domestic subsidy programme would be a prohibited action.
5. Would a victim compensation scheme (funded  from central treasury resources, rather
than penalties imposed on convicted criminals) constitute a "specific action against"
crime?  Please explain.  Would your answer be any different if the scheme were funded
from penalties imposed on convicted criminals?  Why?
4.632  The concept of "specific action against crime" is not in any WTO Agreement – and therefore
it has not been defined by the Appellate Body. The meaning of this phrase is thus hard to  establish.
Furthermore, if one were to apply (by analogy, and for the sake of argument) the conclusions in
United States Anti-Dumping Act of 1916 , one would first have to define the constituent elements of
crime, and this would fall well beyond the purview of the case before the panel.
6. Assume that a Member enacts legisl ation mandating the payment of $5,000 to
petitioners to compensate them for the cost of making the petition and participating in
the anti-dumping investigation.  Would that payment constitute a "specific action
against dumping of exports" within the meaning of Article 18.1 of the AD Agreement?Why, or why not?
4.633  No.  As the Appellate Body pointed out, "a specific action against dumping" is action that is
taken in response to situations presenting the constituent elements of dumping.  These elements were
individually specified in Chile's reply to question 2.  None of these elements is present in the example
postulated in this question, since although the law might establish an incentive for petitioning for anti-
dumping investigations (albeit not as clear and perverse as in the CDSOA), the payment of US$5,000
is not conditional upon a finding (negative or affirmative) of dumping.  Accordingly, in this particular
example, the payment of US$5,000 is made automatically, irrespective of whether or not the
constituent elements of dumping are found.
7. Assume that a Member enacts legislatio n requiring that any anti-dumping duties
collected be paid to state retirement homes.   Would such payments constitute "specific
action against dumping of exports" within the meaning of Article 18.1 of the AD
Agreement?  Why, or why not?
4.634  No.  In the example given, the law does not constitute a response to situations presenting the
constituent elements of dumping.  Contrary to what the United States asserts in its first writtensubmission, Chile – in common with the other complaining parties – does not question a Member's
sovereign right to distribute the proceeds from assessed anti-dumping or countervailing duties. Chile
is specifically questioning the distribution of anti-dumping and countervailing duties in the manner
provided for under the CDSOA.WT/DS217/R
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8. Assume that the US restricted offset payments under the CDSOA to cases where the US
found the existence of dumping, injury and causation but did not impose an anti-
dumping order, and that such payments equalled the amount of anti-dumping duty that
would have been collected had an anti-dumping order been put in place.  Would suchpayments constitute "specific action agains t dumping of exports" within the meaning of
Article 18.1 of the AD Agreement, or "action under other relevant provisions of
GATT 1994" within the meaning of note 24?  Why, or why not?
4.635  Leaving aside the fact that the postulated exampl e is a hypothetical one, since it is impossible
to make a rigorous projection of the amount that would have been collected had anti-dumping
measures been imposed, given that the imposition of such measures generates distortions in tradeflows – distortions which in many cases are significant, and which in some cases impede exports
altogether – such payments would constitute a specific action against dumping.  Indeed, the case
described is a response to situations presenting the constituent elements of dumping – i.e., the
introduction of products into the commerce of another country at less than their normal value, as well
as the attendant injury or threat of injury (see reply to question 2). The offset payments in the examplegiven here are not one of the measures which the Appellate Body defined as the only permissible
actions against dumping, and accordingly, such payments would be contrary to Article 18.1 of the
AD Agreement. Moreover, as was indicated in Chile's reply to question 3, this situation would not be
covered by other relevant provisions of the GATT 1994 within the meaning of footnote 24.
9. Would the CDSOA violate AD Article 5.4 if of fset payments were made to all domestic
producers of the product under investigation, and not merely those domestic producers
supporting the petition?  Please explain.
4.636  To answer this question, Chile believes it must first ascertain whether there is an additional
obligation to be met over and above the quantitative requirements established in AD Article 5.4. Chilebelieves that there is, indeed, such an obligation.  The representativeness of the domestic industry is
not based purely on quantitative criteria (whether or not a particular quorum is met);  qualitative
criteria are also involved:  i.e. the quorum must be confined to those producers that favour and support
an application presenting the three basic and essential requirements prescribed in AD Article 5.2,
namely, dumping, injury
, and causal link .  These are the requirements that must be respected in an
application for an investigation, which must be based on evidence.  The authorities must examine theaccuracy and adequacy of that evidence to determine whether there are sufficient grounds to justifythe initiation of an investigation.  To these considerations Chile wishes to add a fourth factor
associated with the object and purpose of Article VI of GATT 1994 and the AD Agreement:  to obtain
protection from the government to prevent or remedy the injury and to offset unfair trading practices.
In other words, quorums must be achieved on the basis of factors inherent in the AD Agreement, and
not on the basis of other factors constituting economic incentives, which would unquestionably distortthe analysis that producers must perform when de ciding whether or not to support an anti-dumping
and/or countervailing petition.
4.637  Thus, both the CDSOA and the example postulated in the question constitute a factor which
in various ways distorts the analysis which each pr oducer must perform when deciding whether or not
to support a petition. If the producer decides to support the petition under these circumstances, the(qualitative) representativeness of the domestic industry would no longer be based on the factors
required by the AD Agreement for the initiation of an investigation, even if the quantitative
requirements were met. It follows that the spirit and scope of Article 5.4 of the AD Agreement and
Article 11.4 of the SCM Agreement would be violated in both cases.WT/DS217/R
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4.638  At all events, the question is not a purely hypothetical one inasmuch as the incentive provided
by the CDSOA on condition that an anti-dumping dut y is applied, would lead all producers to pursue
and support the initiation of an investigation in light of the possible benefit to be derived.
10. Is a Member not acting in good faith when it provides incentives for the use of a WTO-
consistent remedy?  Please explain.
4.639  As Chile indicated in its reply to the previous question, the domestic industry's applications
for anti-dumping or countervailing investigations must be based on factors spelled out in Article VI of
the GATT 1994 and the AD Agreement or the SCM Agreement (in other words there must be
dumping and/or subsidy, injury, and a causal link);  furthermore, petitioners must seek the
government's protection to prevent or remedy this injury and offset unfair trading practices.  Takingthese factors into consideration, the domestic industry must carry out its own examination of the costs
and benefits involved in submitting an application.  If the government provides incentives as well, this
will distort the examination which the domestic industry has to perform.
4.640  If one pursues to its logical conclusion the argument put forward in reply to question 10, each
Member would have an underlying obligation to refrain from introducing any decision-making factorsextraneous to the AD Agreement and SCM Agreement, or to Article VI of the GATT, if such factors
were to promote and encourage "false" support for the petition and, by the same token, inevitably
distort the meaning and scope of the concepts "degree of support" and "opposition" under Articles 5.4
and 11.4.
4.641  Besides, the Member in the example given above would be acting in a manner inconsistent
with Article X.3(a) of the GATT 1994, irrespective of  whether there were good or bad faith in said
Member's intentions.
11. Does support for an anti-dumping petition have to be genuine (i.e., based on the
actuality or expectation of injury) for the purposes of Article 5.4 of the AD Agreement?
If so, how could an investigating authority ensure that support is genuine in all cases?
4.642  As Chile indicated in its reply to question 10, prior to initiating an investigation, the
investigating authority is obliged to review th e evidence submitted by the domestic industry of
dumping, injury, and a causal link. An anti-dumping application based on these elements, duly
verified by the investigating authority, would acco rdingly be justified. It follows that the producers
that support this application are those that are able to produce evidence of the existence of these three
elements, including the existence or expectation of in jury. If such elements were not present, (i) the
application would fail to meet the requirements sp ecified in Article 5.2, and (ii) the authority would
be unable to fulfil its obligation to review the relevant evidence to determine whether there were
grounds for initiating an investigation.  If the producers' support were based on other factors – such as
the incentive generated by the CDSOA – the application would not be genuine, and the authority
would be unable to fulfil its obligation under Article 5.3 of the AD Agreement in an unbiased,objective, and reasonable manner.
4.643  For this reason, the AD Agreement establishes two mechanisms that enable the investigating
authority to ensure that the support is genuine. Firs t, the authority is required to examine the accuracy
and adequacy of the evidence of dumping, injury, and causal link, submitted with the application
(Chile describes this as "qualitative support").  Second, the authority is obliged to determine thedegree of support or opposition using the quantitative parameters established in Article 5.4 (this Chile
might refer to as "quantitative support").WT/DS217/R
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4.644  Finally, the investigating authority must ensure  that the relevant legislation and the WTO
Agreements have been used appropriately. Here, the authority may not interfere in private parties'
decisions to petition for an investigation.
4.645  Having said that, Chile believes that the investigating authority's assessment of whether
support for the application is genuine should go no further than the requirements stated in Article 5;
accordingly, the authority should not attempt to ga uge the intentions of the parties involved. What
Chile is questioning in this dispute are the incentives afforded by the CDSOA, which will generate an
increased number of anti-dumping and subsidy investigations, with their attendant impact on global
trade flows.
12. Does a domestic producer only "support" an anti-dumping application for the purpose
of Article 5.4 if its support is motivated solely by its desire for the imposition of an anti-dumping measure?  Please explain.
4.646  A domestic producer will support an anti-dumpi ng application when there is dumping, when
the dumping produces injury or the threat of injury, and when there is a causal link between the
dumped imports and the injury. Such support is accordingly motivated by the producer's desire forthis situation to be remedied by means of an anti-dumping measure. The authority must ensure that
the support is genuinely given on the basis of the three elements referred to above. Now, if there are
other motives attributable to government incentives or pressure, and if the support is provided solely
because these incentives are available – in other words, if there would be no support without the
incentives – then unquestionably the requirements of Article 5 of the AD Agreement would not bemet.
13. Is it your view that there is no "support" (within the meaning of Article 5.4) for an
application if such support is motivated - in part, at least - by a domestic producer's
desire to be eligible for CDSOA offset payments?
4.647  If the domestic producer, in the absence of a desire to be eligible for CDSOA offset
payments, would not have supported a petition, then there would be no support within the meaning of
Article 5.4.
14. Would a Member violate Article 8.3 of the AD Agreement if it decided, as a matter of
general policy, never to accept price undertakings?  Please explain.
4.648  Yes it would, because in so doing the Member would be turning this particular provision into
a dead letter. Article 8.3 establishes certain circumstances under which the investigating authority
may exceptionally reject undertakings, including a procedure for notifying the exporter and giving the
latter an opportunity to make comments thereon. If the hypothetical case stated in your question were
to materialize, this exception would become the only  rule preventing the use of an instrument that is
explicitly provided for and regulated by the AD Agreement.
4.649  In developing countries, this scenario would prevent the authority from making use of one of
the few constructive remedies specified in AD Agreement, as provided for in Article 15.
(b) Questions to all parties
32. With reference to footnote 24 of the AD Agreement and footnote 56 to the SCM
Agreement, to what extent can subsidization be considered an action "under"Article XVI of GATT 1994?WT/DS217/R
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4.650  Although Chile is not sure exactly what the Pane l means by this question, it would appear to
be focusing on the scope of footnote 24. In fact, footnote 56 cannot make reference to Article XVI
since that Article is one of the provisions of the GATT 1994 as interpreted in the SCM Agreement,
under Article 32.1 of the SCM Agreement. Now, Articles XVI and VI (where relevant) of the GATT1994, as interpreted in the SCM Agreement, form an  architecture which regulates subsidies. Under
this architecture, there are subsidies which Members may grant and other subsidies which are
prohibited. In addition to its procedural rules, Article XVI contains prohibitions on using particular
subsidies; conversely, however, it permits subsidies that are not prohibited (whether under that Article
or under the SCM Agreement). Accordingly, it may well be possible to adopt actions "under"
Article XVI, if the latter is considered part of an architecture.
4.651  Nevertheless, Chile would welcome clarification from the Panel so that it can provide a more
specific answer to the  question.
33. Please provide an example of a "n on-specific" action against dumping.
4.652  Assuming that a product is believed to be a dumped product, and if – by virtue of the fact that
it is a commodity  or commodity-like  – such dumping is very widespread, the investigating authority
(in lieu  of an anti-dumping action or investigation) may take other steps that counteract the injury
more effectively and facilitate the adjustment process. For example:
(a) A safeguard;
(b) Raise the MFN duty up to the bound level;
(c) Renegotiate the tariff under Article XXVIII of GATT 1994;(d) Subsidize the production of the affected industry;
(e) Subsidize the consumer.
4.653  None of these actions is contingent upon a finding of all the constituent elements of dumping.
Note that in the case of border measures, they are on a MFN basis. In general, these are economic
policy options which may, in certain instances, prove more effective than an anti-dumping actionunder the AD Agreement.
34. Please give examples of the sort of "other reasons, including reasons of general policy"
that Members might invoke under Article 8.3 of the AD Agreement.
• When the undertaking offered is incompatible with the laws on competition in the market in
question.
• When the market structure would render them ineffective as undertakings. For example, if there
were many importer firms connected with the exporters.
35. Does the violation of the international law pr inciple of good faith necessarily constitute a
violation of the WTO Agreement?  Does either the AD Agreement or the WTO
Agreement impose an independent obligation on Members to act in good faith?
4.654  It is understood that Members in their dealings with other Members, as well as in observing
the treaties which they have entered into, must perform their obligations in good faith (Article 26 ofthe Vienna Convention). Accordingly, if a Member fails to perform its obligations under these treatiesWT/DS217/R
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– in other words, violates the treaties – then that Member is acting in bad faith. However, even if there
is no independent obligation to act in good faith, no such obligation would be necessary inasmuch as
the principle is fully applicable to the WTO Agreements. For example, in US – Hot-Rolled Steel , the
Appellate Body held that good faith is a general principle of law and a principle of generalinternational law, that informs the provisions of  the AD Agreement as well as the other covered
agreements. Furthermore, to the extent that WTO Members are meeting their obligations and
undertakings, they are also meeting the "obligation"  to act in good faith that is incumbent upon them
under international law.
36. Is there anything in the panel or Appellate Body reports in the 1916 Act case to suggest
that either the panel or the Appellate Body, when addressing the meaning of Article 18.1
of the AD Agreement, had in mind the pure subsidy hypothetical set forth in question 3above?
4.655  Chile was not a party to the US -  1916 Act  proceedings;  thus it had no access to the
documents submitted by the Parties, nor did it take part in oral hearings.  Accordingly, aside from the
matters discussed in the pertinent reports, Chile would be unable to determine the intent of the Panel
or Appellate Body. Furthermore, question 3 has been posed by the current Panel which is examiningthe particular case before us here;  thus it is hard to say whether a panel or Appellate Body in a
different case, that took place a while ago, might have shared the same concerns.
5. European Communities, India, Indonesia, Thailand
(a) Questions to the complaining parties
1. Please comment on para. 91 of the US firs t written submission.  Do you agree that "it is
clearly possible for an action to be 'in response to' dumping or a subsidy but not be
'against' dumping or a subsidy"?  Please ex plain, taking into account the Appellate
Body's finding that "'specific action agai nst dumping' … is action that is taken in
response to situations presenting the cons tituent elements of 'dumping'" (1916 Act,
para. 122).  Does the Appellate Body's finding suggest that "specific action againstdumping" is necessarily a subset of action "in response to" dumping?  Please explain.
4.656  The Appellate Body has interpreted the notion of “specific action against dumping” as “action
taken in response to situations presenting the constituent elements of ‘dumping’”. That interpretation
leaves no scope for arguing that “specific action against dumping or subsidisation” is a “subset” of
“action in response to dumping”. For the Appellate Body, the two expressions have the same
meaning:  “specific action against dumping” is “action in response to dumping”.
4.657  The US contention that the above passage “provides no guidance as to the meaning of the
term against” is untenable. By interpreting the notion of “specific action against dumping” as “action
taken in response to the constituent elements of dumping”, the Appellate Body was giving meaning
also to the term “against”.
4.658  In support of its assertion that “it is clearly possible for action to be ‘in response to’ dumping
or a subsidy but not be ‘against’ dumping or a subsidy” the United States relies exclusively on two
examples: the distribution of anti-dumping or counterva iling duties to a charity; and the flying of flags
at half-mast following the issuance of an anti-dum ping or countervailing duty order. Both examples
are purely hypothetical, can be  readily distinguished from the offset payments and, in any event, fail
to prove the US point.WT/DS217/R
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4.659  As discussed below (Reply to Question 7), contrary to the assumption made by the
United States, the distribution of anti-dumping or countervailing duties to a charity is not an action “in
response to” dumping or subsidisation. As regards the second example, flying the flag at half-mast,
the possibility that a Member will ever take such action is remote. Moreover, in the even remoter casethat another Member would bother to bring a co mplaint against such action, the defendant would
stand a good chance to become the first Member to  ever succeed in rebutting the presumption of
nullification or impairment attached to all the violations of the WTO Agreement. The Complainants
submit that the Panel need not disturb the interpretation made by the Appellate Body in U.S - 1916
Act in order to make room for the use of flag flying as a trade remedy.
4.660  For the above reasons, the Panel should reject the US attempts to re-interpret the term
“against”. That term has already been interpreted by the Appellate Body in 1916 Act as part of itsinterpretation of the notion of “specific action against dumping”. By arguing now that it is necessary
to give meaning to the term “against”, the United St ates is in reality seeking to replace the Appellate
Body’s interpretation of “specific action against dumping” by a narrower, self-serving interpretation
of that notion.
4.661  However, should the Panel agree with the US view that the Appellate Body’s interpretation of
“specific action against dumping” needs to be qualified by re-interpreting the term “against”, the
Complainants submit that the reading of that term made by the United States is unduly restrictive. In
accordance with its ordinary meaning, the term “against” may encompass not only action that
“applies” directly to imports or importers, but more generally any action which is objectively capable
of offsetting or preventing dumping or subsidis ation, whether by imposing a direct burden on the
importers, or by providing an advantage to the domestic producers (see the Complainants’ Second
Submission, at Section IV.B).
2. Please explain exactly how you see that the "constituent elements of dumping" have ¨
been incorporated into the CDSOA.
4.662  The offset payments constitute “action which may be taken only when the constituent
elements of dumping or subsidisation are present”  and, therefore, “specific action against dumping or
subsidisation”, for at least three different reasons:
- first, the offset payments are not made to all US enterprises, or even to all US
producers “affected” by imports, but only and exclusively to the US
producers “affected” by an instance of dumping or subsidisation which has
been previously the subject of an anti-dumping or a countervailing dutyorder, respectively;
- second, the offset payments are paid for “qualifying expenses” incurred by
the affected domestic producers “after” the issuance of an anti-dumping or a
countervailing duty order; and
- third, the “qualifying expenses” must be related to the production of a
product that has been the subject of an anti-dumping or countervailing duty
order.
4.663  The fact that the offset payments distributed to the “affected” producers of a given product are
paid from the duties collected on imports of the like product provides further evidence of the remedial
purpose of the CDSOA. But it is neither a sufficient nor a necessary condition for establishing that theoffset payments constitute “specific action against dumping or subsidisation”.WT/DS217/R
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4.664  Contrary to the US assertions, the Complainants do not claim that the offset payments
constitute “specific action against dumping or subsidisation” merely because they are paid from anti-
dumping or countervailing duties. If the offset payments were financed directly from the US Treasury,
and in an amount unrelated to the amount of collected anti-dumping or countervailing duties, theywould still be “specific action against dumping” for the above mentioned three reasons.
3. In your view, would it be inconsistent with Article 18.1 of the AD Agreement and
Article 32.1 of the SCM Agreement   for a Member to provide subsidies in response to a
finding of dumping or subsidization, where that subsidization was in lieu of  anti-
dumping or countervailing measures?  If not, please explain in light of your view that
these provisions prohibit any action taken in response to situations presenting the
constituent elements of dumping.
4.665  Yes. Article 18.1 of the Anti-dumping Agreement and Article 32.1 of the SCM Agreement do
not distinguish between “specific action against dumping or subsidisation” which is taken in lieu of
anti-dumping or countervailing measures and that which is taken in addition to those measures. They
prohibit all specific actions against dumping and su bsidisation which are not in accordance with those
Agreements. The Complainants have shown that the offset payments provide a double remedy to the
“affected  domestic producers”. But the offset payments would still be prohibited by Article 18.1 of
the Anti-Dumping Agreement and  Article 32.1 of th e SCM Agreement even if they did not provide
such double protection.
4. Assume that a Member (which has no legal framework for the conduct of anti-
dumping/countervail investigations or imposition of anti-dumping countervailing
measures) implements a domestic subsidy programme with the explicit purpose and
design of offsetting the injurious effects of dumped or subsidized imports.  Would that
programme constitute a “specific action against dumping” (or subsidy)?
If not, please explain, and provide a reaso ned explanation as to how Article 18.1 of the
AD Agreement (or Article 32.1 of the SCM Agreem ent) can be interpreted to distinguish
between this hypothetical subsid y programme and the CDSOA regime .
4.666  Yes, in so far as the grant of the subsidies was conditional upon a finding of dumping or
subsidisation.
5. Would a victim compensation scheme (funded  from central treasury resources, rather
than penalties imposed on convicted criminals) constitute a "specific action against"
crime?  Please explain.  Would your answer be any different if the scheme were funded
from penalties imposed on convicted criminals?  Why?
4.667  The Complainants see little merit in the sugge sted analogy, since there is a fundamental
difference between the situation described in the question and the situation at issue in this case:
victims and criminals do not compete with each other to sell goods in the same market. At any rate,
making compensatory payments to the victims could indeed constitute an effective “action against
crime” if tied to “qualifying expenses” in items such as body-guards, alarm mechanisms or electrified
fences.
6. Assume that a Member enacts legisl ation mandating the payment of $5,000 to
petitioners to compensate them for the cost of making the petition and participating in
the anti-dumping investigation.  Would that payment constitute a "specific action
against dumping of exports" within the meaning of Article 18.1 of the AD Agreement?
Why, or why not?WT/DS217/R
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4.668  As described in the question, the payment would seem not to be dependent upon a positive
finding of dumping and, therefore, would not constitute “specific action against dumping” according
to the test set forth at paragraph 122 of the Appellate Body’s report in US - 1916 Act . The EC would
recall, nevertheless, that in footnote 66 of that report the Appellate Body left open the possibility that
the notion of “specific action against dumping” might be broader. However, like the Appellate Body
in US - 1916 Act , the Panel need not reach that issue in this case, because the CDSOA meets clearly
the test of paragraph 122.
7. Assume that a Member enacts legislatio n requiring that any anti-dumping duties
collected be paid to state retirement homes.   Would such payments constitute "specific
action against dumping of exports" within the meaning of Article 18.1 of the ADAgreement?  Why, or why not?
4.669  Making payments to state retirement homes is not a “response” to dumping and, therefore,
does not constitute “specific action against dumping”. The mere fact that an action is funded with
anti-dumping or countervailing duties does not turn such action into a “response” to dumping. Moneyis fungible. It would be absurd if one and the same action had to be characterised as an “action against
dumping” if it were funded with anti-dumping duties, as an “action against sales” if it were  financed
from a value added tax, or as an “action against profits” if it were funded with the proceeds of an
income tax.
4.670  The test laid down by the Appellate Body in US - 1916 Act  (“action that may be taken only
when the constituent elements of dumping are present”) must be satisfied by the “action” itself, and
not by the funds used to finance such action. In the proposed example, the relevant “action” is making
payments to a state retirement home. That “action” is not, as such, dependent upon the constituent
elements of dumping, but only upon the existence of a qualifying recipient institution. It is only the
funding of such action which is dependent upon a finding of dumping.
4.671  As explained above, the Complainants do not claim that the offset payments are “specific
action against dumping or subsidisation” simply because they are paid from anti-dumping or
countervailing duties. The offset payments are a “response” to dumping or subsidisation because they
are made exclusively to domestic producers affected by dumping or subsidisation for qualifying
expenses incurred after the issuance of an anti-dumping or countervailing duty order with respect to
the production of the same product which is the subject of such orders. The offset payments would
still be dependent upon a finding of dumping or subsidisation and, consequently, “specific actionagainst dumping or subsidisation” if they were paid  from the US Treasury or from any other source of
Government revenue.
8. Assume that the US restricted offset payments under the CDSOA to cases where the US
found the existence of dumping, injury and causation but did not impose an anti-
dumping order, and that such payments equalled the amount of anti-dumping duty thatwould have been collected had an anti-dumping order been put in place.  Would such
payments constitute "specific action agains t dumping of exports" within the meaning of
Article 18.1 of the AD Agreement, or "action under other relevant provisions of
GATT 1994" within the meaning of note 24?  Why, or why not?
4.672  The payments described in the question would constitute an action that “may be taken only
when the constituent elements of dumping are present” and, consequently, would be “specific action
against dumping”. The fact that the United States refrains from imposing an anti-dumping order
would not exclude a violation of Article 18.1, for the reasons already explained in the reply to
question 3. The payments described in the question would not constitute “action under other relevantWT/DS217/R
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provisions of GATT 1994” for the same reasons th at they constitute “specific action against
dumping”. Moreover, they would not be made “ under” any other “relevant” GATT provision (see
below the reply to Question 32).
9. Would the CDSOA violate AD Article 5.4 if of fset payments were made to all domestic
producers of the product under investigation, and not merely those domestic producers
supporting the petition?  Please explain.
4.673  Yes. In the situation described in the question, the offset payments would still provide an
incentive to file or support applications, because each domestic producer could not be sure that the
other domestic producers would file or support an application. The incentive to file an application
would remain until an application is lodged by another producer, while the incentive to support theapplication would subsist until the moment when th e thresholds for initiating an investigation are
reached.
10. Is a Member not acting in good faith when it provides incentives for the use of a WTO-
consistent remedy?  Please explain.
4.674  The proposition advanced in the question is like saying that, because the Constitution of the
United States allows the re-election of President Bush, his supporters act in good faith if they buy the
necessary votes to ensure that he is re-elected.
4.675  The question misses the crucial point that anti-dumping and countervailing measures are not
“a WTO consistent remedy” unless they have been imposed pursuant to an investigation initiated onthe basis of an application made “by or on behalf of the domestic industry”. The purpose of that
requirement is to limit the initiation of investigations (and consequently the imposition of measures)
to those cases where the domestic industry (rather than the Government or a minority of domestic
producers) is interested in the imposition of measures. The CDSOA seeks to avoid the limitations on
the initiation of investigations imposed by Article 5.4 of the Anti-Dumping Agreement andArticle 11.4 of the SCM Agreement by providing a financial incentive to file or support applications.
4.676  The obligation to perform a treaty obligation in good faith means that such  obligations “must
not be evaded by a merely literal interpretation”. It means also that the parties “must abstain from acts
that are calculated to frustrate the object and purpose of the treaty”. As explained in the
Complainants’ submission, the CDSOA frustrates the object and purpose of Article 5.4 of the Anti-
Dumping Agreement and Article 11.4 of the SCM Agreement because it encourages the opening of
investigations and the imposition of measures in cases where the domestic industry is not interested insuch measures. For that reason, the CDSOA is incomp atible with the obligation of the United States
to comply in good faith with the requirements of those articles.
11. Does support for an anti-dumping petition have to be genuine (i.e., based on the
actuality or expectation of injury) for the purposes of Article 5.4 of the AD Agreement?
If so, how could an investigating authority ensure that support is genuine in all cases?
4.677  Yes. If the domestic producers declare their support for the application in order to escape a
sanction imposed by the law (or a harm threatened by the Government or by another party) such
declaration cannot be considered as “support” for the purposes of Article 5.4 of the Anti-Dumping
Agreement and Article 11.4 of the SCM Agreement. Likewise, if the domestic producers declare theirsupport for the application in order to qualify for an advantage, such as the offset payments, that
declaration does not constitute “support” for the application. Rather, it is “support” for the offset
payments.WT/DS217/R
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4.678  If, as argued by the United States, it did not matter whether the support is “genuine”, a
Member’s authorities would be entitled to take any act ion within their reach in order to make sure that
the thresholds are attained: not only bribing the domestic producers to file or support applications, as
in the present case, but also denying them advantages (e.g. tax credits or government contracts), oreven imposing upon them sanctions (e.g. fines or, why not, imprisonment) if they failed to do so. In
those Members where the respect of human rights is of less concern than the protection of the
domestic industries, the authorities could go even further. For example, they could subject any
reluctant domestic producers to torture with the assurance that the “subjective motivations” of those
producers for signing the declarations of support would be deemed irrelevant for WTO purposes.
These examples evidence that the US formalistic interpretation of the term “support” would lead to
absurd results and cannot be correct.
4.679  In the absence of evidence to the contrary, the authorities must presume that, if a domestic
producer has declared formally its support for the application, such support is “genuine”, just like the
electoral authorities of all countries presume that, in  the absence of any evidence to the contrary, the
ballots cast by the voters are the genuine expression of their political choices. However, if the
authorities are presented with evidence that a declaration of support is not “genuine”, for example,because the petitioner has threatened or bribed the producer concerned, they cannot disregard such
evidence. To do so would be a violation of their duty to conduct an objective examination of the
existence of support.
4.680  By its very existence, the CDSOA destroys the presumption that a formal declaration of
support is evidence of genuine support. The CDSOA provides a strong incentive to file “non-genuine”applications and to make “non-genuine” declarations of support. As a result, it renders suspect all
applications and declarations of support made by the US producers. If the authorities could read the
minds of the US producers, they could disregard the “non-genuine” declarations of support and make
a proper determination of support, notwithstanding the incentives provided by the CDSOA. Since this
is impossible, the CDSOA has the necessary consequence that the US authorities are prevented fromreaching a proper determination of support, whether positive or negative, before initiating an
investigation, thereby violating Article 5.4 of th e Anti-Dumping Agreement and Article 11.4 of the
SCM Agreement.
4.681  The United States concedes, indeed stresses, the obvious point that the US authorities cannot
tell the genuine applications/declarations of support from those induced by the CDSOA, but fails to
draw the appropriate consequence from this. According to the United States, since the U.S authorities
cannot ascertain whether support is genuine or indu ced by the CDSOA, it would follow that the whole
issue is entirely irrelevant. This argument puts logic on its head. It is like saying that the buying of
votes should be permitted because the authorities cannot exclude that those voters who have been
bribed by a candidate would have voted for that candidate anyway. It is precisely because the
motivations of voters cannot be ascertained that all democracies ban the buying of votes per se,
regardless of its actual impact on the outcome of the election.
12. Does a domestic producer only "support" an anti-dumping application for the purpose
of Article 5.4 if its support is motivated solely by its desire for the imposition of an anti-
dumping measure?  Please explain.
4.682  A domestic producer “supports” an application if it declares its support because it supports
the measures as such,  and not because it has been coerced or induced to make a declaration of
support by the Government (or by the petitioner). In the case at hand, this means that a domestic
producer cannot be considered to “support” an application unless it would have declared its support
also in the absence of the offset payments.WT/DS217/R
WT/DS234/R
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13. Is it your view that there is no "support" (within the meaning of Article 5.4) for an
application if such support is motivated - in part, at least - by a domestic producer's
desire to be eligible for CDSOA offset payments?
4.683  As explained above, there is no “support” when the domestic producer would not have
supported the application but for the offset payments.
14. Would a Member violate Article 8.3 of the AD Agreement if it decided, as a matter of
general policy, never to accept price undertakings?  Please explain.
4.684  Yes. The interpretation suggested in the question would render superfluous Article 8.3 Anti-
Dumping Agreement.
4.685  The reference to “reasons of general policy” in Article 8.3 means that a Member may reject
undertakings not only for “reasons” related to the specific terms and circumstances of each
undertaking offered, but also for more general considerations which do not require a  case-by-case
examination of each undertaking. For example, a Member may decide not to accept any undertakings
in a certain product sector where monitoring is too difficult, or where there is a history of evasion ofundertakings, or where undertakings raise anti-trust concerns.
(b) Question to Canada
30. At para. 44 of its oral submission, Canada states that the Offset Act is a "specific action
against dumping" because inter alia  "payments are made only to those producers
'affected' by dumping".  Does Canada consider that the Offset Act would be a "specificaction against dumping" if payments were made to all domestic producers, and not only
those that had supported the petition?  Please explain.
4.686  The CDSOA defines the notion of “affected domestic producer” as including only those
producers who have filed or supported an application leading to the imposition of anti-dumping orcountervailing duties. However, even if that definition were amended to cover all the US producers of
the like product (i.e. including those who did not su pport the application), the offset payments would
still be “specific action against dumping or subsidisation”, because it would remain that no offset
payments would be paid to the US producers of other products which are not “affected” by dumping
or subsidisation.
(c) Questions to the European Communities
31. With reference to the last sentence of para. 33 of the EC oral statement, does the
European Communities consider that price und ertakings may only be rejected if the
acceptance of an undertaking is not "practicable"?  Please explain.
4.687  The EC would suggest that this question should have been addressed to the United States.
Indeed, at paragraph 132 of its First Submission, the United States stated that
[…] [Articles 8 and 18] state that an undertaking “need not be accepted if the
authorities of the importing member consider the acceptance impractical” because the
number of exporters is too great, or “for other reasons, including reasons of general
policy”. The ordinary meaning of “impractical” is that which is “not practical” or
“not available or useful in practice”, or “not inclined or suited to action”. Thesearticles do not limit or define the reasons that an administering authority may find an
undertaking to be “impractical”.WT/DS217/R
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4.688  At paragraph 134, the Unites States added that
 […] As explained above, the articles provide that the authorities need not accept an
undertaking if it is “impractical”. They do not limit the reasons that may lead the
authorities to conclude that acceptance is “impractical.”
4.689  Finally, at paragraph 136 the United States stated that
 […] The logical reading of the two sentences is that, once an administering authority
has concluded that an undertaking is impractical for whatever reason, the undertaking
is also considered to be “inappropriate”.
4.690  The above quoted passages suggest that the United States takes the view that an undertaking
may be rejected only if it is “impractical”. The passage of the EC’s oral statement cited in the question
addressed that argument. An alternative reading of Article 8.3 of the Anti-Dumping Agreement andArticle 18.3 of the SCM Agreement would be that undertakings may be rejected if they are
“impractical” or for “other reasons, including reasons of general policy”. In support of this reading, it
could be argued that the second sentence of those tw o Articles does not use the term “impractical” but
the term “inappropriate”, presumably with the intention to capture the two categories of “reasons”
mentioned in the first sentence (i.e. “impracticability” and “other reasons”). The argument made bythe Complainants at paragraph 96 of their First Submission is based on this reading.
4.691  Regardless of the interpretation, it remains that, contrary to the US assertions, the rejection of
undertakings is not within the authority’s “complete discretion”, but must be based on “reasons”.
(d) Questions to all parties
32. With reference to footnote 24 of the AD Agreement and footnote 56 to the SCM
Agreement, to what extent can subsidization be considered an action "under"
Article XVI of GATT 1994?
4.692  Footnotes 24 and 56 allude to action taken “under other relevant provisions” of the GATT.
This is not the same as saying “action which is not prohibited by some other GATT provision”. The“other relevant provisions” referred to in footnotes 24 and 56 are those GATT provisions which
confer and regulate positively the right to take a certain type of remedial action, such as Article VI,
Article XIX, or Articles XII and XVIII. Article XVI is not one of such “relevant provisions”.
4.693  Article XVI, as interpreted and elaborated in Parts II and III of the SCM Agreement, lays
down certain disciplines governing the use of subsidies, but does not provide for a positive right to
grant subsidies as a trade remedy. A measure which is neither prohibited by Part II nor actionable
under Part III may still be prohibited, on diff erent grounds, by another WTO provision (e.g.
Article III:2 of the GATT). One can say of a subsid y that it is not prohibited by Part II or not
actionable under Part III of the SCM Agreement, but not that it is “action” taken “under” Article 3 or
“under” Article 5 of the SCM Agreement.
4.694  As far as footnote 56 of the SCM Agreement is concerned, the Complainants would recall
that the SCM Agreement does not interpret only the subsidies provisions of Article VI of the GATT.The SCM Agreement is also an interpretation of Article XVI of the GATT. Therefore, Article XVI
cannot be one of the “other relevant provisions of GATT 1994” mentioned in footnote 56. Instead, it
is one of the “interpreted” provisions of the GATT alluded in Article 32.1
33. Please provide an example of a "n on-specific" action against dumping.WT/DS217/R
WT/DS234/R
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4.695  Assume that a Member imposes a safeguard measure under Article XIX of GATT against an
injurious increase in imports which is caused, at least in part, by dumping. That action may be
characterised as an action “against dumping” in so far as it applies, inter alia , to dumped imports, but
is not “specific action against dumping” because it is not dependent upon a finding of dumping.  It is
dependent upon a finding of an injurious increase in imports.
4.696  Or assume that a Member grants a subsidy which allows its exporters to engage in dumping.
If another Member imposes countervailing duties on those exports, such action would be “action
against dumping” because it applies to dumped imports. But it would not be “specific action against
dumping”, because it would not be conditional upon a finding of dumping, but instead upon a finding
of subsidisation.
4.697  To mention but one more example, assume that a Member grants subsidies to any industry in
difficulties which agrees to a restructuring plan, regardless of the causes of the difficulties (and,
therefore, including the situation where the diffic ulties are caused by dumped imports). That action
would be “action against dumping” in so far as the difficulties are caused by dumped imports. But
they would not be “specific action against dumping” because the granting of the subsidies is notdependent upon a finding of dumping.
34. Please give examples of the sort of "other reasons, including reasons of general policy"
that Members might invoke under Article 8.3 of the AD Agreement.
4.698  See above the reply to Question 14.
35. Does the violation of the international law pr inciple of good faith necessarily constitute a
violation of the WTO Agreement?  Does either the AD Agreement or the WTO
Agreement impose an independent obligation on Members to act in good faith?
4.699  The Complainants have not invoked the violation of an “independent”, self-standing
obligation to act in good faith. Rather, the claim made by the Complainants is that, by failing to
perform in good faith the obligations imposed by the provisions at issue of the Anti-Dumping
Agreement and the SCM Agreement, the United States has violated those provisions.
4.700  The principle of good faith is an “integral part” of the rule pacta sunt servanda , i.e. of the rule
that treaties are binding. This is reflected in Article 26 of the Vienna Convention on the Law of
Treaties  which, under the title “ pacta sunt servanda ”, provides that
Every treaty in force is binding upon the parties of it and must be performed by them
in good faith.
4.701  Thus, by failing to perform in good faith a treaty obligation, a party violates that treaty
obligation. The same is true of the obligations imposed by the WTO Agreement.
4.702  The WTO Agreement does not contain any express provision to the effect that the obligations
which it imposes must be performed in good faith. Nevertheless, Article 3.2 of the DSU stipulates thatthe provisions of the covered agreements must be interpreted in accordance with the customary rules
of interpretation of public international law. Similarly, Article 17.6 (ii) of the Anti-Dumping
Agreement provides that “the panel shall interp ret the relevant provisions of the Agreement in
accordance with customary rules of public international law”. By now it is well established that the
rules alluded in those two provisions include those codified in the Vienna Convention on the Law ofTreaties.WT/DS217/R
WT/DS234/R
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4.703  Article 31(1) of the Vienna Convention states the general rule of interpretation of treaty
obligations as follows:
A treaty shall be interpreted in good faith in accordance with the ordinary meaning to
be given to the terms of the treaty in their context and in their light of its object andpurpose.
4.704  Unlike the Vienna Convention, the WTO Agreement does not state expressly an obligation to
“perform” in good faith the obligations imposed by the WTO Agreement. But such obligation is
implicit in the requirement to “interpret” those obligations in good faith. Surely, if the WTO
provisions must be interpreted in good faith it is because they must be observed in good faith.
4.705  The Appellate Body has recognised the relevance of the principle of good faith in the context
of the WTO Agreement. According to the Appellate Body, the principle of good faith is “at once ageneral principle of law and a principle of general international law that informs the provisions of the
Anti-Dumping Agreement, as well as the other covered agreements”.
4.706  More specifically, the Appellate Body has explained that the requirement to conduct an
“objective examination” of the existence of injury set forth in Article 3.1 of the Anti-Dumping
Agreement means that such examination must conform “to the dictates of the basic principles of goodfaith and fundamental fairness” and is “yet another expression of the general principle of good faith”.
36. Is there anything in the panel or Appellate Body reports in the 1916 Act case to suggest
that either the panel or the Appellate Body, when addressing the meaning of Article 18.1
of the AD Agreement, had in mind the pure subsidy hypothetical set forth in question 3
above?
4.707  As far as the EC can recall, the “subsidy hypothetical” set forth in Question 3 was not
discussed before the panels or the Appellate Body.
4.708  The Complainants do not wish to speculate on what the panels or the Appellate Body “had in
mind”. They would recall, nevertheless, that at paragraph 81 of its report, the Appellate Body notedthat “specific action against dumping could take a wide variety of forms”. Further, in footnote 66 the
Appellate Body cautioned that “it did not consider it necessary, in the present cases, to decide whether
the ‘concept of specific action against dumping’ may be broader”. This suggests that, when defining
the notion of “specific action against dumping”, the Appellate Body “had in mind” a “wide variety of
actions” and was concerned that the definition set forth at paragraph 122 of the report might be, if
anything, too restrictive.
6. Japan
(a) Questions to the complaining parties
1. Please comment on para. 91 of the US firs t written submission.  Do you agree that "it is
clearly possible for an action to be 'in response to' dumping or a subsidy but not be
'against' dumping or a subsidy"?  Please ex plain, taking into account the Appellate
Body's finding that "'specific action agains t dumping' … is action that is taken in
response to situations presenting the cons tituent elements of 'dumping'" (1916 Act,
para. 122).  Does the Appellate Body's finding suggest that "specific action against
dumping" is necessarily a subset of action "in response to" dumping?  Please explain.WT/DS217/R
WT/DS234/R
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4.709  Japan disagrees with the United States’ allegation that it is possible for an action to be “in
response to” dumping but not be “against” dumping.   The Appellate Body states that “the ordinary
meaning of the phrase ‘specific action against dumpi ng’ of exports within the meaning of Article 18.1
is action that is taken in response to situations presenting the constituent elements of ‘dumping’.”111  It
further states “Article VI is applicable to any ‘specific action against dumping’ of exports, i.e. , action
that is taken in response to situations presenting the constituent elements of ‘dumping’.”112   These
statements clarify that “specific action ‘against’ dumping” is equivalent to “action that is taken ‘in
response to’ situations presenting the constituent elements of dumping.”  The “specific action against
dumping” is not a subset of action “in response to” dumping.
4.710  The Appellate Body’s expression in the 1916 Act of an action “in response to” dumping
would be properly understood when separated it into two elements.  First, an action can be taken “in
response to” dumping only when the constituent elements of dumping exist before the action is taken.
The presence of the dumping is thus a precondition to take an action.  Second, the Appellate Body
uses expression of “in response to” in the context of Article VI,113 and accordingly, the expression
must be understood in that context.  In this respec t, the Appellate Body uses the term “in response to
dumping” interchangeably with “counteract dumping” to discuss the scope of Article VI and the ADAgreement
114.  The EC Panel in 1916 Act also found that Article VI:2 provides that only measures in
the form of anti-dumping duties may be applied to counteract  dumping as such.115  These statements
clarify that the Appellate Body’s expression of an  action “in response to” dumping would properly be
understood to mean an action “to counteract” dumping.
4.711  Therefore, An action is specific against dumping when it satisfies the following conditions:
(i) The action is conditioned upon situations presenting the constituent elements
of dumping; and,
(ii) The action is taken to counteract dumping.
4.712  Examples presented in the US first written submission, such as contributions to charity and
flying a flag at half-mast, are not specific actions against dumping because these examples are notactions to counteract dumping, and thus fail to satisfy the second condition above.  In contrast, the
distribution, which the CDSOA mandates, satisfies both conditions, and therefore is “specific action
against dumping.”
2. Please explain exactly how you see that th e "constituent elements of dumping" have
been incorporated into the CDSOA.
                                                     
111 Appellate Body Report, United States – Anti-Dumping Act of 1916  (WT/DS 136,162/AB/R) (“1916
Appellate Body”), para. 122. (emphasis added.)
112  1916 Appellate Body, para.126 (emphasis added).
113 1916 Appellate Body, para. 126 (“[w]e have found that Article 18.1 of the  Anti-Dumping
Agreement  requires that any ‘specific action against dumping’ be in accordance with the provisions ofArticle VI of the GATT 1994 concerning dumping”.)  See also other quotations from the 1916 Appellate Body,
supra .
114 1916 Appellate Body, para. 109.  See also  para. 116, and 117.
115 See WT/DS136/R para.6.204.  The EC Panel and Japan Panel also uses the term “address” to
paraphrase the term “counteract.”  (“We have reached the conclusion that rules and declines of that article
[Article VI] apply to laws that address  ‘dumping’ as defined in Article VI:1 of GATT 1994”) (WT/DS136/R
para. 6.163.  See also  WT/DS162, para. 6.182).WT/DS217/R
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4.713  As discussed in Japan's first written submission in para. 4.13, the “constituent elements of
dumping” include the introduction by a country of a product into the commerce of another country at
less than its normal value.
4.714  The CDSOA has incorporated the constituent elements of dumping because the CDSOA
mandates the distribution only when the United States Government (“USG”) issues an order to
impose anti-dumping duties on imported products and only as long as the USG maintains the order.
See Section 754 (a) of Tariff Act of 1930, as amended by Section 1003 of CDSOA.  The USG issues
an anti-dumping order only when it finds an export price of a product into the United States is less
than its normal value.  Further, the order would be ab le to remain in force “only so long as and to the
extent necessary to counteract dumping which is causing injury.”  See Article 11.1 of AD Agreement.
The distribution under the CDSOA is conditioned upon the situations presenting constituent elementsof dumping.  The distributions of collected duties under the CDSOA become a practical and
theoretical impossibility in the absence of the cons tituent elements of dumping (or subsidization). As
such, the “constituent elements of dumping”  have been incorporated into the CDSOA.
3. In your view, would it be inconsistent with Article 18.1 of the AD Agreement and
Article 32.1 of the SCM Agreement   for a Member to provide subsidies in response to a
finding of dumping or subsidization, where that subsidization was in lieu of  anti-
dumping or countervailing measures?  If not, please explain in light of your view that
these provisions prohibit any action taken in response to situations presenting the
constituent elements of dumping.
4.715  Assuming that the subsidy is provided to “affected domestic producers,” as is the CDSOA,
this hypothesis would be inconsistent with these Articles.
4.716  The Appellate Body stated in the 1916 Act case, “Article VI, and, in particular, Article VI:2,
read in conjunction with the  Anti-Dumping Agreement, limit the permissible responses to dumping to
definitive anti-dumping duties, provisional measures and price undertakings.”
116  As the Appellate
Body found, these Articles and provisions prohibit Members from taking any other actions in
response to dumping except for these three measures. Subsidies in response to a finding of dumping in
this hypothesis are not one of the three types of permissible measures.
4.717  As discussed in Japan's first written submission in paragraphs 4.36 through 4.46, Article 10,
footnote 35, and 32.1 of the SCM Agreement limit specific actions against subsidy that a Member
may take to countervailing duties, provisional measures, price undertakings, or countermeasures
under Article 4 and 7.  The provision of subsidies in response to a finding of subsidisation is notamong of these permissible measures.
4.718  A Member, therefore, may not provide subsidie s in response to dumping or subsidisation.
This conclusion does not differ even if the subsidisation is in lieu of anti-dumping or countervailing
measures permitted under the AD Agreement or the SCM Agreement.  Indeed, it is within a
Member’s discretion whether to impose either or none of the permitted measures.  No provisions inthe AD Agreement, the SCM Agreement or other WTO Agreements, however, permit any alternative
measures.  Thus, the hypothesized subsidies are inconsistent with the AD and the SCM agreements
irrespective of the fact that the Member refrains from taking permissible measures in response to
dumping or a subsidy.
4. Assume that a Member (which has no legal framework for the conduct of anti-
dumping/countervail investigations or imposition of anti-dumping countervailing
                                                     
116 1916 Appellate Body, para 137.WT/DS217/R
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measures) implements a domestic subsidy programme with the explicit purpose and
design of offsetting the injurious effects of dumped or subsidized imports.  Would that
programme constitute a “specific action against dumping” (or subsidy)?
If not, please explain, and provide a reaso ned explanation as to how Article 18.1 of the
AD Agreement (or Article 32.1 of the SCM Agreem ent) can be interpreted to distinguish
between this hypothetical subsid y programme and the CDSOA regime .
4.719  Japan assumes that the subsidy programme is to offset the injury caused by “ dumping ” or
”subsidy ” as defined in Article VI of GATT 1994, the AD Agreement or the SCM Agreement.  Japan
also assumes that the subsidy is not a countermeasure permitted under Article 4 or 7 of the SCMAgreement.  Upon these assumptions, this hypotheti cal programme would be inconsistent with the
AD Agreement and the SCM Agreement.
4.720  The subsidy would satisfy the first condition as  discussed in Japan's answer to Question 1
above.  The subsidy would be granted only when th e Member finds dumping or a subsidy within the
meaning of Article VI of GATT 1994, the AD Agreem ent or the SCM Agreement.  The execution of
the subsidy programme is therefore conditioned upon situations presenting the constituent elements of
dumping or subsidization.
4.721  The subsidy would also satisfy the second cond ition in Japan's answer to Question 1 above.
In this hypothesis, a Member would provide a subsidy to domestic producers, which are injured
because of dumping or subsidy.  This subsidy is intended and designed to resume the competitivepower of domestic producers against dumping or subsid y.  In other words, the subsidy is intended and
designed to counteract dumping or subsidy.  The subsidy is therefore a measure to counteract
dumping or subsidy.
4.722  The subsidy programme thus would satisfy both of the two conditions discussed in Japan's
answer to Question 1 above.  The programme therefore constitutes a specific action against dumpingor subsidy under Article 18.1 of the AD Agreem ent or Article 32.1 of the SCM Agreement.
4.723  It should be noted that a Member must act in a manner consistent with Articles 18.1 and 32.1
of the AD and SCM Agreements, even if the Member chooses not to have any legal framework for
anti-dumping or countervailing duty investigations, as discussed in Japan's answer to the Question 3
above.
5. Would a victim compensation scheme (funded  from central treasury resources, rather
than penalties imposed on convicted criminals) constitute a "specific action against"crime?  Please explain.  Would your answer be any different if the scheme were funded
from penalties imposed on convicted criminals?  Why?
4.724  Because of differences in nature among various crimes, it is a difficult task to discuss what
constitutes a “specific action against” crime in general.  A victim compensation scheme, however,may be viewed as a “specific action against” some crimes, such as  fraudulent interference with a
victim’s business.  If Japan may consider that m onetary loss by the interference to the victim is a
situation presenting the constituent elements of th e crime, compensation to the victim then would
counteract the crime.  It therefore would be a specific action against crime.
4.725  Japan's answer would not change due to the so urce of the fund.  When the funding to victims
is considered to be a specific action against crime as analysed above, the source of the funding is
irrelevant to the analysis.  Imposition of a penalty on a criminal would constitute another specific
action against crime separately from this hypothetical funding.WT/DS217/R
WT/DS234/R
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6. Assume that a Member enacts legisl ation mandating the payment of $5,000 to
petitioners to compensate them for the cost of making the petition and participating in
the anti-dumping investigation.  Would that payment constitute a "specific action
against dumping of exports" within the meaning of Article 18.1 of the AD Agreement?Why, or why not?
4.726  Assuming that a Member would make the payment, upon a finding of dumping, for
preparation of a petition and participation into an investigation under the AD Agreement, such
payment would constitute a “specific action against dumping of exports.”  In this case, a valid petition
must contain positive evidence of the constituent elements of dumping.  See Article 5.2 of AD
Agreement.   The payment for the petition, therefore, is a specific action taken where the firstcondition as discussed in Japan's answer to the Question 1 above is satisfied.
4.727  The preparation of the petition is also an action to counteract dumping.  The action of
preparing a petition is required of any petitioner, and is therefore an action necessary to counteract
dumping.  A Member’s payment for the preparation of a petition is equivalent to the action of the
preparation itself, and thus is also a specific action to counteract dumping.  The payment thereforealso satisfies the second condition to be a “specific action against dumping.” As the payment would
satisfy both conditions to be a “specific action against dumping,” the payment would be an action
prohibited under the Article 18.1 of the AD Agreement.
7. Assume that a Member enacts legislatio n requiring that any anti-dumping duties
collected be paid to state retirement homes.   Would such payments constitute "specific
action against dumping of exports" within the meaning of Article 18.1 of the AD
Agreement?  Why, or why not?
4.728  The payment to state retirement homes would not constitute a “specific action against
dumping” because the payment would not be an action to counteract dumping, and therefore does notsatisfy the second condition as discussed in the answer to the Question 1 above.
8. Assume that the US restricted offset payments under the CDSOA to cases where the US
found the existence of dumping, injury and causation but did not impose an anti-
dumping order, and that such payments equalled the amount of anti-dumping duty that
would have been collected had an anti-dumping order been put in place.  Would such
payments constitute "specific action agains t dumping of exports" within the meaning of
Article 18.1 of the AD Agreement, or "action under other relevant provisions of GATT1994" within the meaning of note 24?  Why, or why not?
4.729  This offset payment would constitute a “specific action against dumping of exports” because
the offset payment would be made in situations presenting the constituent elements of dumping, and
would counteract dumping or subsidy.  The USG’s decision not to impose an anti-dumping duty onimports is irrelevant.  Even if the offset payment would not be funded from the collected anti-
dumping or countervailing duties, it does not alter the payment’s status as a “specific action against
dumping.”  Please see Japan's answers to Questions 1, 3 and 4 above for further discussions in this
connection.
4.730  The offset payment in this hypothesis is not an “action under other relevant provisions of
GATT 1994” because the offset payment is a “specific action against dumping.”  The Appellate Body
in the 1916 Act case found that “ ‘Action’ within the meaning of footnote 24 is to be distinguished
from ‘specific action against dumping’ of exports, which is governed by Article 18.1 itself.”
117  I t
                                                     
117 1916 Appellate Body, para 123.WT/DS217/R
WT/DS234/R
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further found that “Article 18.1 should be read as requiring that any ‘specific action against dumping’
of exports from another Member be in accordance with the relevant provisions of  Article VI of the
GATT 1994, as interpreted by the  Anti-Dumping Agreement.”  These statements clarify that
footnote 24 exclude no “specific action against dumping” from the application of Article 18.1.
4.731  The United States erred in arguing that the CDSOA is exempted from the application of
Article 18.1 of AD Agreement because of footnote 24.  As Japan demonstrated in its first written
submission, oral statement, second submission an d above, the CDSOA mandates a “specific action
against dumping” within the meaning of Article 18.1 of AD Agreement that is not permitted by
Article VI and the AD Agreement.  As the Appellate Body instructs, footnote 24 does not exclude the
CDSOA from the application of Article 18.1.
9. Would the CDSOA violate AD Article 5.4 if of fset payments were made to all domestic
producers of the product under investigation, and not merely those domestic producers
supporting the petition?  Please explain.
4.732  Yes.  The payment still provides a financial incentive to support a petition because the offset
payment will never be made unless an anti-dumping or countervailing duty investigation is initiated.An anti-dumping or countervailing investigation may be initiated only when a petition attracts 25 per
cent support among the entire domestic production, and 50 per cent support among domestic
production expressing either support or opposition.  The offset payments thus still provide a strong
incentive to domestic producers to support the petition.
10. Is a Member not acting in good faith when it provides incentives for the use of a WTO-
consistent remedy?  Please explain.
4.733  Japan understands that the incentive questioned in this dispute is not incentive for the use of a
WTO consistent remedy, but incentive for creation of an appearance clearing the legal requirements
superficially for the use of WTO consistent remedy.  Articles 5.4 of the AD Agreement and 11.4 ofthe SCM Agreement require a minimum expression of support by domestic producers before  a
Member legally may initiate an investigation.  In other words, the expression of a sufficient degree of
industry support is the predicate of a Member’s very right to initiate.  A Member may not, in good
faith compliance with its obligations under those articles, “purchase” that legal right by offering
payments to domestic producers so as to induce th em to express support they might not otherwise
express.
11. Does support for an anti-dumping petition have to be genuine (i.e., based on the
actuality or expectation of injury) for the purposes of Article 5.4 of the AD Agreement?
If so, how could an investigating authority ensure that support is genuine in all cases?
12. Does a domestic producer only "support" an anti-dumping application for the purpose
of Article 5.4 if its support is motivated solely by its desire for the imposition of an anti-dumping measure?  Please explain.
13. Is it your view that there is no "support" (within the meaning of Article 5.4) for an
application if such support is motivated - in part, at least - by a domestic producer's
desire to be eligible for CDSOA offset payments?
4.734  The determination of the support under Article 5.4 of the AD Agreement must be based on
the examination of true or genuine support to a claim that the domestic industry is injured by
dumping.  In ordinary situations, the investigation authorities may presume that expressions ofWT/DS217/R
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support from domestic producers are true or genuine without further scrutiny unless circumstances or
other evidence indicates that their expressions would be tainted by other interests.
4.735  The question in this dispute, however, is NOT whether the USG is obliged to scrutinize
motives of domestic industries under Article 5.4 at the time of any polling of support.  The question iswhether a WTO Member may promise to provide financial benefits to domestic producers upon the
condition that they support a petition at the time of the polling.
4.736  As discussed in Japan's first written statement, oral statement, and answer to Question 10
above, the USG has an obligation to perform the determination required by Article 5.4 in good faith.
Further, Article 4.1 of AD Agreement informs Article 5.4, and makes clear the duty of care required
of the investigating authorities to ensure that other interests do not distort expression by domestic
producers of their support or opposition to a petition.  Japan refers to its first written submission,paragraphs 4.47 through 4.75 for further discussion on this issue.  The CDSOA explicitly supplies
“other interests” to domestic producers in a manner inconsistent with USG’s obligations under
Article 5.4.   
4.737  The only way for the USG to perform its obligations under Article 5.4 in good faith and
determine the degree of support properly is simply to remove the financial incentives that the CDSOA
mandates.
14. Would a Member violate Article 8.3 of the AD Agreement if it decided, as a matter of
general policy, never to accept price undertakings?  Please explain.
4.738  While Article 8.3 of the AD Agreement does not require the acceptance of undertakings, a
good faith application of its terms would require acceptance in those situations in which it is practical
or appropriate to do so.  Members have an obligation to consider offered undertakings in good faith
and must have a proper reason if they are rejected.
4.739  Article 8.3 of the AD Agreement does not justify a Member’s rejection of an offered price
undertaking only based on its policy never to accept price undertakings.  The Member still wouldhave an obligation to review an offered undertaking and may reject it only when it would have a
proper reason to reject the individual offer in all cases.  A mere statement that the Member has such a
policy is not sufficient for the purpose of Article 8.3.  This hypothesis, however, does not apply to the
USG because the USG has never taken, or does not claim in its rebuttals, that it will take, such a
position.
(b) Questions to all parties
32. With reference to footnote 24 of the AD Agreement and footnote 56 to the SCM
Agreement, to what extent can subsidization be considered an action "under"
Article XVI of GATT 1994?
4.740  A subsidy granted without taking any procedures set forth in Article XVI of the GATT is not
an action “under other relevant provisions of the GATT” within the meaning of footnotes 24 and 56.Article XVI does not provide a right to grant subsid ies in general, it merely deals with reporting
requirements and other procedural issues.  Therefore, a Member that simply grants a subsidy is not
taking action “under” Article XVI.
4.741  Subsidization further cannot be considered an action “under other relevant provisions of the
GATT”, within the meaning of footnote 56 of the SCM Agreement because Article XVI is “theprovisions of GATT” under Article 32.1.  Article 32.1 prohibits Members from taking specific actionWT/DS217/R
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against a subsidy of another Member “except in accordance with the provisions of GATT, as
interpreted by this Agreement. ”  (emphasis added.)  The SCM Agreement interprets not only
Article VI:3 of GATT but also Article XVI.  The reference in footnote 56 to “ other relevant
provisions of GATT” is meant to encompass only those provisions that are not covered by
Article 32.1, i.e., provisions that are not interpreted by the SCM Agreement.  Therefore, neither
Article VI:3 nor Article XVI  can be considered “ other provisions of the GATT under footnote 56.
4.742  It also bears noting that the distributions under the CDSOA do not fall in the scope of
footnotes 24 and 56 because, as Japan and other complainants have demonstrated, they are specific
actions against dumping or subsidy covered by Articles 18.1 and 32.1.  The Appellate Body in the
1916 Antidumping Act case found that “action” within the meaning of footnote 24 is to be
distinguished from “specific action against dumping” within the meaning of Article 18.1.118  A
measure that is considered “specific action agai nst dumping” is “governed by Article 18.1 itself.”119
Likewise, a measure that is considered “specific action against a subsidy” is governed by Article 32.1.
Also, the Panel in the 1916 Antidumping Act case specified that footnote 24 does not affect the
conclusion that “when dealing with dumping as such , Members must comply with Article VI of the
GATT 1994 and the Anti-Dumping Agreement.”120  Therefore, the distributions under the CDSOA,
which are specific  actions against dumping or subsidy covered by Articles 18.1 and 32.1, would not
fall within the scope of footnotes 24 or 56.  The United States cannot justify the distribution under the
CDSOA based on footnotes 24 and 56.
33. Please provide an example of a "n on-specific" action against dumping.
4.743  A safeguard measure in accordance with Article XIX of GATT 1994 and the Agreement of
Safeguard is an example of a non-specific action against dumping.  A safeguard measure normally is
taken in response to situations in which an unforeseen increase of imports causes serious injury or
threat of serious injury to domestic industry.  If Japan supposes a case in which dumping is one of the
elements causing the serious injury or threat thereof, taking a safeguard measure may, as a result, haveeffects to address dumping.  It is, however, not an action which is specifically addressed to dumping,
because a safeguard measure is an action taken in response to the increase of imports that causes
serious injury or threat of serious injury, and not in response to dumping.
34. Please give examples of the sort of "other reasons, including reasons of general policy"
that Members might invoke under Article 8.3 of the AD Agreement.
4.744  As discussed in Japan's answer to Question 14, a Member has an obligation to review an
offered undertaking, and may reject it only when it has a proper reason to reject it in all cases.  A mere
statement that the Member has a policy not to accept price undertakings is not sufficient to justify the
rejection for the purpose of Article 8.3.
35. Does the violation of the international law pr inciple of good faith necessarily constitute a
violation of the WTO Agreement?  Does either the AD Agreement or the WTOAgreement impose an independent obligation on Members to act in good faith?
4.745  The answer is “yes” to both questions.  The international law principle of good faith is a basis
to consider whether a Member performs its obligations in compliance with specific provisions of the
AD Agreement and the SCM Agreement.  The Understanding on Rules and Procedures Governing theSettlement of Disputes (the “DSU”) provides that this dispute settlement system serves to clarify the
                                                     
118 1916 Appellate Body, para. 123.
119 1916 Appellate Body, para. 123.
120 1916 Panel report, WT/DS136/R, footnote 374.WT/DS217/R
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existing provisions of WTO agreements covered by DSU121 “in accordance with customary rules of
interpretation of public international law.”122  Article 17.6(ii) of the AD Agreement also provides that
the provisions of the AD Agreement shall be interpreted in accordance with customary rules of
interpretation of public international law.
4.746  Article 26 of the Vienna Convention on the Law of Treaties, which requires that parties
perform every treaty in good faith, has been recogniz ed by the Appellate Body as “a general principle
of law and a principle of general international law, that informs the provisions of the  Anti-Dumping
Agreement,  as well as the other covered agreements.”123
4.747  Further, Article 31 of the Convention requires that the treaty, such as the AD Agreement and
the SCM Agreement, must be interpreted in good fa ith in accordance with the ordinary meaning to be
given to the terms in the context of the treaty, and in the light of its object and purposes.
4.748  While the good faith performance is not an independent obligation explicitly provided in the
WTO Agreement, the administration of national trade laws and regulations in a uniform, impartial and
reasonable manner is a Member’s obligation explicitly provided in Article X:3(a) of GATT 1994.
Not only must a Member’s anti-dumping laws and regulations conform with the AD Agreement, that
Member must also perform its obligations under the AD Agreement in a uniform, impartial and
reasonable manner.  For example, 732(c)(4)(A) of the Tariff Act of 1930 of the United States,
codified at 19 USC. § 1673a(c)(4)(A), provides the same 50 per cent and 25 per cent for industrial
support tests as provided in Article 5.4 of the AD Agreement and Article 11.4 of SCM Agreement.
The USG thus has an obligation to perform these tests in a uniform, impartial and reasonable manner.
36. Is there anything in the panel or Appellate Body reports in the 1916 Act case to suggest
that either the panel or the Appellate Body, when addressing the meaning of Article 18.1
of the AD Agreement, had in mind the pure subsidy hypothetical set forth in question 3
above?
4.749  In addition to Appellate Body’s findings quoted above, Japan wishes the Panel to take note of
the following findings by Appellate Body and the Panel.  The Appellate Body found that: Article VI,
and, in particular, Article VI:2, read in conjunction with the  Anti-Dumping Agreement, limit the
permissible responses to dumping to definitive anti-dumping duties, provisional measures and price
undertakings.  (para. 137).
4.750  These findings clarify that no other measures, including the hypothetical subsidy set forth in
Question 3 above, are permissible response to dumping.  The negotiation history of Article VI
strengthens these findings, as the EC Panel Report notes in paragraphs 6.201 and 6.202. 124
36bis. ADDRESSED ONLY TO THOSE PARTIES THAT WERE PARTIES OR THIRD
PARTIES IN THE 1916 ACT PROCEEDINGS:  Was there anything in your
submissions to the panel or Appellate Body in the 1916 Act proceedings that would have
caused the panel or Appellate Body to a ddress the meaning of Article 18.1 of the AD
Agreement in the context of the pure subsidy hypothetical set forth in question 3 above?
                                                     
121 WTO agreements covered by DSU include the AD Agreement and the SCM Agreement.  See
Article 1 and Appendix I of the DSU.
122 The DSU Article 3.2.
123 United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan ,
WT/DS184/AB/R, para. 101 and footnote 56.  See also Argentina – Measures Affecting Imports of Footwear,
Textiles, Apparel and Other Items , WT/DS56/R para. 6.14, (25 November 1997, adopted as modified)
124 WT/DS136/R, 31 March 2000.WT/DS217/R
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4.751  Japan does not find any arguments specifically addressing the hypothetical set forth in
question 3.  Nevertheless, Japan draws the Panel’s attention to the following paragraphs of Japan’s
written submission to the Panel and to the Appellate Body in the 1916 Antidumping Act  case,
regarding Article 18.1 of the AD Agreement:
- First Written Submission of Japan before the Panel (20 September 1999)
(WT/DS 162), paragraphs 62-71.
- Second Written Submission of Japan before the Panel (24 November 1999)
(WT/DS 162), paragraph 52.
- Written Submission of Japan before the Appellate Body (30 June 2000)
(WT/DS 136/162), paragraphs 54, 59-63, 66, 67, 71.
7. Korea
(a) Questions to the complaining parties
1. Please comment on para. 91 of the US firs t written submission.  Do you agree that "it is
clearly possible for an action to be 'in response to' dumping or a subsidy but not be
'against' dumping or a subsidy"?  Please ex plain, taking into account the Appellate
Body's finding that "'specific action agains t dumping' … is action that is taken in
response to situations presenting the cons tituent elements of 'dumping'" (1916 Act,
para. 122).  Does the Appellate Body's finding suggest that "specific action against
dumping" is necessarily a subset of action "in response to" dumping?  Please explain.
4.752  No, due to the finding of the Appellate Body in US-1916 Act , it is not possible.
4.753  No, the Appellate Body’s finding does not suggest th is.  This is because, as a matter of logic
(given the Appellate Body’s interpretation in US-1916 Act  (para. 122)), if an action is “in response to”
dumping it is “against” dumping.  The Appellate Body has interpreted “against” dumping to be “in
response to situations presenting the constituent elements of ‘dumping’.”
2. Please explain exactly how you see that the “constituent elements of dumping” have
been incorporated into the CDSOA.
4.754  The Byrd Amendment does not operate, i.e., it has no effect whatsoever, absent a finding by
the US authorities that the constituent elements of dumping have been met.  This finding is a
necessary condition precedent for operation of the Byrd Amendment and, therefore, the “constituent
elements of dumping” have been incorporated into the Byrd Amendment.
3. In your view, would it be inconsistent with Article 18.1 of the AD Agreement and
Article 32.1 of the SCM Agreement   for a Member to provide subsidies in response to a
finding of dumping or subsidization, where that subsidization was in lieu of  anti-
dumping or countervailing measures?  If not, please explain in light of your view that
these provisions prohibit any action taken in response to situations presenting the
constituent elements of dumping.
4.755  Yes, it would be inconsistent.  In response to a finding that dumping or subsidization has
occurred in the context of an anti-dumping or countervailing duty investigation, a Member is
permitted only to apply the remedies se t forth within the relevant agreement, i.e., offsetting duties not
to exceed the amount of dumping or subsidy.  In general, a Member may, of course, grant a subsidy ifWT/DS217/R
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it wishes, so long as the subsidy is not inconsistent with the relevant provisions of GATT 1994 and
the SCM Agreement.
4. Assume that a Member (which has no legal framework for the conduct of anti-
dumping/countervail investigations or imposition of anti-dumping countervailingmeasures) implements a domestic subsidy programme with the explicit purpose and
design of offsetting the injurious effects of dumped or subsidized imports.  Would that
programme constitute a “specific action against dumping” (or subsidy)?
If not, please explain, and provide a reaso ned explanation as to how Article 18.1 of the
AD Agreement (or Article 32.1 of the SCM Agreem ent) can be interpreted to distinguish
between this hypothetical subsid y programme and the CDSOA regime.
4.756  Insofar as the domestic subsidy programme would be “in response to situations presenting the
constituent elements of ‘dumping’” or subs idy, the programme would not be permissible.
5. Would a victim compensation scheme (funded  from central treasury resources, rather
than penalties imposed on convicted criminals) constitute a "specific action against"crime?  Please explain.  Would your answer be any different if the scheme were funded
from penalties imposed on convicted criminals?  Why?
4.757  With all due respect, the question is irrelevant because criminals are not in a competitive
market with their victims.  The relationship between a criminal and its victim is completely differentfrom that which exists between imported and domestic goods, which compete in a marketplace day in
and day out.  Thus, a grant to a victim (or a fine or penalty against a criminal) does not have a similar
effect – the two parties are not competing in a marketplace.
6. Assume that a Member enacts legisl ation mandating the payment of $5,000 to
petitioners to compensate them for the cost of making the petition and participating inthe anti-dumping investigation.  Would that payment constitute a "specific action
against dumping of exports" within the meaning of Article 18.1 of the AD Agreement?
Why, or why not?
4.758  The situation set out in the question is, perhaps, even worse, because the payment would
precede an actual finding that the constituent elements  exist.  (In essence, it would be a specific action
against alleged dumping.)  It also would act to advantage the petitioners vis-à-vis the allegedly
dumped imports.  In addition, it certainly would impr operly bias the process in favor of petitioners,
possibly violating Article 5.4 of the AD Agreement and Article 11.4 of the SCM Agreement.  This
said, if one were to strictly apply the Appellate Body’s analysis set forth at paragraph 122 of the US -
1916 Act  report, because the measure would not follow a positive finding of dumping, it would not be
a “specific action against dumping.”
7. Assume that a Member enacts legislatio n requiring that any anti-dumping duties
collected be paid to state retirement homes.  Would such payments constitute "specific
action against dumping of exports" within the meaning of Article 18.1 of the AD
Agreement?  Why, or why not?
4.759  No, the payments would not constitute specific action against dumping of exports, because
they would have no impact whatsoever on the conditions of competition.
8. Assume that the US restricted offset payments under the CDSOA to cases where the US
found the existence of dumping, injury and causation but did not impose an anti-WT/DS217/R
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dumping order, and that such payments equalled the amount of anti-dumping duty that
would have been collected had an anti-dumping order been put in place.  Would such
payments constitute “specific action agains t dumping of exports” within the meaning of
Article 18.1 of the AD Agreement, or “action under other relevant provisions of GATT1994” within the meaning of note 24?  Why, or why not?
4.760  The payments would be a specific action against dumping under Article 18.1 insofar as the
payments would be conditioned on affirmative findings of dumping, injury and causation.
9. Would the CDSOA violate AD Article 5.4 if of fset payments were made to all domestic
producers of the product under investigation, and not merely those domestic producers
supporting the petition?  Please explain.
4.761  Yes.  In that case (which does not exist here), Article 5.4 would be violated, because US
companies still would be spurred by the legislation to file and support petitions, which, absent the
legislation, they would not support.  The incentive would exist because each US company could not
be certain that other US companies would file and support a petition.
10. Is a Member not acting in good faith when it provides incentives for the use of a WTO-
consistent remedy?  Please explain.
4.762  A Member is not acting in good faith when it alters the economic climate so as to encourage
trade remedy proceedings.  The provisions (e.g., standing) were negotiated with a view towardexisting economic incentives (merits of the case ), not with a view toward the existing economic
incentives, biased by a cash reward.  In other words, had the negotiators considered cash rewards
permissible, the thresholds likely would be much  higher. Moreover, anti-dumping and countervailing
measures are not “a WTO-consistent remedy” unless they have been imposed pursuant to an
investigation initiated on the basis of an application made “by or on behalf of the domestic industry.”This requirement limits the investigations (and consequently the imposition of measures) to cases
where the domestic industry
 – not a small subset of it – is interested in the imposition of WTO-
consistent measures, not cash rewards.  Note, also, that in this case, the Byrd Amendment acts toencourage proceedings under a regime (the US anti-dumping regime) which has been found to violate
WTO obligations and has yet to be brought into conformance.
11. Does support for an anti-dumping petition have to be genuine (i.e., based on the
actuality or expectation of injury) for the purposes of Article 5.4 of the AD Agreement?If so, how could an investigating authority ensure that support is genuine in all cases?
4.763  At best, yes.  However, Article 5.4 obligates Members, not industries.  Nonetheless, when a
Member acts to encourage spurious petitions, the Member must also act to ensure that the support is
for reasons of the investigation itse lf  rather than the cash reward.
12. Does a domestic producer only "support" an anti-dumping application for the purpose
of Article 5.4 if its support is motivated solely by its desire for the imposition of an anti-
dumping measure?  Please explain.
4.764  Yes, the producer’s interest in starting an investigation should arise from market
considerations.
13. Is it your view that there is no "support" (within the meaning of Article 5.4) for an
application if such support is motivated - in part, at least - by a domestic producer's
desire to be eligible for CDSOA offset payments?WT/DS217/R
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4.765  Where a producer would not support a petition absent the possibility of a cash reward, the
producer cannot be said to “support” the petition under Article 5.4.
14. Would a Member violate Article 8.3 of the AD Agreement if it decided, as a matter of
general policy, never to accept price undertakings?  Please explain.
4.766  Yes.  A Member has the authority to reject undertakings that are “impractical.”  Whether an
undertaking is impractical should be decided on a case-by-case basis, considering the context and
relevant circumstances.
(b) Questions to all parties
32. With reference to footnote 24 of the AD Agreement and footnote 56 to the SCM
Agreement, to what extent can subsidization be considered an action "under" Article
XVI of GATT 1994?
4.767  The provisions are not related.  A Member has the authority to grant a subsidy, as long as the
subsidy complies with the relevant WTO provisions.  This is true regardless of whether the conditions
for imposing anti-dumping duties, countervailing duties or a safeguard measure exist.
33. Please provide an example of a "n on-specific" action against dumping.
4.768  In a situation in which the requirements for imposing either an anti-dumping duty or a
safeguard measure are met, a Member might decide to impose a safeguard measure, complying withthe relevant WTO provisions.
34. Please give examples of the sort of "other reasons, including reasons of general policy"
that Members might invoke under Article 8.3 of the AD Agreement.
4.769  A Member might establish a general policy of not accepting undertakings with regard to
imports from a country that does not accept undertakings under the same conditions.
35. Does the violation of the international law pr inciple of good faith necessarily constitute a
violation of the WTO Agreement?  Does either the AD Agreement or the WTO
Agreement impose an independent obligation on Members to act in good faith?
4.770  Yes, absent the requirement of “good faith,” the WTO agreements are meaningless.  “Good
faith” is required for any agreement to have meaning.  This has been confirmed by the Appellate
Body in US – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan ,
WT/DS184/AB/R (24 July 2001), para. 101.
36. Is there anything in the panel or Appellate Body reports in the 1916 Act case to suggest
that either the panel or the Appellate Body, when addressing the meaning of Article 18.1
of the AD Agreement, had in mind the pure subsidy hypothetical set forth in question 3above?
4.771  The panels and Appellate Body were focusing on whether any type
 of remedy, other than
permitted duties, was acceptable.  They concluded “no.”WT/DS217/R
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8. Mexico
(a) Questions to the complaining parties
1. Please comment on para. 91 of the US firs t written submission.  Do you agree that "it is
clearly possible for an action to be 'in response to' dumping or a subsidy but not be'against' dumping or a subsidy"?  Please ex plain, taking into account the Appellate
Body's finding that "'specific action agains t dumping' … is action that is taken in
response to situations presenting the cons tituent elements of 'dumping'" (1916 Act,
para. 122).  Does the Appellate Body's finding suggest that "specific action against
dumping" is necessarily a subset of action "in response to" dumping?  Please explain.
4.772  The Appellate Body‘s finding in United States - Anti-Dumping Act of 1916  does not suggest
that "specific action against dumping" is a subset of action "in response to" dumping.  The Appellate
Body carefully examined the meaning of the phrase "specific action against" and explicitly
determined that a "specific action against dumping" is an action taken in response to situations
presenting the constituent elements of dumping.  In the light of the above finding, there is no basisand, therefore, it is not necessary to create a distinction between “against” and “in response to”..Applying the test established by the Appellate B ody, the Continued Dumping and Subsidy Offset Act
of 2000 ("the Act") and its offsets are "in response to situations presenting the constituent elements of
dumping".  As such, they constitute "specific action against" dumping or subsidization.
4.773  In this dispute, it is not necessary for the Panel to determine definitively the universe of
measures that could constitute "specific action against dumping" within the meaning of Articles 18.1and 32.1.  Mexico submits that, at a minimum, the phrase "specific action against" encompasses
actions such as the Act and the offsets it distributes.
4.774  As regards paragraph 91 of the United States' first written submission, even if one were to
accept that it is possible for an action to be "in response to" dumping or a subsidy, but not "against"
dumping or a subsidy, the action at issue in th is dispute is undoubtedly "against" dumping or a
subsidy, even using the United States' narrow interpretation of the term "against".
2. Please explain exactly how you see that the “constituent elements of dumping” have
been incorporated into the CDSOA.
4.775  In Mexico's view, Article 18.1 of the Anti-Dumping Agreement encompasses action that is
taken in response to situations presenting the constituent elements of dumping.  The Act and the
offsets distributed under it are clearly "in response to situations presenting the constituent elements ofdumping" or subsidization, because the distribution of offsets is an action that may be taken only
when the constituent elements of dumping or subsidization are present.
4.776  Since no funds would be collected and distributed in the absence of an order based on
findings of dumping or of subsidization, because the magnitude of the subsidies is linked to the
magnitude of the anti-dumping and countervailing duties, the Act is an action in response to situationspresenting the constituent elements of dumping (or a subsidy), and therefore constitutes a "specific
action against" dumping (or a subsidy).
3. In your view, would it be inconsistent with Article 18.1 of the AD Agreement and
Article 32.1 of the SCM Agreement   for a Member to provide subsidies in response to a
finding of dumping or subsidization, where that subsidization was in lieu of  anti-
dumping or countervailing measures?  If not, please explain in light of your view thatWT/DS217/R
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these provisions prohibit any action taken in response to situations presenting the
constituent elements of dumping.
4.777  Yes.  As described, such an action appears to be inconsistent with Articles 18.1 and 32.1
especially if the subsidies equal in magnitude the duties that would otherwise be payable.  Irrespective
of whether subsidization is in lieu of anti-dumping or countervailing measures or in addition to such
measures, it is not a form of action that is authorized under Article VI of the GATT 1994 (as
interpreted by the Anti-Dumping Agreement and the SCM Agreement) to respond to situations
presenting the constituent elements of dumping or subsidization.
4. Assume that a Member (which has no legal framework for the conduct of anti-
dumping/countervail investigations or imposition of anti-dumping countervailingmeasures) implements a domestic subsidy programme with the explicit purpose and
design of offsetting the injurious effects of dumped or subsidized imports.  Would that
programme constitute a “specific action against dumping” (or subsidy)?
If not, please explain, and provide a reaso ned explanation as to how Article 18.1 of the
AD Agreement (or Article 32.1 of the SCM Agreem ent) can be interpreted to distinguish
between this hypothetical subsid y programme and the CDSOA regime.
4.778  For the reasons explained in Mexico's reply to question 3 and in Mexico’s other submissions
with respect to the meaning of the expression "specific action against", the hypothetical programmeand the subsidies granted under it could constitute a "specific action against dumping" or a subsidy.
5. Would a victim compensation scheme (funded from central treasury resources, rather
than penalties imposed on convicted criminals) constitute a "specific action against" crime?
Please explain.  Would your answer be any different if the scheme were funded from penalties
imposed on convicted criminals?  Why?
4.779  In the case of the United States – Anti-Dumping Act of 1916 , the Appellate Body found that
the phrase “specific action against dumping of exports” meant an action that is taken “in response to
situations presenting the constituent elements of dumping”.  It is difficult to apply this finding to the
analogy suggested by the Panel.  However, Mexico notes that a victim compensation scheme differs
from the CDSOA and its offsets in many respects .  For example, any payment under such a scheme
does not directly and systematically “offset” the crime committed.  The payments and their amount(irrespective of the source of the funds) may not be generated by crime in and of itself.
6. Assume that a Member enacts legisl ation mandating the payment of $5,000 to
petitioners to compensate them for the cost of making the petition and participating in the anti-
dumping investigation.  Would that payment constitute a "specific action against dumping of
exports" within the meaning of Article 18.1 of the AD Agreement?  Why, or why not?
4.780  The hypothetical measure described in this question is distinguishable from the Act and its
offsets in that the payment of $5,000 to petitioners does not appear caused by and linked to the
existence of a finding or order of injurious dumping, nor is it linked to the magnitude of the anti-
dumping or countervailing duties collected.  As such, in the absence of other elements demonstratingthat the payment can only be made where the cons tituent elements of dumping exist, it appears that
the measure would not constitute a "specific action against" dumping.
7. Assume that a Member enacts legislatio n requiring that any anti-dumping duties
collected be paid to state retirement homes.   Would such payments constitute "specificWT/DS217/R
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action against dumping of exports" within the meaning of Article 18.1 of the AD
Agreement?  Why, or why not?
4.781  In this hypothetical case, the linkages between the action and the dumping and subsidization
are not defined.  Accordingly, it is difficult to analyze whether it would amount to a specific action
against dumping of exports without making further assumption.
4.782  Under the narrow interpretation of “against” pr oposed by the United States, arguably such an
action would not be against dumped imports or the importers.
8. Assume that the US restricted offset payments under the CDSOA to cases where the US
found the existence of dumping, injury and causation but did not impose an anti-
dumping order, and that such payments equalled the amount of anti-dumping duty thatwould have been collected had an anti-dumping order been put in place.  Would such
payments constitute “specific action agains t dumping of exports” within the meaning of
Article 18.1 of the AD Agreement, or “action under other relevant provisions of GATT
1994” within the meaning of note 24?  Why, or why not?
4.783  Based on the facts described in the question, the payments appear to constitute an action
which may be taken only in response to situations presenting the constituent elements of dumping,
and therefore would be "specific action against dumping".
9. Would the CDSOA violate AD Article 5.4 if of fset payments were made to all domestic
producers of the product under investigation, and not merely those domestic producerssupporting the petition?  Please explain.
4.784  Yes.  It appears that under the hypothetical scenario raised by the Panel, an incentive
distorting the functioning of the thresholds regardin g standing and, therefore, the examination that the
investigating authority is required to make in order to determine whether the application has beenmade "by or on behalf of the domestic industry" w ould still exist.  The distorting incentive would
remain, because it would be in the interest of produc ers to increase the likelihood that an investigation
will take place (and therefore the likelihood that subsidies will be granted) by filing or supporting a
petition.
10. Is a Member not acting in good faith when it provides incentives for the use of a WTO-
consistent remedy?  Please explain.
4.785   The issue in this dispute is not whether the United States is providing an incentive for the use
of a WTO-consistent remedy., Rather, it is whether the incentives that are being provided undermine
the requirements of the Anti-Dumping and SCM Agreements.  A Member cannot be characterized as
acting "in good faith" if its actions undermine the agreements.
11. Does support for an anti-dumping petition have to be genuine (i.e., based on the
actuality or expectation of injury) for the purposes of Article 5.4 of the AD Agreement?
If so, how could an investigating authority ensure that support is genuine in all cases?
4.786  In this dispute the legal issue to be decided under Article 5.4 is not whether the support for an
anti-dumping petition is "genuine" or whether the investigating authorities must examine whatmotivated domestic producers to support a petition.  Rather, it is whether the United States has
undermined its ability to make determinations in an objective manner when it rewards domestic
producers that support the petition and, consequently, penalize those that do not.  Distorting
expression of support by the domestic industry by providing a new incentive to petition or support aWT/DS217/R
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petition is not compatible with the United States obligation to make determinations under Article 5.4
in an objective manner.
12. Does a domestic producer only "support" an anti-dumping application for the purpose
of Article 5.4 if its support is motivated solely by its desire for the imposition of an anti-dumping measure?  Please explain.
4.787  See the reply to question 11.
13. Is it your view that there is no "support" (within the meaning of Article 5.4) for an
application if such support is motivated - in part, at least - by a domestic producer's
desire to be eligible for CDSOA offset payments?
4.788  See the reply to question 11.  In such a situation, a domestic producer’s expression of support
is tainted.  At the risk of placing their competitors in a more advantageous competitive position,
domestic producers must indicate support for the petition.
14. Would a Member violate Article 8.3 of the AD Agreement if it decided, as a matter of
general policy, never to accept price undertakings?  Please explain.
4.789  Yes.  Such a measure appears to violate Article 8.3 of the Anti-Dumping Agreement because
it would make it impossible for the investigating authorities of the Member in question to conduct an
objective investigation into whether price undertakings would be appropriate in any given case.
Therefore, it would render Article 8.3 of the Anti-Dumping Agreement inutile.
(b) Questions for Mexico
25. Please comment on the meaning of the phrase "in particular" in Article 5(b) of the
SCM Agreement, in light of Mexico's claim that the Byrd Amendment nullifies or impairs
benefits accruing to Mexico under Article VI of GATT 1994.
4.790  The context of the phrase "in particular" makes it clear that the reference to "benefits of
concessions bound under Article II of GATT 1994" can be interpreted as the chief type of "benefits
accruing directly or indirectly to other Members under GATT 1994" that are referenced inparagraph (b).  Under this interpretation, benefits under Article II would be relevant to a paragraph (b)
analysis "much more than  in other cases" (i.e. much more than the benefits accruing under other
provisions of GATT 1994).  However, the nullificati on or impairment of benefits accruing under other
articles of GATT 1994 could still be subject to scrutiny under paragraph (b).  The phrase "in particularthe benefits of concessions bound under Article II of GATT 1994" simply presents the chief type of
such nullification or impairment.
26. If a subsidy contained eligibility criteria or conditions that were not "objective" within
the meaning of footnote 2 to the SCM Agreement, would it ipso facto  be specific within the
meaning of Article 2?
4.791  No.  In contrast to paragraph (a) of Article 2.1, paragraph (b) does not establish requirements
for determining when specificity exists.  Rather, it elaborates on a situation where an allegation of
specificity is based on criteria or conditions established by the granting authority or by the legislation
pursuant to which the granting authority operates.  In such a situation, the defending Member cancounter the allegation of specificity by demonstrating that the requirements of paragraph (b) and
footnote 2 have been met.WT/DS217/R
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27. Please explain further the basis for you r view that, when examining the issue of
specificity, each offset should be treate d as a "separate and distinct subsidy".
4.792  The United States argues that the Act, in itself, is not specific.  The appropriate question is not
whether the Act is specific; rather, it is whether the subsidies conferred under the Act are specific.
4.793  Factually, the subsidies conferred by the Act can be distinguished from those conferred under
a typical subsidy programme.   In the case of the subsidies conferred by the CDSOA, there is no
common pool of funds.  Rather, discrete "special ac counts" are established to fund each offset, which
is linked to a specific anti-dumping or countervailing order or finding.  Each of the special accounts is
funded separately through the assessment and collection of anti-dumping and countervailing duties
and the amount of the funds for each account is dependent on the magnitude of the duties assessedand collected under its respective finding or order.  Finally, recipients eligible for offsets paid from
one special account are not eligible for offsets paid  from another special account unless they meet the
eligibility requirements for that account.  Consequently, the structure and architecture of the Act
creates a series of separate and distinct subsidies.
4.794  Legally, this means that the "financial contri bution" and the "benefit" associated with each
special account (i.e. with each offset) are separate and distinct.  In other words, each special account
or offset constitutes a separate and distinct subsidy within the meaning of Article 1.1.
28. Mexico advances a number of arguments in support of its claim that the CDSOA causes
non-violation nullification or impairment.  Would Mexico rely on the same arguments to
demonstrate non-violation nullification or impairment in respect of a programme under whichthe grant of a subsidy is not contingent on a demonstration of the constituent elements of
dumping or subsidization?
4.795  The basic approach to providing non-violation nullification or impairment would also be
applicable generally to nullification or impairment claims pertaining to subsidies.  That is,nullification or impairment can be proven based on the design, structure and architecture of the
subsidy in question.
4.796  What could differ in the case of non-violation nullification or impairment claims relating to a
subsidy that is not linked to the existence of dumping or subsidization is the benefits accruing directly
or indirectly under the GATT 1994 which are claimed to have been nullified or impaired.
4.797  In this dispute, the systematic and direct linkage between dumping and subsidization, the
collection of anti-dumping and countervailing du ties and the conferral of subsidies to eligible
recipients creates the nullification or impairment of the benefits accruing to Mexico under Articles II
and VI of the GATT 1994.  The arguments underpinning  this nullification or impairment may not be
relevant to the challenge of another type of subsidy.
29. The Oilseeds Panel asserted that countries "must … be assumed to base their tariff
negotiations on the expectation that the price effect of the tariff concessions will not be
systematically offset".  That Panel further assert ed that "[a]t issue in the case before it are
product-specific subsidies that protect producers completely from the movement of prices for
imports and thereby prevent tariff concessions fr om having any impact on the competitive
relationship between domestic and imported oilseeds" (underline supplied).  To what extent, if
any, does the CDSOA "systematically offset" the price effects of tariff concessions granted bythe US to Mexico?  Please explain.  To what  extent, if any, does the CDSOA provide for
"product-specific subsidies that … prevent tariff  concessions from having any impact on theWT/DS217/R
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competitive relationship between domestic and imported" (underline supplied) products?
Please explain.
4.798  This question raises two issues:  (i) whether the nullification or impairment of a benefit or
concession must be 100 per cent (i.e. prevent tariff concessions from having any impact);  (ii) the
nature of the nullification or impairment caused by the Act.
4.799  Regarding the first of these issues, in the Follow-up on the Panel Report in the case
European Economic Community – Payments and Subsidies Paid to Processors and Producers of
Oilseeds and Related Animal-Feed Proteins  (BISD 39S/91) (Oilseeds II) , it was established that non-
violation nullification or impairment can occur in situations where the impairment of the benefit is
less than 100 per cent.  The key consideration is a “systemic offsetting” of a legitimately expectedcompetitive relationship.
4.800  Regarding the second issue, Mexico is not arguing that the legitimately expected competitive
relationship solely accrues from or is being defined by the tariff concessions under Article II of the
GATT 1994 (as was the case in Oilseeds I and II ).  Factually, the competitive relationship at issue is
that which is legitimately expected by Mexico when anti-dumping or countervailing duties have beenimposed against exports of Mexican products.  Legally, the benefits defining this relationship accrue
to Mexico from Articles II and VI of the GATT.  This is explained in paragraphs 80 to 83 of Mexico's
first written submission.
4.801  The systematic nature of the nullification or impairment of the competitive relationship
legitimately expected by Mexico arises from the methodical and regular way the subsidies conferredunder the CDSOA upset that competitive relationship.  As a result of those subsidies, Articles II and
VI of the GATT 1994 no longer limit the adverse impact on the expected competitive relationship
arising from the application of the anti-dumping and countervailing duties.  The benefits accruing
from these provisions are manifestly impaired.
(c) Questions to All Parties
32. With reference to footnote 24 of the AD Agreement and footnote 56 to the SCM
Agreement, to what extent can subsidization be considered an action "under"
Article XVI of GATT 1994?
4.802  Article XVI does not refer to the positive act of subsidization.  In other words, there is no
textual basis for the position that the subsidy could occur “under” Article XVI.
33. Please provide an example of a "n on-specific" action against dumping.
4.803  The provision of restructuring support to an industry that is facing difficulties and that is
being adversely affected by dumped exports where that support is not contingent upon a finding of
dumping.  In such a situation, the restructuring support is not a specific action against dumping
because it is not an action that may be taken only when the constituent elements of dumping arepresent.
34. Please give examples of the sort of "other reasons, including reasons of general policy"
that Members might invoke under Article 8.3 of the AD Agreement.
4.804  Two examples would be anti-trust concerns and circumvention concerns related to the
undertakings.WT/DS217/R
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35. Does the violation of the international law pr inciple of good faith necessarily constitute a
violation of the WTO Agreement?  Does either the AD Agreement or the WTO
Agreement impose an independent obligation on Members to act in good faith?
4.805  No.  The two mentioned Agreements do not impose an independent obligation on WTO
Members to act in good faith.  However, this does not mean that the principle of good faith is
irrelevant.  Pursuant to Article 3.2 of the DSU, this principle applies to the interpretation of WTO
Agreements, and consequently, to the interpretation, implementation and application of the
Agreements by WTO Members.
36. Is there anything in the panel or Appellate Body reports in the 1916 Act case to suggest
that either the panel or the Appellate Body, when addressing the meaning of Article 18.1
of the AD Agreement, had in mind the pure subsidy hypothetical set forth in question 3
above?
4.806  Mexico takes the view that there is nothing in the reports of the Panel or the Appellate Body
in the US - 1916 Act  to suggest that the Panel or the Appellate Body considered the "pure subsidy
hypothetical" set forth in question 3.
36bis. ADDRESSED ONLY TO THOSE PARTIES THAT WERE PARTIES OR THIRD
PARTIES IN THE US –  1916 ACT  PROCEEDINGS:  Was there anything in your
submissions to the Panel or Appellate Body in the 1916 Act proceedings that would have
caused the Panel or Appellate Body to a ddress the meaning of Article 18.1 of the AD
Agreement in the context of the pure subsidy hypothetical set forth in question 3 above?
4.807  No.  The "subsidy hypothetical" established in question 3 was not discussed in the
submissions made by Mexico during these proceedings.
F. ANSWERS OF THE UNITED STATES TO QUESTIONS FROM THE PANEL , CHILE AND THE
EUROPEAN COMMUNITIES
1. Answers of the United States to questions from the Panel
4.808  With respect to the Panel’s question concerning whether specific action is "against" dumping
or subsidization if it is applied to the exporter and is burdensome, the answer of the United States is
yes.  Articles 18.1 and 32.1 of the Antidumping and SCM Agreements, respectively, concern the type
of action taken against dumping or subsidization.  As a practical matter, imported goods are produced,
exported, and imported by foreign producers, exporters, and importers.  Therefore, specific actioncould be applied to an exporter of a dumped or subsidized import.  CDSOA cannot be specific action
against dumping or subsidization because it does not (1) authorize action in response to the
constituent elements of dumping or subsidization, or (2) apply to and burden imports or their
importers, foreign producers, or exporters.
4.809  With respect to the Panel’s question of whether undertakings are specific action "against"
dumping or subsidization, the United States recalls that the Appellate Body in United States – Anti-
Dumping Act of 1916  explained that the permissible responses to dumping to definitive anti-dumping
duties, provisional measures, and price undertakings.  The three forms of action are, by definition,
specific action against dumping or subsidization.  Moreover, undertakings fall within the definition of
specific action “against” dumping or subsidization because they  (1) are action in response to theconstituent elements of dumping or subsidization which can only be entered into with respect to
conduct producing a preliminary affirmative determination of dumping or subsidization, and (2) apply
to the exporter to limit its ability to export dumped or subsidized products to the importer, or apply toWT/DS217/R
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the government of the exporting Member to eliminat e or limit the subsidy available to the exporter or
take other measures concerning its effects.
4.810  With respect to the Panel’s question of whether severance of diplomatic relations would
constitute action “against” dumping or subsidization, such action would not be action "against"dumping or subsidization because it would not apply to imports, or their importers, foreign producers,
or exporters.
4.811  With respect to the Panel’s question on the meaning of the phrase “in particular” in
Article 5(b) of the SCM Agreement, the phrase "in particular" is a transitional expression used
throughout GATT 1994 and the SCM Agreement.  The Oxford English Dictionary defines “in
particular” as “as one of a number distinguished from the rest; especially” and “one by one,
individually.”  When used in Article 5(b), the phrase illustrates the meaning of the main phrase itmodifies and suggests that tariff concessions under Article II are not the only negotiated benefit which
can be nullified or impaired under GATT 1994.  Regardless, Mexico has not proved any nullification
or impairment of benefits accruing to it under any article of GATT 1994.
4.812  With respect to the Panel’s question concerning whether a subsidy would be ipso facto
specific if it contained eligibility criteria or conditions that were not “objective,” Article 2 of theSCM Agreement contains progressive guidelines for the determination of whether a programme is
specific or non-specific.  Article 2.1(b) describes subsidies that are not specific under Article 2.  The
fact that a subsidy does not meet the description in Article 2.1(b), however, does not mean that it is
therefore deemed specific.
4.813  With respect to the Panel’s question concerning how the criteria for CDSOA eligibility are
economic in nature, the term "economic" is defined by the New Shorter Oxford Dictionary as
"relating to monetary consideration, financial" and "relating to the management of private, domestic,
etc., finances."  This definition provides support for a broad interpretation of the term “economic” that
encompasses the inclusion of any government or private action related to monetary or financial
concerns ( e.g.  production, consumption, distribution or ot her such factors).  The plain language of
footnote 2 and the negotiating history support a broad interpretation of criteria that are "economic in
nature."  The criteria for receiving CDSOA distribu tions are within the rubric of the term “economic.”
First, in supporting a petition, domestic producers act to protect monetary and financial concerns in a
market where they are experiencing unfair competition.  Second, the requirement that the producer
remain in operation is also based on monetary and financial considerations because by remaining in
business, a company deals with those monetary and financial concerns of  maintaining profitability
and viability in the market.  Third, the qualifying e xpenditures are economic in nature as they relate to
operating and production costs.
4.814  With respect to the Panel’s question concerning whether a subsidy would be de jure or de
facto specific if it were rendered specific because of eligibility requirements that were not objective,
the United States points out that a subsidy is not necessarily specific by virtue of the presence of non-
objective criteria.  A showing of specificity must still be made under Article 2.1(a) or 2.1(c).Assuming argendo  that presence of non-objective criteria makes a subsidy specific, it would not be
possible to determine whether it would be de jure or de facto  specific without more information about
the law.  If the law explicitly limited the availability of the subsidy, it would be de jure specific.  If it,
in practice, limited the subsidy to certain enterprises, it would be de facto specific.
4.815  Concerning the Panel’s request to consider the Appellate Body’s statement in Canada-Autos
at para. 100, the request pre-supposes that the discussion in Canada – Autos has relevance to the issue
of specificity.  The Canada – Autos discussion, however, is not instructive because there is a crucial
difference between the specificity provisions of Article 2.1 and the export contingency provisions ofWT/DS217/R
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Article 3.  Article  2.1(a), the "de jure" provision of specificity, states that a subsidy is specific if it
"explicitly" limits access to a subsidy.  "Explicitly," even under the most relaxed definition, must
mean at least that the limitation to certain enterprises must be evident on the face of the legislation.
Article 3.1(a), however, does not use the term "explicitly," and, as interpreted by Canada – Autos ,
could include situations where the underlying legal instrument does not provide expressis verbis , but
implicitly,  that the subsidy is contingent upon exportation.  The use of word "explicitly" in
Article 2.1(a) precludes identification of a subsidy as being specific based upon the hypothetical
operation of the law rather than the actual words of the law.
4.816  With respect to the Panel’s question of whethe r imposing sanctions for failure to support a
petition would violate AD Agreement Article 5.4, it is difficult to answer this hypothetical question
without complete facts, but do not see why it would violate Article 5.4.
4.817  With respect to the Panel’s question of whether the United States has changed the manner in
which it performs its assessment of standing as a result of the CDSOA, the answer is no.
4.818  With respect to the Panel’s question concerning the meaning of the Statement of
Administration Policy issued on 11 October 2000 referring to  "significant concerns regarding the ...
consistency with [US] trade policy objectives" of the CDSOA, the US Administration has changedsince issuance of the statement.  The current Administration cannot detail the “significant concerns”
of the prior Administration as that Administration did not memorialize them.
4.819  Concerning the Panel’s request for comment on th e EC’s statement that it would be important
to know how many undertakings were rejected or not offered in the first place because of industry
opposition, the US government could not possibly k now how many undertakings were not offered in
the first place because of opposition by the domestic industry and does not  regularly maintain
information concerning the number of undertakings rejected. The United States notes that it provided
information concerning suspension agreements effective August 2001 (based on information available
on the Department of Commerce website and in its public files) in Exhibit 7 of its First Written
Submission.  It is the complaining parties who a ssert that the CDSOA has a particular effect on
undertakings and therefore it is their burden to demonstrate that effect.
4.820  Concerning the Panel’s request for comment on concerns raised by Indonesia and other
complaining parties about the impact of the CDSOA on developing countries, the United States notes
that Article 15 of the Antidumping Agreement is not within this Panel's terms of reference, as it was
not identified in any of the panel requests, and therefore cannot be entertained by the Panel.  In any
case, the United States continues to fulfill its Article 15 "best efforts" commitment.  Article 15 only
necessitates only that the developed countries "explore" constructive remedies before applyinganti-dumping duties.  Indonesia's argument is a misplaced effort to rewrite other Antidumping
Agreement provisions, or to insert substantive rules never accepted by negotiators.  Moreover, the
complaining parties have provided no evidence that the CDSOA will affect the administration of US
laws governing undertakings; thus concerns th at the CDSOA will some how affect commitments
under Article 15 are similarly unfounded.
4.821  With respect to the Panel’s question about the extent to which subsidization can be considered
an action "under" Article XVI of GATT 1994, subsidies provided to a Member’s domestic producer
for any reason must be consistent with or, in other words, in accordance with GATT Article XVI.
4.822  With respect to the Panel’s request for an example of a "non-specific" action against
dumping, non-specific action against dumping is an act ion covered by the terms of footnote 24 of the
Antidumping Agreement.  Non-specific action does not include action against dumping, as such, butWT/DS217/R
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would include action against the causes or effects of  dumping.  It is action, however, that does apply
to dumped imports or the importer/exporter/foreign producer.  One such example is a safeguard.
4.823  With respect to the Panel’s request for examples of the sort of "other reasons, including
reasons of general policy" that Members might invoke under Article 8.3 of the AD Agreement, aMember might conclude that it already has enough undertakings in place and lacks the resources (or
does not want to devote the resources) to properly monitor and administer additional undertakings.
Or, a Member might consider that negotiating price commitments represents bad policy and that the
only desirable form of anti-dumping measure is a duty equal to the full calculated margin of dumping.
4.824  With respect to the Panel’s question of whether a violation of the international law principle
of good faith necessarily constitutes a violation of the WTO Agreement, a violation of the good faith
principle  cannot constitute a violation of the WTO Agreement without a violation of a particular
obligation in the agreement.  Appendix 1 to th e DSU, which defines the covered agreements for
purposes of the DSU, does not list an international law principle of good faith.  Nor does the WTO
distinguish between a breach of an agreement in good faith and a breach in bad faith – in either case it
would be a breach of the agreement and would have the consequences provided in the WTO
Agreement.  Nor is it clear what is meant by a violation of the international law principle of goodfaith.
4.825  With respect to the Panel’s question of whether the AD Agreement or the WTO Agreement
impose an independent obligation on Members to act in good faith, neither agreement nor any other
provision of the WTO Agreement imposes an independent obligation on Members to act in good
faith. Concerning the present case, there is no WTO provision requiring Members to judge thesubjective motivations of domestic producers in supporting an anti-dumping or countervailing duty
petition or opposing an undertaking.  According to AD Article 5.4 and SCM Article 11.4, the
United States is only obligated to meet certain numerical thresholds of domestic industry support
before initiating an investigation.  According to AD Article 8 and SCM Article 18, undertakings need
not be accepted at all.  Thus, even if the CDS OA did provide some motivation for domestic producers
to support a petition or oppose an undertaking, it would not “threaten” action inconsistent with WTO
obligations, or impede the United States from upholding its obligations in good faith under AD
Articles 5.4 and 8 and SCM Articles 11.4 and 18.
4.826  With respect to the Panel’s question of whether there is anything in 1916 Act reports to
suggest that either the panel or the Appellate B ody, when addressing the meaning of Article 18.1 of
the AD Agreement, had in mind the pure subsidy hypothetical set forth in question 3 above, there is
nothing in the reports to suggest that they considered a subsidy hypothetical.  The panels andAppellate Body in that case were concerned with the issue of whether or not civil and criminal
penalties imposed on importers were specific action against dumping within the meaning of
Article 18.1 of the Antidumping Agreement.
4.827  With respect to the Panel’s question about whether there was anything in the US submissions
to the panel or Appellate Body in the 1916 Act proceedings that would have caused the panel or theAppellate Body to address the meaning of Articl e 18.1 of the AD Agreement in the context of the
pure subsidy hypothetical set forth in question 3 above, the answer is no.
2. Answers of the United States to questions from Chile
4.828  With respect to Chile’s question about the tax and accounting treatment given the money
distributed under the CDSOA, the money distribu ted under the CDSOA is taxable income and should
be reflected in the accounting books of the recipients as such.WT/DS217/R
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4.829  With respect to what happens to the funds collected as a result of investigations initiated ex
officio by the investigating authority, the US Customs Service has not specifically addressed this
issue.  The statute, however, states that the Commission shall forward to Customs a list of “petitioners
and persons with respect to each order and finding and a list of persons that indicate support of thepetition by letter or through questionnaire response .”  Even if there is no “petitioner,” Customs will
still receive a list of supporters identified by letters or through their questionnaire responses.  The
relevant letters and questionnaire responses are those filed in the “Commission’s record” or, in select
cases, entries of appearances in administrative reviews conduced by the Commerce Department.
4.830  With respect to Chile’s question concerning how the “situation” of the industry investigated
differs when in one “scenario” an order is imposed and in the second “scenario” an order is imposed,
plus the domestic industry receives money collected on dumped or subsidized imports, it is not clearwhat is meant by “situation.”  If the question intends to ask how the exporting industry is affected by
the subsidy to the domestic industry, the answer will depend on the facts.  In other words, the
exporting industry may or may not be affected.
4.831  With respect to Chile’s question concerning how the “situation” of the domestic industry
differs in the two “scenarios,” in the second, the domestic industry receives a subsidy.
4.832  With respect to Chile’s question concerning how the competitive relationship between the
two industries differs in the two “scenarios,”  the answer will depend on the facts of the case.
4.833  With respect to Chile’s question concerning the difference between the burden or liability to
which the investigated industry is subject in the two “scenarios,” in the first scenario, the duty is
imposed on the good being produced (or sold) by the exporting industry/foreign producer.  Thus, aduty is an additional financial burden to the exporting industry.  However, whether the exporting
industry is financially burdened by a subsidy to the domestic industry (scenario two above) will
depend on the facts.  It may or may not be affected.
4.834  With respect to Chile’s question as to whet her the CDSOA is an incentive for domestic
producers to file or support anti-dumping petitions in order to have access to the “funds,” the CDSOAdoes not serve as a real incentive to file or support petitions.  The costs of participating in an
investigation for an industry, already materially injured or threatened with material injury, could be
far greater than the disbursements received years later.  Moreover, that a petition will result in an
order is far from guaranteed and even if an order does result, payments, if any, received are contingent
on a number of factors and remote in nature.  The "promise" of a remote, uncertain and unknown
payment is not an incentive to spend a million plus dollars without knowing whether an order will be
issued, the amount of duties that may be collected, or the share of those duties to be received by thecompany.
4.835  With respect to Chile’s question concerning wh ether it would be irrational for a company to
abstain from stating its position or to express opposition to an investigation, it may or may not be
irrational, from an economic point of view, for a domestic producer to abstain from stating a position
or expressing opposition in the remote chance of receiving distributions.
4.836  With respect to Chile’s question concerning how many price undertakings were rejected, the
United States references its response to Question 23 from the Panel where it indicates that it does not
keep information on undertakings that have been rejected.WT/DS217/R
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3. Answers of the United States to questions from the European Communities
4.837  With respect to the EC’s question about whether CDSOA offsets have the purpose described
in the section of the CDSOA entitled “Findings,” the answer is no.  The “findings” are not part of the
law and, in any event, do not identify a purpose.  If a purpose is not specifically identified in a law,the purpose of the law is reflected in the language of the law itself.  Here, the CDSOA is intended to
distribute funds to recipients that meet the criteria set forth in the Act.
4.838  With respect to the EC’s hypothetical concerning a monetary fine on domestic producers who
do not support an application, this hypothetical is not before the Panel, and the United States believes
it is more useful to focus on the measure at issue.  Having said that, depending on the actual facts and
application of such a measure, it might give rise to a claim of non-violation nullification or
impairment.  The United States does not see why it would breach Articles ADA 5.4 and SCM 11.4.
4.839  With respect to the EC’s question concerning whether Article 18.1 of the Anti-Dumping
Agreement and Article 32.1 of the SCM Agreement apply to dumping and subsidisation which do not
involve imports into the territory of the Member taking the action, first, the premise of this question is
incorrect.  Articles 18.1 and 32.1 apply to specific action taken against dumping or a subsidy (not to
“dumping or subsidization”).  Second, Members do not take specific action against dumping or asubsidy which do not involve imports into their territory.
G. 
SECOND WRITTEN SUBMISSIONS OF THE COMPLAINING PARTIES
1. Australia
(a) Introduction
4.840  In its First Submission, Australia demonstrated that the Continued Dumping and Subsidy
Offset Act of 2000  (“the Act”) is mandatory legislation that is inconsistent with provisions of the Anti-
Dumping Agreement, the SCM Agreement, the GATT 1994 and the WTO Agreement.
4.841  Australia is of the view that the United States has not countered or refuted the prima facie
case made by Australia in respect of any of its claims.  In it second submission, Australia addresses
the defensive arguments put forward by the United States.  Australia will show that, contrary to theassertion by the United States that Australia has misunderstood the structure of the Act and the
operation of United States trade laws,
125 it is the United States which has misunderstood and/or
ignored the essential elements of Australia’s case.
(b) A Member’s sovereign right to appropriate lawfully assessed and collected anti-dumping and
countervailing duties must accord with its WTO obligations
4.842  According to the United States:
- Australia has essentially argued that “WTO Members cannot enact a law
which permits the distribution of revenues generated from AD/CVD duties to
any recipient other than the national treasury”;126  and
- Australia has called on the Panel “to adopt arguments that go well beyond the
clarification of existing provisions and preservation of rights and obligations
                                                     
125 First Submission of the United States, paragraph 2.
126 First Submission of the United States, paragraph 19.WT/DS217/R
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that DSU Article 3.2 envisions” and “would have the Panel create new rights
and obligations for the Members or, in other words, act ex aequo et bono ”.127
4.843  In fact, what Australia has done is to ask the Panel to find that the Act is a specific action
against dumping or a subsidy otherwise than in accordance with GATT 1994 as interpreted by theAnti-Dumping Agreement and/or the SCM Agreement, contrary to the obligations already accepted
by the United States under those Agreements.  The assertions by the United States are a clearmisrepresentation of Australia’s case.  Australia is not arguing that Members can’t distribute anti-
dumping or countervailing duties otherwise than to th e national treasury.  There is nothing in the First
Submission of Australia – or any other complainant – to suggest otherwise.  Neither is Australia, nor
any other complainant, asking the Panel to act ex aequo et bono .  The United States has put forward
voluminous material to refute arguments that have not been made.  That material is not pertinent tothis dispute.
4.844  Moreover, the United States recognises that “WTO Members have agreed to exercise their
sovereignty according to their WTO Agreement commitments” 
128, and “Members are free to pursue
their own domestic goals through spending so long as they do not do so in a way that violate
commitments made in the WTO Agreement” 129.  Australia endorses these statements wholeheartedly.
It is the precise nature of Members’ existing commitments under the WTO Agreement in relation to
“specific action against dumping/a subsidy” that is at issue in this dispute.
4.845  The issue of restricting a Member’s sovereign right to appropriate lawful revenues ex aequo
et bono  simply does not arise in this dispute.  Rather, this dispute concerns whether the United States
is acting in a manner that violates commitments already made in the WTO Agreement.
(c) The inconsistency of the Act with Article 18.1 of the Anti-Dumping Agreement, in
conjunction with Article VI:2 of the GATT 1994 and Article 1 of the Anti-Dumping
Agreement, and with Article 32.1 of the SCM Agreement, in conjunction with Article VI:3 of
the GATT 1994 and Article 10 of the SCM Agreement
4.846  Australia asserts that the United States argues that “because it does not mandate the
imposition of anti-dumping or countervailing measures, or any other type of specific action against
dumping or subsidies, on imports or their importers, the [Act] is not within the scope of GATT
Article VI, or the various provisions of the Antidumping and SCM Agreements cited by the
complaining parties”.130  The United States further argues that the Act “is simply a statute authorizing
governmental payments ”131 (emphasis in original).  The United States then purports to apply the
reasoning of the Appellate Body in US – 1916 AD Act  to show that, because the offset payments
under the Act are “not based upon” the constituent elements of dumping or a subsidy and because theAct is not an action “against” dumping or a subsidy, the Act does not constitute “specific action
against dumping/a subsidy”.
132  However, the United States’ arguments are unsustainable.
                                                     
127 First Submission of the United States, paragraph 28.
128 First Submission of the United States, paragraph 20.
129 First Submission of the United States, paragraph 25.
130 First Submission of the United States, paragraph 77.
131 First Submission of the United States, paragraph 77.
132 First Submission of the United States, paragraph 83.WT/DS217/R
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(i) The Act is action taken in response to situations presenting the constituent elements of
dumping and a subsidy
4.847  According to the United States, “Article VI  and the Antidumping and SCM Agreements do
not apply to the [Act] because it is not based upon the constituent elements of dumping or a
subsidy”133 (emphasis added).  It is not clear to Australia what the United States means by the phrase
“not based upon”, or indeed the authority to which it refers for its interpretation of GATT Article VI
and the Anti-Dumping and SCM Agreements.
4.848  In US – 1916 AD Act , the Appellate Body found that the phrase “specific action against
dumping” is “action that is taken in response to situations presenting the constituent elements of
dumping”134 (emphasis added).  The Appellate Body did not say “that the phrase ‘specific action
against dumping’ … meant ‘action that is taken in response to the constituent elements of dumping’ ”,notwithstanding the United States’ repeated assertions otherwise.
 135  The Appellate Body’s finding
clearly recognised that specific action against dumping is not limited to action against the constituent
elements of dumping, but that it “encompass[es] action that may be taken only when the constituent
elements of ‘dumping’ are present[…]”136 (emphasis in original).  It was in this context that the
Appellate Body then found that “the constituent elements of ‘dumping’ are built into the essentialelements of civil and criminal liability under the 1916 Act”.
137  The Appellate Body’s findings in US –
1916 AD Act  do not provide any support for the contention that Article VI and the Anti-Dumping and
SCM Agreements are not applicable because the Act “is not based upon the constituent elements of
dumping or a subsidy”.
4.849  Further, Australia argues, the United States contends that footnote 373 to the Panel Report in
the EC complaint in US – 1916 AD Act  confirms that “the scope of Article VI and the Antidumping
Agreement extends to measures which address dumping as such ” and that “dumping as such  refers to
action based upon the constituent elements of dumping”138 (emphases in original).  However, it is
clearly evident from the text of footnote 373 that the Panel was distinguishing “dumping as such”
from “the effects of dumping” in considering the meaning of footnote 24 to Article 18.1 of the Anti-
Dumping Agreement.  Again, according to Australi a, the United States’ contention is not in fact
supported by the Panel’s findings.
4.850  The United States concludes that, because the Act is not based upon a test that includes the
constituent elements of dumping or a subsidy, the Act does not address dumping or subsidisation as
such and is not within the scope of Article VI and the Anti-Dumping and SCM Agreements.139
However, Australia asserts, this conclusion ignores the fundamental fact that there must have existed
a finding of dumping or subsidisation (as well as injury and a causal link) for an anti-dumping orcountervailing duty order to have been issued.  (Moreover, the United States’ argument also ignores
that the availability of funds for disbursement as offset payments under the Act is conditional on
continued dumping and subsidisation:  if no anti-dumping or countervailing duties are collected, no
payments are made.)  In other words, a prerequisite for an offset payment under the Act is the
existence of a situation presenting the constituent elements of dumping or a subsidy:  an offset
                                                     
133 First Submission of the United States, paragraph 86.
134 US – 1916 AD Act , Report of the Appellate Body, paragraph 122.
135 First Submission of the United States, paragraphs 81 and 84, referring to paragraph 122 of the
Appellate Body Report in US – 1916 AD Act , and repeated in paragraphs 86, 87 and 89.
136 US – 1916 AD Act , Report of the Appellate Body, paragraph 122.
137 First Submission of the United States, paragraph 87, referring to paragraph 130 of the Appellate
Body Report in US – 1916 AD Act.
138 First Submission of the United States, paragraph 88.
139 First Submission of the United States, paragraph 89.WT/DS217/R
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payment under the Act may be made only when the constituent elements of dumping or a subsidy are
present.
(ii) The Act is a “specific action against dumping/a subsidy”
4.851  According to the United States, “it is clearly possible for an action to be ‘in response to’
dumping or a subsidy but not be ‘against’ dumping or a subsidy”.140  The United States also contends
that “to consider a specific action as ‘against’ dumping or subsidization, the action must apply to the
imported good or the importer, and it must be burdensome”.141  Again, however, these arguments are
not sustainable in a number of respects.
4.852  Firstly, Australia argues that the United States ignores that the Appellate Body’s finding on
the meaning of the phrase “specific action against dumping” gave meaning to the word “against”, and
did so in a way that encompasses other ordinary meanings of the word in context.
4.853  Secondly, in the view of  Australia, the United States ignores that, consistent with the
requirement of Article 3.2 of the DSU, the Appellate Body’s finding on the meaning of “specific
action against dumping” gave meaning to the phrase, as well as to the word “against”, in their context
and in light of the object and purpose of the broader framework of rules governing the imposition of
anti-dumping and countervailing measures provided by GATT Article VI as interpreted by the Anti-Dumping and SCM Agreements in accordance with the customary rules of interpretation of public
international law.
4.854  Thirdly, Australia submits, the United States’ arguments are premised on the repeated
misquotation of the Appellate Body’s findings in US – 1916 AD Act  that “specific action against
dumping” is ‘action that is taken in response to the constituent elements of dumping’.
142
4.855  Fourthly, according to Australia , the United States bases this argument on selective
dictionary meanings of the word “against”:  it asse rts that “the ordinary meaning suggests that the
specific action therefore must be in ‘hostile opposition to’ dumping/subsidization, and must ‘come
into contact with’ dumping/subsidization”.143  However, the word “against” has other, equally valid,
ordinary meanings, including “in competition with”,  “to the disadvantage of”, “in resistance to” and
“as protection from”.144  Moreover, none of these meanings, including those put forward by the
United States, compel the conclusion that a specific action “against” dumping or subsidisation must
apply exclusively to the imported good or to the importer, and must be burdensome to those goods or
importers.
4.856  Fifthly, Australia posits that the United States’ argument is premised on meanings of
“dumping” and “a subsidy” that have no basis in the relevant texts.  Article 18.1 of the Anti-Dumping
Agreement proscribes “specific action against dum ping of exports from another Member” not in
accordance with GATT 1994.  It does not proscribe specific action “against dumped exports”,
“against the dumpers of exports” or “against the importers of dumped goods ” not in accordance with
GATT 1994.  Similarly, Article 32.1 of the SCM Agreement proscribes specific action “against a
subsidy” not in accordance with GATT 1994.  It does not proscribe specific action “against subsidised
exports” or “against importers of subsidised goods ” not in accordance with GATT 1994.  The
United States is in effect arguing that the Panel should create new rights and obligations under
                                                     
140 First Submission of the United States, paragraph 91.
141 First Submission of the United States, paragraph 92.
142 See paragraph 9 above.
143 First Submission of the United States, paragraph 92.
144 The New Shorter Oxford English Dictionary , 1993, pp. 38-39, (L. Brown ed).WT/DS217/R
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GATT 1994, the Anti-Dumping Agreement and the SCM Agreement or, in other words, act ex aequo
et bono .  To read the distinctions requested by the United States into the words of Articles 18.1 and
32.1 would not give the words their ordinary meaning in their context and in light of the object and
purpose of the Anti-Dumping Agreement, the SCM Agreement and the GATT,145 and would be
contrary to the Panel’s obligation to clarify the provisions in accordance with the customary rules of
interpretation of public international law as required by Article 3.2 of the DSU.
4.857  Finally, it is the opinion of Australia that the United States ignores that the offset payments
are likely to precipitate changed behaviour on the part of the producers and importers of dumped or
subsidised goods, as well on the part of domestic producers, thereby altering the competitive
relationship between imported goods and the domesti c like products in ways not contemplated by
GATT 1994 or the Anti-Dumping or SCM Agreements.  (Moreover, the competitive relationship withgoods that have not been found to be dumped or subsidised is also likely to be altered.)  Thus, it
cannot be said that the Act imposes no burden or liability on imported dumped or subsidised goods.
4.858  Contrary to assertions by the United States,
146 Australia has not argued that the offset
payments under the Act constitute a specific action against dumping or subsidisation because they are
paid directly from anti-dumping or countervailing duties.  Rather, Australia has argued that the offsetpayments constitute specific action against dumping or subsidisation because they are conditional on
the existence of situations presenting the constituent elements of dumping:  they are payments that
may be made only when the constituent elements of dumping or a subsidy are present.
4.859  The United States further argues that the “intent” of the law is the sole basis for Australia’s
claim that the Act is a specific action against dumping and subsidisation.147  Australia argues that once
again, however, the United States has ignored the essential element of Australia’s argument:  that the
Title of the Act and the accompanying Findings of Congress  confirm that the Act is, and was intended
to be, specific action against dumping/a subsidy.148  The Act is a “specific action against dumping/a
subsidy” on the basis of the substantive provisions of the Act:  payments under the Act may be made
only when the constituent elements of dumping and subsidisation are present.
4.860  Australia considers that the United States has presented an argument that has no basis in
either the texts of GATT 1994, the Anti-Dumping or SCM Agreements or in the clarifications of the
relevant provisions provided by previous WTO jurisprudence.
(iii) Footnotes 24 and 56 cannot exclude the Act from the scope of Article VI of the GATT 1994
and the Anti-Dumping and SCM Agreements
4.861  The United States argues that, even if the Act is determined by the Panel to be “an action
against dumping or a subsidy, footnotes 24 and 56 to Articles 18.1 and 32, respectively, operate topermit the [Act]”
149 as action under another relevant GATT provision (GATT Article XVI).150
According to Australia, this argument, however, is unsustainable.
4.862  Australia argues that the footnotes to Articles 18.1 and 32.1 clarify the scope of those
provisions:  they do not create exceptions to that scope.  As the Panel in US – 1916 AD Act  found in
response to the argument by the United States that footnote 24 does not lock a Member into levying
                                                     
145 United States – Standards for Reformulated and Conventional Gasoline , AB-1996-1, Report of the
Appellate Body, WT/DS2/AB/R, page 17.
146 See, for example, First Submission of the United States, paragraph 19.
147 First Submission of the United States, paragraph 95.
148 First Submission of Australia, paragraphs 43-45 and 53.
149 First Submission of the United States, paragraph 101.
150 First Submission of the United States, paragraph 111.WT/DS217/R
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anti-dumping duties when faced with a factual situation constituting injurious dumping and leaves the
option of taking other measures that are in accordance with the GATT 1994:
"if the interpretation suggested by the United States were to be followed, Members
could address “dumping” without having to respect the provisions of Article VI of theGATT 1994 and the Anti-Dumping Agreement.  Such an interpretation would
deprive Article VI of the GATT 1994 and the Anti-Dumping Agreement of their
useful effect within the framework of rules and disciplines imposed by the WTO
Agreement."
151  
4.863  The Panel’s reasoning is equally applicable in the present case.  To accept the United States’
argument that offset payments under the Act are permitted by footnotes 24 and 56 would be to reduce
the prohibition in Articles 18.1 and 32.1 on “specific action against dumping/a subsidy” otherwisethan in accordance with GATT 1994 to inutility and redundancy.  This of course the Panel may not
do.
152
4.864  Moreover, Australia submits, GATT Article XVI cannot be an “other relevant provision of
GATT 1994” within the meaning of footnote 56, as GATT Article XVI is one of the provisions of
GATT 1994 interpreted by the SCM Agreement, in pa rticular in Part III, within the meaning of
Article 32.1 of the SCM Agreement.  In US – 1916 AD Act , the Appellate Body found that the
provisions of the GATT 1994 “interpreted” by the Anti-Dumping Agreement were those provisions of
GATT Article VI concerning dumping, and that th e “other relevant provisions of GATT 1994” in
footnote 24 “can only refer to provisions other than the provisions of Article VI concerning
dumping”.153  By the same rationale, the other relevant provisions of GATT 1994 in footnote 56 can
only refer to provisions other than the provisions of Article VI concerning countervailing duties and
Article XVI.
4.865  The United States itself said:  “In sum, the or dinary meaning of the phrase ‘not intended to
preclude action under other relevant provisions of GATT 1994’ in footnotes 24 and 56 is to permit
action involving dumping or subsidies (but not specifically against ) that is consistent with GATT
provisions other than GATT Article VI”154 (emphasis added).  Australia agrees.  It is the scope of
“specific action against dumping/a subsidy” that is the issue and this has already been clarified by the
Appellate Body.
4.866  The fact that the offset payments under the Act might not be inconsistent with GATT
Article XVI – an issue which need not be addressed here – is irrelevant.  For so long as the Act
constitutes “specific action against dumping/a subsidy”, that is, action that may be taken only when
the constituent elements of dumping are present, it will be inconsistent with Articles 18.1 and 32.1.
(iv) The obligations of Articles 4.10 and 7.9 of the SCM Agreement
4.867  Australia does not intend to pursue further arguments in relation to Articles 4.10 and 7.9 of
the SCM Agreement.
                                                     
151 US – AD 1916 Act , Report of the Panel (Complaint by the EC), paragraph 6.199.
152 In United States – Standards for Reformulated and Conventional Gasoline , page 23, the Appellate
Body said:  “One of the corollaries of the ‘general rule of interpretation’ in the Vienna Convention  is that
interpretation must give meaning and effect to all the terms of a treaty.  An interpreter is not free to adopt areading that would result in reducing whole clauses or paragraphs of a treaty to redundancy or inutility.”
153 US – AD 1916 Act , Report of the Appellate Body, paragraph 124-5.
154 First Submission of the United States, paragraph 108.WT/DS217/R
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(v) Conclusion
4.868  Australia is of the view that the arguments of the United States that the Act is not within the
scope of GATT Article VI or the provisions of the Anti-Dumping and SCM Agreements at issue in
this dispute and that the Act is simply a government payment programme are without merit.  The Actis a clear and systematic extension of the United States’ statutory framework for the imposition of
anti-dumping and countervailing duties.  Offset payments under the Act are conditional, inter alia , on
findings that there exist situations presenting the constituent elements of dumping or a subsidy.  The
Act is a “specific action against dumping/a subsidy” within the meaning of Article 18.1 of the Anti-
Dumping Agreement and Article 32.1 of the SCM Agreement respectively that is not in accordance
with the provisions of the GATT 1994 as interpreted by the Anti-Dumping/SCM Agreements.
(d) The inconsistency of the act with Article 5.4 of the anti-dumping agreement and Article 11.4
of the SCM Agreement
4.869  In its First Submission, Australia argued that:
- the Act creates a systemic bias in favour of domestic producers of a like
product who support an application for an investigation, making it easier for
the needed levels of industry support to be reached;
- the Act contravenes the fundamental principle that the legal framework of a
rules-based system must be impartial and objective;
- Articles 5.4 and 11.4, read in their respective contexts, require that domestic
industry express its support for, or opposition to, an application for an anti-
dumping or countervailing duty investigation on the basis of evidence of:dumping or subsidisation;  injury, threat of injury, or retardation;  and a
causal link between the dumping or subsidisation and injury;
- the Act distorts, or threatens to distort, the requirement that an application be
made “by or on behalf of the domestic industry”;  and
- by so doing, the Act frustrates the intent of Articles 5.4 and 11.4 to establish
whether an application is truly being made by or on behalf of the domestic
industry.
4.870  The United States has offered little to refute Australia’s argument.  The United States says:
“It is highly unlikely that the complaining parties could ever summon credible evidence that the [Act]
has distorted the decisions of companies in supporting petitions …  To establish such distortion, the
complaining parties would have to show that, ‘but  for’ the distributions, domestic producers would
not otherwise have filed a petition or supported an investigation, and that the participation of thoseproducers was necessary to establish standing in that investigation”.
155
4.871  Australia asserts that the United States’ view of what is necessary to establish distortion of
domestic producer decisions cannot be correct.  If it were, it would mean that the United States could
enact legislation – to the opposite effect of what it has done – imposing substantial monetary penalties
on domestic producers who do not support an investigation.  Yet in such circumstances it would neverbe possible to “summon credible evidence” – as defined by the United States – to demonstrate that
such legislation has distorted the decisions of companies.
                                                     
155 First Submission of the United States, paragraph 123.WT/DS217/R
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4.872  The United States also argues that it is generally irrational for domestic producers to oppose
relief.156  However, Australia is of the view that there could well be occasions when it will be
perfectly rational that at least some domestic producers will not support, or will oppose, relief, for
example, if a domestic producer considered that a domestic competitor would be likely to receive ahigher offset payment and thus gain a financial advantage.
4.873  The United States further argues “it is rare for domestic producers in the United States not to
have sufficient industry support in filing anti-dumping or countervailing duty petitions.  …  Thus, if
there is sufficient support anyway, it cannot be said that the [Act] will affect the number of cases
meeting the thresholds of Articles 5.4 and 11.4, even if such an increase could constitute a breach of
those articles”157 (emphasis added).
4.874  However, according to Australia, the mere possibility that the Act could distort the
requirement that an application be made “by or on behalf of the domestic industry” in any
circumstances must be a breach of those Articles, notwithstanding that the incidence of insufficient
industry support for an investigation is rare.
4.875  In US – Section 301 , the Panel found that “the good faith requirement in the Vienna
Convention suggests, thus, that a promise to have recourse to and abide by the rules and procedures ofthe DSU, also in one’s legislation, includes the undertaking to refrain from adopting national laws
which threaten prohibited conduct”.
158 Australia is of the view that this finding is equally applicable to
the current dispute.  The principle of good faith “that informs the provisions of the Anti-Dumping
Agreement, as well as the other covered agreements”159 suggests that a promise to apply anti-dumping
measures “only under the circumstances provided for in Article VI of GATT 1994 and pursuant toinvestigations initiated
[…] and conducted in accordance with the provisions of”160 the Anti-Dumping
Agreement includes the undertaking to refrain from adopting national laws which threaten prohibited
conduct.
4.876  Australia considers that also pertinent to this dispute is the Appellate Body’s statement in US
– Hot-Rolled Steel , in relation to Article 3.1 of the Anti-Dumping Agreement, that “investigating
authorities are not entitled to conduct their investig ation in such a way that it becomes more likely
that, as a result of the fact-finding or evaluation process, they will determine that the domestic
industry is injured”.161  It is Australia’s view that the situation in the current dispute is analogous:  the
United States cannot be entitled to enact legislation that makes it more likely that the needed levels of
domestic industry support will be reached in any investigation.
(e) Conclusion
4.877  For the reasons presented in its submission, Australia respectfully maintains its request that
the Panel make the findings and recommendations set out at paragraphs 124-125 of its First
Submission.
                                                     
156 First Submission of the United States, paragraph 124.
157 First Submission of the United States, paragraph 125.
158 United States – Sections 301-310 of the Trade Act of 1974 , Report of the Panel, WT/DS152/R,
paragraph 7.68.
159 United  States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan , AB-
2001-02, Report of the Appellate Body, WT/DS184/AB/R, 24 July 2001, adopted 23 August 2001,paragraph 101.
160 Anti-Dumping Agreement, Article 1.
161 United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan , Report
of the Appellate Body, paragraph 196.WT/DS217/R
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2. Brazil
(a) Introduction
4.878  Brazil asserts that in the Oral Statement of the United States at the First Meeting of the Panel
in United States - Continued Dumping and Subsidy Offset Act of 2000 , the United States was unable
to rebut any of the claims made by the complaining parties in this proceeding.  The United States
relies principally on the argument that the Continuing Dumping and Subsidy Offset Act of 2000162
(hereinafter the Byrd Amendment) is nothing more than a payment programme and, in the absence of
specific WTO obligations with respect to the uses of the revenues from anti-dumping and
countervailing duties, it should be viewed as any other payment programme of a government.163
Under this standard, the United States argues, “the disciplines relevant to government paymentprogrammes are contained in the subsidies provisions of the SCM Agreement” and that the “relevantlegal question is whether the CDSOA is a prohibited subsidy.”
164
4.879  In fact, Brazil is of the view that the relevant legal question is whether the Byrd Amendment
payments constitute “specific action against dumping” under Article 18.1 of the Agreement on
Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 (hereinafter “AD
Agreement”) which is not “in accordance with the provisions of GATT 1994” as interpreted by theAD Agreement .  The kind of payments under the Byrd Amendment clearly are not among the actions
specified in the AD and SCM Agreements – anti-dumping or countervailing duties, provisional
measures, or undertakings.  Consequently, if these payments are specific action against dumping they
are not in accordance with the GATT 1994, as interpreted by these Agreements.
4.880  Brazil asserts that the United States can only prevail in this proceeding if it convinces the
panel to ignore the direct relationship between the Byrd Amendment payments and the dumping and
subsidization against which the United States is permitted to take specific measures under the AD and
SCM Agreements .  The linkages, however, are abundantly clear and include the following:
(a) The official title of the Byrd Amendment states its purpose as being to “offset”
dumping and subsidies.
(b) The sponsors and supporters of the Byrd Amendment have stated that the purpose of
the payments under the law are to discourage dumping and subsidization and to offset
the effects of dumping and subsidization, the same purposes as the anti-dumping and
countervailing measures permitted under the relevant Agreements.
(c) Byrd Amendment  payments are only made if anti-dumping or countervailing duties
are collected pursuant to the determinations required under the AD and SCM
Agreements  – i.e. the existence of injurious dumping or injurious subsidization.
(d) Byrd Amendment payments are only made to parties that supported the request for
the imposition of anti-dumping or countervailing duties.
(e) Byrd Amendment  payments end when an anti-dumping or countervailing duty order
is terminated.
                                                     
162 19 USC. 1675 c.
163 Oral Statement of the United States at the First Meeting of the Panel, United States – Continued
Dumping and Subsidy Offset Act of 2000 (DS217 & 234), 5 February 2002 (hereinafter US Statement) at
paras. 3 and 8.
164 Id. at paras. 8 and 9.WT/DS217/R
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(f) Byrd Amendment  payments are linked to expenditures by the recipients benefiting
the product subject to anti-dumping or countervailing duties.
4.881  Brazil argues that the Byrd Amendment provides that companies which successfully petition
for the imposition of anti-dumping or countervailing duties will receive not only the protection thatthe imposition of these duties affords but also the revenues collected as a result of these duties.
4.882  Brazil's submission will not seek to review the arguments already made by Brazil or to
address each and every argument relied upon by the United States.  Rather, the submission will be
limited to addressing the deficiencies in the principal US arguments as presented in its oral statement
on 5 February.
(i) The complaining parties are not asking the panel to add to or diminish the rights and
obligations provided in the covered agreem ents, but only to determine whether the Byrd
Amendment  payments are specific actions against dumping and subsidization not in
accordance with the covered agreements
4.883  Brazil asserts that the United States argues th at the complaining parties are seeking to expand
existing obligations under the covered agreements contrary to Article 19.2 of the Understanding on
the Rules and Procedures Governing the Settlement of  Disputes (hereinafter DSU).  This argument is
based on the assertion by the United States that there is “no WTO obligation with respect to the uses
to which anti-dumping and countervailing duties might be put, or to distinguish the use of these funds
from any other source of government revenue.”
165  As with most of the US argumentation, this
argument misses the point.
4.884  According to Brazil, while the AD Agreement does not restrict the uses to which anti-
dumping duties can be applied once collected, the AD Agreement does contain very specific language
in Article 18.1 that prohibits specific action against dumping except in accordance with the GATT
1994 and the AD Agreement.  By rewarding the parties requesting the anti-dumping duties with the
disbursement of the revenues from those dutie s under Byrd Amendment, the United States is
contravening its WTO obligations.  They are contravening these obligations not because the ADAgreement or the GATT 1994 place limitations on how the revenues from anti-dumping duties may
be spent, but because the AD Agreement and GATT 1994 place limitations on the actions which may
be taken against dumping.
4.885  Thus, Brazil argues, the complaining parties in this proceeding are not seeking to impose any
new or additional obligations on Members, rather they are simply seeking to enforce the existing
obligations under Article 18.1 of the AD Agreement consistent with the findings of the panel and
Appellate Body in United States - Antidumping Act of 1916.
166 (hereinafter the “1916 Act”)   The
obligations at issue are the restrictions on actions against dumping.  Whether and how the United
States uses the revenues collected from anti-dumping duties is only relevant in the context of whether
they are being used for actions against dumping.
(ii) The Byrd Amendment payments do not have to be prohibited or actionable subsidies under
the SCM Agreement  in order to be found inconsistent with Article 18.1 of the AD Agreement
and Article 32.1 of the SCM Agreement
                                                     
165 US Statement at para. 9.
166 United States – Antidumping Act of 1916, Report of the Appellate Body, WT/DS/136/AB/R,
WT/DS162/AB/R, adopted 26 September 2000 and Report of the Panel, WT/DS136/R, 31 March 2000 and
WT/DS163/R, 29 May 2000.WT/DS217/R
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4.886  The United States makes much of the fact that no party has claimed that the payments under
the Byrd Amendment constitute prohibited subsidies under the SCM Agreement  and that only Mexico
has made a claim that these payments are actionable subsidies.167  The US rationale is that the
disciplines governing payment programmes are contained in the subsidies provisions of the SCMAgreement .
168 Brazil asserts that again, the US argument misses the point and should be dismissed as
irrelevant.
4.887  According to Brazil, the complaining parties, wi th the exception of Mexico, did not base their
complaint on the issue of whether the Byrd Amendment  payments constitute actionable subsidies for
a very simple reason: the panel does not need to reach this issue to find the US in violation of its
WTO obligations.  Again, the US tries to confuse the issue.  The issue is not whether there are
constraints on how the US spends the revenues from anti-dumping and countervailing duties, butwhether rewarding US parties that have supported the imposition of these duties by disbursing the
revenues from the duties to these parties is a specific action against dumping or subsidization not
authorized under the relevant agreements.
4.888  Thus, Brazil argues, the US discussion of whether the Byrd Amendment payments are
actionable subsidies under Article 5 of the SCM Agr eement is simply not relevant to the claims under
Articles 18.1 and 32.1 of the AD and SCM Agreements respectively.  While these payments may be
actionable subsidies and may cause adverse effects, this question is wholly independent of the
question of whether they constitute specifi c action against dumping and subsidization.
(iii) The Byrd Amendment mandates specific action against dumping and subsidization not
authorized by the relevant agreements.
Contrary to the United States arguments, the rele vant question is not whether the Byrd Amendment
payments are imposed on imports or importers, but whether they are specific actions against dumping
and subsidization, namely actions to “offset or prevent” dumping
4.889  The US claims that the Byrd Amendment payments are not specific actions against dumping
and subsidization because they do not “impose any type of measure on imports or importers.”169  The
primary basis of this argument is an obscure definition of the word “against” which the US claims
indicates that the specific action must be “in hostile opposition to and in contact with dumping or
subsidy.”170  To support its position, the United States attempts to read into the relevant agreements,
language and definitions that are without merit.
4.890  Brazil asserts that according to Article VI:2 of the GATT 1994, anti-dumping duties are
intended to “offset or prevent” dumping.  The specific actions permitted to “offset or prevent”
dumping are provided for in Articles 7, 8 and 9 of the AD Agreement, specifically provisionalmeasures, anti-dumping duties and price undertakings.  Other actions to “offset or prevent” dumping
are not permitted under Article 18.1 of the AD Agreement. Thus, the relevant question is not whether
the Byrd Amendment constitutes action against imports or importers or even whether the action is in
hostile opposition to or in contact with the dumping and subsidy.  The relevant question is whether the
Byrd Amendment payments constitute specific action to offset or prevent dumping and subsidization.
4.891  Brazil is of the view that the US attempt to read into the language “specific action against
dumping” a limitation which defines specific action as action against imports or importers is
                                                     
167 US Statement at para. 9.
168 Id.
169 US Statement at para 24.
170 Id. at para. 29WT/DS217/R
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specifically contradicted by the text, which places no such limitation on actions against dumping, and
confirmed by prior panel and Appellate Body decisions.  Specifically, the panel report in 1916 Act
defined the relevant measures as “measures to counteract dumping.”171  The Appellate Body
referenced “any action…against dumping of exports.”172  Neither imposed any limitation in terms of
actions imposed upon imports or importers.  Rather, according to the Appellate Body, “specific
actions against dumping” include “any…action that is taken in response to situations presenting the
constituent elements of ‘dumping’.”173
The Byrd Amendment payments are specific action against dumping
4.892  The United States argues, “the sole basis of the complaining parties’ argument that the
CDSOA is ‘against’ dumping and subsidies is the supposed intent or purpose of the law.”174  T h e
United States then argues that “the Panel must look at what the law does, not what its policy purposeis” and urges the panel to reject any consideration of the purpose of the Byrd Amendment.
175  The US
then makes its most sweeping characterization, stating that the “CDSOA has nothing to do with
imported goods or importers.”176
4.893  Brazil asserts that in fact, the relevant inquiry as articulated by the Appellate Body in 1916
Act is whether the action is taken in response to situations presenting the constituent elements ofdumping.
177  There is no question that the Byrd Amendment mandates an action, specifically the
distribution of anti-dumping and countervailing dut y revenues to domestic parties that supported the
request for the imposition of those duties.
4.894  Is this action “in response to situations presenting the constituent elements of dumping”,
Brazil asks?  Since the Byrd Amendment payments are only available when an anti-dumping orcountervailing duty order is in place, are only available to parties that supported the request for the
imposition of those duties; and are only available when specific products are dumped or subsidized
and imported into the United States, Brazil finds it is difficult to see how these payments are not in
response to a situation presenting the constituent elements of dumping.  Indeed, the existence of the
constituent elements of dumping is a condition precedent to any payments.
4.895  Brazil asserts that it is true that one could have a situation where payments were triggered by
the collection of an anti-dumping or countervailing duty, but the payments are neither “in response to”
or “against” dumping.  The US flag example is one such situation.  Thus, the limitation does not apply
to actions that are not against dumping or in response to dumping, but only conditioned on there being
revenues from dumping duties.  As is clear from Article VI:2, actions against dumping or in response
to dumping are actions which seek to “offset or prevent” dumping.  Thus, the question is whether the
payments under the Byrd Amendment are actions which “offset or prevent” dumping.
4.896  According to Brazil, while the plain language in a statute as to its purpose and the statements
of its sponsors as to its purpose may not always be conclusive as to the actual purpose, they certainly
are relevant in any evaluation.  The United States would have the panel believe that the purpose, both
intended and actual, of the Byrd Amendment is a great mystery.  However, the purpose is articulated
in the title of the legislation itself – the Continued Dumping and Subsidy Offset Act.   Thus, the title
                                                     
171 Panel Report, 1916 Act,  at para.6.230
172 Appellate Body Report, 1916 Act, at para126.
173 Id.
174 US Statement at para. 30
175 Id.
176 Id. at para 31.
177 Appellate Body Report, 1916 Act, at para. 126.WT/DS217/R
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clearly would lead one to believe that the purpose of the legislation is to “offset” continued dumping
and subsidization.
4.897  Similarly, the legislation’s sponsors supported its passage because it would allow parties
adversely affected by dumping and subsidization “to recover monetarily”, to be compensated for“damages” and to receive assistance at the expense of their competitors.
178  Rather than arguing that
the Byrd Amendment has no such purpose and showing that it does not “offset or prevent” dumping,
the United States has simply stonewalled the panel: the purpose is a mystery and the programme is
simply a payment programme with no apparent purpose, objective or effect.
4.898  Brazil asserts that, in fact, even the most superficial analysis of the Byrd Amendment
payments leads one to the conclusion that it is an action to offset or prevent dumping.  The dumping
duties themselves increase the importer’s costs, while the Byrd Amendment payments decrease thecosts of the domestic competitor for the same product.  Thus, there is a double offset – duties increase
import prices and payments decrease domestic producer costs.  There is also a double incentive to
prevent dumping – every time a dumping duty is paid it directly benefits a competing domestic
producer.  Rather than addressing th e obvious – that the Byrd Amendment  payments offset and
prevent dumping – the United States has chosen to obfuscate.
4.899  Finally, although Brazil does not believe it is legally relevant, the United States has asserted
that the Byrd Amendment  payments “must apply to the imported good or the importer, and it must be
burdensome.”
179   In fact,  Brazil considers that this condition is met.  The competitive effect of the
payments are felt by the imported product and the importer in the form of competing with a domestic
supplier who has lower costs as a result of the payments received or to be received.  A newcompetitive element burdens the conditions of competition in the US market.  The competitive effect
is identical to the effect of increasing the anti-dumping duties by a comparable amount.  You can
either increase the importer’s costs or decrease the domestic industry’s costs, the effect is the same.
The importer has an added competitive burden.
(b) Systemic issues
4.900  Brazil submits that the AD and SCM Agreements represent a negotiated balancing of the
interests of Members reflected in rights and obligations under those agreements.  By acting
unilaterally to provide additional remedies to offset and prevent dumping and subsidization, the US
has fundamentally altered the balance of rights and obligations under the agreements.  It has provided
additional incentives for domestic parties to request anti-dumping and countervailing duties be
imposed on imports and that they be maintained even after their remedial purposes are achieved.  It
has introduced a new form of remedy into the WTO system, monetary rewards or damages, which, ifendorsed by this panel, could fundamentally change the nature of the WTO system.  Finally, it has
created a situation in which use of the “cumulation”  provisions of the agreements (Articles 3.3 and
15.3 of the AD and SCM Agreements  respectively) will increase to the detriment of marginal
suppliers, primarily suppliers in developing countries.
4.901  In the opinion of Brazil, there are reasons that the agreements limit the actions that can be
taken against dumping and subsidization.  The most obvious is the desire to impose disciplines on the
extent to which Members can take measures to offset or prevent dumping or subsidization.  The
systemic issues illustrate further reasons for these disciplines in that a departure from these disciplines
                                                     
178 146 Cong. Rec. S10697 (daily e. 18 October 2000) (statement of Senator Robert Byrd); 144 Cong.
Rec. S7883-7884 (daily ed. 9 July 1998) (statement of Senator DeWine).
179 First Written Submission of the United States of America, United States – Continued Dumping and
Subsidy Offset Act of 2000, (DS217&234),  14 January 2002 at para. 92.WT/DS217/R
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by allowing additional remedies will also create a new, different, and unintended balance between the
rights and obligations of Members under these agreements.  Industries in importing countries will not
only obtain more relief than was intended by the agreements, there will also be more incentive to file
cases, more incentive to maintain anti-dumping and countervailing duties in effect, more use of thecumulation provisions, and, ultimately, a greater change in the competitive conditions in the
importing market than would be the case if the disciplines of the agreement are enforced.
(c) Conclusion
4.902  Brazil reiterates its requests that the panel find the US in violation of its WTO obligations and
findings and recommendations as set forth in paragraphs 43 and 44 of the First Written Submission of
Brazil.
3. Canada
(a) Introduction
4.903  Canada's submission responds to the first Oral Statement of the United States as well as its
First Written Submission. According to Canada, none of the arguments raised in those submissions
persuasively addresses the legal basis of the challenge against the  Continued Dumping and Subsidy
Offset Act (the Act or the Byrd Amendment).
4.904  Canada asserts that though not legally relevant for the purposes of this challenge, the harm
caused by this Act  is significant.  For Canada, in one sector alone, over US$490 million is currently
held in bonds in clearing accounts.
(b) Arguments of the United States
4.905  According to Canada, the United States argues that:
- the Act is a mere government “payment” programme;
- such programmes fall within the purview of a state’s sovereign right to
spend;
- there is no limit on the manner in which anti-dumping and countervailing
duties can be appropriated;
- the Act  does not incorporate the constituent elements of dumping;
- the offset payments in question do not “come into contact with” importers
and imported goods and therefore do not constitute a specific action “against”
dumping or a subsidy;
- the Act  cannot be said to have an effect on the  actions of domestic industry or
the administration of domestic dumping or subsidies laws; and
- the complainants raise the wrong claims and that the real question is whether
offset payments constitute prohibited or actionable subsidies.WT/DS217/R
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(c) Specific action against dumping or a subsidy
(i) Articles 18.1 and 32.1 of the Agreements
4.906  Canada is of the view that the Appellate Body has found that Article 18.1 provides a clear
prohibition on forms of action against dumping that are not in accordance with Article VI ofGATT 1994 as interpreted by the Anti-dumping Agreement.  Three forms of action are permitted:
definitive anti-dumping duties, provisional duties and price undertakings.  Specific action against
dumping could take a wide variety of forms.  It is action taken in response to, and at minimum only
when, the constituent elements of ‘dumping’ are present.”  The concept of “specific action against
dumping” however could be broader.
4.907  The constituent elements of “dumping” are defined in Article VI:1.  There must be products
imported and cleared through customs and those imported products must be priced at a price lowerthan their normal value.  Article VI defines conditions under which counteracting dumping as such  is
allowed.  It applies where the practice that triggers the imposition of a measures is “dumping” within
the meaning of Article VI:1.  Where a Member addresses a practice that meets that definition, it has to
abide by WTO rules governing anti-dumping.
4.908  Footnote 24 to Article 18.1 permits action that is allowed under other provisions of
GATT 1994 as long as the measure does not address dumping as such.
4.909  According to Canada, the analysis of the Appellate Body in the United States – 1916 Act
challenge  can be applied to interpret Article 32.1 of the SCM Agreement.  Article 32.1 mirrors
Article 18.1 of the Anti-dumping Agreement.  Therefore, Article 32.1 prohibits all actions that are not
in accordance with GATT 1994 as interpreted by the SCM Agreement. The SCM Agreementinterprets two relevant provisions of GATT 1994: Articles VI and XVI. Therefore, specific actions
against subsidies must accord with these provisions as interpreted by the SCM Agreement.
Permissible actions that can be taken against subsidies are limited to one of two recourses:
countervailing measures under Part V of the SCM Agreement or countermeasures under Parts II or III
of the SCM Agreement. The Act only raises issues in the context of Part V of the SCM Agreementand Article VI:3 of GATT 1994.  Those provisions limit remedies to duties, price undertakings and
provisional duties.
4.910  Canada argues that “specific action against a subsidy” is any action taken when the
constituent elements of subsidisation are present. The constituent elements of a subsidy are defined in
Article 1 of the SCM Agreement.   Footnote 56 to Article 32.1 does not preclude action against a
subsidy as long as the measure taken is not a response to subsidies as such and such action accords
with other relevant provisions of GATT 1994 ( e.g., action under Article III of GATT 1994).
(ii) The Act constitutes “specific action” against dumping or a subsidy that is not in accordance
with the provisions of GATT 1994
4.911  According to Canada, the design, architecture and structure of the Act establish that the Act  is
a direct response to dumping and subsidisation.  The Act is now an integral part of the anti-dumping
and countervailing duty regime of the United States.  Petitioners now receive two remedies whendefinitive duties are imposed on dumped or subsidised goods: (1) the imposition of the duties with the
ensuing beneficial economic impact (i.e. increased sales and higher profits); and (2) a portion of the
collected duties in respect of the dumped imports or subsidised imports.
4.912  Canada asserts that the offset payments under the Act act against dumping or subsidies.  They
operate to offset costs incurred by domestic goods that compete with imports found dumped orWT/DS217/R
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subsidised.  Moreover, they impose a burden on imports of allegedly dumped or subsidised goods into
the United States in addition to anti-dumping and countervailing duties, by changing the competitive
relationship between imports and competing domestic products.
4.913  According to Canada, the constituent elements of dumping are incorporated into the operation
of the Act.  To trigger offset payments under the Act , an Order must be imposed on dumped or
subsidised products and duties must be collected.  Offset payments are not paid from just any “pot of
money”.  They originate from a charge on specific imports.  Offset payments are funded entirely by
anti-dumping and countervailing duties.  They are paid out to offset dumping or subsidisation of
imports into the United States.  Funds collected under Orders are strictly segregated.  Expenditures
must have been incurred for the production of competing domestic products during the time an Order
is in place. Only “affected domestic producers” – those injured by imports who participate ininvestigations – can make claims pursuant to specific Orders.
4.914  Canada asserts that an offset payment under the  Act is not a definitive anti-dumping or
countervailing duty, price undertaking or provisional measure.  It is a subsidy meant to offset
injurious dumping and subsidies.  Accordingly, it is not in a form authorized by Article VI of GATT
1994 as interpreted by the Agreements, and violates Articles 18.1 and 32.1 of the Agreements.
(iii) US Arguments do not address the complaint and are incorrect
Constituent elements
4.915  The United States submits that the  Act is not a response to the “constituent elements” of
dumping or subsidies because it has two requirements: that the producers making the claim have
standing as an “affected domestic producer” and that the claim is for a “qualifying expenditure”.  Italso alleges a measure can only respond to “constituent elements”, if the elements are “built into” it
and that the Act fails this test as well.
4.916  Canada submits that the US arguments are incorrect.  The  Act is a direct response to
situations presenting the constituent elements of dumping and subsidies for the following reasons.
4.917  First, in the view of Canada, there are more than two requirements for the operation of the
Act. Most important, to trigger the Act and for it to operate, an Order must be imposed and duties
must be collected.  This means the eligibility criteria for the distribution of offset payments under the
Act are directly and wholly contingent upon imported goods being dumped or subsidised into the
United States so that definitive duties are imposed.  Without such products and the practice of
dumping or subsidies, it does not matter that there are affected domestic producers or qualifying
expenditures.
4.918  Moreover, Canada argues, the two requirements under the Act cited by the United States are
further evidence that the Act is a direct response to  situations presenting the constituent elements of
dumping or subsidisation.  Neither requirement exists without the presence of those elements.
“Affected domestic producers” can only qualify to make claims if the investigations in which they
participate result in final determinations.  “Qualifying expenditures” are those incurred for the
production of domestic goods that compete with imports subject to an Order.
4.919  Second, Canada submits, in the United States – 1916 Act  appeal, the Appellate Body
determined that while there were additional requirem ents to those required by Article VI to impose
penalties under the 1916 Act, this did not alter the fact that the 1916 Act applied only where
constituent elements of dumping were present.  Members’ practices could not escape discipline byWT/DS217/R
WT/DS234/R
Page 172
simply characterizing a practice as something other than dumping or subsidisation.  This is a fortiori
true of the Act.
4.920  In this instance, Canada asserts, there is no question that the conduct targeted by the measure
in question – the Act – is dumping or a subsidy; the Act by its very design does not operate otherwise.Rather, the United States appears to argue that Articles 18.1 and 32.1 do not apply to subsidies when
they are used as specific action against dumping or a subsidy.  Specific action , under those provisions,
however is limited to three recourses.  It is not permitted if there other  requirements that must be met;
and it is not permitted if the means  chosen is a subsidy.
4.921  Third, the US implication that the “constituent el ements” must be built into a measure for it to
be inconsistent is incorrect.  First, the Act by definition incorporates such “constituent elements”.  It
does not operate unless there is a dumping or a countervailing duty Order, which is proof of theexistence of such constituent elements under US law.
4.922  Moreover, the US interpretation of the United States – 1916 Act  Appellate Body report is
wrong.  There the Appellate Body found that the 1916 Act required the presence of the constituent
elements of dumping.  It further determined that “[t]he constituent elements of ‘dumping’ are built
into the essential elements of civil and criminal  liability under the 1916 Act.”  However, nowhere did
the Appellate Body suggest that a measure is a “specific action against dumping” or subsidies only if
the requirements are built into the measure in question.
4.923  Further, other factors also support Canada’s position that the Act constitutes a response to
situations presenting the constituent elements of dumping.  While not decisive, they are indicative.
These factors include the express words of the Act including its title, reference to payments as offsets,and the Findings of Congress stated in Section 1002.  They also include the legislative history of the
Act.
4.924  According to Canada, the Act, therefore, is not just a “mere government payment
programme” nor is it a simple distribution of duties.  It is a subsidy designed as a direct response to
situations presenting the constituent elements of dumping or subsidies.  Accordingly, the only relevantquestion for the Panel is not, as the United States submits, whether the  Act constitutes a prohibited or
actionable subsidy.  Canada submits that the Act constitutes a specific action that is prohibited under
Articles 18.1 and 32.1 of the Agreements.
Against
4.925  The United States argues that the Act  is not subject to Articles 18.1 and 32.1 because it is not
a measure “against” dumping or subsidies.  It submits that the “only logical way” for a measure to be
against dumping or subsidies is through “com[ing] into contact with” the imported good or importerand imposing a burden.  It asserts that the Act does neither.
4.926  The United States also argues that the only evidence the complainants give to prove the
measure is “against” dumping or subsidies is the intent, purpose and objective of the measure and that
that is irrelevant to prove the claim.  Canada argues that the arguments of the United States are
incorrect.
4.927  First, Canada asserts that the Act does, in fact, constitute a measure against imported goods
and importers.  The Act provides for the grant of subsidies funded by anti-dumping or countervailing
duties to petitioners in anti-dumping and countervailing actions.  An importer must therefore not only
pay the duties in question, but also witness the same duties subsidise its direct competitors.  AnWT/DS217/R
WT/DS234/R
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imported good subject to these duties will not only have its price raised by the amount of the duties,
but must compete in the market against subsidised domestic goods.
4.928  Indeed, in the Canada - Periodicals  case, the Appellate Body found that the grant of indirect
subsidies exclusively to domestic goods altered th e competitive relationship between those goods and
imported like products and, accordingly, acted against imported goods.  And the SCM Agreement is
structured on the premise that certain subsidies act against imported goods.  Byrd Amendment
subsidies do act against imported goods and importers.
4.929  Moreover, the United States seems to suggest that the only logical way to come into contact
with dumping and subsidies for purposes of these provisions is through direct impact on imports and
importers in the sense of a fine, tax, imprisonment or a court judgement. According to Canada, that is
incorrect.
4.930  The words of Article 18.1 and 32.1 state that there must be action against the practice of
dumping and subsidies rather than a good or an importer.  The provisions of GATT Article VI provide
guidance regarding the manner in which action can be taken against dumping or subsidies.  To take
action against dumping or subsidies is to “offset or prevent” the dumping or subsidy.  In other words,
action taken against dumping or subsidies is action taken to counteract or discourage the practice.Moreover, in this context, the ordinary meaning of “against” and one that is more logically applicable
is “in opposition to”.  The Act  meets these requirements.
4.931  Further, in the view of Canada, the Appellate Body found “specific action” was action taken
“in response to” situations presenting the constituen t elements of dumping.  Read in context, “in
response to” is equivalent to “against.”  However, nowhere does the Appellate Body limit this tomeasures against imports and importers.
4.932  In the most ordinary sense of the term, subsidies paid out under the Act constitute specific
action “against” dumping or subsidies.  The United States asserts that it does not know why it hands
out billions of dollars in subsidies to companies already benefiting from the protection of anti-
dumping or countervailing duties. According to Canada, the purpose and effect of the Act  are evident
from its structure.
4.933  Subsidies are paid from charges on imports found dumped or subsidised.  They are paid
directly to domestic producers for expenditures incurred to produce competing domestic products
during the term of an Order. Categories for “qualifying expenditures” relate to capital expenditures for
producing domestic goods that compete with imports.  Duties are segregated into special accounts to
ensure payments target specific imports.  Recipients are restricted to those who participate in
investigations and are “injured” by the imports. The Act constitutes a second response to counteractdumping and subsidisation in the US trade remedy system.  In addition to duties that raises prices to
restore conditions of competition, foreign exporters and importers now also see their money go
directly to increase the competitiveness of their competitors.
4.934  According to Canada, the United States, therefore,  misconstrues the facts in alleging that the
complainants rely solely on the intent of the Act to establish that the Act constitutes action “against”
dumping or subsidies.  The purpose or intent of th e Act only confirms what its operation and structure
already establish: that the Act is a direct response to dumping or subsidies.
4.935  Finally, Canada argues that there is no logic in the US position that the intent of the Act, as
reflected in its clear terms, is completely irrelevant to this dispute.  Section 1002 expressly states the
intent of Congress in passing this law: to strengthen US trade remedy laws to neutralize continueddumping and subsidies.WT/DS217/R
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4.936  This, Canada asserts, is also supported by the Act’s legislative history.  Various statements by
the drafters of the legislation are equally explicit in stating this intent of the Act.  Indeed, the words of
Senator Byrd, the author of the Byrd Amendment, establish the case of the complainants.
4.937  Even under the test proposed by the United States, the Act constitutes action “against”
imports and importers that imposes a burden.  The Act  must therefore meet the restrictions in
Articles 18.1 and 32.1 of the Agreements.
Footnotes
4.938  The United States submits that footnotes 24 and 56 to Articles 18.1 and 32.1 of the
Agreements permit action against dumping or subsidies that is consistent with GATT provisions other
than GATT Article VI.  In its view, if the Act is found to be an “action”, it is action that addresses the
causes and effects of dumping and subsidies within the scope of the footnotes.  Since GATTArticle XVI permits subsidies, the United States submits “if the CDSOA is considered to be an action
against dumping, the distributions are otherwise permitted by the footnotes to Articles 18.1 and 32.1
as action under another relevant GATT provision.”
4.939  According to Canada, if the US position were correct, the prohibition of Articles 18.1 and
32.1 would reach only those measures that are already inconsistent with GATT 1994.  This makes nosense.  Footnotes 24 and 56 cannot be interpreted to mean that if a measure were consistent with other
provisions under GATT 1994, Article 18.1 would be i rrelevant or inapplicable.  Rather, Article 18.1
(and 32.1) targets “actions” that might otherwise be consistent with GATT 1994 – that is action that
may not already be caught by other provisions – to the extent that such action is specifically against
dumping or subsidies.
4.940  The United States – 1916 Act  panels clarified the distinction between “action” within the
meaning of the footnotes and “specific action” within the meaning of Article 18.1 (and 32.1) of the
Agreements.  “Specific action” is triggered by the practice of dumping (or subsidies) while “action” is
triggered primarily by some other occurrence.  This is regardless of whether it also affects the practice
of dumping (or subsidies).
4.941  Therefore, Canada argues, where a measure is a specific action against dumping, it does not
escape the requirements of Article 18.1 of the Anti-dumping Agreement because it might be otherwise
consistent with GATT 1994.  The analysis is equally applicable to Article 32.1 of the SCM
Agreement.  The panels in the United States –  1916 Act challenge confirm this in the context of
reviewing the negotiating history of Article VI.
4.942  The Act  does not merely address the causes or effects of dumping or subsidies. According to
Canada, the Act  is a direct response triggered by the presence of the constituent elements of dumping
and subsidies.  The basis for its imposition is objectively the presence of dumping or subsidies.
Accordingly, it is “specific action” against dumping or subsidies within the meaning of Articles 18.1
and 32.1 and it must meet the requirements of those provisions.
4.943  The Act  constitutes a measure taken against dumping or subsidies as such .  Accordingly, it is
irrelevant that Byrd Amendment subsidies might otherwise be permitted under Article XVI.  In anyevent, with footnote 56, as it has already been observed, Article XVI cannot be an “other relevant
provision of GATT 1994”.  Article 32.1 requires that action must accord with the “provisions of
GATT 1994 as interpreted by” the SCM Agreement . Since Article XVI constitutes a provision
interpreted by the  SCM Agreement  within the meaning of that provision, it cannot constitute an “other
relevant provision” of GATT 1994 within the meaning of footnote 56.WT/DS217/R
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The SCM Agreement
4.944  The United States submits that the reasoning in the United States – 1916 Act Appellate Body
report is not applicable to the interpretation of GATT Article VI:3 and the SCM Agreement  and that
GATT Article VI:3 read in conjunction with Article 10 does not limit the permissible remedies forsubsidies to duties.
4.945  Canada submits that the US argument is incorrect.  Article 32.1 of the SCM Agreement
mirrors Article 18.1 of the Anti-dumping Agreement in text, context, and object and purpose.
Accordingly, the findings of the Appellate Body in the United States – 1916 Act case are particularly
pertinent in the interpretation and application of Article 32.1.
4.946  According to Canada, Article 32.1 prohibits specific action against a subsidy that does not
accord with GATT 1994 as interpreted by the SCM Agreement .  In this context, the SCM Agreement
interprets two provisions of GATT 1994 that are relevant to the issue at hand, Articles VI and XVI.
Specific action against a subsidy must therefore accord with Articles VI and XVI as interpreted by the
SCM Agreement.   These provisions restrict Members’ actions against subsidies as such to two sets of
recourses.  Members may apply countermeasures under Parts II and III of the SCM Agreement.  Or
they may impose measures under Part V (countervailing duties, provisional measures and priceundertakings).  Footnote 35 to Article 10 of Part V expressly states that Members may do one or the
other to address the effects of a particular subsidy in the domestic market but not both.
4.947  The provisions of Part V elaborate on the countervailing duty provisions contained in
Article VI:3 of GATT 1994.  Read together, Part V of the SCM Agreement and Article VI:3 restrict
the permissible remedies (other than countermeasures) against subsidies to countervailing duties,undertakings and provisional measures.
4.948  The Act operates in the context of the issuance of countervailing duty orders and the
assessment and distribution of countervailing duties.  As a result, for purposes of this challenge, the
Act only raises issues in the context of Part V of the SCM Agreement and Article VI:3 of GATT.
Having chosen this avenue, the United States is restricted in its applicable remedies for specific actionagainst a subsidy to duties, undertakings and provisional measures.
4.949  According to Canada, this restriction is confirmed by the negotiating history of Article VI.
The United States – 1916 Act  panels reviewed this negotiating history in the context of anti-dumping
duties.  It shows that while the express limitation on actions against subsidies (and dumping) to duties
was removed, that did not alter the fact “measures other than compensatory anti-dumping and
countervailing duties may not be applied to counteract dumping or subsidization except in so far as
such other measures are permitted under other provisions of the General Agreement.”
4.950  This position did not change with the adoption of the SCM Agreement, which elaborated on
the countervailing duty provisions of Article VI of GATT 1994. Accordingly, Article VI:3 and Part V
of the SCM Agreement limit applicable remedies to duties, provisional measures and undertakings.
(iv) Conclusions concerning “specific action against …”
4.951  Canada asserts that the issue is not whether there are specific  rules in the WTO Agreements
dealing with the appropriation of anti-dumping or countervailing duties.  Or whether Canada should
more appropriately have brought a case under Article 5(c) of the SCM Agreement. A subsidy that is a
specific action against dumping or a subsidy within the meaning of Articles 18.1 and 32.1 of the
Agreements is not permitted by the Agreements.  The source of funds for the subsidies establishes
more clearly that they constitute a “specific action”, but where  the money comes from is only oneWT/DS217/R
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element among many that prove the subsidies as “specific action” and as such in violation of
Articles 18.1 and 32.1.
(d) Determination of industry threshold levels
4.952  Canada argues that Articles 5.4 and 11.4 of the Agreements set out the thresholds for level of
domestic industry support required for a dumping or countervailing duty investigation to be initiated.
These Articles require a positive determination based on an examination of the degree of support that
the application is “by or on behalf of the domestic industry.”  They reflect an agreement by the
Members that only applications supported by the majority of industry were intended to be the basis of
investigations.  Numerical thresholds were introduced to establish greater certainty and predictability.
Accordingly, the examination of thresholds must not be pro forma .
4.953  It is the view of Canada that the US position that the thresholds are only quantitative renders
the obligation to establish industry support levels meaningless.  The threshold in Articles 5.4 and 11.4
is not a simple number: it is, rather, a threshold as to the level of support  a particular petition enjoys in
the industry.  A law that provides incentives for the industry to decide one way or another – monetary
rewards for support and the threat of subsidised competition if no support is forthcoming – distorts
that support and prevents a proper and accurate determination of support.  The Act makes itimpossible to determine if industry petitions or support for petitions reflect real injury or the prospect
of subsidisation under the Act.  It is contrary to the object and purpose of these provisions to remove
uncertainty and lack of predictability for imports. According to Canada, it therefore violates
Articles 5.4 and 11.4.
4.954  Finally, Canada submits that the Act results in a per se  violation of the Agreements.  For this
reason, Canada considers it is not necessary for Canada to adduce evidence of actual bias.  Indeed, as
another complainant pointed out, by the very operation of the Act it is now impossible to adduce such
evidence.
(e) Undertaking agreements
4.955  Articles 8.1 and 18.1 of the Agreements require that a Member provide administering
authorities the ability  to enter into “price undertakings” to facilitate the early termination of
investigations.  Ability must be construed as including not only the legal authority but also the
discretion to enter into such agreements: legal auth ority that is impossible to exercise does not amount
to ability.  Articles 18 and 26 of the Vienna Convention on the Law of Treaties support this
interpretation.
4.956  According to Canada, the United States argues that the obligations contained in Articles 8.1
and 18.1 are formalistic only.  The US also argues that domestic industry has little influence in thedecisions of the US Department of Commerce (the DOC) to enter into agreements.
4.957  While domestic authorities have discretion to accept or reject undertaking agreements, a
Member may not pass a law that undermines and circumvents that discretion. The Act in effect does
so.  It creates incentives that target and encourage interested parties to thwart proposed undertakings.
4.958  Moreover, the US position that the DOC has “complete discretion” to ignore the domestic
industry, does not accord with the pronouncement of the US Court of International Trade (the CIT).
The CIT exhaustively examined the legislative history of suspension agreements and ruled that DOC
may not dismiss the views of the industry.  The United States never addresses these rulings.WT/DS217/R
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4.959  Finally, based on the value of potential offsets payments, Canada submits that it defies
common sense to argue, as the United States does, that the prospect of hundreds of millions of dollars
in subsidies does not affect the decision of the domestic industry in respect of undertakings.  The Byrd
Amendment would keep prices, raised by duties, high and divert millions of dollars to the industry.The Act, therefore, procures the dissent of industry from support of undertakings and so fatally
compromises the discretion of the investigating authorities to enter into such undertakings.
(f) Fair, reasonable and impartial administration of US laws
4.960  Article X:3(a) requires that Members administer their laws in  a fair, reasonable, neutral and
impartial manner.  It establishes minimum standards of procedural fairness.
4.961  The measure at issue is the Act.  It causes the unfair, inequitable and unreasonable
administration of US anti-dumping and countervailing duty laws, particularly with respect to standingand undertakings.  This was in fact stated in Canada’s Panel Request. According to Canada, the
United States, in its arguments, makes an improper distinction between the administered measure and
the administrative measure at issue.
4.962  Canada argues that the Act alters the manner in which anti-dumping and countervailing duty
laws are applied.  It is the administrative measure at issue.  In Argentina - Leather, the measure atissue was a resolution that permitted domestic industry  to become involved with the custom clearance
process of the goods of its domestic suppliers.  The issue examined by the panel was the effect the
administrative measure had on the administration of Customs laws.  The administrative measure here
is the Act .  The Panel must examine whether its impact leads to a fair, reasonable and neutral
administration of anti-dumping and countervailing duty laws.
4.963  The Act introduces financial incentives into the US system that are available only where
investigations are brought and end with the imposition of a duty. According to Canada, the Act
influences the decisions of parties of the industry to bring or support petitions and thwart undertakings
by creating a potentially sizeable financial reward.  The Act, therefore,  creates an inherent danger that
imports will face unnecessary anti-dumping and countervailing duty investigations in the US domesticmarket.  This undermines the security that imports can face in the US market.  This is neither a fair,
reasonable nor neutral administration of laws. Accordingly, the Act  violates GATT Article X:3(a).
4.964  Canada is of the view that the Act  results in a violation of Article X:3(a) as such ; the
complainants need not prove actual harm.  The Act  influences the behaviour of actors in the US anti-
dumping and countervailing duty regime.  The United States cannot claim that that influence has
nothing to do with how the US Customs Service administers US laws.
(g) Conformity of laws with WTO agreements
4.965  Article XVI:4 of the WTO Agreement and Arti cles 18.4 and 32.5 of the Agreements oblige
Members to bring their domestic law into conformity with their obligations under the WTO
Agreements. According to Canada, the Act  violates Articles 18.1 and 32.1 of the Agreements in
conjunction with GATT 1994, Articles 5.4 and 11.4 of the Agreements, Articles 8.1 and 18.1 of the
Agreements and Article X:(3)(a) of GATT 1994.  Acco rdingly, it violates Article XVI:4 of the WTO
Agreement and Articles 18.4 and 32.5 of the Agreements.WT/DS217/R
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(h) Conclusion
4.966  Canada requests that the Panel find that the Act is inconsistent with the Anti-dumping
Agreement, SCM Agreement, GATT 1994 and the WTO Agreement as stated.  It requests that the
Panel recommend that the United States bring its measure into conformity with those Agreements.
4. Chile and Japan
(a) Introduction
4.967  Japan and Chile assert that they have demonstrated that the Continued Dumping and Subsidy
Offset Act of 2000 (hereinafter referred to as th e “CDSOA”) is inconsistent with and violates the
General Agreement on Tariffs and Trade 1994 (“GATT”), the Agreement on Implementation of
Article VI of the General Agreement on Tariff s and Trade 1994 (“AD Agreement”), the Agreement
on Subsidies and Countervailing Measures (“SCM Agreement”) and the Agreement Establishing theWTO (“the WTO Agreement”).  
(b) Rebuttal of United States’ arguments
(i) General
Mischaracterization of the CDSOA by the United States
4.968  Japan and Chile argue that to say, as the United States does, that the CDSOA is a “payment
programme” is to say nothing of its conformity with WTO rules.  Even if characterized as a “payment
programme” it still violates the United States’ obligations under the cited Agreements.
The cited provisions of the AD Agreement and the SCM Agreement limit the sovereign power of
Members
4.969  According to Japan and Chile, the United States ’ argument that there is nothing in the WTO
Agreements that expressly prohibits the distribution of anti-dumping or countervailing duties to
domestic producers is similar to that made by the United States, and rejected by the Panel, in the
United States - Antidumping Act of 1916  case (the “1916 Act case”).  Specifically, the Panel in that
case rejected the United States’ argument that “if the measure is of a nature that is simply not
regulated by the GATT 1994 (…) the measure is a fortiori consistent with the GATT 1994.”
4.970  The distribution of collected anti-dumping and countervailing duties to domestic producers
who (as a condition of eligibility under the CDSOA) supported a petition, is a specific action against
dumping or subsidization that violates the AD Agreement, the SCM Agreement and the GATT.
Contrary to what the United States alleges, Japan and Chile are not arguing that WTO Members
cannot “enact a law which permits the distribution of revenues generated from AD/CVD duties to any
recipient other than the national treasury.”
4.971  GATT and WTO jurisprudence, including recent cases, confirm that Members have consented
to limit their sovereign right to distribute and allocate revenues. Members agreed to limit that
sovereign power when they consented to, inter alia, Articles 18.1 of the AD Agreement, 32.1 of the
SCM Agreement and VI of GATT.  They undertook an obligation to conform their legislation, past
and future, to the provisions of those Agreements.WT/DS217/R
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Relevance of the 1916 Act case
4.972  Japan and Chile assert that the interpretation of Article 18.1 of the AD Agreement, 32.1 of the
SCM Agreement and Article VI of the GATT in the 1916 Act case confirm that the CDSOA is
inconsistent with those provisions.  The United States admits that the reasoning in the 1916 Act caseapplies to the examination of the claims under the AD Agreement, when it argues, albeit incorrectly,
that the CDSOA “does not satisfy the test articulated in the 1916 Act.”
4.973  Japan and Chile argue that the Appellate Body’s interpretation of the phrase “specific action
against” of Article 18.1 applies to the parallel and identical phrase in Article 32.1. Article 32.1
prohibits Members from taking specific action in response to a situation that presents the constituent
elements of subsidization, unless that action is in accordance with Article VI:3, as interpreted by the
SCM Agreement.   However, the United States objects to the application of the reasoning of the Paneland the Appellate Body in the US -  1916 Act  case to the examination of the complainants’ claims
under the SCM Agreement, based on the incorrect and unsupported arguments contained in footnote
64 of its first written submission.
4.974  Japan and Chile are of the view that the United States misinterprets and misrepresents
Article 10 of the SCM Agreement.  Footnote 35 of Article 10 states that only one form of relief shall
be available to a Member to protect against the effects of a particular subsidy in its domestic market,
and specifies that the only possible form of relief is either a countervailing duty or a countermeasure
authorized by the DSB, pursuant to Articles 4.10 and 7.9 of the SCM Agreement.  Thus, footnote 35
limits the permissible remedies to the effects of subsidies to a countervailing measure or a
countermeasure authorized by the DSB. The United States expressly admits that the CDSOA “is not a
‘countermeasure’ within the meaning of Articles 4.10 and 7.9” and concedes that the CDSOA does
not mandate the imposition of countervailing duties.  Therefore, it must be concluded that the CDSOA
is a specific action against subsidy that is not in accordance with Article VI:3.
Purpose of the CDSOA
4.975  Japan and Chile believe that the purpose of the CDSOA is relevant for the examination of the
measure’s conformity with the WTO Agreements.  The purpose of the CDSOA is further evidence of
what the CDSOA does: it addresses dumping and subs idization; it mandates specific actions against
dumping or a subsidy (i.e., action taken in response to a situation presenting the constituent elements
of dumping or subsidization).
4.976  According to Japan and Chile, the purpose of the CDSOA is expressed, in part, in its Section
1002.  That Section makes clear that “dumping” and “subsidization” are the target of the distributions.
Subparagraph 1 of Section 1002 finds that “injuri ous dumping is to be condemned and actionable
subsidies which cause injury to the domestic industries must be effectively neutralized.”  A measure
that “neutralizes” injurious dumping and actionable subsidies is a measure “against” that dumping and
those subsidies.  Section 1002 concludes by procla iming that Congress, in promulgating the CDSOA,
finds that “the United States trade laws should be strengthened to see that the remedial purpose of
those laws is achieved.”  The purpose of the CDSOA is also reflected and evidenced in its legislativehistory, including the statements made by the s ponsors of the CDSOA, as well as its opponents.
4.977  In its appellant’s submission in the United States—Tax Treatment for “Foreign Sales
Corporations,” Recourse to Article 21.5 of the DSU by the European Communities, the United States
asked the Appellate Body to rely on the purpose of the law, evidenced in its legislative history.  Citing
to reports of the United States’ House of Representatives, the United States stated that the “legislativehistory [of the Extraterritorial Income Exclusion Act of 2000] makes clear that it was purposefully
drafted to provide tax relief based on export-neutral criteria.”  The United States also pointed to theWT/DS217/R
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legislative history of the ETI Act to support its argument that the Act fell within the scope of footnote
59 of the SCM Agreement.  Citing the legislative history of the Act contained in US Senate reports,
the United States argued that “[t]he legislative history accompanying the Act makes the point [that the
Act relies on the exemption method to avoid double taxation of foreign-source income].”  TheAppellate Body referred to and considered the citations by the United States to the legislative history
of the Act in reaching its determination.  It specifically stated that it took “particular note” of the
statements concerning the legislative history of the ETI Act.
4.978  US courts, including the Supreme Court, regularly examine legislative history and other
congressional sources of legislative intent (including findings by the US Congress, reports prepared
by the legislature, and statements made by members of Congress on the floor of the House of
Representatives or the Senate), to assist them in interpreting the meaning of particular words andphrases.  For instance, in Crosby v. National Foreign Trade Council  (involving a law that was also the
object of a formal complaint in the WTO) the United States Supreme Court based its decision, in part,
on an examination of the Congress’ purpose in passing the law, as expressed, in part, by statements of
its sponsors.  In FDA v. Brown & Williamson Tobacco Corp.  the US Supreme Court stated that the
intent of Congress and the legislators was “certainly relevant.”  In Olmstead v. Zimring the US
Supreme Court arrived at its decision, in part, by reviewing congressional findings contained in the
statute at issue.
4.979  Therefore, Japan and Chile submit, the text of the CDSOA that appears at Section 1003 can
and should be interpreted by examining the congressional findings in Section 1002 of CDSOA, and
by examining the legislative history, which includes statements made by members of the USCongress.  The findings by Congress and the statements made by the sponsors and by the opponents
of the CDSOA are evidence that the CDSOA mandates specific action that is a violation of the AD
Agreement, the SCM Agreement, the GATT and the WTO Agreement.
Amount of the distributions under the CDSOA
4.980  According to Japan and Chile, the distributions of the anti-dumping and countervailing duties
to domestic producers, regardless of the amount or whether they correspond to the actual amount of
the injurious effect of the dumping or subsidization, is a specific action against dumping or a subsidy
that violates the AD Agreement, the SCM Agreement and the GATT.
(ii) Action against dumping and subsidization
4.981  The CDSOA mandates action that is “taken in response to situations presenting the
constituent elements of ‘dumping’” or subsidization and is thus a specific action against dumping or a
subsidy.  The CDSOA, therefore, falls within the scope of Article VI, the AD Agreement and the
SCM Agreement.
4.982  The United States’ definition and interpretation of the word “against” is not only contrary to
the Appellate Body and the Panels in 1916 Act case; it is also not supported by the plain dictionary
meaning of that word, in any of the three official languages of the WTO, nor is it in accordance with
the customary rules of interpretation of public international law.
Linkage between the constituent elements of dumping and the distribution of duties under the
CDSOA
4.983  Japan and Chile argue that there is an intimate and dependent connection between the
CDSOA and dumping or subsidization.  This connection, recognized by the United States in its oralWT/DS217/R
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statement, further demonstrates that the CDSOA indeed addresses and counteracts dumping and
subsidization.  It is therefore within the purview of the cited Agreements.
4.984  Japan and Chile assert that the basis for the payments (i.e., the finding of dumping or
subsidies), and the eligibility criteria (who the recipients of the distributions are, i.e., “affected”domestic producers that support a petition) are evidence that the distributions are specific action
against dumping or a subsidy.  They demonstrate that the linkage between dumping or subsidization
and the distribution is two-fold: i) the distribution is conditioned upon the constituent elements of
dumping or subsidization; and ii) the distribution counteracts dumping or subsidization --in the words
of the CDSOA, it “neutralizes” injurious dumping or actionable subsidies.
4.985  The funding of the payments to the domestic producers (i.e., dumping and countervailing
duties, which is collected pursuant to finding of dumping and subsidy) is relevant, for it reveals thatthe distribution is specific action against dumping or subsidization.
4.986  Japan and Chile consider that the close connection is also evidenced by the actual language of
the CDSOA, including Section 1002.  That Section contains inter alia  the following language: “the
United States trade laws should be strengthened to see that the remedial purpose of those laws is
achieved”; “dumping is to be condemned and actionable subsidies (…) must be effectivelyneutralized.” Also noteworthy is the fact that the distributions of the collected duties are identified
throughout the CDSOA as continued dumping or subsidies “ offsets, ” meaning that the payments to
domestic producers “counterbalance” or “compensate” for dumping and subsidization.
Interpretation of the phrase “specific action against dumping [a subsidy]”
4.987  Japan and Chile submit that there is no reason why the Panel should depart from the
interpretation of that exact same phrase given by the Panel and the Appellate Body in the case
concerning the 1916 Antidumping Act.  In that case, the Panel and the Appellate Body correctly
interpreted the AD Agreement in accordance with the ordinary meaning of the terms of Article 18.1,
in its context and in the light of its object and pu rpose.  It interpreted the phrase “specific action
against dumping” to mean action taken “in response to a situation presenting the constituent elementsof dumping.”  That interpretation applies to the parallel provision in Article 32.1 of the SCM
Agreement, as both contain the exact same phrase.
4.988  The dictionary definition of the word “against” is “in opposition to”, in “resistance to”,
“counter to.”  The distributions under the CDSOA oppose and neutralize dumping and subsidization.
The sponsors of the CDSOA expressly described the distributions as a way to “counter…foreign
dumping and subsidization.”
4.989  Japan and Chile argue that the word “against” must also be interpreted in the other two
authentic languages of the WTO.  There is nothing in the Spanish definition of the word “against”
(i.e., contra in the Diccionario de la Real Academia Española) that even remotely suggests that for an
action to be considered “against” it must impose a burden or liability on, or be in contact with, the
imported good or the importer. Similarly, there is nothing in the French version of the AD Agreement
or the SCM Agreement that supports the interpretation offered by the United States of Articles 18.1and 32.1.
4.990  The United States definition of “against” is unjustified and is not in accordance with the
customary rules of interpretation of public international law.  It disregards the ordinary meaning of the
word “against” in its context and in light of the object and purpose of the AD Agreement and the
SCM Agreement.  There is nothing in the AD Agreement or the SCM Agreement, or in the dictionarydefinition of the word “against”, that suggests that, in order for an action to be specifically “against”WT/DS217/R
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dumping or subsidization, it must impose a burden or liability on the imported good or the importer.
Thus, the primary defense of the United States in this case rests on a fabricated definition and
interpretation of the word “against”.
4.991  According to Japan and Chile, nothing requires that the constituent elements of dumping or
subsidization be “built into” the CDSOA in order for a violation to occur.  Notwithstanding the above,
Japan and Chile have demonstrated that the constituent elements of dumping and subsidization are
indeed built into or incorporated the CDSOA.
Article 32.1 and VI:3 must be read in conjunction with Articles 10, 4.10 and 7.9 of the SCM
Agreement
4.992  Japan and Chile argue that Articles 10, 4.10 and 7.9 of the SCM Agreement, which inter alia
limit the permissible remedies that a Member may take in response to subsidization, support the claimthat the distribution of collected duties mandated by the CDSOA are specific action against a subsidy
that is not in accordance with Article VI:3.
4.993  According to Article 32.1, any specific action a Member decides to take against a subsidy
must be in conformity with Article VI:3.  Article  VI:3 is interpreted and elaborated inter alia by
Articles 10, 4 and 7 of the SCM Agreement. Footnote 35 to Article 10 specifies that the only possibleform of relief available to a Member to protect against the effect of a subsidy in its domestic market is
either a countervailing duty or a countermeasure au thorized by the DSB. Articles 4.10 and 7.9 explain
what countermeasures are authorized by the DSB and under what circumstances.  The specific action
against a subsidy that is mandated by the CDSOA is, as the United States admits, neither a
countervailing duty nor a countermeasure authorized by the DSB.  Such specific action, therefore, isnot in accordance with Article VI:3 of the GA TT and is therefore a violation of Article 32.1.
Footnote 24 of the AD Agreement and footnote 56 of the SCM Agreement do not exclude the
CDSOA from the scope of Article VI, Article 18.1 of the AD Agreement or Article 32.1 of the SCM
Agreement
4.994  Japan and Chile submit that the United States argues, incorrectly, that footnote 24 of the AD
Agreement and footnote 56 exclude the CDSOA from the scope of Articles VI, 18.1 and 32.1.
4.995  The Panel in the 1916 Act case found that the meaning of footnote 24 (and, therefore, mutatis
mutandis footnote 56) is that a Member “cannot choose to address ‘dumping’ as such with
instruments or in ways that are different from those allowed in the WTO Agreement for that purpose.”
Also, the Appellate Body in the 1916 Act case found that “action” within the meaning of footnote 24
is to be distinguished from “specific action against dumping” within the meaning of Article 18.1. A
measure that is considered “specific action agai nst dumping” is “governed by Article 18.1 itself.”
Likewise, a measure that is considered “specific action against a subsidy” is governed by Article 32.1.
4.996  In the view of Japan and Chile, the CDSOA is not excluded from the scope of Articles 18.1
and 32.1 by footnotes 24 and 56, for it is not “action” in the general sense, but rather specific action
against dumping or subsidy.
4.997  Moreover, Japan and Chile argue, Article 32.1 requires the specific action to be in accordance
with Article VI:3 and XVI (since the SCM Agreement also interprets Article XVI of the GATT).
Article XVI, therefore, does not fall within the category of “other relevant provisions of GATT 1994”
referred to by footnote 56 of the SCM Agreement.  Thus, the United States cannot claim that the
CDSOA is excluded from the scope of Article 32.1 based on footnote 56.WT/DS217/R
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4.998  Also, granting a subsidy is not an action that is taken “under” Article XVI, but merely one
that has to be in conformity with that provision once it has been granted.  Consequently, the fact that
the CDSOA grants a subsidy to domestic producers does not mean that the CDSOA falls within the
scope of footnote 24 or 56.
4.999  Finally, even if the distribution under the CDSOA is arguendo  in conformity with
Article XVI, it is still a specific action against dumping or a subsidy that is not in accordance with
Article VI:2 or VI:3 and is theref ore a violation of Articles 18.1 and 32.1.
(iii) The CDSOA violates standing to initiate requir ements of Article 5.4 of the AD Agreement and
11.4 of the SCM Agreement
4.1000  Japan and Chile posit that the United States’ interpretation that the numerical benchmarks in
Articles 5.4 and 11.4 impose only a nominal obligation on Members to count heads, while noobjective or purpose is to be served by the counting, is incorrect. The benchmarks are a mechanism, a
tool to attain the objective of the provisions: to guard against the initiation of unjustified and
unwarranted anti-dumping and countervailing inve stigations.  The CDSOA negates and undermines
those guarantees.
4.1001  The general principle of pacta sunt servanda imposes the obligation on Members to perform
the WTO agreements in good faith.  It is an obligation on Members, not on private actors. The United
States is simply eluding the real issue when it says that it is not obliged to question the subjective
motivation of the domestic producers.  The issue is not the subjective motivation of the producers, but
the action taken by the United States to affect that motivation by providing a financial inducement for
them to support petitions they might not otherwise support.
(iv) The CDSOA is inconsistent with Articles 8.1 of the AD Agreement and 18.1 of the SCM
Agreement, concerning voluntary undertakings
4.1002  According to Japan and Chile, in light of the Agreements’ object and purpose, it is impossible
to conclude that the United States is applying Articles 8.1 and 18.1 in a good faith manner when it
gives a financial incentive to domestic produces to object to the acceptance of a proposedundertaking, thus making its acceptance more difficult by the competent authority.  Even if the
Commerce Department retains the formal legal authority to reject or accept undertakings, the voice of
the domestic producers will have an effect on the ultimate decision of the Commerce Department.
4.1003  Japan and Chile argue that it is not true that Articles 8.3 and 18.3 do not require the
administering authority to determine that the un dertaking is “inappropriate” before rejecting it.
Articles 8.3 and 18.3 implicitly require Members to accept undertakings if they are practical and
appropriate .
(v) The CDSOA is an unreasonable, not impartia l and not uniform administration of the United
States’ trade laws, and is thus inconsistent with Article X:3(a) of the GATT
4.1004  Japan and Chile posit that the CDSOA is inconsistent with Article X:3(a) in the way it
administers the United States’ anti-dumping and c ountervailing duty laws.  Therefore, it is not the
administration of the CDSOA that the complain ants must demonstrate was inconsistent with
Article X:3(a), as the United States alleges.
4.1005  According to Japan and Chile, the United States did not address the totality of the claims
brought by Japan and Chile against the CDSOA for its failure to administer the United States’ trade
laws in an reasonable, impartial and uniform manner.WT/DS217/R
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4.1006  Japan and Chile are of the view that there was no need to identify the provisions of US law
relating to standing determinations and price undertakings in the request for the establishment of this
Panel, because Japan and Chile are not challenging those aspects of the United States legislation. It is
the CDSOA that administers those laws that is being challenged and which was sufficiently identified.
(vi) The United States is violating its general obligation to ensure that its laws are in conformity
with the WTO Agreements, including the GATT, the AD Agreement and the SCM Agreement
4.1007  Japan and Chile argue that the United States has not contested the fact that a finding by this
Panel that the CDSOA violates Articles 18.1, 5.4 and 8 of the AD Agreement, Articles 32.1, 11.4 and
18 of the SCM Agreement, and Article X:3(a) of the GATT by the United States, necessarily and
inevitably entails a finding that the United States is violating its general obligation under Article XVI
of the WTO Agreement, Article 18.4 of the AD Ag reement and Article 32.5 of the SCM Agreement,
to ensure the conformity of its laws, regulations and administrative procedures with its obligations
under the covered agreements.
(c) Conclusion
4.1008  Japan and Chile respectfully request the Panel to find that the CDSOA:
- Mandates specific action against dumping that is not in accordance with
Article VI:2 of the GATT, as interpreted by the AD Agreement, and is
therefore a violation of Article 18.1 of the AD Agreement.
- Mandates specific action against a subsidy of another Member that is not in
accordance with Article VI of the GATT, read in conjunction with
Articles 10, 4.10 and 7.9 of the SCM Agreement, and is therefore a violationof Article 32.1 of the SCM Agreement.
- Is inconsistent with the standing to initiate requirements of Article 5.4 of the
AD Agreement and 11.4 of the SCM Agreement.
- Is inconsistent with Articles 8.1 of the AD Agreement and 18.1 of the SCM
Agreement.
- Prevents the United States from administering its anti-dumping and
countervailing duty laws in a reasonable, impartial and uniform manner, and
the United States therefore acts inconsistently with Article X:3(a) of the
GATT.
- Violates the United States’ general obligation under Article XVI of the WTO
Agreement, Article 18.4 of the AD Agreement and Article 32.5 of the SCM
Agreement, to ensure the conformity of its laws, regulations andadministrative procedures with its obligations under the covered agreements.
4.1009  Japan and Chile urge the Panel to find, pursuant to Article 3.8 of the DSU, that as a
consequence of the infringement of the above cited provisions, the United States has nullified and
impaired the benefits accruing to Japan and Chile under these Agreements. Japan and Chile further
request the Panel to recommend that the United States withdraw the CDSOA as the only possible wayfor the United States to implement the recomme ndations and bring the CDSOA into conformity with
the corresponding covered agreementsWT/DS217/R
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5. European Communities, India, Indonesia and Thailand
(a) A Member’s right to appropriate anti-dumping and countervailing duties must be exercised in
conformity with its WTO obligations
4.1010  The European Communities, India, Indonesia and Thailand argue that the WTO Agreement
contains no provision regulating specifically how anti-dumping and countervailing duties should be
spent by Members. But from this it does not foll ow that any Government action financed from such
funds must be necessarily in conformity with the WTO Agreement. In this respect, anti-dumping or
countervailing duties are not different from any other sources of Government revenue. The
United States is making again the same mistake as in the US - 1916 Act  case, where it argued
unsuccessfully that since the remedies provided by the 1916 Antidumping Act were not expressly
regulated by Article VI of the GATT they were consistent with that provision.
4.1011  Contrary to the US assertions, the Complainan ts have not argued that “WTO Members cannot
enact a law which permits the distribution of revenues generated from AD/CVD duties to any
recipient other than the national treasury”. Rath er, the Complainants’ claim is that the CDSOA is
incompatible with the US obligations under the WTO Agreement because such revenue is distributed
to the domestic producers “affected” by dumping or subsidisation. The Complainants would not havebrought this case if that revenue were donated to a charity, as suggested elsewhere by the United
States, or contributed to an “adjustment assistance” programme available to any domestic producer in
difficulties.
4.1012  The European Communities, India, Indonesia and Thailand argue that the Complainants’ case
is not dependent upon the fact that the offset payments are made from the revenue collected pursuantto anti-dumping and countervailing duty orders. Even if the offsets were paid directly from the
general US Treasury, and in an amount unrelated to the amount of collected duties, they would still be
incompatible with the same WTO provisions.
4.1013  Finally, the Complainants agree that, of course, this Panel may not decide this dispute ex
aequo et bono . However, since no complainant has requested the Panel to do so, the arguments to that
effect made by the United States are pointless.
(b) The fact that the offset payments are subsidies within the meaning of the SCM Agreement
does not exclude the application of the provisions cited by the complainants
4.1014  The United States suggests that any measure that happens to fall within the scope of the
definition of “subsidy” in Article 1 of the SCM Agreement is  subject exclusively to the disciplines
contained in Parts II and III of the SCM Agreement, to the exclusion of any other provisions of the
SCM Agreement and of the other covered agreements. The European Communities, India, Indonesiaand Thailand assert that this argument is similar to an argument rejected by the panel in Indonesia –
Autos, according to which the SCM Agreement would be lex specialis with respect to subsidies and
exclude the application of Article III:2 of the GATT. The United States argued at length against that
proposition.
(c) The CDSOA is inconsistent with Articles 18.1 of the Anti-Dumping Agreement and 32.1 of
the SCM Agreement
(i) The offset payments are “based upon”  the constituent elements of dumping
4.1015  The European Communities, India, Indonesia and Thailand consider that it is far from clear
what the United States means by “based upon”. As concluded by the Appellate Body in United StatesWT/DS217/R
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- 1916 Act , the relevant test for establishing whether a measure constitutes specific action against
dumping or subsidisation is whether such measure can be taken only when the constituent elements of
dumping are present. If the “based upon” test now put  forward by the United States is different from
the Appellate Body’s test, the Complainants reject its pertinence. If it is the same test, then theComplainants submit that they have shown beyond doubt that the offset payments can be made only
when the constituent elements of dumping or subsidisation are present and, therefore, constitute
specific action against dumping or subsidisation.
4.1016  As noted by the United States, the offset payments are made only to the “affected domestic
producers”. However, the European Communities, India, Indonesia and Thailand assert that the
relevant legal analysis cannot stop at that point. The CDSOA defines the term “affected domestic
producers” as referring to the producers which have filed or supported an application leading to theimposition of anti-dumping or countervailing duty measures. Thus, an “affected” domestic producer is
a producer “affected” by dumping or subsidisation. A domestic producer “affected” by a surge in fair
imports, or by a recession, or by bad weather, to mention but a few examples of the multiple
circumstances that may cause injuries to the domestic producers, is not an “affected domestic
producer” within the meaning of the CDSOA and is not entitled to the offset payments.
4.1017  In turn, the European Communities, India, Indonesia and Thailand note that the term
“qualifying expenses” is defined by the CDSOA as referring to certain categories of expenses
incurred by the “affected domestic producers” after the issuance of an anti-dumping or countervailing
duty order. Moreover, such expenses must be related to the production of a product that has been thesubject of an anti-dumping or countervailing duty order.
(ii) The offset payments are action “against” dumping or subsidisation
The US interpretation cannot be reconciled with  the report of the Appellate Body in US - 1916 Act
4.1018  The European Communities, India, Indonesia and Thailand argue that the US interpretation
cannot be reconciled with the report of the Appellate Body in 1916 Act.  Paragraph 122 of that report
leaves no scope for arguing that “specific action against dumping or subsidisation” is a subset of“action in response to dumping”. For the Appellate Body, the two expressions have the same
meaning: “specific action against dumping” is “action in response to dumping”.
4.1019  The US contention that the report of the Appellate Body “provides no guidance as to the
meaning of the term against” is untenable in the opinion of the European Communities, India,
Indonesia and Thailand. By interpreting the noti on of “specific action against dumping” as “action
taken in response to the constituent elements of dumping”, the Appellate Body was giving meaning
also to the term “against”.
4.1020  According to the European Communities, India, Indonesia and Thailand, the US position is
based on nothing more than two hypothetical examples. As shown by the Complainants, both
examples can be readily distinguished from the offset payments and, in any event, fail to prove the US
point.
4.1021  For the above reasons, the European Communities, India, Indonesia and Thailand submit that
the Panel should reject the US attempts to re-interpret the term “against”. By arguing now that it is
necessary to give meaning to the term “against”, the United States is in reality seeking to replace the
Appellate Body’s interpretation of “specific action against dumping” by a narrower, self-serving
interpretation of that notion.WT/DS217/R
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The US interpretation is not in accordance with the ordinary meaning of “against”
4.1022  At any rate, the European Communities, India, Indonesia and Thailand are of the view that,
should the Panel see merit in the US contention that  the Appellate Body’s interpretation of “specific
action against dumping” needs to be qualified by re-interpreting the term “against”, the Complainantssubmit that the reading of that term made by the United States is not in accordance with its ordinary
meaning, either alone or in its context.
4.1023  According to the European Communities, India, Indonesia and Thailand, the United States
cites no authority in support of its reading of the term “against” other than a dictionary definition,
according to which one of the ordinary meanings of that term  is “into contact with”. The same
dictionary used by the United States gives other meanings of the term “against” which are far more
pertinent in this context, but have been conveniently omitted from the US submission. These include,for example, “in competition with”, “to the disadvantage of”, “in resistance to” and “as protection
from”. These meanings indicate that the notion of action “against” dumping or subsidisation may
include not only actions that impose a direct “liability” on dumped imports (or importers), but also
actions that afford protection to the domestic producers by giving them an advantage over the dumped
or subsidised imports with which they compete.
4.1024  The European Communities, India, Indonesia and Thailand posit that this interpretation is
borne out by the relevant context. Article VI:2 of the GATT allows the imposition of anti-dumping
duties “in order to prevent or offset dumping”. Similarly, the last sentence of Article VI:3 of the
GATT defines the term ‘countervailing duty’ as “a special duty levied for the purpose of offsetting
any bounty or subsidy”. This indicates that the notion of action “against” dumping or subsidisationmust include, at a minimum, any actions which, like the levying of anti-dumping or countervailing
duties, are taken “in order to” or “with the purpose” of “offsetting” (or “preventing”) dumping or
subsidisation. In turn, “to offset” means to “set off as an equivalent against; cancel out by something
on the other side or of contrary nature; counterb alance, compensate”. This shows that dumping and
subsidisation may be “offset” not only directly, by imposing a liability on the dumped or subsidisedimports, but also indirectly, by granting an advantage to the domestic producers which cancels out the
price advantage enjoyed by the imports as a result of dumping or subsidisation.
4.1025  Unlike distributing anti-dumping duties to a charity or flying the flag at half mast, the
European Communities, India, Indonesia and Thailand urge the offset payments are objectively apt to
“offset” (or even “prevent”) dumping or subsidisation even if they do not “apply” directly to dumped
or subsidised imports. Whether or not they achieve that  result in specific instances is irrelevant for the
purposes of Article 18.1 of the Anti-Dumping Ag reement and Article 32.1 of the SCM Agreement,
because those provisions are not subject to an “actual effects” test or to a de minimis requirement.
Thus, in US - 1916 Act , neither the panels nor the Appellate Body considered it necessary to examine
whether the liabilities imposed by the 1916 Antidumping Act had actually had the effect of preventing
or offsetting dumping in specific cases.
The stated purpose of the CDSOA confirms that the offset payments are action “against” dumping or
subsidisation
4.1026  The European Communities, India, Indonesia and Thailand argue that contrary to the
assertions made by the United States at the first meeting with the Panel, the purpose of the offset
payments is clearly described in Section 1002 of the CDSOA which contains the “findings” of
Congress providing the justification for the enactment of the CDSOA. That section is an integral partof the CDSOA.WT/DS217/R
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4.1027  According to the US Congress, the European Communities, India, Indonesia and Thailand
observe the purpose of the offset payments is to “neutralize effectively” dumping and subsidisation by
ensuring that prices “return to fair levels”. In other words, the purpose of the CDSOA is to “offset”
dumping and subsidisation. The names given by the US Congress to the act (“Continued Dumpingand Subsidy Offset Act”) and to the payments made under the act (“offsets”) provide further
confirmation of such  purpose.
4.1028  The European Communities, India, Indonesia and Thailand assert that the panel reports in US
- 1916 Act  did not say that the purpose of the measure is “legally irrelevant”, but rather that a measure
which is objectively a “specific action against dumping” cannot escape condemnation simply because
it has a different stated purpose. The panels in US - 1916 Act  were concerned that if the legal
characterisation of a measure as “specific action against dumping” were dependent upon its statedpurpose, it would be extremely easy for Members to evade the prohibition contained in Article 18.1 of
the Anti-Dumping Agreement simply by stating some  spurious purpose in the legislation at issue.
That concern, however, does not arise in the present  case.
4.1029  The Complainants agree that the purpose of the CDSOA is that stated by the CDSOA itself.
The US submission refers repeatedly to the CDSOA as a “payment programme”. However, it isobvious that making payments is not an objective in itself, but rather an instrument to achieve some
purpose. The United States has not argued that the “findings” made by the US Congress in
Section 1002 of the CDSOA are incorrect or false. Nor has the United States argued that the CDSOA
is inapt to achieve the purpose reflected in those “findings”. Indeed, had the US submission argued
that, it would be tantamount to saying that the US legislators were either incompetent or insincere. Inthe view of the European Communities, India, Indonesia and Thailand, given that it is not disputed
that the purpose of the CDSOA is that stated by the US Congress in the CDSOA, there is no reason
why that purpose should be disregarded by the Panel.
The US interpretation does not account for dumping and subsidisation which do not involve imports
into the territory of the Member taking the action
4.1030  Furthermore, according to the European Communities, India, Indonesia and Thailand, the US
interpretation of the term “against” overlooks that Article 32.1 of the SCM Agreement and
Article 18.1 of the Anti-Dumping Agreement do not pr ohibit only specific action against “subsidised
imports” or “dumped imports”, but more generally specific action against “a subsidy of another
Member” and “dumping of exports from another Member”, respectively, neither of which involves
necessarily imports into the territory of the Member taking the action.
(iii) The CDSOA is not “permitted” by footnotes 24 and 56
4.1031  The United States argue that the offset payments are “permitted” by footnotes 24 and 56
because they are subsidies allowed by Article XVI of the GATT. As explained below, the European
Communities, India, Indonesia and Thailand argue that this defence is wrong on several counts.
4.1032  First, the United States appears to have misunderstood the relationship between Articles 18.1
of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement and their respectivefootnotes. Footnotes 24 and 56 are not exceptions to Articles 18.1 and 32.1. Rather, they serve to
clarify the scope of those provisions.
4.1033  Second, the United States disregards that the SCM Agreement does not interpret only the
subsidies provisions of Article VI of the GATT. The SCM Agreement is also an interpretation of
Article XVI of the GATT.WT/DS217/R
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4.1034  Third, footnotes 24 and 56 allude to action taken “under other relevant provisions” of the
GATT. This is not the same as saying action which is “not prohibited by some other GATT
provision”. The “other relevant provisions” referred to in footnotes 24 and 56 are those GATT
provisions which confer and regulate the right to take a certain type of remedial action, such asArticle VI, Article XIX, or Articles XII and XVIII. Article XVI is not one of such “relevant
provisions”.
4.1035  Fourth, the United States disregards that a measure may be compatible with Parts II and III of
the SCM Agreement and still be prohibited, on different grounds, by another WTO provision.
4.1036  Finally, according to the European Communities, India, Indonesia and Thailand, the United
States misreads the interpretation of footnote 24 made by the two panels in United States - 1916 Act .
Those panels have explained that the purpose of footnote 24 is to clarify that Article 18.1 does notprevent Members from taking action against practices that involve dumping, where the existence of
dumping is not the “practice that triggers the imposition of the measures”.
(d) The CDSOA is inconsistent with Articles 5.4 of the Anti-Dumping Agreement and
Article 11.4 of the SCM Agreement
(i) The CDSOA is incompatible with the obligation to conduct an objective examination of
whether an application is made “by or on behalf of the domestic industry”
4.1037  According to the European Communities, India, Indonesia and Thailand, the United States
takes an extremely narrow and formalistic view of what is required by the obligation to conduct an
objective examination. In essence, the United States is arguing that the administering authorities
should be allowed to manipulate the outcome of the determination by inducing, or even coercing the
domestic producers to make declarations of support, provided that they make no arithmetical errors
when adding up the declarations in order to calculate the level of support.
4.1038  The Appellate Body takes a very different view in the opinion of the European Communities,
India, Indonesia and Thailand. The Appellate Body has said in a recent case that in order to be
“objective” an examination must conform to “the dictates of the basic principles of good faith andfundamental fairness”. More precisely, according to the Appellate Body, the obligation to conduct  an
“objective” examination requires that the relevant  facts “… be investigated in an unbiased manner,
without favouring the interests of any interested  party, or group of interested parties in the
investigation”.
4.1039  In the view of the European Communities, India, Indonesia and Thailand, the US submission
does not address anywhere the Complainants’ clai m that the CDSOA is incompatible with the
obligation to conduct an objective examination of whether an application is made “by or on behalf ofthe domestic industry” because it fails to conform to the “dictates of the basic principles of good faith
and fundamental fairness” as those dictates have been interpreted by the Appellate Body.
(ii) The CDSOA prevents the US authorities from reaching a proper determination of whether an
application has been made “by or on behalf of” the domestic industry
4.1040  The European Communities, India, Indonesia and Thailand submit that the Complainants’
claim is firmly grounded on the wording of Articles 5.4 and 11.4. A formal declaration of support is
not always evidence of “support” within the meaning of those provisions. If the domestic producers
declare their support for the application in order to qualify for an unrelated advantage, such as the
offset payments, that declaration cannot be considered as “support” for the application within the
meaning of Articles 5.4 and 11.4. Rather, it is “support” for the offset payments.WT/DS217/R
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4.1041  In the view of the European Communities, India, Indonesia and Thailand, the formalistic
interpretation of the term “support” made  by the United States would lead to absurd and unacceptable
results and cannot be correct. If, as argued by the United States, it did not matter whether support is
“genuine”, the authorities (or the petitioners) could take any action within their reach in order tocoerce or induce the domestic producers to make or support applications, so as to ensure that the
quantitative thresholds of Articles 5.4 and 11.4 are reached. For example, a  Member could enact a
legal provision to the effect that, once a domestic producer has made a petition, all the other domestic
producers must support such petition.
4.1042  The Complainants are not suggesting that the authorities must ascertain the “subjective
motivations” behind each and every declaration of support. In the absence of evidence to the contrary,
the authorities must assume that, if a domestic producer has declared formally its support for theapplication, such support is “genuine”, just like the electoral authorities of all countries assume that,
in the absence of any evidence to the contrary, the ballots cast by the voters are the genuine
expression of their political choices. However, if the authorities are presented with evidence that a
declaration of support is not “genuine” they cannot disregard such evidence. To do so would be a
violation of their duty to conduct an objective examination of the existence of support.
4.1043  The European Communities, India, Indonesia and Thailand assert that by its very existence,
the CDSOA destroys the presumption that a formal  declaration of support is evidence of genuine
support. The CDSOA provides a strong incentive to file “non-genuine” applications and to make
“non-genuine” declarations of support. As a result, it renders suspect all applications and declarations
of support made by the US producers. If the authorities could read the minds of the US producers,they could disregard the “non-genuine” declarations of support and make a proper determination of
support, notwithstanding the incentives provided by the CDSOA. Since this is impossible, the
CDSOA has the necessary consequence that the US authorities are prevented from reaching a proper
determination of support, whether positive or negative.
4.1044  In the opinion of the European Communities, India, Indonesia and Thailand, the United States
concedes that the US authorities cannot tell the genuine applications/declarations of support from
those induced by the CDSOA, but fails to draw th e appropriate consequence from this. According to
the United States, since the U.S authorities cannot ascertain whether the support is genuine or induced
by the CDSOA, it would follow that the whole issu e is irrelevant. This argument puts logic on its
head. It is like saying that the buying of votes should be permitted because the authorities cannot
exclude that those voters who have been bribed by a candidate would have voted for that candidate
anyway. It is precisely because the motivations of voters cannot be ascertained that all democraciesban the buying of votes per se, regardless of its actual impact on the outcome of the election.
4.1045  Contrary to the US assertions, the European Communities, India, Indonesia and Thailand
argue it may be perfectly rational for a domestic producer to oppose (or at least not to support) a
petition, for example in order to avoid retaliation in its export markets, or because it reckons that the
anti-dumping or countervailing measures will provide an advantage to a domestic rival, which is moreexposed to dumped or subsidised imports. Indeed, if it were irrational to oppose an application,
Articles 5.4 and 11.4 would be superfluous. Th e European Communities, India, Indonesia and
Thailand submit that the interpretation of those two provisions cannot start from the premise that they
are useless.
4.1046  In the view of the European Communities, India, Indonesia and Thailand, the fact that all the
petitions filed in the year preceding the enactmen t of the CDSOA met the legal thresholds for support
does not prove the point made by the United States, because the very existence of legal thresholds for
support may, of itself, discourage the filing of applications in those cases where the petitioners have
reasons to believe that they will not obtain the necessary support.WT/DS217/R
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4.1047  The European Communities, India, Indonesia and Thailand assert that the indisputable fact is
that  the CDSOA provides a strong financial incentive to file or support applications. It may well be
that in some cases such incentive will be inconsequential because, as argued by the United States, the
domestic producers would in any event have filed or supported an application. However, in anindefinite number of other cases, the financial in centive provided by the CDSOA may have a decisive
effect. That possibility is enough to find that the CDSOA is inconsistent with Articles 5.4 and 11.4.
(iii) The CDSOA defeats the object and purpose of Articles 5.4 and 11.4
4.1048  The European Communities, India, Indonesia and Thailand are of the view that it is implicit
in the obligation to perform a treaty provision in good faith that the parties “must abstain from acts
that are calculated to frustrate the object and purpose of the treaty”. As explained in the
Complainants’ submission, the CDSOA frustrates the object and purpose of Articles 5.4 and 11.4because it encourages the opening of investigations and the imposition of measures in cases where the
domestic industry is not interested in such measures. For that reason, the CDSOA is incompatible
with the obligation of the United States to comp ly in good faith with the requirements of those
articles. The US submission does not address this argument.
(e) The CDSOA is inconsistent with Article 8.3 of the Anti-Dumping Agreement and
Article 18.3 of the SCM Agreement
4.1049  The European Communities, India, Indonesia and Thailand argue that while the administering
authority enjoys certainly a wide degree of discretion, such discretion is not unlimited.  The first
sentence of Article 8.3 and Article 18.3 makes it clear that the administering authority must have a
“reason” for rejecting an undertaking and, therefore, that the decision to reject an undertaking is notwithin the authority’s “complete discretion”.
4.1050  Articles 8.3 and 18.3 do not limit a priori the types of reasons which may be invoked by the
authority. But this does not mean that the authority can invoke all sorts of motives. For example, it
would be contrary to Articles 8.3 and 18.3 to reject an undertaking on the ground that the name of the
exporter begins with the letter ‘A’, or that it was raining when the undertaking was offered. Those
grounds are not proper “reasons” within the meaning of Articles 8.3 and 18.3 because they are not
pertinent for deciding whether the acceptance of an undertaking is “appropriate”.
4.1051  The European Communities, India, Indonesia and Thailand note that the petitioners’
opposition may be a pertinent “reason” for rejecting an undertaking where it reflects the legitimate
concern that the undertaking will not provide equivalent protection. On the other hand, the pecuniary
interest of the petitioners in securing the windfall of the offset payments is a totally extraneous
consideration which cannot be regarded as a pertinent “reason” for rejecting an undertaking.
4.1052  The Complainants have argued that the CDSOA is not in conformity with the obligation to
make an objective assessment of whether the acceptance of an undertaking would be appropriate
because, under the CDSOA, the US authorities provide a financial incentive to the petitioners for
opposing the undertakings and then rely upon such opposition in order to reject the undertaking. The
US submission does not address this argument. Like wise, the US submission fails to address the
Complainants’ argument that the CDSOA frustrates the object and purpose of Articles 8 and 18.
4.1053  The European Communities, India, Indonesia and Thailand observe that the stated policy of
the US authorities is to accord a “considerable weight” to the petitioners’ opposition. The United
States does not dispute that this is in fact the established policy of its authorities. That policy goes
clearly beyond granting merely procedural rights.WT/DS217/R
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4.1054  According to the European Communities, India, Indonesia and Thailand, in order to have a
complete picture of the US practice, it would be indispensable to know, in addition, how many
undertakings were rejected, or simply were not offered in the first place, because of the opposition
expressed, formally or informally, by the domestic industry.
4.1055  The European Communities, India, Indonesia and Thailand submit that the CDSOA provides
an almost irresistible financial incentive to oppose the acceptance of any undertakings offered by the
exporters. It may well be that, as argued by the United States,  the petitioners’ primary concern is “a
return to the conditions of fair trade”. But that objective may be achieved as well through the
imposition of duties. The CDSOA allows the petitioners to have it both ways: they can have a “return
to conditions of fair trade” and, in addition, the windfall of the offset payments.
4.1056  Finally, the Complainants note that the US submission fails to address their  argument that the
CDSOA is particularly detrimental to developing country Members because it effectively deprives
them of the “constructive remedy” par excellence envisaged in Article 15 of the Anti-Dumping
Agreement.
(f) The CDSOA is inconsistent with Article X:3 (a) of the GATT
4.1057  According to the European Communities, India, Indonesia and Thailand, this claim is not
concerned with the administration of the CDSOA. Instead, the claim submitted by the Complainants
is that the CDSOA results in an unreasonable and partial administration of the provisions of the US
anti-dumping and countervailing duty laws and regulations governing the initiation of investigations
and the acceptance of undertakings. Thus the “administrative” measure at issue is the CDSOA,
whereas the “administered” measures are the US anti-dumping laws and regulations.
4.1058  The European Communities, India, Indonesia and Thailand consider that this claim was
clearly stated in the request for the establishment of  a panel. Therefore, the United States’ suggestion
to the effect that it is outside the terms of reference of the Panel is groundless.
4.1059  As explained by the panel in Argentina – Hides and Skins, Article X.3 (a) is not concerned
only with individual acts of enforcement or with “unwritten” administrative practices. It may apply aswell with respect to generally applicable measures of an administrative nature. Thus, the fact that
CDSOA is a generally applicable measure does not bring it outside the scope of Article X.3 (a).
4.1060  According to the European Communities, India, Indonesia and Thailand, the same panel
found that the administrative measure at issue was incompatible with Article X:3 (a) because it gave
rise to an “inherent danger” that the administered customs laws, regulations and rules would be
applied in a partial manner. The Panel did not consider it necessary to consider whether, in practice,
the administrative measure at issue had actually resulted in an impartial application of theadministered laws, regulations and rules in specific instances.
4.1061  The European Communities, India, Indonesia and Thailand argue that they have demonstrated
that the CDSOA creates an “inherent danger” that the provisions of the US anti-dumping and
countervailing duty laws and regulations concerning determinations of support and the acceptance of
undertakings will be applied by the US authorities in a partial and unreasonable manner. Such“inherent danger” is sufficient to find that the CDSOA is inconsistent with Article X:3 (a) of the
GATT.WT/DS217/R
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6. Korea
(a) Introduction
4.1062  Korea submits that the United States has failed to rebut the prima facie case advanced by the
complainants in this dispute settlement proceeding.  Before turning to each of Korea’s claims, Korea
wishes to address some general, systemic issues.  First, regarding the “power of the purse,” Members
do have the power of the purse, but when they joined  the WTO, they agreed to limit that power where
exercising it would conflict with WTO provisions.180  Second, a Member may not avoid its WTO
obligations by altering the incentive structure that se rved as the basis of the negotiations leading to the
WTO agreements.  Here, the United States offers a cash reward that profoundly affects the decision-
making of domestic industries regarding whether to pursue or support a petition and whether to accept
an undertaking.  The end result is that the relevant WTO provisions are reduced to inutility. Finally,the provision of cash rewards to domestic industries that successfully pursue trade remedy actions
improperly distorts trade and, thus, should be condemned.
4.1063  Korea asks the Panel to find that, by maintaining the Byrd Amendment
181, the United States is
in violation of Articles VI a nd X:3(a) of GATT 1994; Articles 5.4, 8 and 18.1 of the AD Agreement;
and Articles 11.4, 18 and 32.1 of the SCM Agreement.  Korea requests the Panel both to recommendthat the United States bring its laws into conformity with its obligations under these WTO provisions
and to suggest that, to meet its WTO obligations, the United States should repeal the Byrd
Amendment.
(b) The Byrd Amendment is an impermissible specific action against dumping and subsidization
4.1064  Before responding to the various points raised by the United States, Korea wishes to set out
the points which the United States has not contested in its first written submission.
(a) The Byrd Amendment is mandatory legislation.  The authorities have no discretion;
they must distribute anti-dumping and countervailing duties collected to the domestic
companies that qualify under a specific order.
(b) Absent a finding that the constituent elements of dumping (or impermissible subsidy)
are met and imposition of an order and collection of duties, no funds are distributed
under the Byrd Amendment.  A finding of the constituent elements is a condition
precedent to distribution of the duties.
(c) All of the duties collected under a specific order must be distributed to qualifying
producers and, until distribution, are kept in separate, order-specific accounts.
(d) The duties are not distributed to all injured producers, but only to those that brought
or supported the petition.
(e) Payments are tied directly to qualifying expenses for producing the like product.
                                                     
180 See United States – Tax Treatment for “Foreign Sales Corporations,”  WT/DS108/AB/R
(24 February 2000), para. 177 (US measures regarding foreign sales corporations held inconsistent with theSCM Agreement).
181 Public Law 106-387 (28 October 2000), 114 Stat. 1549, Title X – Continued Dumping and Subsidy
Offset (Byrd Amendment or CDSOA), Section 754(a).WT/DS217/R
WT/DS234/R
Page 194
(f) As indicated by the title of the Byrd Amendment, the duties are distributed
specifically in order to “offset” “continued dumping or subsidy”, i.e., to counter harm
suffered due to dumping or subsidization.
4.1065  Korea argues that, as this list shows, the United States has conceded all of the facts necessary
for the Panel to conclude that the Byrd Amendm ent is an impermissible specific action against
dumping and subsidization.
(i) The Byrd Amendment is a specific action against dumping and subsidization
4.1066  Korea argues that the US interpretation is not based on the ordinary meaning of the words.
The US relies on the least appropriate definition of “against” – “into contact with”.  This particular
definition is not relevant to the interpretation of “against” in Article 18.1 of the AD or Article 32.1 of
the SCM Agreement.  “Into contact with” is used to describe physical contact:  “[b]reakers crashedagainst the wall of the promenade.”
182  This cannot be the ordinary meaning of “against” as it is used
in the WTO provisions at issue and, therefore, the US interpretation must be rejected.
4.1067  According to Korea, the US argument is not supported by other text in the relevant
provisions.  Article 18.1 refers to “specific action against dumping .”  But, to fit this text to its
distorted interpretation of “against,” the United Stat es is forced to argue that “dumping” refers to
“specific action against (dumped) imported goods or importers .”  As noted by the Appellate Body in
US-1916 Act , “dumping” is a situation or process, not an object,183 and, thus, it is not a candidate for
physical contact.
4.1068  In the view of Korea, contrary to the US argument, the available ordinary meaning of
“against” shows that the Byrd Amendment is a specific action “against” dumping (or subsidization).The first entry in the definition of “against” is “[o]f motion or action in opposition”.
184  This is the
most appropriate definition for “against”.  When “against” is used in the context of action “against” a
situation or other non-physical process, “against” must be interpreted as meaning “in opposition”.
4.1069  Korea asserts that the relationship between the specific action and the dumping (or
subsidization) must, as a matter of logic, be one of the following three:  (i) “in opposition to”; (ii) “insupport of”; or (iii) neutral (neither “in opposition to” nor “in support of”).  The constituent elements
of dumping include:  (i) introduction into commerce of imported products; and (ii) the gap between
the import price and the normal value (where import price is less than normal value).
185  One of the
measures the authorities can take “in opposition to” dumping is to impose anti-dumping duties on the
imports.  Another measure they can take is to provide support to the affected  domestic industries,
which compete  with the imports.  Both of these actions are “in opposition to” the introduction into
commerce of unfairly traded imports.  The Byrd Amendment acts “in opposition to” dumping throughthe second modality, since it provides support to the affected
186 domestic industry, competing  with the
                                                     
182 The New Shorter Oxford English Dictionary  (Clarendon Press, 1993).
183 United States – Anti-Dumping Act of 1916 , WT/DS136/AB/R, WT/DS162/AB/R (28 August 2000)
(US-1916 Act ), paras. 122 and 126 (finding “dumping” to be a situation in which two constituent elements are
satisfied – (i) introduction into commerce of imported pr oducts (ii) where the import prices is less than normal
value).
184 The New Shorter Oxford English Dictionary  (Clarendon Press, 1993).
185 US –  1916 Act , WT/DS136/R (31 March 2000) ( EC Panel Report ), para. 6.104; WT/DS162/R
(29 May 2000) ( Japan Panel Report ), para. 6.117.
186 Byrd Amendment, Section 754(b)(1).  The use of the word “affected” inextricably ties the payments
to the underlying investigation and order.  An “ affected ” domestic producer is a producer that has been affected
by the dumping or subsidization in question.WT/DS217/R
WT/DS234/R
Page 195
imports.  Thus, the Byrd Amendment acts “in opposition  to” dumping (or subsidy), and is a “specific
action against dumping”.
4.1070  In US – 1916 Act , Korea asserts, the Appellate Body interpreted this language as “action that
is taken in response to  situations presenting the constituent elements of ‘dumping’.”187  T h e  U S
argument misstates and, ultimately, ignores this ho lding.  Contrary to the US assertion, there, the
Appellate Body interpreted “against” and its contex t, holding that “‘specific action against dumping’
of exports within the meaning of Article 18.1 is action that is taken in response to situations
presenting the constituent elements of ‘dumping.’”188  But, when the United States quotes this
passage, Korea argues that it omits two key words:  “situations presenting”.189  The United States does
this, presumably, to narrow the Appellate Body’s holding and avoid its application to this case.  But,
the situation faced in the US –  1916 Act  proceeding was much less clear than that presented by the
Byrd Amendment here.  Thus, the US examples190 are irrelevant because, unlike the Byrd
Amendment, they do not affect competition in the marketplace.
4.1071  In addition, the United States argues that constituent elements of dumping are not built into
the Byrd Amendment.191  Again, Korea submits, the United States is incorrect.  The operation of the
Byrd Amendment demonstrates conclusively that it is a specific action against dumping orsubsidization:
- one, the Byrd Amendment does not operate unless the US authorities have
found that the constituent elements of dumping or subsidization exist and
have imposed an order;
- two, the only parties that can collect the cash reward are the “affected
domestic producers,” i.e., the US producers that brought or supported the
petition and were part of the underlying investigation that led to imposition of
the order
192; and
- three, the funds are distributed only for “qualifying expenditures”, which are
limited to certain expenses for producing a product covered by the order.193
4.1072  In Korea’s view, the United States further argues that, because the Byrd Amendment imposes
two requirements in addition to the constituent elements of dumping,194 under the holding of the
Appellate Body in US - 1916 Act , the Byrd Amendment cannot be a specific action against dumping
or subsidization.  This argument is completely contrary to the Appellate Body’s interpretation.  In its
appeal of the 1916 Act panel reports, the United States argued that the measure targeted predatory
pricing, not dumping, and that the additional tests in the measure (for intent and injurious effects)
removed the measure from the scope of Article 18.1, i.e., given the additional tests, the measure could
not be a specific action against dumping.195  The Appellate Body rejected this argument, finding that
                                                     
187 US – 1916 Act , para. 126 (emphasis added).
188 US – 1916 Act , para. 122.
189 See First Written Submission of the United States, United States – Continued Dumping-Subsidy
Offset Act of 2000 , WT/DS217, WT/DS234 (14 January 2002) (US First Submission), para. 84.
190 See id. , para. 91.
191 Id., para. 83.
192 Byrd Amendment, Section 754(b)(1).
193 Id., Sections 754(a) and 754(b)(4).
194 These are the “affected domestic producer” and “qualifying expenditure” requirements.
195 US – 1916 Act , paras. 104 and 107.WT/DS217/R
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Page 196
the addition of requirements did not alter the fact that the measure applied only where the constituent
elements of dumping were found to exist.196
4.1073  Korea asserts that the fallacy of the US argument is also demonstrated by the US statement
that “[t]he amount of the distributions under the CDSOA have nothing to do with measuring theextent to which a US producer has been affected by dumping or subsidization of imports.”
197  But,
under the Byrd Amendment, the amount of distributions  is decided by the amount of duties collected,
which is determined by the measurement of th e dumping (or subsidization) found to exist.
4.1074  Finally, Korea is of the view that the above analysis is confirmed by the purpose of the Byrd
Amendment.  The United States argues that the “purpose” of the Byrd Amendment is “not
relevant.”198  This is incorrect.  In the US-1916 Act  proceeding, the panel held merely that the stated
purpose of a measure is not always dispositive.  The purpose, therefore, is relevant, even though it is
the effect of the measure that is key.199  Finally, the statements quoted in Korea’s First Submission
serve not merely as statements of purpose, but also as evidence of the operation and impact of theByrd Amendment.
200  They are evidence not merely of the fact that the Byrd Amendment was
intended to provide a specific remedy against dumping and subsidization, but also of the fact that this
is precisely what the Byrd Amendment actually does.
(ii) The Byrd Amendment is not protected by footnotes 24 and 56
4.1075  In the opinion of Korea, contrary to the US argument,201 if a measure is a specific action
against dumping or subsidization, the measure is  prohibited by Articles 18.1 and 32.1 and is not
“saved” by Footnotes 24 and 56.  This reading is supported by the very jurisprudence cited by the
United States.  As the US-1916 Act  panel found, “reading footnote 24 as permitting actions other than
anti-dumping actions allowed under other provisions, as long as the measure does not address
dumping as such, is fully consistent with the principle of useful interpretation.”202  In other words,
Footnote 24 works only as long as the measure does not address dumping as such.   Thus, when this
Panel determines that the Byrd Amendment is an action against dumping or a subsidy, Footnotes 24
and 56 cannot save the Byrd Amendment, contrary to the US assertion.
4.1076  Korea asserts that the United States should also heed the fact that “action”, as it appears in
Footnotes 24 and 56, refers to actions addressing causes or effects of dumping (or subsidization),
rather than the dumping (or the subsidy) itself.  As the 1916 Act panel found, Footnote 24 allows a
Member to “address the effects of dumping, e.g. increased imports, or its causes ( e.g., subsidization)
through other legitimate means under the WTO Agreement, such as countervailing or safeguard
measures.”203  But, the Byrd Amendment does not address simply the cause or the effects of dumping
(or subsidization).  The measure addresses dumping (or subsidization) as such.
                                                     
196 Id., para. 122.
197 US First Submission, para. 86.
198 Oral Statement of the United States at the First Meeting of the Panel, United States – Continued
Dumping and Subsidy Offset Act of 2000 , WT/DS217, WT/DS234 (5 February 2002), para. 30.
199 See, e.g., Japan Panel Report , para. 6.150 (noting that legislative history, including statements
regarding purpose, confirm prior analysis of effect of 1916 Act).
200 See First Submission of the Republic of Korea, United States – Continued Dumping and Subsidy
Offset Act of 2000 , WT/DS217, WT/DS234 (6 December 2001) (Korea’s First Submission), paras. 16, 17, 34-36
and 44.
201 US First Submission, para. 101.
202 Japan Panel Report , para. 6.132 (emphasis added).
203 EC Panel Report , n.373.WT/DS217/R
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Page 197
(c) The Byrd Amendment violates Article 5.4 of the AD Agreement and Article 11.4 of the SCM
Agreement
4.1077  Korea argues that if one were to accept the US argument,204 then a Member planning to
impose an anti-dumping measure could do anything – including imposing mandatory legislation as inthe instant case – to encourage domestic companies to support the petition and still meet the
obligation arising under Articles 5.4 and 11.4 where a sufficient number of companies “supported”
the petition.  This shows that the US position does not rest on good faith implementation of its treaty
obligations.  Good faith implementation is a general principle of law and a principle of good
international law, which is reflected, inter alia , in Article 26 of the Vienna Convention on the Law of
Treaties and Article X:3(a) of GATT.
205
4.1078  By arguing that Complainants should have provided “empirical support”,206 the United States
seems to suggest that Complainants are required to demonstrate the actual effect of the Byrd
Amendment.  This, Korea submits, is incorrect.  As the Appellate Body repeatedly has stated, an
effects test is irrelevant where, as here, a measure violates the provisions of the WTO.207
4.1079  Finally, according to Korea, even if one assumes, as the United States does, that it is
“generally” irrational for domestic companies to “oppose” relief,208 the assumption confirms Korea’s
position – in some cases, the Byrd Amendment will lead US companies to support petitions they
“generally” would not support.  Thus, the cash reward affects the initiation of investigations under
Articles 5.4 and 11.4 in the cases which do not fall under the “general” category of the US argument.
(d) The Byrd Amendment violates Article 8 of the AD Agreement and Article 18 of the SCM
Agreement
4.1080  The United States criticizes Complainants fo r failing to provide “evidence that the CDSOA
has had or will have any actual effect on the Commerce Department’s consideration of proposed
undertakings.”209  Korea is of the view that this criticism is ill-founded.  First, as discussed in detail at
paragraph 4.1078, above, because this is an “on its face” claim, such proof is not required.210  Second,
the Byrd Amendment obviously creates a very strong incentive for all petitioners to oppose all
undertakings because, if the Commerce Department does accept an undertaking, the Department will
not impose an order and duties will not be collected and distributed to petitioners via the Byrd
Amendment.
4.1081  Moreover, according to the United States, a Member is free to reject any and all undertakings,
for any and all reasons. Korea submits that this interpretation would read out of the Agreements the
first sentence of Articles 8.1 and 18.1, and the third sentence of Articles 8.3 and 18.3, giving
authorities complete and utter authority to reject even the most reasonable, practical and appropriate
                                                     
204 US First Submission, para. 120.
205 See United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan ,
WT/DS184/AB/R (24 July 2001) ( US – Hot-Rolled Steel ), para. 101.  See also United States – Definitive
Safeguard Measures on Imports of Circular We lded Carbon Quality Line Pipe from Korea , WT/DS202/AB/R
(15 February 2002), para. 110.
206 US First Submission, para. 122.
207 Japan – Taxes on Alcoholic Beverages , WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R
(4 December 1996), pages 15-16; Korea – Taxes on Alcoholic Beverages , WT/DS75/AB/R, WT/DS84/AB/R
(18 January 1999), paras. 128-133.
208 US First Submission, para. 124.
209 US First Submission, para. 138.
210 See also  US – 1916 Act , paras. 60-61 (noting right of a Member to bring claim against “legislation
as such” and finding violation not based on trade effects).WT/DS217/R
WT/DS234/R
Page 198
undertakings.  Moreover, this obligation of Articles 8.3 and 18.3 is subject to the “good faith”
requirement set out by the Appellate Body.211  Therefore, the US interpretation must be rejected.
(e) The Byrd Amendment results in unreasonable and biased administration of US law, in
contravention of Article X:3(a) of GATT 1994
4.1082  Korea asserts that the US argument that Article X:3(a) addresses only the administration  of
national laws and not national laws themselves212 is flawed.  The Byrd Amendment itself prevents the
United States from uniform, impartial and reasonable administration of US laws concerning the
threshold investigation and the acceptance of undertakings.  As did the measure at issue in Argentina
– Hides and Leather , the Byrd Amendment creates an “inherent danger” that the United States will
apply its anti-dumping and countervailing duty laws in a partial and unreasonable manner.213  T h e
Byrd Amendment thus is inconsistent with Article X:3(a) of GATT 1994.
7. Mexico
(a) Introduction
4.1083  Mexico argues that in its first written submission to and oral statement at the first substantive
meeting with the Panel, Mexico established prima facie that the Continued Dumping and Subsidy
Offset Act of 2000  (the "CDSOA") is inconsistent with certain provisions of the WTO Agreements.
4.1084  In its rebuttal submission, Mexico elaborates upon its arguments and responds to the
arguments raised by the United States.  Accordingly, Mexico requests that the Panel grant the relief
requested at paragraphs 123 and 124 of Mexico’s first submission.
(b) The Characterization Of The CDSOA
4.1085  Mexico submits that the CDSOA is not "simply a statute authorizing government payments",
as the United States contends.
4.1086  The subsidy programmes referred to by the Unit ed States to justify the existence of the
CDSOA are clearly distinguishable from the CDSOA and its offsets.
4.1087  From the time of their creation to the time of their disbursement, the structure and architecture
of the subsidies conferred by the CDSOA is unique.  For example, the financial contributions are not
pooled in a general account for the CDSOA as a whol e and then disbursed to any eligible recipient
from that general account.
(c) Ex aequo et bono
4.1088  According to Mexico, no ex æquo et bono  issues arise in this dispute.  The measure at issue –
the CDSOA – is disciplined by the provisions cited in the claims brought by Mexico and the other
complaining Members.  Mexico is simply asking  the Panel to interpret and apply the disciplines
negotiated by the WTO Members and incorporated in the relevant agreements.  Indeed, correctly
interpreted and applied, the provisions encompass the measure at issue.
                                                     
211 US – Hot-Rolled Steel , para. 101.
212 US First Submission, para. 151.
213 See Argentina – Measures Affecting the Export of Bovine Hides and the Import of Finished Leather ,
WT/DS155/R (19 December 2000), paras. 11.71 and 11.100.WT/DS217/R
WT/DS234/R
Page 199
(d) Article 18.1 of the Anti-dumping Agreemen t and Article 32.1 of the SCM Agreement
4.1089  Contrary to the arguments of the United Stat es, Mexico argues that the CDSOA and the
distribution of offsets under the CDSOA is a speci fic action "against" the dumping of exports from
another Member within the meaning of Article 18.1 and a specific action against a subsidy of anotherMember within the meaning of Article 32.1 of the SCM Agreement.
(i) "Situations Presenting" The Constituent Elements Of Dumping
4.1090  Mexico notes that the Appellate Body did not  state that "specific action against dumping"
refers to "action that is taken in response to the constituent elements of dumping".  The Appellate
Body stated that specific action against dumping  of exports within the meaning of Article 18.1 is
"action that is taken in response to situations presenting the constituent elements of dumping".  The
omission of the words "to situations presenting" is significant because it contradicts the US argument
that the  CDSOA must be based upon a test that includes the constituent elements of dumping or
subsidy.
4.1091  Clearly, Mexico argues, the CDSOA and the offsets distributed under it are "in response to
situations presenting the constituent elements of dumping [and subsidization]" and such action "may
be taken only when the constituent elements of dumping [and subsidization] are present".  If there was
no dumping or subsidization, there would be no offsets because there would be no funds to distribute.
(ii) Specific Action "Against" Dumping And Subsidization
4.1092  Mexico posits that, contrary to the arguments of the United States, there is no requirement
that, in order to constitute a specific action "against" dumping or subsidization, the action must:  (i)
apply to the imported good or the importer;  and (ii) it must be burdensome.
4.1093  In Mexico's view, there is no legal basis for the interpretation proposed by the US.  The
Appellate Body directly put its mind to the meaning of the phrase "specific action against dumping of
exports" and established that an action "against" dumping of exports is an "action that is taken in
response to situations presenting the constituent elements of dumping".  There is no requirement that
punitive action must be taken against imports or the importer.
4.1094  Furthermore, in the opinion of Mexico, the US argument is contradicted by the wording of
Article 18.1 of the Anti-dumping Agreement and Ar ticle 32.1 of the SCM Agreement.  Article 18.1
refers to specific action "against dumping of exports" not "against dumped exports" (i.e., the physical
exports themselves) and not "against importers of dumped exports".
4.1095  Mexico argues that the fact that the focus is not on imports or importers is even clearer in the
context of Article 32.1 of the Anti-dumping Agreement.  The Article refers to specific action "against
a subsidy of another Member", not "against the subsidization of exports" or  "against subsidizedexports" or “against importers of subsidized exports”.
4.1096  Even if the US argument had legal merit, Mexico notes, the facts in this dispute do not
support it.  The distribution of offsets under the CDSOA does have a "burdensome" effect on
"imports" because it systematically upsets the relative conditions of competition between imports and
like domestic products.WT/DS217/R
WT/DS234/R
Page 200
(iii) Footnotes 24 And 56
4.1097  According to Mexico, footnote 24 to the Anti-dumping Agreement and footnote 56 to the
SCM Agreement do not, as suggested by the US, create an exception to Articles 18.1 and 32.1.  The
footnotes simply clarify the scope of their associated provisions.
4.1098  Moreover, Mexico is of the view that the footnotes refer only to action taken "under other
relevant provisions of GATT 1994".  The Appellate Body interpreted this phrase in Anti-Dumping Act
of 1916 .  It reasoned that those provisions did not include action taken under Article VI of GATT
1994.
4.1099  In Mexico's opinion, applying this reasoning to the SCM Agreement, it is clear that the phrase
"provisions of GATT 1994, as interpreted by this Agreement" in Article 32.1 refers to Articles VI and
XVI of GATT 1994.  Accordingly, the "other relevant provisions" referred to in footnote 56 of theSCM Agreement do not include Articles VI and XVI.  Thus, even if the US is correct that its action
has been brought under GATT Article XVI, actio n under that provision is not encompassed by
footnote 56.
4.1100  Finally, Mexico argues that the CDSOA is not an "appropriate" action within the meaning of
footnotes 24 and 56, because it amounts to an actionable subsidy that is inconsistent with Article 5(b)of the SCM Agreement, by virtue of the fact that it nullifies or impairs benefits accruing to Mexico
under the GATT 1994.  Moreover, it is inconsistent with Articles 5.4, 8 and 18.4 of the Anti-Dumping
Agreement, Articles 11.4, 18 and 32.5 of the SCM Ag reement, Article X:3(a) of the GATT 1994 and
Article XVI:4 of the WTO Agreement.
(e) Article 5(b) Of The SCM Agreement
4.1101  Mexico considers that the issue to be decided under Article 5(b) of the SCM Agreement is
whether, through the use of a subsidy, the CDSOA causes adverse effects in the form of nullification
or impairment of benefits accruing directly or indirectly to Mexico under the GATT 1994.  In this
regard, it is not disputed that the offsets distributed under the Act constitute financial contributions
that confer benefits and, therefore, amount to subsidies within the meaning of Article 1 of the SCMAgreement.
(i) The Granting Of Subsidies Is Mandated
4.1102  In the view of Mexico, the US has not cont ested that the CDSOA mandates the granting of
subsidies.  Indeed, the US acknowledges that the "CDSOA instructs the United States Customs
Service to distribute funds in an amount not to exceed the duties collected pursuant to anti-dumpingand countervailing duty orders to eligible domestic producers".
214
(ii) Specificity
The appropriate focus is on the subsidies not the act
4.1103  Mexico asserts that by focusing on Mexico’s alleged failure to "show that the CDSOA is a
specific subsidy", the United States misses the point.  Under Article 2 of the SCM Agreement,
Mexico does not have to show that the CDSOA, itself, is a specific subsidy.  Rather, it has to establish
that subsidies exist and that such subsidies are sp ecific within the meaning of Article 2.1 of the SCM
Agreement.
                                                     
214 Oral Statement of the United States at the First Meeting with the Panel, para. 4 (emphasis added).WT/DS217/R
WT/DS234/R
Page 201
4.1104  In Mexico's view, pursuant to paragraph 1 of Article 1, a subsidy shall be deemed to exist if
there is a financial contribution by a government that confers a benefit.  In the circumstances of this
dispute, in and of itself, the CDSOA is not a subsidy as defined by the SCM Agreement.  Rather, it is
the offsets distributed under the CDSOA that constitute financial contributions conferring benefitsthat amount to subsidies.  Thus, in accordance with Article 2, the Panel must determine whether the
offsets  (i.e., the subsidy), not the CDSOA, are specific to "certain enterprises".
The subsidies are specific
4.1105  It is Mexico’s position that the subsidies conferred under the CDSOA are specific within the
meaning of Article 2.1(a) of the SCM Agreement on the basis that the legislation pursuant to which
the granting authority operates explicitly limits  access to a subsidy to certain enterprises.
4.1106  An important characteristic of the CDSOA is that it governs the administration of a series of
separate and distinct subsidies.  By design and legal requirement, each offset is a separate and distinct
subsidy.  The funds that form the "financial cont ribution" element of each subsidy are deposited and
maintained in separate special accounts that are, themselves, linked to the products that are the subject
of each order or finding.
4.1107  Another important characteristic of the CDSOA is that access to each distinct subsidy is
explicitly limited to certain enterprises who are producers of products that are like the product subject
to the order or finding in question or worker representatives of those producers.  Finally, access is
further restricted to those enterprises that were peti tioners in the original investigation that led to the
duties or those enterprises that supported the petition.  In Mexico's view, that, in law, an enterprise
will not be eligible to receive offsets collected with respect to a product it does not produce, even ifthere are funds in the special account for that offs et, is positive evidence of specificity within the
meaning of Article 2.1(a) of the SCM Agreement.
4.1108  Mexico submits that the subsidies are, therefore, actionable under Part III of the SCM
Agreement.  The fact that the CDSOA governs a se ries of separate and distinct subsidies, each of
which is specific, does not mean that the subsidies are non-actionable.  Such a determination wouldmean that a WTO Member could avoid the disciplines governing actionable subsidies simply by
administering otherwise specific subsidies through "different special accounts" provided for under a
single piece of legislation.
Specificity under Article 2.1(b) and (c)
4.1109  Mexico argues that the US arguments regarding specificity under Article 2.1(b) and (c) are
not relevant to this dispute because the subsidies are specific under Article 2.1(a).
4.1110  According to Mexico, even if Article 2.1(c) was relevant to this dispute, any criteria or
conditions established by the CDSOA are not "objective criteria or conditions" as defined in footnote
2 to the SCM Agreement.  Such criteria or conditions are not neutral, they favour certain enterprises
over others, they are not economic in nature and they are not horizontal in application. Accordingly,
they do not fall within the definition set out in footnote 2 of the SCM Agreement.
(iii) Adverse Effects
4.1111  Mexico is raising two types of nullification or impairment claim under its Article 5 challenge:
(a) "violation" nullification or impairment;  and (b) "non-violation" nullification or impairment.WT/DS217/R
WT/DS234/R
Page 202
"Violation" nullification or impairment
4.1112   It is Mexico’s position that "violation" nullification or impairment presumes that the Panel
finds a violation of a provision of the GATT 1994 in one of the other claims before it.  Therefore, this
type of nullification or impairment does not give rise to an independent ground for challenge.
4.1113  Contrary to what is suggested by the United States, Mexico asserts that its position on
"violation" nullification or impairment under Article 5(b) will not create a new class of prohibited
subsidies.  Mexico’s position is that where a subsidy violates a provision of the GATT 1994,
nullification or impairment is automatic under paragraph (a) of Article XXIII:1 because a WTO
Member has failed to carry out its obligations under the GATT 1994.  Therefore, where the violation
in question occurs as a result of the "use of" a subs idy within the meaning of Article 5(b) of the SCM
Agreement, a violation of that provision will also o ccur.  The implication of a violation of Article 5(b)
in such circumstances is that the SCM Agreement provides for a specific remedy.
"Non-violation" nullification or impairment
4.1114  With respect to "non-violation" nullification or  impairment and the US argument that the
CDSOA must be "applied", Mexico is presenting two arguments:  (i) The granting of actionable
subsidies under the CDSOA nullifies or impairs benefits accruing to Mexico under the GATT 1994;and (ii) the maintaining of the subsidies through the CDSOA also nullifies or impairs benefits
accruing to Mexico under the GATT 1994.
Granting of actionable subsidies
4.1115  Mexico is arguing that the CDSOA mandates the granting of actionable subsidies and that
such subsidies per se  will cause adverse effects when they are granted.
4.1116  Mexico’s position is that the phrase “through the use of a subsidy” encompasses the action of
granting a subsidy.  The US argues that in order to demonstrate nullification or impairment under
Article 5(b), Mexico must present evidence of  actual disbursements under the CDSOA.  This
argument is flawed because, in the circumstances of this dispute, subsidies under the CDSOA can bechallenged under Article 5(b) prior to their actual granting.
4.1117  Mexico argues that by virtue of Article 5, a limited subset of "non-violation" nullification or
impairment (i.e., that caused through the use of an actionable subsidy) can give rise to a violation of a
provision of the SCM Agreement – namely, Article 5.  Such a violation gives rise to the remedies in
Article 7.4 of the SCM Agreement.
4.1118  Mexico is of the view that this difference between "non-violation" nullification or impairment
under Article 5 and under Article XXIII:1(b) has important implications on when a measure can be
challenged.  The US position that Article XXIII:1(b) requires the application of a measure is not
relevant to when a challenge can be brought under a substantive article in a WTO Agreement, such as
Article 5.   The issue of when a measure can be challenged under a substantive article of a WTO
Agreement is governed by the "mandatory/discretionary" doctrine which allows a Member to
challenge legislation on an "as such" basis.  The doctrine allows parties to challenge measures "thatwill necessarily result in action inconsistent with GATT/WTO obligations, before such action is
actually taken".
4.1119  In its challenge of the granting of actionable subsidies under the CDSOA, Mexico’s position
is that the Act mandates the granting of actionable subsidies and that, when granted, such subsidiesWT/DS217/R
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will cause nullification or impairment.  In other words, when the subsidies are granted, an action that
even the US acknowledges as amounting to application, a violation will occur.
4.1120  Thus, Mexico considers that it is clear that Mexico can challenge the CDSOA prior to the
granting of subsidies under the Act.  The only question is whether the Act will "necessarily result inaction" that is inconsistent with Article 5(b) – i.e., will nullification or impairment automatically be
caused or automatically "exist" when subsidies are granted under the Act.  The issue of how the
distribution of offsets will necessarily upset the relative conditions of competition between Mexican
and like US products is discussed below.
Maintaining of actionable subsidies
4.1121  Mexico is also arguing that the CDSOA maintains actionable subsidies and that the
maintenance of those subsidies in the circumstances is currently nullifying or impairing benefits that
accrue to Mexico under the GATT 1994.
4.1122  In Mexico's view, the CDSOA "maintains" subsidies because it provides the means for a
subsidy, i.e., it establishes a framework for its c onferral.  Furthermore, the CDSOA does not simply
maintain subsidies in that sense.  It establishes special accounts, provides for the deposit of funds in
such accounts, provides for the identification of eligible recipients and the issuance of a list thereof,
and mandates the distribution of the funds.
4.1123  Thus, Mexico asserts that it can challenge the CDSOA prior to the granting of subsidies under
the Act on the basis that the Act is maintaining subsidies in a manner that amounts to the "use of a
subsidy" within the meaning of Article 5 and in a manner that causes nullification or impairment.  Thenature of the nullification or impairment caused by the maintenance of the subsidies is addressed
below.
The nullification or impairment caused  by the subsidies under the CDSOA
(i) Nullification or impairment that will be caused by the granting of the subsidies4.1124  By virtue of the design, structure and architecture of the CDSOA, Mexico argues that it has
demonstrated that the offsets will systematically upset the competitive relationship between Mexican
products and like United States products legitimately expected by Mexico. As discussed atparagraphs 101 and 102 of Mexico’s first submission, Mexico asserts that the nullification or
impairment caused by the subsidies is systematic.
4.1125  As discussed at paragraphs 89-91 of Mexico’s first submission, Mexico is of the view that it
is well established in GATT 1947 jurisprudence that the introduction or increase of a subsidy will
have an adverse effect on negotiated concessions.  This principle goes as far back as the 1955 decision
of the GATT CONTRACTING PARTIES.
215  The GATT Panel in EEC - Oilseeds I  characterized the
1955 decision as creating an "assumption".216  Thus, in presenting its case, Mexico considers it is
                                                     
215 First Written Submission of Mexico, para. 89.
216 European Economic Community – Payments and Subsidies Paid to Processors and Producers of
Oilseeds and Related Animal-Feed Proteins  ("EEC - Oilseeds I"), adopted on 25 January 1990, BISD 37S/86, at
para. 148.  The Panel stated that "the case before it does not require the Panel to address the question of whetherthe assumption created by the 1955 decision of the CONTRACTING PARTIES applies to all production
subsidies…" [emphasis added]. The Panel also stated at para. 154 of its Report that "the CONTRACTINGPARTIES considered in 1960 that 'it is fair to assume that a subsidy which provides an incentive to increasedproduction will, in the absence of offsetting measures, e.g. a consumption subsidy, either increase exports or
reduce imports'".WT/DS217/R
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entitled to rely on the assumption that the introduction of a subsidy by the CDSOA will have an
adverse effect on negotiated concessions.
4.1126  In EEC – Oilseeds I  and EEC – Oilseeds II , the GATT Panels carefully analysed the
mechanisms, framework, essential features, characteristics and operations of the schemes in questionin order to determine whether the subsidies systematically upset the expected competitive
relationship.  Their findings of nullification or impairment were not based on evidence of specific
trade effects of subsidies on imported products, but on evidence pertaining to the design and operation
of the measures at issue.  In assessing whether the competitive relationship was impaired, the Panel
focused on the systematic relationship between the subsidies and the tariff bindings in question.  It
found that the tariff bindings were systematically undermined by the subsidy.
4.1127  Mexico asserts that in this dispute, the benefits accruing to Mexico under Articles II and VI of
the GATT are likewise being systematically undermined.  This is clearly illustrated by the fact that the
maximum duties that are permitted to be collected are being passed on to the prime beneficiaries of
the duties, systematically and automatically enhancing the relative competitive position of US
products compared to like Mexican products.
4.1128  Moreover, in Mexico's opinion, by virtue of the design, structure and architecture of the
CDSOA, there is a clear correlation between the offsets and the adverse effect on the expected
competitive relationship. The subsidies are created by the existence of dumping and subsidization and
the assessment of resulting duties.  The duties are passed on to the prime beneficiaries of the duties,
who are also direct competitors of Mexican exporters facing the anti-dumping and countervailing
duties.
4.1129  Thus, according to Mexico, there is a clear and systematic linkage between the granting of
actionable subsidies and the nullification or impairment of benefits at issue in this dispute.
(ii) Nullification or impairment caused by the maintenance of the subsidies
4.1130  Mexico argues that even before subsidies are granted under the CDSOA, the maintenance of
subsidies under the Act nullifies or impairs benefits accruing to Mexico under GATT Articles II and
VI that concern the creation of predictability needed to plan future trade.  Given the certainty that any
anti-dumping or countervailing duties that will be collected will be re-distributed to the producers of
directly competitive products and the uncertainty as to the magnitude of the subsidies, it is impossible
for efficient Mexican exporters who can still sell into the US market when facing duties to predict the
relative conditions of competition between their products and like US products.  This is particularly
problematic in the view of Mexico with respect to products that require significant lead time betweenorder and delivery.
4.1131  Mexico submits that through the introduction of this new factor, the predictability needed to
plan future trade that is legitimately expected by Mexico under Articles II:2(b) and VI of the GATT
1994 is nullified or impaired by the maintenance of actionable subsidies by the CDSOA.
(iii) Reasonable expectations
4.1132  Contrary to the US argument, Mexico argues that it could not have reasonably expected the
CDSOA and the basis that compensation proposals had been suggested in the past.
4.1133  In the view of Mexico, the evidence cited by the US supports Mexico’s position that it could
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has been proposed in the past, it has been adamantly opposed by the US administration and it has not
been passed into law.  In fact, the US administration opposed the introduction of the CDSOA.
4.1134  According to Mexico, the evidence actually demonstrates that the US administration itself
could not have reasonably anticipa ted the introduction of the CDSOA.
(f) Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement
4.1135  Mexico posits that the United States is clearly under an obligation to make its determinations
under Articles 5.4 and 11.4 in an "objective manner".  The CDSOA directly interferes with this
obligation by rewarding domestic producers who support the petition and penalizing those who do not
(by denying them subsidies that their domestic competitors will receive).
4.1136  According to Mexico, the CDSOA has manifestly changed the ability of the United States to
make its determinations in an objective manner.  It has "tilted the balance" away from opposition orneutrality towards petitioning or supporting a petition.
(g) Article 8 of the Anti-Dumping Agreement and Article 18 of the SCM Agreement
4.1137  Mexico is of the view that the United States is under an obligation to make its determinations
under Articles 8 and 18 in an "objective manner".  The CDSOA directly interferes with this obligation
by rewarding domestic producers who oppose undertakings.
4.1138  Again, Mexico argues, the CDSOA has fundamentally transformed the nature of the decision
that must be made by the individual members of a domestic industry.  In order to maximize the
economic effect of the imposition of anti-dumping and countervailing duties and thereby act in the
best interests of their owners or shareholders, domestic producers will have to oppose undertakings.
4.1139  Mexico asserts that in this way, the CDSOA has "tilted the balance" away towards the
opposition of undertakings.  Thus, contrary to the position of the United States, the CDSOA clearly
affects the operation of the domestic law provisions implementing Articles 8 and 18.
(h) Article X:3(a) of the GATT 1994
4.1140  According to Mexico, the CDSOA interferes with the reasonable and impartial administration
of United States' laws and regulations implementing the provisions of the Anti-Dumping Agreementand SCM Agreement.  Therefore, it is inconsistent with Article X:3(a) of the GATT 1994.
(i) Article XVI:4 of the WTO Agreement, Article 18.4 of the Anti-Dumping Agreement and
Article 32.5 of the SCM Agreement
4.1141  Mexico submits that as a consequence of being inconsistent with the above-noted provisions
of the Anti-Dumping Agreement, the SCM Agreement and the GATT 1994, the CDSOA is
inconsistent with Article XVI:4 of the WTO Agreem ent, Article 18.4 of the Anti-dumping Agreement
and Article 32.5 of the SCM Agreement.
H. S
ECOND WRITTEN SUBMISSION OF THE UNITED STATES
(a) Introduction
4.1142  In this submission, the United States responds to arguments raised in their oral statements
during the first meeting of the Panel.   The United States submits that despite their insistence that theWT/DS217/R
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Continued Dumping and Subsidy Offset Act (“CDSOA”), as a subsidy programme, will cause or has
caused substantial adverse effects, none of the complaining parties have challenged the Act as an
actionable subsidy under Article 5(c) of the SCM Agreement, for which even a showing of threat of
harm is sufficient.  According to the United States, this fact alone casts serious doubt on thecredibility of the complaining parties’ claims of harm.  Instead of pursuing the most relevant legal
claim given the allegations in this dispute, the complaining parties argue that the CDSOA constitutes
a “specific action against” dumping or a subsidy.
4.1143  In the view of the United States, like their al legations of harmful effects, the complaining
parties’ argument that the CDSOA distorts the administration of standing and undertaking provisions
is without any supporting evidence.  More importantly, their argument would require this Panel to
rewrite the WTO obligations regarding standing determinations and the acceptance of priceundertakings.  In short, the complaining parties have failed to satisfy their burden of establishing a
prima facie case of a WTO violation.  A WTO violation cannot be created out of unwritten
obligations and pure speculation.  For these and the reasons explained more fully below, the United
States respectfully requests that the Panel reject the complaining parties’ claims.
(i) The CDSOA is not an actionable subsidy
4.1144  Under Article 2.1 of the SCM Agreement, the determination of specificity turns on whether
the subsidy is limited “to an enterprise or industry  or group of enterprises or industries.”  The phrase
“certain enterprises” is defined for purposes of Article 2.1 as “an enterprise or industry or group of
enterprises or industries.”  Thus, Article 2.1(a) covers subsidies that are explicitly  limited to an
enterprise or industry or group  of enterprises or industries.
4.1145  The United States argues that, for obvious reasons, Mexico does not claim that the CDSOA is
limited to a single enterprise or industry.  Thus, for the Panel to find that the CDSOA is a de jure
specific subsidy, it would have to  conclude that the universe of industries and enterprises which could
in principle  receive CDSOA payments can be considered a “group of enterprises or industries” under
Article 2.1.
4.1146  Although there is no WTO precedent providing interpretative guidance regarding how small
and homogenous a group of beneficiaries must be in order to qualify as “a group of enterprises or
industries” in the context of Article 2.1, the CDSOA does not present a close case. The United States
asserts that CDSOA benefits are not limited to an enterprise, industry, or group thereof.  Any producer
that meets the objective and neutral criteria is eligible for distributions.  As illustrated by the language
of the statute, CDSOA benefits are available in principle to any producer of any product on which
anti-dumping or countervailing duty duties could be collected.   Narrower groups than this, such as“all manufacturing” and “all agriculture,” are too broad to qualify as a “group of enterprises or
industries” for specificity purposes.  CDSOA paymen ts are available to all agricultural producers and
manufacturers, creating a universe of potential recipients far too large and varied to be considered a
“group” in this context.
4.1147  Mexico argues that each CDSOA distribution is a  de jure  specific subsidy because the money
is kept in separate accounts, is capped by the duties collected under a particular AD/CVD order, and is
only distributed to enterprises that produce the domestic like product and were among the petitioners
in the original proceeding. The United States argues specificity analysis, however, must be carried out
for the challenged subsidy programme (here the CDSOA) as a whole rather than by focusing on
individual disbursements.  Otherwise, no matte r how broadly available and broadly distributed
benefits under a government programme may be, each  disbursement would be considered a specific
subsidy – a result that would render Article 2 of the SCM Agreement a nullity and one that MexicoWT/DS217/R
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cannot really mean to endorse.  Mexico certainly provides no legal support or precedent for its
unusual “one-outlay-at-a-time” analysis.
4.1148  Mexico also implicitly argues that the CDS OA cannot meet the “objective criteria” standard
of Article 2.1(b) and, for that reason, can be found de jure  specific under Article 2.1(a). The United
States is of the view that, contrary to Mexico’s  assertion, CDSOA distributions are based on objective
criteria, and eligibility is automatic if the criteria are met.  An affected domestic producer is eligible to
receive a distribution for qualifying expenditures if (1) it was a petitioner or interested party in
support of the petition, and (2) it remains in operation.  The enterprises eligible for distributions will
vary from year to year as new cases are brought; as entries are liquidated and duties are, or are not,
assessed; and as orders are revoked.  The list of qualifying expenditures is also neutral, objective, and
applies across-the-board for all domestic industries.
4.1149  The United States argues that even if the criteria of the CDSOA were not considered to meet
the description in Article 2.1(b), however, that would not mean that the CDSOA is automatically
specific.  Mexico would still have to demonstrate by positive evidence that the CDSOA constitutes a
de jure  specific subsidy, which it has not done.
4.1150  In the view of the United States, the Panel need not reach the question of adverse effects in
this dispute.  Nevertheless, the United States submits, Mexico has failed to meet its burden of proving
adverse effects in the form of nullification or impairment of benefits.  Pursuant to footnote 12 in
Article 5(b), the existence of nullification or impairment under Article 5 of the SCM Agreement is to
be established in accordance with the practice of application of GATT Article XXIII.  Under GATT
and WTO practice, the non-violation provisions  of GATT Article XXIII:1(b) have offered an
exceptional remedy that panels have approached with caution.  There are three requirements of a non-
violation nullification or impairment claim under Article XXIII:1(b):  (1) the application of a
measure; (2) a benefit accruing under the relevant agreement; and (3) the nullification or impairment
of the benefit as a result of the application of the measure that was not reasonably anticipated.
4.1151  According to the panel in Japan – Film, the first requirement means that Article XXIII:1(b)
limits non-violation claims to measures that are currently being applied.  Furthermore, this
interpretation is supported by DSU Article 26.1 which also states that a non-violation finding must be
based on “application” of the measure.
4.1152  According to the United States, Mexico argues that footnote 12 does not prevent it from
challenging the CDSOA as such under a non-violati on nullification or impairment theory because
Mexico has brought the claim under Article 5(b).  A simple review of the text of footnote 12 confirms
that it does not distinguish between “procedural” issues and “substantive” issues, as asserted byMexico.  The practice in determining the existence of non-violation nullification or impairment under
GATT Article XXIII:1(b) includes the requirement that the measure be currently applied.  In this
sense, Mexico’s argument is circular because the determination of the existence of nullification or
impairment is based upon the application of the measure, not the measure itself.
4.1153  The United States argues that with respect to this third requirement, Mexico has simply
speculated that the distributions will reduce the ability of the Mexican exporter to compete and sell in
the US market.  Yet, Mexico does not even identify the affected Mexican imports.  Indeed, Mexico
cannot identify such imports as it chose to challenge the law as such.
4.1154  In the view of the United States, the nullification or impairment of benefits cannot be
presumed in a non-violation claim.  In its oral statement, Mexico cites the EEC – Oilseeds case for the
proposition that it need not produce any evidence demonstrating the nullification or impairment
because it is allegedly “systematic,” and can instead “focus” on “whether there has been an adverseWT/DS217/R
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change in conditions of competition legitimately expected  by Mexico.” The United States argues that
this argument misreads EEC – Oilseeds , where the Panel sustained the non-violation claim on the
basis that the complainant had shown  that the competitive relationship was actually  upset.  The Panel
did not simply accept the proposition that the EEC subsidy upset that relationship per se.  Nor did the
Panel state that nullification or impairment may be presumed if it is “systematic” in nature.  In fact,
the United States submitted voluminous data detailing the operations and mechanisms of the subsidy
programmes and adverse effects to show that its exporters of the particular goods in question suffered
from the change in the competitive relationship.  In the end, the Panel sustained the claim, having
“carefully analyzed” the data.  Mexico has submitted no such detailed data and, in fact, as explained
above, has not even managed to identify any particular products for which the competitive
relationship has been or will of necessity be upset.
4.1155  The United States posits that Mexico's expectations with respect to US tariff concessions are
only reasonable with respect to the products covered by those tariff concessions.  Here, the CDSOA is
not a product-specific subsidy and Mexico, having challenged the law as such , did not (indeed,
cannot) identify any products to which benefits accrue.  The CDSOA itself does not identify any
specific product but can apply to any product subject to an anti-dumping or countervailing duty order.The amount of money received under the CDSOA is not linked to the level of production or sale of
that product or designed to supplement those leve ls.  As the CDSOA is not a product-specific subsidy,
Mexico's claims that CDSOA per se nullifies or impairs benefits under GATT Articles II and VI
should be rejected.
4.1156  The United States submits that there is no reason to believe that the CDSOA will cause “more
than a de minimis contribution” to any nullification or impairment either.  Mexico provides no
justification for its assumption that offsets will be used to lower domestic prices or have any effect on
the domestic market.  Under the CDSOA, domestic  producers may use their offset for any purpose,
including making gifts to charity, compensating workers, developing non-subject products, or paying
creditors.  How any of these activities could affect Mexican producers of the products subject toorders has not been established.
4.1157  The United States is of the view that Mexico has also failed to establish the third requirement
when it claims that it could not have reasonably anticipated the introduction of the CDSOA because
previous legislative proposals had not been enacted into law.  The question is whether Mexico was on
notice that the United States could pass such a measure.  The answer to that question is “yes.”
Discussions in Congress concerning measures sim ilar to the CDSOA took place prior to and during
the Uruguay Round negotiations.  Thus, Mexico could have reasonably anticipated that such ameasure could become law in the United States.
(ii) The CDSOA is not a specific action against dumping or a subsidy
4.1158  Based on the ordinary meaning of the text and the limited guidance provided by the 1916 Act
reports, the United States submits that the test to determine whether a measure is "specific action
against" dumping or subsidization is whether a measures authorizes:  (1) specific action:  a measure
based upon the constituent elements of dumping or a subsidy, i.e., action based upon imported
products being sold at less than normal value, or a financial contribution and a benefit is granted; (2)
against:  which burdens ( e.g. imposes a liability); (3) dumping or subsidization: the dumped or
subsidized imported good, or an entity connected to in the sense of being responsible for the dumped
or subsidized good such as the importer, exporter or foreign producer.
4.1159  The United States argues that the complaining parties all avoid the important distinction noted
by the Appellate Body between the words "specific action" in the main provision and "action" in the
footnote.  The absence of the word "specific" in footnotes 24 and 56 means that the modifierWT/DS217/R
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"specific" has meaning which must be given effect.  This distinction was also recognized by the
panels in 1916 Act.  The panels repeatedly stated that “specific action” is action based upon “dumping
as such .”  In the view of the United States, the panels meant what they said, meaning, that the action
must be based directly upon the constituent elements.
4.1160  The United States asserts that, unlike the 1916 Act, the CDSOA is not based upon the
constituent elements of dumping or a subsidy.  The plain language of the CDSOA does not instruct
Customs to take action in the form of disbursements in response to situations or conduct presenting
the constituent elements of dumping or subsidization.
4.1161  It is the view of the United States that the complaining parties ignore these important
distinctions and argue that the CDSOA is "specific action" because distributions are linked, however
remotely, to anti-dumping and countervailing duty orders.  Not only do the complaining parties’arguments broaden the definition of “specific action” beyond that established in the 1916 Act case,
they broaden the definition to such a degree that it would impose a whole host of new obligations on
Members, including the requirement that all legal subsidies provided from the general revenue should
not be derived from AD/CVD duties, especially if th e recipients of those legal subsidies are industries
who competed with products subject to AD/CVD orders.
4.1162  Nor is the fact that CDSOA distributions are funded by AD/CVD duties legally relevant.  The
text of Articles 18.1 and 32.1 does not refer to duties or the uses to which the duties collected may be
put.  There was no linkage between duties and the civil and criminal actions in the 1916 Act  case.  It
is not clear why CDSOA would be acceptable if only the payments were made through the general
Treasury accounts rather than the special accounts.
4.1163  According to the United States, the complaining pa rties have also failed to establish that the
CDSOA is an action “against” dumping or a subsidy.  The ordinary meaning of the term “against”
suggests that the action must operate directly on the imported good or the importer.  This
interpretation is supported by the definition of dumping in GATT Article VI:1.  That provision
defines dumping as products  of one country being introduced into the commerce of another country at
less than normal value.  Thus, under Article 18.1, specific action against dumping is specific action
against products being introduced into the commerce of another country at less than normal value.  In
other words, the action must be against imported products.
4.1164  Indeed, in the United States' view, the complaining parties agree that the impact of the
specific action must be on the imported good or an entity responsible for the dumping or subsidized
good such as the importer, exporter or foreign pr oducer.   They would, however, have this Panel
rewrite Articles 18.1 and 32.1 to read “no specific action with a presumed negative effect on importgoods or foreign producers...”  in contravention of DSU Article 3.2.  Further, such a test is overly
broad and unworkable by including any type of domestic legislation which improves the position of
the domestic industry.
4.1165  The United States argues that if the complaining parties could show the harmful effects from
the CDSOA that they allege, they would have brought a claim under SCM Agreement Article 5(c).
Reading a presumed effects test into Articles 18.1 and 32.1 is not only not supported by the text of
those provisions but would convert an actionable subsidy claim into a prohibited subsidy, thereby
allowing the complaining parties to circumvent the requirements of Articles 3 and 5 of the SCM
Agreement.
4.1166  Finally, some complaining parties claim that the CDSOA is a specific action against dumping
or a subsidy because the recipient is a domestic producer that is "affected" by dumping orWT/DS217/R
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subsidization. The United States argues that the statute, however, does not require producers to show
they are injured by dumped or subsidized imports to receive distributions.
4.1167  The United States agrees that Footnotes 24 and 56 serve to clarify the scope of obligations
under Articles 18.1 and 32.1 of the Antidumping and SCM Agreements, respectively.  Actions againstdumping and subsidies as such  must proceed under the Antidumping or SCM Agreement; other
actions, however, such as actions under GATT Articl e XVI to address the effects of dumping and/or
subsidies, are explicitly permitted by footnotes 24 and 56.  The CDSOA, to the extent that the Panel
were to find it to be an action against dumping and/or subsidies, is nevertheless clearly an action
under GATT Article XVI to address the effects of such practices.
4.1168  According to the EC, action under GATT Article XVI is not covered by the footnotes because
the SCM Agreement interprets Article XVI.  Yet, the EC does not allege that GATT Article XVIlimits the form of specific action that can be taken against dumping or subsidization within the
meaning of Articles 18.1 and 32.1.  Nor is the EC correct that the SCM Agreement necessarily
interprets  GATT Article XVI. The United States argues that even if such "interpretation" were a valid
ground to exclude GATT Article XVI under footnote 56, the EC offers absolutely no reason why
action under GATT Article XVI should not be permitted under footnote 24 in the Antidumping
Agreement.
4.1169  The United States asserts that the EC argues that the term “under” actually means  “confer
and regulate positively the right” to take action.  Yet, according to the United States, the ordinary
meaning of the term “under” suggests that acti on “in accordance with” other GATT provisions is
permissible.  This is also consistent with both panel reports in the 1916 Act case which interpreted theword “under” in footnote 24 to mean “compatible with.”
4.1170  The EC further states that footnote 24 clarifies that Article 18.1 "does not prevent Members
from taking action in response to situations that involve dumping, where the existence of dumping is
not the event that triggers such action."  The panels in the 1916 Act  case and Indonesia – Auto
Industry , however, recognized that action could be taken to address dumping and subsidization
(including its effects or causes) as long as it did not address dumping and subsidization, as such.
Thus, in the view of the United States, footnotes 24 and 56 address actions against dumping and
subsidies.  If the Panel were to conclude that the CDSOA is action against dumping or a subsidy,
footnotes 24 and 56 would operate to permit the CDSOA.
(iii) The CDSOA does not violate WTO standing obligations
4.1171  With respect to WTO obligations on standing, the complaining parties’ theories are not
grounded in the language of Articles 5.4 and 11.4. The Un ited States argues that to express “support”
for something means to “[u]phold or maintain the valid ity or authority of (a thing)”; “give assistance
in (a course of action)”; “[s]trengthen the position of (a person or community) by one’s assistance or
backing”; “uphold the rights, opinion, or status of”; “stand by, back up”; “[p]rovide authority for or
corroboration of (a statement etc.)”; “bear out, substantiate”; “speak in favor of (a proposition or
proponent).”  The word “support” as used in Articles 5.4 and 11.4 does not require an inquiry into thereasons for that support.  Even if relevant, however , the complaining parties again fail to submit any
evidence to support their claims.  Speculation about what a statute may do or not do is not sufficient
to support a claim of inconsistency.
4.1172  The United States is of the view that Articles 5.4 and 11.4 contain identical standing
requirements for initiating investigations which are expressed as numerical benchmarks.  Articles 5.4and 11.4 are implemented in US law in sections 702(c)(4) and 732(c)(4) of the Tariff Act of 1930, as
amended.  These provisions were not modified in any way by the CDSOA.  On its face , the CDSOAWT/DS217/R
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does not make it any more likely that any investigation will be initiated by the Commerce
Department.  In addition, it is undisputed that the Commerce Department continues to apply the
numerical industry support benchmarks set forth in the Antidumping and SCM Agreements and that
the CDSOA has not had any impact on the manner  in which the Commerce Department applies those
benchmarks.
4.1173  According to the United States, there is no requirement for administering authorities to
determine the reasons for the positions taken by members of the domestic industry.  Arguments from
the complaining parties that the “object and purpose” of the standing provisions or their Uruguay
Round negotiating history support reading a qualitative assessment requirement into the standing
provisions are similarly unavailing.  There is no stated purpose of the standing provisions.
Moreover, the negotiating history reflects the objection of certain countries to (1) initiations by thegovernment, (2) petitions from a single producer or Congressman, or (3) presumptions of support.
The concern was about whether assertions of support made by one party (or a government) were
representative of the domestic industry as a whole.  The underlying reasons for that support was not
an issue during the negotiations and is not relevant under Articles 5.4 and 11.4.
4.1174  The United States does not deny that WTO Members must uphold their obligations under the
covered agreements in good faith.  The United States argues that it has done so both pre- and post-
CDSOA enactment.  The complaining parties, howev er, provide no support for their claim that the
CDSOA “ by its very operation  precludes the possibility of an examination in good faith of industry
support under Articles 5.4 and 11.4.”  The complaining parties do not assert that the CDSOA prevents
the United States from calculating in good faith whether these numerical thresholds are met, but ratherthat this good faith calculation is not enough.  The United States must second guess whether
producers’ expression of support are “true.”  This is an unworkable requirement and one that would
render it impossible for any Member to exercise its standing obligations in “good faith.”
4.1175  Even assuming, arguendo , that the CDSOA provides some inducement to file or support
petitions, the United States submits that the mere provision of such an inducement is not contrary tothe Antidumping Agreement or the SCM Agreement.  The very existence of the Antidumping and
SCM Agreements gives domestic interests a strong financial inducement to file, and support,
petitions.  If the mere provision of an inducement to file or support petitions is found to violate
Articles 5.4 and 11.4, however, Members will lose control over the implementation of their own AD
and CVD laws.  Simply stated, any change in methodology that favours the domestic industry may
induce a domestic party to file or support a petiti on.  Such a one-sided interpretation is unreasonable.
4.1176  Finally, the United States notes that the CDSOA conditions eligibility for disbursements on
whether the domestic party indicated such support to the International Trade Commission.   T h e
information submitted by domestic parties to the International Trade Commission on this issue has no
bearing whatsoever on the Commerce De partment's standing determination.
4.1177  The United States argues that, as a practical matter, it is highly improbable that CDSOA is a
factor at all in a domestic company’s or union’s consideration of whether to support a petition.Payments received under the CDSOA are not a consequence or quid pro quo of an expression of
support for an anti-dumping or countervailing duty petition.  For distributions even to be possible, the
petition must prove (1) dumping or subsidization, (2) injury, and (3) causation, and an order must be
imposed.  That a petition will result in an order is far from guaranteed: from 1980 to 2000, only
36.1 per cent of the petitions filed resulted in affirmative determinations by both the US Departmentof Commerce (dumping or subsidization) and th e US International Trade Commission (injury and
causation).  Whether the producer will then receive payments under the CDSOA is then further
contingent on (1) the level of imports, (2) the level of the margins, (3) the number producersWT/DS217/R
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supporting the petition, (4) the number of producers filing certifications, and (5) the amount of
qualifying expenditures.
4.1178  The United States asserts that any payments made under the CDSOA as a result of a
successful petition would be at some unknown, future date.  The time from filing a petition untilduties are assessed and eligible for distribution under the CDSOA is measured in years and dependent
on a series of factors: (1) whether an administrative review is requested (by a foreign producer,
importer, domestic producer); (2) whether an appeal is taken to the US Court of International Trade
and then to the US Court of Appeals for the Federa l Circuit; and (3) whether there are remands to the
agency for further consideration of particular issues and re-examination by the reviewing court(s).
While entries can be liquidated in as little as two years after merchandise enters the United States,
liquidation in many cases is 3 to 5 years after entry and can be as long as 10 years in unusualsituations.  The "promise" of a remote, uncertain and unknown payment is hardly worth gambling a
million plus dollars on a "frivolous" anti-dumping or countervailing duty case as complaining parties
suggest.
(iv) The CDSOA does not violate WTO undertaking obligations
4.1179  The United States argues that the Antidumping and SCM Agreements do not create an
obligation for administering authorities to enter into undertakings.  Moreover, when a Member
chooses to consider a proposed undertaking, the agreements are quite clear that the undertaking may
be rejected because it is “impractical” or for any other “policy reason.”  Indeed, the complaining
parties are well aware of this gap in their argument.
4.1180  Further, according to the United States, the complaining parties’ argument misrepresents the
significance under US law of domestic industry views regarding proposed undertakings.  US law
merely requires that the Commerce Department, to the extent practicable , consult the consuming and
domestic industries before determining whether an undertaking is in the “public interest.”  Moreover,
the law stipulates that, in analyzing the public in terest, the Commerce Department is to take into
account the following factors:  US international economic interests, the impact on consumer prices
and supplies of merchandise, and the impact on the competitiveness of the domestic industry.  Thus,
the views of the domestic industry do not in any way dictate the outcome of the public interest
analysis and, for this reason, they do not determine the decision to accept or reject a proposed
undertaking.   Indeed, the domestic industry has opposed more than 75 per cent of the undertakings
which the United States has accepted  since 1996.
4.1181  Finally, the oral statements of Indonesia, India, and Argentina focus on the impact on
developing countries of the alleged “disincentives” created by the CDSOA with respect toundertakings. The United States argues that none of these statements refers to any evidence  that the
CDSOA creates “disincentives” for the United Stat es to enter into undertakings with developing
country Members.  US law stipulates that a key factor in the decision to accept an undertaking is the
international economic interests of the United States.  It is without question that the advancement of
the economies of developing countries is an important international economic interest of the UnitedStates.   Moreover, Argentina’s claims regarding Article 15 of the Antidumping Agreement are
simply not within the Panel’s terms of reference and therefore cannot be considered.
(v) The CDSOA does not violate GATT Article X:3
4.1182  The United States argues that the complaining parties have made it perfectly clear that the
allegedly offending measure with respect to Article  X:3(a) is US implementation of its AD and CVD
laws, not US implementation of CDSOA.  The complaining parties’ panel requests allege WTO
breaches by means of CDSOA, not by means of the provisions of US law under which US authoritiesWT/DS217/R
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determine the adequacy of industry support for petitions or consider whether to accept price
undertakings.  Because US implementation of its AD and CVD laws is not within the terms of
reference of this dispute, the Panel should reject the Article X:3(a) claims.
4.1183  In the view of the United States, the complain ing parties have not produced any evidence that
any particular AD or CVD investigation has been handled by the United States in a non-uniform,
partial, or unreasonable manner as a result of the CDSOA.   The complaining parties’ entire
Article X:3(a) argument rests on their belief that the CDSOA will influence domestic producers to
bring or support an investigation, or oppose an undertaking, they otherwise would not.  They have,
however, not even provided evidence that, “but  for” the CDSOA, domestic producers would not
otherwise have supported a petition or opposed an undertaking.  Moreover, even if they had brought
forth such evidence, it would not implicate the ac tions of the United States in implementing the
Antidumping and SCM Agreements. The United States argues that there is no requirement in those
agreements that the administering authorities (1) examine the reasons behind industry support for
petitions or (2) accede to domestic industry opposition to an undertaking.
4.1184  The complaining parties rely on Bovine Hides  to support their claim that a law can be
inconsistent with Article X:3(a) if it gives rise to the “inherent danger” of partial administration.  Yet,The United States argues, in that case, the Argentine law concerned access to confidential information
and the law had been applied.  In this case, the complaining parties have attempted to use
Article X:3(a) to challenge the CDSOA as such.  Unlike the Argentine law, the CDSOA will hardly
give rise to an “inherent danger” of partial administration because it does not affect Commerce’s
administration of US standing  and undertaking provisions.
4.1185  Finally, in regard to the claim that the CDSOA- type laws will proliferate, the United States
notes that, even if this were true, it would have no bearing on Article X:3(a).  Moreover, to the extent
that the complaining parties maintain that such proliferation will cause more AD or CVD cases to be
pursued, complaining parties are simply reiterating their unsubstantiated claims about the impact of
the CDSOA on standing inquiries and undertaking decisions.
I. 
SECOND ORAL STATEMENTS OF THE COMPLAINING PARTIES
1. Australia
4.1186  The central claim made by Australia is that the Continued Dumping and Sub sidy Offset Act of
2000  is a specific action against dumping and a subsidy otherwise than in accordance with the
provisions of GATT 1994 as interpreted by the Anti-Dumping and SCM Agreements.
4.1187  In its Second Written Submission, the United States asserts that findings in the United States
– Antidumping Act of 1916  case provide only limited guidance in this dispute.  The United States
submits that the test to determine whether a measure is “specific action against” dumping or a subsidy
is whether the measure authorises (1) action based upon the constituent elements of dumping or a
subsidy (2) which burdens (3) the dumped or subsidised goods of an entity connected to the dumped
or subsidised goods.  The United States then argues that the Byrd Amendment is not based upon the
constituent elements of dumping or a subsidy and does not burden dumped or subsidised goods orentities responsible for those goods.
4.1188  Australia submits that the United States’ proposed test ignores that the Appellate Body’s
findings on the meaning of the phrase “specific action against dumping” in the 1916 Act case gave
meaning to the full phrase, as well as to the word  “against”.  The Appellate Body’s findings did so in
the context, and in light of the object and purpose , of the broader framework of rules governing theWT/DS217/R
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imposition of anti-dumping measures provided by GATT Article VI as interpreted by the Anti-
Dumping Agreement.
4.1189  According to Australia, the United States’ proposed test is based on selective dictionary
meanings of the word “against”.  It ignores other, equally valid, ordinary meanings.  Moreover, noneof the meanings, including those put forward by the United States, compel the conclusion that a
specific action “against” dumping or a subsidy must apply exclusively to the imported good or to an
entity connected to those goods, and must be burdensome to those goods or to that entity.
4.1190  The United States’ proposed test is premised on meanings of “dumping” and “a subsidy” that
have no basis in the relevant texts.  Article 18.1 of the Anti-Dumping Agreement governs specific
action against “dumping of exports” from another Member.  It does not govern specific action against
“dumped exports” or “the dumpers of exports”.  Neither does the definition of dumping in GATT
Article VI:1 – “by which products of one country are introduced into the commerce of another
country at less than the normal value of the products” – compel such a conclusion.
4.1191  Similarly, Australia submits, Article 32.1 of the SCM Agreement governs specific action
against “a subsidy” of another member.  It does not govern specific action against “subsidised
exports” or “the importers of subsidised exports”.  Moreover, “a subsidy” is expressly defined inArticle 1 of the SCM Agreement:  a financial contri bution by a government, or any form of income or
price support in the sense of GATT Article XVI, that confers a benefit.  The meaning of “a subsidy”
within the context of Article 32.1 put forward by the United States is incompatible with the definition
of a subsidy in Article 1.
4.1192  The United States argues that the Byrd Amendment is not based upon the constituent
elements of dumping or a subsidy and does not burden dumped or subsidised goods or entities
responsible for those goods.
4.1193  Australia is of the view that the United Stat es’ argument is premised on a new misquotation
of the Appellate Body’s findings in the 1916 Act case .  The United States substitutes “based upon” for
the words “in response to” used by the Appellate Body.  These two phrases are not equivalent inmeaning.
4.1194  According to Australia, the United States’ argu ment continues to ignore that the existence of
the constituent elements of dumping or a subsidy is a necessary condition to a domestic producer’s
potential entitlements under the Byrd Amendment.  Yet, the United States says at paragraph 90 of its
Second Written Submission:  “For distributions … to be possible, the petition must prove (1) dumping
or subsidisation …  Whether the producer will then receive payments under the [Byrd Amendment] is
then further contingent on  (1) the level of imports,  (2) the level of the margins ...”.  In the context ofthis statement, margins means the anti-dumping or countervailing duties to be applied.  Thus,
according to the United States itself, offset paym ents under the Byrd Amendment are in fact twice
conditional on the existence of the constituent elements of dumping or a subsidy.
4.1195  The United States argues that specific action against dumping and a subsidy must be
burdensome.  Australia does not consider that this argument is correct.  The Byrd Amendment is ofcourse the measure at issue in this dispute.  It is in that context that Australia has said that offset
payments under the Byrd Amendment alter the competitive relationship between dumped or
subsidised goods and domestically-produced like products in ways not contemplated by GATT 1994
and the Anti-Dumping and SCM Agreements.  That does not mean, however, that Australia agrees
that the impact of specific action against dumping or a subsidy must necessarily be on the importedgood or an entity responsible for the imported good as the United States asserts.  Australia argues thatWT/DS217/R
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once again, the United States is misrepresenting Australia’s arguments and refuting arguments that
Australia has not made.
4.1196  The United States also argues that, even if the Byrd Amendment is an action against dumping
or a subsidy, footnotes 24 and 56 would operate to permit the Byrd Amendment.  However, asdetailed in Australia’s First and Second Written Submissions, Australia is of the view that
footnotes 24 and 56 do not create exceptions to the scope of Articles 18.1 and 32.1.  For so long as the
Byrd Amendment constitutes specific action against dumping and a subsidy, it is governed
exclusively by Articles 18.1 and 32.1.
4.1197  Concerning the “Findings of Congress”, even deferring to the United States on the status in
domestic law of the “findings” section, the second sentence of section 754(a) of the Byrd Amendment
states:  “Such distribution shall be known as the ‘continued dumping and subsidy offset’.”  In thewords of the United States in answer to the question from the European Communities, the purpose of
the Byrd Amendment is specifically identified in the law, and reflected in the language of the law
itself.  As set out in Australia’s First Written Submission, the purpose of the Byrd Amendment – as
specifically identified in the Act and reflected in th e language of the law itself – is to counterbalance,
act against and remedy continued dumping and subsidisation.
4.1198  Australia argues the Byrd Amendment is a specific action against dumping and a subsidy
other than in accordance with the provisions of GATT 1994 as interpreted by the Anti-Dumping and
SCM Agreements.  It is thus inconsistent with Article 18.1 of the Anti-Dumping Agreement, in
conjunction with GATT Article VI:2 and Article 1 of the Anti-Dumping Agreement, and with
Article 32.1 of the SCM Agreement, in conjunction with GATT Article VI:3 and Article 10 of theSCM Agreement.
4.1199  Australia has also claimed that the Byrd Amendment in inconsistent with Article 5.4 of the
Anti-Dumping Agreement and Article 11.4 of the SCM Agreement.
4.1200  The United States seems to be asserting that Australia’s argument would mean that any
change in methodology that might benefit the domestic industry in any particular case could providean incentive for domestic industry to support a petition in that case and thus violate Articles 5.4 and
11.4.  Australia observes that implementation of anti-dumping and countervailing duty laws by the
United States is not before the Panel in this dispute.  Whether a change in methodology might provide
an incentive for domestic industry to support a petition would need to be assessed in the
circumstances of a particular case.  As a general observation, however, Australia recalls the Appellate
Body’s statement in United States – Hot-Rolled Steel  that “investigating authorities are not entitled to
conduct their investigation in such a way that it becomes more likely that, as a result of the fact-finding or evaluation process, they will determine that the domestic industry is injured”.  Australia
considers this statement to be applicable to any action by a Member to implement anti-dumping and
countervailing duty laws.
4.1201  The United States argues at length that the process leading to the imposition of anti-dumping
or countervailing duties is in any case so difficult, time-consuming and expensive that the ByrdAmendment is unlikely to affect the determination of  standing.  According to Australia, even if that
were so, the mere possibility that the Byrd Amendment could affect the standing requirement in any
circumstances must be a violation of Articles 5.4 and 11.4.
4.1202  In the opinion of Australia, the United States has not rebutted the prima facie  case made by
Australia that the Byrd Amendment constitutes specific action against dumping and a subsidy notpermitted by GATT 1994 as interpreted by the Anti-Dumping and SCM Agreements.  Neither has the
United States rebutted the prima facie  case made by Australia that the Byrd Amendment frustrates theWT/DS217/R
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intent of Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement to
establish whether an application for an anti-dumping or countervailing duty investigation is truly
being made by or on behalf of the domestic industry.
2. Brazil
(a) Introduction
4.1203  The systemic concerns raised by Brazil in this case are: first, the  introduction of the notion of
monetary compensation to aggrieved parties into the remedial structure of the specific agreements at
issue and, more generally, into the WTO structure.  Brazil submits that the endorsement of  this
practice would create an entirely new remedial structure to address dumping and subsidization not
contemplated by either the agreements at issue in this proceeding or in any of the WTO agreements.
The US cannot point to a single word, phrase, or provision that authorizes the use of such remediesand ignores the very specific language in the agreements limiting the remedies available to address
dumping and subsidization. Second, Brazil believes that the CDSOA will substantially increase both
the burden on developing country companies and the incidence of anti-dumping and countervailing
measures applied to these companies.
(i) CDSOA: Payment programme, subsidy or sp ecific action against dumping and subsidies?
4.1204  At paragraph 2 of its second submission, the US makes the claim that “the complaining
parties do not dispute” that the CDSOA is a payment programme.  To the extent that a payment
programme is defined as any programme that transfers money from the government to a private party,
then the CDSOA would fall within this definition.  Similarly, the CDSOA might be characterized as a
subsidy programme in that it makes a “financial contribution” which “benefits” the recipientcompany.  However, these are not the issues before the panel.  Brazil asserts that no one is asking the
panel to define a payment programme and determine whether the CDSOA is a payment programme.
Indeed, Brazil can find no relevance to such a determination under the GATT 1994, the AD
Agreement or the SCM Agreement.
4.1205  Brazil asserts that in the 1916 Act case, both the panel and Appellate Body found that specific
actions against dumping and subsidization other than those specifically authorized in the AD and
SCM Agreements are inconsistent with the obligations of the United States under these agreements.
The sole question is one of interpretation of Article 18.1 of the AD Agreement and Article 32.1 of the
SCM Agreement.
(ii) A determination that the CDSOA is specific  action against dumping does not involve a
“presumed negative effects test.”
4.1206  The US also asserts in paragraph 5 of its second submission that the complaining parties are
relying on a “presumed negative effects test” for which there is no authority under Article 18 of the
AD Agreement or Article 32 of the SCM Agreement.  In fact, Brazil argues, it is the US that has
suggested this test, not the complaining parties. In paragraph 92 of the first submission of the United
States, the US affirms that “to consider a specific action as ‘against’ dumping or subsidization, the
action must apply to the imported good or the importer, and it must be burdensome”.  Brazil’sarguments proved that even under the US test – which finds no support whatsoever in the relevant
Agreements – the CDSOA payments must be consid ered to be “against” dumping or subsidization.
4.1207  According to Brazil, the US position, as summar ized in paragraph 5 of its second submission,
is that the purpose, intent, objective, operation, and effect of the CDSOA is irrelevant.  This position
inevitably leads to one of two possible conclusions in interpreting Articles 18.1 and 32.1.  If one is notWT/DS217/R
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permitted under the agreements to determine the purpose of specific actions taken when the
constituent elements of dumping and subsidization are present in order to determine whether these
actions are “against” dumping and subsidization, then all actions taken when the constituent elements
of dumping and subsidization are present must be considered “against” dumping.   Or, if to establishwhether the actions are “against” dumping, one is not permitted to determine the purpose of specific
actions taken when the constituent elements of dumping and subsidization are present, then
Articles 18.1 and 32.1 provide limitations which can never be evaluated and are, therefore,
meaningless.  Thus, in Brazil's view, the US is suggesting a limitation on interpretation of the
agreements that prevents any meaningful evaluation of the action at issue, namely the CDSOA.
4.1208  Brazil argues that Article VI:2 of the GATT 1994 specifically permits the use of  anti-
dumping measures “in order to offset or prevent dumping”.  Articles 7, 8 and 9 of the AD Agreement
permit the use of provisional measures, undertakings and anti-dumping duties respectively to offset or
prevent dumping.  Article 18.1 of the AD Agreement specifically limits measures against dumping to
those specified in Article 7, 8 and 9.  In combination, these articles restrict measures to offset or
prevent dumping to provisional measures, undertakings and anti-dumping duties.  Brazil wonders how
one determines whether or not actions are to offset or prevent dumping, if one cannot, as the USsuggests, look at the purpose, intent, operation or effects of such actions taken when the constituent
elements of dumping are present ?  Brazil submits that, in essence,  the US is requesting the panel to
read the limitations of Articles 18.1 and 32.1 out of the agreements.
(iii) The CDSOA payments are not “remotely” linke d, but directly linked, to the constituent
elements of dumping and subsidization
4.1209  In paragraph 43 of its second submission, the US argues that the complaining parties are
suggesting that any linkage between actions and dumping or subsidization, no matter how remote,
satisfy the requirement that the action be “specific action”. The US then goes on to characterize the
position of the complaining parties as including within the definition of “specific action against
dumping” all actions where an AD or CVD order are a ‘necessary prerequisite’ or a ‘condition’ or‘contingency’ for action”.  Brazil argues that this characterization is simply false.
4.1210  According to Brazil, the US has attempted to use examples where either the levying of anti-
dumping and countervailing duties are a “necessary prerequisite”  to an action or  where an action is
“contingent” on the collection of such duties as the basis to assert that the complaining parties are
attempting to broaden the limitations of Articles 18.1 and 32.1.  In fact, the opposite is true.
Distributing revenues from anti-dumping and countervailing duties to charities is clearly contingent
on the collection of such duties.  However, such action is in response to a stimulus other thandumping or subsidization – for example, the need of the society for the activities performed by the
charity.  The distribution is irrelevant in terms of  remedying dumping or subsidization.  The action is
neither against nor in response to dumping or subs idization. Similarly, flying the flag at half-mast
after determinations of dumping and subsidization is an action that is contingent on or conditioned
 on
such determinations.  However, it is irrelevant to the purposes of offsetting or preventing dumping or
subsidization and, therefore, not against dumping or subsidization. Thus, contrary to the assertion by
the United States, Brazil is not seeking to proscribe all payments contingent on or conditioned on theconstituent elements of dumping or subsidization.  It is simply seeking to proscribe, as do Articles
18.1 and 32.1, actions which are “against” dumping and subsidization, including payments which
offset or prevent dumping but which are not au thorized measures under either the AD or SCM
Agreements.
4.1211  Finally, Brazil refers the panel to the language of Articles 18.1 and 32.1.  In the view of
Brazil, the language does not, as the US would have the panel believe, state that no specific action
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or subsidization.  There is no such qualification.  Rather, these provisions state that “no specific
action” at all is authorized against dumping or subsidization except the actions specified in the
agreements.  The only limitations are that the action must be “specific” and it must be “against”
dumping and subsidization.  Thus, the relevant inquiry is not whether the action is imposed on theproduct, the importer or the exporter, but rather whether the action is “specific” and “against”
dumping and subsidization.
(iv) Are actions against dumping and subsidization proscribed by Articles 18.1 and 32.1 limited to
actions that are related to the revenues from anti-dumping and countervailing duties?
4.1212  In paragraph 45 of its second submission, the United States asserts that: “Brazil claims not to
challenge the right of the United States to choose how its revenues are disbursed in general, but just
its right to disburse anti-dumping and countervailing duties”.  Brazil asserts that it has never taken theposition that CDSOA payments are “specific action against dumping and subsidization” solely
because these payments are derived from the revenues of anti-dumping and countervailing duties.
Rather, Brazil has stated that one of the factors linking the CDSOA payments to the constituent
elements of dumping is the fact that no such paym ents would be available absent anti-dumping and/or
countervailing duty orders.
4.1213  Brazil notes, however, that while the source of th e funds is a factor in evaluating the CDSOA,
Brazil has not represented this as either the primary factor or the exclusive factor linking the CDSOA
payments to the constituent elements of dumping.  Indeed, the linkage emphasized by Brazil is
between the “entitlement” to such payments and the anti-dumping and countervailing duty orders, not
the source of the funding for such payments.  Brazil argues that the fact that both the entitlement to
payment and the source of revenues for the payment under the CDSOA are dependent on anti-
dumping and countervailing duty orders simply st rengthens the linkage.  Entitlement to CDSOA
payments are based on the existence of anti-dumping and countervailing duty orders.  Similarly, the
CDSOA payments themselves are only available if there are anti-dumping and countervailing duty
orders in place because, otherwise, there would be no revenues to distribute.  Whether or notentitlement to payments from revenues other than anti-dumping and countervailing duties would
represent a “specific action against dumping or subsidization” would depend on the facts in such a
case.
(v) CDSOA payments are totally dependent on th e constituent elements of dumping and
subsidization
4.1214  Brazil asserts that in paragraph 42 of its second submission, the US again argues that
distributions under the CDSOA “have nothing to do with the constituent elements of dumping”because they are “based on certifications from an ‘affected domestic producer’ regarding its
‘qualifying expenditures’”.  According to Brazil, the US argument begs the question of what is
“affecting” the producer.  If the answer to this question is the dumping or the subsidization, then the
text of the CDSOA makes abundantly clear what the intent of the measure is. The US ignores the fact
that whether the recipient is an “affected domestic producer” or has a “qualifying expenditure” isirrelevant if there is no anti-dumping or counter vailing duty order against a product produced by that
“affected domestic producer”.  Similarly, the existence of a “qualifying expenditure” is irrelevant
unless there is an anti-dumping or countervailing duty order on the product to which that “qualifying
expenditure” applies.  These are simply additional conditions that must be satisfied in order to receive
the CDSOA payments.  However, without the exis tence of anti-dumping or countervailing duty
orders, these conditions become irrelevant.
4.1215  In the view of Brazil, the existence of additional criteria to qualify for the CDSOA payments
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to demonstrate “antitrust intent” was required beyond demonstration of dumping and injury to qualify
for the treble damages provided under the law or to be subject to the criminal penalties.
Notwithstanding these additional requirements beyond demonstration of dumping and injury, the
panel and Appellate Body found these remedial actions to be specific actions against dumping notauthorized under the AD Agreement and, therefore, inconsistent with Article 18.1. Similarly, the fact
that entitlement to remedial actions under the CD SOA are dependent on demonstrating more than the
existence of dumping and injury do not make these actions any less actions against dumping or
subsidization.
(vi) Balance of concessions negotiated in the Uruguay Round
4.1216  It is the view of Brazil that the AD and SCM Agreements represent a balance of concessions
negotiated by WTO Members.  Changes in any of the material terms of the agreements can upset thisbalance of concessions. The remedies permitted under the agreements are among the most important
terms of the agreements.  Specifically, the position of Members on the appropriate thresholds for
determinations of injury, causation, dumping, subsidization, and the duration of measures will vary
depending on the nature of the remedy being imposed.  From the perspective of Members with
concerns about the adverse effects of anti-dumping and countervailing measures on exports, if moresevere measures are permitted, higher thresholds for application of those measures should be required.
Conversely, Members with concerns about the adverse effects of dumping and subsidization on
domestic industries will likely seek more severe measures and will want lower thresholds for
application of those measures as the protection afforded by these measures for domestic industries
decline.
4.1217  Brazil argues that Articles 18.1 and 32.1 clearly demonstrate that Members did not agree to
open-ended remedies when negotiating the AD and SCM Agreements.  Members agreed to specific
remedies. Had Brazil understood that in addition to the application of anti-dumping and
countervailing duties, Members were permitted to provide CDSOA type payments to industries in the
importing country, Brazil’s position on “sunset” of anti-dumping and countervailing duty measures or
on undertakings might have been different.  After all, injury might be eliminated more quickly if
industries are receiving monetary awards in addition to  the protection of the measures agreed to in the
agreements.  In addition, exporters might have a greater interest in undertakings and want such
undertakings to be mandatory if they understood that the revenues from anti-dumping duties would
benefit their competitors in the export market.
4.1218  Brazil submits that as part of the balance of concessions made in negotiating the AD and
SCM Agreements, Members put limits on the remedies  available to authorities in importing countries
to address dumping and subsidization.  Brazil is of the view that the United States should not be
permitted to unilaterally upset this balance of concessions.
(b) Conclusion
4.1219  According to Brazil, a finding by the panel that the CDSOA is not action against dumping and
subsidization would render Articles 18.1 and 32.1 of the AD and SCM Agreements respectivelymeaningless.  In so doing, it would permit Members to take remedial measures against dumping and
subsidization, which are not provided for in the GATT 1994, the AD Agreement, and the SCM
Agreement.  This, in turn, would eliminate the core disciplines imposed by these agreements contrary
to the specific terms of Articles 18.1 and 32.1.  Resolution of whether the CDSOA is an
impermissible specific action against dumping and subsidization does not require the panel to draw aline between permissible and impermissible actions to be applied to the many possible claims based
on alternative factual scenarios.  Rather, the panel ne eds only to address the specific facts at issue in
this proceeding and evaluate those facts in light of the limitation imposed on remedial measures inWT/DS217/R
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Articles 18.1 and 32.1 of the AD and SCM Agreements respectively. The CDSOA payments are
specific action to offset or prevent dumping and are not authorized by the relevant agreements.
3. Canada
(a) Introduction
4.1220  Canada argues that none of the arguments adva nced by the United States has persuasively
responded to the submissions made by the complainants.  Canada considers that the US attempts to
divert the Panel’s attention from the issues by, in effect, arguing past the complainants.
(b) Specific action against dumping or a subsidy
(i) “Subsidy” or not, the Byrd Amendment as a “spe cific action” is subject to the disciplines of
Articles 18.1 and 32.1
4.1221  Canada believes that as a first step, it is important to recall again what this case is about.  The
measure at issue, the Byrd Amendment, provides for the distribution of subsidies.  Indeed, the defence
of the United States seems to rest entirely on this point.  But, Canada argues, subsidies are subject to a
range of disciplines under the WTO Agreement.  These disciplines include Article 3 of the SCM
Agreement, Article III of GATT 1994, and so on.  And th e United States agreed with this proposition
in response to a direct question at the First Hearing.  Finally, the source of funding of a subsidy doesnot shield it from scrutiny by a panel.  That is, whet her a subsidy is funded out of special taxes, duties
or general revenue does not render an otherwise illegal subsidy consistent with the WTO Agreement.
The United States expressly admitted as much when it forcefully stated, also at the First Hearing, that
there is nothing special about anti-dumping or countervailing duties as sources of funds.
4.1222  And so, according to Canada, the “sovereign right” to appropriate anti-dumping or
countervailing duties is not absolute.  That right is subject to obligations negotiated and undertaken by
the Members of the WTO.  Canada submits that US protestations concerning its “sovereign rights”
are, therefore, irrelevant in this context.
4.1223  The issue before this Panel is whether these subsidies – these offset payments – granted under
the Byrd Amendment constitute “specific action against dumping” or a subsidy.
(ii) US arguments on “specific action …”
4.1224  The United States dismissed the Appellate Body’s findings in the 1916 Act case as being of
“limited guidance”.  The United States then pr oposes its own three-part test for determining
compliance with Articles 18.1 and 32.1.
(iii) US arguments are incorrect
4.1225  Articles 18.1 and 32.1 prohibit “specific action against dumping” or a subsidy except those in
accordance with the provisions of GATT 1994.
4.1226  In Canada's view, nothing in the treaty language requires that the measure at issue – the
“specific action” – itself contain the “constituent elem ents of dumping”.  Nothing in Articles 18.1 and
32.1 limits the scope of that Article to measures that “operate directly on the imported good or the
importer.” [emphasis added] And Articles 18.1 and 32.1 address dumping and a subsidy as practices;
there is no mention in either article of dumped goods, or “an entity connected” to those goods.  Inother words, the test proposed by the United States has no basis in the text of the Articles.WT/DS217/R
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4.1227  Canada asserts that the interpretation of the Appellate Body in the 1916 Act case of
Article 18.1 is fully faithful to the words of the treaty.  “Specific action against dumping”, it said,
refers to “action in response to situations presenti ng the constituent elements of dumping.” That the
Act might have had other  purposes or other  requirements did not change its basic operation.  That the
United States might have called the practice something other than dumping  – predatory pricing, for
example – did not alter the thrust of that measure.  The 1916 Anti-Dumping Act  was an action in
response to (against, countering, condemning, offsetting) a practice , and that practice presented the
constituent elements of dumping.
4.1228  In the opinion of Canada, the language of the treaty is clear; and there is nothing “limited” in
the “guidance” of the Appellate Body.  If anything, the Byrd Amendment falls more squarely within
Articles 18.1 and 32.1 of the Agreements as interpreted by the Appellate Body than the 1916 Anti-
Dumping Act :
- the full title of the Act is the Continuing Dumping and Subsidies Offset Act;
- the Byrd Amendment is designed with the purpose of condemning dumping
and neutralising subsidies;
- it is part and parcel of the US trade remedy regime – its provisions do not
come into operation unless there has been an anti-dumping or countervailing
order determining the existence of “constituent elements of dumping” or a
subsidy; and
- every aspect of the Byrd Amendment operates to offset  (counteract, respond
to, act against) dumped or subsidised goods that enter into the United States.
4.1229  Contrary to what the United States argues in paragraph 43 of its Second Submission, the link
between the Byrd Amendment and dumping or a subsidy is not “remote”; it is not other  requirements
that trigger the distributions under the Byrd Amendment.  The relationship between the Byrd
Amendment and “dumping” or “a subsidy” is direct and substantial; the impact on imported goods is
incontrovertible.
4.1230  Canada now turns to the arguments of the United States with respect to footnotes 24 and 56.
4.1231  According to Canada, the United States argues that any “action” consistent with GATT 1994
is excluded from the scope of Articles 18.1 and 32.1.  This necessarily implies that Articles 18.1 and
32.1 prohibit only those actions that are already inconsistent with GATT 1994.  To state the
proposition is to underline its absurdity.
4.1232  Canada submits that the better view is that Articles 18.1 and 32.1 prohibit actions in response
to dumping or subsidies as such  that are not set out in Article VI (as interpreted by the Agreements)
and this includes subsidies.
4.1233  In this respect – and to close off the argument in this section – Canada recalls the context and
object and purpose of Articles 18.1 and 32.1.  Each article is a “final provision” at the end of
agreements setting out detailed  rules for the permitted  “specific actions.”  The Anti-dumping
Agreement contains no less than eleven articles  governing the initiation of investigations,
consideration of evidence, imposition of provisional measures, acceptance of undertakings, collection
of duties, duration and review of anti-dumping measures, and so on.  The SCM Agreement has
similarly detailed rules on the imposition of countervailing measures.WT/DS217/R
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4.1234  Canada asserts that the scheme  of the Agreements is therefore not open to doubt.  In drafting
the Anti-dumping and SCM Agreements, the Members considered the range of “specific actions”
possible against dumping or a subsidy, agreed upon three of those, negotiated rules governing those
“specific actions”, and prohibited the rest .  Footnotes 24 and 56 should not be interpreted so as to
undermine the basic structure of the Agreements.  If a measure falls within Articles 18.1 and 32.1, it is
not exempted by virtue of those footnotes.
4.1235  Accordingly, WTO Members must not imprison or fine importers that dump, for that reason ,
even though such action would be “consistent with GATT 1994”.  They must not impose additional
domestic levies on dumped or subsidies goods.  They must not prohibit retailers from selling dumped
or subsidised goods.  And they must not grant subsidies to “condemn”, “neutralise” and offset
dumping or subsidisation.
(c) Standing
4.1236  Canada argues that, in its second submission, the United States repeats that its obligation
under Articles 5.4 and 11.4 is simply to calculate a number.  It adds that inducements to file or
support petitions are not contrary to the Agreements.  It also adds that offset payments cannot really
be inducements because they rest on many contingencies.
4.1237  First, Canada submits that the United States misinterprets Articles 5.4 and 11.4.  The
application of basic principles of treaty interpretation, set out in Article 31 of the Vienna Convention ,
shows that thresholds are more than a simple number.  They set out the level  of support needed from
domestic industry that is affected by imports.  And that level of support must not be artificially
inflated, through either inducements or penalties, to meet those thresholds.
4.1238  According to Canada, the ordinary meaning of the terms of Articles 5.4 and 11.4 is that
authorities may not initiate investigations unless they determine requisite thresholds have been met.
They form part of the essential procedural requirements for initiation in Articles 5 and 11 of the
Agreements.  Their object and purpose are to create certainty and predictability.  The negotiating
history set out in Canada's First Submission clarifies this.  The United States itself acknowledges thatArticles 5.4 and 11.4 were drafted to establish industry support through numerical and objective
thresholds.  Threshold levels reflect the careful balance in the Agreements between the right of
foreign importers to access a market and the domestic industry to be safe from unfair trade practices.
Together, this means that the standing obligation in Articles 5.4 and 11.4 should not be reduced to a
meaningless number.
4.1239  In Canada's view, the issue here is not whether the US must inquire into reasons for industry
support.  Rather, the issue is whether the US can m eet its obligations to examine support where it has
enacted a law that undermines the validity of thresholds.  The Byrd Amendment actively encourages
domestic industry support.  And it interferes with a basic assumption for industry support - that that
support reflects harm caused.  This necessarily results in the US being unable to fulfill its obligation.
This violates Articles 5.4 and 11.4.
4.1240  Second, Canada argues that, contrary to US assertions, inducements that actively encourage
support for petitions violate a Member's obligations.  These inducements influence the judgement of
participants in investigations.  This prevents a fair and neutral administration of laws contrary to
GATT Article X:3(a).  It also di storts industry support levels under Articles 5.4 and 11.4.  The United
States claims that payments under the Amendment offer the same inducement as providing
information on dumping and countervail laws.  But, getting information is not the same as gettingmoney.WT/DS217/R
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4.1241  Third, Canada is of the opinion that offset  payments are not a remote possibility for industry.
For simply filing a certification under an Order, two companies in one industry received almost half
of the entire US$206 million given out so far.
4.1242  Finally, Canada considers that the contingencies cited by the United States only further prove
that the Byrd Amendment is specific action against dumping and subsidies.  As indeed the
United States notes in its Second Written Submission, for distributions even to be possible, the
petition must prove dumping and subsidis ation and an Order must be imposed.
(d) Undertakings
4.1243  The United States, in its Second Submission, also repeats its arguments regarding its
obligations under Articles 8 and 18.  It reiterates that it has no obligation to enter into undertakings,
that it has complete discretion to reject undertakings, and that the complainants have provided noevidence that the Amendment influences US producers.
4.1244  Canada argues that the question at issue is whether the United States can meet its obligations
under Articles 8 and 18 where it introduces a law that undermines its real discretion to enter into
undertakings.  The requirement under Articles 8 and 18 is that Members provide for their authorities
the ability to enter into undertaking agreements to terminate investigations early.  The purpose ofthese provisions is to restore the competitive relationship between imports and domestic products with
minimal disruption to trade, including that caused by imposing duties.  To fulfill this obligation, a
Member may not undermine the real discretion of its authorities to complete agreements.  That would
render Articles 8 and 18 meaningless.
4.1245  Canada submits that the Byrd Amendment creates a monetary interest for domestic industry
to thwart undertakings.  This interest has been reinforced by the distributions by US Customs.  As
Canada demonstrated in its First Submission, domestic industry approval is necessary to complete
undertakings.  Under US law, the Court of Intern ational Trade has ruled that US investigating
authorities may not dismiss the opposition of its domestic industry to enter into undertakings.  The
United States has not disputed these findings.
4.1246  Accordingly, in the Amendment, the United Stat es has introduced a law that undermines the
ability of its authorities to enter into undertaking agreements.  As such, Canada submits, it violates
Articles 8 and 18.
(e) Administration of laws
4.1247  Finally, Canada is of the view that, in its second submission, the United States again
misunderstands the claim under Article X:3(a) of GATT 1994.  Following its jurisdictional
arguments, the United States asserts that the complainants fail to provide evidence of the
administration of the Byrd Amendment or its effect on domestic producers.  The United States also
argues that the complainants must show that producers would not have supported a petition or
opposed an undertaking “but for" the Amendment.  The US cites no authority for this proposition.
4.1248  Canada argues that Article X:3(a) requires a fair, neutral and reasonable administration of
laws.  It requires an examination of the effect of an administrative measure on the administration oflaws.  The Panel in Argentina-Hides noted that this may involve an examination of whether there is a
possible impact on the competitive situation for traders but it does not require evidence of trade
damage.  It found that a measure that creates an inherent danger that laws will be administered in a
partial or unreasonable manner gives rise to a violation.  These findings are applicable here.WT/DS217/R
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4.1249  Canada posits that the Byrd Amendment creates a strong monetary inducement for domestic
industry.  The Amendment  encourages domestic industry to file petitions and thwart undertakings to
receive payments.  This is an influence on participants in domestic anti-dumping and countervailing
duty proceedings that is contrary to a neutral and impartial administration of laws. It affects the accessthat imports have to the US markets - access that was duly negotiated.  It also creates the potential for
the proliferation of investigations.  This undermines the security that imports face in the US market.
Accordingly, the Amendment leads to an administration of laws that is not fair, reasonable or neutral
in violation of GATT Article X:3(a).
(f) Conclusion
4.1250  Canada recalls that its request for findings has been set out in its submissions.
4. Chile
(a) Introduction
4.1251  Chile will not repeat arguments that it has stated in its two written submissions with Japan
and during the first hearing.  Instead Chile will respond to some arguments of the second submission
of the United States.
(ii) The CDSOA is indeed a specific action against dumping or a subsidy
4.1252  Chile argues that contrary to the US assertion, Chile, in its second submission with Japan
provided evidence of the importance in US and International Law of the intention of the legislator.
Even though the US may claim the contrary, th e intention of the proponents of the CDSOA, as
expressly stated in the findings of the Act and the statement of purposes of US Congressmen either, as
supporters or detractors, is to provide for an additional remedy to anti-dumping and countervailingduties, in situations were the constituent elements of dumping or subsidisation are present.  In support,
Chile quotes from the findings of the Act: “United Stat es trade laws should be strengthened to see that
the remedial purpose of those laws is achieved”
4.1253  Chile submits that for most if not all legal systems the objectives of statute as well as the
records of legislative discussion are a fundamental source for the interpretation of laws when they areat issue and their legal nature and effects are questioned.
4.1254  Furthermore, Chile is of the view that the achievements and effects of the CDSOA simply
confirms the intention and purpose of the Act.  The objective is being fulfilled, or Chile wonders, was
it not the intention of the proponents of the Byrd Amendment to give million of dollars to “affected”
domestic producers, as the US Customs Service began to do last month in order to strengthen the
trade remedy laws and further offset dumping and or subsidies?
4.1255  Chile asserts that the US continues to interpret the concept “against” in a manner that not only
is doubtful in English but certainly inconsistent with the Spanish and French versions of the ADA.  In
its second submission the US only repeats its very tortuous understanding of the word “against”
without even mentioning the arguments of Ch ile and Korea regarding the Spanish and French
versions of the Agreements.  The three texts must be read harmoniously.  And the French and Spanish
support one clear reading and meaning of the English version.  It seems that the US would instead like
to use an unreasonable interpretation which, in addition, is in contradiction with the other two
authentic texts.WT/DS217/R
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4.1256  In Chile's view,  the US’s understanding of the word “against” is not supported by the
Spanish meaning of “en contra de”.  Chile argues that that concept cannot  be understood as meaning
that the action must operate directly on the imported good or the importer.  As Chile stated in the first
hearing, “en contra de” in Spanish means in opposition to or contrary to.  Chile considers it is assimple as that, no need to look for twisted meanings.  In that sense, and as Chile asserts it explained in
its response to the Panel's second question the CDSOA is a specific action in opposition to dumping
and subsidisation since it provides for the distribution of duties assessed among the “affectedproducers” and for “qualified expenditures”.  If there is no request, investigation and determination of
dumping or subsidy the CDSOA would not operate.  And for an authority to reach a determination of
existence of the constituent elements of dumping (subsidy) it has to find and base it on evidence.
4.1257  In addition, Chile argues, the CDSOA provides that the distribution will cover “qualifying
expenditures”.  Not any expenditure but those incurred after the issuance of the AD duty finding or
order or CVD order.
4.1258  According to Chile, even the US recognises that  the link is much stronger than the mere fact
that the AD Duties or CVD constitute a cap to the funds distributed.  Indeed, in its answer to Chile's
question number 4, the US indicates that the payments under the CDSOA are contingent on (2) thelevel of the margins.  That assertion is in Chile's vi ew in contradiction with the statement that injury is
neither a requirement nor a consideration under the CDSOA.  Certainly the latter.
4.1259  Moreover, in paragraph 58 of its second submission, the US insists that “distributions are not
related to domestic producers’ injury from dumped and subsidised imports”. Chile asserts that this is
not true.  It if was, it simply means that th e ITC would have recommended anti-dumping measures or
countervailing duties without the existence of injury.  Chile would be grateful to know details.
4.1260  Finally, regarding this issue, Chile brings to the Panel’s attention that contrary to what the US
states in par. 46 of its second submission, the CDSOA would still be an action against dumping or
subsidies and hence unacceptable if the payments were made through the general Treasury.  It is not
the fact that the money comes from AD Duties or CVD what makes the CDSOA inconsistent withWTO.  It is the provision of specific action against dumping and subsidy which makes the CDSOA
inconsistent with Articles 18.1 and 32.1.  Precisely, what Chile would like to clarify is that the
CDSOA will never be WTO consistent by changing the source of funds.
4.1261  Regarding the arguments on footnote 24 and 56, Chile will let other co complainants
elaborate on this issue.  Chile would only like to remind the Panel that the issue here is not if the
measure could be authorised by those footnotes but the fact that even if it is concluded that the
CDSOA is permitted under them, none of those footnotes authorises a Member to adopt at the sametime two measures or remedies to repair or prevent the same injury.
4.1262  Chile argues that the US is trying to confuse the Panel arguing that the CDSOA is authorised
by footnotes 24 or 56.  The real point is that th e CDSOA provides for double remedy against dumping
and/or subsidisation.  And in that sense, if the authority decided to remedy or prevent the injury
though one measure, in this case an AD Duty and or a CVD, it can not apply a second measure underother relevant provision of the WTO.  Chile considers that it is one or the other, but not both.  As
Chile clearly stated in its responses, it could be an internal political decision that even though the
authority can make a dumping determination, it is preferable to use another trade defence measure.
Notwithstanding that the requirements to apply that  other measure as provided in the respective WTO
provisions are complied with.WT/DS217/R
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(iii) The CDSOA alters standing requirements
4.1263  Chile posits that the United States misses the point again.  Chile has not questioned that the
CDSOA changes the standing requirements in US Trade Laws.  Chile's contention is much simpler.
The CDSOA does not allow the US authorities to  comply with the standing requirements in
Article 5.4 of the ADA and 11.4 of the SCM.
4.1264  Chile thinks that Articles 5.4 of the ADA and 11.4 of the SCM not only provide for a
numerical representation of the industry but also for qualitative criteria.  Article 5.2 of the ADA
indicates that an application by or on behalf the domestic industry to initiate an investigation shall
include evidence of a) dumping, b) injury and c) a causal link.   It adds that a simple assertion is not
enough.  The ADA goes on and in the following paragraph mandates the investigating authority to
examine the accuracy and adequacy of the evidence provided in the application to determine whetherthere is sufficient evidence to justify the investigat ion.   In other words, a requirement to determine if
the application is well founded and the petitioner has the reasons to request an investigation that that
article specifies.  Article 11 of the SCM has similar provisions.
4.1265  According to Chile, this implies that the expression of support established in paragraph 4
must be reached by factors inherent to the ADA (SCM) and not by external factors such as economicincentives.  Even worse if those factors are consequence of a governmental decision or programme.
These external factors without question introduce a bias to the analysis that each producer will make
when deciding to support or not an application.  But also, if the support is based on other factors, such
as the incentive provided by the CDSOA the request would not be authentic under Article 5.2 and the
investigating authority would not comply in an im partial, objective and reasonable way with the
obligation  under Article 5.3.
4.1266  In the case of the CDSOA, Chile can agree with the US that it does not change the numerical
requirements of US Trade Laws regarding stan ding.  Chile argues that unquestionably the US
government by means of the economic incentives provided by the CDSOA, is introducing external
factors in a decision that under Article 5 has to be taken on the merits of each case and based on thethree essential requirements stipulated in paragraph 2 of that Article: dumping, injury and causality.
In that sense, the CDSOA is inconsistent with Articles 5 and 11 and the US is acting inconsistently
with Article X:3(a) of GATT 1994 since it is not administering its laws and regulations in the way
provided for in that provision by introducing an element of distortion in the decision process that
private citizens make before deciding to support or not an investigation.
4.1267  Chile is of the view that the US in this sec tion of its second submission misses the point again
and tries to divert the Panel away from the real issue.  In paragraph 72 the US may have a point sincethere is no evidence yet that the CDSOA has caused domestic producers to file or support petitions.
But first, the CDSOA indeed provides a significant incentive for producers to file or support petitions
in order to have access to the “subsidy”.  And second, and most important, if a producer decides to
request an investigation – for any motivation that may have, even if he wishes to stop imports and not
receive the “subsidy” – the support of the rest of the domestic industry is almost automaticallyassured.  Not supporting the petition means loosing competitive advantage not with foreign producers
– since the AD Duties or CVD will “affect” them as well even if they oppose the investigation – but
vis à vis  their own domestic competitors that will receive the “subsidy”.  Or  putting it in other terms,
nobody wants to be left outside.  And everybody wants to earn more.  Chile considers that this is a
point that the US cleverly avoided to touch.WT/DS217/R
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(iv) Violation of Article X:3 of GATT 94
4.1268  Article X:3 reads, “each contracting party shall administer in a uniform, impartial and
reasonable manner its laws, regulations, decisions and rulings”.  Chile is not claiming that the
implementation of the CDSOA is inconsistent with that provision nor that the measure in question isthe implementation of the US AD and CVD laws.  Chile considers that the US is trying to confuse the
Panel again.
4.1269  According to Chile, the measure challenged is  the CDSOA.  And it is challenged because it
provides for the administration of the US laws, regulations, decision and rulings in a way that it is not
uniform, impartial and reasonable.  And in that sense the US is in breach of its obligation under
Article X:3.  Chile simply cannot understand the logic behind the US argument.  Chile or other
complainants could not have challenged the implementation of US Trade Laws as such without ameasure or without an act that is a function of a political State in exercising its governmental duty
217.
The CDSOA is just such an act of the US exercising its governmental duty and in that sense it is the
way that that Member is administering its Laws and regulations.  Chile asserts that as it has explained,
the US is doing so in a way that is unreasonable, partial and not uniform.
(b) Conclusion
4.1270  Chile submits that the US has tried by all means to avoid getting to the points raised by the
complainants deviating the Panel’s attention to secondary issues.  It uses tortuous interpretation of
concepts contrary to the spirit of the provisions and the text of the other authentic versions of WTO
Agreements.  It ignores the fact that the CDSOA calls for an additional remedy to dumping and
subsidy and it claims that the complainants are challenging US Laws on standing as well as theimplementation of such Laws.  In Chile's view, the CDSOA provides not only for additional remedy
to AD measures or CVD but for specific action against dumping and subsidy. In that sense it is
inconsistent with Articles VI of GATT 94, 18.1 of ADA and 32.1 of SCM.  The CDSOA by providing
an incentive to file or support AD or CVD investigations is against the requirements of Articles 5.4
and 11.4, as it introduces an external factor to a decision that should be solely based on elementsmentioned in Article 5 and 11.  Finally, according to Chile, the US through the CDSOA is not
administering it laws, regulations, decisions and rulings in an uniform, impartial and reasonable
manner as prescribed by Article X:3 of GATT 1994.
5. European Communities
(a) Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement
4.1271  According to the European Communities, the  United States asserts that the interpretation of
“specific action against dumping” made by the Appellate Body in 1916 Act offers only “limitedguidance” and then puts forward a new test which is  plainly at odds with the Appellate Body’s own
test. The EC notes that the relevance of the interpretation made by the Appellate Body in 1916 Act is
not limited to the type of measures at issue in that case. It would be presumptuous to assume that the
Appellate Body failed to consider the implications of  that interpretation in other situations. In fact, the
report in 1916 Act suggests that, if anything, the A ppellate Body was concerned that its interpretation
might be too narrow.
                                                     
217 Definition of administration in the Webster’s Encyclopedic Unabridged Dictionary.WT/DS217/R
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(i) Articles 18.1 and 32.1 do not require that the action be “based directly upon” dumping or a
subsidy
4.1272  The European Communities considers that the firs t element of the US’ test is that the “action
must be based directly  upon the constituent elements” of dumping or a subsidy. According to the
European Communities, this requirement has no basis in the wording of Articles 18.1 and 32.1 and is
inconsistent with the interpretation made by th e Appellate Body in 1916 Act. According to the
Appellate Body, the relevant test is whether the action at issue “may be taken only when the
constituent elements of dumping are present”. The European Communities asserts that the
complainants have shown beyond doubt that the offset payments meet that test.
4.1273  The European Communities posits that, contrary to the US assertion, the EC does not argue
that the offset payments are a specific action against dumping or subsidisation simply because theyare funded with anti-dumping or countervailing duties. The offset payments are a specific action
against dumping or subsidisation because they are made exclusively to domestic producers which
have filed or supported a petition leading to the imposition of an anti-dumping or a countervailing
measure for “qualifying expenses” incurred after the imposition of such anti-dumping or
countervailing measure with respect to the production of the same product which is the subject of theanti-dumping or countervailing measure in question.
(ii) The meaning of “against”
4.1274  The second element of the US test, which the United States derives from the term “against”,
is that the action must “apply directly” to the dumped or subsidised goods (or to the importer or the
exporter) and must be “burdensome”. In the EC’s view, by interpreting the notion of “specific actionagainst dumping” as “action taken in response to a situation presenting the constituent elements of
dumping”, the Appellate Body gave meaning also to the term “against”.
4.1275  The European Communities argues that the reading of the term “against” made by the United
States is not supported by its ordinary meaning, either on its own or in its context. The notion of
action “against” dumping or subsidisation may encompass any action, which is objectively capable ofoffsetting or preventing dumping or subsidisation, whether by imposing a direct burden on the
importer or by giving an advantage to the domestic producers of like products.
4.1276  According to the European Communities, the United States accuses the EC and other
complainants of reading into Article 18.1 and 32.1 a “presumed effects test”. The same is true of the
United States’ own test because the action must be “burdensome”. Yet, whether or not an action is
“burdensome” will depend on its “effects” (“actual” or “assumed”). The only difference between the
US test and the interpretation made by the EC is that the United States assumes a priori  that only
those actions which apply directly to the importers are capable of being “burdensome”, whereas the
EC submits that giving an advantage to the domestic producers can be as effective, if not more, in
order to offset or prevent dumping or subsidisation.
4.1277  The United States’ argument that if the complainants “could show the harmful effects from
the CDSOA that they allege, they would have brought  a claim under Article 5 (c)” , in the view of the
European Communities, misrepresents the EC’s claim. The EC does not allege that the offset
payments are causing harm to the EC exporters. Rath er, the EC claims that the type of action provided
for in the Byrd Amendment is objectively capable of offsetting or preventing dumping or
subsidisation. Whether or not the offset payments achieve that objective in specific instances is
irrelevant for the purposes of establishing a violation of Articles 18.1 and 32.1. Those two provisionsdo not require showing that the action at issue has actually had any “harmful effects”.WT/DS217/R
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4.1278  The United States argues that the complainants’ interpretation would “convert an actionable
subsidy claim into a prohibited subsidy, thereby a llowing the complaining parties to circumvent the
requirements of Articles 3 and 5 of the SCM Agreement”. The European Communities asserts that
this argument is based upon the erroneous premise that Parts II and III of the SCM Agreement are lex
specialis  with respect to subsidies. Parts II and III do not exclude the application of other WTO
provisions to any measures, which happen to fall within the definition of subsidy. A measure, which is
neither prohibited under Part II nor actionable under Part III may still be prohibited by a different
provision of the WTO Agreements  on different grounds. The offset payments are not prohibited by
Articles 18.1 and 32.1 because they are subsidies, but because they are specific action against
dumping or subsidisation.
(iii) Footnotes 24 and 56
4.1279  The United States alleges that, what it calls “the EC’s trigger test”, is inconsistent with the
panel reports in US - 1916 Act . The EC recalls that it has not invented the “trigger test” but rather the
panels established that test in US –1916 Act. This was confirmed by the Appellate Body at
paragraph 122 of its report in the same case. The reason why the offset payments are not “permitted”
by the footnotes is the same as the reason why they constitute specific action against dumping orsubsidisation, i.e. because they can be made only when the elements of dumping or subsidisation are
present.
4.1280  The EC considers that it has explained that Article XVI of the GATT is one of the provisions
“interpreted” by the SCM Agreement and, consequently, cannot be one of the “other provisions” cited
in footnote 56. While the EC would agree that Parts II and III of the SCM Agreement “do not strictly
interpret Article XVI”, the EC notes that the term “interpreted” is not used “strictly” in Article 32.1.
Indeed, if it were, Article 32.1 would become inapplicable because, “strictly” speaking, the SCM
Agreement does not “interpret” any GATT  provision.
4.1281  The SCM Agreement contains no express language similar to Article 10 with regard to
Article XVI.  But the same was true also under the Tokyo Round Subsidies Code which, nevertheless,was called “Agreement on the Interpretation and Application of Articles VI, XVI and XXIII of the
GATT”. Moreover, the SCM Agreement makes no less than eight express references to Article XVI.
No similar references are made to any other substantive provision of the GATT, with the only
exception of Article VI.
4.1282  The European Communities asserts that the United States' argument that the EC “does not
allege that GATT Article XVI limits the form of specific action that can be taken against dumping or
subsidisation” is incorrect. The EC and other complainants have claimed that Article XVI, asinterpreted by Parts II and III of the SCM Agreement, allows Members to take only two types of
action against subsidisation: countermeasures under Article 4 or countermeasures under Article 7.
4.1283  The EC notes that “action under other relevant provisions of GATT 1994”, the phrase used in
footnotes 24 and 56, is not the same as “action which is not prohibited by some other provision of the
GATT 1994” and that the “relevant provisions” cited in footnotes 24 and 56 are those that confer apositive right to take action, such as Articles VI or XIX. Article XVI is not one of such “relevant
provisions”.
4.1284  According to the European Communities, the United States’ argument that the term “under”
means “compatible with” cannot be correct because it would have the consequence that footnote 56
would allow action which is “compatible” with Article XVI even where such action is not“compatible” with Parts II and III of the SCM Agreement. Furthermore, on the US interpretation,WT/DS217/R
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Articles 18.1 and 32.1 would become wholly redu ndant, as they would prohibit only action, which is
already inconsistent with some other GATT  provision.
4.1285  In the European Communities’ view, the other linguistic versions of the agreement confirm
that the US reading of the term “under” as “compatib le with” is incorrect.  Both the French term “au
titre de” and the Spanish term “al amparo de” indicate clearly that the “action” alluded in the
footnotes must be taken on the basis of a positive right conferred by the “other relevant GATT
provision” in question, rather than being merely “compatible” with such provision.
(b) Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement
4.1286  The European Communities argues that the United States seems to concede that the
administering authorities must conduct an objective examination. Nevertheless, it takes an extremely
narrow view of what is involved in such obligation. In essence, the United States is arguing that the
authorities should be allowed to manipulate the outcome of the examination by inducing, or even
coercing the domestic producers to make declarations of support, provided that they make no
arithmetical errors when adding up the declarations in order to calculate the level of support.
4.1287  In the view of the European Communities, the Appellate Body takes a very different view.
According to the Appellate Body, in order to be “objective” an examination must conform to “thedictates of the basic principles of good faith and fundamental fairness”. The relevant facts must be
investigated “in an unbiased manner, without favouring the interests of any interested party, or group
of interested parties in the investigation”.
4.1288  The European Communities asserts that the Un ited States does not address anywhere the
argument that the Byrd Amendment makes it impossi ble for the US authorities to conform to the
“dictates of the basic principles of good faith and fundamental fairness”, as such “dictates” have been
interpreted by the Appellate Body.
4.1289  According to the European Communities, the ve ry existence of the Byrd Amendment renders
suspect any applications and expressions of support made by the US producers and, as a result, makes
it impossible for the US authorities to reach a proper determination of support, whether positive ornegative, before initiating an investigation.
4.1290  The US response to this is that Articles 5.4 and 11.4 do not require assessing the “subjective
motivations” of the producers. In this regard th e EC notes a contradiction between the US second
submission and its reply to one of the Panel’s questions. On the one hand, the United States considers
that a measure by which sanctions would be imposed on the domestic producers, which failed to
support a petition, might give rise to a non-violation claim of nullification or impairment. On the other
hand, the United States concedes that legislation, which made it mandatory for the domestic producersto support an application, would breach Articles 5.4 and 11.4.
4.1291  The European Communities submits that this admission undermines the US argument that it
is irrelevant whether or not a declaration of support  is “genuine”. Contrary to the US submission, the
measure described in the EC’s example does not “preclude” an “examination” of the degree of
support, because the domestic producers may still decide not to support the application and bear thesanctions imposed by the law. The reason why that measure breaches Articles 5.4 and 11.4 is the
same that makes the Byrd Amendment inconsistent with those provisions: a declaration of support
extracted with the threat of legal sanctions, like a declaration of support induced by the promise of the
offset  payments, does not constitute “support” for the purposes of Articles 5.4 and 11.4.WT/DS217/R
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4.1292  The United States alleges that “WTO Members routinely encourage their industries to file
anti-dumping petitions” and that, for that reason, the “mere provision of an inducement to file or
support petitions” cannot be considered contrary to Articles 5.4 and 11.4. According to the European
Communities, it is obvious, however, that one thing is to inform the domestic producers about how tomake an application, another thing is to “encourage” them to do so, and yet another thing is to pay
them for filing or supporting applications.
4.1293  The United States argues that “any change in methodology that favours the domestic industry
may induce a domestic party to file or support a petition”. The European Communities asserts that this
argument relies upon the erroneous assumption that a domestic producer will always be interested in
the imposition of duties, at least provided that the duties are high enough. Yet, it may be perfectly
rational for a domestic producer to oppose an application. If a domestic producer is against theinitiation of an investigation, a “change in methodology” which leads to a higher margin of dumping
or subsidisation will not make him change his mi nd and support the application. To the contrary, it
will reinforce his opposition.
4.1294  Finally, as regards the argument that the payments under the Byrd Amendment are “remote,
uncertain and unknown”, the EC recalls that on 30 January 2002 the US Customs announced thedistribution of offset  payments totalling 206 millions USD.
(c) Article 8.3 of the Anti-Dumping Agreement and Article 18.3 of the SCM Agreement
4.1295  The EC considers that, in order to have a complete picture of the US practice regarding the
acceptance of undertakings, it is necessary to know not only how many undertakings have been
accepted since 1996 despite the petitioners’ opposition, but also how many undertakings have beenrejected because of such opposition.  The Panel requested the United States to comment on this,
which the US did only in a limited way.  Although the information requested was pertinent, available
to the US authorities, even if its is not “regular ly maintained”, and not confidential.  The European
Communities invites the Panel to draw appropriate inferences from the US reply.
(d) Article X.3 (a) of the GATT
4.1296  The EC claims that the “administrative” measure (i.e. the Byrd Amendment) and not the
“administered” measure (i.e. the US anti-dumping and countervailing duty laws) violates
Article X.3(a). The “measure at issue” within the meaning of Article 6.2 of the DSU  is the Byrd
Amendment. This measure as well as the “administered” measure was clearly identified in the panel
request.
4.1297  According to the European Communities, the United States misreads the findings of the Panel
in Argentina – Hides and Skins. The “administration” measure at issue in that case wasResolución 2,235 of the Administración Nacional de Aduanas. The EC claimed that Resolution 2,235
resulted in a partial administration of Argentina’ s customs laws. The EC did not provide, and the
panel did not consider, any evidence regarding the actual administration of Resolution 2,235. Nor did
the panel consider any evidence that the “administered” measures (the customs laws) had actually
been applied partially. The panel found that Resolution 2,235 as such, and not its administration,violated Article X.3 (a) because, by its very existence, it created an inherent risk that the
“administered” customs laws would be applied in a partial manner.  In the EC's view, likewise, in the
case at hand, the very existence of the Byrd Amendment gives rise to an inherent risk that the US anti-
dumping and countervailing duty laws will be applied unreasonably and partially and is, therefore,
inconsistent per se  with Article X.3 (a).WT/DS217/R
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6. India
4.1298  In its submissions India along with certain other complainants, EC, Indonesia, and Thailand
has offered a comprehensive factual framework and legal arguments establishing why the Continued
Dumping and Subsidy Offset Act 2000 (CDSOA or By rd Amendment) violates the obligations of US
under WTO Agreements. India's statement will be confined to certain crucial issues in the dispute.
4.1299  The United States asserts that the CDSOA is not an action against dumping or subsidization.
In India’s view the offset payments are a specific action against dumping or subsidisation because
they are made exclusively to domestic producers that have filed or supported a petition leading to the
imposition of an anti-dumping or a countervailing measure for “qualifying expenses” incurred after
the imposition of such anti-dumping or countervailing measure with respect to the production of the
same product which is the subject of the anti-dumping or countervailing measure in question. Theoffset payments would still be dependent upon a finding of dumping or subsidisation and,
consequently, “specific action against dumping or subsidisation” even if they were paid from the US
Treasury or from any other source of Government revenue.
4.1300  According to India, the United States has also argued that Article 5.4 of the Anti-dumping
Agreement and Article 11.4 of the Subsidies and Countervailing Measures Agreement do not requirethe administering authorities to assess the subjective motivation of the producers’ expression of
support for the petition seeking initiation of an investigation. According to the United States the only
obligation of the administering authorities is to determine whether the quantitative benchmarks have
been met.
4.1301  In India’s view the authorities may presume that if a domestic producer has formally declared
its support for the application, such support w ould normally be genuine. The CDSOA however calls
into question such a presumption. The CDSOA provides a strong incentive to file “non-genuine”
applications and to make “non-genuine” declarations of support. As a result, it may render suspect all
applications and declarations of support made by the US producers. The CDSOA has the necessary
consequence that the US authorities are prevented from reaching a proper determination of support,whether positive or negative, before initiating an investigation, thereby violating Article 5.4 of the
Anti-Dumping Agreement and Article 11.4 of the SCM Agreement.
4.1302  India recalls that the complainants have submitted that the availability of offsets have an
adverse impact on acceptability of price undertakings. The United States has asserted that Articles 8
and 18 allow the administering authorities to reject an undertaking for any reason. While Articles 8.3
of the ADA and 18.3 of the SCM Agreement do not limit a priori the types of reasons which may be
invoked by the authority, it is India’s contention that the authority cannot invoke all sorts of motivesfor rejecting an undertaking. For example, it would be contrary to Articles 8.3 and 18.3 to reject an
undertaking on the ground that the name of the exporter begins with the letter ‘A’ Such grounds are
not proper “reasons” within the meaning of Articles 8.3 and 18.3 because they are not pertinent to
consider the ‘acceptance of an undertaking as inappropriate’.
4.1303  India argues that the petitioners’ opposition may be a pertinent “reason” for rejecting an
undertaking where it reflects the legitimate concern that the undertaking will not provide equivalent
protection. On the other hand, according to India, the pecuniary interest of the petitioners in securing
the windfall of the offset payments is a totally extraneous consideration, which cannot be regarded as
a pertinent “reason” for rejecting an undertaking.
4.1304  The Complainants have argued that the CDSOA is not in conformity with the obligation to
make an objective assessment of whether the acceptance of an undertaking would be appropriateWT/DS217/R
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because, under the CDSOA, the US authorities provide a financial incentive to the petitioners for
opposing the undertakings and then rely upon such opposition in order to reject the undertaking.
4.1305  India is of the view that its joint submissions have highlighted the pernicious consequences of
the offsets for developing countries. The Marrakesh Agreement has recognized the need for positiveefforts designed to ensure that developing countries secure a share in the growth in international trade.
By enabling the authorities to violate obligations under the Anti-dumping Agreement and the SCM
Agreement, the CDSOA would adversely affect expor ts from developing countries and hence would
be contrary to the letter and spirit of the preamble of the Marrakesh Agreement.
7. Indonesia
4.1306  Indonesia associates itself with the statement made by the distinguished Delegate of the EC
on various legal arguments in further rebutting arguments made by United States in the secondsubmission and its oral statement. Indonesia will restrict this statement to specific issues especially
relating to developing countries’ interests as a follow-up to Indonesia's first oral statement.
4.1307  The United States argues in its written answer to the panel’s question no.24 and paragraph
102 of its second submission that Article 15 of the Anti Dumping Agreement is not within the Panel’s
terms of reference as it was not identified in the Panel requests. Although Indonesia recognizes thatArticle 15 of the Anti Dumping Agreement  is not within the Panel’s term of reference, nevertheless,
Indonesia recalls that Article 12.11 of the Dispute Settlement Understanding regarding the panel
procedure states that: “Where one of the parties is a developing country member, the panel’s report
shall explicitly indicate the form in which account has been taken of relevant provisions on
differential and more-favourable treatment for developing country members that form part of thecovered agreements which have been raised by the developing country members in the course of the
dispute settlement procedures.”
4.1308  In Indonesia’s view it contains an obligation to the Panel to give consideration to the special
and differential treatment provision in the covered agreement raised by a developing country, even
though this provision is not specifically indicated in the Panel’s terms of reference. The mere fact thata developing country does not raise the special and differential treatment provision is irrelevant to
make Panel not to make its judgment to this specific issue.
4.1309  Indonesia and other complainants in this dispute have already raised the Anti Dumping
Agreement as a covered agreement. Article 15 of the Anti Dumping Agreement is already identified
as  “relevant provisions on differential and more-favourable treatment”.  For that reason, Indonesia
considers that the Panel should take into account Article 15 of the Anti Dumping Agreement in its
report.
4.1310  Indonesia asserts that the CDSOA will provide a financial incentive for petitioners to reject
the proposed undertakings because the petitioners would expect to receive money from the
distribution of duties. Indonesia recalls that it has been recognized in the previous Panel proceeding
that undertakings are a constructive remedy par ex cellence.  Consequently, by introducing CDSOA, it
will frustrate the object and purpose of Article 15 of the Anti Dumping agreement.
4.1311  Indonesia argues that Article 15 of the Anti Dumping Agreement is part of general rules of
special and differential treatment that carry  an obligation for all members, especially the developed
ones, to fulfil it.  Article 15 of the Anti Dumping Agreement is not a specific provision in the context
of the whole WTO agreement. Similar provisions exist in all WTO Agreements as part of the balance
of rights and obligations of all WTO members. Th us, it contains no exclusion for the United States
from performing this specific obligation.WT/DS217/R
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4.1312  The United States also argues that Article 15 of the Anti Dumping Agreement is a “best
effort”  commitment. Indonesia disagrees with the Unit ed States interpretation as it has been stated by
the “Doha Decision on Implementation-related issues and concerns” that Article 15 of the Anti
Dumping Agreement is a mandatory provision.  As a mandatory provision,  the United States, as adeveloped country member, is not exempted from carrying out this specific obligation. By
implementing the CDSOA, the United States is not in a position to fulfil its obligation under
Article 15 of the Anti Dumping Agreement as the domestic industry will be inclined to oppose
undertakings as they anticipate receiving distribution of duties.
8. Japan
(a) The purpose of the CDSOA is legally relevant
4.1313  Japan submits that the purpose of the CDSOA and its legislative history are legally relevant
and should be considered by the Panel.  Contrary to the assertion made by the United States, US
courts do rely on legislative history or consider the intended purpose of the legislation.
4.1314  The actual language of the CDSOA states that dumping and subsidies are to be “condemned”
and “effectively neutralized” and that “United States trade laws should be strengthened”, since the
“continued dumping or subsidization can frustrat e the remedial purpose” of those laws.  The
distributions, according to the CDSOA, “offset”  continued dumping and subsidization.  The principal
sponsors of the CDSOA described the distributions as a way to “ counter  (…) foreign dumping and
subsidization.” Japan considers that these statements are relevant for the Panel’s examination of the
CDSOA.
4.1315  Japan asserts that, contrary to the United States’ assertion, Japan and the EC did not argue in
the 1916 Act case that a purpose of a law is irrelevant.  A purpose of a law is significant evidence of
what a law actually does.  However, when the WTO inconsistency is established by the text alone, a
stated purpose of a law does not cure the inconsiste ncy.  In this dispute, the purpose of the CDSOA is
provided by the complainants as additional evidence that the CDSOA violates Articles 18.1 and 32.1
and the other cited provisions.
(b) The United States’ interpretation of “specific actions against dumping or a subsidy” is not in
accordance with customary rules of interpretation
4.1316  Japan argues that the United States’ interpretation of Articles 18.1 and 32.1 is out of context,
disregards the ordinary meaning of those terms, and is not in accordance with other customary rules of
interpretation of public international law.  The Appellate Body in the 1916 Act case correctly
interpreted the language of Articles 18.1 and 32.1 and explained that “specific actions against
dumping” means “specific actions taken in response to situations presenting the constituent elementsof dumping.”
4.1317  In the view of Japan, there is no mention in the Appellate Body’s interpretation or in the AD
Agreement of “action based directly upon” the constituent elements of dumping. The Appellate
Body’s interpretation clearly states that the action is in response to “ situations”  presenting the
constituent elements of dumping, and not to the “constituent elements” of dumping.
4.1318  The United States interprets the word "against" as requiring imposition of a burden or liability
on the imported good or the importer. Japan submits that the United States’ interpretation: a) is not
supported by the ordinary meaning of the word “against”; b) is not in accordance with the customary
rules of interpretation of public international law because it ignores, among other things, the context
of Article VI, the AD Agreement and the SCM Agreement; and c) disregards the interpretationWT/DS217/R
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developed by the Panel and the Appellate Body in the 1916 Act case.  The Appellate Body in the
1916 Act case correctly interpreted the word “against” in its proper context.
4.1319  The United States defines “dumping or subsidization” as the “dumped or subsidized imported
goods. ”  According to Japan, the US states, incorrectly, that Article VI of GATT defines dumping as
“products of one country being introduced into the commerce of another country at less than normal
value.”  This interpretation is incorrect.  As the Appellate Body in the 1916 Act  case notes,
Article VI:1 defines “dumping” as a conduct , by which products of one country are introduced into
the commerce of another country at less than normal value.  It makes abundantly clear that dumped or
subsidized goods or products are to be distinguished and cannot be equated to “dumping” and
“subsidization.”
4.1320  Japan submits that the United States revision of its interpretation to add “exporters or foreign
producers” shows only that the US definition of specific action against dumping is arbitrary and not
based on treaty text.
(c) The CDSOA mandates specific actions against dumping and a subsidy
4.1321  In Japan's view, the United States erroneously argues that the CDSOA’s “criteria upon which
the distributions are made have nothing to do with the constituent elements of dumping or
subsidization” and alleges that the distributions are only “remotely” linked to the anti-dumping and
countervailing duty orders.  This, Japan argues, is factually incorrect.  The distributions under the
CDSOA necessitate a finding of dumping or subsidization.  That finding, in turn, positively requires
that the constituent elements of dumping or a subsidy be present.  Thus, the distributions are, as a
matter of fact, undeniably taken in response to situations presenting the constituent elements ofdumping and subsidization.
4.1322  Contrary to the United States allegations, Japan has not argued for a so-called “presumed
negative effects” test.  Rather, the claims are based inter alia on the actual effects of the CDSOA.
The evidence on file is enough to establish a prima facie  case of non-conformity.  The arguments
made by the United States regarding the alleged and “presumed negative effects” test are simplyanother attempt to misrepresent and distort the arguments and claims presented by the complainants
against the CDSOA.
4.1323  Japan submits that the distributions of duties under the CDSOA are a specific action against
dumping or a subsidy in violation of Article 18.1 and 32.1, even if the amount of the distributions
does not correspond to the amount of the damage or injurious effect of dumping or a subsidy.  Also,
the relation between the distributions and the injury is already present and implicit in the intimate
connection between the distributions and the anti-dumping and countervailing measures.
(d) Footnotes 24 and 56 do not exclude the CDSOA from the coverage of Articles 18.1 and 32.1
4.1324  Japan considers that the Appellate Body in the 1916 Act case found that “action” within the
meaning of footnote 24 is to be distinguished fr om “specific action against dumping” within the
meaning of Article 18.1.  It added that a measure th at is considered “specific action against dumping”
is “governed by Article 18.1 itself.”  Since the CDSOA is specific action against dumping and asubsidy, it cannot possibly fall within the coverage of footnotes 24 and 56, and is thus not excluded
from the prohibition of Articles 18.1 and 32.1.
4.1325  According to Japan, footnote 35 explicitly provides that the only relief that shall be available
to protect from the effects of a particular subsidy are either countervailing duties or countermeasuresWT/DS217/R
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under Articles 4 or 7 of the SCM Agreement.  According to this footnote, no other action may be
taken to provide a relief from the effects of continuous subsidization in the US market.
4.1326  Japan argues that the interpretation by the United States of the word “under” within
footnotes 24 and 56 (e.g. “compatible" with) is not in accordance with the ordinary meaning of thatword in its context.  In footnotes 24 and 56, “under” is preceded by the word “action” and followed by
reference to identifiable provisions.  In the WTO Agreements, the same phrase of “action under”
followed by particular provisions appears in Ar ticle 5.7 of Agricultural Agreement and Article 6.11 of
the Textiles and Clothing Agreement.  In these examples, the phrase “action under” alludes to a right
positively conferred by the cited provision.
4.1327  Japan recalls that the United States also argues that the SCM Agreement does not interpret
Article XVI.  Various provisions of the SCM Agreement, including Article 1, which defines asubsidy, refer to Article XVI.  Article XVI sets forth procedures and certain disciplines with respect to
subsidies and nothing more.
(e) The CDSOA is inconsistent with Articles 5.4 and 11.4 concerning the standing to initiate
requirement
4.1328  In Japan's view, the CDSOA itself, independently from its application, is evidence of the
violation on the part of the United States of Arti cles 5.4 and 11.4.  Actual application of the CDSOA
will only confirm what the measure, on its face, already demonstrates.
4.1329  According to Japan, the fact that the CDSOA does not modify the US trade laws regarding
standing requirements or voluntary undertakings is irrelevant and does not alter the fact that the
CDSOA violates the cited provisions.
4.1330  Japan notes that the United States argues that there is no requirement in Articles 5.4 and 11.4
of inquiry into the motivations of the support of do mestic producers.  Japan considers that there is a
requirement, however, of performance of treaty obligations in good faith.  To increase the likelihood
of “disingenuous” support by domestic producers to petitions, or opposition to undertakings, cannot,
by any standard of public international law, be considered a good faith application of the provisionsconcerning standing requirements and voluntary undertakings.
4.1331  Japan argues that the United States did not present any rebuttals to the arguments pertaining
to Articles 4.1 and 16.1, which inform and confirm the object and purpose of Articles 5.4 and 11.4.
The object and purpose of those provisions, of wh ich the numerical benchmarks are but a tool, are
frustrated by the CDSOA.  As a consequence, even if the numerical benchmarks remain unaltered and
the investigating authority goes through the charade of counting heads, the CDSOA makes it
unavoidably impossible for the United States to perform its obligations under Articles 5.4 and 11.4 ingood faith.
4.1332  Japan asserts that by pretending that the promise of a distribution of collected duties will not
induce a domestic producer to file or support a petition or oppose an undertaking, the United States is
wilfully ignoring the economic reality of competitive markets.
4.1333  Assuming arguendo that anti-dumping and countervailing duty laws provide an incentive to
support a petition, Japan submits that they would st ill not be comparable to the CDSOA.  To the
extent that these laws correctly implement the AD Agreement and the SCM Agreement, they would
not constitute a violation of the WTO Agreements.  In stark contrast, the CDSOA’s additional
financial incentives are inconsistent with Articles 5.4 and 11.4.WT/DS217/R
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4.1334  Japan notes that a decision by the United States to make distributions available to all of the
domestic producers, and not only those that suppor ted a petition, would not cure the CDSOA of its
inconsistencies with the WTO Agreements.  The CDSOA would, even under those circumstances,
still induce domestic producers to support a petition or oppose an undertaking.  Producers would stillwant to assure themselves that the level of support meets the minimum numerical benchmark so that
they can obtain the windfall of the distributions  under the CDSOA.  Consequently, they would
support the petition, lest no other domestic producer does.
(f) By enacting and maintaining the CDSOA, the United States violates Article X:3(a) of GATT
1994.
4.1335  Japan's claim under Article X:3(a) is simple an d straightforward: the CDSOA, which is the
measure under examination in this disputes, administers the United States’ trade laws in a manner that
is unreasonable, not uniform and not impartial.  The CDSOA has been sufficiently and adequately
identified and is within the terms of reference of the Panel.
9. Korea
(a) Introduction
4.1336  Korea notes that it has already set out its position in the First and Second Submissions.
(b) The Byrd Amendment is an impermissible specific action against dumping and subsidies
4.1337  Korea recalls that the United States criticizes the complainants for offering an interpretation
“not supported” by the text of Articles 18.1 and 32.1 and the 1916 Act Appellate Body and panel
reports.  At the same time, Korea argues, the US advances an interpretation that is self-serving and
that disregards the text.  Moreover, the US ignores the fact that the Appellate Body already hasinterpreted “against.”
218  As Korea demonstrated at paragraph 19 of its Second Submission, in the
1916 Act proceeding at paragraph 122, the Appellate Body defined “against” as “in response to.”
4.1338  Korea further asserts that, regarding “constituent elements of dumping,” if an action (in this
case, giving cash rewards) cannot, as a matter of law, be taken absent a finding that the constituent
elements of dumping have been met, then the requirement set out in 1916 Act reports is met.  This“but for” interpretation is reasonable, and the US attempt to mischaracterize it should be rejected.
4.1339  Korea notes further that, in this case, the issue is even more clearly presented than in the 1916
Act proceeding.  There, the measure set out its own prerequisites that differed in some respects from
the primary US anti-dumping law.  So, the panels a nd Appellate Body were forced to parse the text of
the 1916 Act to determine if the Act sets out the constituent elements of dumping.  Here, in stark
contrast, there is no similar dispute.  The action of granting cash rewards cannot be taken absent a pre-
existing finding by the authorities that the constituent elements of dumping or subsidy, as they aredefined by the US anti-dumping and countervailing duty laws, have been met.
4.1340  Korea notes that the United States tries to derail the debate by pretending that the required
order and the cash reward are “remotely” linked.
219  Further, the US posits that the only two
                                                     
218 First Written Submission of the United States, United States – Continued Dumping and Subsidy
Offset Act of 2000 , WT/DS217, WT/DS234 (14 January 2002) (US First Submission), para. 90.
219 Second Written Submission of the United States, United States – Continued Dumping and Subsidy
Offset Act of 2000 , WT/DS217, WT/DS234 (27 February 2002) (US Second Submission), para. 43.WT/DS217/R
WT/DS234/R
Page 238
requirements for receiving the cash reward are, one, that the recipient be an “affected domestic
producer” that, two, has submitted “qualifying expenditures.”220
4.1341  Korea submits that again, the United States is incorrect.  The link is quite strong – indeed, the
existence of an anti-dumping or countervailing duty order is a pre-condition to the cash reward.  Theadditional requirements are irrelevant absent a find ing that the constituent elements are met, followed
by imposition and collection of duties.  Thus, they are additional factors similar to the intent and
injurious effects requirements in the 1916 Act.  In the 1916 Act proceeding, the Appellate Body
rejected the US assertion that the presence of additional elements meant that the 1916 Act could not
be a specific action against dumping.
221  The Panel should do the same here.
4.1342  Korea asserts that, regarding the word “against”, the United States continues to ignore the
plain meaning of “against dumping” and “against a subsidy,” claiming that Complainants’interpretations are not supported by the text.
222  The US interpretation is based on a definition of
“against” that requires physical contact, which cannot occur as a matter of physics with a non-
physical process or noun such as “dumping” or “a subsidy.”  To make matters worse, the
United States ignores the actual text, which is “against dumping” and substitutes a self-serving re-
writing:  “against imported products.”223  It is forced to do so in order to support its flawed definition
of “against”, which requires a physical object, as opposed to a process, such as dumping.
4.1343  Korea is of the view that, because the text do es not support its flawed interpretation, the
United States is forced to attack Complainants’ position by mis-characterizing it as “presuming” a
negative effect on imported goods or foreign producers.224  In so doing, the United States would have
the Panel and US trading partners ignore not only the statements by the US officials that supported thelegislation, but also basic economic principles:  if two companies, foreign company X and domestic
company Y, are competing in the marketplace, one can act against – or disadvantage – foreign
company X in the market by imposing costs on foreign company X or by giving money to domestic
company Y.  Not satisfied with either the former or, even, the latter, alone, the United States has
decided to do both, using the Byrd Amendment to accomplish the latter.
4.1344  In short, Korea argues that the effects of the Byrd Amendment are not presumed, they are
known.  The Byrd Amendment indisputably alters the conditions of competition.  Moreover, as
Korea’s analysis shows, the US flag-flying and other examples, which are presented to frighten the
Panel into accepting the US view, are irrelevant.
225  Here, the action by the United States directly
disadvantages imports in the US market.
4.1345  Finally, the United States asserts that the cash rewards are not related in any way to domestic
producers’ injury.226  Korea submits that this is incorrect.   According to Korea, the cash rewards
cannot exceed the anti-dumping or countervailing duties collected.  Moreover, before the US
authorities can grant the cash rewards, they must find that the constituent elements of dumping or
subsidy are met and that the dumping or subsidy is causing injury to the US industry.  Only then may
they impose the duties.  The duties are specifically designed to offset the dumping or subsidy and,
thus, to prevent continuing injury from the dumping or subsidy.  So, the ceiling of the cash reward
                                                     
220 Id., para. 42.
221 United States – Anti-Dumping Act of 1916 , WT/DS136/AB/R, WT/DS162/AB/R (28 August 2000),
paras. 104, 107 and 122.
222 US Second Submission, paras. 47-59.
223 Id., para. 48.
224 Id., para. 52.
225 Id., para. 53.
226 Id., para. 58.WT/DS217/R
WT/DS234/R
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amount is defined by the total duties collected to offset and prevent future injury.  The US statement
to the contrary, therefore, is incorrect.
(c) Footnotes 24 and 56 do not save the Byrd Amendment
4.1346  Korea asserts that footnotes 24 and 56 are not relevant to this proceeding.  Because the Byrd
Amendment is a specific action against dumping and subsidization, it does not fall within the scope of
these Footnotes.  Korea argues that, as Complainants have demonstrated, in the 1916 Act report the
Appellate Body concluded at paragraphs 122-126 that  Footnotes 24 and 56 clarify that a Member may
select a WTO-consistent remedy other than applying duties pursuant to the Anti-Dumping Agreement
and the Subsidies Agreement even where the conditions for applying duties exist.  Korea presents the
following example: considering Count ry X subsidizes an industry and, due to the subsidy, its industry
is able to dump products in Country Y, resulting in increased imports to Country Y.  In this example,
depending upon the precise facts, Country Y might be able to apply an anti-dumping duty or a
countervailing duty or a safeguard measure, as long as the application of the measure by Country Y
complies with the relevant WTO provisions.
4.1347  The United States also claims that the Byrd Amendment is justified as an action under
Article XVI of GATT 1994.  According to the United States, even if the Panel were to find the ByrdAmendment “to be an action against dumping and/or subsidies,” the Amendment “is nevertheless
clearly an action under GATT Article XVI to address the effects of such practices.”
227  Korea posits
that this is nothing more than a claim that, in response to dumping or a subsidy as such, a Member
may grant a subsidy.  This position is directly contrary to the holding of the Appellate Body in the
1916 Act proceeding.  Therefore, Korea believes the Panel should reject this US assertion as well.
4.1348  In short, concerning the US argument regarding Footnotes 24 and 56, Korea considers it
suffices to point out that the actions envisaged in these Footnotes are limited to actions that are not
actions in response to dumping or subsidization, as such.  Therefore, it is clear that the ByrdAmendment is not saved by these Footnotes.
(d) The Byrd Amendment violates the provisions of the Anti-Dumping Agreement and the
Subsidies Agreement regarding standing and undertaking determinations
4.1349  According to Korea, the United States bases its rebuttal on whether or not the Byrd
Amendment alters the US administration of US laws regarding standing and undertaking
determinations.
228  In doing so, the United States ignor es the thrust of Korea's argument.
4.1350  According to Korea, a Member can undo or disregard the results of WTO negotiations in at
least two ways.  First, it can pass a law that is directly contrary to the text of a WTO provision.  This
is what the United States has done regarding Article 18.1 and Article 32.1.  Second, it can pass a lawthat so alters the incentive structure in which private actors make decisions that the negotiated text has
been distorted and reduced to inutility - it no longer can perform as the negotiators intended it to.
This is precisely what the United States has done with respect to the WTO provisions regarding
standing and undertaking determinations.  This is why, in this case, the fact that the law actually used
to administer a WTO provision has not changed is irrelevant.
4.1351  In short, Korea considers that the United States  urges this Panel to adopt an interpretation that
would permit all Members to pass laws that w ould undermine and reduce to inutility any WTO
                                                     
227 Id., para. 61.
228 Id., paras. 70-75.WT/DS217/R
WT/DS234/R
Page 240
provision which regulates or is dependent on private conduct (by altering the incentives that
determine that conduct).  Korea argues that this should not be permitted.
4.1352  Korea notes that the United States claims th at Complainants have not introduced evidence
that the Byrd Amendment affects determinations regarding standing229 and undertakings.230  K o r e a
submits that this claim is both irrelevant and inaccurate.  It is irrelevant because, where, as here, a
measure is inconsistent with a WTO provision, the complaining party is not required to meet an
effects test.231  It is inaccurate because Complainants have shown beyond doubt that the Byrd
Amendment definitely does affect decision-making.  Korea considers it has demonstrated that US
government officials proposed and passed it to give US companies a second, additional remedy to
help them combat allegedly unfair trade.  The United States cannot credibly argue that the provision
of a second remedy in the form of a cash reward does not encourage both filing and support ofpetitions and opposition to undertakings.
4.1353  Moreover, Korea considers that the United States concedes its case by agreeing that
incentives – such as duties – do operate to encourage petitions.  In the words of the United States:
the very existence of the Antidumping and SCM Agreements gives domestic interestsa strong financial inducement to file, and support, petitions.
232
4.1354  In Korea's view, that statement is 100 per cent correct. Like a cash reward, potential duties do
create an incentive to bring and support cases.  The flaw in the US presentation is that the
United States pretends that, as opposed to potential duties, cash rewards for some reason do not create
an incentive to bring and support cases.  Obviously, the cash reward does exactly this.  It alsofunctions as an incentive for the domestic industry to oppose undertakings.
4.1355  Korea asserts that this analysis also shows the weakness of the US argument that the Byrd
Amendment does nothing more than to encourage the use of a permissible remedy.
233  According to
Korea, it does not; instead, it creates a new, impermissible remedy.  Moreover, by creating an
impermissible remedy in the form of a cash reward, it improperly encourages additional use of US
anti-dumping and countervailing duty laws.
4.1356  The United States further asserts that, in any case, the imposition of duties (and receipt of
cash rewards) is too speculative to support Complainants’ argument.234  Again, according to Korea,
the United States has conceded its case.  At the very least, even accepting the US position, the
provision of cash rewards will have an effect on marginal cases where a US company otherwise
would not file or support a petition or oppose an undertaking.  Of course, in the view of Korea, the
Byrd Amendment affects cases in general, not merely marginal cases.
4.1357  Finally, regarding the US argument on undertakings, Korea contends that the United States
continues to assert that the provisions on undertakings are merely hortatory.  Korea argues that this
interpretation is flawed and must be rejected.  Articles 8 and 18 each comprise six separate paragraphs
setting out a host of requirements that apply specifically to producers regarding undertakings.  They
therefore most assuredly are not hortatory, as they impose requirements.  Most relevant are those set
                                                     
229 Id., paras. 88-95.
230 Id., para. 100.
231See, e.g., Japan – Taxes on Alcoholic Beverages , WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R
(4 December 1996), pp. 15-16; Korea – Taxes on Alcoholic Beverages , WT/DS75/AB/R (18 January 1999),
paras. 128-133.
232 US Second Submission, para. 85.
233 Id., paras. 84-87.
234 Id., paras. 88-95.WT/DS217/R
WT/DS234/R
Page 241
out in paragraphs 1 and 3 of the Articles.  As Complainants have demonstrated, read together, these
provisions allow a Member to reject a proposed un dertaking only where it would be “impractical” or
for a reason that otherwise is relevant.  And, of course, this obligation of Articles 8.3 and 18.3 is
subject to the general “good faith” obligation.235
(e) The Byrd Amendment violates Article X:3 of GATT 1994
4.1358  Korea submits that the Complainants have established that the Byrd Amendment so alters the
incentives that previously determined whether a US company would file or support a petition or
oppose an undertaking that it constitutes a violation of relevant WTO provisions.  There is a
secondary effect as well.  The Byrd Amendment precludes the United States from applying its laws
regarding standing and undertaking determinations in a “reasonable, impartial and uniform manner.”
4.1359  According to Korea, and contrary to US claims,236 this violation is within this Panel’s terms of
reference.  The violation here is not created by the US laws regarding standing and undertakings but
by the Byrd Amendment.  The Panel should reject this US attempt to limit the Panel’s authority.
(f) The Byrd Amendment undermines the Multilateral Trading System
4.1360  Korea, before concluding, comments on the implications of this case for the multilateral
trading system.  The system has never suffered from  a lack of protectionist forces.  In fact, the
multilateral trading system, in large part, developed in response to challenges from protective forces.
Given the evolution of the multilateral trading system, beginning with the GATT and followed by the
WTO, obviously the multilateral trading system has succeeded to a large extent in overcoming
protectionism.  But, even so, the system is still beset by protectionist forces, which can be pretty
creative at times.  Korea asserts that the Byrd Amendment is a perfect example of protectionist forcestrying to nullify the purpose of the WTO agreements on Anti-Dumping and Subsidies through the
back door.  If this Panel does not check the Byrd Amendment, then protectionist forces may be
emboldened to develop additional creative initiatives aimed at weakening the free trade system that
WTO Members for years have been working so hard to create and, now, to protect.  Korea considers
that to guard against this possibility, a clear ruling on this case is required.
(g) Conclusion
4.1361  In conclusion, Korea respectfully asks the Panel to find that the US is in violation of
Article VI and X:3(a) of GATT 1994; Arti cles 5.4, 8 and 18.1 of the AD Agreement; and
Articles 11.4, 18 and 32.1 of the SCM Agreement.  Korea requests the Panel both to recommend that
the United States bring its laws into conformity with its obligations under these WTO provisions and
to suggest that, to meet its WTO obligations, the United States should repeal the Byrd Amendment.
10. Mexico
(a) Introduction
4.1362  In this oral statement, Mexico will respond to the main arguments that are invoked by the
United States in its rebuttal submission agains t Mexico's claims under Article 5 of the SCM
Agreement.  Mexico will also briefly address certain issues that are raised by the United States
                                                     
235 See, e.g., United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from
Japan , WT/DS184/AB/R (24 July 2001), para. 101.
236 US Second Submission, paras. 104-111.WT/DS217/R
WT/DS234/R
Page 242
regarding the claims under Article 18.1 of the Anti-Dumping Agreement and the analogous provisions
in Article 32.1 of the SCM Agreement.
4.1363  As for the other claims made by Mexico, they have been dealt with in its prior submissions
and in the other claimants’ written and oral submissi ons.  Mexico agrees with the submissions of the
other complaining parties with respect to those claims and incorporates them in its arguments.
(b) Preliminary Remarks
4.1364  First, Mexico emphasizes the importance of Mexico’s Article 5(b) claim.  The remedies
available to Mexico in the case of an Article 5(b) violation differ from those available in the case of
its other claims in this dispute.  Where a violation of Article 5(b) is found, under Article 7.9 of the
SCM Agreement the United States will at most have  six months to withdraw the subsidy or remove its
adverse effects.  This goes beyond the requirement in Article 19 of the DSU that the US "bring themeasure into conformity" with its WTO obligations.
4.1365  Second, Mexico notes that the United States argues that Article 5(b) of the SCM Agreement
should be interpreted in a manner that is identical to Article XXIII:1(b) of the GATT 1994.  Mexico is
of the view that such an interpretation cannot be accepted by this Panel because it would render
Article 5(b) inutile.  As explained in Mexico’s  previous submissions, Article 5(b) differs from
Article XXIII:1(b) in important respects.
(c) Claim Under Article 5(b) of the SCM Agreement
(i) Specificity
Subsidy versus programme
4.1366  Mexico notes that at paragraphs 10-20 of its written rebuttal submission, the US argues that
the CDSOA, as a programme, is not a specific subsidy.
4.1367  Mexico asserts , as discussed at paragraphs 37-41 of Mexico’s written rebuttal submission,
that it is legally incorrect for the US to focus th e specificity analysis on the CDSOA as a programme
without regard to the nature of the subsidies that are conferred under the Act.
4.1368  Mexico is of the view that a careful reading of Article 2.1(a) demonstrates that it supports
Mexico’s arguments.  The Article refers to situations in which legislation explicitly limits access to a
subsidy.  The "legislation" in this dispute is the Continued Dumping and Subsidy Offset Act of 2000
("the Act") and the subsidies are the offsets distributed under it.  Since specificity arises as a result of
the provisions of the Act, it can only be said that the subsidies conferred under the Act are specific,
not the Act in itself.  Accordingly, it is inappropriate for the US to argue that the Act is or is not
specific.  The legal question is whether the subsidies conferred under the Act are or are not specific.
4.1369  If Mexico’s approach is not accepted, a WTO Member could shield otherwise-specific
subsidies from challenge by conferring those subsidies under a single legislative instrument or
programme.  In order to prevent the disciplines in the SCM Agreement from being undermined in this
way, the nature of the subsidies conferred under a programme (i.e., separate and independent
subsidies) must be taken into account in the specificity analysis.
4.1370  Thus, it is Mexico’s position that the CDSOA explicitly limits access to the subsidies to
certain enterprises, within the meaning of Article 2.1(a) of the SCM Agreement.  Specificity isWT/DS217/R
WT/DS234/R
Page 243
manifest in the actual words of the law.  In partic ular, Mexico refers to the following subsections of
the CDSOA: 754(a), 754(b)(1) and (4), and 754(c). 
Disbursements and outlays
4.1371  At paragraph 16 of its written rebuttal submission, the US argues that the specificity analysis
must be carried out for the challenged subsidy programme as a whole rather than by "focusing on
individual disbursements".
4.1372  Mexico is not arguing that the test for assessing specificity should be applied to each
“disbursement” under the CDSOA.  Mexico’s position is that the test for assessing specificity must be
applied to each “subsidy” conferred under the programme.
4.1373  Mexico asserts that the Panel must determine whether Separate and independent subsidies are
being conferred under the CDSOA.  If it determines that this is the case, it must then apply thespecificity test to each subsidy.  This approach to  specificity must be applied in all instances where a
programme confers separate subsidies.  Otherwise, a WTO Member will be able to insulate from
challenge otherwise-specific subsidies simply by administering them under a single programme.
From the outset, the financial contributions are targeted to specific products and, therefore, specific
industries
4.1374  In the view of Mexico, from the outset, the financial contributions are targeted.  The targeting
begins even before a financial contribution exists , because there must be an underlying anti-dumping
or countervailing duty order or finding with respect to which a special account is established.
Moreover, the funding mechanism for each subsid y is completely independent of the funding
mechanism for the other subsidies.  This is because the funding mechanism – i.e., the collection ofanti-dumping and countervailing duties – is, itself, tied to the specific products that are subject to the
anti-dumping or countervailing duty order or finding in question.
4.1375  Thus, according to Mexico, the amount of funding for a particular subsidy does not in any
way affect the amount of funding for a subsidy that is linked to another order or finding.
4.1376  This, in Mexico's view, fundamentally distinguishes the subsidies conferred under the
CDSOA from subsidies that are conferred under a typical subsidy programme where the nature of the
financial contribution is horizontal (i.e., the same for all recipients) and the funding of that financial
contribution is horizontal (i.e., a common budget ).  Under a normal subsidy programme, the
disbursements or outlays may give the appearance of specificity;  however, those disbursements or
outlays do not amount to discrete subsidies, nor are they the result of discrete subsidies.  Under the
CDSOA, the unique nature of the "financial contribution" element of the subsidies creates a separate
and distinct subsidy that inherently results in limit ing eligibility to each subsidy to a specific industry.
Other arguments
4.1377  Mexico notes that, in addressing the "objective criteria" issue, the US does not refer to the fact
that such criteria must be "horizontal in applicatio n" and to the fundamental criterion for eligibility for
a subsidy conferred under the CDSOA, which is that the recipient must be a petitioner in the
investigation that led to the order or finding that forms the foundation of the subsidy in question, orthat the recipient support that petition.
4.1378  It is Mexico’s position that this fundamental criterion of the CDSOA is not "horizontal", nor
is it "economic", even within the broad meaning proposed by the US in its response to Question 18
from the Panel.WT/DS217/R
WT/DS234/R
Page 244
4.1379  Finally, the US argues that Mexico has not presented "positive evidence" that the CDSOA is
specific.  Mexico submits that the positive evidence that Mexico relies upon to demonstrate specificity
is the design, structure, and architecture of the CDSOA, which has been fully documented in the
evidence before this Panel.
(ii) Adverse Effects
Circular argument
4.1380  At paragraph 26 of its written rebuttal submissi on, the US argues that "Mexico’s argument is
circular because the determination of the existence of nullification or impairment is based upon the
application of the measure, not the measure itself".
4.1381  Mexico considers that the US argument on this point is unclear.  With respect to Mexico’s
challenge regarding the "granting" of subsidies under the CDSOA, it is Mexico’s position that whensubsidies are granted (i.e., "applied" even under the restrictive US interpretation) nullification or
impairment will exist.  Thus, Mexico’s position fa ithfully follows the wording of footnote 12 to the
SCM Agreement.
4.1382  In Mexico's view, what is really at issue in these paragraphs of the US rebuttal submission is
"when" Mexico can challenge the CDSOA under Article 5(b).  To answer this issue, this Panel must
determine whether the well established doctrine gove rning legislation as such challenges applies to
Article 5(b).
Evidence of the upsetting of the expected competitive relationship
4.1383  As noted in Mexico’s prior submissions, with respect to its challenge of the "granting" of
subsidies under the CDSOA, Mexico posits that the subsidies conferred by the CDSOA willautomatically upset the expected competitive relationship when they are granted.  As discussed at
paragraphs 78-92 of Mexico’s rebuttal submission, the upsetting of the expected competitive
relationship is demonstrated by the design, structure and architecture of the CDSOA, which is well
documented in the evidence before this Panel.  On this issue, Mexico refers to paragraphs 81-89 of its
rebuttal submission.
Affected Mexican imports
4.1384  At paragraph 28 of its rebuttal submission, the US argues that Mexico "does not even identify
the affected Mexican imports". Mexico asserts that although it is not necessary for Mexico to identify
such exports with respect to its legislation as such challenge of the "granting of subsidies" under the
CDSOA, Mexico is also arguing that, through the maintenance of subsidies, the CDSOA is currently
nullifying or impairing benefits accruing to Mexico related to the predictability of conditions for
future trade (Mexico’s rebuttal submission, paragraphs 93-98).  Mexico has also identified products ofMexico which are currently subject to anti-dumping and countervailing duty orders and findings
(Exhibit Mexico-5) and with respect to which predictability has been nullified or impaired.  At
paragraph 32 of its written rebuttal submission, the US makes a related argument with respect to tariff
concessions that the CDSOA "is not a product-specific subsidy".  As noted in Mexico’s submissions
on specificity, the subsidies conferred by the CDSOA are inherently "product-specific" and, therefore,industry-specific.WT/DS217/R
WT/DS234/R
Page 245
Interpretation of the Panel reports in Oilseeds I  and II
4.1385  At paragraph 30 of its written rebuttal submission, the US interprets the Panel report in EEC –
Oilseeds  as turning on the fact that the "complainant has shown that the competitive relationship was
actually upset".  While Mexico does not take issue with the fact that the complainant in that disputemay have put forward considerable evidence regard ing the effect that the EEC programme had on its
products, Mexico considers that a review of paragraphs 147, 148, 152 and 154 of the Panel Report
indicates that the Panel was concerned with the "price mechanism" in the challenged measure and the
operation of the "scheme" that was established.  In other words, notwithstanding the possible other
evidence before it, the Panel focused on the design, structure and architecture of the subsidies before
it.  The Panel Report in EEC – Oilseeds II  supports this focus.
Other arguments
4.1386  Mexico notes that at paragraph 33 of its written rebuttal submission, the US argues that
Mexico must demonstrate that the CDSOA will cause more than a de minimis contribution to any
nullification or impairment.  It cites paragraph 10.84 of the Panel Report in Japan – Film  for this
proposition.  Paragraph 10.84 addressed the issue of the causal linkage between the measure and the
alleged nullification or impairment.  According to Mexico, that causal linkage is clearly established inthis dispute, therefore, the passage from Japan – Film  has no application to the facts of this dispute.
4.1387  The US also argues at paragraph 33 of its written rebuttal submission that, "[u]nder the
CDSOA, domestic producers may use their offset for any purpose, including making gifts to charity,
compensating workers, developing non-subject products, or paying creditors". Mexico argues that this
argument ignores the terms of the CDSOA and its implementing regulations.  Under the definition of
"qualifying expenditure" in the Act and regulations, the subsidy is granted after the expense is
incurred.  According to section 159.61(c) of the Regulations, the qualifying expenditures "must be
related to the production of the same product that is the subject of the related order or finding".
4.1388  At paragraph 35 of its written rebuttal submission, the US submits that "Mexico was on notice
that the United States could pass such a measure". Mexico is of the view that the mere fact that aWTO Member "could" take action is not enough to demonstrate that another WTO Member could
reasonably have anticipated that action.  The legal question is not whether the US could implement
the CDSOA, because the US "could" conceivably do anything.  The proper legal question is whether
Mexico could reasonably have anticipated the CDSOA.  On this issue, Mexico simply repeats
paragraph 106 of its written rebuttal submission.
(d) Claims Under Articles 18.1 of the Anti-Dum ping Agreement and 32.1 of the SCM Agreement
4.1389  At paragraphs 40-69 of its written rebuttal submission, the United States raises three
arguments to support its position that the CDSOA is not a specific action against dumping or a
subsidy.
4.1390  Mexico considers that it has already demonstrated at paragraphs 9-32 of its rebuttal
submission that the three general arguments raised by the United States are incorrect and must,
therefore, be rejected.  Mexico agrees with the arguments of the other complaining parties as theyfurther demonstrate the legal flaws in the US interpretation of the relevant provisions.
(e) Conclusion
4.1391  For the foregoing reasons and those espoused in Mexico’s previous submissions, Mexico
requests that the Panel find that the CDSOA is inconsistent with the provisions of the Anti-DumpingWT/DS217/R
WT/DS234/R
Page 246
Agreement, the SCM Agreement, the GATT 1994 an d the WTO Agreement at issue in this dispute.
Mexico also requests that the Panel grant the relief described at paragraph 124 of Mexico’s first
written submission.
11. Thailand
4.1392  At this juncture, Thailand reiterates its common views as previously expressed by other
complaining parties in their oral statements made today.
4.1393  Thailand notes that the United States has argued in paragraph 2 of its Second Submission that
“none of the complaining parties have challenged the Act as an actionable subsidy under Article 5(c)
of the SCM Agreement, for which even a showing of threat of harm is sufficient.” However, Thailand
argues that it is crystal clear as claimed in paragraphs 23-29 of the First Written Submission of the
European Communities, India, Indonesia and Thailand that the Byrd Amendment constitutes aspecific action against dumping and subsidization which is not in accordance with the GATT.  In
Thailand's view, there is no requirement to argue furt her, should it prove necessary need to institute
proceedings, that adverse effects take place as stipulated in Article 5 of the SCM.
4.1394  Thailand argues that, pertaining to paragraph 5 of the US Second Submission, one could
claim that there is no distinction regarding the use of AD/CVD duties and also the source ofgovernment revenue. This is, Thailand submits, a misled point of argument made by the U. S. and is
not the point made by the complaining parties.
4.1395  Another point raised in paragraph 5, Thailand further argues, is the identity of the recipient
which, in the U. S. perspective, is tied up with the words “presumed negative effects” In fact, the
terms “identity” and “presumed negative effects” would have certain bearing if the action in questionis considered as specific action against dumping or subsidization in accordance with Articles 18 and
32 of the AD and CVD Agreements, respectively.
4.1396  Thailand notes that in European Communities – Regime for the Importation, Sale and
Distribution of Bananas, the Panel pronounced that the infringement of obligations is a prima facie
case of nullification or impairment of benefits, which as a result, has shifted the burden of proof to thealleged party.  Thailand is of the view that the statement made by the U. S. in paragraph 7 of its
Second Submission should therefor be rejected.
4.1397  Thailand then turns to paragraph 57 of  the U. S. Second Submission which presumably
underlines that Thailand is mistaken when interpreting the word “ affected” to convey the same
meaning as “adversely affected”. In response, Thailand would have been easily convinced if any
measure taken under the CDSOA had been given effect  as a result of a stand-alone legislation having
no links whatsoever with dumping or subsidization in nature.  Moreover, Thailand finds it  isrelatively difficult to understand why any domestic producer who is “affected” in a positive manner
would be good enough to issue a certification so that the Customs Authority may take action in
accordance with the CDSOA, while those who are “affected” in a negative manner may not get any
action as a response, as explained in paragraph 42 of the US Second Submission.  To put it in another
way, the question is whether those who had got payment so far under the CDSOA which amounts tomore than 200 million dollars falls within which category.
4.1398  Thailand submits that another invalid point is raised in paragraphs 89 and 92 of the US
Second Submission that “it is highly improbable that CDSOA is a factor at all in a domestic
company’s or union’s consideration of whether to support a petition” when time has lapsed before
payment is made.  In fact, when payment is made is not a factor recognized at all under the AD andSCM Agreements.WT/DS217/R
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4.1399  For the reasons given, Thailand respectfully requests that the Panel consider this case based
on GATT/WTO jurisprudence and thereby make findings and recommendations in favor of the
complaining parties.
J. SECOND ORAL STATEMENT OF THE UNITED STATES
(a) Article 5(b) of the SCM Agreement
4.1400  The United States argues that Mexico’s Article 5(b) argument should be rejected because the
CDSOA is not a “specific” subsidy and because Mexico has not demonstrated nullification or
impairment or any other form of “adverse effects”  under SCM Article 5.  According to Mexico, the
CDSOA is de jure specific because each offset is a “separate and distinct subsidy.”  Specificity
analysis, however, must be carried out for the challenged subsidy programme (here the CDSOA) as a
whole rather than by focusing on individual di sbursements.  Otherwise, no matter how broadly
available and broadly distributed benefits under a government programme may be, each disbursement
would be considered a specific subsidy – a result that would render Article 2 a nullity.
4.1401  The United States submits that a textual analysis of Articles 1 and 2 does not support
Mexico’s interpretation either.  Article 2.1(a) expressly states, in relevant part, that if the “legislation
pursuant to which the granting authority operates, explicitly limits access to a subsidy to certain
enterprises,” the subsidy is specific.  Therefore, the focus is not on each subsidy disbursed but on the
legislation establishing the subsidy programme.
4.1402  Although the Panel need not reach the question of adverse effects in this dispute, the United
States asserts that Mexico has failed to meet its burden of proving adverse effects in the form of
nullification or impairment of benefits under Arti cle 5(b) of the SCM Agreement.  Mexico’s theory
that an “actionable” subsidy can be established without any showing of adverse effects is inconsistent
with the structure and design of the SCM Agreement and would eliminate the primary distinction
between Articles 3 and 5 of the SCM Agreement.   In any event, because the CDSOA does not violate
any WTO Agreement provision, this point is moot.
4.1403  According to the United States, Mexico’s theory of a non-violation nullification or
impairment claim should also be rejected.  Mexico  fails to understand that the application of a
measure is a requirement to establish the existence of nullification or impairment.   While Mexico
may have the right to bring a challenge based on the mandatory/discretionary doctrine, that doctrine
does not allow Mexico to bypass the required elements of a non-violation nullification or impairment
claim.
4.1404  The United States is of the view that Mexico has also failed to demonstrate that the
competitive relationship in the US market between domestic and Mexican products has been upset bya subsidy which was not reasonably anticipated.  Mexico’s argument is squarely contradicted by the
relevant provisions and jurisprudence.  First, GATT Article XXIII:1(b) requires that a benefit “is
being nullified or impaired,” not that it will be in the future.  Second, Mexico mis-cites the EEC –
Oilseeds case.
4.1405  The United States considers that in any event, Mexico’s per se  argument misunderstands the
nature of a non-violation claim.  Per se  nullification or impairment by definition exists only where a
complainant proves an actual WTO violation.  Mexico does claim a current nullification or
impairment by the “maintaining” of subsidies under the CDSOA, but it is with regard to a different
benefit allegedly accruing to Mexico under GATT Articles II and VI.  Yet, “predictability” in
planning future sales has never been recognized as a benefit accruing under GATT Articles II and VI.WT/DS217/R
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4.1406  The United States notes that Mexico says not to worry about opening the flood gates for non-
violation nullification or impairment claims because Article 5(b) only covers subsidies that
“systematically” nullify or impair benefits.  However, in the United States' view, there is simply no
basis in Article 5(b) for limiting non-violation nullification or impairment claims in this way.
(b) Specific action against dumping or subsidies
4.1407  The United States asserts that under the subsidies provisions of SCM Agreement and GATT
Article XVI, a Member’s right to use subsidies is subject to other Members’ rights to impose
countervailing duties on imports, or to take authorized countermeasures.  There is no “fourth” right to
bring a WTO challenge to circumvent those provisions as the complaining parties are attempting to do
in this case by mounting a per se  attack on a domestic subsidy using Articles 18.1 or 32.1 of the
Antidumping and SCM Agreements, respectively.
4.1408  According to the United States, the test to determine whether a measure is "specific action
against" dumping or subsidies is whether the measure is (1) based upon the constituent elements of
dumping or a subsidy, and (2) burdens, (3) the dumped or subsidized imported good, or an entity
connected to, in the sense of being responsible for, the dumped or subsidized good such as the
importer, exporter or foreign producer.  In other words, there are three criteria and just because ameasure may be based upon the constituent elements of dumping does not necessarily mean that it is
“against” dumping or subsidies.
4.1409  The United States notes that some parties claim that the CDSOA is specific action “based
upon” the constituent elements of dumping or a subsidy because an AD/CVD order is a condition
precedent to distributions.  However, according to the United States, funding CDSOA distributions
with AD/CVD duties is not any different than funding state retirement homes in terms of the presence
of the constituent elements.   What makes “specific action” in the main provisions of Articles 18.1 and
32.1 different from “action” in the footnotes is that it is action based directly upon the constituent
elements.  Whether or not a law authorizes specific action can only be determined by examining the
actual requirements of that law.
4.1410  Other complaining parties argue that the CDSOA is “specific action” because the recipient is
a domestic producer that is "affected" by dumping or subsidization.  The United States asserts that the
statute, however, does not require producers to show they are injured by dumped or subsidized
imports to receive distributions and the amount of the distribution has nothing to do with measuring or
recovering damages.  In any event, is it not clear to the United States why that fact, if true, would
even be relevant to whether distributions are “specific action” under Articles 18.1 and 32.1.
4.1411  According to the United States, the complaining pa rties have also failed to establish that the
CDSOA is an action “against” dumping or a subsidy.  The ordinary meaning of the term “against”
suggests that the action must operate directly on the imported good or the entity connected to it.  This
interpretation is supported by the definition of dumping in GATT Article VI:1 which defines dumping
as products of one country being introduced into the commerce of another country at less than normal
value.  The object of “specific action” under Articles 18.1 and 32.1 extends to the entity connected to,in the sense of being responsible for, the dumped or  subsidized good such as the importer, exporter or
foreign producer.  This is consistent with the panel and Appellate Body reports in the 1916 Act case.
4.1412  The United States is of the view that the complaining parties’ alternative definitions of the
word “against” are not informed by its context in Articles 18.1 and 32.1.  In that context, there are
already four examples of measures that are “specific action against” dumping as identified by theAppellate Body in the 1916 Act case:  (1) duties on imports, (2) provisional measures on imports,
(3) price undertakings for imports, and (4) civil and criminal penalties on importers.   Each one of theWT/DS217/R
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measures imposes a limitation or burden directly on the imported goods or the entity connected to, in
the sense of being responsible for, the dumped or subsidized good.  None of the measures apply
indirectly in ways unrelated to the imported dumped or subsidized good.
4.1413  The United States notes that many of the complaining parties argue that the CDSOA is a
specific action against dumping or subsidies because of its supposed effect on the competitive
relationship or the conditions of competition between imported and domestic goods. In the view of the
United States, there is no basis in the text of Articles 18.1 and 32.1 for a conditions of competition
test.  Even if the subsidy is considered to have changed the conditions of competition between the
producers of the good that received the distribution and all other producers, both foreign and
domestic, that did not, it does not mean that measure acts against dumping or subsidies.  A presumed
negative effects test or a conditions of competition test is overly broad as it would cover any othertype of domestic legislation that improved the position of the domestic industry.
4.1414  To support their “effects” argument, the complaining parties urge this Panel to rely on the
CDSOA’s legislative history. The United States is of the view that the CDSOA’s legislative history
would only be relevant to its interpretation if the statute were ambiguous and the Panel then needed it
to determine the fact of the CDSOA.  Nothing about the operation of the CDSOA is ambiguous, and
Articles 18.1 and 32.1 of the Antidumping and SC M Agreements, respectively, only limit specific
action against dumping or subsidies.
4.1415  In conclusion, the United States argues that under the complaining parties’ argument that a
Member cannot grant domestic subsidies in response to another Member’s subsidies, the first Member
to subsidize can prevent, other Members from granting subsidies just by virtue of the fact that theywere first. The United States submits that this reading cannot reasonably be a proper construction of
Article 32.1 and would lead to perverse results.  It is also  not supported by the structure of the SCM
Agreement including footnote 35 as well as the distinction between prohibited and actionable
subsidies.  The complaining parties are attempting to  insert another category of prohibited subsidies,
besides export subsidies, into the SCM Agreement, i.e. counter-subsidies.  The Panel should reject
such a distorted interpretation.
4.1416  If this Panel finds that the CDSOA is an “action against” dumping or subsidies, then the
United States submits that it is otherwise permitted under footnotes 24 and 56 to the Antidumping and
SCM Agreements, respectively as action under GATT Article XVI to address the effects dumping
and/or subsidies.  No party disputes that the CDSOA authorizes “action” in the form of a subsidy, and
no party disputes that the CDSOA is consistent wi th GATT Article XVI.  The complaining parties
have themselves argued that the CDSOA is intended to offset the effects of continued dumping orsubsidies.  Therefore, if the Panel finds that the CDSOA authorizes action against dumping and/or
subsidies, it is nevertheless action under GATT Article XVI to address the effects of such practices.
(c) Standing
4.1417  The United States asserts that the text of Articles 5.4 and 11.4 do not contain a requirement
that “support” for a petition must be “genuine” or “true,” but rather establish objective, numericalbenchmarks.  The United States has implemented these benchmarks which have not been modified in
any way by the CDSOA.
4.1418  According to the United States, the complainin g parties have provided no support for their
claim that the CDSOA precludes a good faith examin ation of industry support under Articles 5.4 and
11.4.  Complaining parties do not assert that the CDSOA prevents the United States from calculatingin good faith whether these numerical thresholds are met, but rather that this good faith calculation isWT/DS217/R
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not enough.  The United States must second gue ss whether producers’ expressions of support are
“true.”  This is not required by the agreements and is an unworkable requirement.
4.1419  The United States is of the view that it is highly improbable that CDSOA is a factor in a
domestic company’s or union’s consideration of wh ether to support a petition.  CDSOA distributions,
if any, are contingent on a number of factors and made at some unknown, future date.  The "promise"
of a remote, uncertain and unknown payment is hardly worth gambling a million plus dollars on a
"frivolous" anti-dumping or countervailing duty case.   Moreover, petitioners who file frivolous anti-
dumping and countervailing duty cases subject themselves to potential antitrust scrutiny.
4.1420  The United States argues that, even assuming arguendo, that the CDSOA has an effect on the
domestic producers’ decision to support or oppose a petition, it is not clear what effect that would
necessarily be.  Whatever the effect, it remains the case that the mere provision of such an inducementis not contrary to the Antidumping Agreement or the SCM Agreement.
(d) Undertakings
4.1421  The United States asserts that US law merely requires that the Commerce Department, to the
extent practicable, consult with the domestic industry before determining whether an undertaking is in
the “public interest.”  Views of the domestic industry do not in any way dictate the outcome and, forthis reason, they do not determine the decision to accept or reject a proposed undertaking.  The
Bethlehem Steel cases do not hold otherwise.  Indeed, the only evidence presented to this Panel
establishes that the domestic industry has opposed more than 75 per cent of the undertakings which
the United States has accepted since 1996.
4.1422  The United States submits that the complaining parties do not seem to understand why
petitioners would ever support undertakings after the CDSOA. Given that only 36.1 per cent of the
petitions filed result in affirmative final determinations by  Commerce and the Commission, a
petitioner has ample incentive to support a suspension agreement which is likely to provide relief than
take its chances on affirmative final determinations .  In sum, the complaining parties have failed to
make a prima facie  case that the CDSOA violates the standing or undertaking obligations in the
Antidumping and SCM Agreements.
(e) GATT Article X:3(a)
4.1423  In the view of the United States, the complaining parties made it perfectly clear that the
allegedly offending measure with respect to Article  X:3(a) is US implementation of its anti-dumping
and countervailing duty laws, not US implementati on of the CDSOA.  The complaining parties did
not, however, explain where in their requests for the establishment of a panel the allegedly offending
measures are cited.  Complaining parties’ Article X:3(a) claims are thus, not within this Panel’s termsof reference and must be rejected.
4.1424  Some complaining parties assert that the CDSOA “administers” the trade laws.  The United
States administers its trade laws, not the CDSOA.   In fact, the Department of Commerce, which
handles standing and undertakings determinations, does not administer the CDSOA, the Customs
Service does.  Argentina - Hides provides no guidance on this issue.
4.1425  The United States argues that even if the co mplaining parties can overcome the jurisdictional
defect, their arguments rest entirely on the uns upported belief that the CDSOA will influence
domestic interests to bring or support an investigation, or oppose an undertaking.  Moreover, there is
no requirement in the agreements that the admini stering authority (1) examine the reasons behind
industry support for petitions or (2) accede to domestic industry opposition to an undertaking.  InWT/DS217/R
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contrast to US-301, in the instant case the complaining parties have been unable to demonstrate that
the CDSOA requires, or permits a Member to engage in, any prohibited conduct.
K. COMPLAINING PARTIES ' ANSWERS TO QUESTIONS FROM THE PANEL AFTER THE SECOND
MEETING
1. Australia
(a) Questions to all complaining parties
3. Subsidy A is paid to all domestic producers of product X, and the grant of that subsidy
is not tied in any way to a determination of du mping on the part of exporters/foreign producers
of product X.  Subsidy B is paid to all domestic producers of product X, subject to a finding of
dumping on the part of importers/exporters/foreign producers of product X.  For the purpose of
this question, please assume that subsidy A would not constitute a specific action "against"dumping (but indicate if you disagree).  (a) Should subsidy B be treated as a specific action
"against" dumping?  (b) Why?  (c) If subsidy B sh ould be treated as a specific action "against"
dumping, what is the difference between the impact of subsidies A and B that means that
subsidy B constitutes specific action "against" dumping, whereas subsidy A does not?
(d) Subsidy B would be expected to provide the domestic producers of product X with acompetitive advantage over imported products generally.  Does subsidy B provide those
domestic producers with a greater competitive advantage over dumped imports in particular?
Why?
(a) Yes.
(b) As described, subsidy B payments are conditional on the existence of the constituent elements
of dumping.
(c) The “impact” of a subsidy is immaterial to the determination of whether that subsidy is a
specific action against dumping.  If subsidy B constitutes action that may be taken only when
the constituent elements of dumping are present, it is a specific action against dumping.
(d) If subsidy B is action taken in conjunction with the imposition of anti-dumping duties, as is
the case with offset payments under the CDSOA, it provides a double remedy in relation to
dumped imports, as well as a remedy in relation to imports which have not been found to be
dumped in any case.
4. If an affected domestic producer receives an offset payment under the CDSOA, would
that payment only change the competitive rela tionship between that domestic producer and
foreign producers subject to the relevant anti-dumping order, or would it also change the
competitive relationship between that domest ic producer and all other producers, including
other domestic producers not eligible for offset  payments, and foreign producers not subject to
the relevant anti-dumping order?
4.1426  According to Australia, offset payments unde r CDSOA change the competitive relationship
between the recipients of those payments and all other producers (including foreign producers), whileproviding a double remedy in respect of dumped (or subsidised) goods.
5. If offset payments may be used by affected domestic producers exclusively to bolster
their competitive position vis-à-vis  imports subject to the relevant anti-dumping order, does this
constitute the CDSOA as a "specific action against  dumping"?  If so, isn't it the action by theWT/DS217/R
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affected domestic producers (i.e., how they use the offset payments) that constitutes action
"against" dumping, as opposed to the provision of offset payments that may be used by affected
domestic producers exclusively to bolster their competitive position vis-à-vis  imports subject to
the relevant anti-dumping order)?
4.1427  It is unclear to Australia what is meant by this question.  Australia has not argued that the
CDSOA is a specific action against dumping because the offset payments must be “used” by affected
domestic producers exclusively to bolster their competitive position vis-à-vis  imports subject to the
relevant anti-dumping order.  Indeed, offset payments under the CDSOA are reimbursements of
qualifying expenditures incurred in relation to production of the like product.  However, just as for
example an export subsidy paid by reimbursement of expenses after actual export still constitutes anexport subsidy, the payment of a subsidy conditional on the existence of the constituent elements of
dumping by reimbursement of expenses at a later date still constitutes specific action against
dumping.
6. Is it possible to distinguish the CDS OA from the 1916 Act (for the purpose of
Article 18.1 of the AD Agreement) because action under the latter (i.e., a court order imposing afine or imprisonment) had an automatic, direct, negative impact on entities engaged in
dumping, whereas action under the CDSOA (i.e, untie d subsidies) does not?  Please explain.
4.1428  With respect, Australia submits that the premise of this question is incorrect.  Offset payments
under the CDSOA are not untied subsidies.  They are reimbursements
 of qualifying expenditures :
that is, expenditure incurred after the anti-dumping duty order or finding was issued for specified
categories of expenditure related to the production of the like product.237  Domestic producers must
continue to produce the like product to qualify fo r further payments under the CDSOA.  While the
CDSOA does not have a direct impact on dumped produc ts or entities connected with those products,
it nevertheless affects those products through the double remedy it provides, that is, subsidy paymentsin addition to anti-dumping (or countervailing) duties.
7. Please comment on paras 44, 45 and 46 of the US oral statement at the secondsubstantive meeting.
4.1429  Australia is of the view that the arguments at paragraphs 44-46 of the United States’ oral
statement at the second meeting of the Panel are fundamentally flawed.
4.1430  Members do not have a right to engage in “counter-subsidisation” under either GATT
Article XVI or the SCM Agreement, notwithstanding that Members might grant subsidies for that
reason.  The fact that “counter subsidies” are not included in footnote 35 to the SCM Agreement, or
provided for elsewhere in the SCM Agreement, confirms that they are not a permissible form of relief.
4.1431  A dispute settlement proceeding is not something that may be undertaken only when the
constituent elements of a subsidy (or dumping) are present.  It is not a “specific action against asubsidy” within the meaning of Article 32.1 of the SCM Agreement.  Moreover, Articles 4, 7 and 30
of the SCM Agreement confer a positive right on Members to take dispute settlement action.  The fact
that dispute settlement action is not mentioned in footnote 35 to the SCM Agreement is irrelevant.
8. Can a measure be "against" dumping if it does not have an adverse bearing on either
the imported product per se , or the importer, the exporter or foreign producer of that product?
If so, how?
                                                     
237 First Written Submission of Australia, paragraphs 17-18.WT/DS217/R
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4.1432  As previously explained by Australia238, the word “against” has many ordinary meanings,
including “in competition with”, “to the disadvanta ge of”, “in resistance to” and “as protection from”.
Australia would agree that a measure “against” dumping within the meaning of Article 18.1 of the
Anti-Dumping Agreement would need to have an “adverse bearing” in relation to dumped products,or to an entity connected with those products.  However, even the necessity of an “adverse bearing”
does not compel the conclusion that a measure “against” dumping must apply exclusively to the
dumped products, or to an entity connected with those products, or be burdensome to those products
or entities.  The CDSOA, the measure at issue in this dispute, is just such a case.  While it does not
apply directly to dumped products or to an entity connected with those products, and is not directly
burdensome to those products or entities, the CDSOA nevertheless provides a double remedy – that is,
it has an “adverse bearing” – in respect of those products.
9. The complaining parties assert, on the basi s of para. 122 of the Appellate Body report on
1916 Act, that action "in response to" dumping is necessarily action "against" dumping.  If
action taken "in response to" dumping is of benefit to dumping, dumped imports, or those
engaged in dumping, would such action be "against" dumping?
4.1433  See answer to Question 8.
2. Brazil
(a) Questions to all complaining parties
3. Subsidy A is paid to all domestic producers of product X, and the grant of that subsidy
is not tied in any way to a determination of dumping on the part of exporters/foreign producersof product X.  Subsidy B is paid to all domestic producers of product X, subject to a finding of
dumping on the part of importers/exporters/foreign producers of product X.  For the purpose of
this question, please assume that subsidy A would not constitute a specific action "against"
dumping (but indicate if you disagree).  (a) Should subsidy B be treated as a specific action
"against" dumping?  (b) Why?  (c) If subsidy B sh ould be treated as a specific action "against"
dumping, what is the difference between the impact of subsidies A and B that means that
subsidy B constitutes specific action "against" dumping, whereas subsidy A does not?
(d) Subsidy B would be expected to provide the domestic producers of product X with a
competitive advantage over imported products generally.  Does subsidy B provide those
domestic producers with a greater competitive advantage over dumped imports in particular?
Why?
4.1434  Brazil replies as follows:
(a) Yes, subsidy B should be treated as a specific action against dumping.
(b) Subsidy B is only paid when the constituent el ements of dumping are present.  That is, the
subsidy is not paid unless and until there has been a determination of dumping and injury by
the authorities in the importing country.  In addition, the beneficiaries of subsidy B are the
same as the beneficiaries of the anti-dumping measures.  Thus, this is an additional action to
offset or prevent dumping.  By rewarding domestic producers of a dumped product with a
subsidy payment subsidy B addresses the same situation being addressed by anti-dumpingmeasures.
                                                     
238 Second Written Submission of Australia, paragraph 16.WT/DS217/R
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Brazil is of the view that the panel should not lose sight of the fact that anti-dumping
measures are intended to confer a benefit on the domestic producers by either preventing
dumping and forcing the prices of the imported product up or by imposing duties which are
intended to have a comparable effect.  The adverse effects of anti-dumping measures onforeign producers have an equivalent beneficial effect on domestic producers.  If foreign
producers, as a result of anti-dumping duties, raise prices and, therefore, become less
competitive in the importing market, the domestic  producers benefit by this change in the
competitive position of the foreign producers.  A measure against dumping, however, can also
be a measure that changes the competitive positions of foreign and domestic producers by
other actions which affect the relative conditions of competition between domestic and
foreign producers.  For example, providing a financial benefit to domestic producers has thesame effect as providing a financial penalty to foreign producers.  Where an action is based
on the constituent elements of dumping and has the effect, either by imposing a burden on the
party engaged in dumping or providing a benefit to the industry in the importing country, of
offsetting or preventing dumping, it is a measure against dumping. Actions which affect the
relative competitive positions of the foreign producers and a domestic industry are not limitedto actions imposing additional burdens on the foreign producers, importers or the imported
product; the relative positions can also be changed by actions which directly confer a benefit
to the importing industry (i.e. a subsidy).
Brazil reminds the panel of the language in Article 18.1.  The limitation is expressed in
absolute terms, using the phrase “no specific action against dumping.”  It does not say “no
specific action against exporters of dumped products”.  It does not say “no specific action
against importers of dumped products”.  And, it does not say “no specific action against
dumped products”.  Thus, the assumption that actions must impose a burden on the exporter,
importer or the dumped product in order to be actions against dumping is simply notsupported by the language of Article 18.1.  Providing a benefit to the industry in the
importing country has no less effect in terms of competition between the imported and
domestic product than does the imposition of a financial burden on the exporter or importer.
(c) Subsidy A is not based on the constituent elements of dumping.  There may be many actions
which a government can take which affect the competitive relationships between domestic
and foreign producers or products.  Indeed, the SCM Agreement is an effort to limit theseactions.  However, the AD Agreement is not concerned with all such actions or even with all
such actions which may affect products which have been found to be dumped.  The AD
Agreement places disciplines on what actions au thorities may take against dumping, not all
actions which may affect the competitive relationship between products.
(d) The fact that subsidy B may have effects on the conditions of competition between domestic
producers and producers other than those that have been found to be dumping is irrelevant.
Indeed, dumping duties have an effect beyond the impact on the competitive conditions
between the domestic producers and the foreign producers subject to the anti-dumping
measures.  Foreign producers not subject to anti-dumping duties also benefit from the changein competitive conditions resulting from anti-dumping measures.  The fact that subsidy B has
an effect on competitive conditions other than those between the foreign producers found to
be dumping and the domestic producers does not make the action any less an action against
dumping.
4. If an affected domestic producer receives an offset payment under the CDSOA, would
that payment only change the competitive rela tionship between that domestic producer and
foreign producers subject to the relevant anti-dumping order, or would it also change the
competitive relationship between that domest ic producer and all other producers, includingWT/DS217/R
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other domestic producers not eligible for offset  payments, and foreign producers not subject to
the relevant anti-dumping order?
4.1435  According to Brazil, obviously, companies re ceiving subsidies improve their competitive
position against companies not receiving subsidies, whether these are domestic competitors or foreign
competitors.  This, however, in Brazil's opinion, begs the question.  The effects of the measures
authorized by the AD Agreement are not limited to adverse effects on the dumping parties and
beneficial effects on the domestic industry.  Fore ign producers not subject to anti-dumping measures
may also benefit.  Article 18.1 does not in any way justify defining measures against dumping based
on whether parties other than the domestic industry in the importing country, the members of the
domestic industry requesting the relief, or other producers in the world are the beneficiaries of suchmeasures.  Nor does it define such measures in relation to whether parties other than those found to be
dumping may be adversely affected by the measure.
5. If offset payments may be used by affected domestic producers exclusively to bolster
their competitive position vis-à-vis  imports subject to the relevant anti-dumping order, does this
constitute the CDSOA as a "specific action against  dumping"?  If so, isn't it the action by the
affected domestic producers (i.e., how they use the offset payments) that constitutes action
"against" dumping, as opposed to the provision of offset payments that may be used by affected
domestic producers exclusively to bolster their competitive position vis-à-vis  imports subject to
the relevant anti-dumping order)?
4.1436  The central issue is not the specifics of how the CDSOA payments are used.  Money, once
received, is fungible.  If a company takes the CDSOA payments and uses them to improve its
competitive position in the market for the product found to have been dumped, it obviously has an
effect on the conditions of competition.  It may also, however, allow it to take the resources it
intended to devote to improving competitiveness in the dumped product and reallocate them to otherproducts.  In either case, the company has realized a competitive benefit.
6. Is it possible to distinguish the CDS OA from the 1916 Act (for the purpose of
Article 18.1 of the AD Agreement) because action under the latter (i.e., a court order imposing a
fine or imprisonment) had an automatic, direct, negative impact on entities engaged in
dumping, whereas action under the CDSOA (i.e, untie d subsidies) does not?  Please explain.
4.1437  Brazil argues that this is not the standard of Article 18.1.  A penalty imposed on one party, in
the form of anti-dumping duties, may have the same effect as a benefit provided to the opposing party,
in the form of a subsidy payment.  Article 18.1 does not distinguish between actions on the basis of
whether the exporting producers are penalized or disciplined or the domestic producers are benefited.
4.1438  Let us assume that a country decides not to impose anti-dumping measures where the
constituent elements of dumping are present, but rather to provide its domestic producers with asubsidy equal to the margin of dumping of the foreign producers.  Specifically, the remedy for
dumping is an equalization payment to allow domes tic producers to compete with the dumped foreign
product.  Is this a specific action against dumping?  It would be difficult to say that it is not.  It is
clearly an action to offset or prevent dumping.  Yet, damages are not assessed against the foreign
producers, the domestic producers don’t have to use the payments to price more competitively, andthe impact on the foreign producers is limited to the ex tent that the payments are actually used by the
domestic producers to lower prices.  The action is an intrusion into the marketplace to offset or
prevent dumping.  The AD Agreement limits such intrusions, regardless of the consequences, to the
anti-dumping measures specified in the agreement.WT/DS217/R
WT/DS234/R
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7. Please comment on paras 44, 45 and 46 of the US oral statement at the second
substantive meeting.
4.1439  According to Brazil, footnotes 24 and 56 do not permit action against dumping other than
measures provided for in the AD and SCM Agreements respectively.  The purpose of the footnotes is
not to preclude action authorized under other provisions of the GATT 1994 which might incidentally
also affect dumped or subsidized imports.  The clearest example is the imposition of safeguards
measures under Article XIX of the GATT 1994.  Wi thout footnotes 24 and 56, safeguard measures
could not be imposed on products already subject to anti-dumping or countervailing measures.  While
safeguards measures cannot be imposed as a remedy for dumping or subsidization (i.e. to offset or
prevent subsidization), authorities are not precluded from application of safeguard measures whereanti-dumping and countervailing measures are already in place.  This is the only reasonable reading of
these footnotes and, indeed, is the only possible rationale for their inclusion in the agreements.  Thus,
the limitations in Article 18.1 and 32.1 do not prevent imposition of remedies authorized in other
provisions of the GATT 1994, where the conditions for applying such measures are met, just because
there are already anti-dumping or countervailing measures on the same products.  The footnotes donot, however, authorize independent measures other than those specified in the agreements against
dumping or subsidization.
8. Can a measure be "against" dumping if it does not have an adverse bearing on either
the imported product per se , or the importer, the exporter or foreign producer of that product?
If so, how?
4.1440  Brazil considers that imposition of anti-dumping measures authorized in the AD Agreement
have effects on both the export side of the equation (i.e. the foreign producer, exporter, importer and
the products exported or imported) and on the import side of the equation (i.e the domestic
producers).  Adverse effects on one side are mirrored by beneficial effects on the other.  Thus, anti-dumping measures have an adverse bearing on the export side of the equation by affecting price or
making it more difficult to import a product while benefiting the import side because its competitive
position is improved by the imposition of the anti-dumping measures on its competitors and its
competitors products.  However, a subsidy to the producers in the importing industry also has an
adverse bearing on the foreign producer, exporter, importer and the products exported or imported.
The subsidy provides a benefit to the domestic producers which, like anti-dumping measures,
improves the competitive position of those producers relative to the foreign producers, exporters,importers and their competing product.  As a result, the subsidy granted to domestic producers has an
adverse bearing on the foreign competitors.
4.1441  Put simply, the actions at issue are actions which affect the competitive conditions in the
market, whether they are directed at the import side or the domestic side.  A subsidy to the domestic
producers can have an equally adverse bearing on the parties engaged in the dumping as can an anti-dumping measure authorized by the AD Agreement.
9. The complaining parties assert, on the basi s of para. 122 of the Appellate Body report on
1916 Act, that action "in response to" dumping is necessarily action "against" dumping.  If
action taken "in response to" dumping is of benefit to dumping, dumped imports, or those
engaged in dumping, would such action be "against" dumping?
4.1442  According to Brazil, the Appellate Body used the phrase “in response to” dumping as part of
its explanation of “against” dumping.  In this context, “in response to” clearly means to counteract or,
in the language of Article VI to “offset or prevent” dumping.  It is difficult to see how one could insert
an interpretation which essentially means to “encourage” or “support” dumping, which would be thecase if the action taken is of benefit to dumping, dumped imports, or those engaged in dumping.WT/DS217/R
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Ultimately, the meaning of measures "against" dumping is informed by Article VI and the statement
therein that the actions are to offset or prevent dumping.
3. Canada
(a) Questions to the European Communities
1. The EC asserts that CDSOA offset payments would still constitute "specific action
against dumping" even if they were "financed dire ctly from the US Treasury, and in an amount
unrelated to the amount of collected anti-dumping … duties" (replies to Panel questions,
para. 11).  Does this mean that the CDSOA offset payments would still constitute "specific
action against dumping" even if they were unrelated to the imposition of an anti-dumping
order?
4.1443  Canada argues that Articles 18.1 and 32.1 of the Agreements prohibit “specific actions against
dumping” or a subsidy other than those set out in Article VI of GATT 1994.  Article 18.1 has been
interpreted by the Appellate Body as prohibiting actions “in response to situations presenting the
constituent elements of ‘dumping’ .”239  Such situations may exist in a variety of circumstances: where,
for example, the constituent elements are set out in a law (such as in the United States – 1916 Act
case), or where the action in question cannot take place unless the “constituent elements” were
present.
4.1444  In the case at hand, Byrd Amendment offset payments would not be made without an “order”.
The Byrd Amendment operates to offset the effects of the continued entry of dumped goods after a
duty order is in place.  It reimburses costs that are incurred for the production of like-domestic goodson the assumption that those costs arise from continued dumping despite the order.  Statements by the
drafters of the Amendment further clarify and support this; Canada refers in particular to the
statements of Senators Byrd and DeWine set out in paragraphs 28 - 30 of the First Written Submission
of Canada.  Given that the object and purpose of the Byrd Amendment is to “condemn dumping” and
“neutralise” subsidies, the imposition of an anti-dumping (or countervailing) order is central to theoperation of the Byrd Amendment.
4.1445  Accordingly, if the Byrd Amendment were not related to such orders, it would be a different
measure entirely: it would have a different purpose, and a different impact, than the measure before
the Panel.  Whether that other  measure would constitute a “specific action”, would depend on a
constellation of alternative facts that are not at issue in this dispute.
2. The EC asserts that CDSOA offset payments constitute "specific action against
dumping" because "they are paid only to producers affected by dumping and subsidization"(replies to Panel questions, para. 5).  How does the nature of the recipie nt determine whether or
not offset payments are "against" dumping?
4.1446  According to Canada, the nature of a recipient of a subsidy can have a significant impact on
the legal consequences flowing from, and the legal characterisation of, that subsidy.  Indirect
subsidies paid only to domestic producers may come within the scope of Article III of GATT 1994, as
indeed the Appellate Body found in Canada - Periodicals .  Subsidies paid to a purely export-driven
enterprise or industrial sector may well constitute subsidies contingent upon export performance
regardless of the legal requirements for the payment of that subsidy ( Australia – Leather  and Canada
– Aircraft ).
                                                     
239 United States – Anti-Dumping Act of 1916 , Report of the Appellate Body, WT/DS136/AB/R,
WT/DS162/AB/R, adopted 26 Septembe r 2000, para. 122. [emphasis added]WT/DS217/R
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4.1447  In the case of dumping, “specific action against” dumping – that is, action to deter or counter
the practice  of dumping – may involve action “against” any number of actors: the importer, the
exporter, the domestic producer, or indeed consumer s of “dumped” goods, to name but a few.  Such
action may also include the imposition of a measure not against a specific entity, but “against” theimported good, either directly or indirectly.  For example, a specific consumption tax on dumped
goods would fit within the definition of “specifi c action against dumping.”  Similarly, a specific
subsidy to consumers of domestic like products may also constitute a “specific action against
dumping.”
4.1448  In this instance, the recipients  of the Byrd Amendment subsidy are direct competitors of
importers of dumped (and subsidised) goods.  The Byrd Amendment requires the reimbursement of
certain costs related to the production of the domestic like product, which competes directly againstthe dumped or subsidised goods.  Such a subsidy, paid in respect of the domestic like product, has the
same impact on dumped goods as does an anti-dumping duty: it makes the competing domestic like
product more competitive.*  Accordingly, the nature  of the recipient of a subsidy is highly germane to
the question of whether that subsidy constitu tes a “specific action” within the meaning of
Articles 18.1 and 32.1.
* An anti-dumping duty is presumed  to affect the price of an imported dumped
good in the domestic market.  A Member may not impose a duty higher than the
margin of dumping simply because, for example, the importer absorbs the full impact
of the duties and continues to sell the goods at the same price.  In the same vein,
paying subsidies to producers of domestic like goods must be presumed to affect theconditions of competition between the domestic like good and the dumped good,
whether or not the subsidies are in fact  used to reduce the price of domestic like
goods.
(b) All complaining parties
3. Subsidy A is paid to all domestic producers of product X, and the grant of that subsidy
is not tied in any way to a determination of dumping on the part of exporters/foreign producers
of product X.  Subsidy B is paid to all domestic producers of product X, subject to a finding of
dumping on the part of importers/exporters/foreign producers of product X.  For the purpose of
this question, please assume that subsidy A would not constitute a specific action "against"
dumping (but indicate if you disagree).  (a) Should subsidy B be treated as a specific action
"against" dumping?  (b) Why?  (c) If subsidy B sh ould be treated as a specific action "against"
dumping, what is the difference between the impact of subsidies A and B that means thatsubsidy B constitutes specific action "against" dumping, whereas subsidy A does not?
(d) Subsidy B would be expected to provide the domestic producers of product X with a
competitive advantage over imported products generally.  Does subsidy B provide those
domestic producers with a greater competitive advantage over dumped imports in particular?
Why?
(a) The answer is a qualified “yes”, although the fact situation presented by the panel is not
complete.
(b) According to the Appellate Body in the United States - 1916 Act  case, specific action against
dumping is action taken in response to situations presenting the constituent elements of
dumping.  Based on the limited scenario set out in the question, Subsidy B appears to be a
specific action against dumping as it would not  exist other than in the presence of the
constituent elements of dumping and against or in response to dumping.  This appears to be a
payment made to “offset” dumping other than in ways permitted by Article VI ofWT/DS217/R
WT/DS234/R
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GATT 1994.  Therefore, it is a specific action against dumping that does not accord with the
restrictions stated in Articles 18.1 and 32.1 of the Agreements.
(c) A difference in form may, and in most cases does, indicate a difference in function and,
especially, legal consequence.  For example, a subsidy paid to the producers of an exported
product is not necessarily a prohibited export subsidy; the same subsidy, paid to the same
producer in respect of the same export product would be illegal if it were made legally
contingent upon  export performance.
In this instance, Subsidy A is not related to dumping; it is a simple grant of money subject to
the general disciplines of the SCM Agreement.  Subsidy B is, however, contingent upon afinding of dumping.  There would be a strong presumption that subsidy B has the effect of
countering or offsetting dumping as such , in the sense that it would make it more difficult for
goods found to have been dumped to compete against domestic like products.  However, the
Anti-dumping Agreement permits only three  actions to “counter” dumping – that is, to make
it more difficult for the dumped goods to compete in the domestic market by presumably
raising the price of the dumped good.  Subsidy B, which presumably lowers the price of the
domestic like product, is not a permitted action.
(d) Where dumped imports are also subject to an anti-dumping duty, then those import products
would face two actions against them.  This would place them at a particular competitivedisadvantage to domestic goods that receive subsidy B.  This is especially true if the
producers of dumped imports are funding subsidy B.
4. If an affected domestic producer receives an offset payment under the CDSOA, would
that payment only change the competitive rela tionship between that domestic producer and
foreign producers subject to the relevant anti-dumping order, or would it also change the
competitive relationship between that domest ic producer and all other producers, including
other domestic producers not eligible for offset  payments, and foreign producers not subject to
the relevant anti-dumping order?
4.1449  There are two parts to Canada’s answer.
4.1450  First, as Canada noted in its First Written Submission and its First Oral Statement, the
payment has the potential to change the competitiv e relationship between eligible domestic producers
and all other domestic producers, particularly those that are not eligible for offset payments.  This is
why Canada has also raised a claim under Articles 5.4 and 11.4 of the Agreements.  The competitive
disadvantage of not receiving a payment creates incentives for companies to indicate support for
petitions for investigations and during investigations or face subsidised competition from otherproducers who are eligible.  Those competitors will be eligible to receive subsidies every year the
Order is in place.  Therefore, the impact continues for years.
4.1451  Second, it is also correct that foreign producers not subject to the relevant anti-dumping order
would be affected by the Byrd Amendment  offset payments.  Canada has not denied that the Byrd
Amendment is a subsidy or that WTO Members have an independent right of action under Parts II,III, and V of the SCM Agreement.  Nevertheless, whatever be the collateral impact of Byrd
Amendment offset payments, they operate to, and have the principal impact of, “condemning”
dumping and “neutralising” subsidies.  They were devised for these purposes.  They operate against
dumping and subsidies, and as these offset payments are not permitted actions under Article VI of
GATT 1994, they are prohibited under Articles 18.1 and 32.1 of the Agreements.WT/DS217/R
WT/DS234/R
Page 260
5. If offset payments may be used by affected domestic producers exclusively to bolster
their competitive position vis-à-vis  imports subject to the relevant anti-dumping order, does this
constitute the CDSOA as a "specific action against  dumping"?  If so, isn't it the action by the
affected domestic producers (i.e., how they use the offset payments) that constitutes action"against" dumping, as opposed to the provision of offset payments that may be used by affected
domestic producers exclusively to bolster their competitive position vis-à-vis  imports subject to
the relevant anti-dumping order)?
4.1452  At issue in this dispute is not what the producers do with Byrd Amendment offset payments,
but what the obligations of the United States are in respect of actions it may take against dumping or a
subsidy.
4.1453  Accordingly, what a producer actually does with the payments it receives is not relevant to
whether the United States has structured the payments in such a way that they constitute “specific
action against dumping.”
4.1454  Article VI:2 of GATT 1994 indicates that an action is “against” dumping where it offsets,
counteracts, or prevents dumping.  Therefore, if money is paid to domestic producers for costsincurred related to a product under an order, during the time the order is in place – that is, costs that
arise because dumping continues and dumped goods are entering into the commerce of the
United States – then the fact those costs are being reimbursed ( i.e. offset) to those specific domestic
producers is all that is necessary to constitute action “against” dumping.  The reimbursement of the
costs and the subsidy to domestic producers is in addition to the payment of duties and threatenimports with decreased competitive position.
4.1455  In this respect Canada recalls the disciplines of the SCM Agreement generally and, especially,
the presumptions  underlying those disciplines.  For example, under Part V of the SCM Agreement,
countervailing measures may be imposed on “subsidised” goods where the subsidies are specific and
where “material injury” is caused by the goods in question.  Article 15.1, in particular, provides that adetermination of injury must be made based on an “objective examination” of the volume of the
subsidised imports and the consequent impact on domestic producers.  In other words, Article 15
presumes  that a subsidised good enjoys a competitive advantage, regardless of what the recipients of
the subsidy might actually  have done with the subsidy in question.  More important, this presumption
is not rebuttable: a subsidised producer does not escape discipline under Part V if it proves that it
spent the subsidies in question on holidays for its employees, rather than on bolstering the
competitiveness of its exported product.
4.1456  Therefore, subsidies paid to a domestic industry must be presumed to increase the
competitiveness of the domestic like product; and to the extent that this is done with the object and
effect of “condemning” dumping and “neutralising” subsidies, it is a specific action not permitted by
Articles 18.1 and 32.1 of the Agreements.
6. Is it possible to distinguish the CDS OA from the 1916 Act (for the purpose of
Article 18.1 of the AD Agreement) because action under the latter (i.e., a court order imposing a
fine or imprisonment) had an automatic, direct, negative impact on entities engaged in
dumping, whereas action under the CDSOA (i.e, untie d subsidies) does not?  Please explain.
4.1457  Canada is of the view that nothing in the text of Articles 18.1 and 32.1 provides for such a
distinction; nothing in the context or object and purpose of these Articles would direct the Panel to
read into the Articles words and concepts that are not there.WT/DS217/R
WT/DS234/R
Page 261
4.1458  In any event, as a matter of fact the CDSOA is not an “untied” subsidy.  The Byrd
Amendment requires the payment of “tied” subsidies in two ways.  First, the subsidies are paid only
where there are dumped or subsidised goods in the market.  The offset payments are therefore “tied”
to the presence in the market of such goods, to an amount equal to the duties imposed on, collected
from, the importation of such goods.  Second, the offset payments reimburse  certain costs directly tied
to the production of the domestic like product to domestic producers who participated in an
investigation.  In Canada’s respectful submission, the distinction between future accounting for
subsidies paid, and reimbursement of specific actual expenditure is one without a difference.
4.1459  As well, Byrd Amendment offset payments do indeed have a direct, automatic and negative
impact on “entities engaged in dumping.”  Payments must be made where duties have been collected
and a domestic producer meets the criteria set in the Byrd Amendment.  This action has a directimpact on importers of dumped goods in that money is given directly to competitors for expenses
related to the production of the domestic like product.
4.1460  Finally, the panels in the United States – 1916 Act  case noted that a relevant question to
determine whether an action is specific action against dumping under Article 18.1 is whether the
objective reason for the imposition of a measure is dumping or something else, such as an increase inimports for a safeguard action.  In noting that certain actions such as safeguards are not “specific
action” the Japan Panel stated that, “even though those measures may be legally applied to address
dumping, the basis for their imposition would not objectively be ‘dumping’, but its causes or
effects.… [D]umping could not be considered as the objective reason for the imposition of the
measures …”.
240
4.1461  The Byrd Amendment does not operate but for the continued existence of dumped or
subsidised products within the US after an order is imposed.  The continued existence of dumping and
subsidisation are the “objective reason for the imposition of the measure.”  That “affected domestic
producers” and “qualifying expenditures” exist to receive a payment only reinforce the conclusion
that there is continued existence of dumping and subsidies that must be offset.
7. Please comment on paras 44, 45 and 46 of the US oral statement at the second
substantive meeting.
4.1462  The United States argues that the SCM Agreement does not limit the right of a Member to use
subsidies as measures to counteract dumping and subsidisation.  Canada disagrees.
4.1463  The WTO Agreement restricts a Member’s right to counter-subsidise.  Where a counter-
subsidy amounts to an export contingent or an import substitution subsidy, it is prohibited byArticle 3.  Where such a subsidy falls within the terms of Articles III:2 or III:4 of GATT 1994 and but
not of Article III:8, it is prohibited by that Article.  And where a counter-subsidy is action taken in
respect to the constituent elements of dumping or a subsidy, it is subject to the prohibition set out in
Article 18.1 and 32.1 of the Agreements.  A Member  may not avoid that prohibition by taking an
action in the form of a counter-subsidy, where a counter-subsidy meets the requirements of theseArticles.  Footnote 35 to Article 10 of the SCM Agreement  specifically limits actions that may be
taken against subsidies to countermeasures authorised under that Agreement, duties, provisional
duties and undertaking agreements.
                                                     
240 United States – Anti-Dumping Act of 1916 (Complaint by Japan) , Report of the Panel,
WT/DS162/R, adopted 26 September 2000, para. 6.228.WT/DS217/R
WT/DS234/R
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8. Can a measure be "against" dumping if it does not have an adverse bearing on either
the imported product per se , or the importer, the exporter or foreign producer of that product?
If so, how?
4.1464  Canada asserts that a measure is “against dumping” if it counters the practice  of dumping.
4.1465  Article 18.1 refers to “specific action against dumping.”  In context, and in the light of the
findings of the Appellate Body in respect of Article 18.1, this is action that in some way counters  or
“condemns” dumping – action that does or is capable of adversely affecting the practice  of dumping
as such  so that either the practice is discontinued, or its effects in the market are neutralised.  In other
words, such specific actions are, in a market context, measures that make dumping a costly activity or
practice.
4.1466  Anti-dumping duties have the potential of raising the price of a dumped good in the domestic
market and therefore making it less competitive.  Price undertakings simply raise the price of a
dumped good and “equalise” the conditions of competition of that good in the domestic market.  The
Anti-dumping Agreement permits both of these “specific actions” (and provisional measures).  It
prohibits all other measures that make dumping a costly activity or practice.  These may include (thelist is not exhaustive):
/g167 fines or imprisonment for the importer;
/g167 product sales prohibitions or labelling requirements aimed at dumped goods (“This is
a dumped product”);
/g167 internal taxes aimed at dumped goods;
/g167 internal sales or marketing regulations governing dumped goods (“We sell dumped
goods” signs posted in shop windows);
/g167 fines or imprisonment for consumers of dumped goods; or
/g167 other measures that make the dumped good less competitive in the domestic market,
such as subsidies to competitors specifically tied to dumping or the dumped good in
question.
9. The complaining parties assert, on the basi s of para. 122 of the Appellate Body report on
1916 Act, that action "in response to" dumping is necessarily action "against" dumping.  If
action taken "in response to" dumping is of benefit to dumping, dumped imports, or those
engaged in dumping, would such action be "against" dumping?
4.1467  Canada considers that Articles 18.1 and 32.1 of the Agreements provide that specific action
against dumping or a subsidy must be in accordance with GATT 1994.  The Appellate Body
interpreted the phrase “specific action against” as “action taken in response to situations presenting
the constituent elements of dumping”.  It interpreted “against” to mean “in response to”; the AppellateBody used these terms as synonyms.
4.1468  The Vienna Convention requires that a treaty is interpreted in good faith, in accordance with
the ordinary meaning of its terms in the light of its context and object and purpose .  Accordingly, the
Appellate Body could not have intended its interpretation of the word “against” to mean “ beneficially
in response to.”  The Appellate Body’s interpretation makes no sense if it were to be divorced fromthe specific treaty language it was interpreting in the context in which that treaty language was found.
4.1469  Accordingly, action that benefits dumping or imports or those engaged in dumping is not
specific action “against” dumping.WT/DS217/R
WT/DS234/R
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(c) Questions to Canada
10. At para. 11 of its second oral statement, Canada states that the 1916 Act was an action
"in response to (against, countering, condemning, offsetting)" a practice.  What is the basis for
equating the term "in response to" with the terms "countering", "condemning", and
"offsetting"?
4.1470  In Canada's view, Article 18.1 of the Anti-dumping Agreement provides that specific action
against dumping must be in accordance with GATT 1994.  The Appellate Body, as noted in the
previous question, found that specific action against dumping is action taken “in response to”
situations presenting the constituent elements of dumping.  This is the basis for equating “in response
to” to “against”.
4.1471  Further, Article VI of GATT 1994 indicates that action that offsets or prevents dumping is
action against the practice of dumping.  Article VI:2 indicates that Members may apply a duty to
offset or prevent dumping.  To offset something is to counteract it.  The dictionary defines “offset” as
“[a] counterbalance to or compensation for something else; a consideration or amount diminishing or
neutralizing the effect of a contrary one; a set-off.”241  Further, GATT Article VI:1 provides that
Members recognize that dumping is to be “condemned” if it causes or threatens injury.
(d) Questions to the United States
11. Are there any conditions governing what af fected producers must do with payments
under the CDSOA for qualifying expenditures?  Fo r example, may those payments be used to
improve the competitive position of the affect ed producer in respect of a product totally
unrelated to the product subject to the anti-dumping order?
4.1472  According to Canada, at issue here is whether the Act and the payments under it fall within
the scope of Articles 18.1 and 32.1 of the Agreements.  This is determined by whether the Act callsfor action in response to (or “against”) situations presenting the constituent elements of dumping or
subsidies.  What producers do with the payments once they receive them does not bear upon that
issue.
4.1473  The Act provides for payments to reimburse costs incurred because of a continued presence
of dumped and subsidised imports in the US market after a duty is imposed.  This money is paid to
domestic producers to offset the costs they incurred for the production of the like-domestic product
that is injured because of dumping or subsidisation.  This makes it action against dumping orsubsidies.  Money is fungible; it can be used for any purpose.  Producers are being reimbursed for
costs already incurred due to dumping and subsidisat ion; this critical point establishes that the
payments amount to “specific action against dumping” or a subsidy.
4.1474  The restrictions on the costs that may be reimbursed further support this conclusion.  A
certification for reimbursement must enumerate the category under which an expense falls and theamount claimed. The expense must relate to the production of the like-domestic good to that subject
to the order and be incurred after the order is imposed and before it terminates.  The relevant
categories of “qualifying expenditures” are capital operational expenditures:
(a) manufacturing facilities
                                                     
241 The New Shorter Oxford English Dictionary , Vol. 2 (Oxford: Clarendon Press, 1993), p. 1985.
(Exhibit CDA-7)WT/DS217/R
WT/DS234/R
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(b) equipment
(c) research and development
(d) personnel training
(e) acquisition and technology(f) health care benefits to employees paid for by the employer
(g) pension benefits to employees paid for by the employer
(h) environmental equipment, training or technology
(i) acquisition of raw materials and other inputs
(j) working capital or other funds needed to maintain production
12. Is there any requirement that qualifying expenditure must be incurred by affected
producers in relation to their competition with dumped imports specifically, rather than their
competition with imported and domestic products more generally?
4.1475  Canada submits that the reimbursement must relate to the dumped product; and the payment
is only in the amount of the duties collected.
4. Chile
(a) Questions to all complaining parties
3. Subsidy A is paid to all domestic producers of product X, and the grant of that subsidy
is not tied in any way to a determination of dumping on the part of exporters/foreign producers
of product X.  Subsidy B is paid to all domestic producers of product X, subject to a finding ofdumping on the part of importers/exporters/foreign producers of product X.  For the purpose of
this question, please assume that subsidy A would not constitute a specific action "against"
dumping (but indicate if you disagree).
(a) Should subsidy B be treated as a specific action "against" dumping?(b) Why?
4.1476  Chile does not understand the usefulness of this question since it does not address the issue
raised by Chile and the complainants.  The hypothesis presented by the Panel is not even related to the
characteristics of the CDSOA since the question is based in a programme that benefits all domestic
producers, a substantial difference with the CDSOA.  Having said that and for the purpose of thehypothesis, Subsidy B should be treated as a specific action "against" dumping because the condition
that triggers the payment of the subsidy is the finding of dumping, i.e., a situation that has the
constituent elements of dumping. Hence, the subsidy is an action taken specifically against dumping.
(c) If subsidy B should be treated as a spec ific action "against" dumping, what is the
difference between the impact of subsidies A and B that means that subsidy Bconstitutes specific action "against" dumping, whereas subsidy A does not?
4.1477  Chile is of the view that the term "impact" is very broad and ambiguous. Nevertheless an
action against dumping is per se  a specific action not because of its impact but because it is taken in
response to a situation that presents the constituen ts elements of dumping.  The potential or actual
impact of an action or measure is not within the lega l elements that have to be considered in order to
qualify it as a specific action against dumping. Neither GATT Article VI as interpreted by ADA
Article neither 18.1 nor the 1916 Act case incorporate the notion of impact of a subsidy as part of the
definition of “specific action against dumping”.WT/DS217/R
WT/DS234/R
Page 265
(d) Subsidy B would be expected to provide the domestic producers of product X with a
competitive advantage over imported products generally.  Does subsidy B provide those
domestic producers with a greater competitive advantage over dumped imports in
particular?  Why?
4.1478  Again, Chile does not understand the scope and meaning of this question and how it is related
with the question raised by the complainants in th is dispute, since it is based on the hypothetical case
not even closely similar to the CDSOA, given that one of the distinguishable elements in the latter is
not present in the hypothesis presented by the Panel, i.e. that offsets are distributed only to "affected"
producers
4.1479  But for academic purposes Chile will answer the Panel's question with a no, not particularly.
The competitive advantages between domestic producers and dumped imports could be affected or
influenced by a great number of factors. For example, the amount of the subsidy, the presence of other
subsidies, the cost of production, the social—economic conditions, the eligibility requirements of
domestic producers to benefit from the subsidy, the qualifying expenditures covered by the subsidy,
etc. In other words, this impact has to be analysed on a case-by-case basis and having all the relevantfactors at hand.
4. If an affected domestic producer receives an offset payment under the CDSOA, would
that payment only change the competitive rela tionship between that domestic producer and
foreign producers subject to the relevant anti-dumping order, or would it also change the
competitive relationship between that domest ic producer and all other producers, including
other domestic producers not eligible for offset  payments, and foreign producers not subject to
the relevant anti-dumping order?
4.1480  Assuming that the question refers to producers of the same product, and as Chile said in its
second oral statement
242 the offset payment will obviously change the competitive relationship
between the domestic producer that receives the payment and all other producers, both domestics and
foreigners (subject or not to the relevant anti-dumping order).
5. If offset payments may be used by affected domestic producers exclusively to bolster
their competitive position vis-à-vis  imports subject to the relevant anti-dumping order, does this
constitute the CDSOA as a "specific action against  dumping"?  If so, isn't it the action by the
affected domestic producers (i.e., how they use the offset payments) that constitutes action
"against" dumping, as opposed to the provision of offset payments that may be used by affected
domestic producers exclusively to bolster their competitive position vis-à-vis  imports subject to
the relevant anti-dumping order)?
4.1481  Chile considers that whether or not the affected producers are restricted to use the offset
payments exclusively to bolster their competitive position vis-à-vis  imports subject to the relevant
anti-dumping order, what constitutes the CDSOA a “specific action against dumping” is that it is an
action taken in response to a situation that presents the constituent elements of dumping.
4.1482  The main element to consider if the CDSOA is a “specific action against dumping” is not the
use the affected producers may give to the offset payments.  If it weren't only restricted  "to bolster
their competitive position..." it would still be a "specific action against dumping".   The WTOcommitments are made by governments and not by th eir private sectors.  The question that must be
raised is why those producers are eligible for these payments. As Chile stated in February, "It is not
the spending of the money, in and of itself,(…) It is the manner in which the United States spends that
                                                     
242 Para. 21, Second Oral Statement by Chile, 12 March 2002WT/DS217/R
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money that  constitutes a violation of the various provisions cited by the complainants."243  It is the
fact that only with a positive finding in a dumping investigation (i.e., when dumping, injury and
causality have been proved) the offset payments are triggered. Whether domestic producers use this
money to go on holidays or to bolster their competitive position is not an issue for purposes ofconsidering the CDSOA a “specific action against dumping”.
4.1483  Moreover, as Chile has stated earlier, money is fungible, so whether the beneficiaries use the
money for what is provided or intended to, is something very difficult to prove escaping from the
scope of the investigating authorities.  If it were, it means that for future investigations, complaining
parties will be in an obligation to present evidence that payments made by governments were in fact
used in alleviating or improving the competitive pos ition of domestic industry, otherwise, it would not
be neither a subsidy nor a “specific action against dumping”.
6. Is it possible to distinguish the CDS OA from the 1916 Act (for the purpose of
Article 18.1 of the AD Agreement) because action under the latter (i.e., a court order imposing a
fine or imprisonment) had an automatic, direct, negative impact on entities engaged in
dumping, whereas action under the CDSOA (i.e, untie d subsidies) does not?  Please explain.
4.1484  Before answering the question, Chile would like to point out that as stated by the Panel, these
questions do not prejudge the Panel’s findings.  In that sense, Chile understands that in this question
in particular the Panel is not making a finding that action under the CDSOA has not an automatic,
direct, negative impact on entities engaged in dumping.  If that were the case, Chile certainly does not
agree with that conclusion.
4.1485  For the purpose of Article 18.1 of the AD Agreement, both measures are specific actions
against dumping because both are an "action that is taken in response to situations presenting the
constituent elements of "dumping" "
244.  The Appellate Body in the 1916 Act case did not incorporate
adjectives as "automatic" or "direct" for a measure to be considered a "specific action".  The only
requisite was - at a minimum - that the action is taken  when the constituent elements of "dumping"are present.
7. Please comment on paras 44, 45 and 46 of the US oral statement at the second
substantive meeting.
4.1486  Chile would like to point out that there seems to be an error with the numbering of the
paragraphs between the oral statement the US rendered at the Second Substantive Meeting with the
Panel and the electronic version the US sent to the Secretary and the parties. Therefore, Chile wouldlike to know which version of the US submission the Panel is making reference to in its question,
before commenting on it.
8. Can a measure be "against" dumping if it does not have an adverse bearing on either
the imported product per se , or the importer, the exporter or foreign producer of that product?
If so, how?
4.1487  Chile is of the view that the question about the qualification of a measure as a “specific action
against dumping” should be analysed on a normative or prescriptive basis rather than a descriptive
one. If a measure is taken in response to a situation that has the constituent elements of dumping, this
measure shall comply with the obligations and legal standards set forth in Article VI of GATT 1994as interpreted by the ADA. Hence, the measure must  only consist in one relief adopting one of the
                                                     
243 Para. 4, Second Written Submission of Japan and Chile, 27 February 2002.
244 Para. 122 Appellate Body, WT/DS136/AB/R, WT/DS162AB/R.WT/DS217/R
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three forms of relieves allowed by this normative frame. Under this normative frame, the adverse
bearing of a measure taken in response to dumping is a factual issue not part of what has to be
assessed in order to consider the measure a specific action against dumping.
4.1488  In addition, there seems to be confusion betwee n the expected results from an action and their
effects.  Country A may design a measure against dumping (or whatever) and expect some results.
Whether these results are finally reached is other problem.  In the case under consideration by the
Panel, CDSOA stands as a second specific response to dumping, because, besides the anti-dumping
measure adopted, the domestic producers will receive an offset payment given the same reason.  This
means that dumping is being tackled by two ways.
9. The complaining parties assert, on the basi s of para. 122 of the Appellate Body report on
1916 Act, that action "in response to" dumping is necessarily action "against" dumping.  If
action taken "in response to" dumping is of benefit to dumping, dumped imports, or those
engaged in dumping, would such action be "against" dumping?
4.1489  Chile sees no logic in this question for purposes of what is at stake in this dispute.
Furthermore, Chile sees no logic in an action in response to dumping intended to benefit dumping,dumped imports or those engaged in dumping.
4.1490  In its answers to the questions raised by the Panel on 26 February, Chile addressed this point.
In that opportunity, and on the basis of paragraph 122 of the Appellate Body report on 1916 Act,
Chile stated that "nothing in that report allows to conclude that a measure in response to dumping (or
subsidy) it is not a measure against dumping."  Chile added that its interpretation was that theAppellate Body was plainly using the concept of "i n response to" as a way to explain what "action
against" should be understood to mean.   So in that sense the finding suggests that "specific action
against dumping" is not a subset of action "in response to" dumping.  Thus, even if the response could
have positive effects, it will be an action against dumping.
4.1491  The key issue here is that an action is specific against dumping because it is adopted in
response to a situation that has the constituent element of dumping, whether or not it is finally "of
benefit to dumping, dumped imports, or those engaged in dumping".
4.1492  Article 18.1 of the ADA, the ADA in itself and Article VI of GATT 1994 represent the
express and written intention of all WTO Members to address and regulate the treatment of dumping
by measures taken against it (“in opposition to”). This means that even though dumping is not in itself
prohibited under the WTO, under some circumstances, under certain conditions and following certain
procedures, Members are allowed to adopt some trade remedies against it.  That is why the Panel orthe Appellate Body in the 1916 Act case never were in a position nor intended to consider if a
measure taken in response to dumping was a specific measure against it when it benefited dumping,
dumped imports, or those engaged in dumping.
5. European Communities, India, Indonesia and Thailand
(a) Questions to the European Communities
1. The EC asserts that CDSOA offset payments would still constitute "specific action
against dumping" even if they were "financed dire ctly from the US Treasury, and in an amount
unrelated to the amount of collected anti-dumping … duties" (replies to Panel questions, para.
11).  Does this mean that the CDSOA offset payments would still constitute "specific action
against dumping" even if they were unrelated to  the imposition of an anti-dumping order?WT/DS217/R
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4.1493  The offset  payments would constitute “specific action against dumping” as long as they were
made in response to a finding of dumping, regardless of whether, in addition to the offset  payments,
the US authorities imposed anti-dumping duties on the basis of that finding.
2. The EC asserts that CDSOA offset paymen ts constitute "specific action against
dumping" because "they are paid only to producers affected by dumping and subsidization"
(replies to Panel questions, para. 5).  How does the nature of the recipie nt determine whether or
not offset payments are "against" dumping?
4.1494  The remark cited by the Panel does not address the meaning of the term “against” as such.
The point made by the EC was that the offset  payments constitute action taken “in response to a
situation presenting the constituent elements of dumping” (and, therefore, “specific action against
dumping”) because they are paid exclusively to the “affected domestic producers”, the existence ofwhich presupposes a finding of dumping.  This was explained in further detail in the EC’s Reply to
Question 2.
(b) Questions to all complaining parties
3. Subsidy A is paid to all domestic producers of product X, and the grant of that subsidy
is not tied in any way to a determination of dumping on the part of exporters/foreign producersof product X.  Subsidy B is paid to all domestic producers of product X, subject to a finding of
dumping on the part of importers/exporters/foreign producers of product X.  For the purpose of
this question, please assume that subsidy A would not constitute a specific action "against"
dumping (but indicate if you disagree).  (a) Should subsidy B be treated as a specific action
"against" dumping?  (b) Why?  (c) If subsidy B sh ould be treated as a specific action "against"
dumping, what is the difference between the impact of subsidies A and B that means that
subsidy B constitutes specific action "against" dumping, whereas subsidy A does not?
(d) Subsidy B would be expected to provide the domestic producers of product X with a
competitive advantage over imported products generally.  Does subsidy B provide those
domestic producers with a greater competitive advantage over dumped imports in particular?
Why?
4.1495  The EC, India, Indonesia and Thailand agree that Subsidy A is not “specific action against
dumping” because it is not taken “in response to a situation presenting the constituent elements of
dumping”.  The EC, India, Indonesia and Thailand further agree that Subsidy B should be treated as a
specific action “against” dumping, because it is a “response to a situation presenting the constituent
elements of dumping”.
4.1496  The difference between the impact of Subsidies A and B is the following: While both can
have an adverse “impact” on dumped imports, Subsidy A, unlike Subsidy B, does nothing to prevent
or stop dumping as such.  Because Subsidy A is not a response to dumping, foreign producers cannot
prevent its granting by refraining from dumping.  Thus, Subsidy A has no dissuasive effect against
dumping. To the contrary, Subsidy A may encourage foreign exporters to engage in dumping in orderto match the subsidised prices of the domestic producers.
4.1497  In contrast, Subsidy B, like the offset  payments, is a “penalty” for dumping, which may, as
such, dissuade foreign producers from engaging in dumping or induce them to stop dumping.  This
effect of Subsidy B is not addressed under Part III of the SCM Agreement, because it does not result
from the subsidy as such, but from the condition for its granting.
4.1498  The following example illustrates further the di fference between Subsidy A and Subsidy B. If
an importer of dumped goods is sentenced to prison for customs fraud committed in connection with
the importation of those goods the penalty has the same “impact” upon that importer, andWT/DS217/R
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consequently upon the imported goods, as one of the actions at issue in 1916 Act.  Yet, it is not
“specific action against dumping” because, being a response to customs fraud and not to dumping, it
does nothing to prevent or stop dumping as such.
4.1499  This example evidences that what distinguishes a “specific action against dumping” from
other actions with an adverse “impact” upon dumped imports (or upon “entities engaged in dumping”)
is the fact that it is taken in response to dumping, rather than the nature or the extent of such “impact”
or the precise way in which it is brought about.
4.1500  Finally, as will be explained in its reply to question 4, the EC agrees that Subsidy B would
provide domestic producers of product X with a greater competitive advantage over dumped imports
in particular.
4. If an affected domestic producer receives an offset payment under the CDSOA, would
that payment only change the competitive rela tionship between that domestic producer and
foreign producers subject to the relevant anti-dumping order, or would it also change the
competitive relationship between that domest ic producer and all other producers, including
other domestic producers not eligible for offset  payments, and foreign producers not subject to
the relevant anti-dumping order?
4.1501  As a “collateral” effect, the CDSOA may change also the competitive relationship between
the “affected” producers and non-dumped imports/”non-affected” producers.  However, because the
CDSOA is a response to “dumping”, rather than to “imports” or to “domestic competition”, its effectsupon dumped imports are qualitatively different.
4.1502  First, the very existence of the CDSOA has a deterring effect on dumping.  The mere
possibility that the offsets  payments will harm their exports may dissuade foreign exporters from
engaging in dumping.  This dissuasive effect is additional to that of the ordinary US anti-dumping
laws.  In contrast, the CDSOA has no dissuasive effect with respect to non-dumped imports or withrespect to sales by the domestic producers because it is not a response to those practices.  The
exporters of non-dumped goods and the non-affected domestic producers can do nothing and,
therefore, will do nothing to prevent the payment of the offsets .
4.1503  Second, once the offset  payments have been made, an exporter of non-dumped products, or a
non-affected domestic producer, may respond by lowering their prices, thereby cancelling the effects
of the offset  payments.  In contrast, if the exporters of dumped goods did the same, that would
increase their dumping margin, which would lead to higher anti-dumping duties and, consequently, tobigger offset  payments, thereby increasing, rather than reducing the price advantage of the “affected”
domestic producers.
5. If offset payments may be used by affected domestic producers exclusively to bolster
their competitive position vis-à-vis  imports subject to the relevant anti-dumping order, does this
constitute the CDSOA as a "specific action against  dumping"?  If so, isn't it the action by the
affected domestic producers (i.e., how they use the offset payments) that constitutes action
"against" dumping, as opposed to the provision of offset payments that may be used by affected
domestic producers exclusively to bolster their competitive position vis-à-vis  imports subject to
the relevant anti-dumping order)?
4.1504  As explained below in the reply to Question 11, the offset  payments are tied to the production
of products subject to anti-dumping orders and, therefore, must be assumed to benefit only thoseWT/DS217/R
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products in accordance with standard principles for the attribution of subsid ies.  Indeed, the CDSOA
itself is premised on that assumption.
4.1505  On the other hand, the EC, India, Indonesia and Thailand doubt that, in practice, the affected
producers may “bolster their competitive position” vis-à-vis dumped imports of the subject productswithout, at the same time, bolstering also their competitive position vis-à-vis non-dumped imports and
other domestic sales of like products. At any rate, that would not preclude the offset  payments from
being “specific action against dumping”. The Panel’s question assumes that “specific action against
dumping” means “action that can have an adverse impact on dumped imports exclusively”.  For the
reasons explained below, the EC, India, Indonesia and Thailand do not agree with that proposition.
4.1506  As made clear by the Appellate Body, a “specific action against dumping” is an action taken
in response to dumping.  Of course, if such action is to be effective in order to prevent or offset
dumping (unlike, for example, flying the flag at half mast), it must be capable of having some sort of
adverse impact on the dumped imports (or on the “entities engaged in dumping”).  But, as explained
above, what distinguishes a “specific action against dumping” is the fact that it is taken in response to
dumping, rather than the extent of such adverse impact.
4.1507  The offset  payments are not paid in response to domestic competition or in response to non-
dumped imports, but only and exclusively in response to dumping.  For that reason, they constitute
“specific action against dumping”.
4.1508  Furthermore, the fact that the offset  payments can have a “collateral” adverse impact on other
imports or on non-affected domestic producers does not detract from the fact that, at the same time,
they have also an adverse impact on dumped imports.  Thus, the CDSOA is not just a “specific actionagainst dumping”, but also one which can be effective in order to prevent or offset dumping.
4.1509  At any rate, as shown above, the effects of the CDSOA with respect to dumping are
qualitatively different from its effects with respect to non-dumped imports/sales by “non-affected”
domestic producers.  Thus, even if it were correct that “specific action against dumping” means
“action that can have an adverse impact exclusively on dumped imports”, the CDSOA would still be“specific action against dumping” to the extent of that difference.
4.1510  In particular, the CDSOA has a dissuasive effect “exclusively” against dumping.  The fact
that the offset  payments may have also an incidental adverse impact on non-dumped imports/non-
affected domestic producers does not negate such “exclusive” effect.  Nor, even less, does the
theoretical possibility that, against the US Congress’ own expectations, the offsets  may be used to
cross-subsidise other products.
6. Is it possible to distinguish the CDS OA from the 1916 Act (for the purpose of
Article 18.1 of the AD Agreement) because action under the latter (i.e., a court order imposing a
fine or imprisonment) had an automatic, direct, negative impact on entities engaged in
dumping, whereas action under the CDSOA (i.e, untie d subsidies) does not?  Please explain.
4.1511  The EC, India, Indonesia and Thailand argue that it is obvious that the “actions” provided
under the 1916 Anti-dumping Act  do not operate “against” dumping in the same way as the offset
payments do.  But this does not preclude the offset  payments from being also “specific action against
dumping”.
4.1512  The offset  payments can have also a “negative impact” on “entities engaged in dumping”.
The only difference between the offset  payments and the actions at issue in the 1916 Act is that the
latter applied “directly” to the importers.WT/DS217/R
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4.1513  However, there is nothing in the 1916 Act panel reports or in the Appellate Body report which
suggests that the notion of “specific action against dumping” should be restricted to those types of
measures which apply “directly” to “entities engaged in dumping”.
4.1514  To the contrary, the panels in 1916 Act concluded that “the type of measures imposed under
the 1916 Act is not relevant to determining whether the 1916 Act falls within the scope of Article VI”
and that “whether or not Article VI applies doe s not depend on whether a Member addresses dumping
through the imposition of duties or through the imposition of other remedies … [T]he application of
Article VI depends on whether the practice that triggers the imposition of the measures is dumping.”
4.1515  The Appellate Body agreed with the panels and ruled that “specific action against dumping”
means “action that is taken in response to a situation presenting the constituent elements of dumping”.
Furthermore, the Appellate Body observed that “s pecific action against dumping could take a wide
variety of forms”.
4.1516  In sum, what distinguishes a “specific action against dumping” from other actions with an
“adverse impact” on dumped imports is that it is taken in response to dumping, rather than the nature
or extent of such impact or the precise way in which it is brought about.
4.1517  Furthermore, in the context of the SCM Agreement, the view that “specific action against a
subsidy” includes only action that applies “directly” to subsidised imports (or entities engaged in
subsidization) would lead to manifestly absurd  results.  The “countermeasures” provided for in
Articles 4 and 7 of the SCM Agreement may take a wide variety of forms, including both measures
which would qualify as “specific action against a subsidy” according to the US interpretation (e.g. a
duty on imports which benefit from export subsidies or which cause “adverse effects” of the typedescribed in Article 5.1 a)) and measures which have only an indirect impact on the subsidising
Government (e.g. a duty on imports of a different product).  Thus, on the US interpretation,
Article 32.1 would have to be read as providing that some “countermeasures” (those which apply
directly to imports of subsidised goods) have to be taken “in accordance” with  Parts II or III of the
SCM Agreement, while other countermeasures (those which do not apply “directly” to imports ofsubsidised goods) would not.  Clearly, such distinction would make no sense.
4.1518  Presumably, the US response to the above would be that the provisions of the GATT 1994
referred to in Article 32.1 are exclusively those of Article VI.  As explained elsewhere, that view is
incorrect: the SCM Agreement is also an interpretation of Article XVI. But, assuming arguendo  that it
were not, the US interpretation of “specific action against a subsidy” as action that applies “directly”
to subsidised imports would lead to an even more ab surd result.  It would mean, for example, that if a
Member wanted to take countermeasures against a prohibited export subsidy in the form of importduties on the subsidised products it would have to comply first with the substantive and procedural
requirements of Part V of the SCM Agreement.
4.1519  The only logical interpretation of Article 32.1 is that “countermeasures” are always “specific
action against a subsidy” and must be taken “in accordance with” Article XVI, as interpreted by
Parts II and III.
7. Please comment on paras 44, 45 and 46 of the US oral statement at the second
substantive meeting.
4.1520  The EC, India, Indonesia and Thailand consider that the US concerns are exaggerated.  The
mere fact of granting a subsidy to a company that competes with a foreign producer, which happens tohave received a subsidy first would not constitute a “specific action against a subsidy”.  For that, it
would be necessary that the subsidy could be characterised as action that "may be taken only when theWT/DS217/R
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constituent elements of a subsidy are present”.  In other words, it would have to be shown that the
granting of the subsidy was contingent upon a previous finding of foreign subsidization.  The
Complainants are not aware that other WTO Members “engage regularly” in such  kind of
“conditional” counter-subsidization.
4.1521  Footnote 35 of the SCM Agreement does not refer to dispute settlement action under
Article 32.1 as a permitted form of relief because such action is not “specific action against a
subsidy”. Rather, it is an action against a “specific action against a subsidy” prohibited by
Article 32.1, which prohibited action may take “a wide variety of forms”, including that of a subsidy.
4.1522  The action taken by the EC, India, Indonesia and Thailand against the CDSOA is not a
response to a subsidy qua subsidy.  The EC, India, Indonesia and Thailand do not claim that the
CDSOA is prohibited by Article 32.1 because it is a subsidy, but because it is a specific action againsta subsidy.  Indeed, the Complainants have not even claimed that the CDSOA is a subsidy.  A finding
that the CDSOA violates Article 32.1 is not dependent upon a finding that it constitutes a “subsidy”
within the meaning of Article 1 of the SCM Agreem ent.  In sum, the relief, which the EC, India,
Indonesia and Thailand seek to obtain in this case is not relief from a subsidy but rather from a
violation of Article 32.1.
4.1523  It may be added that, by the same token, footnote 35 does not mention dispute settlement
action based upon Article III:2 of the GATT as a permitted form of relief.  And yet it is well
established that the fact that a discriminatory tax constitutes a subsidy for the purposes of the SCM
Agreement does not exclude the application of Article III:2.
8. Can a measure be "against" dumping if it does not have an adverse bearing on either
the imported product per se , or the importer, the exporter or foreign producer of that product?
If so, how?
4.1524  As mentioned above, the EC, India, Indonesia and Thailand would agree that, to be effective,
a “specific action against dumping” must be capable of having some adverse impact upon the dumpedimports (or upon the “entities engaged in dumping”).  The offset  payments can have such an adverse
impact upon dumped imports.
9. The complaining parties assert, on the basi s of para. 122 of the Appellate Body report on
1916 Act, that action "in response to" dumping is necessarily action "against" dumping.  If
action taken "in response to" dumping is of benefit to dumping, dumped imports, or those
engaged in dumping, would such action be "against" dumping?
4.1525  The EC, India, Indonesia and Thailand refer to their reply to Question 8.
(c) Questions to the United States
11. Are there any conditions governing what af fected producers must do with payments
under the CDSOA for qualifying expenditures?  Fo r example, may those payments be used to
improve the competitive position of the affect ed producer in respect of a product totally
unrelated to the product subject to the anti-dumping order?
4.1526  The CDSOA does not say what the affected producers must do with the offset  payments,
because the conditions for receiving the offset  payments are already sufficient to ensure that they
achieve their stated purpose (i.e. to offs et continued dumping or subsidization).WT/DS217/R
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1.1527  Contrary to what is stated in Question 6, the offset  payments are not “untied” subsidies.  They
are clearly tied to the production of the products, which are the subject of an anti-dumping or a
countervailing duty order:
• first, the offset  payments are paid exclusively to the producers of subject products.  A
company which does not manufacture the product covered by the order concerned
during a fiscal year is not entitled to the distribution of the duties collected during that
year pursuant to that order.
• second, the offset  payments are paid for, and in proportion to, certain types of
“qualifying expenses” incurred after the issuance of the anti-dumping or
countervailing duty order with respect to the production of the same product which is
the subject of the order in question.
4.1528  Thus, the offset  payments operate as a reimbursement of certain expenses incurred by the
affected producers with respect to the production of subject products.  As such, the offset  payments
lower the production cost of the subject products and must be assumed to be passed through into
lower prices for those products.
4.1529  This is not just the EC, India, Indonesia and Thailand's assumption.  The CDSOA is premised
upon the same assumption. If the offset  payment were not used for the benefit of the subject products,
the CDSOA could not achieve its stated purpose to offset continued dumping and subsidization.
4.1530  Furthermore, the assumption that the subsidies that are tied to the production of a given
product are used for the benefit of that product is a sound and generally accepted one.  The same
assumption is made in paragraph 3 of Annex IV of the SCM Agreement as well as by most, if not all
the countervailing-duty authorities around the world.
4.1531  For instance, the countervailing duty regulations of the United States provide that “if a
subsidy is tied to the production or sale of a particular product, the Secretary will attribute the subsidy
only to that product.”
4.1532  In the view of the US authorities, whether a su bsidy is tied to a given product requires a case-
by-case judgement. Nevertheless, those authorities have indicated that, because money is fungible, indeciding whether a subsidy is “tied” they will take into account the purpose of the subsidy at the time
when it is granted, rather than how it is actually used.
4.1533  In the case at hand, both the stated purpose of the CDSOA and the purpose revealed by its
design and structure (and in particular by the two above mentioned conditions) is to benefit the
subject products.
4.1534  Of course, since money is fungible, there is a theoretical possibility that the offset  payments
may be used to cross-subsidise a different product.  But that risk is inherent in any product-tied
production subsidy.  There are no “conditions” which can exclude completely such possibility, short
of controlling the price of the subsidised products.
4.1535  That theoretical possibility, nevertheless, does not  detract from the indisputable fact that the
granting of the offset  payments is tied to the anticipation that they will be used for the benefit of the
subject products.  Quite simply, the US Congress  would not have passed the CDSOA if it had
expected that the offset  payments would not be used for offsetting dumping or subsidization.WT/DS217/R
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4.1536  Nor does the theoretical possibility that the offsets  may be diverted to other uses deprive the
CDSOA from its dissuading effects vis-à-vis  foreign exporters of the subject products, which are
based on their rational expectations as to how the affected domestic producers are likely to use the
offsets .  Indeed, if the US Congress expects that the offset  payments will be used to offset dumping
and subsidization, it is questionable whether it would be wise for the foreign exporters to take a
different view.
6. Japan
(a) Questions to the European Communities
1. The EC asserts that CDSOA offset payments would still constitute "specific action
against dumping" even if they were "financed dire ctly from the US Treasury, and in an amount
unrelated to the amount of collected anti-dumping … duties" (replies to Panel questions, para.11).  Does this mean that the CDSOA offset payments would still constitute "specific action
against dumping" even if they were unrelated to  the imposition of an anti-dumping order?
4.1537  Japan shares the position of the EC.  The source of the funds, in and of itself, is not the
determinative factor of whether the CDSOA offset payments constitute “specific action againstdumping.”  Regardless of the source of the funds, the payments constitute “specific action against
dumping” because they are made only when the constituent elements of dumping have been
established and are made to counteract dumping.  The CDSOA offset payments would still constitute
“specific action against dumping” if they were conditioned on the presence of the constituent
elements of dumping and taken in response to situations presenting those constituent elements, even ifthe source of funds for the offset payments were unrelated to the imposition of an anti-dumping order.
(See Japan’s second submission and Question 3 below for further discussion of the issue of “specific
action against dumping”).
2. The EC asserts that CDSOA offset payments constitute "specific action against
dumping" because "they are paid only to producers affected by dumping and subsidization"(replies to Panel questions, para. 5).  How does the nature of the recipie nt determine whether or
not offset payments are "against" dumping?
4.1538  Japan shares the position of the EC.  The recipient of the CDSOA offset payments is one of
the crucial factors when determining whether the offset payment constitutes a “specific action against
dumping.”
4.1539  The CDSOA offset payment is a countermeasure against dumping.  The offset payment is
made only when the investigating authority determ ines that US domestic producers are injured by
dumped imports.  The CDSOA offset payments are made for the “qualifying expenditure”, i.e.,
production costs of like products, to compensate these costs.  The CDSOA offset payments thus
operate to counteract dumping.  The payment under the CDSOA therefore is a specific action against
dumping.
4.1540  The Panel should not be confused by the misleadi ng explanations of the United States that the
CDSOA sets forth no condition on how recipients use the payment so it would be used for whatever
they want.
(b) Questions to all complaining parties
3. Subsidy A is paid to all domestic producers of product X, and the grant of that subsidy
is not tied in any way to a determination of dumping on the part of exporters/foreign producersWT/DS217/R
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of product X.  Subsidy B is paid to all domestic producers of product X, subject to a finding of
dumping on the part of importers/exporters/foreign producers of product X.  For the purpose of
this question, please assume that subsidy A would not constitute a specific action "against"
dumping (but indicate if you disagree).  (a) Should subsidy B be treated as a specific action"against" dumping?  (b) Why?  (c) If subsidy B sh ould be treated as a specific action "against"
dumping, what is the difference between the impact of subsidies A and B that means that
subsidy B constitutes specific action "against" dumping, whereas subsidy A does not?
(d) Subsidy B would be expected to provide the domestic producers of product X with a
competitive advantage over imported products generally.  Does subsidy B provide those
domestic producers with a greater competitive advantage over dumped imports in particular?
Why?
4.1541  Japan understands that “product X” in subsidy A is not considered as being dumped, since the
granting of subsidy A is not tied in any way  to the determination of dumping.
(a) Yes.
(b) Because subsidy B is made: (i) “ subject to a finding of dumping”  of imported
product X; and, (ii) to domestic producers of product X.  A subsidy that is “subject to
a finding of dumping” is conditioned and premised on the presence of the constituent
elements of dumping.  Thus, subsidy B is a “specific action against dumping.”
The Appellate Body found in the 1916 Act case that “specific actions against
dumping” are those actions “taken in response to situations presenting the constituent
elements of dumping.”245 The interpretation of “specific action against dumping”, i.e.,
actions “taken in response to situations presenting the constituent elements of
dumping” encompasses two elements: (i) the action is conditioned upon situationspresenting the constituent elements of dumping; and, (ii) the action is taken to
counteract
246 dumping.
Subsidy B satisfies these two elements .  In comparison, subsidy A would not
constitute a specific action against dumping because the grant of subsidy A is not
conditioned on the presence of “constituent elements of dumping.”
(c) The fact that subsidy A is not a specific action against dumping, whereas subsidy B is
such an action, does not depend on impact, if by impact is meant the effect on the
recipient.  The difference is not in the effe ct but in the criteria for eligibility, i.e.
whether an action is conditioned upon the situations presenting constituent elements
of dumping.  To receive subsidy A, a recipient does not have to establish theconstituent elements of dumping; to receive subsidy B, it must do so.
(d) Subsidy B is an action against dumping beyond those actions permitted by the
Agreement (provisional measures, final measures, and undertakings) to counteract
dumping. The question is whether subsidy B counteracts dumping.  Whether subsidyB confers an advantage to domestic producers over non-dumped imports, if any, in
addition to an advantage over dumped imports, does not affect the conclusion that
subsidy B addresses and counteracts dumping.   
                                                     
245 1916 Act, para. 122.
246 According to the Shorter Oxford Dictionary, “cou nteract” means to “neutralize the action or effect
of”.WT/DS217/R
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4. If an affected domestic producer receives an offset payment under the CDSOA, would
that payment only change the competitive rela tionship between that domestic producer and
foreign producers subject to the relevant anti-dumping order, or would it also change the
competitive relationship between that domest ic producer and all other producers, including
other domestic producers not eligible for offset  payments, and foreign producers not subject to
the relevant anti-dumping order?
4.1542  While CDSOA payments are made to compensate  for “qualifying expenditures”, the financial
advantage they grant may affect all imports, not just dumped imports.  Of course, the payment is
conditioned on the presence of dumping, and it is explicitly aimed at dumping.  The fact that the
CDSOA’s offset payments may have an impact on non-dumped imports, however, does not negate the
fact that the offset payments counteract dumping and are therefore a specific action against dumping.
5. If offset payments may be used by affected domestic producers exclusively to bolster
their competitive position vis-à-vis  imports subject to the relevant anti-dumping order, does this
constitute the CDSOA as a "specific action against  dumping"?  If so, isn't it the action by the
affected domestic producers (i.e., how they use the offset payments) that constitutes action"against" dumping, as opposed to the provision of offset payments that may be used by affected
domestic producers exclusively to bolster their competitive position vis-à-vis  imports subject to
the relevant anti-dumping order)?
4.1543  The offset payment under CDSOA is a specific action against dumping, regardless and
independently of how the domestic producer chooses to use the proceeds of the offset payment.  How
an affected domestic producer happens to use the proceeds of an offset payment is no more relevant
than how a recipient uses the proceeds of a subsidy conditioned on export.  A finding of prohibited
export subsidy is not conditioned on how the recipient chooses to use the subsidy.  Since money is
fungible, both could use the proceeds for anything  – advertising expenditures, for example.  In eachinstance, the legally relevant facts are the criteria established by a Member government to establish
eligibility for the payment, not what a private party does with the payment after it is received.   
6. Is it possible to distinguish the CDS OA from the 1916 Act (for the purpose of
Article 18.1 of the AD Agreement) because action under the latter (i.e., a court order imposing a
fine or imprisonment) had an automatic, direct, negative impact on entities engaged in
dumping, whereas action under the CDSOA (i.e, untie d subsidies) does not?  Please explain.
4.1544  No.  Japan considers that in both instances,  specific action, beyond that permitted by the
Agreement, is being taken against dumping.  If the specific action is not permitted, it does not matter
what form it takes or on which element a Member takes the action.
4.1545  The CDSOA operates to counteract dumping by giving advantages to domestic producers.
There is no basis in the text of relevant agreements or in the reports of the Appellate Body or the
Panel to limit “specific action against dumping” to direct burden on importers or exporters.
7. Please comment on paras 44, 45 and 46 of the US oral statement at the second
substantive meeting.
4.1546  In paragraphs 44, 45 and 46 the United States argues that, in making CDSOA payments in
response to subsidies, it is merely engaged in pe rmitted “counter-subsidization”.  The United States
failed to substantiate its claim that “Members regularly engage in counter-subsidization.”
247  Japan is
                                                     
247 Oral Statement of the Untied States, 12 March 2002, para. 44.WT/DS217/R
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not aware of any Member taking counter-subsidization against another Member’s subsidy, except for
the CDSOA.  The United States alleges that Canada’s subsidy last year would be “in response to and
on exactly the same subsidized terms as those given by Brazil.”248  The United States, however,
produced no evidence or a citation of the allegedly quoted case to support its claim.
4.1547  Nothing in the WTO covered agreements or any Panel or Appellate Body report indicates that
WTO Members may or do “regularly engage in counter-subsidization” when faced with a subsidy
from another Member, as the United States claims.  The United States asserts, incorrectly, that the
CDSOA offset payment is “a specific action taken in response to a subsidy” which is permissible
under the SCM Agreement.  There are no provisions that permit Members to take a counter-subsidy in
response to a subsidy by another Member.  Further, footnote 35 to Article 10 and Article 32.1 of
ASCM Agreement limits a “specific action against subsidy” within the meaning of the SCMAgreement.  There is a world of difference between a Member pursuing its legal rights to challenge
other Members’ violation to WTO agreements and a Member taking an action prohibited by the SCM
Agreement. In fact, by the United States’ logic, no Member would ever be able to challenge the
legality of a subsidy.
8. Can a measure be "against" dumping if it does not have an adverse bearing on either
the imported product per se , or the importer, the exporter or foreign producer of that product?
If so, how?
4.1548  Yes.  In Japan's view, a measure is “against” dumping when it counteracts dumping.  The
payments authorized by the CDSOA are explicitly directed against dumping and are made only whenthe constituent elements of dumping are present.  Please see also Japan's replies to  Questions 2, 3 and
6 above for further discussions.
9. The complaining parties assert, on the basi s of para. 122 of the Appellate Body report on
1916 Act, that action "in response to" dumping is necessarily action "against" dumping.  If
action taken "in response to" dumping is of benefit to dumping, dumped imports, or thoseengaged in dumping, would such action be "against" dumping?
4.1549  The Appellate Body’s interpretation was made in the context of Article VI of GATT 1994.  It
states, “‘[a]n anti-dumping measure’ must, accordin g to Article 1 of the Anti-Dumping Agreement, be
consistent with Article VI of the GATT 1994 a nd the provisions of the Anti-Dumping Agreement.”
249
The term “in response to” must be understood in this context.
4.1550  Whether an action is taken “in response to” situations presenting the constituent elements of
dumping (i.e., a “specific action against dumping”) depends on two factors: the action is conditioned
upon situations presenting the constituent elements of dumping; and, the action is taken to counteract
dumping.  The EC Panel in the 1916 Act case also found that Article VI:2 provides that only measures
in the form of anti-dumping duties may be applied to counteract  dumping as such.  In interpreting
these provisions, the Appellate Body also used the term “counteract.”
(c) Questions to Canada
10. At para. 11 of its second oral statement, Canada states that the 1916 Act was an action
"in response to (against, countering, condemning, offsetting)" a practice.  What is the basis for
equating the term "in response to" with the terms "countering", "condemning", and
"offsetting"?
                                                     
248 Id.
249 1916 Act Para. 129.WT/DS217/R
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4.1551  Article VI:1 of the GATT 1994 provides that dumping may be “condemned.”  Article VI:2
provides that to “offset” or prevent dumping, anti-dumping duties may be levied.  In interpreting these
provisions, the Appellate Body used the term “counteract.”  Canada’s use of “countering,”“condemning,” and “offsetting” is a reasonable attempt to verbalize the relevant concept.
(d) United States
11. Are there any conditions governing what af fected producers must do with payments
under the CDSOA for qualifying expenditures?  Fo r example, may those payments be used to
improve the competitive position of the affect ed producer in respect of a product totally
unrelated to the product subject to the anti-dumping order?
4.1552  As discussed in Question 5 above, how the proceeds of the CDSOA offset payment are used
by the domestic producer is irrelevant to the determination of whether the offset payments are specific
actions against dumping or a subsidy.  What matters is the fact that the payments are made only when
the constituent elements of dumping have been established.
12. Is there any requirement that qualifying expenditure must be incurred by affected
producers in relation to their competition with dumped imports specifically, rather than their
competition with imported and domestic products more generally?
4.1553  The CDSOA offset payments are made:
(i) upon imposition of an anti-dumping or countervailing duty on the imported like
products;
(ii) to domestic producers of like products; and(iii) for “qualified expenditures” of like products.
4.1554  As discussed in Question 2 above, the CDSOA offset payment can be made only where the
investigating authority has determined that domestic producers are injured by dumped imports.  The
CDSOA requires domestic producers to remain in production of the like product adversely affected by
dumping, in order to receive the payment. These circumstances are evidence that the CDSOA offset
payments are designed and in fact counteract dumping.  It is irrelevant whether the domestic like
products compete, in addition, with non-dumped imports.
13. Regarding para. 65 of the US oral statement at the second meeting, what proportion of
affirmative preliminary determinations become negative final determinations upon completion
of the investigation?
4.1555  The United States Department of Commerce publishes its annual numbers of initiations,
affirmative preliminary determinations, affirmative final determinations, and anti-dumping and
countervailing duty order at http://ia.ita.doc.gov/stats/iastats1.html.  Japan provides a summary of
such data for the Panel’s consideration (anti-dumping and countervailing investigations combined).WT/DS217/R
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1995 1996 1997 1998 1999 2000 2001 1995-2000
Total1996-2001
Total
Initiations 16 22 21 47 56 52 95 214 293
P r e l i m s 2 61 61 93 54 32 27 6 1 6 1 2 1 1
Finals 44 14 15 19 52 42 45 186 187
Duty Orders 26 11 7 10 25 26 36 105 115
Cases         Over Initiation      Over Prelim
Initiations (1995 to 2000)250  214 100% N/A
Affirmative DOC Prelim (1996 to 2001)   211 98.6% 100%
Affirmative DOC Final (1996 to 2001)   187 87.4% 88.6%Duty Orders (1996 to 2001)   115 53.7% 54.5%
4.1556  The above data indicates that 11.2 per cent of investigations ended up with price undertaking
(i.e., suspension agreements in US statutory parlance).  In total, 64.9 per cent of investigations
resulted in either anti-dumping/countervailing duty orders or price undertakings.
7. Korea
(a) Questions to all complaining parties
3. Subsidy A is paid to all domestic producers of product X, and the grant of that subsidy
is not tied in any way to a determination of dumping on the part of exporters/foreign producers
of product X.  Subsidy B is paid to all domestic producers of product X, subject to a finding ofdumping on the part of importers/exporters/foreign producers of product X.  For the purpose of
this question, please assume that subsidy A would not constitute a specific action "against"
dumping (but indicate if you disagree).  (a) Should subsidy B be treated as a specific action
"against" dumping?  (b) Why?  (c) If subsidy B sh ould be treated as a specific action "against"
dumping, what is the difference between the impact of subsidies A and B that means thatsubsidy B constitutes specific action "against" dumping, whereas subsidy A does not?
(d) Subsidy B would be expected to provide the domestic producers of product X with a
competitive advantage over imported products generally.  Does subsidy B provide those
domestic producers with a greater competitive advantage over dumped imports in particular?
Why?
4.1557  Korea replies as follows:
(a) Yes, Subsidy B should be treated as a specific action “against” dumping.
(b) The Appellate Body stated in US – Anti-Dumping Act of 1916 that “specific action
against dumping” of exports must, at a minimum, encompass action that may betaken only when the constituent elements of “dumping” are present. (emphasis in the
original, AB report on US – Anti-Dumping Act of 1916, para 122)  The fact that
Subsidy B is provided ‘subject to a findin g of dumping’ suggests that Subsidy B is an
action that may be taken only when the constituent elements of “dumping” are
present, and thus is a specific action against dumping.
                                                     
250 Percentages of affirmative preliminary/final determinations and duty orders in 1996-2001 over
initiations in 1995-2000 are provided, since initiations usually take at least one year from its initiation until the
final stage of investigations.WT/DS217/R
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Furthermore, the allocation of funds provided under the CDSOA acts against (in
opposition to) dumping, because it further strengthens the competitive position of
domestic producers on top of the remedy that has been already provided in the form
of anti-dumping duties.    
(c) It is not because of the ‘difference in impact’ that Subsidy B is a specific action
against dumping, while Subsidy A is not. In contrast to Subsidy B, Subsidy A does
not depend upon a finding of the constituent elements of dumping.  Therefore, it is
not “in response to” dumping as required by the Appellate Body at paragraph 122 of
the report in United States—Anti-Dumping Act of 1916. .
(d) It is possible to make a distinction between the impact of allocated duties upon
dumped imports and their impact on non-dumped products.  In case of dumped
products, the terms of competition have been disturbed due to dumping.  Thus, the
impact of allocated duties is to restore  the disturbed terms of competition in addition
to the remedy provided in the form of anti-dumping duties.   In case of non-dumpedproducts, the impact is to disrupt the terms of competition that existed between
domestic and non-dumped imports before the allocation of duties.
4.1558  Korea submits that the above distinction, however, is not pertinent, if the issue at hand is the
definition of ‘specific action against dumping’.  What is pertinent is that allocation of duties topetitioning domestic producers acts against (in opposition to) dumping, by strengthening their
competitive position vis-à-vis dumping exporters, in addition to the anti-dumping duties imposed
upon those exporters.  The impact of the same Subsidy B upon non-subject exporters is simply
incidental.
4. If an affected domestic producer receives an offset payment under the CDSOA, would
that payment only change the competitive rela tionship between that domestic producer and
foreign producers subject to the relevant anti-dumping order, or would it also change the
competitive relationship between that domest ic producer and all other producers, including
other domestic producers not eligible for offset  payments, and foreign producers not subject to
the relevant anti-dumping order?
4.1559  Korea is of the view that it would change the competitive relationship with all producers,
including foreign producers not subject to the order (if any) and domestic producers that failed to
support the petition (if any).  Indeed, the latter aspect – the change vis-à-vis other domestic producers
– is the basis of Complainants’ demonstration that the Byrd Amendment violates AD Agreement and
SCM Agreement provisions on standing determinations.  This is because the Byrd Amendment
compels all domestic producers to support petitions so as not to suffer a competitive disadvantage.
4.1560  Having said that, it should be pointed out once again that the impact upon non-subject foreign
producers and non-supporting domestic producers is not pertinent, if  the issue at hand is the
definition of ‘specific action against dumping’.  What is pertinent is that allocation of duties to
petitioning domestic producers acts against (in opposition to) dumping, by strengthening their
competitive position vis-à-vis  dumping exporters, in addition to the  anti-dumping duties imposed
upon those exporters.
5. If offset payments may be used by affected domestic producers exclusively to bolster
their competitive position vis-à-vis  imports subject to the relevant anti-dumping order, does this
constitute the CDSOA as a "specific action against  dumping"?  If so, isn't it the action by the
affected domestic producers (i.e., how they use the offset payments) that constitutes action"against" dumping, as opposed to the provision of offset payments that may be used by affectedWT/DS217/R
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domestic producers exclusively to bolster their competitive position vis-à-vis  imports subject to
the relevant anti-dumping order)?
4.1561  Korea considers that the CDSOA duties can be disbursed only on the basis of  ‘qualifying
expenditures’ that have been identified by petitioning domestic industries.  Thus, the CDSOA
operates to compensate the petitioning domestic indus tries to the extent of ‘qualifying expenditures’.
“Qualifying expenditures’ are costs for the indust ries, and having the costs met with the CDSOA
disbursed fund strengthens the competitive position of petitioning industries.
4.1562  If industries use the disbursed duties for purposes other than the ‘qualifying expenditures’, it
does not detract from the fact that the duties were disbursed and contributed to strengthening the
conditions of competition, because funds are fungible and it is not relevant if the specific fundsallocated were used in defraying costs falling under the qualifying expenses or not.
4.1563  The lack of restrictions on how the Byrd Amendment payments are used is thus irrelevant to
this proceeding.  It is the provision of offset paym ents itself that is a specific action against dumping.
6. Is it possible to distinguish the CDS OA from the 1916 Act (for the purpose of
Article 18.1 of the AD Agreement) because action under the latter (i.e., a court order imposing afine or imprisonment) had an automatic, direct, negative impact on entities engaged in
dumping, whereas action under the CDSOA (i.e, untie d subsidies) does not?  Please explain.
4.1564  Korea believes one can draw this distinction, but it is irrelevant.  The rule to be applied is
“against,” which, at paragraph 122 of 1916 Act, was interpreted by the Appellate Body as “inresponse to.”  Moreover, the language of Article 18.1 is “against dumping,” not “against entities
engaged in dumping.”  Thus, an analysis of the text of the relevant provisions and prior Appellate
Body statements demonstrates that this is a “distinction without a difference.”
7. Please comment on paras 44, 45 and 46 of the US oral statement at the second
substantive meeting.
4.1565  Korea posits that the US argument at paragraphs 44-46 is absurd and does nothing other than
to highlight the weakness of the US position in general.  The US refuses, again, to focus on the fact
that Complainants’ interpretation of “specific action against” presumes – because such is the case here
with the Byrd Amendment – that a finding that the constituent elements of subsidization (or dumping)
has been made before the action is taken.  Moreover, the US mischaracterizes Korea’s complaint.
Korea is arguing not that the Byrd Amendment is an  impermissible subsidy (which it likely is), but
that the Byrd Amendment is an impermissible specific action against dumping or a subsidy.  Thus, the
outrageous US statement at paragraph 46 that Complainants’ own argument condemns this case –
which, in any case, is designed simply to insu late the Byrd Amendment from WTO disciplines – is
without merit.
8. Can a measure be "against" dumping if it does not have an adverse bearing on either
the imported product per se , or the importer, the exporter or foreign producer of that product?
If so, how?
4.1566  In its first submission to the Panel, the US argued that the ordinary meaning of “against’ is ‘in
contact with’ and argued, on the basis of such a flawed meaning of ‘against’ that only the actionsapplying to imported goods or importers are speci fic actions against dumping. (US First Submission,
para 94)  As Korea has argued in the first substantive meeting with the Panel, ‘in contact with’ is not
an ordinary meaning of ‘against’(Korea’s Oral Statement, para 6), and any assertion of the US based
upon such a meaning cannot hold.WT/DS217/R
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4.1567  Secondly, the relevant provision reads ‘action against dumping’ , not ‘action against imports
or exporters’.  This is another reason, why, in Kore a’s view, the US is wrong to assert that specific
action against dumping should be limited to action affecting imports or importers per se.
4.1568  Having said that,  in Korea’s view, the Byrd Amendment does not fall within the hypothetical
– it does have an “adverse bearing” or “adverse impact” on the “importer, exporter or foreign
producer.”  It impacts them adversely by strengthening their primary competitors in the US market:
the “affected” domestic US producers.
9. The complaining parties assert, on the basi s of para. 122 of the Appellate Body report on
1916 Act, that action "in response to" dumping is necessarily action "against" dumping.  If
action taken "in response to" dumping is of benefit to dumping, dumped imports, or those
engaged in dumping, would such action be "against" dumping?
4.1569  The Appellate Body’s ruling, as contained in para 122 of its report in US -Anti-Dumping Act
of 1916 , provides a good guidance to assess the meaning of ‘action against dumping’.  During the
panel proceedings, Korea, and other complaining parties, complemented the guideline with another
argument, based upon the ordinary meaning of ‘against’ as it appears in Article 18.1 of the ADA andArticle 32.1 of the SCMA.
4.1570  The ordinary meaning of ‘against’ is ‘in opposition to’.  From the two elements of dumping as
identified by the panels in US -1916 Act, dumping is the introduction into commerce of products at
less than the normal value.  When the authorities find such dumping, there are several different
measures they can take ‘in opposition to’ such dumping.  One is to impose extra burden upon theimports.  Another is to provide support to the affected domestic industry, which compete with the
imports.  Both measures act ‘in opposition to’ dumping.
4.1571  With respect to the Panel’s question, action beneficial to dumping is not an action in
opposition to dumping, from the explanation in the above paragraph, and thus is not action against
dumping.
4.1572  A further comment in this connection is that the interpretation of ‘against’ as ‘in opposition
to’, argued by the complaining parties on the basis of  the ordinary meaning of ‘against’, is closely in
line with the interpretation of ‘against’ as ‘in respons e to’, an interpretation provided by the Appellate
Body in US-1916 Act.   It is because it is not realistic to think that any government would take action
beneficial to dumping.  Thus, it was not necessary on the part of the Appellate Body to elaborate that
‘against’ should be interpreted as ‘in opposition to’ as well as ‘in response to’.
8. Mexico
(a) Questions to all complaining parties
3. Subsidy A is paid to all domestic producers of product X, and the grant of that subsidy
is not tied in any way to a determination of dumping on the part of exporters/foreign producers
of product X.  Subsidy B is paid to all domestic producers of product X, subject to a finding of
dumping on the part of importers/exporters/foreign producers of product X.  For the purpose ofthis question, please assume that subsidy A would not constitute a specific action "against"
dumping (but indicate if you disagree).
(a) Should subsidy B be treated as a specific action "against" dumping?
4.1573  Yes.WT/DS217/R
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(b) Why?
4.1574  It should constitute a specific action “against” dumping to the extent that it is an action that is
taken in response to situations presenting the constituent elements of dumping.  In Anti-dumping Actof 1916, the Appellate Body determined that “specific action against dumping of exports must, at a
minimum, encompass action that may be taken only when the constituent elements of dumping are
present.  The conferral of Subsidy B appears to be an action that is directly caused by a finding of the
existence of dumping and that can only be taken in circumstances where there is a finding of
dumping.  As such, it should be treated as a specific action “against” dumping.
(c) If subsidy B should be treated as a spec ific action "against" dumping, what is the
difference between the impact of subsidies A and B that means that subsidy Bconstitutes specific action "against" dumping, whereas subsidy A does not?
4.1575  As discussed at paragraphs 16 to 23 of Mexico’s written rebuttal submission, there is no
requirement to analyze the “impact” of a measure in order to determine whether it constitutes a
“specific action against” dumping within the mean ing of Article 18.1 of the Anti-dumping Agreement
4.1576  In the hypothetical described in the question, it is unclear whether the “impact” of subsidies A
and B would be different. The two subsidies differ in  that one is linked to dumping while the other is
not.  However, there is no indication of the nature of the linkages between subsidy B and the
dumping.  These linkages are essential to assessing the impact of subsidy B compared to subsidy A.
4.1577  Although there is a linkage between subsidy B a nd dumping, that linkage is not well defined
as it is in the case of the subsidies conferred under the CDSOA.  For example, there is no indication
that the amount of the subsidy exactly matches the amount of anti-dumping duties collected, that
eligibility would be restricted to petitioners and supporters in an anti-dumping investigation (i.e.,
direct competitors with importers and exporters of dumped products), and that the eligible expenses
that are offset by the subsidies must relate to the production of the subject products.
4.1578  Accordingly, in contrast to the subsidies provided under the CDSOA, there is not enough
evidence to determine whether subsidy B would systematically result in a greater competitive burden
on imported products (and on the importer or exporters of such products) relative to like US productsthat benefit from the subsidies.  In the absence of such clear linkages, the impact that subsidy B may
have cannot be compared to the impact of subsidy A.  Nor can it be compared to the situation before
this Panel.
(d) Subsidy B would be expected to provide the domestic producers of product X with a
competitive advantage over imported products generally.  Does subsidy B provide those
domestic producers with a greater competitive advantage over dumped imports in
particular?  Why?
4.1579  In the hypothetical the specific linkages between Subsidy B and dumped imports are
undefined.  Accordingly, it is difficult to assess the degree of competitive advantage for domestic
producers over dumped imports in particular.
4.1580  In the case of the subsidies conferred by the CDSOA, there are clearer and more direct
linkages between the subsidies, the recipients of the subsidies and the dumped imports.  Dumped
imports are systematically placed at a competitive disadvantage vis-à-vis the products of the recipientsbecause: the funds that are distributed are created by the existence of dumping, the amount of the
funds is equal to the amount of such dumping (i.e., anti-dumping duties); the funds are distributed to
petitioners or those in support of the petition that led to the duties (i.e., to those producers who benefitWT/DS217/R
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most from the imposition of the duties); the industry was determined to have been materially injured
as a result of the dumped imports; and the funds are distributed as offsets to expenses related to the
production of products that are “like” those to be found dumped.
4. If an affected domestic producer receives an offset payment under the CDSOA, would
that payment only change the competitive rela tionship between that domestic producer and
foreign producers subject to the relevant anti-dumping order, or would it also change the
competitive relationship between that domest ic producer and all other producers, including
other domestic producers not eligible for offset  payments, and foreign producers not subject to
the relevant anti-dumping order?
4.1581  Mexico is of the view that the payments unde r the CDSOA could also change the competitive
relationship between the domestic producer that receives the offset payments and all other competing
producers, foreign or domestic.  The competitive relationship is “tilted” in favour of the products
produced by the recipients of the CDSOA.
4.1582  The fact that the relative competitive relationship could also be affected vis-à-vis undumped
imports and domestic products does not mean that the CDSOA is not a specific action againstdumping or subsidies.  The CDSOA and the subsidies it confers amounts to a specific action against
dumping or subsidies because of the clear linkages between the subsidies and the dumped/ subsidised
imports as described in Mexico’s response to Question 3(d), above. The fact that the subsidies may
also have an effect on relative competitive relationships with other products does not change this fact.
It is well recognized that measures may have multiple attributes or effects. One or more of these mayviolate WTO disciplines while others may not.  The fact that certain attributes or effects may not give
rise to WTO inconsistencies does not remedy WTO inconsistencies created by the others.
4.1583  In the case of the CDSOA and the subsidies it confers, its primary attributes and effects
amount to an impermissible action against dumping and subsidies under Article 18.1 of the
Antidumping Agreement and Article 32.1 of the SCM Ag reement. It also nullifies or impairs benefits
accruing to Mexico under Articles II and VI of the GATT 1994 and, thereby, violates Article 5(b) of
the SCM Agreement.
5. If offset payments may be used by affected domestic producers exclusively to bolster
their competitive position vis-à-vis  imports subject to the relevant anti-dumping order, does this
constitute the CDSOA as a "specific action against  dumping"?  If so, isn't it the action by the
affected domestic producers (i.e., how they use the offset payments) that constitutes action
"against" dumping, as opposed to the provision of offset payments that may be used by affected
domestic producers exclusively to bolster their competitive position vis-à-vis  imports subject to
the relevant anti-dumping order)?
4.1584  According to Mexico, all relevant facts and circumstances, whether relating to the creation
and provision of the subsidies or eligibility to the subsidies, must be assessed in determining whether
the CDSOA and its subsidies amount to a “specific action against dumping”.
4.1585  The fact that the eligible expenses that are offset by the CDSOA payments must be related to
the production of products that are “like” those subject to the relevant order or finding is an important
factual element.  This element explicitly links th e payments to products that directly compete with
those subject to the order or finding.
4.1586  However, it is not the sole factual element.  Ot her relevant facts relate to the creation of the
funds that are distributed (e.g. the creation of special accounts that are specific to each order or
finding), the funding of the special accounts by the collection of anti-dumping and countervailingWT/DS217/R
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duties, and the restriction of eligible recipients to petitioners to the investigation that led to the order
or finding and those in support of those petitioners.  Together, these facts establish that, regardless of
how the eligible recipients use the funds that they receive, the CDSOA and the offset payments
amount to a specific action against dumping.
6. Is it possible to distinguish the CDS OA from the 1916 Act (for the purpose of
Article 18.1 of the AD Agreement) because action under the latter (i.e., a court order imposing a
fine or imprisonment) had an automatic, direct, negative impact on entities engaged in
dumping, whereas action under the CDSOA (i.e, untie d subsidies) does not?  Please explain.
4.1587  Mexico argues that although the nature and characteristics of the CDSOA and the 1916 Act
differ, for the purpose of Article 18.1 of the AD Agreement, both have an automatic direct, negativeimpact on entities engaged in dumping. In the case  of the CDSOA, the anti-dumping duties that are
collected when an entity engaged in dumping sells into the US market are passed on to the direct
beneficiaries of the anti-dumping duties (i.e., the petitioners and those in support of the petition).  In
other words, the act of dumping results in the automatic conferral of a financial reward to a direct
competitor.  The circumstances in which the subsidies are conferred are relevant to understandingtheir direct effect. In all instances, the subsidies are being conferred to recipients that have been found
to be injured or threatened by injury by reason of the subject dumped imports. The duties that fund the
subsidies would not exist but for that injury or threat of injury.  Moreover, the duties remain in place
only so long as is necessary to counteract the effects of the dumping which is causing such injury.
Thus, during the entire period over which the CDSOA subsidies are granted, the domestic industrywill legally be in need of anti-dumping duty protection from the dumped imports. In such
circumstances, the granting of subsidies generated by the payment of anti-dumping duties will
necessarily enhance the competitive position of the recipients vis-à-vis the dumped imports.
4.1588  Mexico disagrees with the statement that actions under the CDSOA are “untied subsidies”.
By law, the subsidies are contingent upon expenses being incurred in the production of the goods thatare like those subject to the anti-dumping order or finding in question. Thus, they are legally tied to
the production of like domestic products. It is irrele vant that the funds that are ultimately  disbursed
could be applied to other expenses.  For example, the fact that funds conferred in the form of
subsidies that are contingent upon export performance (Article 3.1 of the SCM Agreement) are
ultimately expended on uses unrelated to the exports does not mean that the subsidies are no longer
“export” subsidies.  Cash (i.e., the funds) is fungible.  What is relevant is the legal criteria for
eligibility for the subsidy in question (i.e., contingency upon export performance or contingency uponincurring expenditures in the production of like domestic products).
4.1589  The nature of the direct negative impact is illustrated in the context of the nullification or
impairment of benefits. As discussed at paragraphs 78 to 98 of Mexico’s rebuttal submission and in its
response to question 29 from the Panel, the subsidies at issue in this dispute have a negative impact on
imports because, upon granting, they automatically, consistently and repeatedly upset the relativeconditions of competition legitimately expected by Mexico under GATT Articles II and VI.  When
anti-dumping and countervailing duties are in place, the conditions of competition between Mexican
products and like United States products will no longer be defined, at most, by the relevant US tariff
binding plus the maximum allowable anti-dumping or countervailing duties permitted under
Article VI:2 and 3 of the GATT 1994.  Rather, the conditions of competition will be further definedby the amount of the CDSOA subsidies. It is this  additional upsetting of the expected competitive
relationship that amounts to the direct negative impact.
7. Please comment on paras 44, 45 and 46 of the US oral statement at the second
substantive meeting.WT/DS217/R
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4.1590  At paragraph 44 of its second oral statement, the United States argues that WTO Members
regularly engage in counter-subsidization.  In Mexi co’s view, this argument is irrelevant to this
dispute.  Whether “counter-subsidization” is consistent with WTO obligations would have to be
assessed on a case by case basis, in the light of facts and circumstances surrounding the conferral ofthe subsidies in question.
4.1591  At paragraphs 44 and 45, the United States appears to argue that this WTO dispute
“constitutes a specific action taken in response to a subsidy, the CDSOA”.  It appears to further argue
that, if accepted by this Panel, the complainants’ interpretation of Article 32.1 and footnote 35 of the
SCM Agreement would prevent this WTO dispute from being brought forward.
4.1592  In Mexico’s view, the type of action referred to in Article 32.1 is action taken by a WTO
Member in the context of a domestic measure.  It is not meant to encompass action that is taken underthe WTO dispute settlement procedures. Accordingly, whether this WTO dispute was initiated “in
response to” a subsidy is irrelevant this Panel’s interpretation of Article 32.1.
8. Can a measure be "against" dumping if it does not have an adverse bearing on either
the imported product per se , or the importer, the exporter or foreign producer of that product?
If so, how?
4.1593  The Appellate Body in Anti-dumping Act of 1916  found that an action “against” dumping of
exports is an action that is “taken in response to situations presenting the constituent elements of
dumping”.  It did not rule that a measure can only be “against” dumping if it has an adverse bearing
on either the imported product per se , or the importer, the exporter or foreign producer of that
product.  Thus, there is no requirement that punitive action must be taken against the imported
product, the importer, the exporter, or foreign producer.
4.1594  In any event, Mexico believes that it is not necessary for the Panel to answer this question to
resolve this dispute. As noted above in response to the previous questions and in Mexico’s written and
oral submissions, the CDSOA and the subsidies it confers has a direct adverse effect on the importedproduct and the exporter of that product.
9. The complaining parties assert, on the basi s of para. 122 of the Appellate Body report on
1916 Act, that action "in response to" dumping is necessarily action "against" dumping.  If
action taken "in response to" dumping is of benefit to dumping, dumped imports, or those
engaged in dumping, would such action be "against" dumping?
4.1595  According to Mexico, given the clear negative effect the CDSOA and its subsidies have on
imports, it is not necessary to answer this question to resolve this dispute.
(b) Questions to the United States
11. Are there any conditions governing what af fected producers must do with payments
under the CDSOA for qualifying expenditures?  Fo r example, may those payments be used to
improve the competitive position of the affect ed producer in respect of a product totally
unrelated to the product subject to the anti-dumping order?
12. Is there any requirement that qualifying expenditure must be incurred by affected
producers in relation to their competition with dumped imports specifically, rather than their
competition with imported and domestic products more generally?WT/DS217/R
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1.1596  With respect to Questions 11 and 12 to the United States, Mexico re-iterates and elaborates
upon the responses it gave at the second meeting with the Panel to related oral questions from the
Panel:
•It does not matter what the cash disbursements are ultimately used for. They are legally
contingent upon production expenses being incurred and, therefore, are “production
subsidies”.  As outlined at paragraph 81 of Mexico’s written rebuttal submission, such
subsidies are assumed to have an adverse effect on negotiated concessions.
•The subsidies conferred under the CDSOA must be distinguished from a subsidy that is
granted to a recipient without any conditions atta ched to it.  In the case of the CDSOA, clear
conditions—related to the incurring of expenses related to the production of the good subject
to the order or finding upon which the subsidy is based—are attached to the subsidy. As noted
in Mexico’s response to Question 6 of the Panel (above), it is irrelevant that the funds that are
ultimately disbursed could be applied to other expenses.  For example, the fact that fundsconferred in the form of subsidies that are contingent upon export performance (Article 3.1 of
the SCM Agreement) are ultimately expended on uses unrelated to the exports does not mean
that the subsidies are no longer “export” subsidies.  Cash (i.e., the funds) is fungible.  What is
relevant is the legal criteria for eligibility for the subsidy in question (i.e., contingency upon
export performance or contingency upon incurring expenditures in the production of likedomestic products).
•Money is fungible. It either directly or indirectly enhances competitiveness.
•A distinguishing characteristic of the CDSOA subsidies is that they are granted in the context
of applied anti-dumping (or countervailing) duties. This context distinguishes the CDSOA
subsidies from the type of subsidy illustrated in “Subsidy A” (Question 3 from the Panel) and
must be taken into account in assessing the effect of the subsidies on the competitive positionof the recipients. In all instances, the subsidies are being conferred to recipients that have
been found to be injured or threatened by injury by reason of the subject dumped imports. The
duties that fund the subsidies would not exist but for the dumping and the injury.  Moreover,
the duties remain in place only so long as is necessary to counteract the effects of the
dumping and injury. Thus, during the entire period over which the CDSOA subsidies aregranted, the domestic industry will legally be in need of anti-dumping duty protection from
the dumped imports. In such circumstances, the granting of subsidies generated by the
payment of anti-dumping duties will necessarily enhance the competitive position of the
recipients vis-à-vis the dumped imports.
•Finally, in order for a recipient to continue to receive CDSOA subsidies, that recipient must
continue to incur expenses related to the production of the good subject to the order or finding
upon which the subsidy is based.
14. In your view, did the EEC –  Oilseeds I  case concern nullification or impairment caused
by the "application" of a measure, as opposed to nullification or impairment caused by the
measure per se ?  Please explain.
4.1597  Mexico considers that this question raises two issues. The first relates to whether a measure
must be applied before nullification or impairment can be caused.  The second relates to what isrequired to prove the existence of the nullification or impairment.WT/DS217/R
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4.1598  As outlined in Mexico’s prior submissions, it agrees that a measure must be applied before
nullification or impairment can be caused. With respect to Mexico’s challenge of the “granting” of
subsidies under the CDSOA, the measure is “applied” when the subsidies are “granted”.  Mexico is
entitled to challenge the measure prior to its application by virtue of the doctrine governing legislationas such challenges. With respect to Mexico’s challenge of the “maintaining” of subsidies under the
CDSOA, the maintenance of subsidies in the circum stances of this dispute amounts to the application
of a measure.
4.1599  The US and Mexico appear to have divergent views on what is needed to prove that a
measure causes nullification or impairment. Mexico’s view is that the GATT Panels in EEC –
Oilseeds I & II  examined the design, structure and architecture of the EEC oilseeds regime in order to
conclude that the regime nullified or impaired the expected competitive relationship.  The US seemsto argue that additional evidence is required.  Mexico disagrees. Nullification or impairment caused
by a measure, particularly in the case of the CDSOA, can be demonstrated on the basis of the design,
structure and architecture of a measure. By virtue of the design, structure and architecture of the
CDSOA, upon granting the subsidies will per se  cause nullification or impairment as described in
Mexico’s prior written and oral submissions. In other words, such nullification or impairment is acertainty.
L. 
UNITED STATES ' ANSWERS TO QUESTIONS FROM THE PANEL AFTER THE SECOND MEETING
(a) Questions to the United States
11. Are there any conditions governing what af fected producers must do with payments
under the CDSOA for qualifying expenditures?  Fo r example, may those payments be used to
improve the competitive position of the affe cted producer in respect of a product totally
unrelated to the product subject to the anti-dumping order?
4.1600  No.  There are no conditions governing the use of the distributions under the CDSOA.  In
response to comments on the proposed regulations, the Customs Service stated that:
There is no statutory requirement as to how a disbursement to an affected domestic
producer is to be spent, and, absent statutory authority, Customs may not impose such
a requirement.251
4.1601  Therefore, an affected domestic producer can use the money for any purpose, including gifts
to charity, payment of creditors, additional compensation or early retirement packages for workers,
new product development, new cafeterias, or to improve the competitive position in respect of a
product totally unrelated to the product subject to the anti-dumping order.
12. Is there any requirement that qualifying expenditure must be incurred by affected
producers in relation to their competition with dumped imports specifically, rather than their
competition with imported and domestic products more generally?
4.1602  No, there is no requirement that qualifying expenditures must be incurred in relation to
competition with dumped imports specifically.  The qualifying expenditures are incurred in relation to
competition with all producers of that product - both domestic and foreign - not just the producers of
the dumped product.
                                                     
251 19 CFR Parts 159 and 178, 66 Fed. Reg. 48,546, 48,549 (Dep’t Comm. 2001) (Final Rule),
Common Exhibit 3.WT/DS217/R
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13. Regarding para. 65 of the US oral statement at the second meeting, what proportion of
affirmative preliminary determinations become negative final determinations upon completion
of the investigation?
4.1603  In the United States, there are two agencies charged with conducting anti-dumping and
countervailing duty investigations.  The US Depa rtment of Commerce investigates whether imports
are being dumped or subsidized, and the US International Trade Commission investigates whether
those imports are causing material injury or threat thereof to the domestic industry or the
establishment of a domestic industry is being materially retarded.
4.1604  After an investigation is initiated, both agencies make preliminary and final determinations in
the following order:  (1) Commission prelimin ary determination, (2) Commerce preliminary
determination, (3) Commerce final determination, (4) Commission final determination.  If the
Commission’s preliminary determination is negative, the investigation ends.  If Commerce’s
preliminary determination is negative, however, the investigation proceeds to the final phase.  If
Commerce’s final determination is negative, the investigation ends.  If the Commission’s final
determination is negative, the investigation ends252
4.1605  As the United States explained in its initial answer to this question, the United States does not
regularly maintain information concerning all pr eliminary and final determinations in every anti-
dumping and countervailing duty investigation in one database.  The United States was able to
provide the information in paragraph 65 because it was based on information available on the
Commission’s website.  In response to the panel’s question, however, the United States has reviewed
statistics posted on the US Department of Commerce’s website as updated by Federal Register
notices and estimates that, for investigations initiated between 1980 and 1999, which were not
suspended or otherwise terminated (prior to a final determination), approximately 37 per cent of
affirmative Commission preliminary determinations became negative final Commerce or Commission
determinations.
14. In your view, did the EEC -  Oilseeds I  case concern nullification or impairment caused
by the "application" of a measure, as opposed to nullification or impairment caused by the
measure per se ?  Please explain.
4.1606  Yes.  The United States considers that the application of the measure in that case, i.e., the
provision of subsidies to EC oilseed producers, was on-going so it was not an issue there.  In that
case, the panel considered the US claim that an EC Regulation, which had been in effect for over20 years, had nullified and impaired its Article II benefits in the sense of Article XXIII:1(b) “by the
subsequent introduction of and substantial increases in producer and processor subsidies on
Community oilseeds and protein animal feed components."
253  The United States submitted
voluminous pricing data covering over a 10 year period and import, production, and consumption data
covering a 25 year period which showed that the EC Regulation benefited oilseed producers andactually upset the competitive position of US oilseed imports.
254  The design and architecture of the
measure itself was relevant to establishing causation, i.e., that it was the subsidies which caused the
upset to the competitive relationship.  Having carefully analyzed the price mechanism, the panel
concluded that the product-specific measure as applied would “protect Community producers
completely from the movement of prices for imports and hence prevent the lowering of import duties
                                                     
252 See 19 C.F.R. §§ 207.21, 351.205(a), 351.210(a).
253 EEC – Payments and Subsidies Paid to Processors and Producers of Oilseeds and Related
Animal-Feed Proteins, BISD 37S/86, paras. 53, 131-32, 135 (12/14/89).
254 Id. at paras. 89-90, 92, 97, 100, 102, 104, 106, 108, Annexes D&E.WT/DS217/R
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from having any impact on the competitive relationship between domestic and imported oilseeds.”
Paras. 147-148.
4.1607  The United States would also like to offer the following comments in response to the
questions posed to the complaining parties:
(b) Questions to all complaining parties
3. Subsidy A is paid to all domestic producers of product X, and the grant of that subsidy
is not tied in any way to a determination of dumping on the part of exporters/foreign producers
of product X.  Subsidy B is paid to all domestic producers of product X, subject to a finding of
dumping on the part of importers/exporters/foreign producers of product X.  For the purpose of
this question, please assume that subsidy A would not constitute a specific action "against"
dumping (but indicate if you disagree).
(a) Should subsidy B be treated as a specific action "against" dumping?(b) Why?
(c) If subsidy B should be treated as a specific action "against" dumping, what is
the difference between the impact of subs idies A and B that means that subsidy
B constitutes specific action "against" dumping, whereas subsidy A does not?
4.1608  (a),(b) & (c) Subsidy B is not a specific action against dumping for the same reason that
subsidy A is not.  Because Subsidy B does not apply to the imported good, or the
importer/exporter/foreign producer, there is no basis to conclude that the subsidy is “against”
dumping.  This is made clear by the text of Article VI:1 of the General Agreement on Tariffs and
Trade 1994 which defines dumping.  Applying that definition to Article 18.1 of the Agreement on
Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 makes clear thatArticle 18.1 applies to “specific action against exports (products) from another Member (a country)
being introduced into the commerce of a Member (another country) at less than the normal value of
the products.”  For purposes of the analysis proffered by the complaining parties, the “impact” of the
two subsidies is the same in terms of changing the conditions of competition between recipients of the
subsidy and all other producers of the subsidy, and not just foreign producers that are dumping the
product.  Thus, if the Panel were to conclude th at Subsidy B is a “specific action against dumping,”
that would mean that subsidy A is also a “specific action against dumping.”
(d) Subsidy B would be expected to provide the domestic producers of product X
with a competitive advantage over imported products generally.  Does subsidy B
provide those domestic producers with a greater competitive advantage over
dumped imports in particular?  Why?
4.1609  First, as explained below in response to questions 4 and 5, the United States does not agree
that a subsidy necessarily improves the competitive position of a producer.  In any event, Subsidy B
would not provide a greater competitive advantage over dumped imports than the other products that
did not receive the subsidy.  It is important to recall that dumping over time is evidence of a
competitive advantage.  The imposition of an anti-dumping duty levels the playing field; it does notplace the dumped product at a disadvantage. Thus, there is no basis to conclude that a domestic
subsidy would give a greater competitive advantage relative to dumped products than other like
products.WT/DS217/R
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4. If an affected domestic producer receives an offset payment under the CDSOA, would
that payment only change the competitive rela tionship between that domestic producer and
foreign producers subject to the relevant anti-dumping order, or would it also change the
competitive relationship between that domest ic producer and all other producers, including
other domestic producers not eligible for offset  payments, and foreign producers not subject to
the relevant anti-dumping order?
4.1610  According to the United States, there is no reason to believe that CDSOA payments will
necessarily change the competitive relationship between producers.  An affected domestic producer
can use the money for any purpose, including gifts to charity, payment of creditors, additional
compensation or early retirement packages for workers, new product development, or new cafeterias.CDSOA payments will not necessarily be used by  domestic producers to improve their competitive
position with respect to the product subject to relevant anti-dumping or countervailing duty orders.  If
it is concluded that CDSOA distributions change the competitive relationship between the domestic
producer that received the distribution and the foreign producer engaged in dumping, it also must be
concluded, as a matter of economics, that it changes the competitive relationship between thatdomestic producer and all other producers of that product.
5. If offset payments may be used by affected domestic producers exclusively to bolster
their competitive position vis-à-vis  imports subject to the relevant anti-dumping order, does this
constitute the CDSOA as a "specific action against  dumping"?  If so, isn't it the action by the
affected domestic producers (i.e., how they use the offset payments) that constitutes action"against" dumping, as opposed to the provision of offset payments that may be used by affected
domestic producers exclusively to bolster their competitive position vis-à-vis  imports subject to
the relevant anti-dumping order)?
4.1611  As explained in the answer to Question Number 11 to the United States, offset payments are
made for qualifying expenditures which relate to a particular product.  However, nothing in the
CDSOA in any way limits how a recipient of funds  can spend the money.  Hence, there is no
requirement for offset payments to “be used by affected domestic producers exclusively to bolster
their competitive position vis-à-vis imports subject to the relevant anti-dumping order.”  Recipients
can use the money for any purpose and are not limited to using the funds on the domestic like product.
4.1612  In addition, the United States notes that it disagrees with the premise of this question that
improving the competitive relationship of a domestic producer can be considered as acting “ against”dumping.  There is no basis to include a “conditions of competition” test or, “improving a competitive
relationship” test in Articles 18.1 and 32.1 of the Antidumping and SCM Agreements, respectively.  If
improving the competitive position is found to be relevant, it is action by the affected domestic
producer, a private party, and not the CDSOA because there is no requirement that affected domestic
producers use the distributions to bolster their competitive position with regard to the products subjectto the AD/CVD orders.
6. Is it possible to distinguish the CDS OA from the 1916 Act (for the purpose of
Article 18.1 of the AD Agreement) because action under the latter (i.e., a court order imposing a
fine or imprisonment) had an automatic, direct, negative impact on entities engaged in
dumping, whereas action under the CDSOA (i.e, untie d subsidies) does not?  Please explain.
4.1613  Yes.  The United States is of the view that the two measures are wholly different.  The only
connection between the CDSOA and  dumping is the fact that the distributions are funded with
AD/CVD duties.  First, the CDSOA is not based upon the constituent elements of dumping.  In
contrast,  the 1916 Act included the constituent elements of dumping as two of its essential elements.Second, the CDSOA does not apply to imported goods or the importer/exporter/foreign producer, andWT/DS217/R
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therefore, the effect on those entities and thus on dumping is a matter of speculation.  In contrast, the
1916 Act imposed monetary penalties or imprisonment directly on the importer.255  A court order
imposing a fine or imprisonment on an importer has an automatic, direct, negative impact on the
entity engaged in dumping.  In contrast, there is  no automatic, direct, negative impact from CDSOA
payments on entities engaged in dumping.
7. Please comment on paras 44, 45 and 46 of the US oral statement at the second
substantive meeting.
4.1614  The US would like to note that the Canadian counter-subsidies in the aircraft dispute were
found to be WTO-inconsistent because they were found to be prohibited export subsidies under
Article 3 of the SCM Agreement, not because they were “specific action against a subsidy.”  In fact,that argument was not raised in that dispute.  As the United States noted at the Panel meeting,
complainants’ argument that subsidies in response to a subsidy are “specific action against a subsidy”
would create an additional category of “prohibited subsidy.”  However complainants have been
unable to find textual support for their argument, which would have far-reaching effects.  Indeed the
text of the SCM Agreement shows the opposite.  There is nothing in Article 3 of the SCM Agreementto create such an additional category even though Article 3 lists the categories of prohibited subsidies,
nor is there any indication that Article 32.1 was intended to be a “back door” means of creating such a
category.
8. Can a measure be "against" dumping if it does not have an adverse bearing on either
the imported product per se , or the importer, the exporter or foreign producer of that product?
If so, how?
4.1615  No.  In the view of the United States, the measure must not only have an adverse bearing on
either the imported product, or the importer/expo rter/foreign producer, but it must apply to one of
them to be considered a “specific action against” dumping or a subsidy.
9. The complaining parties assert, on the basi s of para. 122 of the Appellate Body report on
1916 Act, that action "in response to" dumping is necessarily action "against" dumping.  If
action taken "in response to" dumping is of benefit to dumping, dumped imports, or those
engaged in dumping, would such action be "against" dumping?
4.1616  No.  According to the United States, the Panel’s question points out the inherent weakness in
the complaining parties’ arguments.  The complaining parties' suggested "response" test wouldinclude any action in any way responsive to dumping or subsidization.  Such an interpretation is
inconsistent with the ordinary meaning of the word “against” in the context of the Antidumping and
SCM Agreements, as well as GATT Article VI.  The complaining parties err in relying on the
terminology used by the Appellate Body to describe obligations under Article 18.1 when the term
“against” was not specifically considered.  In that case, the question was not raised because the 1916Act imposed civil or criminal liability directly on the importer based on pricing conduct that fell
within the definition of dumping.  In this case, the CDSOA is a payment programme which does not
apply “against” the imported product or the entity responsible for it.
V. ARGUMENTS OF THE THIRD PARTIES
5.1 The arguments of the third parties, Argentina, Costa Rica, Hong Kong, China, Israel and
Norway are set out in their submissions to the Panel and are attached to this Report as Annexes (see
                                                     
255 In the words of Article VI:1 of the GATT 1994, the CDSOA (unlike the 1916 Act) does not act to
prevent (or “against”) products being introduced in commerce at less than normal value.WT/DS217/R
WT/DS234/R
Page 293
List of Annexes, page (v)). We note that Costa Rica did not make any submission to the Panel. Israel
did not make an oral statement at the meeting of the Panel with the third parties.
VI. INTERIM REVIEW
6.1 On 31 July 2002, a number of parties submitted written requests for review by the Panel of
particular aspects of the interim report issued on 17 July 2002.  On 7 August 2002, Japan submitted
written comments on the US request for review.  None of the parties requested an additional meeting
with the Panel.  The interim review issues raised by the parties are addressed below.
A. UNITED STATES
6.2 The United States takes issue with paragraphs 7.3 – 7.6 of the interim report, where the Panel
denies the US request under DSU Article 9.2 for issuance of a separate final panel report in the
dispute brought by Mexico.  The United States asserts that the use of the word "shall" in the text ofDSU Article 9.2 imposes an "unequivocal obligation" on panels to issue separate reports when so
requested by one of the parties to a dispute.  Acco rding to the United states, this was the "basis" for
the panel's treatment of DSU Article 9.2 in EC – Bananas III (US) .
256
6.3 We are not persuaded by the arguments advanced by the United States.  In our view, the
second sentence of DSU Article 9.2 cannot reasonably be interpreted to grant Members anunconditional right to separate panel reports in all circumstances.  Such an unconditional right would
allow a respondent to delay issuance of the final report by making its request for a separate report
very late in the panel proceedings.  While the United States refers to the approach of the panel in EC –
Bananas III (US) , we would note that the request of the European Communities for separate reports in
that case was made at the meeting at which the DSB established the panel.
257  The fact that that panel
considered itself bound to issue separate reports therefore provides no support for the argument that
Members have an unconditional right to request separate reports at any time in the panel proceedings.
6.4 We are of course aware of the use of the word "shall" in the second sentence of DSU Article
9.2.  In our view, the primary concern of DSU Article 9.2 is that, as set out in the first sentence of that
provision, panels shall organise their work "in such a manner that the rights which the parties to thedispute would have enjoyed had separate panels examined the complains are in no way impaired".
We read the second sentence of DSU Article 9.2 in light of the first sentence.  The United States made
its request for a separate report very late in these proceedings, without indicating how rights which it
would have enjoyed had separate panels examined the complaints would be impaired if we were to
fail to issue a separate report for the dispute brought by Mexico.  Since there is nothing on the record
to suggest that the approach we are taking would impair any rights that the US would have enjoyed
had separate panels been established, we do not consider ourselves bound to issue a separate report inrespect of the dispute brought by Mexico.
6.5 By contrast, rights accruing to Mexico would have been impaired had we granted the US
request.  Since the United States only requested a separate final report,
258 Mexico would have been
denied its right to comment on a separate interim report in respect of its dispute.  Although the United
                                                     
256 European Communities – Regime for the Importation, Sale and Distribution of Bananas – Complaint
by the United States ("EC – Bananas III (US) "), WT/DS27/R/USA, adopted 25 September 1997.
257 See EC – Bananas III (US) , para. II.42.
258 The United States suggests that the Panel would have had time to prepare a separate interim report.
If the Panel had considered this possible, without further delaying issuance of the interim report, the Panelwould have done so.  The United States itself was aware that there was not sufficient time to prepare a separateinterim report, since it expressly only requested a separate final report "[I]n order to avoid causing a delay in the
issuance of the interim report".WT/DS217/R
WT/DS234/R
Page 294
States asserts that there is no need for separate final reports to be preceded by separate interim reports,
we consider that the right to a separate interim report in such circumstances is enshrined in DSU
Article 15.2.  If there is to be a separate final report in the circumstances envisaged by DSU Article
9.2, due process requires that there must also be a separate interim report.  It is not enough that acomplaining party sees an interim report combining its arguments and claims with those made by
other complaining parties, and setting forth the panel's findings and conclusions in respect of those
arguments and claims, with an indication from the panel that its own arguments and claims, and the
relevant panel findings and conclusions, will subsequently be distilled out into a separate final report.
A party is entitled to see what its final report will look like, to satisfy itself that all of its arguments
and claims have been included and addressed by the panel.  This will not necessarily be the case when
a separate final report is created on the basis of a combined interim report, since certain argumentsand/or claims may inadvertantly be overlooked or mis-attributed when preparing the separate final
report.
259
B. MEXICO
6.6 Mexico requested the Panel to include in paragraph 4.197 a specific reference to duties
applicable to products of Mexico on the list of qualifying domestic producers who may be eligible toreceive disbursements under the CDSOA in relation with imported products from Mexico. Mexico
indicates that it had made a similar request in its comments on the descriptive part of the Panel report
released on 12 April 2002. We note, however, that this list of products may have appeared in Mexico's
first written submission to the Panel, but was not included in the executive summary of that
submission prepared by Mexico, and submitted to the Panel on 13 December 2001. In accordancewith the Panel's working procedures, the parties were requested to prepare executive summaries of
their own submission to assist the Secretariat in drafting a concise arguments section of the Panel
report so as to facilitate timely translation and circulation of the Panel report to the Members. The
working procedures further determined that the summ aries of the first written submission and rebuttal
written submission shall be limited to 10 pages. In our view the purpose of such an executivesummary, limited to 10 pages, would be undermined if the parties would be allowed to come back
with further additions to their summaries at the time  of reviewing the descriptive part/interim report.
We therefore reject Mexico's request for inclusion of the list of products in paragraph 4.197.
6.7 Mexico requested changes to the Panel's summary of Mexico's arguments at paragraphs
7.106, 7.111, 7.121 and 7.126 of the interim report.  We have made changes to these paragraphs as we
consider appropriate.
6.8 Mexico claims that paragraphs 7.113 – 7.116 of the interim report do not take account of and
respond to an important part of Mexico's specificity argument.  In doing so, Mexico distinguishes
between "disbursements or outlays" under the CD SOA, and "subsidies conferred under the CDSOA".
We are unable to accept this distinction, since "subsidies conferred under the CDSOA" and
"disbursements or outlays" under the CDSOA are necessarily one and the same thing.
6.9 Mexico takes issue with the Panel's analysis in para. 7.128 of the interim report.  Mexico
appears to argue that benefits accruing under GATT Articles II and VI are systematically offset
                                                     
259 If an argument is attributed to "complainants" in the combined interim report, a panel would need to
determine whether or not it should be attributed to a particular complaining party if a separate final report is tobe prepared in respect of the dispute brought by that part y.  This is not necessarily a straightforward process, and
errors may occur.  Such errors cannot be remedied by  the panel once the final report has been issued.  Mexico
itself was conscious of the need to ensure that any separate final report included findings and conclusionsregarding all its claims, including those claims which are common with those of other complainants (see
Mexico's 18 June 2002 reaction to the US request for separate final reports).WT/DS217/R
WT/DS234/R
Page 295
simply because CDSOA offset subsidies will affect the competitive relationship that would otherwise
exist from the result of the imposition of tariffs and the maximum permitted anti-
dumping/countervailing duties on imports.  However, the fact that a subsidy to domestic producers
will affect the competitive relationship with imported products is not sufficient to demonstratenullification or impairment, in the sense of benefits being systematically offset.  We addressed this
issue in note 334 of the interim report, and therefore see no reason to amend our report.
C. C
ANADA
6.10 Canada requested changes to paragraphs 7.7, 7.21, 7.22, 7.45, 7.61, 7.81 and 7.89 of the
interim report. We have made changes to these paragraphs as we consider appropriate.
6.11 Canada proposed that the Panel include a reference to GATT Article VI:2 and 3 in para. 7.46
of the interim report.  We do not consider this change appropriate.  The appropriate place to refer toGATT Article VI:2 and 3 is para. 7.51, where it is already addressed.
6.12 Canada also suggested that the Panel further elaborate on its findings concerning paragraphs
7.59 to 7.66 of the interim report, and paragraph 7.64 in particular. We consider that the findings
sufficiently set forth the Panel's reasoning and that there is therefore no need for such further
elaboration as suggested by Canada.
D. A
USTRALIA
6.13 Australia requested a change to the presentation of its arguments in paragraph 4.862. We
changed this paragraph as suggested by Australia.
6.14 Australia requested the Panel to consider replacing paragraphs 7.136 - 7.139 of the interim
report, and not to rule on Australia's claim addressed in these paragraphs as Australia had indicated inits second written submission that it did not intend to pursue further arguments in relation to Articles
4.10 and 7.9 SCM Agreement. We decided to accept this suggestion by Australia and have amended
these paragraphs accordingly.
6.15 Australia commented that paragraph 8.3 of the interim report was in some ways contradictory
to paragraph 7.52 and suggested that it be replaced by a repetition of paragraph 7.52. We do notconsider that there is any contradiction between what we stated in paragraph 8.3 and what we said in
paragraph 7.52.  We therefore reject Australia's suggestion in this respect.
E. J
APAN
6.16 Japan requested changes to paragraphs 7.1, 7.3, and 7.46 to 7.50 of the interim report. We
have made changes to these paragraphs as we consider appropriate.
6.17 Japan requested that the last sentence of paragraph 8.3 be deleted as it seemed unnecessary in
view of the Panel's finding in paragraph 7.52. We do not consider that the last sentence of paragraph8.3 is unnecessary merely because it repeats part of the Panel's finding. We therefore reject Japan's
request.
F. E
UROPEAN COMMUNITIES
6.18 The European Communities requested a minor change in paragraph 7.61 of the interim report,
which we have made.WT/DS217/R
WT/DS234/R
Page 296
6.19 The European Communities suggested to delete paragraph 8.3 of the interim report, or at least
the last sentence thereof, as it considers that this  paragraph is difficult to reconcile with paragraph
7.52. As stated above, we do not consider that there is any contradiction between what we stated in
paragraph 8.3 and what we said in paragraph 7.52.  We therefore reject the EC's suggestion in thisrespect.
6.20 The European Communities requested that paragraph 8.6 be rephrased to clarify that the
Panels' recommendations can only be implemented by the United States by repealing the CDSOA.
We consider that paragraph 8.3 is clear and we do not consider it necessary therefore to rephrase this
paragraph in the way suggested by the EC.
G. K
OREA
6.21 Korea requested changes to paragraph 4.1349 and footnote 337 of the interim report, which
we have made.
VII. FINDINGS
7.1 This case raises issues regarding the conformity of the CDSOA with AD Articles 5.4, 8.3, 15,
18.1 and 18.4, SCM Articles 4.10, 5(b), 7.9, 11.4, 18.3, 32.1 and 32.5, GATT Articles VI:2, VI:3, and
X:3(a), and Article XVI:4 of the WTO Agreement.  After addressing two procedural issues, we shallbegin our substantive work by examining the claims raised by the complaining parties under AD
Article 18.4, SCM Article 32.1, and paragraphs 2 and 3 of GATT Article VI.
A. 
PROCEDURAL ISSUES
1. Submission of new evidence
7.2 On 27 March 2002, Canada requested permission from the Panel to submit a letter filed with
the US International Trade Commission ("USITC") by a US producer in the context of a US
countervailing duty investigation.  The United States asked the Panel to decline Canada's request.  On
3 May 2002, the Panel sent the following letter to the parties regarding this matter:
On 27 March 2002, Canada requested permission from the Panel to submit a letter
filed with the US International Trade Commission ("USITC") by a US producer inthe context of a US countervailing duty investigation.  According to Canada, the letter
"provides highly relevant evidence in response to arguments of the United States in
these proceedings that the [CDSOA] has no effect or influence on whether domestic
industry will support petitions to receive offset payment".  Canada asserted that it was
not in a position to submit the letter within the timelines provided in paragraph 14 of
the Panel's Working Procedures, because the letter was filed with the USITC on
22 March 2002, and brought to the attention of the Government of Canada twobusiness days later.
The United States submits that Canada’s request should be denied as Canada has not
shown the requisite “good cause” under paragraph 14 of the Panel's Working
Procedures, which provides that “[p]arties shall submit all factual evidence to the
Panel no later than during the first substantive meeting, except with respect toevidence necessary for the purposes of rebuttal submissions or answers to questions.
Exceptions to this procedure will be granted upon a showing of good cause.”
According to the United States, although Canada argues that it was not in a position
to submit this evidence because it was not brought to its attention untilWT/DS217/R
WT/DS234/R
Page 297
24 March 2002, in fact Canada was in a position to bring this information to the
Panel’s attention much earlier.  This is because, on 11 February 2002, the relevant US
producer filed a letter with the USITC indicating its support for the relevant petitions
in order to qualify for benefits under the CDSOA.  The United States asserts that thisletter is dated on the USITC website as 14 February 2002, and was mailed directly to
the Canadian government itself on 13 February 2002.  The United States further
asserts that this letter contains the exact same information that Canada now wishes to
bring before the Panel, and is referenced specifically on page 2 of the document
submitted by Canada.  The United States submits that because Canada was in a
position to bring this information to the Panel’s attention much earlier, it cannot be
said that Canada has shown “good cause” for its delay in presenting this informationto the Panel until after both the second panel meeting and the deadline for answering
the Panel’s second set of questions.
The Panel notes that the letter at issue did not come into the possession of Canada
until 24 March 2002, i.e., after the first substantive meeting held on
5/6 February 2002.  The fact that some of the information in the letter may have beenavailable to Canada earlier in time does not change the fact that the letter did not
come into Canada's possession until 24 March 2002.  Furthermore, even if Canadahad submitted the information contained in the letter when (according to the
United States) it was first able to do so (13 February 2002), the submission of that
information would still have been after the first substantive meeting.  The Panel alsonotes that the information contained in the letter is in the public domain, and that the
information is pertinent to these proceedings since it relates to an issue which we
have been asked to consider, i.e., whether or not the CDSOA will cause domestic
producers to support petitions for the purpose of receiving CDSOA offset payments.
For these reasons, the Panel considers that there is "good cause" for it to acceptCanada's submission of this letter under paragraph 14 of our Working Procedures.
The Panel therefore invites the United States to comment on the substance of the
letter.  Other complaining parties may also comment on the substance of the letter, if
they so choose.  All comments should be submitted to the Secretariat by close of
business on Monday, 13 May 2002.
260
2. Issuance of separate reports
7.3 In a letter dated 10 June 2002, the United States asked the Panel to issue a separate final
report on the dispute brought by Mexico (WT/DS234).261  The United States based its request on the
fact that Mexico’s panel request included a claim under SCM Article 5(b), in addition to the claims
common to all complaining parties.  The United States made its request pursuant to Article 9.2 of the
DSU, which provides in relevant part:
If one of the parties to the dispute so requests, the panel shall submit separate reports
on the dispute concerned.
                                                     
260 Comments were received from Japan and the United States.
261 In a letter dated 12 June 2002, the Panel invited the parties to comment on the US request.
Comments were received from the European Communities, Japan and Mexico.  The European Communitiesexpressed surprise at the timing of the US request.  Japan expressed systemic concerns regarding the timing ofthe US request.  Mexico did not oppose the US request, provided that the Panel made findings and conclusions
regarding all Mexico's claims, including those claims made in common with other complaining parties.WT/DS217/R
WT/DS234/R
Page 298
7.4 Although Article 9.2 of the DSU provides that the United States may request a separate report
on the dispute brought by Mexico, we consider that requests made under that provision should be
made in a timely manner, since any need to prepare separate reports may affect the manner in which a
panel organises its proceedings.  In particular, such requests should be made at an early juncture in thepanel process, preferably at the time that a panel is established.  In the present case, the US request
was received on 10 June 2002, approximately two months after issuance of the descriptive part of the
Panel's report.  Nevertheless, the United States provides no explanation of why it was unable to
submit its request at an earlier date.  Nor does the United States describe any prejudice that it will
suffer if the Panel were to fail to issue a separate report on the dispute brought by Mexico.  It is not
incumbent on us to assume that a failure to issue separate reports will prejudice the United States,
especially as Mexico's SCM Article 5(b) claim is handled separately and discreetly in the presentreport.
7.5 Upon considering the US request, we formed the vi ew that the preparation of a separate report
on the dispute brought by Mexico would delay issuance of the Panel's interim report.  Although the
United States only requested a separate final report, we are not prepared to issue a separate final
report without also issuing a separate interim report.  This is because we are not entitled to issue a
final report on the dispute brought by Mexico without first having issued an interim report on that
dispute.  Otherwise Mexico would be denied its ri ght to request a review of precise aspects of its
interim report (DSU Article 15.2).
7.6 For these reasons, we reject the US request for a separate final report on the dispute brought
by Mexico.
B. AD ARTICLE 18.1 AND SCM ARTICLE 32.1, AND PARAGRAPHS 2 AND 3 OF GATT ARTICLE VI –
SPECIFIC ACTION AGAINST DUMPING /SUBSIDY
1. Introduction
7.7 The complaining parties assert that the CDSOA constitutes "specific action against
dumping"/subsidisation, contrary to Article 18.1 of the AD Agreement, Article 32.1 of the SCMAgreement, and paragraphs 2 and 3 of Article VI of the GATT 1994.  The following evaluation and
findings focus primarily on the AD Article 18.1 claim.  However, they apply equally in respect of the
claims made under SCM Article 32.1 and GATT Article VI:2 and 3. The United States suggests that
the reasoning of the Appellate Body in US – 1916 Act (AB)
262 regarding AD Article 18.1 should not
apply equivalently to GATT Article VI:3 and the SCM Agreement.  In particular, the United States
notes that, although AD Article 18.1 and SCM Articl e 32.1 contain essentially identical language,
GATT Article VI:3 is not the same as Article VI:2.   In addition, SCM Article 10 is significantlydifferent from AD Article 1 in that SCM Article 10 refers to “countervailing duties” while Article 1
refers to “anti-dumping measures.”  According to the United States, the Appellate Body found that
AD Article 1 encompasses all measures taken against dumping since that provision contains no
limitation on the particular types of measures. SCM Article 10, in contrast, refers to “countervailing
duties,” not “measures” taken against subsidies.  In the United States' view, GATT Article VI:3 readin conjunction with Article 10 does not limit the permissible remedies for subsidies to duties.  The
United States submits that, instead, those provisions operate to impose the requirements of Part V of
the SCM Agreement only when the measure taken is countervailing duties.  The Panel does not accept
the US argument.  The Appellate Body found in US – 1916 Act  that "Article VI, and, in particular,
Article VI:2, read in conjunction with the Anti-Dumping Agreement , limit the permissible responses to
dumping to definitive anti-dumping duties, provisional measures and price undertakings".   The
                                                     
262 United States – Anti-Dumping Act of 1916  ("US – 1916 Act (AB) "), WT/DS136/AB/R,
WT/DS162/AB/R, adopted 26 September 2000.WT/DS217/R
WT/DS234/R
Page 299
Appellate Body's analysis was not based on any particular AD provision in isolation, but on the AD
Agreement as a whole.  Since the Appellate Body's analysis was not based exclusively on AD
Article 1, we fail to see why a different approach should apply in respect of the permissible responses
to subsidization, simply because of a difference between the text of AD Article 1 and SCM Article 10.In identifying the permissible responses to subsidization, we consider it important to have regard to
the type of remedies foreseen by the SCM Agreement.  (We note that the panel in US – 1916 Act
(Japan)
263 took a similar approach for the purpose of identifying the permissible remedies against
dumping).  Part V of the SCM Agreement foresees  definitive countervailing duties, provisional
measures and undertakings, whereas Part III foresees countermeasures.  These, therefore, are the
permissible responses to subsidization.  To the extent that the CDSOA may be regarded as a "specific
action against a subsidy" but not one of these permissible responses to subsidization, it would beinconsistent with SCM Article 32.1.
7.8 As noted above, the Appellate Body has confirmed that there are three "permissible responses
to dumping" available to WTO Members.
264  A Member may have recourse to definitive anti-dumping
duties, provisional measures, and price undertakings.  Such "permissible responses to dumping"
constitute "specific action against dumping" with in the meaning of AD Article 18.1, which provides
that:
No specific action against dumping of exports from another Member can be taken
except in accordance with the provisions of  GATT 1994, as interpreted by this
Agreement.*
*  This is not intended to preclude action under other relevant provisions of GATT 1994, as appropriate.
7.9 By virtue of AD Article 18.1, other types of "specific action against dumping" are not
permitted.  Thus, if the CDSOA is a "specific act ion against dumping", but not one of the three
"permissible responses to dumping", it will violate AD Article 18.1.  The issue before the Panel iswhether or not the CDSOA is a "specific action against dumping".
7.10 The complaining parties submit that the CDSOA constitutes "specific action against
dumping" because CDSOA offset payments are dependent on a finding of dumping.  In this regard,
the complaining parties rely on the following statem ent by the Appellate Body at para. 122 of its
report on US – 1916 Act :
In our view, the ordinary meaning of the phrase "specific action against dumping" of
exports within the meaning of Article 18.1 is action that is taken in response tosituations presenting the constituent elements of "dumping".  "Specific action against
dumping" of exports must, at a minimum, encompass action that may be taken  only
when the constituent elements of "dumping" are present.
66
66.  We do not find it necessary, in the present cases, to decide whether the concept of "specific action
against dumping" may be broader.
7.11 The United States adopts a two-tier approach to this issue.  First, the United States relies on
the above Appellate Body statement to argue that AD Article 18.1 only applies in respect of actions
that address dumping "as such".  The United States submits that CDSOA offset payments are not
made "in response to situations presenting the co nstituent elements of dumping", and that the CDSOA
                                                     
263 United States – Anti-Dumping Act of 1916 – Complaint by Japan ("US – 1916 Act (Japan) "),
WT/DS162/R and Add.1, adopted 26 September 2000, as upheld by the Appellate Body Report,WT/DS136/AB/R, WT/DS162/AB/R, para. 6. 216.
264 US – 1916 Act (AB) , para. 137.WT/DS217/R
WT/DS234/R
Page 300
is therefore not based on a test that includes the constituent elements of dumping.  Accordingly, the
United States submits that the CDSOA does not address dumping "as such".
7.12 Second, the United States emphasises that AD Article 18.1 is restricted to specific actions
"against" dumping.  The United States asserts that the Appellate Body had no need to interpret thisspecific term in the 1916 Act , and argues that the Appellate Body should not be understood to have
found that AD Article 18.1 applies to all "action that is taken in response to situations presenting the
constituent elements of dumping".  According to the United States, certain action may be "in response
to" dumping, but not "against" dumping.  The United States submits that, in order for action to be
"against" dumping, and thereby fall within the scope of AD Article 18.1, such action must (1) apply to
the imported good or importer, and (2) be burdensome (as was the case in the 1916 Act ).
7.13 The issues raised by the parties require us to determine whether or not the CDSOA constitutes
a "specific action against dumping" within the meaning of Article 18.1 of the AD Agreement.  In
identifying the appropriate standard for resolving th is issue, we have had regard to the Appellate
Body's treatment of this provision in US – 1916 Act .
265  We note that there is disagreement between
the parties as to whether or not the test applied by the Appellate Body in US – 1916 Act  for the
purpose of determining whether or not the measure at issue in that case was a "specific action againstdumping" is conclusive of the issue before us. If the test set forth in para. 122 of the Appellate Body
report in US – 1916 Act  were conclusive, a measure would constitute "specific action against
dumping" if it were "taken in response to situations presenting the constituent elements of dumping".
This would be the case if the measure could be taken only when the constituent elements of dumping
were present.  We therefore begin our analysis by considering the relevance of the test applied by theAppellate Body in US – 1916 Act  to these proceedings.  Thus, we shall consider whether any "action
that may be taken  only  when the constituent elements of 'dumping' are present" necessarily
constitutes "specific action against dumping"?  In particular, is an action necessarily "against"
dumping simply because it is taken "in response to" dumping", or is it necessary to further determine
that a measure taken "in response to" dumping is also "against" dumping?  We then identify theappropriate standard for determining whether or not a measure constitutes "specific action against
dumping" and apply it to the CDSOA.  Finally, we examine the US argument that the CDSOA is
permitted by footnotes 24 and 56 of the AD and SCM Agreements respectively.
2. The standard for determining whether or not a measure constitutes a "specific action
against dumping"
7.14 For the reasons set forth below, we do not consider that the test applied by the Appellate
Body in US – 1916 Act  is conclusive of whether or not a measure constitutes "specific action against
dumping".  In our view, a measure is not "specifi c action against dumping" simply or only because it
is taken in response to situations presenting the constituent elements of dumping, or because it may be
taken only when the constituent elements of dumping are present.  Such a measure will be "specific
action" related to dumping, in the sense that it acts specifically in response to dumping, but it will not
necessarily be "specific action" against dumping.
7.15 First, we note that, at para. 122 of its US – 1916 Act  report, the Appellate Body was referring
to Article 18.1 of the AD Agreement in order to clarify the scope of application of Article VI of
GATT 1994.  In other words, the Appellate Body was referring to Article 18.1 as context for the
purpose of interpreting Article VI, which was the provision at issue in that case.  The Appellate Body
was not interpreting AD Article 18.1 per se .
                                                     
265 We shall also have regard to the general rule of treaty interpretation set forth in Article 31 of the
Vienna Convention, whereby a treaty "shall be inte rpreted in good faith in accordance with the ordinary
meaning to be given to the terms of the treaty in their context and in the light of its object and purpose".WT/DS217/R
WT/DS234/R
Page 301
7.16 Second, we do not consider that the circumstances of the US – 1916 Act  proceedings were
such that the Appellate Body was required to co nsider the meaning of the word "against" in AD
Article 18.1.  This is because there was no disagreement between the parties in that case that the
measure at issue, which imposed criminal and civil liabilities on importers engaged in dumping,constituted action "against" dumping.
266
7.17 Third, we do not consider that action "in response to" dumping will always necessarily be
"against" dumping.  In our view, the category of action "in response to" dumping is broader than the
category of action "against" dumping.  In this regard , the parties provided us with many definitions of
the term "against".  According to the United States , the ordinary meaning of "against" is "of motion or
action in opposition", "in hostility or active opposition to", and "into contact with".267  Australia, the
European Communities, India, Indonesia and Thailand note that the same dictionary also defines"against" as "in competition with", "to the disadvantage of", "in resistance to", and "as protection
from".
268  According to Canada, "[t]o take action against dumping or subsidies is to 'offset or prevent'
the dumping or subsidy.  In other words, action taken against dumping or subsidies is action taken to
counteract or discourage the practice".269  Without necessarily providing a definitive statement of the
meaning of the term "against", we conclude that action "against" dumping must have some adversebearing
270 on dumping.  Thus, action "in response to" dumping will only constitute action "against"
dumping to the extent that it has an adverse bearing on dumping.271  Action which is in response to
dumping, but also beneficial to dumping (or neutral in effect on dumping), is not "against"
dumping.272
7.18 For these reasons, we do not consider that the test applied by the Appellate Body in US –
1916 Act  is conclusive of the issue of whether or not a measure constitutes a "specific action against
dumping".  A measure is not a "specific action against dumping" simply because it "may be taken
 only  when the constituent elements of 'dumping' are present", or because it is taken "in response to"
dumping.  A measure that may be taken only in situations presenting the constituent elements of
dumping is clearly "specific action" in response to dumping. However, in order for that measure to
                                                     
266 At the risk of over-simplification, the relevant disagreement between the parties was more a
question of whether the measure acted against dumping per se , as opposed to predatory pricing.
267 US first written submission, para. 92, citing the new Shorter Oxford English Dictionary, 38-39
(L. Brown ed., 1993).
268 Australia, second written submission, para. 16.  EC, India, Indonesia and Thailand, second written
submission, para. 28.
269 Canada, second written submission, para. 45.
270 The Oxford English Dictionary Online (www.oed.com) refers to "against" as "expressing the
adverse bearing of many verbs and nouns of action".
271 We consider that this approach is entirely consistent with basic definitions of the term "against"
proposed by the parties.  The complaining parties have asserted that the ordinary meaning of "against" is "incompetition with", "to the disadvantage of", "in resistance to", "in opposition to" and "as protection from".  TheUnited States has asserted that "against" means "burdensome".  All of these definitions, in our view, express
some form of adverse bearing.
272 Certain complaining parties themselves accept that action will not be "against" dumping if it does
not have any adverse bearing on dumping.  For example, the EC, India, Indonesia and Thailand assert that:  "tobe effective, a 'specific action against dumping' must be capable of having some adverse impact upon the
dumped imports (or upon the 'entities engaged in dumping')" (reply to Question 5 from the Panel after the
second substantive meeting).  Furthermore, Australia asserts "that a measure 'against' dumping … would need to
have an 'adverse bearing' in relation to dumped products, or to an entity connected with those products" (reply toquestion 8 from the Panel after the second substantive meeting).  Brazil states that "[t]here may, of course, beactions taken in 'response' to dumping which are not necessarily 'against' dumping.  As such, 'specific actionagainst dumping' is a subset of actions which may be taken in response to the constituent elements of dumping.Indeed, 'specific action against dumping' read in the co ntext of Article VI.2 of the GATT 1994 means action 'to
offset or prevent dumping.'" (Brazil's reply to Question 1 from the Panel at the first substantive meeting).WT/DS217/R
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constitute "specific action against dumping", something more is needed: the measure must also act
"against" – and therefore have an adverse bearing on - dumping.  In other words, a measure will only
constitute "specific action against dumping" if (1) it acts specifically in response to dumping, in the
sense that it may be taken only in situations presenting the constituent elements of dumping,273 and (2)
it acts "against" dumping, in the sense that it has an adverse bearing on dumping.  We shall now
examine whether the CDSOA meets these two conditions.
3. Does the CDSOA act specifically in response to dumping, in the sense that CDSOA
payments may be made only in situations  presenting the constituent elements of
dumping?
(a) Arguments of the parties
7.19 The complaining parties274 assert that CDSOA payments may be made only in situations
presenting the constituent elements of dumping because:
• CDSOA offset payments are made only and ex clusively to US producers that supported an
application for an anti-dumping investigation:
• CDSOA offset payments are made only and exclusively to US producers "affected" by an
instance of dumping which is the subject of an anti-dumping order;
• CDSOA offset payments are paid for "qualifying expenses" incurred by the affected domestic
producers "after" the issuance of anti-dumping order; and
• the "qualifying expenses" must be related to the production of a product that is the subject of an
anti-dumping order.
7.20 The United States denies that CDSOA payments may be made only in situations presenting
the constituent elements of dumping.  According to the United States, the CDSOA does not instruct
US Customs to take action in response to situatio ns or conduct presenting the constituent elements of
dumping, and is therefore not directly based on the constituent elements of dumping.  On the contrary,
the CDSOA instructs US Customs to take action based on certifications from an "affected domesticproducer" regarding its "qualifying expenditures".  The United States asserts that the fact that an anti-
dumping order is a necessary prerequisite, or condition, for CDSOA payments is not sufficient to
make the CDSOA a "specific action against dumping".  Nor is the fact that CDSOA distributions are
funded by anti-dumping duties.
(b) Evaluation by the Panel
7.21 We note that, at first sight, the CDSOA contains no reference to the constituent elements of
dumping.  Nor are the constituent elements of dumping explicitly built into the essential elements of
                                                     
273 According to our understanding of the Appellate Body, action that may be taken only when the
constituent elements of dumping are present is taken "in response to" dumping.  Although the category of action"in response to" dumping may be broader than the category of action that may be taken only when the
constituent elements of dumping are present, for present purposes we shall confine ourselves to considering
whether or not the CDSOA is in response to dumping, in the sense of operating only when the constituentelements of dumping are present.  In this regard, we note that the Appellate Body did not "find it necessary  …to decide whether the concept of 'specific action against dumping' may be broader" ( US – 1916 Act (AB) ,
note 66).
274 Not all complaining parties rely on each of thes e factors to support their argument that the CDSOA
offset payments may be made only when the constituent elements of dumping are present.WT/DS217/R
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eligibility for offset payment subsidies. Nevertheless it is clear that CDSOA payments may only be
made in situations where the constituent elements of dumping are present.  Specifically, CDSOA
offset payments follow automatically from the coll ection of anti-dumping duties, which in turn may
only be collected following the imposition of anti-dumping orders, which may only be imposed
following a determination of dumping (injury and causation).  Thus there is a clear, direct and
unavoidable connection between the determination of dumping and CDSOA offset payments.  For
domestic producers who have qualified for CDSOA payments by having supported the petition for an
anti-dumping investigation, and having incurred qualifying expenses in the production of like
products, the CDSOA offset payments flow as  au tomatically from the presence of the constituent
elements of dumping as do the anti-dumping duties themselves.  For this reason, we find that CDSOA
offset payments may be made only in situations presenting the constituent elements of dumping.Indeed, this conclusion is even suggested by the reference to "dumping" in the title of the CDSOA.
7.22 In order to avoid any misunderstanding, we wi sh to emphasise that our finding that CDSOA
offset payments may be made only in situations presenting the constituent elements of dumping is in
no way based on the fact that offset payments are funded from collected anti-dumping duties.  Even if
CDSOA offset payments were funded directly fro m the US Treasury, and in an amount unrelated to
collected anti-dumping duties, we would still be required to reach the conclusion – for the reasons set
forth in the preceding paragraph - that offset payments may be made only in situations presenting the
constituent elements of dumping.
7.23 To conclude, therefore, we find that CDSOA offset payments act specifically in response to
dumping, since they may be made only in situations presenting the constituent elements of dumping.For this reason, we find that the CDSOA is a "specific action" related to dumping.  We must now
consider whether or not the CDSOA is a specific action against dumping.
4. Is the CDSOA a specific action against dumping?
(a) Arguments of the parties
7.24 The complaining parties assert that the CDSOA acts against dumping because it upsets the
competitive relationship between (imported) du mped and domestic products.  According to the
complaining parties, "specific action against dumping" need not necessarily impact directly on the
entity connected to, in the sense of being responsible for, the dumped product.  For example, Australia
asserts that "the necessity of an 'adverse bearing' does not compel the conclusion that a measure
'against' dumping must apply exclusively to the dumped products, or to an entity connected with those
products, or be burdensome to those products or entities".275  The EC, India, Indonesia and Thailand
assert that "to be effective, a 'specific action against dumping' must be capable of having someadverse impact upon the dumped imports (or upon the 'entities engaged in dumping')", although "there
is nothing in the US - 1916 Act  panel reports or in the Appellate Body report which suggests that the
notion of 'specific action against dumping' should be re stricted to those types of measures which apply
'directly' to 'entities engaged in dumping'".
276
7.25 The United States asserts that, in order to be "against" dumping, action "must apply to the
imported good or the importer, and it must be burdensome".277  In particular, according to the
United States, "the action must be directly  against imported products.  As a practical matter, imported
goods are produced, exported, and imported by foreign producers, exporters, and importers.
Therefore, the object of 'specific action' under Articles 18.1 and 32.1 extends to the entity connected
                                                     
275 Australia's response to Question 8 from the Panel after the second substantive meeting.
276 Replies to Questions 6 and 8 from the Panel after the second substantive meeting.
277 US first written submission, para. 92.WT/DS217/R
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to, in the sense of being responsible for, the dumped  or subsidized good such as the importer, exporter
or foreign producer."278
7.26 The complaining parties assert that the US approach to the phrase "against dumping" is overly
restrictive.  The complaining parties assert that th e ordinary meaning of "against" is "in competition
with", "to the disadvantage of", "in resistance to", "in opposition to" and "as protection from".  They
therefore argue that the notion of action "against" dumping may include not only actions that impose a
direct liability on dumped imports, but also actions that afford protection to domestic producers by
giving them an advantage over the dumped imports with which they compete.  As contextual support
the complaining parties refer to Articles VI:2 and VI:3 of GATT 1994, which refer respectively to the
imposition of anti-dumping duties "in order to prevent or offset dumping", and countervailing duties
"for the purpose of offsetting any bounty or subsidy".  The complaining parties argue that the notionof "against" dumping must include, at a minimum, any actions which, like the levying of anti-
dumping or countervailing duties, are taken "in order to" or "with the purpose of" "offsetting" (or
"preventing") dumping or subsidization.  They note that dumping and subsidization may be "offset"
not only directly, but also indirectly, by granting an advantage to domestic producers which cancels
out the price advantage enjoyed by imports as a result of dumping or subsidization.  The complainingparties assert that CDSOA offset payments are therefore likely to precipitate changed behaviour on
the part of the producers and importers of dumped or subsidised goods, as well as on the part of
domestic producers, thereby altering the competitive relationship between imported goods and the
domestic like products in ways not contemplated  by GATT 1994 or the AD or SCM Agreements.
CDSOA offset payments further strengthen the competitive position of domestic producers on top ofthe remedy that has already been provided in the form of anti-dumping/countervailing measures.
7.27 The complaining parties assert that the stated purpose of the CDSOA confirms that CDSOA
offset payments constitute action "against" dumping/subsidization.  They submit that the purpose of
the offset payments is clearly described in Section 1002 of the CDSOA, which contains the “findings”
of Congress providing the justification for the enactment of the CDSOA. The complaining parties
assert that Section 1002 is an integral part of the CDSOA.  They note that paragraph 1 of
Section  1002 states that dumping and subsidisation “must be effectively neutralized”, that paragraph 3
contains the “finding” that the “remedial purpose” of the existing US anti-dumping and countervailing
duty laws is “frustrated” because continued dumping and subsidisation “prevents markets prices from
returning to fair levels”, and that paragraph 5 concludes that “United States trade laws should be
strengthened to see that the remedial purpose of those laws is achieved”. According to the
complaining parties, US Congress therefore asserted that the purpose of the offset payments is to
“neutralize effectively” dumping and subsidisation by ensuring that prices “return to fair levels”. In
other words, the purpose of the CDSOA is to “offset” dumping and subsidisation. The complaining
parties assert that the name given by the US Congress to the act (“ Continued Dumping and Subsidy
Offset Act ”) and to the payments made under the act (“ offsets” ) provides further confirmation of such
purpose.
7.28 The United States asserts that the complaining parties have failed to demonstrate that the
CDSOA acts "against" dumping.  Instead, the compla ining parties presume that the CDSOA will have
negative effects on imported goods.  The United States submits that the complaining parties would
have the Panel rewrite AD Article 18.1 and SCM Article 32.1 to read "no specific action with a
presumed negative effect on import goods or foreign producers …".  The United States also assertsthat the complaining parties' test is overly broad and unworkable, since any type of domestic
legislation which improves the position of the domestic industry could be presumed to have a negative
effect on imported goods.  Nor does the United States agree that the CDSOA acts "against" dumping
because of its supposed effect on the competitive relationship or the conditions of competition
                                                     
278 US oral statement at the second substantive meeting, para. 32.WT/DS217/R
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between domestic goods and imported – including dumped or subsidized – goods.  According to the
United States, a measure only acts "against" dumping or subsidy if it imposes a limitation or burden
directly on the imported goods or the entity connected to, in the sense of being responsible for, the
dumped or subsidized good such as the importer, exporter, or foreign producer.
7.29 According to the United States, the purpose or intent of the CDSOA is legally irrelevant.  The
United States submits that the resolution of this dispute does not depend upon what the CDSOA is
intended to do but what it actually does.  The United States relies on the following statement by the
panel in US - 1916 Act  to reject the argument that the intent or purpose of a measure is relevant in
determining whether it constitutes a “specific action against dumping”:
While we agree that Article VI applies when Members have recourse to a given trade
policy instrument, i.e. anti-dumping ac tion, we do not agree that application of
Article VI is dependent on the objective pursued by the Member concerned…
Article VI is based on an objective premise.  If a Member’s legislation is based on a
test that meets the definition of Article VI :1 {dumping}, Article VI applies.  The
stated purpose of the law cannot affect this conclusion.279
7.30 The United States submits that the US – 1916 Act  panel cited EC - Parts and Components ,
where the panel also rejected the argument that the policy purpose of a measure could determine
whether it fell within the scope of the provisions in question.280  According to the United States, in
that case the panel explained that “[o]nly at the expense of creating substantial legal uncertainty could
the policy purpose of a charge be considered to be relevant in determining whether the charge falls
under Article II:1(b) or Article III:2.”281  According to the United States, despite US arguments that
the 1916 Act was intended to remedy the antitrust problem of predatory pricing, the panel, which was
affirmed by the Appellate Body, found that the purpose or intention of the law could not exclude it
from the scope of Article VI.282  According to the United States, it therefore must also be true that the
stated purpose of a measure cannot bring it within the scope of Article VI and the Antidumping and
SCM Agreements if the actual elements of  the measure do not satisfy the test for the scope of thosearticles.  The United States submits that the legisl ative history of the CDSOA would only be relevant
to its interpretation if the statute were ambiguous a nd the Panel then needed it to determine the fact of
the CDSOA.  In this regard, the present case differs from the US – 1916 Act  case, where the operation
of the statute was claimed to be ambiguous, and the legislative history was consulted to determine
whether the statute could be interpreted as only an antitrust statute, or something else.
7.31 The complaining parties assert that the US – 1916 Act  panels did not say that the purpose of
the measure is “legally irrelevant”, but rather that a measure which is objectively a “specific actionagainst dumping” cannot escape condemnation simply because it has a different stated purpose.
283
The panels in US - 1916 Act  were concerned that if the legal characterisation of a measure as “specific
action against dumping” were dependent upon its st ated purpose, it would be extremely easy for
Members to evade the prohibition contained in Article 18.1 of the Anti-Dumping Agreement simply
by stating some spurious purpose in the legislation at issue.  According to the complaining parties,that concern does not arise in the present  case.
                                                     
279 US – 1916 Act (EC) , para. 6.116.
280 US – 1916 Act (EC) , note 376.
281 EC – Parts and Components , BISD 37/132,  para. 5.7
282 US – 1916 Act (EC) , para. 6.117; US - 1916 Act (Japan) , para. 6.135.
283 US – 1916 Act (EC) , para. 6.116.WT/DS217/R
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7.32 The complaining parties assert that even if the CDSOA is merely a “payment programme”,284
making payments is not an objective in itself, but rather an instrument to achieve some purpose.
According to the complaining parties, the United St ates has not argued that the “findings” made by
the US Congress in Section 1002 of the CDSOA are incorrect or false. Nor has the United States
argued that the CDSOA is inapt to achieve the purpose reflected in those “findings”. Indeed, had the
US submission argued that, it would be tantamount to saying that the US legislators were either
incompetent or insincere.  The complaining parties submit that since the United States has not
disputed that the purpose of the CDSOA is that st ated by the US Congress in the CDSOA, there is no
reason why that purpose should be disregarded by the Panel.285  At any rate, even assuming that, as
argued by the United States, the stated purpose of the CDSOA were “legally irrelevant” for the
characterisation of the CDSOA, that would not prevent the Panel from taking into account the
unquestionably informed views of the US legislators in assessing the factual issue of whether or not
the offset payments  are objectively capable of offsetting or preventing dumping or subsidisation and,
therefore, constitute action “against” dumping or subsidisation.
(b) Evaluation by the Panel
7.33 In considering whether the CDSOA constitutes specific action "against" dumping, we note
that AD Article 18.1 refers only to measures that act against "dumping" as a practice.  There is no
express requirement that the measure must act against the imported dumped product, or entities
connected to, or responsible for, the dumped good such as the importer, exporter, or foreign
producer.286  Nor do we consider that action may only be considered to be "against" dumping if its
acts directly against dumping.  As noted above, we consider that a measure will only act "against"
dumping if it has an adverse bearing on the practice of dumping.287  In our view, the ordinary meaning
of the term "against", which is not qualified in any way in AD Article 18.1, encompasses any form of
adverse bearing, be it direct or indirect.288  Thus, AD Article 18.1 applies to measures that specifically
act either directly or indirectly against the practice of dumping.  Indeed, were it otherwise, we do not
see how the Appellate Body could have concluded in US – 1916 Act  that "[s]pecific action against
dumping could take a wide variety of forms".289
                                                     
284 See US first written submission at para. 19.
285 According to the complaining par ties, the stated purpose of a measure has been deemed relevant for
its legal characterisation in some cases where it was both undisputed and supportive of a finding of violation.See e.g. the report of the Appellate Body on Canada – Certain Measures Concerning Periodicals ,
WT/DS31/AB/R, pp. 30-31.  Commenting upon that report, the panel report on Chile – Taxes on Alcoholic
Beverages , WT/DS87/R, WT/DS110/R, noted the following (at para. 7.118):
Also, it is worth noting the nature of the quotations used in Canada – Periodicals. The statements were
supportive of a finding of a protective objective and structure of the provision. Statements by a governmentagainst WTO interests (e.g., indicating a protective purpose or design) are most probative. Correspondingly, it isless likely that self-serving comments by a government attempting to justify its measure would be particularlyprobative.
286 Similarly, SCM Article 32.1 merely refers to specific action against a "subsidy".  It does not refer to
action against the imported subsidized product, or entities connected to, or responsible for, the subsidized goodsuch as the importer, exporter, or foreign producer.
287 We consider that this approach is entirely consistent with basic definitions of the term "against"
proposed by the parties.  The complaining parties have asserted that the ordinary meaning of "against" is "in
competition with", "to the disadvantage of", "in resistance to", "in opposition to" and "as protection from".  The
United States has asserted that "against" means "burdensome".  All of these definitions, in our view, expresssome form of adverse bearing.
288 In a hypothetical election campaign, Candidate A could seek to adversely impact Candidate B both
directly, by having Candidate B removed from the list of electoral candidates, or indirectly, by paying voters to
vote for Candidate A.  Either type of action, be it direct or indirect, would in our view be "against" Candidate B.
289 US – 1916 Act (AB) , para. 81.WT/DS217/R
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7.34 In our view, the CDSOA has an adverse bearing on dumping.  This conclusion is based on the
following considerations which, taken together, demonstrate that the CDSOA operates "against"
dumping.
(i) Distortion of competition between dumped and domestic products
7.35 The CDSOA has an adverse impact on the competitive relationship between
dumped/subsidized imports and goods produced by "affected domestic producers".  In particular, the
structure of the CDSOA (which combines offset s ubsidies with the collection of anti-dumping duties)
is such that it will act against dumping by conferring on "affected domestic producers" incurring
"qualifying expenses" an offset payment subsidy which would allow them to establish a competitive
advantage over dumped imports.  Although the United States has argued that there is no basis to
include a "conditions of competition" test under AD Article 18.1/SCM Article 32.1, we note that theUnited States itself argued that conformity with those provisions should be determined inter alia  on
the basis of whether the measure at issue is "burdensome" for imported goods/entities responsible for
their importation.  In our view, a primary test of whether or not a measure is "burdensome" on imports
is to determine whether the measure has had an adverse impact on the conditions under which the
imported goods compete with like domestic goods.  In other words, we consider that the US"burdensome" test requires rather than disallows a conditions of competition test.
7.36 "Qualifying expenses" are capital or operational expenditures that must relate to the
production of the like domestic good to that subject to an order, and that must be incurred after the
order is imposed and before it terminates.  In other words, "qualifying expenses" are costs incurred by
domestic producers in competing with dumped imports subject to an order.  The amount of the offsetsubsidy is determined by the amount of duties collected, and therefore by the margin of dumping
involved.  The United States asserted that "dumping over time is evidence of a competitive advantage.
The imposition of an anti-dumping duty levels the playing field; it does not place the dumped product
at a disadvantage."
290  We agree that dumping over time may be evidence of a competitive advantage.
However, the combination of anti-dumping duties and offset subsidies is not merely to level theplaying field, but to transfer that competitive advantage to "affected domestic producers".
291  To the
extent that the competitive advantage enjoyed by dumped imports is transferred to "affected domestic
producers", those imports, and the entities responsible for their commercialization, suffer a
competitive disadvantage.  This competitive disadvantage acts (albeit indirectly) against dumping and
subsidization.
7.37 We note the US argument that there is no reason to believe that the CDSOA payments will
necessarily change the competitive relationship betw een producers.  According to the United States,
an affected domestic producer can use the money for any purpose, including gifts to charity, payment
of creditors, additional compensation or early retirement packages for workers, new product
development, or new cafeterias.  The United States submits that CDSOA payments will not
necessarily be used by domestic producers to improve their competitive position with respect to the
product subject to relevant anti-dumping or countervailing duty orders.  While we accept that theCDSOA does not require "affected domestic producers" to use offset payments for any specific
purpose, we would also note that offset payments will have been made to domestic producers because
of a finding of dumping causing injury, and that it may be expected that most or many will use the
payments, and the improvement in their competitive position these will allow, to address the injury
caused by dumped imports in one way or another.  It is not necessary to specify how this will be done.
                                                     
290 US response to question 3(d) from the Panel after the second substantive meeting.
291 The competitive advantage enjoyed by subsidised imports is likewise transferred to "affected
domestic producers" through the combination of countervailing duties and offset subsidies.WT/DS217/R
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Moreover, since money is fungible, what the reci pient actually does with the cash received is
irrelevant.292
7.38 We also note that the CDSOA confers an advantage on "affected domestic producers" in
respect of competition from all sources, not only that from dumped/subsidised imports subject to anorder.  However, we do not consider that a measure will only constitute "specific action against
dumping" if it only acts exclusively against dumping.  AD Article 18.1 does not refer to "specific
action exclusively against dumping".  Nor is the word "against" qualified by the word "specific",
which instead dictates the type of action at issue (i.e., a measure may be caught by AD Article 18.1 if
it is specific in nature, rather than specific in effect).
293
7.39 We conclude however, that the CDSOA has a specific adverse impact on the competitive
relationship between domestic products and  dumped imports which does not apply to other products.While non-"affected domestic producers" and foreign producers/exporters not subject to orders are
able to lower their prices in order to meet the im proved competitive position of the "affected domestic
producers" resulting from the offset payments, the fact that the offset subsidies are combined with
anti-dumping orders means that foreign producers/exporters subject to orders are unable to do so.
This is because any reduction in their prices will be nullified under United States law by theimposition by the United States of correspondingly increased anti-dumping duties.  Since the
CDSOA transfers the competitive advantage of dumped goods to "affected domestic producers", and
prevents foreign producers/exporters from responding by lowering their prices, the CDSOA
effectively penalises those entities if they continue to export dumped products (subject to orders) to
the United States.  It imposes a penalty on dumped imports by rendering them less competitive vis-à-vis the like products of "affected domestic producers".  We are in no doubt that the imposition of a
penalty on entities engaged in dumping acts ag ainst dumping.  Furthermore, since the CDSOA
combines the imposition of an anti-dumping order with the imposition of a penalty, the CDSOA
operates such as to impose a double remedy on dumped imports.  Such "double jeopardy" will
doubtless dissuade foreign producers/exporters from continuing to dump following the imposition ofan anti-dumping order.  Exporters/foreign producers know that if they dump products in the
United States, and if those products are subject to an anti-dumping order, not only will anti-dumping
duties be levied, but those duties will be transferred to at least some of their US competitors in the
form of CDSOA offset payments.  These payments  benefit the recipient companies, and therefore
disadvantage the exporters/foreign producers engaged in dumping.  Under the CDSOA,
exporters/foreign producers determine by their own conduct whether US producers obtain offset
payments.  In order to eliminate the competitive disadvantage they suffer from offset payments to"affected domestic producers", exporters/foreign producers will clearly be dissuaded from
                                                     
292 Under the SCM Agreement, countervailing duties may be imposed if the subsidy is specific, and
causes in injury to a domestic industry in the importing Member.  In the case of subsidies taking the form ofcash reimbursements of certain expenses incurred in respect of a given product, the imposition of countervailingduties is not subject to an additional obligation to demonstrate that the cash reimbursements were used by therecipient to bolster its competitive position in respect of that product.  The fact that the subsidy was product-
specific leads to a presumption that it benefited the recipi ent in respect of that product.  Nor is it necessary to
establish that a subsidy is actually used to export in order to demonstrate that a subsidy is contingent on exportperformance.
293 As noted above at para. 7.18, a measure constitutes "specific action" within the meaning of AD
Article 18.1 if it acts specifically in response to dumping.WT/DS217/R
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dumping.294  Such dissuasive effect means that the CDSOA bears adversely on dumping, and
therefore acts against dumping.295
7.40 Finally, we note that the consequences outlined above seem to be consistent with the intent of
the US legislature in adopting the CDSOA – i.e., that it would act primarily against dumping orsubsidisation, as opposed to import competition more generally.  We refer in particular to the
"Findings of Congress" set forth in Section 1002 of the CDSOA.  Section 1002 provides in relevant
part that "continued dumping or subsidization of imported products after issuance of anti-dumping
orders or findings or countervailing duty orders can frustrate the remedial purpose of the laws by
preventing  market prices from returning to fair levels".  According to Congress, the US trade laws
"should be strengthened to see that the remedial purpose of those laws is achieved".  In our view,
therefore, Congress intended that the CDSOA should  discourage the "frustrat[ion]" of the "remedial
purpose" of US trade laws by "continued dumping  or subsidization".  We therefore understand that
Congress intended that the CDSOA should act "again st" continued dumping or subsidization (in order
to safeguard the "remedial purpose" of US trade laws).  Since the CDSOA was intended to act against
dumping, and since it has been shown to act against dumping, we consider that it would be
inappropriate for us to find that it does not do so  simply because the CDSOA also has an effect on
competition more generally.  In particular, we do not consider that a Member is entitled to introduce a
measure with the intent of acting against dumping, and then deny that the measure constitutes a
"specific action against dumping" because the measure does not act exclusively against dumped
imports.
7.41 We note the US argument that "the stated purpose of a measure cannot bring it within the
scope of Article VI and the Antidumping and SCM Agreements if the actual elements of the measure
do not satisfy the test for the scope of those articles".
296  In this case, however, we are not relying on
the stated purpose of the CDSOA as a basis for concluding that the CDSOA constitutes a "specific
action against dumping".  We consider that this conclusion can be securely based on other
considerations to which we refer.  That being said, the stated purpose of the CDSOA confirms ourconclusion based on these other considerations, and we are therefore of the view that the stated
purpose of the CDSOA should not be overlooked.  In  effect, acceptance of the US argument that the
CDSOA is not a "specific action against dumping" would mean that the CDSOA does not do what the
US Congress clearly intended it would do, namely to act against (continued) dumping.  On the basis
of the various factors we have considered, we do  not accept that the CDSOA does not do what the US
Congress clearly intended it should do.  In any event, we note that the United States has not disputed
the EC statement that "[a]t any rate, even assuming that, as argued by the United States, the statedpurpose of the CDSOA were 'legally irrelevant' for the characterization of the CDSOA, that would not
prevent the Panel from taking into account the unquestionably informed views of the US legislators in
assessing the factual issue of whether or not the offset payments  are objectively capable of offsetting
or preventing dumping or subsidisation and, therefore, constitute action 'against' dumping or
subsidisation".
297
                                                     
294 Exporters/foreign producers will similarly be dissuaded from accepting subsidies, or from selling
into the United States at subsidized prices.
295 Non-dumping exporters/foreign producers (not subject to an anti-dumping order) can do nothing
and, therefore, will do nothing to prevent CDSOA offset payments.  The CDSOA therefore does not penalize(non-dumping) exporters/foreign producers not subject to an anti-dumping order in the same way that itpenalizes exporters/foreign producers subject to an anti-dumping.
296 US first written submission, para. 99.
297 Second written submission of the European Communities, India, Indonesia and Thailand, para. 38.WT/DS217/R
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(ii) Financial incentive to file/support applications
7.42 The adverse bearing on dumping created by the offset payments is compounded by the
additional consequence of the CDSOA that it will have the effect of providing a financial incentive
for domestic producers to file anti-dumping/countervail applications, or at least to support suchapplications in order to establish their eligibility fo r offset payments.  This will in all probability result
in a greater number of anti-dumping/countervail applications and investigations than would have been
the case without CDSOA, both because additional applications will be filed, and because the AD
Article 5.4/SCM Article 11.4 standing requirements will  likely be met in cases where there would not
have been sufficient "support" absent the CDSOA.
298  A greater number of anti-dumping/countervail
investigations will likely result in a greater number of anti-dumping/countervail orders (since some of
those additional investigations will on the balance of probability result in orders).299  The prospect of
an increased number of investigations will disrupt the trading environment for foreign
producers/exporters that may be engaged in dumping.300
7.43 The United States argues that since there is uncertainty at the time a petition is filed as to the
quantum of duties, if any, which will be distributed under CDSOA, and since many years are likely to
pass before any such distribution will take place, it is highly improbable that the CDSOA is a factor atall in a domestic company’s or union’s consideration of whether to support a petition.  According to
the United States, considered against the million plus US dollars it costs to bring an anti-dumping or
countervailing duty case before the Department of Commerce and the International Trade
Commission, and then to defend it against any possible court challenges, it would be irrational for
domestic producers to bring a "frivolous" or "disingenuous" anti-dumping or countervailing duty casefor a sum certain with the hope of a contingent and uncertain "payoff."
7.44 We acknowledge that the filing of an anti-dumping application is costly, and we have no
reason to doubt the US estimate of the costs of an application.
301  We also acknowledge that, in certain
cases, a significant period of time may elapse between the imposition of an order and the payment of
offset subsidies to "affected domestic producers", and that, depending on a number of variables, theoffset payments may not be significant.  That being said, however, the potential "rewards" involved
are significant.  According to evidence submitted by certain complaining parties (not challenged by
the United States), offset payments to "affected domestic producers" made as of December 2001
totalled over US$206,000,000.  One "affected domestic producer" received US$60,000,000.  Another
received US$30,000,000. While not all "affected domestic producers" will receive offset payments of
such magnitude, in some cases the US$1,000,000 plus cost of filing an application will clearly be
immaterial.  Furthermore, even though offset payments may not be made immediately afterimposition of an order, in many cases such sums woul d be worth waiting for.  Viewed in this light, we
                                                     
298 See also paras 7.59- 7.66 below.
299 We do not consider it necessary to establish that the CDSOA will always result in additional
applications being filed, or additional support for applicatio ns, or additional orders.  The fact that it is likely to
have this effect in an indefinite number of cases provides sufficient basis for our findings.  In this regard, we
note the Appellate Body's finding in US - FSC  that the fact that the fair market value rule would not bear upon
the input choices manufacturers make in all cases did not upset its conclusion that "the fair market value ruletreats imported products less favourably than like domestic products" since "the fact remains that in anindefinite number of other cases, the fair market value ru le operates, by its terms, as a significant constraint
upon the use of imported input products" ( United States – Tax Treatment for "Foreign Sales Corporations" ,
WT/DS108/AB/R, adopted 20 March 2000, para. 221).
300 Increased applications and/or orders will likely create a repressive trading environment even if the
substantive requirements of the AD and SCM Agreements for the imposition of anti-dumping andcountervailing measures are fully respected.
301 We note that the cost of filing an applica tion could of course be spread across a number of
applicants.WT/DS217/R
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conclude that the CDSOA will provide a clear incentive to domestic producers to file anti-
dumping/countervail applications.  This is confirmed by concerns expressed by US Administration
officials regarding the potential for "frivolous" applic ations resulting from an earlier bill on which the
CDSOA was based.  Thus, in 1999, US Secretary of  Commerce William M. Daley stated "as to the
compensation being given to the private sector, I think there is a question … of potential frivolous
suits".  US Trade representative Charlene Barshefsky stated that she "agree[d] fully with what
Secretary Daley … said".302
7.45 We consider that the CDSOA creates an even greater incentive for domestic producers to
support applications filed by others.  This is because the cost of supporting an application is minimal,
while "affected domestic producers" would be eligible for the same amount of offset payment whether
they file or merely support an application.  In other words, the "return" on supporting an application isgreater than the return on filing an application.  Even producers not necessarily interested in the
"return" from CDSOA offset payments will in certain instances choose to support an application, so
as not to be at a competitive disadvantage to other domestic producers (of the like product) by not
sharing in the offset payment subsidies.  While domestic producers may be expected to support
petitions, even without the prospect of offset payment subsidies, there would be cases where theywould not normally do so.  We note, for example, Korea's argument that vertically-integrated
producers often also import the product.  We also note that producers may import particular model-
types in order to plug a gap in their sales inventories.  The imposition of an anti-dumping or
countervail order would not necessarily be of economic benefit for such producers.  Indeed, if support
for applications were quasi-automatic, there would be no need for the standing provisions set forth inAD Article 5.4 and SCM Article 11.4.  Overall we c onclude that producers that might not normally
have supported an application may well be induced to as a result of the CDSOA, given the potential
for offset payment subsidies, especially sin ce they would otherwise render themselves less
competitive vis-à-vis other domestic producers that do receive offset payment subsidies.
303  Finally,
we note that, in support of this conclusion, the potential for the CDSOA to encourage domesticproducers to support applications is illustrated by two letters submitted by Canada.  In the first letter, a
US producer seeks support from other producers for a proposed countervail application.  In requesting
support, the letter explains the operation of the CDSOA, and states that "if the [CDSOA] is …
applicable here, the total amount available to US lumber producers could be very large – easily
running into hundreds of millions of dollars a year."
304  In the second letter, a US producer which
initially filed a Prehearing Brief alleging lack of injury to US producers subsequently withdrew that
Brief and expressed support for the petition "for purposes of qualification for consideration forbenefits under the" CDSOA.
305  In other words, the producer "changed its mind" (and expressed
support for the application) in order to be eligible for offset payment subsidies.
7.46 In light of the above considerations, taken together, we find that the CDSOA has an adverse
bearing on dumping, and therefore acts "against" dumping.  Since the CDSOA is in response to
                                                     
302 Transcript of US Senate Committee on Financing hearing on steel imports, 23 March 1999,
copyright 1999 Federal Document Clearin g-house, Inc. Political Transcripts.
303 The United States submits that domestic producers may continue to oppose an application if they
believe that a domestic competitor would be likely to receive a higher offset subsidy.  We consider this unlikely,however, since offset subsidies are based on "qualifying expenses" actually incurred.  To the extent that twodomestic competitors are both compensated for their "qualifying expenses" pro rata  to the same extent
(100 per cent, 90 per cent, or 80 per cent, for example, of total "qualifying expenses"), the fact that one receives
more offset subsidy than another simply means that the first incurred more "qualifying expenses" than thesecond.  It does not mean that the first obtains a greater degree of subsidy benefit than the second.
304 Letter from J. Ragosta, Dewey Ballantine, dated 8 January 2001, p. 2, attached to a letter from
R. Wood, Chairman of the Coalition for Fair Lumber Imports, regarding an Important Legal Request onSubsidized Canadian Lumber Imports, dated 8 January 2001.
305 Brief of Fred Tebb & Sons, Inc., dated 22 March 2002.WT/DS217/R
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dumping, in the sense that CDSOA offset payments  may be made only in situations presenting the
constituent elements of dumping, and since the CDSOA acts "against" dumping, the CDSOA
constitutes "specific action against dumping" with in the meaning of AD Article 18.1 (and "specific
action against subsidy" within the meaning of SC M Article 32.1).  We now turn to the US argument
that the CDSOA is permitted by footnote 24 of the AD Agreement (and footnote 56 of the SCM
Agreement).
5. Is the CDSOA permitted by footnotes 24 and 56 of the AD and SCM Agreements
respectively?
(a) Arguments of the parties
7.47 The United States asserts that, even if the Panel were to find that the CDSOA is an action –
but not specific action - against dumping/subsidization, footnotes 24 and 56 to Articles 18.1 and 32,respectively, operate to permit the CDSOA.
7.48 The complaining parties submit that the scope of Articles 18.1 and 32.1, on the one hand, and
footnotes 24 and 56, on the other hand, is mutually exclusive.  Thus, a measure prohibited by Articles
18.1 or 32.1 cannot be permitted by footnotes 24 or 56.
7.49 The United States submits that it is not seeking to rely on footnotes 24 and 56 as exceptions to
Articles 18.1 and 32.1.  The United States submits that Articles 18.1 and 32.1 do not cover all types of
action against dumping or a subsidy, just "speci fic" action against dumping or a subsidy, since
footnotes 24 and 56 cover "action" against dumping or subsidization under other relevant provisions
of GATT 1994.  According to the United States, the combination of (1) Articles 18.1 and 32.1 and
(2) footnotes 24 and 56 creates an integrated scheme proscribing only certain actions against dumpingand subsidization. Under that scheme, actions against dumping and subsidies as such  must proceed
under the Antidumping or SCM Agreement; other actions, however, such as actions under GATT
Article XVI to address the effects of dumping and/or subsidies, are explicitly permitted by
footnotes 24 and 56.  The CDSOA, to the extent that the Panel were to find it to be an action against
dumping and/or subsidies, is nevertheless clearly an action under GATT Article XVI to address theeffects of such practices.
(b) Evaluation by the Panel
7.50 We do not understand the United States to argue that a measure prohibited by Articles 18.1 of
the AD Agreement or 32.1 of the SCM Agreement may nevertheless be permitted by footnotes 24 or
56.
306  Indeed, the United States has expressly asserted that footnotes 24 and 56 are not exceptions to
Articles 18.1 or 32.1.307  Thus, the basis for the US reliance on footnotes 24 and 56 appears to be that
the CDSOA is not a "specific" action against dumping or subsidy.308  In other words, the US
arguments concern measures that constitute "action against dumping" or subsidy, rather than "specific
action against dumping" or subsidy.  However, insofar as we have already found that the CDSOA is a
"specific action against dumping" or subsidy, in the meaning of AD Article 18.1 and SCM
                                                     
306 In this regard, the parties have essentially been arguing past one another.  The complaining parties
have responded as if the United States were arguing that footnotes 24 or 56 were exceptions to AD Article 18.1
and SCM Article 32.1, whereas the United States has expressly stated that this is not the case (see note 307
below).
307 US second written submission, note 48 ("[t]he United States does not argue that footnotes 24 and 56
provide exemptions for violations of Articles 18.1 and 32.1".)
308 The United States merely asserts that footnotes 24 and 56 cover action against dumping or
subsidization.  The United States has not asserted that  those footnotes cover specific action against dumping or
subsidization.WT/DS217/R
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Article 32.1, arguments regarding the application of the abovementioned footnotes to non-specific
action against dumping or subsidy are not relevant .  Since the US does not argue that a measure
inconsistent with Articles 18.1 and 32.1 could somehow be "saved" by footnotes 24 and 56, it is not
necessary to address the parties' arguments regarding the import of those footnotes.
6. Conclusion
7.51 In light of the above, we conclude that the CDSOA constitutes a specific action taken in
response to situations presenting the constituent elements of dumping, and that the action taken
pursuant to the CDSOA has an adverse bearing on  dumping.  We therefore conclude that the CDSOA
is a non-permissible “specific action against dumping”, contrary to AD Article 18.1.  We also
conclude that the CDSOA is a non-permissible "specific action against a subsidy", contrary to SCM
Article 32.1.  Since the CDSOA is inconsistent with AD Article 18.1 and SCM Article 32.1, theCDSOA is also in violation of paragraphs  2 and 3 of Article VI of the GATT 1994.
309
7.52 We wish to emphasise that our findings and conclusions relate exclusively to the CDSOA,
which combines the imposition of anti-dumping/countervail orders with the bestowal of offset
payment subsidies in very particular circumstances, such as to constitute "specific action against
dumping"/subsidisation.  Though we consider that subsidization should not generally be used as asurrogate contingent trade remedy, our conclusion (that the CDSOA constitutes "specific action
against dumping") is not based on a finding that subsidization in and of itself necessarily constitutes
"specific action against dumping"/subsidisation.
C. 
AD ARTICLE 5.4/ SCM ARTICLE 11.4 - STANDING
1. Arguments of the parties
7.53 The complaining parties argue that the CDSOA is inconsistent with AD Article 5.4 and SCM
Article 11.4. AD Article 5.4 provides as follows310:
5.4 An investigation shall not be initiated pursuant to
paragraph 1 unless the authorities have determined, on the basis of an
examination of the degree of support for, or opposition to, the
                                                     
309 The Appellate Body confirmed in US – 1916 Act  that a non-permissible response to dumping
violates GATT Article VI:2.  (The Appellate Body asserted in US – 1916 Act  that "Article VI of the GATT 1994
and the  Anti-Dumping Agreement   apply to 'specific action against dumping'.  Article VI, and, in particular,
Article VI:2, read in conjunction with the  Anti-Dumping Agreement , limit the permissible responses to dumping
to definitive anti-dumping duties, provisional measures and price undertakings.  Therefore, the 1916 Act isinconsistent with Article VI:2 and the  Anti-Dumping Agreement   to the extent that it provides for "specific
action against dumping" in the form of civil  and criminal proceedings and penalties" (para. 137)).  We see noreason why a violation of SCM Article 32.1 would not similarly result in a violation of GATT Article VI:3.
310 SCM Article 11.4 similarly provides that :
"11.4 An investigation shall not be initiated pursuant to paragraph 1 unless the authoritieshave determined, on the basis of an examination of the degree of support for, or opposition to,the application expressed by domestic producers of the like product, that the application has
been made by or on behalf of the domestic industry. The application shall be considered to
have been made "by or on behalf of the domestic industry" if it is supported by those domestic
producers whose collective output constitutes more than 50 per cent of the total production ofthe like product produced by that portion of the domestic industry expressing either supportfor or opposition to the application.  However, no investigation shall be initiated whendomestic producers expressly supporting the application account for less than 25 per cent of
total production of the like product produced by the domestic industry." (footnotes omitted)WT/DS217/R
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application expressed13 by domestic producers of the like product,
that the application has been made by or on behalf of the domestic
industry.14 The application shall be considered to have been made "by
or on behalf of the domestic industry" if it is supported by those
domestic producers whose collective output constitutes more than50 per cent of the total production of the like product produced by
that portion of the domestic industry expressing either support for or
opposition to the application.  However, no investigation shall be
initiated when domestic producers expressly supporting the
application account for less than 25 per cent of total production of the
like product produced by the domestic industry.
13In the case of fragmented industries involving an exceptionally large
number of producers, authorities may determine support and opposition byusing statistically valid sampling techniques.
14Members are aware that in the territory of certain Members employees of
domestic producers of the like product or representatives of those employees
may make or support an application for an investigation under paragraph 1.
7.54 According to the complainants, the CDSOA pr ovides a financial inducement to domestic
producers to file applications or to express support for a petition since the payments are only made to
those producers that support the petition. Accord ing to the complainants, AD Article 5.4 and SCM
Article 11.4 require a Member to conduct an objective and good faith examination of the level ofsupport for the application. Through the promise of offset payments, the complaining parties argue,
the US government is unduly influencing the very facts which the authorities are required to examine
in an objective manner. The complaining parties argue that Members must observe the general
principle of good faith, recognized by the Appellate Body as a pervasive principle that informs the
covered agreements, in the application and interpretation of the AD and SCM Agreements. According
to the complainants, when a treaty provision specifies that actions of private parties are necessary to
establish a Member's right to take action, government provision of a financial incentive for thoseprivate parties to act one way rather than another is inconsistent with the requirement that Members
perform their treaty obligations in good faith. Theref ore, the complaining parties are of the view that
the CDSOA prevents the authorities from ascertaining, in an objective and good faith manner,
whether an application is effectively made by or on behalf of the domestic industry as required by AD
Article 5.4 and SCM Article 11.4.
7.55 The complainants submit that the CDSOA frustrates the object and purpose of AD Article 5.4
and SCM Article 11.4, which is to limit the initiation of investigations to those instances where the
domestic industry has a genuine interest in the adoption of anti-dumping/countervail measures.
311
According to the complainants, when the support of a domestic producer is bought with the promiseof a financial reward, such support cannot be regarded as genuine and cannot be taken into accountfor the purposes of the determination required by AD Article 5.4 and SCM Article 11.4. The
complaining parties submit that the formalistic position of the United States which reduces the
standing provision to mere arithmetic leads to an absurd and unreasonable result. The complaining
parties argue that they do not suggest that an inves tigating authority is to ascertain actively in each
                                                     
311 The complaining parties refer in this respect to the negotiating history of this provision as
documented in T. Stewart  (Ed.), The Gatt Uruguay Round, A Negotiating History (1986 – 1992), Vol. II:Commentary (Kluwer 1993) at p.1517. Stewart writes that the thresholds were established to address "concernswith the possibility that unwarranted complaints would be filed and unwarranted investigations commenced".
See, for example, Korea's first written submission, note 35.WT/DS217/R
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case the subjective motivations of a producer in expressing support for an application, but argue that if
there is evidence calling into question the credibility of a declaration of support, the administrative
authorities cannot ignore such evidence without violating AD Article 5.4 and SCM Article 11.4.
7.56 The complaining parties therefore request the Panel to find that by providing a financial
incentive to support an application for the initiation of an anti-dumping/countervail investigation, the
CDSOA is inconsistent with AD Article 5.4 and SCM Article 11.4.
7.57 The United States argues that AD Article 5.4 and SCM Article 11.4 contain objective
numerical benchmarks for determining whether an application was made by or on behalf of the
domestic industry. The United States asserts that the statutory provisions which have implemented
these numerical benchmarks in the United States are not affected by the CDSOA. The United States
further submits that there is no requirement in AD Article 5.4 or SCM Article 11.4 that administeringauthorities determine the reason why domestic producers support an application. Rather, the
United States is of the view that the only oblig ation incumbent upon the authority is to determine in
an unbiased and objective manner whether the quantitative benchmarks have been met. The
United States notes that the complaining parties are not arguing that the United States is failing to
abide by those benchmarks.
7.58 Finally, the United States argues that in any case the complaining parties have not presented
any evidence that the CDSOA actually distorts the application of the standing requirements and that
producers who would otherwise have opposed the a pplication in the absence of the CDSOA are now
supporting investigations and that their support was necessary to initiate the investigation.  The United
States therefore requests that the complaining pa rties' argument of violation of AD Article 5.4 and
SCM Article 11.4 be rejected.
2. Evaluation by the Panel
7.59 The complaining parties claim that the CDSOA violates AD Article 5.4 and SCM
Article 11.4.  The text of these provisions stipulates that there must be sufficient support for the
application before a Member may initiate an investigation. The CDSOA deals with the distribution ofduties collected and the conditions for eligibility for receiving such distributions. As such, the
CDSOA does not amend the United Stat es' statutory provisions concerning standing which implement
the United States' obligations under Article 5.4 AD and 11.4 SCM Agreement in United States law in
sections 702(c)(4) and 732(c)(4) of the Tariff Act of 1930, as amended (19 U.S.C. §§ 1671a(c)(4),
1673a(c)(4)).
7.60 The issues before us however, are whether the CDSOA operates in such a manner that the US
investigating authorities will be unable to conduct an  objective and impartial examination of the level
of support for the application; and whether in consequence the CDSOA has undermined the value of
the provisions of AD Article 5.4 and SCM Article 11.4.
7.61 We note the argument advanced by the European Communities that “those two provisions
[AD Article 5.4 and SCM Article 11.4] were introduced in response to the controversial practice of
the United States authorities of presuming that an application was made by or on behalf of thedomestic industry unless a major proportion of the domestic industry expressed active opposition to
the petition”.
312  In consequence the investigating authorities of a Member are obliged to have regard
to two tests in determining the degree of support for a petition- i.e., the quantitative thresholds in AD
Article 5.4/SCM Article 11.4; and the requirements under AD Article 5.2/SCM Article 11.2 that there
be sufficient evidence concerning dumping/subsidization, injury and the causal link in order to ensure
                                                     
312 First written submission of the European Communities, India, Indonesia and Thailand, footnote 49.WT/DS217/R
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that investigations are not initiated on the basis of frivolous or unfounded suits.  Specifically, in
consequence of these provisions it may be presumed that investigations will not proceed in
circumstances where there may be a small proportion of the domestic industry which is affected by
dumped/subsidized imports, but they do not have the support of at least 50 per cent of the industry.This is the significance of the tests in AD Article 5.4 and SCM Article 11.4.
7.62 We conclude that in consequence of the CDSOA providing that offset payments will be made
only to domestic producers who have supported dumping/subsidy petitions, there is a financial
incentive for domestic producers of like products to initiate and, more importantly to support petitions
for dumping investigations.  This incentive will result in more petitions having the required level of
support from domestic industry than would have been the case without the CDSOA.  Indeed, given
the low costs of supporting a petition, and the strong likelihood that all producers will feel obliged tokeep open their eligibility for offset payments for reasons of competitive parity, we could conclude
that the majority of petitions will achieve the levels of support required under AD Article 5.4/ SCM
Article 11.4.  In this respect we again refer to the evidence referred to at paragraph 7.45 above, and
especially the letter of a US company which after initiation of the investigation changed its position
concerning the application and decided to express support for the application in order to remaineligible for possible offset payment subsidies.   In our view, these letters are evidence of the inevitable
impact of the CDSOA on the position of the domestic industry vis-à-vis anti-dumping/countervail
applications.
7.63 The consequences are several.  We first note however, the United States argument that AD
Article 5.4 requires only that the statistical thresholds be met, and imposes no requirement that theinvestigating authorities  inquire into the motives  or intent of a domestic producer in electing to
support a petition.  This in itself is correct but in our view does not address the matter at issue.  The
first consequence of the operation of the CDSOA on AD Article 5.4/ SCM Article 11.4 is that it
renders the quantitative tests included in the Articl e irrelevant, and leaves the investigating authority
to make its decision on whether or not to pursue an investigation solely in terms of the requirementsset out in AD Article 5.2 and 5.3/SCM Article 11.2 and 11.3, thus denying  parties potentially subject
to the investigation a meaningful test of whether the petition has the required support of the industry.
It recreates the spectre of an investigation being pursued where only a few domestic producers have
been affected by the alleged dumping, but industry support is forthcoming because of the prospect of
offset payments being distributed if dumping is found in consequence of the investigation and anti-
dumping duties imposed.  In consequence the CDSOA may be regarded as having undermined the
value of AD Article 5.4/ SCM Article 11.4 to the count ries with whom the United States trades, and
the United States may be regarded as not having acted in good faith in promoting this outcome.
7.64 The importance of the principle of good faith as a general rule of conduct in international
relations is well established.
313  Good faith requires a party to a treaty to refrain from acting in a
manner which would defeat the object and purpose of the treaty as a whole or the treaty provision in
question.314  In our view, AD Article 5.4 and SCM Article 11.4 have as their object and purpose to
require the authority to examine the degree of support which exists for an application and to
                                                     
313 Also see: V.D. Degan, Sources of International Law, Martinus Nijhoff, 1997, p.401
314 One prominent scholar states that Article 18 of the Vienna Convention on the Law of Treaties,
“while not explicitly referring to the principle of good faith, summarizes its substance by providing that a
signatory "is obliged to refrain from acts which would defeat the object and purpose" of the treaty"” A.
D'Amato, "Good Faith", in "Encyclopaedia of International Law", p. 599.  The International Law Commission
commenting on the principle of good faith stated that "[s]ome members felt that there would be an advantage inalso stating that a party must abstain from acts calcula ted to frustrate the object and purpose of the treaty. The
Commission however considered that this was clearly implicit in the obligation to perform the treaty in goodfaith and preferred to state the pacta sunt servanda  rule in as simple a form as possible" (Yearbook International
Law Commission, 1966, Vol.II, p. 211).WT/DS217/R
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determine whether the application was thus filed by or on behalf of the domestic industry. In this case
the question is whether the CDSOA defeats this object and purpose of AD Article 5.4 and SCM
Article 11.4.
7.65 We consider that the CDSOA in fact implies a return to the situation which existed before the
Uruguay Round Agreement and which led to the in troduction of AD Article 5.4 and SCM Article 11.4
in their current form. As we discussed above, AD Article 5.4 was introduced precisely to ensure that
support was not just assumed to exist but actually existed, and that the support expressed by domestic
producers was evidence of the industry-wide concern of injury being caused by dumped or subsidized
imports.
3. Conclusion
7.66 In sum, by requiring support for the petition as a prerequisite for receiving offset payments,
the CDSOA in effect  mandates domestic producers to support the application and renders the
threshold test of AD Article 5.4 and SCM Article 11.4 completely meaningless. We are therefore of
the view that the United States has failed to comply with its obligations under AD Article 5.4
Agreement and SCM Article 11.4.  Therefore, we find that the CDSOA is inconsistent with AD
Article 5.4 and SCM Article 11.4.
D. AD ARTICLE 8.3/ SCM ARTICLE 18.3 - UNDERTAKINGS
1. Arguments of the parties
7.67 The complaining parties315 argue that AD Article 8.3 and SCM Article 18.3 require the
authority to objectively examine the appropriateness of accepting a price undertaking and to reject an
undertaking offered only for a pertinent reason.
7.68 The complaining parties assert that, in the United States, domestic producers have an effective
veto right when it comes to the acceptance of price undertakings by the investigating authority.316
According to the complainants, because offset paymen t subsidies will only be distributed if duties are
collected, the CDSOA will inevitably cause domestic producers to oppose the acceptance of price
undertakings. Thus, the complainants submit that through the CDSOA, the United States is undulyinfluencing the outcome of the examination of the "appropriateness" of accepting an undertaking in a
way which favours the interests of the petitioners over those of the exporters. The United States is
therefore violating its obligation to have its authority undertake an objective examination of whether
accepting an undertaking would be appropriate in the circumstances. According to the complainants,
the CDSOA will also lead to the rejection of undertakings without a pertinent reason, since the
domestic producers will oppose the acceptance of an undertaking for pecuniary reasons which have
no bearing on whether an undertaking is an "appropriate" alternative remedy. The complainants arguethat the CDSOA thus frustrates the object and purpose of AD Article 8 and SCM Article 18, namely
to provide an alternative remedy to dumping which, while giving equivalent protection to the
domestic producers, is more beneficial to the exporters.
                                                     
315 Australia did not develop this claim in its first submission, and confirmed in its answers to questions
from the Panel that it was not pursuing a claim under AD Article 8  (SCM Article 18) (see Australia's Response
to question 34 from the Panel).
316 Canada states that recent US case law makes clear that the United States Department of Commerce
can effectively only enter into suspension agreements with the consent of the petitioner. Exhibit CDA-13, p 4(Canada's first written submission, paras 86 –88).  The complaining parties assert that the United Statesauthorities have explicitly admitted that the petit ioners’ opposition is something to which they accord
“considerable weight” when deciding whether to accept an undertaking (19 CFR 351 et al., “Explanation of the
Final Rule”, at p. 27312 (Common Exhibit - 12)).WT/DS217/R
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7.69 The United States argues that the CDSOA does not introduce any changes to the
United States statutory provisions relating to price undertakings. In the United States' view, the
complaining parties have not demonstrated that the CDSOA requires United States administering
authorities to breach AD Article 8 and SCM Article 18 in any way. The United States submits thatthere is no obligation under the AD or SCM Agreements for an authority to accept an undertaking.
Moreover, the United States argues, neither Article circumscribes the reasons that may cause an
administering authority to decline to accept a proposed undertaking. The United States is of the view
that the only obligations contained in AD Article 8 and SCM Article 18 are certain procedural steps
that are to be followed under certain circumstances if an undertaking is offered. According to the
United States, since there are no limits on the reasons why the authority may believe the acceptance of
an undertaking to be impractical, it is within the complete discretion of the authority to accept orreject that undertaking.
7.70 The United States concludes that, in any case, the complaining parties have not provided any
evidence that the CDSOA had or will have any actual effect on the consideration of proposed
undertakings by the USDOC. The United States further stresses that domestic producers do not have
an effective veto right over proposed undertakings, as the rights afforded to domestic producers in thecontext of proposed undertakings are procedural in nature, not substantive.
2. Evaluation by the Panel
7.71 The complaining parties argue that the CDSOA is inconsistent with AD Article 8.3 and SCM
Article 18.3. AD Article 8.3 provides as follows:
317
8.3 Undertakings offered need not be accepted if the authorities consider their
acceptance impractical, for example, if the number of actual or potential exporters is
too great, or for other reasons, including reasons of general policy.  Should the case
arise and where practicable, the authorities shall provide to the exporter the reasons
which have led them to consider acceptance of an undertaking as inappropriate, and
shall, to the extent possible, give the exporter an opportunity to make comments
thereon.
7.72 AD Article 8.3 thus provides that if an undertaking is offered, such an undertaking may be
rejected for a number of reasons, including reasons of general policy. We note that the complaining
parties have challenged the CDSOA as such. We recall that we may find that the CDSOA as such is
inconsistent with Articles 8 AD and 18 SCM Agreement only when it mandates a violation of these
provisions. We believe this would be the case if the CDSOA either explicitly amends the statutory
provisions relating to price undertakings in a manner inconsistent with the AD or SCM Agreement, orif its effect is such that the authority cannot possi bly comply with its obligations in respect of price
undertakings under the AD and SCM Agreement.
7.73 The CDSOA does not contain any provisions which amend the United States statutory
provisions on price undertakings which are set forth in sections 704 and 734 of the United States
Tariff Act of 1930, as amended (19 U.S.C. §§ 1671c, 1673c).
 The complainants argue however that
                                                     
317 SCM Article 18.3 similarly provides that:
18.3 Undertakings offered need not be accepted if the authorities of the importing Member
consider their acceptance impractical, for example if the number of actual or potentialexporters is too great, or for other reasons, including reasons of general policy.  Should thecase arise and where practicable, the authorities shall provide to the exporter the reasonswhich have led them to consider acceptance of an undertaking as inappropriate, and shall, tothe extent possible, give the exporter an opportunity to make comments thereon.WT/DS217/R
WT/DS234/R
Page 319
the CDSOA provides an obvious monetary incentive  for the domestic industry to object to the
acceptance of an undertaking, which in light of the important weight of the domestic industry's
opinion on this matter, effectively makes it impossible for an undertaking to be accepted. The
complainants argue that AD Article 8.3 and SCM Article 18.3 provide that an undertaking offeredneed not be accepted if it is impractical to do so or for other pertinent reasons. However, it is argued, a
Member may not outright refuse to accept an under taking for completely unrelated reasons like the
objection by the petitioners for pecuniary reasons.
7.74 We are of the view that the complainants' argument centers around the role of the domestic
industry in the United States AD/CVD system when it comes to the acceptance of price undertakings.
Indeed, it appears that in the complainants’ view, it is through the effect of the CDSOA on domestic
producers and their role in the process of acceptin g or rejecting an undertaking that the CDSOA
violates AD Article 8.3 and SCM Article 18.3. We will therefore first determine the role of the
domestic industry in the United States with regard to the acceptance or rejection of price
undertakings.
7.75 The US statutory provisions concerning price undertakings provide that an undertaking shall
not be accepted unless the authority is satisfied that suspension of the investigation is (a) in the publicinterest and (b) effective monitoring of the suspension agreement by the US is practicable.
Section 704 2 (B) of the United States Tariff Act of 1930 sets forth what the administering authority is
to examine when deciding whether it is in the public interest to accept an undertaking.
7.76 It appears therefore that the United States does not as a matter of general policy always reject
an undertaking offered.  Nor can it be said that the reasons set forth in the relevant US statutoryprovisions for accepting or rejecting an undertaking (i.e., public interest and monitoring capacity) are
not pertinent. In light of this analysis, we need not consider whether an authority may refuse to accept
undertakings as a matter of general policy.  Nor need we consider whether undertakings may be
rejected for non-pertinent reasons.
7.77 In addition to these substantive requirements, the authority is to consult with the domestic
producers and potentially affected domestic consuming industries before deciding whether to accept
an undertaking. In particular, United States law provides that the investigating authority must notify
the petitioner of its intention to suspend the investigation;
318 must provide a copy of the proposed
suspension agreement to the petitioner at the time of the notification, together with an explanation of
how the agreement will be carried out and enforced,  and of how the agreement will meet the
requirements laid down in US law;319 and must “consult” with the petitioner concerning its intention
to suspend the investigation.320
7.78 We note that the USDOC "Regulations on anti-dumping and countervailing duty
proceedings" (the "Regulations") to which the complaining parties refer in support of their argument
clarifies that although the position of the petitioners is an important consideration,
                                                     
318 Sections 704(e)(1) and 734(e)(1) of the Tariff Act of 1930 (Common Exhibit- 15).
319 Ibid., Sections 704(e)(2) and 734(e)(2).
320 Ibid., Sections 704(e)(1) and 734(e)(1). The complaining parties add that other interested parties are
notified (cf. Sections 704(e)(1) and 734(e)(1) of the Tariff Act of 1930 ) and allowed to submit information and
comments for the record (Ibid., Sections 704(e)(3) and 734 (e)(3)), but they are not “consulted” (19 CFR 351 et
al.,  “Explanation of the Final Rule”, at p. 27312, Common Exhibit - 12).WT/DS217/R
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"the Department must assess the public interest based on all the facts, and we do not
believe it appropriate to issue a regulation that singles out one factor [position of the
petitioners] to the exclusion of others"321.
With this statement, the USDOC rejected the su ggestion that it should be required to consider
domestic industry opposition to a suspension agreement as a strong indicator that the agreement is not
in the public interest.
7.79 In both the statutory provisions and the Regulations, therefore, the objection of the petitioners
to the acceptance of an undertaking is only one, be it important, factor in the authority’s assessment of
whether it is in the public interest to accept an undertaking. In our view, the investigating authority
thus remains free to accept an undertaking even if there is domestic industry opposition to suchacceptance. We consider that the complaining parties have not been able to demonstrate either that the
objection by the petitioners to the acceptance of an undertaking de facto  always results in the rejection
thereof. In fact, it seems that almost all suspension agreements have been entered into by the authority
over the opposition of the domestic industry.
322
7.80 Therefore, leaving aside the question whether a Member would be allowed to reject an
undertaking simply because the domestic industry opposes its acceptance, we find that the CDSOA
does not mandate a violation of AD Article 8.3 and SCM Article18.3 in light of the fact that the
objection of the petitioners does not in any case impede the acceptance of an undertaking by the US
authority in accordance with these provisions.  AD Article 8 and SCM 18 provide that when offered,
the investigating authority need not accept the undertaking if it considers it impractical or if for otherreasons it does not want to accept the undertaking. The decision to accept an undertaking or not under
the Agreements is one the investigating authority is to take, and it may reject an undertaking for
various reasons, including reasons of general policy. The fact that domestic producers may or may not
be influenced by the CDSOA to suggest to the auth ority not to accept the undertaking, does not affect
the possibility for interested parties concerned to offer an undertaking or for that undertaking to be
accepted, in light of the non-decisive role of the domestic industry in this process.
7.81 In addition we note that the text of AD Article 8.3 and SCM Article 18.3 does not require the
authority to examine objectively any undertaking offered. Rather, it stresses that undertakings offered
need not be accepted and that the reasons for rejecting an undertaking may be manifold and include
reasons of general policy. In our view, the CDSOA cannot be found to impede the objective
examination of the appropriateness of accepting an undertaking, in the absence of any such obligation
under AD Article 8 and SCM 18.
7.82 In sum, whatever the impact the CDSOA may have on the position of the domestic industry
with regard to undertakings, it does not lead to the conclusion that the CDSOA mandates a violation
of AD Article 8.3 and SCM Article 18.3. We therefor e find that the CDSOA is not inconsistent with
AD Article 8.3 and SCM Article 18.3.
                                                     
321 19 CFR 351 et al., “Explanation of the Final Rule”, at p. 27312 (Common Exhibit - 12).
322 According to the United States, of the 13 undertakings accepted since 1996, 12 were entered into
over the opposition of the domestic producers. These data have not been challenged by the complaining parties.Although Canada submitted certain data in Exhibit CDA-13 (see note 316 above), this evidence does notdemonstrate that undertakings can only be accepted with the consent of the petitioners.  It merely confirms that
the domestic producers will be consulted with regard to the acceptance of a price undertaking.WT/DS217/R
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E. DEVELOPING COUNTRY ISSUE – AD ARTICLE 15
1. Arguments of the parties
7.83 India and Indonesia submit that the CDSOA undermines AD Article 15 on special and
differential treatment for developing countries. In particular, Indonesia considers that the CDSOA
undermines price undertakings as a constructive remedy, since it encourages domestic producers to
oppose the acceptance of price undertakings.
7.84 The United States submits that AD Article 15 is not within this Panel's terms of reference as it
was not identified in any of the complaining parties'  requests for establishment of a panel.  Therefore,
the concerns raised by Indonesia and other developi ng countries should not be entertained.  In any
case, the United States submits that it fulfils it s AD Article 15 "best efforts" commitment in all cases
and will continue to do so.  To the extent that AD Article 15 is a substantive requirement, itnecessitates only that the developed countries "explore" constructive remedies before applying
anti-dumping duties.  Moreover, the complaining parties have provided no evidence that the CDSOA
will affect the administration of US laws governing undertakings.  Therefore, the concerns of
developing parties that the CDSOA will some how affect commitments under AD Article 15 are
similarly unfounded.
7.85 Indonesia submits that AD Article 15 does not have to be included in the Panel's terms of
reference through express incorporation in the comp laining parties' requests for establishment, since
DSU Article 12.11 provides that:
Where one or more of the parties is a developing country Member, the panel's report
shall explicitly indicate the form in which account has been taken of relevantprovisions on differential and more-favourable treatment for developing country
Members that form part of the covered agreements which have been raised by the
developing country Member in the course of the dispute settlement procedures.
7.86 According to Indonesia, DSU Article 12.11 requires the Panel to give consideration to the
special and differential treatment provision in the covered agreement raised by a developing country,even though this provision is not specifically indicated in the Panel’s term of reference.
2. Evaluation by the Panel
7.87 We note that there is no reference to AD Article 15 in the various requests for establishment
of this Panel.  Generally, therefore, AD Article 15 would not fall within our terms of reference.
323
However, we note that DSU Article 12.11 requires panels to "explicitly indicate the form in whichaccount has been taken of relevant provisions on differential and more-favourable treatment for
developing country Members that form part of the covered agreements which have been raised by thedeveloping country Member in the course of the dispute settlement procedures".  Since we consider
AD Article 15 to be relevant, and since that provision has been raised by developing country
Members in the present proceedings, we are bound to consider that provision, even though it was not
referred to in the various requests for establishment.  In doing so, we note that certain developing
country Members attach importance to price undertakings as a "constructive" alternative to anti-dumping duties.
7.88 That being said, we note that the concern expressed by India and Indonesia regarding Article
15 of the AD Agreement rests on those parties' understanding that the CDSOA will cause the
                                                     
323 See, for example, EC – Bananas III , para. 142 (WT/DS27/AB/R).WT/DS217/R
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Page 322
domestic industry to oppose the acceptance of price undertakings, and therefore lead the USDOC to
reject such price undertakings.  In other words, the concern expressed by the relevant complaining
parties is based on the premise that, under US law, the domestic industry is able to veto the
acceptance of price undertakings by the USDOC.  As stated in the preceding section, there is nofactual basis for this premise, since the USDOC remains free to accept an undertaking, even if there is
domestic industry opposition to such acceptance.  Thus, even if the CDSOA were to lead domestic
producers to oppose the acceptance of a proposed price undertakings, this would not necessarily cause
the USDOC to reject such undertakings.  Since the relevant complaining parties' reliance on AD
Article 15 is based on a premise which has not been substantiated, we see no need to give any further
consideration to AD Article 15 in these proceedings.
F. 
AD ARTICLE 18.4/ SCM ARTICLE 32.5 & WTO ARTICLE XVI :4 - NECESSARY STEPS TO ENSURE
CONFORMITY
1. Arguments of the parties
7.89 The complaining parties claim that, by being inconsistent with Articles 18.1, 5.4 and 8.3 of
the AD Agreement, Articles 32.1, 11.4 and 18.3 of the SCM Agreement,324 and Article VI:2 and 3 of
the GATT 1994, the CDSOA is necessarily inconsistent with AD Article 18.4 and SCM Article 32.5,and Article XVI:4 of the WTO Agreement.
7.90 The United States submits that the CDSOA is not inconsistent with AD Article 18.4, SCM
Article 32.5, or WTO Article XVI:4, because it is not inconsistent with Articles 18.1, 5.4 and 8.3 of
the AD Agreement, or Articles 32.1, 11.4 and 18.3 of the SCM Agreement.
2. Evaluation by the Panel
7.91 AD Article 18.4 and SCM Article 32.5 (both with identical wording) provide that
Each Member shall take all necessary steps, of a general or particular character, to
ensure, not later than the date of entry into force of the WTO Agreement for it, the
conformity of its laws, regulations and administrative procedures with the
provisions of this Agreement, as they may apply to the Member in question.
7.92 Article XVI:4 of the WTO Agreement  provides that
Each Member shall ensure the conformity of its laws, regulations and administrative
procedures with its obligations as provided in the annexed Agreements.
7.93 There is no disagreement between the parties that a violation of AD Articles 18.1, 5.4 or 8.3,
or a violation of SCM 32.1, 11.4 and 18.3, would also constitute a violation of AD Article 18.4, SCM
Article 32.5, and WTO Article XVI:4.  Since we have found that the CDSOA is inconsistent with AD
Articles 5.4 and 18.1, and SCM Articles 11.4 and 32.1, we also find that the CDSOA is inconsistentwith AD Article 18.4, SCM Article 32.5, and therefore WTO Article XVI:4.
                                                     
324 Mexico also relies on the alleged violation of SCM Article 5(b) as a basis for alleging violation of
SCM Article 32.5 and WTO Article XVI:4.WT/DS217/R
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G. ADVERSE EFFECTS – SCM ARTICLE 5
1. Arguments of the parties
7.94 Mexico claims that the CDSOA is inconsistent with Article 5(b) of the SCM Agreement
because (1) it mandates the granting of specific subsidies in a manner and in circumstances that willnecessarily nullify or impair benefits accruing to Mexico under Articles II and VI of the GATT 1994,
and (2) it maintains subsidies in a manner and in circumstances that nullify or impair benefits
accruing to Mexico under Articles II and VI of the GATT 1994.
7.95 Mexico submits that offset payments distributed under the CDSOA are specific subsidies
within the meaning of SCM Article 2.1(a).  Mexico  asserts that the CDSOA and the operation of the
granting authority explicitly limit access to the of fset payments to certain enterprises and, on that
basis, the subsidies are specific.  According to Mexico, there are two elements in particular whichclearly show that access to the subsidies under the Act is limited to certain enterprises:  (a) that the
subsidies are distributed through Special Accounts which are linked only to the respective order or
finding; and (b) that the funds in those Special Accounts are only available to the manufacturers or
producers of domestic like products who supported the application at the origin of the respective order
or finding.
7.96 Mexico asserts that both the granting of subs idies under the CDSOA, and the maintenance of
the CDSOA programme, per se  cause adverse effects in the form of nullification or impairment of
benefits accruing to Mexico under Articles II and VI of GATT 1994.  Mexico asserts that both
"violation" and "non-violation" nullification or impairment has been caused.  With regard to
"violation" nullification, Mexico relies on Article 3.8 of the DSU, whereby
[i]n 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.  This means that there is normally a presumption that a breach of the
rules has an adverse impact on other Members parties to that covered agreement, and
in such cases, it shall be up to the Member against whom the complaint has beenbrought to rebut the charge.
Mexico asserts that, in view of DSU Article 3.8, nullification or impairment results from the fact that
the CDSOA violates Articles VI:2 and X:3(a) of the GATT 1994.
7.97 Mexico asserts that, for the purpose of SCM Article 5(b), "non-violation" nullification or
impairment shall be established "in accordance with the practice of application of" Article XXIII:1(b)
of the GATT 1994.  According to Mexico, past GATT 1947 and WTO practice indicates that three
elements must be established in an Article XXIII:1(b) claim: (i) the application of a measure by aWTO Member; (ii) the existence of a benefit accruing under the applicable agreement; and (iii) the
nullification or impairment of a benefit as a result of the application of the measure.
325 Mexico
submits that the fact that the CDSOA mandates the granting and maintenance of subsidies is sufficient
to satisfy the first condition, i.e., the "application" of a measure, even if subsidies have not actually
been granted under the CDSOA.
                                                     
325 Japan – Measures Affecting Consumer Photographic Film and Paper  (“Japan –  Film ”),
WT/DS44/R, adopted 22 April 1998, at para. 10.41; European Communities – Measures Affecting Asbestos and
Asbestos-Containing Products ("EC – Asbestos") , WT/DS135/R, WT/DS135/R/Add.1, adopted 5 April 2001, at
para. 8.283.WT/DS217/R
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7.98 Regarding the second condition, which concerns the existence of benefit, Mexico relies on
benefits accruing under Articles II and VI of the GATT 1994.  With respect to Article II, Mexico
refers to its legitimate expectations of improved market access opportunities resulting from the
relevant United States’ tariff concessions under Article II:1 of the GATT 1994.  In the context of themeasure at issue, Mexico asserts that its legitimate  expectations under Article II:1 must be viewed in
the light of the application of anti-dumping and/or countervailing duties.  With respect to Mexican
exports to the United States that face such duties, Mexico legitimately expects that the competitive
relationship between its products and like US pr oducts will be defined by, at most, the combined
amount of the tariff concession of the United Stat es pursuant to Article II:1, plus the anti-dumping
and/or countervailing duties which Mexican exporters can legitimately expect to have to pay in
addition to the MFN duty by virtue of Article II:2(b).  With respect to Article VI of the GATT 1994,Mexico legitimately expects that the competitive relationship between its products and like US
products will be modified by the imposition of the duties by, at most, the maximum anti-dumping
and/or countervailing duties specified in Article VI:2 and 3.  In Mexico’s view, the benefits accruing
to Mexico under Articles II and VI with respect to the competitive relationship between Mexican and
like US products apply to both current trade and to the creation of predictability needed to plan future
trade.
7.99 Concerning the third condition, Mexico asserts that the abovementioned benefits are nullified
or impaired by both the granting and maintenance of subsidies under the CDSOA, and that the
CDSOA was not reasonably anticipated by Mexico.  Mexico submits that the mandatory granting of
subsidies under the CDSOA will per se  cause adverse effects in the form of nullification or
impairment of benefits accruing to Mexico under Articles II and VI of the GATT 1994 because the
mandatory granting of subsidies under the CDSOA systematically upsets the competitive relationship
legitimately expected by Mexico under GATT Articles II and VI.  Mexico submits that the
maintenance of subsidies under the CDSOA per se  causes adverse effects in the form of nullification
or impairment of benefits that concern the creation of predictability needed to plan future trade insituations where United States’ anti-dumping and c ountervailing duties apply.  According to Mexico,
the conferral of product-specific subsidies to the qualified domestic producers improves their
competitiveness in the United States’ market and makes it more difficult for Mexican exporters to sell
into that market in a manner that avoids the payment of anti-dumping duties or in a manner that
enables sales to be made with the additional payment of anti-dumping and/or countervailing duties.
Given the certainty that any anti-dumping or counter vailing duties collected will be re-distributed to
the producers of the directly competing domestic product and the uncertainty as to the magnitude ofthe subsidies, it is impossible for Mexican exporters to predict the relative conditions of competition
between their products and like United States’ products when planning future sales.  Mexico asserts
that there is a presumption that a complainant should not be considered as having anticipated a
measure where it is demonstrated that the measure was introduced after the conclusion of the tariff or
other negotiations in question.
326  In this case, the benefits in question accrued to Mexico on
1 January 1995, the date of entry into force of the WTO Agreement, whereas the CDSOA entered into
force on 28 October 2000.  Since this was considerably later than 1 January 1995, Mexico claims that
it is entitled to rely on the presumption that it did not anticipate the introduction of the Act and its
consequent upsetting of the expected competitive relationship between Mexican products and like US
products.
7.100  The United States asserts that the CDSOA is not an actionable subsidy for the purpose of
SCM Article 5(b), because it is not specific, and does not cause adverse effects.  The United States
submits that the CDSOA is not specific within the meaning of SCM Article 2.1(a) because the
CDSOA is potentially applicable to any producer in any industry  in the United States.  The
United States notes Mexico's argument  that each CDSOA distribution is a  de jure  specific subsidy
                                                     
326 Japan – Film , supra , at para. 10.79.WT/DS217/R
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Page 325
because the money is kept in separate accounts, is capped by the duties collected under a particular
anti-dumping/countervail order, and is only distributed to enterprises that produce the domestic like
product and were among the petitioners in the original proceeding.  According to the United States,
specificity analysis must be carried out for the ch allenged subsidy programme (here the CDSOA) as a
whole rather than by focusing on individual di sbursements.  Otherwise, no matter how broadly
available and broadly distributed benefits under a government programme may be, each disbursement
would be considered a specific subsidy.  The United States submits that this would render Article 2 of
the SCM Agreement a nullity.
7.101  With regard to the existence of adverse effects, the United States expresses doubt whether a
claim of "violation" nullification or impairme nt, based on DSU Article 3.8, was intended to be
brought within the terms of SCM Article 5(b), because to do so would automatically create apresumption that a subsidy that violates another WT O provision is an actionable subsidy, without any
showing of adverse effects.  According to the Unit ed States, this eliminates the primary distinction
between prohibited subsidies under Article 3 where effects are presumed and actionable subsidies
under Article 5 where the complaining party must demonstrate adverse effects.  The United States
further asserts that, in any event, the CDSOA does not violate any other provision, including GATT1994 Articles VI:2 and VI:3, which are the basis for Mexico’s "violation" nullification or impairment
argument.
7.102  Concerning "non-violation" nullification or impairment under GATT Article XXIII:1(b), the
United States notes the Appellate Body's statement in EC – Asbestos  that "the remedy in
Article XXIII:1(b) should be approached with caution and should remain an exceptional remedy.”
327
The United States submits that, pursuant to footnote 12 in Article 5(b), the existence of nullification
or impairment under Article 5 of the SCM Agreement is to be established in accordance with the
practice of application of GATT Article XXIII.  The United States submits that, under GATT and
WTO practice, there are three requirements for a non-violation nullification or impairment claim
under Article XXIII:1(b):   (1) the application of a measure; (2) a benefit accruing under the relevantagreement; and (3) the nullification or impairment of the benefit as a result of the application of the
measure that was not reasonably anticipated.
7.103  Regarding the need for the application of a measure, the United States asserts that GATT
Article XXIII:1(b) limits non-violation claims to measures that are currently being applied.  The
United States submits that Mexico fails to satisfy this requirement because it has not challenged actual
disbursements under the CDSOA.
7.104  Regarding the third requirement, the United States asserts that Mexico has failed to
demonstrate that the competitive relationship between US products and Mexican imports has been
upset by a subsidy.  The United States submits that past complainants have not succeeded with their
non-violation claims because of the lack of evidence on causality.  According to the United States, the
burden of proof in non-violation cases is high.  DSU Article 26.1(a) (“Non-Violation Complaints of
the Type Described in Paragraph 1(b) of Article XXIII of GATT 1994") requires that a party makingnon-violation claims must present a detailed justification in support of its claims: “the complaining
party shall present a detailed justification in support of any complaint relating to a measure which
does not conflict with the relevant covered agreement. . . .”  The United States asserts that Mexico has
not presented a detailed justification or even identified any products for which the competitive
relationship has been upset.  The United States rejects Mexico's argument that the distribution ofduties under the CDSOA will per se  nullify or impair the benefits accruing to Mexico under GATT
Articles II and VI, as it renders the third element required for a non-violation claim meaningless and
                                                     
327 Appellate Body Report EC – Asbestos , WT/DS133/AB/R, adopted 5 April 2001, para. 186.WT/DS217/R
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flies in the face of the notion that a non-violati on claim is an exceptional remedy that should be
approached with caution.  Acceptance of Mexico ’s argument would automatically convert any
specific domestic subsidy programme which is related to a product on which there is a tariff
concession into a non-violation nullification or impairment of benefits.  According to the UnitedStates, such an interpretation is unreasonable and must be rejected.  The United States asserts that
Mexico has not identified any particular products for which the competitive relationship has been or
will of necessity be upset.  The United States submits that Mexico's expectations with respect to US
tariff concessions are only reasonable with respect to the products covered by those tariff concessions.
Indeed, the 1955 Working Party Report cited by Mexico in its first submission specifically states that
“a contracting party which has negotiated a concession under Article II may be assumed, for the
purpose of Article XXIII, to have a reasonable expectation, failing evidence to the contrary, that thevalue of the concession will not be nullified or impaired by the contracting party which granted the
concession by the subsequent introduction or increase of a domestic subsidy on the product
concerned.”
328  The United States submits that the CDSOA is not a product-specific subsidy and
Mexico, having challenged the law as such , did not (indeed, cannot) identify any products to which
benefits accrue.  The CDSOA itself does not identify any specific product but can apply to anyproduct subject to an anti-dumping or countervail ing duty order.  The amount of money received
under the CDSOA is not linked to the level of production or sale of that product or designed to
supplement those levels.  According to the United States, since the CDSOA is not a product-specific
subsidy, Mexico's claims that CDSOA per se nullifies or impairs benefits under GATT Articles II and
VI should be rejected.
7.105  The United States also submits that Mexico could have reasonably anticipated the CDSOA.
The United States asserts that Mexico was on notice that the United States could pass such a measure,
because discussions in Congress concerning measures similar to the CDSOA took place prior to and
during the Uruguay Round negotiations.
2. Evaluation by the Panel
7.106  In order to examine Mexico's claim that the CDSOA is inconsistent with Article 5(b) of the
SCM Agreement, we must determine whether or not the CDSOA is an actionable subsidy.  A measure
constitutes an actionable subsidy if it is a subsidy, if it is "specific", and if its use causes "adverse
effects".  Since the United States does not deny that the CDSOA is a subsidy,
329 we shall focus on the
issues of specificity and adverse effects.
(a) Is the CDSOA a "specific" subsidy?
7.107  Specificity is governed by Article 2 of the SCM Agreement, which provides:
2.1 In order to determine whether a subsidy, as defined in
paragraph 1 of Article 1, is specific to an enterprise or industry or
group of enterprises or industries (referred to in this Agreement as
"certain enterprises") within the ju risdiction of the granting authority,
the following principles shall apply:
                                                     
328 See Report of the Working Party on Other Barriers to Trade, BISD 3S/222. at para. 13 (3/3/55).
329 In its second written submission, Mexico asserted that "in and of itself, the CDSOA is not a subsidy
as defined by the SCM Agreement.  Rather it is the offsets distributed under the CDSOA … that amount tosubsidies." (para. 40).  Mexico made this statement in the context of its arguments on the question of specificity.We do not understand Mexico to argue that the CDSOA is not capable of violating Article 5(b) because it is not
a subsidy.  As a programme that mandates the grant of subsidies, the CDSOA is clearly susceptible of challenge
under Article 5(b) of the SCM Agreement.WT/DS217/R
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Page 327
(a) Where the granting authority, or the legislation pursuant to
which the granting authority operates, explicitly limits access to a
subsidy to certain enterprises, such subsidy shall be specific.
(b) Where the granting authority, or the legislation pursuant to
which the granting authority operates, establishes objective criteria or
conditions² governing the eligibility for, and the amount of, a
subsidy, specificity shall not exist,  provided that the eligibility is
automatic and that such criteria and conditions are strictly adhered to.
The criteria or conditions must be clearly spelled out in law,
regulation, or other official document, so as to be capable of
verification.
(c) If, notwithstanding any appearance of non-specificity
resulting from the application of the principles laid down in
subparagraphs (a) and (b), there are reasons to believe that the
subsidy may in fact be specific, other factors may be considered.
Such factors are:  use of a subsidy programme by a limited number ofcertain enterprises, predominant use by certain enterprises, the
granting of disproportionately large amounts of subsidy to certain
enterprises, and the manner in which discretion has been exercised by
the granting authority in the decision to grant a subsidy.  In applying
this  subparagraph, account shall be taken of the extent ofdiversification of economic activities within the jurisdiction of the
granting authority, as well as of the length of time during which the
subsidy programme has been in operation.
2.2 A subsidy which is limited to certain enterprises located
within a designated geographical region within the jurisdiction of thegranting authority shall be specific.  It is understood that the setting
or change of generally applicable tax rates by all levels of
government entitled to do so shall not be deemed to be a specific
subsidy for the purposes of this Agreement.
2.3 Any subsidy falling under the provisions of Article 3 shall be
deemed to be specific.
2.4 Any determination of specificity under the provisions of this
Article shall be clearly substantiated on the basis of positive
evidence.
²  
Objective criteria or conditions, as used herein, mean criteria or
conditions which are neutral, which do not favour certain enterprises over
others, and which are economic in nature and horizontal in application, suchas number of employees or size of enterprise.
7.108  Mexico relies on Article 2.1(a) to claim de jure  specificity.  Mexico has confirmed that it is
not claiming de facto specificity.  Mexico has also asserted that Article 2.1 "paragraphs (b) and (c) areWT/DS217/R
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not applicable".330  We shall therefore confine our analysis to specificity within the meaning of
Article 2.1(a) of the SCM Agreement.
7.109  Whereas Article 2.1(a) refers to measures that "explicitly limit[] access to a subsidy to certain
enterprises", the chapeau to Article 2.1 provides that the phrase "certain enterprises" is shorthand for"enterprise or industry or group of enterprises or industries".  Thus, in order to address the issue of
specificity under Article 2.1(a), we must determine whether or not the CDSOA explicitly limits access
to offset payments to an "enterprise or i ndustry or group of enterprises or industries".
7.110  The United States denies that the CDSOA explicitly limits access to offset payments to an
"enterprise or industry or group of enterprises or industries".  The US asserts that CDSOA payments
are not limited to individual enterprises or industries.  Regarding the issue of whether CDSOA
payments are limited to a "group" of enterprises or industries, the US asserts that CDSOA payments
are available in principle to any producer of an y product on which anti-dumping or countervailing
duties could be collected, creating a universe of potential recipients far too large and varied to be
considered a "group".
7.111  Mexico asserts that it does not have to show that  the CDSOA, itself, is a specific subsidy.  It
argues that the test under SCM Article 2.1(a) is whether access to the offsets (i.e., the subsidies) isexplicitly limited to certain enterprises by the granting authority or the legislation pursuant to which
the granting authority operates.  Mexico submits that, by legal requirement, the CDSOA limits access
to each offset to certain enterprises.  Accordin g to Mexico, the structure and architecture of the
CDSOA creates a series of distinct and separate subsidies, because disbursements are not made from a
common fund.  Instead, there are separate "special accounts" linked to specific anti-dumping orcountervailing duty orders.  The funds available for each "special account" are limited by the duties
collected under the specific order at issue, and domestic producers eligible for payments from one
special account are not entitled to payments from another special account.  Thus, if each separate
subsidy is viewed in isolation, each subsidy is specific because it is limited to the relevant "affected
producers" eligible for payments under that account.  Mexico asserts that failure to take into accountthe separate and distinct nature of the subsidie s in testing for specificity would allow Members to
evade the disciplines regulating actionable subsidies simply by administering specific subsidies
according to one and the same law.
7.112  The United States asserts that the specificity analysis must be carried out for the challenged
subsidy programme (i.e., the CDSOA) as a whol e, rather than by focusing on individual
disbursements.  Otherwise, no matter how broadly available and broadly distributed benefits under a
government programme may be, each disbursement would be considered a specific subsidy – a resultthat would render Article 2 of the SCM Agreement a nullity.
7.113  The measure at issue in these proceedings is the CDSOA.
331  It is the CDSOA that is alleged
to violate Article 5(b) of the SCM Agreement.  It is therefore the CDSOA – rather than disbursements
made thereunder - that must be found to constitute a subsidy for the purpose of SCM Article 5.332  In
our view, the same approach should be taken for the question of specificity.  In other words, it is thesubsidy at issue, i.e., the CDSOA, that must be "specific" in order for the provisions of the SCM
Agreement, including Article 5(b), to apply.
                                                     
330 Mexico's second written submission, note 18.
331 At the time that Mexico requested establishment of this Panel, no disbursements under the CDSOA
had been made.
332 The CDSOA constitutes a subsidy for the purpose of SCM Article 5 because it is a programme that
mandates the grant of subsidies.WT/DS217/R
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7.114  Mexico has expressed the concern that an analysis of specificity at the level of the CDSOA
programme per se , rather than disbursements made thereunder, would enable Members to evade
subsidy disciplines.  We do not share this concern, since even if the CDSOA per se  were not specific,
it would be open to Mexico to challenge actual disbursements made under the CDSOA.  On the otherhand, we agree with the US argument that Mexico's  approach to the question of specificity would
render Article 2 of the SCM Agreement a nullity, since any subsidy programme would necessarily be
found to be specific merely because subsidies provided under subsidy programmes are necessarily
enterprise, industry or region-specific.  Mexico attemp ts to counter this argument by asserting that the
CDSOA differs fundamentally from the other examples of subsidy programs raised by the
United States in that the latter do not administer a series of separate and distinct subsidies.  Mexico
submits that the CDSOA must be distinguished fro m a typical subsidy programme, which involves a
common pool of funds which all potential recipients can access, because it has separate accounts for
each individual order or finding, and eligibility to subsidies from each discrete account is explicitly
restricted to certain recipients.  However, even if one were to analyse specificity on the basis of actual
disbursements made under a subsidy programme, we do not consider that the source of funding for
such disbursements would be relevant.  The quest ion would be whether or not disbursements are
specific, in the sense that they are reserved for sp ecific enterprises or industries, or groups thereof.
The source of the funding would have no bearing on this issue.
7.115  Since Mexico would have the Panel assess specificity on the basis of actual disbursements
made under the CDSOA, rather than on the basis of the CDSOA per se , Mexico has not argued that
the CDSOA per se  explicitly limits access to offset payments to an "enterprise or industry or group of
enterprises or industries".  There is therefore no basis for us to find that the CDSOA per se  is
"specific" within the meaning of Article 2.1(a) of the SCM Agreement.
7.116  As a matter of law, pursuant to Article 1.2 of the SCM Agreement, a subsidy that is not
"specific" falls outside the scope of the SCM Agreement, and therefore cannot be inconsistent with
SCM Article 5(b).  In principle, therefore, it is not necessary for us to consider whether or not the useof the CDSOA has caused "adverse effects" within the meaning of that provision. While in principle it
is not necessary for us to consider whether or not the use of the CDSOA has caused "adverse effects"
within the meaning of that provision, we  set out our consideration as follows.
(b) Has the use of the CDSOA caused "adverse effects"?
7.117  Mexico asserts that the use of the CDSOA has caused "adverse effects" within the meaning of
Article 5(b) of the SCM Agreement, i.e., "nullification or impairment of benefits accruing directly or
indirectly to other Members under GATT 1994 in particular the benefits of concessions bound underArticle II of GATT 1994".  In particular, Me xico argues that CDSOA offset payments per se  nullify
or impair benefits accruing to Mexico under GATT Articles II and VI.  As explained in greater detail
below, Mexico claims both "violation" and "non-violation" nullification or impairment.
(i) "Violation" nullification or impairment
7.118  Mexico's claim of "violation" nullification or impairment rests on alleged violations of "the
provisions of the GATT 1994, including Articles VI:2 and X:3(a)".
333  Mexico relies on DSU
Article 3.8, whereby there is prima facie nullification or  impairment whenever there is a violation of a
covered agreement:
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
                                                     
333 Mexico's first written submission, para. 74.WT/DS217/R
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impairment.  This means that there is normally a presumption that a breach of the
rules has an adverse impact on other Members parties to that covered agreement, and
in such cases, it shall be up to the Member against whom the complaint has been
brought to rebut the charge.
7.119  We recall that we have already found that the CDSOA violates AD Articles 5.4 and 18.1,
SCM Articles 11.4 and 32.1, and GATT Article VI:2 and 3.  In our view, however, the presumption of
nullification or impairment resulting from the violation of these provisions under DSU Article 3.8 is
not sufficient to demonstrate nullification or impairment for the purpose of SCM Article 5(b).  The
presumption arising under Article 3.8 DSU relates to nullification or impairment caused by the
violation at issue.  Thus, if a measure violates  Article 18.1 of the AD Agreement and Article VI:2 of
the GATT 1994, that violation would be presumed to  cause nullification or impairment, by virtue of
the non-conformity of that measure with the rele vant provision(s) of the AD Agreement.  For the
purpose of SCM Article 5(b), however, Mexico mu st show that the use of a subsidy caused
nullification or impairment.  It is suggested that  the fact that the CDSOA is in violation of AD
Article 18.1 and GATT Article VI:2 does not address this  issue, since our finding of violation of these
provisions says nothing of the effects resulting from the use of CDSOA as a subsidy.  It merely
addresses the status of the CDSOA as a "specific action against dumping" or subsidization.334
Furthermore, we agree with the United States that reliance on the presumption of nullification orimpairment resulting from Article 3.8 DSU in the c ontext of  an Article 5 SCM claim would eliminate
the primary distinction between prohibited subsidies under Article 3, where effects are presumed, and
actionable subsidies under Article 5, where the complaining party must demonstrate adverse effects".
(ii) "Non-violation" nullif ication or impairment
7.120  As a starting-point for addressing Mexico's  claim of "non-violation" nullification or
impairment, we see no reason not to adopt the basic schematic approach taken by both Mexico and
the United States.  Thus, pursuant to footnote 12 to SCM Article 5(b), we note that "[t]he term
'nullification or impairment' is used in this Agreem ent in the same sense as it is used in the relevant
provisions of GATT 1994, and the existence of such nullification or impairment shall be established
in accordance with the practice of application of these provisions".  Regarding the practice of
application of GATT Article XXIII:1(b), we recall the Japan – Film  panel's finding that three
elements must be established in order to uphold an Article XXIII:1(b) claim: (i) the application of a
measure by a WTO Member; (ii) the existence of a benefit accruing under the applicable agreement;
and (iii) the nullification or impairment of a benefit as a result of the application of a measure.
335  We
shall address each of these elements in turn.
The application of a measure
7.121  The parties disagree on whether or not the present case concerns the "application" of a
measure.  Mexico asserts that the Japan – Film  requirement for the "application" of a measure should
be modified in the context of an Article 5 claim, since Article 5 provides that the "use" of a subsidy
must have caused nullification or impairment.  Mexico asserts that, given the reference in SCMArticle 7.1 (which addresses the remedies for a viol ation of Article 5) to "any subsidy … granted or
                                                     
334 To avoid any misunderstanding, we would emphasise that our finding that the CDSOA constitutes
"specific action against dumping" and subsidy (see para. 7.46 above) is not based on adverse effects resulting
from the use of a subsidy.  Although our finding that the CDSOA constitutes "specific action against dumping"and subsidy rests on the adverse impact of the CDSOA on exporters/foreign producers engaged in dumping, thatadverse impact does not result exclusively from the prov ision of offset payment subsidies (or the use of a
subsidy).  The adverse impact results from the combination of anti-dumping duties and offset payment subsidies
in the particular circumstances of the CDSOA.
335 Japan – Film , para. 10.41.WT/DS217/R
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maintained … result[ing] in … nullification or impa irment", the word "use" in Article 5 should be
interpreted to include both the granting and maintain ing of a subsidy.  Mexico asserts that the CDSOA
grants subsidies when offset payments are actually made.  Mexico also asserts that a subsidy is
maintained by the CDSOA (because the CDSOA pr ovides for a mandatory subsidy regime), even
before the granting of subsidies under the CDSOA.  For its part, the United States relies on the Japan
– Film  panel and DSU Article 26.1 to assert that, in order for a non-violation nullification or
impairment claim to succeed, there must be a measure that is "currently being applied".  The US
asserts that the CDSOA is not a measure that is "currently being applied", since no offset payments
have actually been made.
7.122  In addressing this issue, we note that the Japan – Film  panel was examining alleged "non-
violation" nullification or impairment in the context of a claim under Article XXIII:1(b) of the GATT1994, and not Article 5 of the SCM Agreement.  In examining Mexico's claim under Article 5, we
consider that we should be guided by the ordinary  meaning of SCM Article 5, read in context.  SCM
Article 5(b) clearly demonstrates that the drafters of the SCM Agreement envisaged the possibility of
nullification or impairment resulting from the "use" of a subsidy.  In a dispute regarding SCM
Article 5(b), therefore, the Japan – Film  panel's reference to the "application" of a measure must
encompass the "use" of a subsidy.  Furthermore, guidance as to the manner in which a subsidy may be
"used" may be derived from the relevant context.  We consider that SCM Article 7 constitutes
particularly relevant context, since it sets forth the remedies available for alleged violations of inter
alia SCM Article 5(b).  In particular, Article 7.1 provides for the initiation of dispute settlement
proceedings in respect of nullification or impairment caused by subsidies "granted or maintained" byanother Member.  This is the same nullification or impairment as that caused by the "use" of subsidies
within the meaning of Article 5(b).  In the contex t of Article 7.1, therefore, the "use" of a subsidy is
equated with the "grant[]" or "maintain[ing]" of a subsidy.  For the purposes of claims of "non-
violation" nullification or impairment arising under SCM Article 5(b), therefore, we consider that the
"application" of a measure encompasses the "use" of a subsidy, in the sense of the grant ormaintaining of a subsidy.  We therefore reject the US argument that the CDSOA should not be said to
have been "applied" if no actual disbursements have been made thereunder.  Even if disbursements
have not been granted under the CDSOA, the maintenance of the CDSOA programme constitutes
"application" of a measure for the purpose of a "non-violation" nullification or impairment claim
under SCM Article 5(b).  We therefore find that the first requirement identified by the Japan – Film
panel has been met.
7.123  Leaving aside the contextual relevance of SCM Article 7.1 to this issue, we consider that our
approach to the term "application" is su pported by the Appellate Body findings in US – Line Pipe ,
where the Appellate Body asserted that a duty … does not need actually to be enforced and collected
to be 'applied' to a product".
336  We understand the Appellate Body to mean that the existence of a
duty, and the potential enforcement and collection of that duty, is sufficient for it to "apply" to a
product.  We likewise consider that the existence of a subsidy programme, and the potential use ofthat subsidy programme, is sufficient for that programme to "apply".
The existence of a benefit
7.124  Regarding the second element identified by the Japan – Film  panel, Mexico relies on benefit
accruing under Articles II and VI of the GATT 1994.  The United States does not dispute that benefits
resulting from negotiated tariff concessions accrue to Mexico under these provisions.  There is noreason, therefore, why we should not find that this second requirement has been met.
                                                     
336 Appellate Body Report, United States – Definitive Safeguard Measures on Imports of Circular Welded
Carbon Quality Line Pipe from Korea ("US – Line Pipe "), WT/DS202/AB/R, adopted 8 March 2002, para. 129.WT/DS217/R
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The nullification or impairment of a benefit
7.125  Mexico claims that both the granting of subsidies (i.e., the making of actual disbursements)
and the maintaining of subsidies (i.e., the main taining of the CDSOA programme) under the CDSOA
per se  cause "non-violation" nullification or impairment.  In addressing this claim, we take particular
note of the Appellate Body's assertion in EC – Asbestos  that non-violation nullification or impairment
is a "rather unusual remedy".337  We also note that like the panel in Japan – Film , the Appellate Body
considered that the "non-violation" nullification or impairment remedy "should be approached with
caution and should remain an exceptional remedy".338
7.126  We recall that, according to footnote 12 to Article 5(b) of the SCM Agreement, "[t]he term
'nullification or impairment' is used in this Agreem ent in the same sense as it is used in the relevant
provisions of GATT 1994, and the existence of such nullification or impairment shall be establishedin accordance with the practice of application of these provisions".  In our view, this would appear to
be a codification of GATT practice regarding non-violation complaints.  There is only one adopted
GATT case concerning "non-violation" nullification or impairment caused by a subsidy programme,
namely EEC – Oilseeds .
339  This is one of the cases that Mexico has sought to rely on in support of its
claim.  In light of footnote 12, we consider it approp riate to be guided by the findings of that panel.
7.127  In EEC – Oilseeds , the panel asserted that countries "must … be assumed to base their tariff
negotiations on the expectation that the price effect of the tariff concessions will not be systematically
offset".  The panel "examined whether it was reasona ble for the United States to expect that the
Community would not introduce subsidy schemes systematically counteracting the price effect of the
tariff concessions".340 This would suggest, therefore, that the EEC – Oilseeds panel considered that
non-violation nullification or impairment would ar ise when the effect of a tariff concession is
systematically offset or counteracted by a subsidy programme.  This is a reasonable approach, since a
standard of "systematic offsetting/counteracting" would preserve the exceptional nature of the "non-
violation" nullification or impairment remedy.341 342  We shall therefore examine whether or not the
CDSOA systematically offsets or counteracts benefits accruing to Mexico.
7.128  Mexico claims that both the grant of subsidies under the CDSOA, and the maintenance  of the
CDSOA programme per se , have caused "non-violation" nullification or impairment.  In order to
                                                     
337 EC – Asbestos , para. 185.
338 EC – Asbestos , para. 186.
339 European Economic Community - Payments and Subsidies Paid to Processors and Producers of
Oilseeds and Related Animal-Feed Proteins ("EEC – Oilseeds "), adopted 25 January 1990, BISD 37S/86.
340 EEC – Oilseeds , para. 147. The panel found that "[a]t issue in the case before it [we]re product-
specific subsidies that protect producers completely from the movement of prices for imports and therebyprevent tariff concessions from having any impact on the competitive relationship between domestic andimported oilseeds" (para. 148).
341 In the context of subsidies, there is a tension between the right of a Member to subsidize (except
prohibited subsidies), on the one hand, and the legitimate expectations of improved market access resulting from
negotiated tariff concessions, on the other.  Any subsidy to domestic producers is likely to have some adverseeffect on the competitive relationship between domestic and imported products.  However, the fact that therewill be some impact should not be sufficient to uphold a claim of non-violation nullification or impairment.Otherwise, any specific domestic subsidy programme which is related to a product on which there is a tariff
concession could constitute the non-violation nullification or impairment of benefits.  This would hardly make
non-violation nullification or impairment an "exceptional" or "unusual" remedy, as the Appellate Body has saidit should be.
342 Mexico would appear to agree with such an  approach, since it has argued "non-violation"
nullification or impairment on the basis that "offset payments will systematically upset the competitive
relationship between Mexican products and like United St ates products legitimately expected by Mexico"
(Mexico's second written submission, para. 83).WT/DS217/R
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determine whether or not the grant of subsidie s under the CDSOA programme would systematically
offset benefits accruing to Mexico under Articles II and VI of the GATT 1994, at a minimum we must
assess the amount of subsidy to be provided, relative to the amount of the tariff concession.  In the
present case, though, because the Panel is examining the CDSOA per se , rather than actual
disbursements made under the CDSOA, there is no way of knowing whether CDSOA offset payments
will systematically offset or counteract tariff concessions.  This is because it is not clear what the
amount of subsidy will be in a given case, nor what level of tariff concession was made by the US for
the product at issue.  In other words, becaus e the CDSOA does not provide for product-specific
subsides (unlike the subsidy programme at issue in EEC – Oilseeds ), and because the amount of such
subsidies is not directly linked to the level of tariff concession made for the specific product at issue
(but rather to the amount of anti-dumping or coun tervailing duties collected), there is no certainty that
the grant of offset payments under the CDSOA will systematically offset or counteract benefits
accruing to Mexico under Articles II and VI of the GATT 1994.
7.129  Mexico claims that the maintaining of the CDSOA programme per se  nullifies or impairs
benefits accruing to Mexico related to the predictabili ty of conditions for future trade.  Mexico asserts
that it is impossible for efficient Mexican exporters who can still sell into the US market when facinganti-dumping or countervailing duties to predict the relative conditions of competition between their
products and like US products.  In other words, Mexican exporters are unable to predict in advance
how much subsidy will be bestowed on "affected domestic producers".
7.130  The United States submits that commitments made under GATT Articles II and VI do not
include an express or implied promise of total predictability.  We agree, and see no basis for findingto the contrary.  In any event, we consider that th e unpredictability relied on by Mexico could result
from any subsidy programme which does not fix the exact amount of subsidy to domestic producers
in advance, or from a Member's decision to bestow ad hoc , non-recurring subsidies.  Our acceptance
of Mexico's argument would have far-reaching consequences, and would run counter to the Appellate
Body's statement that "non-violation" nullification or impairment "should be approached with cautionand should remain an exceptional remedy".  To uphold Mexico's claim would be tantamount to
finding that any form of unpredictable subsidization causes "non-violation" nullification or
impairment.
7.131  An additional issue arising under the third element is the question of whether or not Mexico
could have reasonably anticipated at the conclusi on of the Uruguay Round of trade negotiations that
the United States would pass the CDSOA into law.  In this regard, like the Japan – Film  panel, we
consider that there is a presumption that a Member should not be held to have anticipated a measureintroduced subsequent to the trade negotiations at issue.  Since the CDSOA was introduced
subsequent to the conclusion of the Uruguay Round negotiations, there is therefore a presumption that
Mexico could not reasonably have anticipated the introduction of that measure.  In seeking to rebut
this presumption, the United States asserts that measures similar to the CDSOA were proposed in the
US Congress prior to the conclusion of the Uruguay Round.  Mexico responds that the fact thatsimilar proposals were not enacted in the past led it to assume that further attempts to introduce such
legislation would similarly fail.  The United States replies that whether Mexico believed that the
CDSOA would or would not become law in the United States is not germane, since the question is
whether Mexico was on notice that the United States could pass such a measure.  In our view,
however, the fact that the United States could pass the CDSOA is not determinative of this issue,since, as a sovereign state, the United States could in principle pass any piece of legislation.  The issue
is whether or not Mexico could have reasonably anticipated that the United States would pass the
CDSOA.  We think not, because former proposals for similar legislation were defeated, and such
proposals were opposed by the US Administration.  Furthermore, the adoption of the CDSOA is
inconsistent with Article 18.1 of the AD Agreement and Article 32.1 of the SCM Agreement.  Given
the express prohibition in those provisions regarding specific action against dumping and subsidy, weWT/DS217/R
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do not consider that Mexico should be held to have reasonably anticipated that the United States
would pass precisely such specific action against dumping or subsidy.343  Accordingly, the
United States has failed to rebut the presumption that Mexico could not reasonably anticipated the
passing of the CDSOA.
(iii) Summary of findings on adverse effects
7.132  For the above reasons, we find that Mexico has failed to establish "violation" nullification or
impairment.  We further find that Mexico has failed to establish all of the necessary elements for its
"non-violation" nullification or impairment claim.  Accordingly, we find that Mexico has failed to
demonstrate that the CDSOA has caused "adverse effects" within the meaning of Article 5(b) of the
SCM Agreement.
(c) Conclusion
7.133  Since Mexico has failed to establish that the CDSOA per se  is a "specific" subsidy that causes
"adverse effects", we reject Mexico's claim that the CDSOA per se  is inconsistent with Article 5(b) of
the SCM Agreement.
H. SCM ARTICLES 4.10 AND 7.9
1. Arguments of the parties
7.134  Australia submits that the CDSOA violates  SCM Articles 4.10 and 7.9.  In its first
submission, Australia submitted that the CDSOA vi olates SCM Article 4.10 because it mandates the
application of countermeasures in the absence of dispute settlement proceedings having established
that a wrongful act has been committed.  Australia also submitted in its first submission that the
CDSOA violates SCM Article 7.9 because it imposes a countermeasure against subsidised importswhich have not been found through a dispute settlement proceeding to cause adverse effects on the
US domestic industry.
7.135  The United States asserted in its first submission that SCM Articles 4.10 and 7.9 do not
contain an obligation or prohibition on Members and therefore cannot form the basis of a violation.
The United States submits that even if those provisions do contain an obligation which could form thelegal basis of a violation, the CDSOA is not a "countermeasure" within the meaning of SCM
Articles 4.10 and 7.9.
2. Evaluation by the Panel
7.136  Australia indicated in its second written submission that it did not intend to pursue further
arguments in relation to Articles 4.10 and 7.9 of the SCM Agreement.
344  On this basis, we consider
Australia to have withdrawn its claims concerning these provisions and do not make a finding.345
                                                     
343 This does not mean that the violation of a provision of a covered agreement necessarily forms the
basis for a claim of "non-violation" nullification or impairment.  It simply means that we see no basis for findingthat one Member should be deemed to reasonably anticipate that another Member will violate an expressprohibition .
344 See para. 4.867 above.
345 The text of this paragraph was proposed by Australia in its comments on the interim report.WT/DS217/R
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I. GATT ARTICLE X :3(A)
1. Arguments of the parties
7.137  The complaining parties346  assert that the CDSOA is inconsistent with Article X:3(a) of the
GATT 1994 because it leads to an unreasonable and partial administration of US laws and regulationsregarding the initiation of investigations and the acceptance of undertakings.
7.138  The complaining parties argue that Article X:3 GATT 1994 requires the uniform, impartial
and reasonable administration of a Member's laws and regulations, such as the US anti-dumping and
countervail laws concerning initiation and the acceptance of undertakings. The complainants argue
that the Tariff Act 1930 is itself a law of general application, and because the CDSOA is an
amendment to the Tariff Act, the CDSOA is also subject to the requirements of Article X:3(a).
347
According to the complainants, the CDSOA necessarily  leads to an unreasonable administration of the
anti-dumping/countervail law and regulations because investigations will be initiated and measures
will be imposed in cases where the domestic industry has no genuine interest in the adoption of such
measures, but is acting on the basis of a strong financial incentive to support the application and to
oppose an undertaking.  The complainants further submit that the CDSOA also leads to a partial
administration of the US anti-dumping law since it artificially increases the level of support for the
application and deprives the exporters of a fair consideration for an alternative remedy as the
exporters' interests in obtaining such an alternative remedy is subordinated to the pecuniary interests
of the domestic producers.
7.139  The United States argues that the complaining parties have failed to present any evidence of
the actual administration of the CDSOA as re quired under Article X:3 GATT 1994. The US asserts
that the complaining parties' allegations are no more than speculations concerning the impact of the
CDSOA on the number of AD petitions filed or undertakings accepted. In any case, the US argues,
decisions by private parties on whether to file or support petitions, or by the USDOC in determining
whether to accept or reject undertakings have nothing to do with the administration of the CDSOA by
the US Customs service. Whatever effect CDS OA may or may not have on the domestic industry,
there is no reason to believe that the Commerce Department will now administer the standing or
undertaking provisions any differently.
7.140  The United States also asserts that the US implementation of  its obligations under the
Antidumping and SCM Agreements is not within the te rms of reference of this dispute.  Furthermore,
the United States submits that the CDSOA is not the sort of administrative measure that can even be
challenged under GATT Article X:3(a).  The panel in Argentina – Hides and Leather carefully
explained that, for a measure to be challengeable under GATT Article X:3(a), it must beadministrative, as opposed to substantive, in nature.
348  The measure at issue in Argentina – Hides and
Leather was administrative in nature because it set forth means for the application and enforcement of
substantive customs rules.349  The United States submits that, in contrast to the measure at issue in the
                                                     
346 We note that Australia has not claimed a violation of Article X of the GATT 1994.
347 Canada refers to the Panel report in Argentina – Measures Affecting the Export of Bovine Hides and
the Import of Finished Leather , WT/DS155/R, adopted 16 February 2001, para. 11.77. Brazil also notes that in
US – Anti-Dumping Measures on Stainless Steel Plate in Coils and Stainless Steel Sheet and Strip from Korea
WT/DS179/R (adopted 1 February 2001 , para. 6.49 n.62), the panel confirmed that anti-dumping laws and
regulations were laws and regulations within the meaning of Article X:1 and hence within the scope ofArticle X:3.
348 Argentina – Measures Affecting The Export of Bovine Hides and The Import of Finished Leather
("Argentina – Hides and leather"), WT/DS155/R, adopted on 16 February 2001, para. 11.70.
349 Id., para. 11.72 (stating the measure at issue “merely provides for a certain manner of applying ...
substantive rules” on customs classification and export duties).WT/DS217/R
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Argentina – Hides and Leather case, the CDSOA does not establish any procedures for the
administration or enforcement of US laws on determ inations of the level of industry support or the
acceptance or rejection of undertakings.  According to the United States, the CDSOA is rather a
substantive measure.  It provides statutory authority for the US Customs Service to distribute anti-dumping and countervailing duties collected to affected domestic producers.  The United States
submits that, as the CDSOA is not administrative in nature, it cannot be challenged under GATT
Article X:3(a).
2. Evaluation by the Panel
7.141  GATT Article X provides in relevant part:
1. Laws, regulations, judicial decisions and administrative
rulings of general application, made effective by any contractingparty, pertaining to the classification or the valuation of products for
customs purposes, or to rates of duty, taxes or other charges, or to
requirements, restrictions or prohibitions on imports or exports or the
transfer of payments therefor, or affecting their sale, distribution,
transportation, insurance, warehousing inspection, exhibition,processing, mixing or other use …
3.(a) Each contracting party shall administer in a uniform,
impartial and reasonable manner all its laws, regulations, decisions
and rulings of the kind described in paragraph 1 of this Article.
7.142  Before addressing the substance of the compla ining parties' Article X:3(a) claim, we must
first examine whether or not this claim falls within our terms of reference.  The United States submits
that it does not, because the US trade la ws allegedly administered by the CDSOA
350 were not included
in the complaining parties' requests for establishment.  We do not agree with the United States, since
this claim concerns the alleged administration of US trade laws by the CDSOA, rather than the trade
laws themselves.  Since the CDSOA, the measure which "administer[s]" within the meaning of GATTArticle X:3(a), is within our terms of reference, so too is the complaining parties' Article X:3(a) claim
regarding the CDSOA.
7.143  In examining the substance of the complaining parties' claim, we consider it appropriate to be
guided by the panel in Argentina – Hides and Leather .  In applying Article X:3(a), that panel stated
that "[t]he relevant question is whether the substance of such a measure is administrative in nature or,
instead, involves substantive issues more properly dealt with under other provisions of the
GATT 1994".
351  In other words, if a measure is substantive in nature, it does not fall within the scope
of GATT Article X:3(a).  Article X:3(a) applies only in respect of measures that are administrative in
nature.  That panel found that the relevant measure was administrative in nature because it did not
"establish substantive Customs rules for enforcement of export laws", and "merely provide[d] for a
certain manner of applying [the relevant] substantive rules".352
7.144  In the present case, we do not consider that the CDSOA "merely provides for a certain
manner of applying [the relevant] substantive rules".  It does not contain rules governing the
application or administration of the US Tariff Ac t of 1930 or applicable US Department of Commerce
                                                     
350 These measures are contained in the US Tariff Act of 1930 and applicable US Department of
Commerce implementing regulations.
351 Argentina – Hides and Leather , para. 11.70.
352 Argentina – Hides and Leather , para. 11.72.WT/DS217/R
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implementing regulations.  The CDSOA does not require the administering authority to administer
those laws and implementing regulations in any particular way.  In fact, the complaining parties'
Article X:3(a) claim focuses on action by US dom estic producers in anti-dumping and countervail
proceedings (in respect of their support for petitions, and their opposition to price undertakings),rather than action by the administering authority.  The alleged impact of the CDSOA on domestic
producers' participation in anti-dumping or countervail proceedings only arises because the CDSOA
contains substantive rules governing the provision of offset payments (i.e., domestic producers may
alter their behaviour in order to meet the substantive eligibility criteria set forth in the CDSOA).
3. Conclusion
7.145  In light of the above, we find that the CDSOA is substantive in nature, and therefore does not
constitute an administrative measure.  We therefore find that the CDSOA falls outside the scope ofArticle X:3(a) of the GATT 1994, and we reject the complaining parties' Article X:3(a) claim
accordingly.
VIII.  CONCLUSIONS AND RECOMMENDATION
8.1 In the light of our findings, we conclude  that the CDSOA is inconsistent with AD
Articles 5.4, 18.1 and 18.4, SCM Articles 11.4, 32.1 and 32.5, Articles VI:2 and VI:3 of the GATT
1994, and Article XVI:4 of the WTO Agreement.
8.2 We reject the complaining parties' claims that the CDSOA is inconsistent with AD
Articles 8.3 and 15, SCM Articles 4.10, 7.9 and 18.3, and Article X:3(a) of the GATT 1994.  We also
reject Mexico's claim that the CDSOA violates SCM Article 5(b).
8.3 The CDSOA is a new and complex measure, applied in a complex legal environment.  In
concluding that the CDSOA is in violation of the abovementioned provisions, we have been
confronted by sensitive issues regarding the use of subsidies as trade remedies.  If Members are of the
view that subsidisation is a permitted response to unfair trade practices, we suggest that they clarify
this matter through negotiation.
8.4 Under Article 3.8 of the DSU, in cases where ther e is infringement of the obligations assumed
under a covered agreement, the action is considered prima facie  to constitute a case of nullification or
impairment of benefits under that agreement.  Acco rdingly, we conclude that to the extent that the
CDSOA is inconsistent with the provisions of  the AD Agreement, the SCM Agreement, and the
GATT 1994, as described in paragraph 8.1 supra , the CDSOA nullifies or impairs benefits accruing to
the complaining parties under those agreements.
8.5 Consistent with Article 19.1 of the DSU, we recommend that the Dispute Settlement Body
request the United States to bring the CDSOA in to conformity with its obligations under the AD
Agreement, the SCM Agreement, and the GATT of 1994.
8.6 Certain complaining parties
353 have asked the Panel to suggest that the United States bring the
CDSOA into conformity by repealing that measure.  The United States did not react to this request.
We note that Article 19.1 of the DSU provides us with the authority to suggest ways in which the
United States could implement our recommendation that it bring the CDSOA into conformity.Although there could potentially be a number of ways in which the United States could bring the
CDSOA into conformity, we find it difficult to conceive of any method which would be more
                                                     
353 Brazil, Chile, Japan, Korea and Mexico.WT/DS217/R
WT/DS234/R
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appropriate and/or effective than the repeal of th e CDSOA measure.  For this reason, we suggest that
the United States bring the CDSOA into conformity by repealing the CDSOA.