United States General Accounting Office

GAO Briefing Report to Congressional

Requesters

June 1995 U.S.-CANADA FREE

TRADE AGREEMENT

Factors Contributing to

Controversy in Appeals

of Trade Remedy Cases

to Binational Panels

GAO/GGD-95-175BR

GAO United States

General Accounting Office

Washington, D.C. 20548

General Government Division

B-260189 

June 16, 1995

The Honorable Bob Packwood

Chairman

The Honorable Daniel Patrick Moynihan

Ranking Minority Member

Committee on Finance

United States Senate

The U.S.-Canada Free Trade Agreement (FTA) took effect in 1989, creating

the world’s largest free trade area at that time. FTA also established various

means, including binational review panels, to settle disputes over

unresolved trade issues between the two countries. One of these issues

was the proper use of national trade remedy laws that combat unfair trade

practices. Some decisions by binational panels that reviewed U.S.

government agency antidumping (AD) and countervailing duty (CVD)

determinations caused public controversy and created trade tensions

between the two countries.

As requested, we (1) summarized U.S. and Canadian expectations for the

binational panel process, (2) developed a statistical overview of panel

activity and decisions, (3) identified and analyzed the participants’ views

on points of satisfaction and dissatisfaction with the panel process, and

(4) identified some other factors that may have contributed to the

controversy over the binational panel process in general.

We provided a briefing to Committee staff on June 7, 1995. This report

summarizes the substance of that briefing.

Background Under U.S. AD/CVD laws, private parties can petition the government to

determine whether a U.S. industry is materially injured or threatened with

material injury by reason of dumped or subsidized imports. In parallel

administrative processes, the Department of Commerce determines

whether dumping or subsidization exists, and the International Trade

Commission (ITC) determines whether a U.S. industry is materially injured

or threatened with material injury as a result. Affirmative findings by both

agencies can result in the U.S. Customs Service collecting a duty on the

imports. Dissatisfied parties can appeal Commerce and ITC determinations

to the U.S. Court of International Trade (CIT), then to the Court of Appeals

Page 1 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
B-260189 

for the Federal Circuit (CAFC), and finally may petition for certiorari to the

Supreme Court.1

If the merchandise imported into the United States was from Canada, and

vice versa, chapter 19 of FTA provided an alternative to domestic judicial

review of agency determinations. Any private party could choose the

option of a review by a five-member panel composed of trade experts from

Canada and the United States rather than appeal to a national court. These

binational panels were to base their decisions on the domestic laws of the

country whose agency made the determination under review. FTA

established a 315-day guideline for panels to issue a final decision from the

date a panel was requested. Also, panels had the option of referring the

case back to the agency on remand for further information or

consideration in light of the panel’s analysis of the record. Then, the

agency was to respond to the remand, and the process was to continue,

sometimes with more remands. Further, either government could request

that a three-member Extraordinary Challenge Committee (ECC) review a

panel decision. ECCs could affirm, remand, or vacate a panel’s decision on

the basis of criteria in FTA chapter 19.

The United States and Canada extended the FTA binational panel

provisions to include Mexico on January 1, 1994, and made the panel

process permanent under the North American Free Trade Agreement

(NAFTA). Although NAFTA binational panel provisions were essentially the

same as FTA’s, U.S. and Canadian negotiators sought some improvements.

The changes in NAFTA included encouraging the use of judges as panelists,

lengthening the time limits for ECC proceedings, and adding language to

clarify the ECC’s role.

Results in Brief The binational panel process was the result of a compromise between U.S.

and Canadian negotiators who could not agree about harmonizing U.S. and

Canadian trade remedy laws in FTA. Canada questioned the need for trade

laws in a free trade area and, therefore, sought to limit the use of U.S.

trade laws against Canadian exports. On the other hand, the United States

wanted to end Canadian subsidies and to keep the use of U.S. trade laws

intact. Under the compromise, binational panels were given the authority

to review U.S. and Canadian agency AD/CVD final determinations. In

conducting such reviews, panels were required to apply the appropriate

1

Canadian law provides for a process very similar to the U.S. process. For example, Revenue Canada

determines the extent of any dumping or subsidization and the Canadian International Trade Tribunal

(CITT) determines whether Canadian industry has been, is, or will be injured. These determinations

can be reviewed by the Federal Court of Canada.

Page 2 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
B-260189 

standards of review and the general legal principles that a court of the

importing country would otherwise apply. (See briefing section I.)

In compromising, U.S. and Canadian negotiators had common goals for

the panel process. These goals were to protect sovereignty, create trade

benefits, reduce political tension, and provide a fair and expeditious

review process. However, their expectations of how the panel process

would accomplish each of these goals differed. For example, on one hand,

Canadian negotiators expected that the panel process would address the

complaints of Canadian producers that U.S. political pressures disposed

U.S. agency officials to side with U.S. industry complainants. They also

expected that the new forum would make panel review speedier, less

costly, and more rigorous than CIT review of U.S. agency actions. On the

other hand, U.S. negotiators expected that quicker resolution of AD/CVD

issues would minimize unnecessary bilateral trade friction, while reliance

on U.S. trade law meant that the panel review would be comparable to CIT

review. Thus, the panel process was a compromise that left the underlying

concerns about the use of trade remedy laws unresolved. (See briefing

section II.)

We developed a statistical overview of the panel process to see if any

patterns emerged. Since the panel process began in 1989, through

September 1994, there have been 49 panel reviews of Canadian and U.S.

agency determinations. Of 23 completed cases, 15 were reviews of U.S.

agency determinations. Panels reviewed about the same proportion of

Commerce and ITC determinations. Three of the 15 completed panel

decisions were reviewed by an ECC. The small number of completed cases

made it difficult to identify any patterns in the way in which panels

operated. (See briefing section III.)

Some participants with whom we spoke expressed satisfaction with the

binational panels’ work. For example, they thought that (1) the process

was faster than that of traditional judicial review, (2) the procedures

administered by the U.S. and Canadian Secretaries operated smoothly,2

(3) the panelists demonstrated an expertise in considering the facts of the

cases, and (4) the panelists gave a thorough and in-depth review of the

cases.

However, other participants had concerns about the panel process,

especially with regard to three panel decisions that the United States

2

Under the FTA and NAFTA, each country has a national Secretariat that administers the binational

panel process and facilitates the panels’ work.

Page 3 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
B-260189 

subsequently challenged under ECC procedures. These concerns included:

(1) whether panels had properly interpreted U.S. law or had improperly

substituted their judgment for the U.S. agencies’; (2) whether the panels

had made excessive use of remands; (3) whether there was a separate U.S.

AD/CVD case law emerging from the panels that would apply only to

Canada; (4) whether the apparent discord between panelists and agency

officials in some cases, or (5) the conflict of interest allegations against

certain panelists, affected the panel process; and (6) what the proper role

for ECC review should be. We analyzed the issues raised by these various

participants. The evidence was inconclusive. The information we

developed could be used both to support some participants’ views and to

challenge those of others. Further, these diverse views may simply reflect

the fact that the underlying country concerns about the use of U.S. and

Canadian trade remedy laws remain unresolved. (See briefing section IV.)

During our work, we noted that there were significant differences between

the behavioral characteristics of the binational panel process and the U.S.

judicial system that it replaces. We cannot say in any particular case that

these different characteristics produced judgments different from those of

a U.S. court.3

 However, some panel behavior may have conflicted with

some participants’ expectations of how the panel process should have

worked. Thus, these differences may have added to the controversy over

certain panel decisions. (See briefing section V.)

Scope and

Methodology

To understand participants’ expectations for the binational panel process,

we reviewed U.S. and Canadian government reports, legislative

documents, and testimony, all from the late 1980s; and we interviewed

former U.S. and Canadian negotiators.

To identify participant’s views about the binational panel process, we

interviewed (1) U.S. and Canadian government officials; (2) private sector

lawyers, some representing U.S. industries petitioning for trade protection

and others representing Canadian respondents opposing them; and

(3) U.S. and Canadian panelists who reviewed cases. Since it was our

intention to determine the range of views about the panel process, we

interviewed a sample of participants who, in our judgment, represented

both U.S. and Canadian parties and who had broad experience, having

taken part in two or more panel cases. Therefore, our sample was not

randomly selected and the weight of any individual view cannot be

3

The results of any particular case can only be interpreted subjectively, and we have no basis to

challenge a panel’s exercise of its authority to make the necessary normative judgments.

Page 4 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
B-260189 

compared to any other. We also augmented these interviews by reviewing

scholarly literature assessing the panel process.

To provide a statistical overview of the process and to analyze

participants’ views, we used data from the (1) U.S. and Canadian FTA

Secretariats,4 (2) Canadian Department of Justice, (3) U.S. Trade

Representative (USTR), (4) ITC, and (5) Department of Commerce. We

analyzed data from the beginning of the FTA binational panel process on

January 1, 1989, to September 30, 1994, and did not include FTA panel cases

completed after that date. To gather information, we read the opinions

written by completed FTA binational panels on U.S. agency determinations,

but we did not assess the panels’ legal reasoning. We used information in

documents and reports produced by the U.S. Secretariat to analyze the

characteristics of panels reviewing U.S. agency decisions. In particular, we

focused on panelists’ backgrounds, types of U.S. agency decisions

appealed, patterns of panel decisionmaking, and length of panel cases.

USTR and the Canadian Department of Justice provided information on the

occupations and educational backgrounds of the panelists on FTA panels

who reviewed U.S. agency determinations. Comparisons of appeal rates,

remand rates, and average completion times between reviews completed

by CIT and the panels included our analysis of data provided by Commerce

and CIT; we did not verify the accuracy of the information in their data

bases. ITC provided the import values of the commodities associated with

the completed panel reviews of U.S. agency decisions, but we did not

verify them. Due to data limitations, we did not evaluate the statistical

relationship between the outcomes and the characteristics of the panel

cases. All of our work helped us identify factors that may have contributed

to the controversy over the panel process.

We did our work in Washington, D.C., and Ottawa, Canada, between

January 1994 and February 1995 in accordance with generally accepted

government auditing standards.

We requested comments on a draft of this report from (1) the U.S.

Secretary of the NAFTA Secretariat, (2) the Assistant Secretary of

Commerce for Import Administration, (3) the International Trade

Commission, (4) the Senior Counsel and Negotiator, Office of the U.S.

Trade Representative, and (5) the Minister Counsellor of the Canadian

Embassy, or any of their designees. The comments are discussed below

and incorporated in the report where appropriate.

4

Under NAFTA, these names were changed to the U.S. and Canadian sections of the NAFTA

Secretariat.

Page 5 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
B-260189 

U.S. Agency and

Canadian Government

Comments

The U.S. Secretary of the NAFTA Secretariat gave us oral comments on our

draft report on May 11, 1995. He generally agreed with the accuracy of the

information and analysis in our report and had a few comments, generally

of an editorial nature, which we incorporated where appropriate.

On May 18, 1995, various ITC staff and commissioners provided oral or

written comments on our draft report, which were coordinated through

the ITC Office of the General Counsel. Reviewers suggested various

changes to ensure that our characterization of AD/CVD law, including injury

determinations, was technically precise with regard to current practice,

and we incorporated these changes where appropriate. We clarified our

discussion in briefing section IV concerning panel judgment in response to

one reviewer’s concern that our statement “panels cited U.S. case law in

their decisions” implied that panels had thus properly applied U.S. law.

Another ITC reviewer was concerned that our presentation in briefing

section IV of data on panel remands and dissents and the nationality of the

panel majority could lead to misunderstandings or inaccurate conclusions;

therefore, we added language to help the reader interpret the data and

some notes to better explain our analysis.

We received oral comments from USTR’s Office of the General Counsel on

May 19, 1995. USTR officials disagreed strongly with the Canadian view that

the affiliation of the U.S. Secretariat with Commerce threatened the U.S.

Secretary’s independence and may have signaled that the panel process

was a low U.S. priority; however, they did not disagree with the

information we presented. Otherwise, USTR officials said they had no major

concerns about our analysis, but they made various suggestions to

improve the clarity of the draft report, including statements about U.S.

negotiating expectations, U.S. ECC challenges of certain panel decisions,

and the differences between panels and CIT. We incorporated their

suggestions where appropriate.

The Office of the Chief Counsel for Import Administration provided oral

comments on May 17, 1995, including those from the Office of the

Assistant Secretary of Commerce for Import Administration. Although

they had concerns about some participants’ views of Commerce’s role in

the panel process, most comments related to making language in our draft

report technically consistent with AD/CVD law and practice, as well as FTA,

NAFTA and related U.S. negotiating expectations. We made changes

throughout the draft report, on the basis of their comments.

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B-260189 

The Minister Counsellor of the Canadian Embassy provided the

Government of Canada’s comments to us in his letter of May 24, 1995. He

later stated that the Government of Canada holds the view that the

Chapter 19 binational process is a “unique and successful process of

settling trade disputes in both countries that has worked effectively.”

While not disagreeing with our analysis, he suggested clarifications to

certain language in the report, including statements made by Canadian

officials and corrections to factual statements. Some of the proposed

amendments reiterated Canadian government concerns that the actions of

U.S. agencies and political pressures had caused controversy over certain

panel cases, and we incorporated these concerns where appropriate. We

made various factual corrections to the draft and added notes to better

present data and clarify our analysis.

As agreed with you, unless you announce the contents of this briefing

report earlier, we plan no further distribution of this report until 30 days

from its issue date. At that time, we will send copies to other interested

congressional committees, U.S. and Canadian government officials, and

other interested parties. We will also make copies available to others on

request.

The major contributors to this briefing report are listed in appendix IV.

Please contact me at (202) 512-4812 if you have any questions concerning

this report.

Allan I. Mendelowitz, 

Managing Director

International Trade, Finance, and

 Competitiveness

Page 7 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Contents

Letter 1

Briefing Section I 

Background

12

Briefing Objectives 12

Genesis of the Free Trade Agreement (FTA) Binational Panel

Process

14

Categories of Trade Remedy Actions 16

Agency Determinations in Applying U.S. Trade Remedy Laws 18

Appeals of U.S. Agency Trade Remedy Determinations 22

U.S. Courts Involved in the Appeals Process 23

Canadian Law Provides for a Similar Trade Remedy System 24

FTA Binational Panel Process: Rules and Requirements 26

FTA Binational Panel Process: ECC Review 28

Why the Panel Process is Unique 30

Who Are the U.S. and Canadian Panel Participants? 31

The Standard of Review Used by Both U.S. Courts and Binational

Panels

32

Judgmental Nature of the Standard of Review 34

Briefing Section II 

Expectations for the

Panel Process

36

U.S. & Canadian Officials: Different Expectations for the Panel

Process

36

Briefing Section III 

Statistical Overview

of Binational Panel

Activity and Decisions

(January 1989-

September 1994)

40

Appeals of U.S. Agency Determinations on Canadian Imports 40

What Has Been the Volume of FTA Binational Panel Activity? 42

What Was the Status of These Binational Panel Reviews? 43

What Was the Distribution of the Types of Panel Reviews? 44

Was There a Trend in Binational Panel Activity Over Time? 45

Who Has Appealed U.S. Agency Determinations to Binational

Panels?

47

Who Has Appealed Canadian Agency Determinations to

Binational Panels?

48

Frequency of Panel Review of Commerce and ITC

Determinations

49

Frequency of Panel Review of Commerce AD or CVD

Determinations

50

Frequency of Panel Review of Commerce Final Determinations 51

What Types of Decisions Have Panels Produced? 52

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Contents

Three Panel Decisions on U.S. Agency Determinations Reviewed

by an ECC

53

Briefing Section IV 

Participant Views

54

Areas of Satisfaction With the Binational Panel Process 54

1. Have Appeals to Panels Been Completed Faster Than Those to

CIT?

56

2. Panel Procedures and FTA Secretaries 60

Canadian Concerns about the U.S. Secretariat 61

3. Training of Panelists Reviewing U.S. Agency Determinations 62

Occupations of Panelists Reviewing U.S. Agency Determinations 63

Experience of Panelists Reviewing U.S. Agency Determinations 64

4. Panels Gave a Thorough and In-Depth Review 65

Six Areas of Participant Concern About the Binational Panel

Process

66

Greatest Participant Concerns About Three Panel Cases That

Went to ECC

67

Three Cases Involved Industries With the Highest Value of

Imports

68

1. Views of Panel Judgment Varied Widely 69

U.S. Government Allegations Regarding Panel Judgment 70

The Difficulties in Assessing the Validity of These Allegations 71

2. Remands 72

Participant Concerns About Panel Remands Varied 73

The Number of Remands 74

Binational Panels Remanded More Frequently Than Did CIT 75

Observations About the Number and Nature of Remands 76

Did Multiple Remands Lengthen the Time to Settle FTA Disputes? 78

Did Panel Composition Affect Panel Remands? 79

3. Concerns That a Separate Case Law May Be Emerging 80

The Nature of Citations Varied 82

4. Varied Concerns That Discord Among Participants Affected

Outcomes

84

Most Panel Decisions Have Been Unanimous 85

Nationality and Nature of Dissent 86

5. Participant Concerns Over Conflict of Interest Allegations

Varied

87

U.S. Government Challenge of Softwood Lumber CVD Panel

Decision

88

Were Withdrawals of Panelists Common? 89

How Did Panelist Withdrawals Affect the Panel Process? 90

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Contents

Observations About Panelists’ Conflict of Interest 91

6. Participant Concerns Over the Proper Role of ECCs 92

How Frequently Were Panel and CIT Decisions Reviewed? 94

Observations About the Role of ECCs 96

Briefing Section V 

Other Factors That

May Have Contributed

to Participant

Concerns

98

Binational Panels are Different From U.S. Courts 98

Appendixes Appendix I: Completed U.S. FTA Binational Panel Reviews

Through September 1994

100

Appendix II: Completed ECC Reviews of Panel Decisions 102

Appendix III: Differences Between Panels and CIT 103

Appendix IV: Major Contributors to This Briefing Report 104

Abbreviations

AD Antidumping

CAFC U.S. Court of Appeals for the Federal Circuit

CVD Countervailing duty

CIT U.S. Court of International Trade

CITT Canadian International Trade Tribunal

ECC Extraordinary Challenge Committee

FTA U.S.-Canada Free Trade Agreement

GATT General Agreement on Tariffs and Trade

ITC U.S. International Trade Commission

NAFTA North American Free Trade Agreement

USTR Office of the U.S. Trade Representative

WTO World Trade Organization

Page 10 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Page 11 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section I 

Background

GAO Briefing Objectives

Provide background on the binational 

panel process

Summarize U.S. and Canadian 

expectations

Develop statistical overview of panel 

activity and decisions

Page 12 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section I 

Background

GAO Briefing Objectives

(continued)

Present participants' views

Identify factors that may have 

contributed to concerns

Page 13 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section I 

Background

GAO Genesis of the Free Trade Agreement 

(FTA) Binational Panel Process

FTA negotiations stalemated over trade 

remedy issues

Canada wanted to limit the use of U.S. 

trade laws against its exports

United States wanted to keep its trade 

laws intact and discipline Canadian 

subsidies

Binational panel compromise left these 

fundamental differences unresolved

Page 14 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section I 

Background

Genesis of the FTA

Binational Panel Process

An official from the Department of Commerce testified before the Senate

Judiciary Committee in 1988 that Canadians feared the trade-liberalizing

benefits of FTA could be undercut by what they viewed as arbitrary

administration of U.S. trade remedy laws. The Canadians’ views stemmed

partly from the outcome of a U.S. countervailing duty (CVD) case

concerning Canadian softwood lumber. Thus, a major Canadian objective

in the negotiations was to devise a new approach to replace these trade

remedy laws. U.S. negotiators were unwilling to exempt Canada from U.S.

CVD law and sought to ensure strong, enforceable discipline over Canadian

subsidies. Despite intense negotiations, it proved impossible for the two

sides to reach agreement on disciplines and new approaches to combat

unfair trade practices.

U.S. and Canadian officials told us that these issues were so important that

Canadian acceptance of the entire FTA was at risk, and that Canadian

negotiators at one time had walked out of the talks. A novel compromise

was reached, however. In chapter 19 of FTA, which was signed on

January 2, 1988, the two governments agreed to retain existing national

trade remedy laws and procedures, but they also agreed that final agency

decisions under these laws could be reviewed by independent binational

panels, rather than by national courts. The two governments created the

panel procedure as an interim mechanism that preserved private rights to

relief from unfair trade practices,1

 but allowed quick resolution of bilateral

trade remedy issues.

1

Meanwhile, other sections of chapter 19 created two further obligations. First, the two countries were

to create a working group to seek to develop more effective rules and disciplines concerning the use of

government subsidies and a substitute system of rules for dealing with unfair pricing and government

subsidization. Second, they were obligated to notify the other party of any intended changes to

antidumping (AD) or CVD laws and enter into consultations, if requested. Then, the other party could

request that a panel review whether these changes conformed to FTA or applicable General

Agreement on Tariffs and Trade (GATT) rules. If such a panel found the changes did not conform to

FTA or GATT rules, the other party would have the right to make comparable changes to its own laws

or terminate the agreement if no satisfactory solution were achieved through further consultations.

Page 15 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section I 

Background

GAO Categories of Trade Remedy Actions

Parties can seek

Antidumping (AD) duties to offset the 

unfair price of imports sold at less 

than fair market value (i.e., dumping)

Countervailing duties (CVD) to offset 

foreign subsidies provided for the 

manufacture, production, or export of 

particular goods 

Page 16 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section I 

Background

Categories of Trade

Remedy Actions

Chapter 19 of FTA covers two categories of U.S. trade remedy actions—AD

and CVD. Dumping is generally considered to be the sale of an exported

product at a price lower than that charged for the same or a like product in

the “home” market of the exporter. U.S. AD laws seek to combat this

practice, which is recognized as a form of unfair price discrimination that

can potentially harm the importing nation’s competing industries. AD

duties are special customs duties imposed to offset the price difference

between the U.S. price and the foreign market value of imported

merchandise that is materially injuring U.S. industry.

Subsidies lower a producer’s costs or increase its revenues. This may

allow a producer to sell his or her products at a lower price than that of

the competition. Subsidies to firms that produce or sell internationally

traded products can distort international trade flows. CVD laws seek to

address the adverse effects that subsidized imports can cause. CVDs are

special customs duties imposed to offset subsidies provided for the

manufacture, production, or export of a particular good. The principal U.S.

statutory provisions related to AD and CVD are contained in subtitle IV, Title

19 of the U.S. Code.

Page 17 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section I 

Background

GAO

Commerce determines whether 

imports are dumped or subsidized

The International Trade Commission 

(ITC) determines whether a U.S. 

industry is materially injured or 

threatened with material injury by 

reason of the dumped or subsidized 

imports

Agency Determinations in Applying 

U.S. Trade Remedy Laws

Page 18 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section I 

Background

Agency Determinations in

Applying U.S. Trade

Remedy Laws

Under U.S. AD/CVD law, private parties can petition Commerce on behalf of

a U.S. industry to determine whether an industry is materially injured or

threatened with material injury by reason of dumped or subsidized

imports. Commerce may also self-initiate an AD/CVD investigation.

In an AD investigation, Commerce is to determine whether sales are at

“less than fair value” by calculating the difference between the foreign

market value of the product and the U.S. price. Depending on the

circumstances, foreign market value is derived from sales in the exporting

country, sales in a third country, or a constructed value based on a

formula set forth in the statute that uses production costs and profit

margins. In a CVD investigation, Commerce is to determine whether a

country is providing a subsidy, either directly or indirectly. A subsidy is

countervailable if it is tied to an industry’s export performance or provided

to a specific industry or group of industries.

ITC is an independent, quasi-judicial federal agency with broad

investigatory powers in matters of trade. It has six commissioners, whom

the President appoints with Senate confirmation for 9-year terms. They

vote to decide whether a U.S. industry is materially injured or threatened

with material injury by reason of criteria specified in 19 U.S.C. 1677.

Page 19 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section I 

Background

GAO

(continued)

If dumping or a subsidy and injury 

exist, Commerce calculates the 

amount of duties on each importer

Commerce may review an 

outstanding AD or CVD order 

annually in an "administrative review"

Agency Determinations in Applying 

U.S. Trade Remedy Laws

Page 20 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section I 

Background

Agency Determinations in

Applying U.S. Trade

Remedy Laws (Cont.)

If Commerce determines that dumping or a countervailable subsidy exists,

it can calculate duties (AD or CVD) on each importer, provided that ITC finds

that a U.S. industry was materially injured or threatened with material

injury. In uncomplicated cases, a final AD determination is to be made

within 280 days, or 205 days in CVD cases, after the date on which the

petition was filed, as provided for in federal regulation.

If requested, Commerce is required to conduct an administrative review of

its outstanding AD/CVD orders on an annual basis. In essence, this is a

repetition of the AD or CVD investigation to assess the actual amount of

duties due on the previous year’s imports. Duties may be refunded or

additional duties collected if the margins changed.

Page 21 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section I 

Background

GAO

Private parties can appeal U.S. agency 

determinations to

appropriate national courts or

a binational panel under chapter 19 of 

FTA

Appeals of U.S. Agency Trade Remedy 

Determinations

Private parties who are dissatisfied with U.S. agency determinations may

appeal to a U.S. court. If the imported merchandise was from Canada,

under chapter 19 of FTA, the dissatisfied private parties (on either side)

have the option of replacing domestic judicial review of AD/CVD

determinations with review by a binational panel.

Page 22 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section I 

Background

GAO

Parties may appeal 

AD, CVD, and injury determinations to 

the U.S. Court of International Trade 

(CIT)

CIT decisions to the Court of Appeals 

for the Federal Circuit (CAFC)

CAFC decisions by petitioning the 

Supreme Court

U.S. Courts Involved in the Appeals 

Process 

For example, foreign exporters or U.S. producers may appeal U.S. agency

determinations to the U.S. Court of International Trade (CIT), then to the

U.S. Court of Appeals for the Federal Circuit (CAFC), and finally may

petition for certiorari to the Supreme Court.

Page 23 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section I 

Background

GAO Canadian Law Provides for a Similar 

Trade Remedy System

Revenue Canada makes AD/CVD 

determinations

Canadian International Trade Tribunal 

(CITT) makes injury determinations

Dissatisfied parties can appeal to the 

Federal Court of Canada or FTA panel

FTA implementation expanded the right 

to appeal Revenue Canada 

determinations

The principal Canadian agencies responsible for AD, CVD, and injury

determinations are the Department of National Revenue, Customs, Excise

and Taxation (Revenue Canada); and the Canadian International Trade

Tribunal.

Under the Canadian Special Import Measures Act, the Deputy Minister of

National Revenue is charged with the administrative activities associated

with investigations. The Anti-dumping and Countervailing Division of

Revenue Canada has been assigned this function. Like Commerce, if

Page 24 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section I 

Background

Revenue Canada’s investigation establishes that an import is being

dumped or subsidized, it calculates the margin of dumping or amount of

subsidy for each importer. Revenue Canada levies duties on the imported

goods equal to either the margin of dumping or the amount of subsidy.

Like the United States’ ITC, CITT makes injury determinations. CITT is an

independent quasi-judicial body that reports to the Canadian Parliament

through the Minister of Finance. CITT is composed of nine full-time

members who serve up to 5-year terms. Under Canadian law, CITT

conducts inquiries and makes findings on whether the importation of

goods that Revenue Canada has found to be dumped or subsidized is

causing or likely to cause “material injury” to the Canadian production of

such goods.

Parties dissatisfied with Canadian agency determinations can appeal to the

Federal Court of Canada or to an FTA binational panel, if applicable.

Canadian legislation implementing FTA expanded the rights of all

dissatisfied parties to seek judicial review of Canadian trade remedy

determinations; before FTA, Revenue Canada’s dumping and subsidy

calculations were not generally appealable, according to Canadian

officials.

The two countries’ trade remedy laws were similar, and this was seen as

very important to the success of the binational panel process. However,

differences in the legal traditions of the two countries also existed. For

example, in contrast to U.S. judges, Canadian judges can only make

limited use of a statute’s legislative history for interpreting ambiguous

provisions, according to a Canadian legal scholar. Also, Canadian Justice

officials told us that they believed Canadian judges deferred more to

administrative authorities than their U.S. counterparts did.

Page 25 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section I 

Background

GAO FTA Binational Panel Process:

Rules and Requirements

Quasi-judicial process established

secretary from each country is to 

administer the process

five-member panel is to be selected for 

each case from U.S. and Canadian 

rosters of candidates

review is to be based on national law of 

the importing country

FTA established rules about the practices and composition of the

quasi-judicial panels. FTA provided a fixed schedule for parties to file

briefs, to give oral arguments, and for panels to issue written decisions. To

ensure panel decisions were fair and impartial, FTA provided for creating

rules of conduct. Each country also provided the necessary resources to

administer the process and designated a secretary to act as the principal

administrator of the legal process and the panels’ work.

Page 26 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section I 

Background

FTA provided that the United States and Canada develop a 50-person roster

of candidates to serve as panelists, with each country appointing 25

individuals not affiliated with either government.2

 These individuals must

be citizens of the United States or Canada; be of good character, high

standing and repute; and be chosen on the basis of their objectivity,

reliability, sound judgment, and general familiarity with international trade

law. Within 30 days of a request for a panel to review a final agency

determination, each government is to appoint two candidates to a

5-member panel, normally from the roster. According to U.S. Trade

Representative (USTR) officials, the fifth candidate is chosen by the

governments. The nationality of each panel’s majority alternates, including

panels considering related injury and AD or CVD cases. Each government

has the right to exercise four peremptory challenges to disqualify

candidates from being appointed to a particular panel. A majority of the

members and the chair (who is chosen by the panel members) of each

panel must be lawyers because of the panels’ quasi-judicial function.

Panels vote to decide what action to take on the basis of their review.

Panels can decide to affirm a final agency determination and reject the

claims of the parties making the appeal. Alternatively, panels can decide to

send a determination back to an agency, known as a “remand,” for a

particular action. Unlike CIT, panels cannot reverse an agency decision.

While individual panelists can dissent from an opinion written by the

majority, a few panelists told us that they seek consensus among all panel

members in any decision.

2

Judges are not considered to be “affiliated” with a government and can be appointed as panel

members.

Page 27 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section I 

Background

GAO FTA Binational Panel Process:

ECC Review

(continued)

Governments may ask that a panel 

decision be reviewed by an 

Extraordinary Challenge Committee 

(ECC)

ECC composed of three current or 

retired U.S. and Canadian judges

ECC review is to be based on FTA 

criteria

Page 28 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section I 

Background

FTA Binational Panel

Process: ECC Review

Under FTA, dissatisfied parties cannot appeal panel decisions to their

domestic courts. However, a government can request review by an ECC.

The three-member committee is chosen from a 10-person roster, half of

which is made up of judges or former judges of a U.S. federal court, and

the other half of judges or former judges from a court of superior

jurisdiction of Canada. Each government selects one committee member;

those two select the third; and then all three select a chairman.

The standard used for ECC review is different from that employed in the

usual judicial review by a U.S. appeals court. An ECC is to determine

whether (1) a member of the panel was guilty of gross misconduct, bias, or

a serious conflict of interest; the panel seriously departed from a

fundamental rule of procedure; or the panel manifestly exceeded its

powers, authority, or jurisdiction and (2) whether such an action

materially affected the panel’s decision and threatened the integrity of the

binational panel review process. ECC decisions to affirm, remand, or vacate

a panel decision are binding on the parties.

Page 29 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section I 

Background

GAO Why the Panel Process is Unique

Binational panels review domestic agency 

determinations

Review is to be based on domestic law, 

not international rules of trade as in 

GATT- WTO

Private parties can request panels 

through governments

Private parties can represent themselves 

before an international appeals body

FTA dispute settlement provisions are different from those found in the

General Agreement on Tariffs and Trade (GATT) and the World Trade

Organization (WTO), which provides a forum for governments to settle

disputes arising from their international obligations. In GATT/WTO, the “law”

being interpreted by the international dispute settlement body is based

upon an international agreement.3

3

For example, a WTO dispute settlement body might review whether U.S. AD/CVD law conflicts with

GATT. Under FTA chapter 19, a binational panel reviews a government agency’s actions on the basis of

the panel’s interpretation of that nation’s laws.

Page 30 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section I 

Background

GAO

Domestic producer petitioning for relief 

from allegedly unfair imports

Foreign producer, exporter, and/or 

domestic importer seeking to avoid 

duties

Domestic agency making determination

Foreign government (defending its 

programs in CVD cases)

Who Are the U.S. and Canadian Panel 

Participants?

Page 31 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section I 

Background

GAO The Standard of Review Used by Both 

U.S. Courts and Binational Panels

Under the U.S. AD and CVD law, judicial 

and panel review is limited to whether 

the U.S. agency's final determination is

unsupported by substantial evidence 

on the record, or otherwise not in 

accordance with law.

 19 U.S.C. 1516a(b)(1)(B) - 1988

Page 32 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section I 

Background

The Standard of Review

Used by Both U.S. Courts

and Binational Panels

Reviewing Final U.S.

Agency Determinations

As reviewing authorities, U.S. courts are obligated to ensure that an

agency’s determination is based on substantial evidence in the record and

is otherwise in accordance with law. This “substantial evidence” standard

generally requires the reviewing authority to accord deference to an

agency’s factual findings, its statutory interpretations, and the

methodologies it used. Therefore, the reviewing authority may not reweigh

the evidence or displace the agency’s choice between two conflicting but

reasonable views, thereby substituting its judgment for that of the agency.

In accordance with paragraph two, article 1904 of FTA, when reviewing a

final U.S. AD or CVD determination, a binational panel must apply the same

standard of review and “general legal principles” as would the U.S. CIT and

the U.S. CAFC.

According to FTA, a decision of a panel is binding on the United States and

Canada, with respect to the particular administrative determination

reviewed by the panel. An FTA panel decision would not serve as precedent

for other U.S. or Canadian cases or judicial review procedures when there

is no panel review—for example, in challenges to AD/CVD determinations

involving imports from countries other than Canada (or those from

Canada when the parties chose to appeal to a national court.)

Page 33 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section I 

Background

GAO Judgmental Nature of the Standard of 

Review

What constitutes substantial evidence is 

a subjective determination based on the 

facts and available information in each 

case

Different judges and panels apply the 

standard differently 

Therefore, judging the merits of any 

decision or comparing panel decisions 

to court decisions is problematic

Page 34 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section I 

Background

Judgmental Nature of the

Standard of Review

Determining what constitutes substantial evidence involves subjective

judgment and is the subject of ongoing debate in U.S. administrative law.

Questions regarding the application of the standard, such as how much

evidence is required to support an agency decision, involve the discretion

of the reviewing court or panel. The criteria that have been articulated by

appellate courts for the application of the standard have not necessarily

provided clear guidance for individual cases.

Consequently, comparing the panels’ treatment of the substantial evidence

standard with that of CIT is difficult because different judges themselves

have applied the standard differently. Some participants told us that they

see CIT judges apply the standard of review in a range of ways—that is, not

uniformly. In the judicial process, the boundaries for CIT judges applying

the standard of review are established through review of these decisions

by higher courts, namely CAFC. However, under FTA, while an ECC can

review a panel decision, the standard for this subsequent review is

different.

Page 35 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section II 

Expectations for the Panel Process

GAO U.S. & Canadian Officials: Different 

Expectations for the Panel Process

Common goal: Protect sovereignty

Canadian expectation: Maintain the 

Canadian government's capacity to 

pursue certain economic programs

U.S. expectation: Maintain U.S. 

companies' rights to obtain relief from 

unfair Canadian imports through U.S. 

trade remedy laws 

U.S. and Canadian negotiators both sought to protect their sovereignty,

create trade benefits, reduce political pressure surrounding trade

remedies, and provide a fair and expeditious review. Nevertheless, U.S.

and Canadian officials had different expectations for the process they

established.

Page 36 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section II 

Expectations for the Panel Process

GAO

Common goal: Create trade benefits

Canadian expectation: Prevent 

perceived abuse of U.S. trade remedy 

laws and thus ensure U.S. market 

access for Canadian firms

U.S. expectation: Enhance the rights 

of U.S. exporters in Canada, since 

judicial review of Canadian agency 

determinations would be expanded

U.S. & Canadian Officials: Different 

Expectations for the Panel Process

Anticipated U.S. and Canadian trade benefits to be gained from the panel

process differed. Former negotiators said that the focus of this new

binational panel provision was on U.S. trade remedy laws. Although

Canadians had pursued AD cases against U.S. exporters under Canadian

trade remedy laws, the negotiators told us these had not generated nearly

as much controversy.

Page 37 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section II 

Expectations for the Panel Process

GAO U.S. & Canadian Officials: Different 

Expectations for the Panel Process

Common goal: Reduce political pressure

Canadian expectation: Address the 

complaints of Canadian producers that 

U.S. political pressures disposed U.S. 

agency officials to side with 

complainants

 

U.S. expectation: Allow quick 

resolution of AD and CVD disputes 

before bilateral trade friction grew

Although U.S. and Canadian officials reached agreement on the details of

the panel process—panels would (1) give the appearance of greater

objectivity, (2) be less politicized, and (3) be quicker (and therefore less

costly) than the judicial review process—they emphasized different

aspects when describing their agreement publicly during their legislative

approval processes. However, U.S. officials believed that panel decisions

would be no different from U.S. court decisions. The United States

emphasized that panels would employ the same standard of review and

same general legal principals as national courts and could

Page 38 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section II 

Expectations for the Panel Process

GAO U.S. & Canadian Officials: Different 

Expectations for the Panel Process

Common goal: Provide a fair and 

expeditious review

Canadian expectation: Make review 

of U.S. agency determinations faster 

and more rigorous than CIT review

U.S. expectation: Yield results 

consistent with CIT because of 

reliance on U.S. law

not substitute their judgment for that of the agencies’. However, Canadian

officials emphasized their belief that panelists’ expert opinions would

improve oversight of U.S. agency actions, and that panels would not be as

deferential as the U.S. courts were. Panels were seen as an improvement

because Canadians believed that CIT was “passive” in its review of U.S.

agency actions, and that politics, not the law, guided agency

determinations.

Page 39 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section III 

Statistical Overview of Binational Panel

Activity and Decisions

(January 1989-September 1994)

GAO

Since FTA, appeals of Commerce 

determinations to the panels and CIT rose from 

20% to 51%. ITC's remained near 80%.

Appeals of U.S. Agency 

Determinations on Canadian Imports

Commerce ITC

0

20

40

60

80

100

20

81

51

78

Percent determinations appealed

1985-1988 1989-1994

Source: GAO analysis of data from Commerce, ITC, and U.S. Secretariat.

Page 40 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section III 

Statistical Overview of Binational Panel

Activity and Decisions

(January 1989-September 1994)

Appeals of U.S. Agency

Determinations on

Canadian Imports Since

FTA

Appeals of U.S. agency determinations concerning Canadian imports have

increased overall since FTA took effect. In practice, most, but not all, of

these appeals have gone to panels rather than to CIT. From January 1989 to

September 1994, Commerce issued 51 AD and CVD determinations regarding

Canadian products, including administrative reviews,4

 of which 26 were

appealed. Twenty-four of these 26 Commerce determinations were

appealed to a panel, and 2 to CIT. Before FTA, from 1985 through 1988,

Commerce issued 41 determinations, of which 8 were appealed to CIT.

During the same period, ITC issued 18 injury determinations, of which 14

were appealed by dissatisfied parties. Seven were appealed to a panel. Of

the seven appealed to CIT, three involved preliminary ITC determinations,

which technically cannot be reviewed by a panel. (Only final agency

determinations are appealable under FTA). In the other four cases, neither

U.S. nor Canadian parties sent the cases to a panel. Before FTA, from 1985

through 1988, ITC issued 16 determinations, of which 13 were appealed to

CIT.

4

Commerce data on number of appealable determinations (used as base) does not include a relatively

small number of scope determinations, unlike data for determinations that were actually appealed.

Page 41 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section III 

Statistical Overview of Binational Panel

Activity and Decisions

(January 1989-September 1994)

GAO What Has Been the Volume of FTA 

Binational Panel Activity?

There have been 49 panel reviews of 

agency determinations since FTA began

Of these

21 were reviews of Canadian agency 

determinations

28 were reviews of U.S. agency 

determinations

Note 1: Consolidated appeals of two agency determinations were counted as one panel review.

Note 2: Five of the 49 panel reviews of U.S. and Canadian agency determinations were initiated

by U.S. or Canadian parties under NAFTA, rather than FTA.

Source: GAO analysis of information from U.S. Secretariat.

Page 42 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section III 

Statistical Overview of Binational Panel

Activity and Decisions

(January 1989-September 1994)

GAO What Was the Status of These 

Binational Panel Reviews?

Panels completed nearly twice as many 

reviews of U.S. agency determinations as of 

Canadian agency determinations

United States Canada

0

5

10

15

7

6

15

8

6

7

Status

Number of reviews

Active Completed Terminated

Note: Terminated refers to those reviews concluded without a decision on the merits.

Source: GAO analysis of information from U.S. Secretariat.

Page 43 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section III 

Statistical Overview of Binational Panel

Activity and Decisions

(January 1989-September 1994)

GAO What Was the Distribution of the Types 

of Panel Reviews?

United States Canada

0

2

4

6

8

10

12

14 13

10

7

1

5

12

3

0

Number of reviews

Dumping Subsidy Injury Scope determination

Note 1: One Canadian determination was both AD and CVD, another was both AD and injury.

These were counted as one case in each respective category.

Note 2: In a scope determination, Commerce rules on whether particular imports are to be

covered by an AD or CVD order.

Source: GAO analysis of data from U.S. Secretariat.

Page 44 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section III 

Statistical Overview of Binational Panel

Activity and Decisions

(January 1989-September 1994)

GAO

Initial surge of reviews of U.S. agency 

determinations initiated in 1989

Large number of reviews of Canadian 

agency determinations initiated in 1993

23 completed panel reviews of U.S. and 

Canadian agency determinations by 

September 1994

Was There a Trend in Binational Panel 

Activity Over Time?

Page 45 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section III 

Statistical Overview of Binational Panel

Activity and Decisions

(January 1989-September 1994)

GAO Was There a Trend in Binational Panel 

Activity Over Time? (continued)

U.S. Canada

1989 1990 1991 1992 1993 1994

0

2

4

6

8

10

12

9

3

555

1 1 1

2 2

11

4

Year panel initiated

Number of panel reviews

Note: Consolidated appeals of two agency determinations were counted as one panel review.

Source: GAO analysis of information from U.S. Secretariat.

Page 46 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section III 

Statistical Overview of Binational Panel

Activity and Decisions

(January 1989-September 1994)

GAO Who Has Appealed U.S. Agency 

Determinations to Binational Panels?

Of the 28 reviews of U.S. agency 

determinations

Canadian parties alone appealed 23

Both U.S. and Canadian parties 

appealed 5

No U.S. agency determinations were 

appealed by U.S. parties alone

Canadian parties subject to an AD or CVD order may appeal the U.S.

agency’s determination to have the duties on their U.S. exports reduced or

eliminated (as may the U.S. importers with similar interests). Similarly, the

U.S. parties seeking AD or CVD protection may appeal a negative

determination to have it reversed, or an affirmative determination to have

the duties increased. Although both Canadian and U.S. parties could

appeal the same affirmative determination, they would be seeking

opposite changes.

Page 47 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section III 

Statistical Overview of Binational Panel

Activity and Decisions

(January 1989-September 1994)

GAO Who Has Appealed Canadian Agency 

Determinations to Binational Panels?

Of 21 reviews of Canadian agency 

determinations

U.S. parties alone appealed 16

Both U.S. and Canadian parties 

appealed 3 

Canadian parties alone appealed 2

Page 48 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section III 

Statistical Overview of Binational Panel

Activity and Decisions

(January 1989-September 1994)

GAO

Panels reviewed about the same proportion of 

Commerce and ITC determinations

Frequency of Panel Review of 

Commerce and ITC Determinations

Reviewed Not reviewed

21

30

7

11

N = 51 N = 18

Commerce determinations ITC determinations

Note: Three scope determinations are not included. Only 13 of 18 ITC determinations were

appealable to panels.

Source: GAO analysis of Commerce and ITC data.

Page 49 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section III 

Statistical Overview of Binational Panel

Activity and Decisions

(January 1989-September 1994)

GAO Frequency of Panel Review of 

Commerce AD or CVD Determinations

Panels reviewed a smaller proportion of AD 

cases than of CVD cases

Reviewed Not reviewed

14

23

7

7

N = 37 

AD determinations

N = 14 

CVD determinations

Note: Three Commerce scope determinations and all ITC injury determinations not included.

Source: GAO analysis of Commerce data.

Page 50 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section III 

Statistical Overview of Binational Panel

Activity and Decisions

(January 1989-September 1994)

GAO

Panels reviewed a greater proportion of 

determinations made after initial investigations 

Frequency of Panel Review of 

Commerce Final Determinations 

Reviewed Not reviewed

10

27

11

3

N = 14 N = 37

Determinations after 

initial investigation

Determinations after 

administrative review

Note: Three Commerce scope determinations and all ITC injury determinations not included.

Source: GAO analysis of Commerce data.

Page 51 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section III 

Statistical Overview of Binational Panel

Activity and Decisions

(January 1989-September 1994)

GAO

As a result of panel decisions, U.S. 

agencies 

Were affirmed (made no changes)

Lowered duties

Increased duties

Reversed injury determinations

Redefined commodities

What Types of Decisions Have Panels 

Produced? 

Note: See appendix I.

Source: GAO analysis of Commerce information.

Page 52 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section III 

Statistical Overview of Binational Panel

Activity and Decisions

(January 1989-September 1994)

GAO Three Panel Decisions on U.S. Agency 

Determinations Reviewed by an ECC

Pork (ITC injury determination)

Live swine (Commerce administrative 

review of a CVD order)

Softwood lumber (Commerce CVD 

determination)

No Canadian cases were reviewed by 

ECC 

USTR officials told us they had received requests from dissatisfied U.S.

parties to call for ECC reviews of four panel decisions. USTR pursued

challenges of three panel reviews and denied a request to challenge a

panel review of Replacement Parts for Self-Propelled Bituminous Paving

Equipment from Canada (USA-89-1904-03),5 in which the panel affirmed a

Commerce administrative review of an AD order. (See app. II.)

5

The panel consolidated this case with USA-89-1904-05.

Page 53 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO Areas of Satisfaction With the 

Binational Panel Process 

Some participants thought

1. the process was faster than that of 

traditional judicial review

2. procedures administered by the U.S. 

and Canadian Secretaries operated 

smoothly

Page 54 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO Areas of Satisfaction With the 

Binational Panel Process 

(continued)

3. panelists demonstrated expertise

 when considering the facts of the

 cases

4. panelists gave a thorough and

 in-depth review 

Page 55 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 1. Have Appeals to Panels Been 

Completed Faster Than Those to CIT?

Binational panel cases were on average 

completed faster than cases at CIT

Binational panels took 502 days to 

complete

CIT cases, in contrast, took 734 days 

to complete

Note: Includes CIT and binational panel cases completed between 1990 and September 1994.

(There were no binational panel cases completed before 1990.)

Source: GAO analysis of data from U.S. Secretariat and CIT.

Page 56 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

1. Have the Appeals to

Panels Been Faster Than

Those to CIT?

The panel process was designed to provide more rapid review than was

typical in U.S. or Canadian courts. FTA (article 1904, paragraph

14) established a 315-day guideline for panels to issue a final decision from

the date a panel was requested. The 315-day guideline does not include the

time when the panels are suspended, according to the U.S. secretary.

We found that, on average, the panel process for U.S. cases has been faster

than that of CIT appeals. To quantify the total time to resolve the case, we

measured time in terms of calendar days. Binational panels took 502 days6

on average to complete cases that were not reviewed by ECC. As of

September 1994, only two panels had exceeded 2 calendar years. In

contrast, CIT took 734 days on average to complete cases (from all

countries) not appealed to CAFC, from 1990 through September 1994.

6

Using a simple standard of a 5-day work week, we found that panels averaged 358 business days.

Page 57 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 1. Have Appeals to Panels Been 

Completed Faster Than those to CIT?

(continued)

The difference in average completion 

times was even larger for those cases 

appealed to a higher body

Panel cases reviewed by ECCs took 

683 days to complete

CIT cases appealed to CAFC took 

1,210 days to complete

Source: GAO analysis of data from U.S. Secretariat and CIT.

Page 58 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

1. Have the Appeals to

Panels Been Faster Than

Those to CIT? (Cont.)

We also compared the time it took to complete binational panel and CIT

cases that were reviewed at a higher level. ECCs are to be established

within 15 days of a request from a government, and ECC review has a

30-day guideline under FTA.

7

 Those three binational panel cases reviewed

by ECC took an average of 683 calendar days from the time the panel was

first initiated to the completion of the ECC. CIT cases (from all countries)

reviewed by CAFC upon further appeal averaged 1,210 calendar days to

complete from 1990 through September 1994. We found that subsequent

CAFC review added a significant amount of time to the U.S. judicial process.

Thus, the most significant factor affecting the greater expediency of the

binational panel process appeared to be the reductions in the time spent

on subsequent review.

7

NAFTA changed the guideline for ECC review to 90 days.

Page 59 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 2. Panel Procedures and FTA 

Secretaries

U.S. and Canadian officials thought the 

process generally worked well

The panel's quasi-judicial procedures 

have been modified with experience

Certain panel procedures represented 

improvements relative to U.S. judicial 

procedures

Panelists expressed satisfaction with 

how the secretaries facilitated their work

Page 60 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 2. Canadian Concerns About the U.S. 

Secretariat

The U.S. FTA Secretariat is affiliated 

with Commerce. The Canadian FTA 

Secretariat is an independent agency

Canadians said the placement of the 

U.S. Secretariat could threaten the 

office's independence

Canadians were concerned that this 

may indicate that the binational panel 

process is a low U.S. priority

Canadian officials expressed concern about the affiliation of the U.S.

Secretariat with Commerce. Commerce provides funding and office space

to the Secretariat. Canadian officials indicated that because Commerce

decisions are reviewed by the panels and because Commerce controls the

Secretariat’s resources, an appearance of bias existed. This situation also

suggested to them that the panel process may be a low U.S. government

priority. Commerce officials told us that a recent reorganization within

Commerce had elevated the level of the Secretariat.

Page 61 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 3. Training of Panelists Reviewing U.S. 

Agency Determinations

Most U.S. and Canadian panelists had

law degrees

100 percent of U.S. Panelists

79 percent of Canadian Panelists

Source: Information from USTR and Canadian Department of Justice.

Page 62 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 3. Occupations of Panelists Reviewing 

U.S. Agency Determinations

Canadian panelists were drawn from a 

greater variety of occupations than were 

U.S. panelists

Over 20 percent of the Canadian 

panelists included professors of 

political science, economists, and 

international trade consultants

U.S. panelists were almost all either 

practitioners or professors of law

Note: Based on the number of panelist positions, in all panels initiated through September 1994.

Source: Information from USTR and Canadian Department of Justice.

Page 63 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 3. Experience of Panelists Reviewing 

U.S. Agency Determinations

Number of times a panelist served on 

different binational panels

Thirteen out of 43 (30 percent) U.S. 

panelists had served on more than 

one panel

Fourteen out of 37 (38 percent) 

Canadian panelists had served on 

more than one panel

Source: Information from USTR and Canadian Department of Justice.

Page 64 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 4. Panels Gave a Thorough and 

In-Depth Review 

Some participants said that panels

wrote longer and more detailed 

opinions,

held long hearings,

were more probing and far-ranging in 

their questions, and

reviewed the facts of a case more 

carefully than CIT usually would

Page 65 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO Six Areas of Participant Concern About 

the Binational Panel Process

1. Panel judgment 

2. Remands

3. Separate case law emerging

4. Apparent discord among participants

5. Conflict of interest allegations against

 panelists

6. Proper role for ECC review

U.S. officials testified in June 1994 that they generally supported the panel

process, but were disappointed with the outcomes in a few cases.

Canadian officials told us they considered the process to have worked

effectively despite a few contentious cases. They expressed concerns

about certain aspects of the process, such as conflict of interest and ECC

issues. Some other participants told us that their greatest concerns about

the panel process resulted from the three cases that went to ECC. Trade

frictions increased between the two countries over these

Page 66 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO Greatest Participant Concerns About 

Three Panel Cases That Went to ECC

These three cases were different 

because they involved

long-standing U.S.-Canadian trade 

disputes predating FTA

public attention through coverage by 

media and scrutiny by elected officials

greater economic interests than in 

other cases

three cases. The fact that all three panels and ECCs involved Canadian

majorities may have added to the controversy. Furthermore, the panel and

ECC votes regarding the softwood lumber CVD case split along national

lines, with the U.S. ECC judge issuing a strong dissent. Some participants

thought that these cases were more controversial because they involved

agricultural products with many producers in price sensitive markets.

They said that other panel decisions were relatively noncontroversial.

Page 67 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO Three Cases Involved Industries With 

the Highest Value of Imports

Products involved in U.S. panel 

cases (year of imports)

Value of imports 

($ millions)

Softwood lumber (1990) $2,873 

Pork (1988) 353 

Live swine (1983) 75 

Primary magnesium (1990) 53 

Red raspberries (1983) 8 

Steel rails (1987) 7 

Parts for self-propelled bituminous 

paving equipment (1976)

Not available

a

a

a

aCommodities with cases involved in an ECC.

Note: Values represent imports in the year under ITC investigation. Products listed represent all

those considered in completed panel reviews.

Source: ITC.

Page 68 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 1. Views of Panel Judgment Varied 

Widely 

Some participants said that

Panels did not properly interpret U.S. law, 

were biased, were not "deferential" 

enough, and improperly substituted their 

judgment for that of the U.S. agencies

While others said that

Panels did properly interpret U.S. law and 

are needed to critically review U.S. 

agency determinations for errors

Some participants believed that panels sometimes have faced more

extreme arguments to defer to U.S. agency judgment than U.S. courts

would have. If extreme deference were given, this could impair any party’s

ability to get an effective review of an agency determination by a panel.

Page 69 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 1. U.S. Government Allegations 

Regarding Panel Judgment

In arguments to ECCs, U.S. officials 

alleged that some panels substituted 

their own judgment for that of the 

agencies, and thus

exceeded their authority under FTA

used procedures that conflicted with 

fundamental U.S. principles of law

ECCs ruled against USTR challenges

Canadian officials said they considered that the U.S. government had been

influenced by political pressures from U.S. industry to initiate ECC review.

They pointed out that subsequent ECC decisions did not uphold the U.S.

government’s challenges.

Page 70 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 1. The Difficulties in Assessing the 

Validity of These Allegations

We found that panels cited to U.S. case 

law authorities; however, this does not 

mean U.S. law was properly applied

The authority to make the judgments 

required on the basis of the evidence in 

the record rests with the panel

Thus, we are not in a position to say 

whether panels properly applied U.S. law

Page 71 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO

Remand: When a court or panel sends a 

determination back to an agency for 

further action

Remands can ask U.S. agencies to

explain decisions

provide more information

make corrections 

2. Remands

Page 72 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 2. Participant Concerns About Panel 

Remands Varied

Some participants said that panel 

remands

made more demands on U.S. 

agencies than did CIT

directed U.S. agencies to take a 

particular action, instead of letting the 

agencies decide changes themselves

were issued more than once in some 

cases, which perhaps unnecessarily 

lengthened the process

Page 73 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 2. The Number of Remands 

On average, panels remanded in a 

greater proportion of cases than did CIT

Panels issued remands in two-thirds 

of their cases 

CIT issued remands in about 

one-third of its cases

Note: Data includes cases filed and completed January 1989 to September 1994. CIT data

includes all countries.

Source: GAO analysis of data from U.S. Secretariat and CIT.

Page 74 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 2. Binational Panels Remanded More 

Frequently Than Did CIT

0 remands 1 remand 2 remands 3 remands

N = 132

90

35

7

U.S. CIT cases

N = 15

5

3

6

1

Binational panel cases

Note: Data includes cases filed and completed January 1989 to September 1994. CIT data

includes all countries.

Source: GAO analysis of data from U.S. Secretariat and CIT.

Page 75 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 2. Observations About the Number and 

Nature of Remands 

Panel practice is still evolving

practice, not statutory requirements, 

established the number of remands for 

CIT

relatively few completed panel cases 

compared to completed CIT cases 

both CIT and panel remands have varied 

from asking for information to directing an 

action

Page 76 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

2. Observations About the

Number and Nature of

Panel Remands

Many remands that panels issued either instructed the agency to provide

further explanation or to reconsider the agency determination in light of

the panels’ decision. For example, in Fresh, Chilled and Frozen Pork from

Canada (USA-89-1904-06), a panel concluded that Commerce had not

articulated clear standards and explanations in determining that a certain

Canadian income stabilization program was countervailable. It therefore

remanded to Commerce for further explanation and reconsideration. On

the other hand, there were instances when a panel remanded with

directions that required an agency to reach a particular conclusion or

finding. For example, in Red Raspberries from Canada (USA-89-1904-01),

the panel determined that Commerce had failed to provide an adequate

explanation of why it had rejected using certain home market sales as the

basis for determining fair value in its dumping calculations. The panel

remanded with instructions that Commerce use these home market sales

in the relevant calculations.

Page 77 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 2. Did Multiple Remands Lengthen the 

Time to Settle FTA Disputes?

Greater number of remands appeared to 

lengthen time to complete a case

Number of

remands

Average days to

complete

Number of

cases

3 959 1

2 599 6

1 452 3

0 378 5

Source: GAO analysis of data from U.S. Secretariat.

Page 78 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 2. Did Panel Composition Affect Panel 

Remands?

Panels with Canadian majorities 

remanded to U.S. agencies more often

Canadian majorities remanded to U.S. 

agencies in 8 out of 9 cases

U.S. majorities remanded to U.S. 

agencies in 2 out of 6 cases

Source: GAO analysis of 15 completed binational panel reviews of U.S. agency determinations.

While panels with Canadian and U.S. majorities differed in how often they

sent decisions back to the agencies during the process, this does not mean

that they necessarily came to different decisions. It merely indicates that

their interactions with the agencies were different. Canadian officials

noted that, in cases involving remands from Canadian majorities, six of the

eight panels were unanimous in voting to remand. They said this indicates

that nationality was not an issue in these remand decisions.

Page 79 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 3. Concerns That a Separate Case 

Law May Be Emerging

Indicators include the number of 

decisions citing other panel decisions

Of 15 cases 

other panels were cited in 10

a few panels cited other panel

decisions frequently

Of these 10 cases

Source: GAO analysis of 15 completed binational panel reviews of U.S. agency determinations.

Page 80 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

3. Concerns That a

Separate Case Law

May Be Emerging

Under FTA, panels are supposed to be guided only by U.S. statutes and

court decisions. Instead, if panels followed the decisions of previous

panels, there is a danger that they would be creating a separate case law

for reviews of determinations concerning imports from Canada (as

opposed to other countries).

One indicator of a separate case law emerging for cases going to panels

might be the number of legal citations to other panel decisions. A large

number of such citations might suggest that panel decisions were having

an influence on subsequent cases. However, the issue of whether the

binational panel process is resulting in a separate case law outside the

scope and control of the U.S. judicial system is a complex question; it

cannot be completely answered by merely examining the number of these

citations.

Page 81 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 3. The Nature of Citations Varied

We cannot judge whether a separate 

case law is emerging with respect to 

Canadian imports

 

Some citations were simple historical 

references

Some were used to rely on the 

reasoning in previous panel 

decisions, which the panel 

considered persuasive but not legally 

binding

Page 82 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

3. The Nature of Citations

Varied

We found that panels did cite previous panels in their decisions on

particular issues in some cases.8

 However, the purpose of such references

sometimes was merely to familiarize the reader with the history of the

dispute or to illustrate the functioning of the panel process. In other

instances, a panel cited other panel cases to rely on the reasoning in a

previous decision that the present panel considered to be “persuasive”

though not legally “binding.”9

 For example, in the opinion on Commerce’s

softwood lumber CVD determination, the panel adopted an interpretation

of a rule under FTA similar to that used by a previous panel, and stated

“The panel has taken a purposive approach to interpreting CFTA Rule 7(a) as was done by

the panel in New Steel Rail, except Light Rail from Canada. . . . While this Panel is not

bound by previous binational panel decisions, it may be guided by such decisions.”

While some may be concerned that a separate body of law is emerging for

Canada since the binational panels are a new entity, one participant told

us that it is inevitable that panels will create a separate body of law. Panels

decide upon new legal and factual issues with each case they review.

However, he believed that this was not a problem in that it did not mean

that panels were “making stuff up.” Instead, like any court, panels analyze

the facts and apply the law.

8

Interestingly, we also found that participants (including U.S. government agencies) sometimes cited

previous panel decisions in presenting their arguments.

9

The U.S. Statement of Administrative Action accompanying the FTA implementing legislation did

indicate that courts may look to panel decisions for their intrinsic persuasiveness.

Page 83 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 4. Varied Concerns That Discord

Among Participants Affected Outcomes

Some participants said 

Panelists approached issues with a bias 

for particular outcomes

Commerce and ITC were recalcitrant 

when responding to panel decisions

Commerce and ITC, in answer to some 

remands, used language that was 

considered disrespectful of the panels

Page 84 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 4. Most Panel Decisions Have Been 

Unanimous

In 5 of the 15 panel cases reviewing U.S. 

agency determinations, one or more 

panelists dissented from a panel opinion

Most of these dissents were partial 

dissents from the final panel opinion

While 8 panelists dissented in 5 

cases, voting split along national lines 

in only one case

Source: GAO analysis of 15 completed cases of U.S. agency determinations.

Page 85 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 4. Nationality and Nature of Dissent 

U.S. panelists have only dissented on panels 

whose opinions have led to lower U.S. duties

U.S. panelists Canadian panelists

0

1

2

3

4

3

1

0

2

0

2

Panel opinion

Number of panelists dissenting

Lowered duty Raised duty Affirmed U.S. agency

Source: GAO analysis of 15 completed binational panel reviews of U.S. agency determinations.

Page 86 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 5. Participant Concerns Over Conflict 

of Interest Allegations Varied

Some participants said

Canadian panelists were susceptible to 

the appearance of conflict because their 

small trade bar meant a greater chance 

they or their firms represent an

interested party

Aggressive use of conflict of interest rules 

against panelists might hamper efforts to 

get good panelists to serve in the future

Page 87 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 5. U.S. Government Challenge of 

Softwood Lumber CVD Panel Decision

USTR alleged that two members of the 

panel materially violated the FTA rules of 

conduct by failing to disclose information 

that revealed at least "the appearance of 

partiality and, in one case, that 

constituted a serious conflict of interest" 

indicating they should have withdrawn

ECC ruled against USTR challenge

Page 88 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 5. Were Withdrawals of Panelists 

Common?

One-third of the panels reviewing U.S. 

agency determinations had panelists 

withdraw before the case was completed

Most panelists withdrew because of 

potential conflicts 

Half of the panelists who withdrew were 

from the United States

Source: GAO analysis of 15 completed binational panel reviews of U.S. agency determinations.

Page 89 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 5. How Did Panelist Withdrawals Affect 

the Panel Process?

Panelist withdrawals appeared to 

lengthen the time it took a panel to 

complete a case

Panels with withdrawals took an 

average of 690 days to complete a 

case

Panels without withdrawals took an 

average of 435 days to complete a 

case

a

aDoes not include time spent under ECC review.

Source: GAO analysis of 15 completed binational panel reviews of U.S. agency determinations.

Page 90 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 5. Observations About Panelists' 

Conflict of Interest

Participants had different beliefs about 

what should be considered a conflict for 

a panelist

Panel rules and the rules of conduct had 

been modified over time, but

U.S. and Canadian officials and some 

panel participants believed that future 

negotiations should include further 

discussion of this issue

Page 91 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 6. Participant Concerns Over the 

Proper Role of ECCs 

Some participants thought that

ECCs allowed panel decisions that 

were inconsistent with U.S. law, 

creating a separate trade law for 

Canadian cases

USTR requested too many ECC 

reviews, treating them like ordinary 

appeals

ECCs ruled against the U.S. government’s challenges of the pork, live swine,

and softwood lumber panel decisions, respectively. Some parties were

concerned that the ECCs had interpreted their role narrowly and did not

provide the kind of examination some participants believed these panel

decisions warranted. The fact that all three ECCs had Canadian majorities

may have added to the controversy about their decisions to affirm the

panels. On the other hand, some parties were concerned because they

believed the U.S. government should not have requested these reviews in

the first place, since overuse of the process could transform the ECC into

Page 92 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

an ordinary appeal mechanism. The contrast between the majority and the

dissenting opinion written for the ECC softwood lumber decision illustrated

the concerns over the ECC role. For example, in dismissing the U.S.

challenge, ECC member Judge Morgan wrote of the ECC:

“Its jurisdiction is restricted to the correction of an ’aberrant panel decision’ and any

’aberrant behavior of panelists’ that would threaten the integrity of the binational panel

system when such action is unwarranted. . . The exceptional nature of an extraordinary

challenge was accentuated by the drafters of the FTA. . . .”

While in a dissent, Judge Wilkie stated that

“Canada considers other matters, normally thought of as the grist for court decisions, none

of an ECC’s business. . . and, Given the obvious errors on the merits in our Binational Panel

3-2 Decision and the unfortunate violations of the Code of Conduct, I fear that my

colleagues, by this Decision, have tied down the safety valve.”

Justice Hart wrote in his majority opinion:

“It is unfortunate that the decision in this matter has not been unanimous because there is

always a chance that it will be interpreted as a decision based on national interest when the

two Canadian members of the Committee form a majority and the American member files a

dissent. We are however all judges of long experience and since the issue before us is one

of first impression a sincere difference of opinion should not be unexpected.”

Page 93 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO

Panels had 20 percent of their decisions 

reviewed by ECC

6. How Frequently Were Panel and CIT 

Decisions Reviewed?

12

3 Reviewed by ECC

Not reviewed by ECC

Source: GAO analysis of information from U.S. Secretariat.

Page 94 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO

CIT had 27 percent of its decisions 

reviewed by CAFC

6. How Frequently Were Panel and CIT 

Decisions Reviewed?

43 Reviewed by CAFC

115 Not reviewed by CAFC

N = 193 completed CIT cases

Note: CIT cases for all countries completed January 1990 to September 1994; therefore, some

cases were appealed earlier.

Source: GAO analysis of CIT data.

Page 95 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

GAO 6. Observations About the Role of 

ECCs

ECC was not designed to be an ordinary 

appeal mechanism

However, officials never agreed on its 

role in reviewing panel decisions

New language in the subsequent 

North American Free Trade 

Agreement (NAFTA) did not resolve 

differences over ECC role

Page 96 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section IV 

Participant Views

6. Observations About the

Role of ECCs

According to U.S. and Canadian officials, ECC review of a panel’s decision

was meant to have a higher threshold than appellate review of a CIT

decision by CAFC. Nevertheless, participants, including the two

governments, disagreed over the interpretation of the ECC standard and

where that threshold should be. As a result, the United States and Canada

later took the opportunity to “clarify” the ECC role as part of their

subsequent NAFTA negotiations. The final NAFTA text incorporated all the

U.S. and Canadian FTA chapter 19 provisions and extended them to

Mexico, but added some clarifying language.10

However, based on our review of U.S. and Canadian government

documents, we believe that the new language in NAFTA regarding ECC did

not resolve the fundamental difference between the parties on this issue.

While U.S. and Canadian officials agreed that the new NAFTA language

“made explicit what was implicit in the FTA,” they unfortunately did not

agree on what was implicit in the agreement. The U.S. officials

characterized this as a significant change, while Canadian officials

characterized it as a nonsubstantive change. Thus, it seems that U.S.

officials expected future ECCs to be less narrow in reviewing panel

decisions, and Canadian officials expected future ECCs to continue to

interpret their role narrowly.

10The CFTA ECC standard of review was amended by NAFTA by stating that an ECC is to determine

whether “the panel manifestly exceeded its powers, authority or jurisdiction set out in this Article, for

example by failing to apply the appropriate standard of review. . . .” (GAO underlining indicates new

text in Article 1904.13(a)(iii).)

Page 97 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section V 

Other Factors That May Have Contributed

to Participant Concerns

GAO

Panel composition and practice is 

somewhat different than that of a court

Differences can 

conflict with the expectations of some 

participants and

add to any controversy over panel 

decisions

Effect of NAFTA changes to panel 

process unknown--no completed cases

Binational Panels Are Different From 

U.S. Courts

Page 98 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Briefing Section V 

Other Factors That May Have Contributed

to Participant Concerns

Binational Panels Behave

Differently From U.S.

Courts

While panels perform the same function and are charged with applying the

same legal standard of review as CIT, they are different in their

composition and in their practices. Participants in the panel process had

opposite views about whether some panel decisions were in keeping with

or contrary to what CIT would have decided. Furthermore, participants

noted procedural differences between the panel process and the judicial

process. (See app. III)

These differences could add to the controversy over the process because

they are not what some U.S. participants are used to encountering in the

U.S. system. For example, several participants noted that panels and

panelists were easier targets for criticism than courts and judges were.

This is because panelists served ad hoc, were otherwise colleagues of the

other participants, may have represented clients on similar issues before

the administering agencies, and did not have the same stature as judges.

Some suggested that permanent panelists may be needed in the future,

while others thought that the private parties should have a role in selecting

panelists. In updating FTA binational panel provisions during NAFTA

negotiations, U.S. officials sought to encourage a more judicial character

in panels by adding a “requirement that the United States include judges

and former judges on the panelist rosters to the fullest extent 

practicable. . .”

Page 99 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Appendix I 

Completed U.S. FTA Binational Panel

Reviews Through September 1994

Case identification Commodity

Type of

determination

ITC import

value

($millions)

USA-89-1904-01 Red Raspberries Dumping $8.3

USA-89-1904-02 Replacement parts for

self-propelled bituminous

paving equipment

Scope NA

USA-89-1904-03 Replacement parts for

self-propelled bituminous

paving equipment

Dumping NA

USA-89-1904-06 Fresh, chilled or frozen pork Subsidy 352.5

USA-89-1904-07 New steel rail, except light

rail

Subsidy 7

USA-89-1904-08 New steel rail, except light

rail

Dumping 7

USA-89-1904-10 New steel rail Injury 7

USA-89-1904-11 Fresh, chilled or frozen pork Injury 352.5

USA-90-1904-01 Replacement parts for

self-propelled bituminous

paving equipment

Dumping NA

USA-91-1904-03 Live swine Subsidy 75

USA-91-1904-04 Live swine Subsidy 75

USA-92-1904-01 Certain softwood lumber

products

Subsidy 2873

USA-92-1904-03 Pure and alloy magnesium Subsidy 53

USA-92-1904-04 Pure and alloy magnesium Dumping 53

USA-92-1904-06 Magnesium Injury 53

Page 100 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Appendix I 

Completed U.S. FTA Binational Panel

Reviews Through September 1994

Nationality of

t

e

)

Parties

initiating

appeal

Panel

majority

Panel

chairman

Number of

panelists

with law

degrees

Number of

remands

Total time to

complete

(days)

Unanimous

decisions Effects of panel decisions

3 Canadian Canadian Canadian 4 2 461 Yes Duty lowered from 2.59

percent to 0.11 percent,

and 3.67 percent to none

A Canadian

and US

USA USA 5 0 347 Yes Agency affirmed

A Canadian

and US

USA USA 5 0 348 Yes Agency affirmed

5 Canadian USA USA 4 2 682 Yes Duty lowered from 8 cents

to 3 cents per kilo

7 Canadian Canadian USA 4 1 338 Yes Duty lowered from 112.34

percent to 94.57 percent

7 Canadian USA USA 5 0 395 No Agency affirmed

7 Canadian Canadian USA 4 0 346 No Agency affirmed

5 Canadian Canadian Canadian 4 2 612 Yes ITC reversed injury

determination

A Canadian

and US

Canadian Canadian 5 3 959 No Duty raised from 9.47

percent to 17.97 percent

5 Canadian Canadian USA 4 2 641 No Duty lowered from

Can$0.0047/lb. to

Can$0.0004/lb. (slaughter

sows and boars),

Can$0.0449/lb. to

Can$0.0051/lb. (other live

swine) and Can$0.0005/lb.

(weanlings: new category)

5 Canadian Canadian Canadian 4 2 675 Yes Duty lowered from

Can$0.0049/lb. to

Can$0.0045/lb. (sows and

boars), and Can$0.0932/lb.

to Can$0.927/lb. (other)

3 Canadian

and US

Canadian Canadian 5 2 797 No Duty lowered from 6.51 to

none

3 Canadian Canadian Canadian 5 1 522 Yes Agency affirmed

3 Canadian USA Canadian 4 0 455 Yes Duty lowered from 31.33

percent to 21.00 percent

3 Canadian USA USA 5 1 496 Yes Commodities redefined,

affirmed injury

Source: GAO analysis of information from U.S. Secretariat, USTR, ITC.

Page 101 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Appendix II 

Completed ECC Reviews of Panel Decisions

ECC case

identification

Panel decision

reviewed Requested by Majority Chairman Dissent ECC decision

ECC 

91-1904-01

USA-89-1904-11

(Pork injury)

U.S. government Canadian US No Affirmed panel

ECC

93-1904-01

USA-91-1904-03

(Live Swine CVD)

U.S. government Canadian US No Affirmed panel

ECC

94-1904-01

USA-92-1904-01

(Lumber CVD)

U.S. government Canadian US Yes Affirmed panel

Source: GAO analysis of information from U.S. Secretariat.

Page 102 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Appendix III 

Differences Between Panels and CIT

Panel characteristics CIT characteristics Comments

A novel institution established in 1989 by

international agreement.

CIT established by Congress in 1980,

replacing U.S. Customs Court.

The panel process is newer and has less

institutional experience.

Panelists’ participation is ad hoc, and they

have other occupations.

Judges are appointed for life and have no

other employment.

Panelists and judges have different

experience working with the law.

Panels are binational, with either a U.S. or

Canadian three person majority.

All CIT judges are U.S. citizens. Foreign panelists may be less familiar with

the law upon which they base their

judgment.

Each panel considers one case at a time. Each judge considers many cases

simultaneously.

Panels and judges have different

workloads and they must focus their

attentions differently.

Commerce and ITC represent themselves

when defending their determinations.

The U.S. Department of Justice represents

Commerce in all U.S. courts. ITC

represents itself.

Some participants noted differences in how

Commerce and Department of Justice

lawyers defended Commerce

determinations, since Commerce is

operationally involved with the cases.

Cases proceed according to a fixed

schedule, with a 315-day guideline.

Cases proceed according to a flexible

schedule, without a deadline.

The panel’s review process is more

compressed. 

.

Decisions are made by a group of five

people seeking consensus and are only

subject to review under extraordinary

circumstances.

Decisions are made by one individual and

are subject to subsequent judicial review.

Decisionmaking dynamics are different

between the two systems.

Source: GAO interviews with panel participants, CIT, and U.S. Secretariat.

Page 103 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
Appendix IV 

Major Contributors to This Briefing Report

General Government

Division, Washington,

D.C.

Adam R. Cowles, Project Manager

Ken Miyamoto, Evaluator

Hazel J. Bailey, Writer-Editor

Katherine M. Wheeler, Publishing Advisor

Office of the General

Counsel, Washington,

D.C.

Sheila K. Ratzenberger, Assistant General Counsel/Project Director

Richard R. Perruso, Attorney-Adviser

(280080) Page 104 GAO/GGD-95-175BR U.S.-Canada Free Trade Agreement
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