UNITED STATES – COUNTERVAILING MEASURES CONCERNING CERTAIN PRODUCTS FROM THE EUROPEAN COMMUNITIES
Document: Recourse to Article 21.5 of the DSU by the European Communities Request for Consultations
Date: 19 March 2004
Document codes: WT/DS212/14
Complainant: EU
Respondent: U.S.
Third parties: Brazil, China, India, South Korea, Mexico
Dispute stage: Implementation & Compliance
Agreements cited: Art. 1, 10, 14, 21.1, 32.5  Subsidies and Countervailing Measures (SCM)Art. XVI:4  Agreement Establishing the World Trade OrganizationArt. 19.1, 19.3, 19.4, 21.2, 21.3  Subsidies and Countervailing Measures (SCM)Art. VI:3  GATT 1994

UNITED STATES – COUNTERVAILING MEASURES CONCERNING
CERTAIN PRODUCTS FROM THE EUROPEAN COMMUNITIES

Recourse to Article 21.5 of the DSU by the European Communities

Request for Consultations

 The following communication, dated 17 March 2004, from the delegation of the European
Commission to the delegation of the United States and to the Chairman of the Dispute Settlement
Body, is circulated pursuant to Article 21.5 of the DSU.

 On 8 January 2003, the Dispute Settlement Body (the " DSB") adopted the Appellate Body
Report and the Panel Report, as modified by the Appellate Body, in the case WT/DS212 " United
States – Countervailing Measures concerning Ce rtain Products from the European Communities ".
The resulting DSB rulings included the recommendation that the United States brings its
administrative practice (the " same person" methodology) and measures found to be inconsistent with
the Agreement on Subsidies and Countervailing Measures (the " SCM Agreement ") into conformity
with its WTO obligations.

 On 27 January 2003, the United States informed the DSB that it intended to implement the
recommendations and rulings of the DSB in a manne r consistent with its WTO obligations. The
parties agreed under Article 21.3(b) of the DSU th at the United States had until 8 November 2003 to
implement the Appellate Body decision.

 In June 2003 the United States finalised a new "change-in-ownership" methodology,
published in the US Federal Register (" Notice of final modification of Agency practice under
Section 123 of the Uruguay Round Agreement" published on the US Federal Register on 23 June 2003
at 68 FR 120 p. 37125).

 The new methodology was then applied to the tw elve individual determinations brought by
the European Communities before th e WTO. The United States issued its final determinations on
these determinations on 7 November 2003 (publishe d on the US Federal Register on 17 November
2003 at 68 FR 221 p. 64858). In the DSB meeting of 7 November 2003, the United States stated that
it had fully complied with the DSB recommendations and rulings on this issue.

 The European Communities disagrees. In par ticular, the following aspects of the measures
taken by the US to comply with its WTO obligations are unsatisfactory:

1. The new "change in ownership" methodology still contains certain elements which are in
breach of the SCM Agreement. In particular, it provides
1 that the unamortized amount of any
pre-sale subsidy continues to be countervailable if a privatization is found not to be at arm's
length and for fair market value. The EC dis putes that this is necessarily the case and that the
amount of any subsidy that may exist corresponds to the "unamortized amount" of the original
subsidy. The new methodology is therefore inconsistent with, inter alia, Articles 10, 14, 19.1,
19.4 and 21 of the SCM Agreement and Article VI:3 of GATT 1994 .

2. In the sunset review Certain Corrosion-Resistant Carbon Steel Flat Products from France
(C-427-810) (Case No. 9), the United Stat es failed to properly determine whether
subsidization would continue or recur. Inter alia, with regard to the privatization concerned,
it failed to properly establish that the price for employees' shares constituted a subsidy or that
it led to any continuation of a countervailable subsidy
2. This is inconsistent with Articles 10,
14, 19.4, 21.1, 21.2 and 21.3 of the SCM Agreement and Article VI:3 of GATT 1994.

3. In the following sunset reviews:

• Cut-to-Length Carbon Steel Plate from United Kingdom (C–412–815) (Case No. 8)
3;

• Cut-to-Length Carbon Steel Plate from Germany (C-428–817) (Case No. 10)4;

• Cut-to-Length Carbon Steel Plate from Spain (C–469–804) (Case No. 11).5

 The United States failed to properly determine wh ether, in these cases, there was continuation
or recurrence of subsidization, because it did not examin e the nature of the privatizations in question.
This is inconsistent with Articles 10, 14, 19.4, 21.1, 21.2 and 21.3 of the SCM Agreement and
Article VI:3 of GATT 1994.

 For the reasons mentioned above, and without prejudice to its rights under the WTO, the
European Communities hereby requests the United States of America to enter into consultations under
Articles 4 and 21.5 of the Understanding on Rules and Procedures Governing the Settlement of Disputes
( the "DSU" ) and Article 30 of the SCM Agreement with respect to United States' new "change-in-
ownership" methodology, its application to the determin ations set out here and the findings in the
"sunset reviews" referred to above.

 The European Communities reserves its rights in respect of all other aspects of the United
States' purported compliance with its obligations in this case. In particular, the European
Communities reserves its rights with respect to the ev entual outcome of a number of court challenges
seeking to overturn the revised methodology.

 We look forward to receiving your reply to the present request and to fixing a mutually
convenient date for consultations.
Note: this memorandum and the other listed below are available at the US Department of Commerce
site at http://ia.ita.doc.gov/download/section129/section129-index.html.
3 See unpublished memorandum of 24 October 2003.
4 See unpublished memorandum of 24 October 2003.
5 See unpublished memorandum of 24 October 2003.