Document: WT/DS379/R Page B-1 ANNEX B THIRD PARTY SUBMISSIONS Contents Page Annex B-1 Executive Summary of the Third Party Submission of Argentina   B-2 Annex B-2 Executive Summary of the Third Party Submission of Australia B-7 Annex B-3 Executive Summary of the Third Party Submission of Brazil B-13
Document codes: WT/DS379/R
Complainant: China
Respondent: U.S.
Third parties: Argentina, Australia, Bahrain, Brazil, Canada, EU, India, Japan, Kuwait, the State of, Mexico, Norway, Saudi Arabia, Taiwan, Turkey
Dispute stage: Appellate Body
Agreements cited: Art. I, VI  GATT 1994Art. 1, 2, 10, 12, 13, 14, 19, 32  Subsidies and Countervailing Measures (SCM)Art. 1, 2, 6, 9, 18, Annex II  Anti-dumpingArt. 15  Protocol of Accession

ANNEX B

THIRD PARTY SUBMISSIONS

Contents Page
Annex B-1 Executive Summary of the Third Party Submission of Argentina B-2
Annex B-2 Executive Summary of the Third Party Submission of Australia B-7
Annex B-3 Executive Summary of the Third Party Submission of Brazil B-13
Annex B-4 Executive Summary of the Third Party Submission of Canada B-17
Annex B-5 Executive Summary of the Thir d Party Submission of the European
Communities
B-21
Annex B-6 Executive Summary of the Third Party Submission of Japan B-26
Annex B-7 Executive Summary of the Third Party Submission of Mexico B-31
Annex B-8 Executive Summary of the Third Party Submission of Norway B-35
Annex B-9 Executive Summary of the Third Party Submission of Saudi Arabia B-40
Annex B-10 Executive Summary of the Third Party Submission of Turkey B-45
Annex B-11 Third Party Oral Statement of Argentina B-47
Annex B-12 Executive Summary of the Third Party Oral Statement of Australia B-49
Annex B-13 Third Party Oral Statement of Brazil B-52
Annex B-14 Third Party Oral Statement of Canada B-54
Annex B-15 Third Party Oral Statement of the European Communities B-58
Annex B-16 Third Party Oral Statement of India B-61
Annex B-17 Third Party Oral Statement of Japan B-65
Annex B-18 Third Party Oral Statement of Mexico B-67
Annex B-19 Third Party Oral Statement of Saudi Arabia B-71
Annex B-20 Third Party Oral Statement of Turkey B-74

I. INTRODUCTION
1. In this third-party submission, Argentina is se tting out its views on some of the issues that
form part of this dispute, in accordance with the written submissions to this Panel by China and the
United States.
II. THE WTO RULES DO NOT CONTAIN ANY RESTRICTIONS ON THE
SIMULTANEOUS APPLICATION OF ANTI-DUMPING DUTIES DETERMINED
USING THE SURROGATE COUNTRY METHODOLOGY AND
COUNTERVAILING DUTIES
2. China claims that the application of anti-dumping duties determined using the methodology
corresponding to a non-market economy country conc urrently with countervailing duties on the same
product is contrary to Articles 10, 19.3, 19.4 an d 32.1 of the SCM Agreement and Article VI of
GATT 1994. In Argentina's opinion, China's claim is based on an incorrect interpretation of the rules.
A. A
RTICLE VI.5 OF GATT 1994 DEALS SPECIFICALLY WITH THE SIMULTANEOUS APPLICATION
OF ANTI -DUMPING DUTIES AND COUNTERVAILING DUTIES AND DOES NOT PROHIBIT
SIMULTANEOUS APPLICATION IN THE TERMS SET OUT BY CHINA
3. GATT 1994 regulates combined application of anti-dumping duties and countervailing duties
specifically in Article VI.5. The ordinary meaning of the wording in Article VI.5 shows that this
provision prohibits the simultaneous application of anti-dumping duties (regardless of whether these
have been determined according to Article 2 of the AD Agreement or using the surrogate country
methodology provided in the second explanatory note to paragraph 1 of Article VI of the GATT) and
countervailing duties that offset export subsidization to the extent that both duties are intended to
remedy the "the same situation". This situation only occurs when the e xport price is lower in
comparison with the normal value because of a subsid y in the same amount granted for the export of
the goods.
4. It is therefore Argentina's opinion that the simultaneous application of anti-dumping duties
and countervailing duties is consiste nt with the WTO rules provided that the countervailing duties in
question are intended to offset domestic subsidies and not export subsidies.
5. In addition, the chapeau of Article 15 of China's Protocol of Accession introduces, as far as
imports of Chinese origin are concerned, a series of rules in addition to those laid down in Article VI,
the AD Agreement and the SCM Agreement. Argentin a considers that if, when negotiating the terms
of its accession to the WTO, China had obtaine d from Members the concession that imports of
Chinese origin could not be subject to the simultaneous application of anti-dumping duties determined
using the surrogate country methodology and counter vailing duties, Article 15 of the Protocol would
have explicitly included such a provision.
B. ABSENCE OF AN EXPLICIT PROHIBITION ON THE SIMULTANEOUS USE OF ANTI -DUMPING
DUTIES AND COUNTERVAILING DUTIES IN THE CASE IN QUESTION
6. The WTO rules include a series of provisions which, in different contexts, prohibit the
simultaneous application of certain measures. 1 It is thus clear that, when Members agree to prohibit
the simultaneous application of certain measures, su ch a prohibition is explicitly incorporated in the
WTO rules. In fact, the principle expressio unius est exclusio alterius suggests that, as the WTO rules
contain a specific prohibition on simultaneous a pplication of certain measures but no specific
prohibition on simultaneous application of anti- dumping duties determined using the surrogate

1 See for example the footnote to Article 35 of the SCM Agreement; Articles 8.2 and 13 of the
Agreement on Agriculture; and Article 6.1 of the Agreement on Textiles and Clothing (in force up until 2004).

country methodology and counterva iling duties, simultaneous application in this latter case is
consistent with the WTO rules
C. A
RTICLE 19.3 AND 19.4 OF THE SCM AGREEMENT ARE NOT IN ANY WAY CONNECTED WITH
THE ISSUE OF SIMULTANEOUS APPLICATION OF ANTI -DUMPING DUTIES DETERMINED USING
THE SURROGATE COUNTRY METHODOLOGY AND COUNTERVAILING DUTIES
7. China's claim is mainly founded on the claim of violation of Article 19.3 and 19.4 of the
SCM Agreement. Neither Article 19.4 nor Article 19.3 deal with the question of simultaneous
application of anti-dumping and countervailing duties and, therefore, there is no textual basis at all for
China's claim that the simultaneous application of anti-dumping duties determined using the surrogate
country methodology and countervailing duties violates these two provisions.
8. In Argentina's view, an assessment of whether Article 19.3 and 19.4 regulate the question of
the simultaneous application of anti-dumping du ties determined using the surrogate country
methodology and countervailing duties must necessar ily take into account both Article VI.5 of
GATT 1994 and Article 15 of the Protocol, which, as explained above, deal with the simultaneous
application of anti-dumping duties and counterva iling duties in general and the simultaneous
application of anti-dumping duties determined acco rding to the surrogate country methodology and
countervailing duties in particular, respectively.
9. This approach would be consiste nt with the principle, well established in WTO case law, that
one of the corollaries of the "general rule of inte rpretation" in the Vienna Convention is that the
interpretation must have meaning and affect all the te rms of the treaty. An interpreter is not free to
adopt a reading that would result in reducing whole clauses or paragraphs of a treaty to redundancy or
inutility.2
D. THE SURROGATE COUNTRY M ETHODOLOGY IS NOT A M ETHODOLOGY RELEVANT TO
COUNTERVAILING DUTIES AND CONSEQUENTLY DOES NOT YIELD A NORMAL VALUE FOR THE
PURPOSES OF THE
AD AGREEMENT, ADJUSTED FOR THE EFFECTS OF SUBSIDIZATION
10. China asserts that the surrogate country me thodology applied in anti-dumping proceedings
yields a market economy normal value already adjusted for the effects of subsidization on the prices
and costs of the exporting non-market economy country.
11. Argentina does not share China's view that application of the surrogate country methodology
yields not only a market economy normal value but al so a normal value that is "subsidization free".
There is no basis whatsoever, either conceptually or legally, for upholding this claim. Prices and costs
in countries where subsidies are granted are distorte d by the latters' effects, and obtaining prices and
costs that reflect market economy conditions by applying the surrogate country methodology in no
way implies that such prices and costs have already b een adjusted by the distorting effects inherent in
the subsidies.
III. INTERPRETATION OF THE TERM "PUBLIC BODY" IN THE SCM AGREEMENT
12. Argentina does not see why it should be co nsidered that, in the context of the
SCM Agreement, either the "welfare" or the "best interests" as objectives for action by an entity are
more relevant than the effective control of a body by the State or government in order to be termed a
"public body" in the context of the SCM Agreement.

2 United States – Standards for Reformulated and Conventional Gasoline (WT/DS2/R), Report of the
Appellate Body, adopted on 20 May 1996, page 21, second paragraph (in the English text).

13. In fact, Argentina considers that the distin ction between public and private relevant to
Article 1.1 of the SCM Agreement concerns the corporate form in which the control of entities
capable of providing such goods and services is orga nized, regardless of their final destination. In
broad terms, therefore, there are private bodies that produce public goods, and public bodies that
produce private goods. Characterization as one or th e other entity depends on the control over the
actor carrying out the activity and not on the destination of the goods or services produced. This issue
had to be addressed by the Panel in Korea – Measures Affecting Trade in Commercial Vessels , and
Argentina agrees with the Panel's evaluation of the issue in this case.3
14. For the foregoing reasons, Argentina consider s that ownership of a public body by the
government is sufficient to define it as such, in terms of its control, and for the purposes of Article 1.1
of the SCM Agreement.
IV. PROCEDURAL ASPECTS OF THE SCM AGREEMENT
A. FAILURE TO HOLD THE CONSULTATIONS PRESCRIBED IN ARTICLE 13.1 OF THE AGREEMENT
ON SUBSIDIES AND COUNTERVAILING MEASURES (SCM AGREEMENT)
15. The Argentine Republic endorses most of the po ints expressed by China in its submission
regarding the "broad interpretation" of Article 13.1 of the SCM Agreement.
16. Argentina considers, in general terms, that fa ilure to hold these consultations or their delayed
holding nullifies the objective for which they were created, which is none other than to allow the
countries involved to reach a mutu ally agreed and satisfactory so lution, through the exchange of
information, and so avoid the initiation of an investigation.
17. One argument that upholds the view expressed above can be found in a proper interpretation
of footnote 44 to Article 13.2, which in the relevant part provides that: " It is particularly important,
[…], that no affirmative determination wheth er preliminary or final be made without reasonable
opportunity for consultations having been given."
18. In this respect, Argentina deems it essential to express its disagreement regarding the 20-day
deadline allowed by the Department of Commerce for determining whether or not to initiate an
investigation as this period in no way suffices to en able a country under investigation to collect and
transmit the information needed to defend its position.
B. FAILURE TO GIVE INTERESTED PARTIES THE PERIOD OF 30 DAYS PRESCRIBED IN
ARTICLE 12.1.1 OF THE AGREEMENT ON SUBSIDIES AND COUNTERVAILING MEASURES
(SCM AGREEMENT)
19. The Argentine Republic also endorses China's interpretation of Article 12.1.1 of the
SCM Agreement regarding the investigating authority 's obligation to allow a period of 30 days for
each one of the "questionnaires".
20. In this connection, Argentina wishes to emphasize that a balanced and appropriate
interpretation of the WTO rules should above all ob serve the "due process principle" codified in
Article 12.1.1 in the part which states: " … ample opportunity to present in writing all evidence
which they consider relevant in respect of the investigation in question".

3 Panel report, Korea – Measures Affecting Trade in Commercial Vessels (WT/DS273/R), especially
paragraphs 7.45 to 7.50.

21. For the foregoing reasons, Argentina is of the view that it is an obligation inherent in
Article 12.1.1 that every Member should allow a mini mum period of 30 days in which to reply to all
questionnaires sent out during the investigation procedure.
V. CONCLUSION
22. In accordance with the analysis set out in this submission, Argentina is of the view that:
• The simultaneous application of anti-dumpi ng duties determined using the surrogate
country methodology and countervailing duties is consistent with the WTO rules;

• government ownership of an entity is a suffici ent factor to determine the existence of
a public body in relation to the SCM Agreement;

• failure to hold the consultations or their delayed holding nullifies the objective laid
down in Article 13.1 of the SCM Agreement; and

• the 30-day period allowed in which to reply to all questionnaires is consistent with a
balanced interpretation of the SCM Agreement.

ANNEX B-2

EXECUTIVE SUMMARY OF THE THIRD
PARTY SUBMISSION OF AUSTRALIA

(15 June 2009)

A. I
NTRODUCTION

1. In its written submission Australia focuses on a select few topics which raise significant
systemic issues and important questions of legal interpretation.

B. P
UBLIC BODY

2. Australia submits that the Panel should be mindf ul not to conflate the test for entrustment or
direction under Article 1.1(a)(1)(iv) with the definition of a public body for the purposes of
Article 1.1(a)(1)(i)-(iii). In Australia's view, the te rm 'public body' is treated as an equivalent of
government in Article 1.1(a)(1) because public bodies, by their nature, are an extension of
government for the purposes of implementing government po licy. This is consistent with the fact that
Article 1.1(a)(1) provides that both governments and public bodies are referred to as "government" in
the SCM Agreement. Conversely, Article 1.1(a)(1)(iv) recognises that private bodies can be used
indirectly by governments to provide a financial contribution. Article 1.1(a)(1)(iv) imposes an
additional test to attribute the actions of a private body to the government – that of entrustment or
direction.

3. Australia considers that, consistent with the Appellate Body findings in US - DRAMs, a clear
distinction needs to be maintained between the test required in subparagraphs (i)-(iii) which relate to
the identity of the actor (public body) on the one hand, and subparagraph (iv) which relates to the
nature of the action (including entrustment or direction), on the other. The Panel in Korea -
Commercial Vessels highlighted the difficulty in defining an entity as public or private depending on
the functions it was exercising at the time. It found that ultimately an entity can exercise dual
government and non-government functions interm ittently and that a body's activities are not
conclusive of that body's character at any given time.

4. Australia submits that the t est for identifying whether an en tity is a public body should relate
to evidence of government control over the entity and not the daily functions or actions of the entity
as determined by the Panel in Korea - Commercial Vessels . Government ownership of an entity is
strong evidence of government control but should be considered among other factors and evidence of
control. In Korea - Commercial Vessels the Panel also looked at other indicia of government control,
including:

 - management of the entity (in that case th e company was presided over by a president
and executive directors who were appointed and dismissed by the Government of
Korea);

 - government ministerial approval of the ope rations and programmes of the entity; and

 - the ability of the government to issue instructions to the entity.

C. E
NTRUSTMENT OR DIRECTION OF A PRIVATE BODY

5. Article 1.1(a)(1)(iv) recognises that private bodies can also be an indirect channel through
which governments can provide a financial contribution by "entrusting or directing" a private body to
act in a particular way. An important issue that arises is the appropriate evidentiary standard to be
applied to determine the existence of entrustment or direction.

6. In Australia's view, the text of Article 1.1(a)(1)(iv) relates to the government action
 of
entrusting or directing a private body to carry out one or more of the type of functions illustrated in
subparagraphs (i) to (iii). The Appellate Body in US - DRAMs articulated the test for "entrustment
and direction" in terms of "entrustment" requiring a government to "give responsibility to a private
body", and "direction" requiring a government to "exercise its authority over a private body".

7. In Australia's view, entrustment or direction w ill not necessarily arise only in terms of a direct
instruction to act or through the creation of a law by government. The Panel in EC - DRAMs noted
that entrustment or direction "does not necessarily need to be 'explicit'". It elaborated that
Article 1.1(a)(1)(iv) is to ensure that indirect government action is also captured by the
SCM Agreement. If the scope of Article 1.1(a)(1)(i v) were limited to only explicit government acts,
governments would be able to circumvent their commitments under this provision. The Appellate
Body in US - DRAMs recalled that this provision is in effect an anti-circumvention provision.

8. The Panel in Japan - DRAMs stated that "since entrustment or direction of a private body will
rarely be formal or explicit … a llegations of government entrustmen t or direction are likely to be
based on pieces of circumstantial evidence". This is consistent with the earlier Appellate Body
statement in US - DRAMs that "entrustment or direction need not be determined on the basis of
explicit acts". Instead, the Appellate Body determin ed in that case that a Panel's assessment requires
"a consideration of the inferences that might reasonably have been drawn … on the basis of the
totality of the evidence".

9. Article 1.1(a)(1)(iv) does not require that th ere be an explicit command or instruction to a
private body in terms which satisfy the requisite el ements of a subsidy under the SCM Agreement.
Rather, a complaining party must provide evidence sufficient in its totality to justify a finding of
entrustment or direction to carry out one or more of the type of functions illustrated in
subparagraphs (i) to (iii).

D. S
UBSIDIZED INPUTS PURCHASED FROM TRADING COMPANIES

10. In Australia's view, and as the Appellate Body noted in US - Softwood Lumber IV , Article 10
of the SCM Agreement and Article VI:3 of GA TT 1994 are relevant provisions when examining
subsidization of inputs to produce the imported product. The Appellate Body in that case found that a
"pass through analysis" is not necessary in every situation in which a s ubsidy is provided on the
production of an input product.

11. Australia notes that the Panel in Mexico - Olive Oil, in recalling the Appellate Body's analysis
in US - Softwood Lumber IV , summarised the principles for when a pass-through analysis would be
necessary stating that "a pass through analys is is required in circumstances in which both of the
following conditions are present:

 1. A subsidy is provided in respect of a product that is an input into the processed,
imported product that is the subject of the countervail investigation; and

 2. The producer of the input product and the producer of the imported product subject to
the countervail investigation are unrelated."

12. This approach is consistent w ith the Appellate Body's findings in US - Countervailing
Measures that there may be a direct or indirect recipient of the benefit of the financial contribution.
Therefore, the direct recipient of the benefit may be the input producer and the indirect recipient may
be the producer of the imported product.

13. Notwithstanding the issue of whether or not a pass-through analysis must be made, Australia
is of the view that the Panel could also examine what could constitute a pass-through analysis. Such
an analysis could include examination: (i) establishing the existence of a subsidy provided to an input
product; and (ii) of the price paid by the producer of the imported product subject to the countervail
investigation compared with an appropriate benchmar k price, to reveal the benefit conferred to that
producer. In Australia's view, this would reflect the understanding of "countervailing duty" as defined
in footnote 36 of Article 10 of the SCM Agre ement and Article VI:3 of GATT 1994, that
countervailing duties are intended to offset subsidies bestowed directly or indirectly.

E. P OLICY LENDING

14. In Australia's view, "policy le nding" is a term that has been applied to describe a certain type
of subsidy programme whereby a government makes a policy decision to provide loans to certain
industries on preferential terms. Australia consid ers that a subsidy provided through a policy lending
programme is subject to the same
 fundamental requirements under Articles 1 and 2 of the
SCM Agreement as all other subsidies. In particul ar, the test for the existence of a subsidy under
Article 1 of the SCM Agreement and for specificity under Article 2 of the Agreement, are separate
tests. Consequently, where a financial contribut ion pursuant to a policy lending programme is not
provided by the government or a public body, it must be demonstrated that the relevant private body
was entrusted and directed according to Article 1.1(a)(1)(iv).

15. Statements of government policies, plans and in tentions are highly relevant considerations in
determining the existence of a subsidy and that th e subsidies are targeted to certain industries or
enterprises. In terms of de jure specificity under a policy lending programme, Australia considers that
the policy statement that forms the basis of the programme must "explicitly limit access to a subsidy
to certain enterprises". Australia finds no basis for the assertion that it must explicitly be "to the
exclusion of other certain enterprises". Australia submits that if a programme is explicitly only
available to certain enterprises or where eligibility is explicitly limited to certain enterprises, it is
implicit that this will be to the exclusion of other certain enterprises. Thus a policy statement will be
de jure specific if it explicitly refers to supplying loans only with respect to 'particular forms or
branches of productive labour; a trade; a manufac ture' as opposed to being "broadly available2
throughout the economy. Furthermore, de jure specificity does not require that there be legislation
that identifies the elements of a subsidy.

16. China states that the policy banks have an express mandate from the central government to
provide loans to targeted industries and 'state-s upported' projects. In Australia's view, while
commercial banks may take account of government policies when evaluating risks associated with
loans, it is an entirely different matter for a commerc ial bank to be given, to take into account, and to
act on a government direction in determining or evaluating lending decisions.

17. Once the existence of a subsidy is estab lished in accordance with Article 1 of the
SCM Agreement and specificity is established in accordance with Article 2 of the SCM Agreement,
there is no need to impose an additional third re quirement on instances of policy lending in terms of
the "transaction" being "made pursuant to" the legisl ation. The issue of the connection between the
policy statement and the provision of the financial contribution is addressed through the analysis of
'entrustment or direction' under an Article 1 analysis.

F. R
EGIONAL SPECIFICITY

18. Regional specificity under Article 2.2 of th e SCM Agreement provides that a "subsidy which
is limited to certain enterprises
 located within a designated geographical region within the jurisdiction
of the granting authority shall be specific" (empha sis added). The test for regional specificity in
Article 2.2 sits separately from the tests for specificity provided in Article 2.1(a)-(c). Article 2.2 can
be distinguished from the tests in Article 2.1(a)-(c), because it specifically establishes regional locality
as the limiting factor that renders a subsidy specific.

19. Australia does not accept that Article 2.2 invol ves an additional element so that the subsidy
must be limited to certain enterprises
 within a limited designated geographic region within the
jurisdiction of the granting authority. Australia notes that if this interpretation of regional specificity
were to be adopted, it would be difficult to envisag e a situation covered by Article 2.2 that would not
already be covered by Article 2.1(a)-(c). Artic le 2.2 establishes an alternative basis upon which a
subsidy might be specific. To require an additional test of limitation to certain enterprises within the
regional specificity test already contained in Article 2.2, would render Article 2.2 meaningless.

20. Australia agrees with the United States that Article 8.1(b) and Artic le 8.2(b) may provide
relevant context in determining regional specificity under Article 2.2. Article 2.1 provides that "an
enterprise or industry or group of enterprises or indus tries" be referred to in the SCM Agreement as
"certain enterprises". In Australia's view, "certain enterprises" in the Agreement should be read as "an
enterprise or industry or group of enterprises or industr ies". Australia submits that this interpretation,
in particular with respect to "certain enterprises" in Article 2.2, would be relevant to the Panel's
examination. The Panel could also usefully clarify whether the use of the term "certain enterprises" in
Article 2.2 is descriptive to distinguish between enterprises that are located within the designated
geographical region and those that are outside.

G. B
ENCHMARK FOR THE DETERMINATION OF BENEFIT

21. Another important issue that arises in this case is the appropriate market benchmark to be
applied to determine the existence of "benefit" under Article 1.1(b) of the SCM Agreement with
respect to a "loan by a government
" under Article 14(b) of the SCM Agreement.

22. As the Appellate Body stated in Canada - Aircraft , "Article 14, which we have said is
relevant context in interpreting Article 1.1(b), supports our view that the marketplace is an appropriate
basis for comparison". The question then becom es, which "marketplace"; how to determine the
boundaries of the relevant market place; and whet her the firm could actually obtain a comparable
commercial loan on the market. Article 14 clearly distinguishes between the appropriate market
comparisons for government loans (subparagraph (b)) and those for "equity capital"
(subparagraph (a)), "loan guarantees" (subparagraph (c)) and "goods and services2 (subparagraph (d)).

23. Article 14(b) states that the comparison should be with a "comparable commercial loan"
actually obtainable on "the market
". It does not refer to "prevailing market conditions … in the
country of provision or purchase ", as subparagraph (d) does. This distinction is due to the fact that
subparagraph (b) relates to "loans" and not to "goods and services" as in subparagraph (d).
Consequently, Australia submits that Article 14(b) does not also require the market benchmark to
"relate or refer to, or be connected with the condi tions prevailing in the market of the country of
provision". Article 14(b) simply does not have the same explicit connection to the "country of
provision or purchase". This is because "loans" are available on an international financial market that
is subject to international influences.

24. Furthermore, Australia considers that there is no basis in the text of Article 14(b) of the
SCM Agreement to limit consideration of a comp arable market benchmark to loans in the same

currency as the RMB-denominated government loans under investigation. Loans obtained in one
currency can be used to purchase any particular currenc y at rates determined by international markets.
Again, Australia considers there is no basis to impose an Article 14(d) market comparison that relates
or refers to, or is connected with the conditions prevailing in the market of the country of provision.

H. C
ONCURRENT APPLICATION OF ANTI-DUMPING AND COUNTERVAILING MEASURES

25. In Australia's view, anti-dumping and counterva iling measures are trade remedies that address
two distinct trade practices and have different purposes and effects. Anti-dumping measures address
dumped products that cause injury to the domestic industry in the importing country. Countervailing
measures on the other hand address subsidized imports that cause injury to the domestic industry.

26. As provided in Article VI:1 of GATT 1994 and Article 2.1 of the Agreement on
Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (the
AD Agreement), an anti-dumping investigation enta ils a price comparison between the normal value
of the product in the home market of the exporting country and the export price in the export market.
Article VI:2 of GATT 1994 provides that an anti-dum ping duty may be levied to offset or prevent
dumping (that is, the difference between the normal value and the export price). Article VI:3 of
GATT 1994 provides that a countervailing investiga tion will determine the existence, degree and
effect of alleged subsidies which are provided by governments or public bodies. Article VI:3 of
GATT 1994 further provides that a countervailing duty ma y be imposed to the amount of the subsidy,
granted directly or indirectly on the manufacture, production or export of the product.

27. The SCM Agreement and the AD Agreement provide, respectively, that the imposition of the
full amount of the subsidy as a countervailing duty or the full margin of dumping as an anti-dumping
duty is a decision to be made by the investigating authorities.
1 However, neither Agreement addresses
concurrent or parallel anti-dumpi ng and countervail investigations. They do not specify that
consideration of the imposition of the full dumping margin or the full amount of the subsidy must take
into account other trade remedy actions which may be underway in the importing country. Nor does
anything in GATT Article VI or elsewhere in the WTO Agreements prevent concurrent or parallel
anti-dumping and countervailing duty investigations into the same product. Indeed, the text of
Article VI:5 reinforces the right of Members to do both.

28. The Panel could usefully examine the following aspects of Article VI:5 of 1994:

 (a) Whether the meaning of "situation" refers to the existence of dumping or
subsidisation or to the injurious effects of those actions;
 (b) Whether the meaning of "compensate" re lates to the level of the dumping and subsidy
margins;
 (c) Whether "export subsidization" has a di fferent meaning to "manufacture, production
or export" of a product under Article VI:3 of GATT 1994;
 (d) Whether the meaning and use of "export s ubsidization" is distinct from determining
whether a subsidy is an export subsidy or a subsidy provided for the manufacture or
production of a product;
 (e) Whether the meaning and use of 'export subs idization' limits its application to export
subsidies; and
 (f) Whether the meaning and use of "export subsidization" may also capture subsidies
provided for the manufacture or producti on of a product which is nevertheless
exported.

1 Article 19.2 of the SCM Agreement and Article 9.1 of the AD Agreement.

29. Australia fails to see that there is a "double remedy" of the effect of any subsidy where there
are concurrent investigations. It could be entirel y consistent for investigating authorities to make
determinations of subsid ization by an exporting Member and at the same time, determine that there
are no sales in the ordinary course of trade in the domestic market of the exporting country due to a
particular market situation where, for example, gove rnment influences prices. If a "surrogate" market
is used to establish a normal value in an anti-dum ping investigation because there are no sales in the
ordinary course of trade, Australia is of the vi ew that such sales do not reflect the subsidized
production in the home market. Indeed, it could be ar gued that such prices are used to ensure that
there is no perversion of prices in determining the normal value.

I. C
ONCLUSION

30. For the reasons set out in its Submission, Au stralia submits that the Panel in this dispute
should:

 (a) Take into account Australia's observations on the appropriate definition of "public
body" under Article 1.1(a)(1) of the SCM Agreement;
 (b) Draw on guidance provided by the highlighted WTO cases on the appropriate test for
entrustment or direction under Article 1.1(a)(1)(iv) of the SCM Agreement;
 (c) Consider what elements of an examin ation would constitute a pass-through analysis
in determining whether a subsidy is provided on production of an input product;
 (d) Note that China has conflated the elemen ts of Article 2.1(a) and Article 1 of the
SCM Agreement for determining de jure specificity when considering "policy loans";
 (e) When interpreting Article 2.2 of the SC M Agreement, be mindful of its relationship
with Article 2.1(a) of the SCM Agreement;
 (f) Take into account Australia's observa tions on the proper market benchmark for a
"loan by a government" when determin ing the existence of benefit under
Article 14(b) of the SCM Agreement; and
 (g) Note Australia's obser vations when interpreting Article VI:5 of GATT 1994 when
considering China's claims about the c oncurrent application of anti-dumping and
countervailing duties.

ANNEX B-3

EXECUTIVE SUMMARY OF THE THIRD PARTY
SUBMISSION OF BRAZIL

(15 June 2009)

I. ARGUMENTS

A. THE CONCEPT OF "PUBLIC BODY" IN ART. 1.1(A)(1) OF THE SCM AGREEMENT

1. Brazil is of the view that the ordinary meaning of the expression "public body" in
Article 1.1(a)(1), interpreted in its context, and in light of the object and purpose of the SCM
Agreement, indicates that shareholding control or ownership by a Government does not warrant, in
and of itself, a presumption that a company is a "public body" for purposes of establishing the
existence of a financial contribution. This view is supported by both WTO jurisprudence and general
international public law, which confirm that corpor ate entities that are legally separate from the State,
even if wholly or partly owned by that State, ar e presumed to be private entities, and therefore their
actions are to be considered prima facie of a private nature.1

2. Brazil believes that nothing in Article 1.1(a)(1 ) supports an interpretation of the term "public"
in "public body" as referring to "public property". On the contrary, the immediate context of the
expression "public body" indicates that it refers to an entity closely assimilated to the government
itself. The use of the term "government" throughout the SCM Agreement to refer indistinctly to "a
government or any public body" underscores the closeness of the nexus between the two concepts.
This same approach was adopted by the Appellate Body in US - CVD DRAMs.
2

3. In order to be closely assimilated to the gove rnment, the link of an entity with the government
must go beyond mere ownership. It must perform fu nctions and exercise attributions that are typical
of the government. It must, for a ll purposes, be considered part of the government itself. That is
certainly not the case of companies that operate in the market, under the rule of private law,
conducting businesses that are typical of privatel y-owned companies, regardless of whether the
government owns a majority stake in it or not. This understanding is corroborated by the ILC Draft
Articles
3 and by Appellate Body precedents.

4. In US - CVD DRAMs the Appellate Body noted that "the conduct of private bodies is
presumptively not attributable to the State" and, to support such view, quoted approvingly to the
following extract of the Commentari es to the ILC Draft Articles: "[s]ince corporate entities, although
owned by and in that sense subject to the contro l of the State, are considered to be separate, prima
facie their conduct in carrying out their activities is not attributable to the State unless they are

1 Commentaries to the ILC Draft Articles on State Responsibility of Internationally Wrongful Acts (ILC
Draft Articles), Article 8, Commentary (6), as referred to in Appellate Body Report, United States –
Countervailing Duty Investigation on Dynamic Random Access Memory Semiconductors (DRAMs) From
Korea, WT/DS296/AB/R, adopted 20 July 2005 (US – CVD DRAMs).
2 US – CVD DRAMs, footnote 166.
3 The ILC Draft Articles have been frequently relied on by the Appellate Body, panels, and also
arbitrators acting under Article 22.6 of the DSU in interpreting WTO law. The ILC Articles have been cited as
"rules of general international law", and as reflective of "customary international law".

exercising elements of governmental authority". By connecting its interpretation of private bodies to
a commentary that specifically affirms that the c onduct of corporate entities owned or controlled by
the State is prima facie not attributable to the State, the A ppellate Body has made it clear its opinion
on two interconnected issues: first, that shareholding control or owners hip is not sufficient to define a
public body; and second, that control or ownership can be a rele vant factor in the analysis of whether
the company (or corporate entity) is exercising elements of governmental authority. Or, under the
terms of 1.1(a)(1)(iv) of the SCM Agreement, of wh ether the company is being entrusted or directed
by the government.

5. In this connection, it is important to differ entiate between the enquiries undertaken in order to
ascertain if a state-owned company is (a) a "public body" under Article 1.1(a)(1) of the
SCM Agreement; or (b) a "private body" entrusted or directed by the government to effectuate one of
the types of financial contributions listed in paragraphs (i) through (iii) thereof. In Brazil's view, the
first enquiry must be directed at the nature of th e entity in question, whereas the second enquiry refers
to specific instances in which the actions of the entity reveal governmental involvement in the form of
entrustment or direction. The issue of ownership is not, in itself, determinative of the status of a state-
owned entity in either enquiry. Conversely, state ownership may be a relevant element, among others,
in assessing both if an entity has the nature of a "public body" or if it is a "private body" entrusted or
directed to act as a proxy of the government in specific instances.

6. It is worthy noting, in this regard, that in the investigation at issue in US – CVD DRAMs the
investigating authorities seem to have understood th at control or ownership by the government does
not suffice to characterize a company as a "public bod y". In that investigation several companies
owned or controlled by the government were not f ound by the investigating authorities to be public
bodies.
4

7. Brazil agrees with the view that SCM provi sions were constructed with the intent of
preventing as much as possible circumvention of its disciplines. 5 Nevertheless, Brazil believes that
the mechanism built into the SCM Agre ement to fulfil this goal is the 'entrustment or direction' clause
in Article 1.1(a)(1)(iv), whereby the possibility of targeting operations disguised as private in nature
but actually resulting from the exercise of governmental authority is provided for. Brazil does not
consider that this objective was meant to be achie ved by a broad, "fast track" interpretation of the
"public body" definition, one which would actually allow the circumvention of the steps set out in
Article 1.1(a) for a financial contribution to be found.

8. It follows from the above that, when unde rtaking a countervailing duty investigation, the
investigating authorities bear the burden of pr oof regarding the identification of a possible
'entrustment or direction' situation involving companies that, albeit owned or controlled by the
government, are prima facie private entities. As explained before, whereas government shareholding
control may be relevant evidence, it cannot be determinative in itself. Furthermore, Brazil
understands that a finding of entrustment or dir ection of an entity by the government should be
restricted to the specific action under consideration by the investigating authorities, and should not be
automatically extended to any other actions attributable to such entity.

9. However, if the investigating authority believ es that the company in question has the nature of
a public body and not of a private entity, it must establish that such company is fundamentally and
permanently devoted to the promotion of public goals determined by the government, performing
functions and exercising attributions that are typi cal of the government itself. In this case, Brazil
contends that the burden faced by the investigating authority is s ubstantially heavier, since it is
required not simply to demonstrate the government's entrustment or direction in respect of specific

5 United States' First Written Submission, para. 117

actions, but it must demonstrate that the entity in que stion is, by its very nature, and in relation to all
its actions, public and not private.

B. THE
 SIMULTANEOUS APPLICATION OF AD AND CVD MEASURES

10. Article VI.2 of the GATT 1994 and Article 9. 1 of the AD Agreement authorize Members to
impose antidumping duties up to the amount of the dumping margin determined according to the
requirements and criteria set out in Article VI of the GATT 1994 and in the provisions of the AD
Agreement. Concurrently, Article VI.3 of the GATT and Article 19.4 of the SCM Agreement allow
Members to levy countervailing duties up to the amount of the subsidy found to exist pursuant to
Article VI of the GATT 1994 and the disciplines of the SCM Agreement.

11. In Brazil's view, provided that the requis ite legal requirements for the imposition of each
remedy are properly observed, there is nothing in the AD Agreement or in the SCM Agreement to
suggest that parallel AD measures and CVD me asures cannot be imposed on the same product
exported by the same Member. Not surprisingl y, no cross-references can be found in the AD
Agreement or in the SCM Agreement conditioning the imposition of one remedy on the satisfaction of
requirements established in relation to the other remedy. It is clear, therefore, that AD measures and
CVD measures have been conceived as autonomous remedies, which should stand or fall on their own
respective merits or faults.

12. This understanding is supporte d by Article VI:5 of the GATT 1994 which contains the only
limitation on the concurrent application of AD a nd CVD measures that can be found in the covered
agreements. Article VI:5 establishes certain cons traints on the parallel application of AD and CVD
remedies in specific circumstances of export subs idization. Apart from the limitation explicitly set
out in Article VI:5, which is circ umscribed to export subsidies, no ot her limitation in this regard is
provided for anywhere in the GATT 1994, in the AD Ag reement or in the SCM Agreement. The text
of Article VI:5 shows that Members were well aware that if they intended to impose any restrictions
or conditions on the parallel applica tion of AD and CVD measures, they had to so explicitly. In this
context, it does not seem credible to argue that, decades after the entry into force of the GATT 1947,
the drafters of the AD and SCM Agreements inte nded to limit the parallel application of the two
remedies but decided to do so implicitly.

13. The GATT 1994 treats remedies adopted to offs et export subsidies more stringently than
those aimed at subsidies "granted on the manufacture or the production" of a product due to the direct
link between export subsidies and pricing practices adopted by their recipients. The economic
operation of an export subsidy typically allows greater returns on foreign sales than on domestic sales.
In principle, this type of governmental interventio n induces recipients to lower the prices of their
foreign sales while keeping their domestic prices stab le; i.e., they are induced to dump in the amount
of the export subsidy received. Conversely, the potential effects of manufacture or production
subsidies on pricing practices are normally much less di rect. It is therefore inappropriate to apply the
logic behind the limitation of Article VI:5 of the GATT to subsidies that are not contingent on export
performance.

14. Brazil also holds the view that the legal perm issibility for the parallel application of AD and
CVD measures, and its underlying logic, apply indistin ctly to investigations conducted in relation to
"market economy" Members and "non-market econom y" Members. Accepting the argument that
methodological challenges arising from price comp arability difficulties in "non-market economy"
Members somehow constrain the parallel applica tion of AD and CVD measures in relation to them
would result in discrimination against "market economy" Members. This result is not supported by
the letter or the spirit of the GATT 1994, the AD Ag reement or the SCM Agreement. In fact, WTO

rules do not establish any provision that create excepti ons to the possibility of parallel application of
the two remedies based on the characteristics of the economy of the Member concerned.

ANNEX B-4

EXECUTIVE SUMMARY OF THE THIRD PARTY
SUBMISSION OF CANADA

(15 June 2009)

I. INTRODUCTION

1. Canada is participating in these proceedings because it has a systemic interest in the
interpretation of WTO subsidy rules and the important consequences the findings of the Panel in this
dispute will have for the future application of t hose disciplines, both in general and to cases involving
China.

2. The Protocol on the Accession of the People's Republic of China, the Report of the Working
Party on the Accession of China , and the transitional nature of China's economy inform Canada's
views on many of the issues in this dispute and should likewise guide the Panel.

II. CHINESE STATE-OWNED ENTERPRISES AS PUBLIC BODIES

3. Canada submits that entities controlled by the government are public bodies within the
meaning of Article 1.1(a)(1) of the SCM Agreement . A government may exercise such control
through whole or majority ownership.

4. Canada's position is consistent with the Panel's decision in Korea – Commercial Vessels. The
Panel in that case found that "an entity will constitu te a 'public body' if it is controlled by the
government (or other public bodies)". The Panel f ound that government control over a Korean entity
was "evidenced primarily by the fact that [the entity] is 100 per cent owned" by the government or
other public bodies. Evidence suggesting government control over the entity also included the fact
that the operations were presided over by direct ors who were appointed and dismissed by the
government, and the fact that governmental approv al of the operations programme was required.
These factors are consistent with the means that a majority owner would ordinarily have to control a
company.

5. Upon its accession, China conceded that its state-owned enterprises ("SOEs") constitute
public bodies. Indeed, in light of the special characteristics of China's economy (including the
prevalence of SOEs), members of the Working Part y sought to clarify that when Chinese SOEs make
financial contributions they do so as government ac tors for the purposes of Article 1.1(a)(1). The
representative of China did not challenge this clarification.

6. China's position is not consistent with the context of Article 1.1(a)(1). Under China's
interpretation, an SOE is a private body when it is not exercising governmental authority conferred to
it by the law of the state. It is only when it ex ercises governmental authority that it would become a
"public body". Where the SOE does exercise gove rnmental authority and sells goods, its actions
would constitute a financial contributio n under Article 1.1(a)(1)(iv) of the SCM Agreement. In that
case, the Chinese Government could be said to have entrusted or directed the putative private body
(the SOE) to sell goods. Consequently, there would be no need for the SOE to be characterized as a
public body for its action to be characterized as a fi nancial contribution (under Article 1.1(a)(1)(iii) of

the SCM Agreement ). As such, China's interpretation of the term "public body" would essentially
make the term inutile.

III. COMMERCE'S USE OF BENCHMARKS OUTSIDE CHINA TO MEASURE THE
BENEFIT CONFERRED BY THE PROVISION OF GOODS BY STATE-OWNED
ENTERPRISES

7. Canada submits that the United States' re ading of the Appellate Body's decision in US –
Softwood Lumber IV in the context of this dispute is erroneous . Nevertheless, in the investigations at
issue, Commerce's actions were consistent with the United States' WTO obligations by virtue of
subparagraph 15(b) of China's Accession Protocol.

8. In US – Softwood Lumber IV , the Appellate Body indicated that, under Article 14(d) of the
SCM Agreement , an importing WTO Member may only reject private prices in the market of the
country of provision if it can demonstrate on the b asis of facts that the go vernment's status as a
significant supplier of goods actually distorts the private prices for the goods in that country.

9. In Circular Welded Carbon Quality Steel Pipe from the People's Republic of China and
Light-Walled Rectangular Pipe and Tube from the People's Republic of China , Commerce considered
that Chinese prices were significantly distorte d due to the Chinese Government's status as a
substantial provider of goods.

10. Such an approach did not satisfy th e requirement of Article 14(d) of the SCM Agreement, as
interpreted by the Appellate Body in US – Softwood Lumber IV.

11. However, the Working Party Report and China's Accession Protocol provide an exception to
this requirement for imports of Chinese origin.

12. At paragraph 150 of the Working Party Report, members noted that the transitional nature of
China's economy could make it difficult to apply Article 14 of the SCM Agreement.

13. Accordingly, subparagraph 15(b) of China's Accession Protocol provides that an importing
WTO Member may calculate a Chinese subsidy benefit on the basis of costs or prices outside China if
there are "special difficulties" in the application of Article 14 of the SCM Agreement.

14. The dominance of Chinese SOEs – a legacy of China's history as a centrally planned economy
– and the potential resulting distortion on private prices for the products they sell are precisely the sort
of "special difficulties" in the application of Article 14 of the SCM Agreement that are contemplated
in subparagraph 15(b) of China's Accession Protocol.

15. Such special difficulties ari se when Chinese SOEs are the predominant providers of goods in
China. Chinese private prices may be distorted a nd may not constitute appropr iate benchmarks as a
result of the role of the SOEs in the market.

16. Under such circumstances, Canada s ubmits that subparagraph 15(b) of China's Accession
Protocol allows an importing WTO Member to rely on prices outside China without having to
demonstrate in accordance with Article 14(d) of the SCM Agreement that Chinese private prices are
distorted.

IV. THE CONCURRENT APPLICATION OF ANTI-DUMPING AND
COUNTERVAILING DUTIES WHERE NORMAL VALUE IS CALCULATED
USING COSTS OR PRICES OUTSIDE CHINA

17. The WTO Agreement treats dumping and subsidization as two different causes of injury to
domestic industries, and provides distinct sets of ru les for each, giving rise to separate remedies: an
anti-dumping duty to remedy injurious dumping and a countervailing duty to remedy injurious
subsidization.

18. When an imported product happens to be bot h dumped and subsidized, and causes injury, an
importing Member may impose both an anti-dumping duty equal to the margin of dumping and a
countervailing duty equal to the amount of the subsidy.

19. Article VI:5 of GATT 1994 confirms the ability of WTO Members, as reflected in practice, to
impose concurrent anti-dumping and countervailing duties except to the extent that they both remedy
dumping or export subsidization.

20. Nothing in the WTO Agreement prevents the concurrent application of duties determined on
the basis of prices or costs found outside the market of the exporting Member whose products are
under investigation.

21. Article 15 of the GATT Subsidies Code prohibited importing countries from applying both
anti-dumping duties determined on this basis and c ountervailing duties. However, this prohibition
was not carried over during the Uruguay Round.

22. If WTO Members intended to prohibit the c oncurrent application of anti-dumping duties
calculated on the basis of subparagraph 15(a)(ii) of China's Accession Protocol and countervailing
duties, they could have stated that intention in China's Accession Protocol as they had done earlier in
the GATT Subsidies Code . Instead, taken together subparagra phs 15(a)(ii) and 15(b) of China's
Accession Protocol enable an importing WTO Member to impose both anti-dumping duty calculated
on the basis of costs or prices outside China and countervailing duty at the same time.

23. A countervailing duty on a Chin ese product will be in "the amount of the subsidy found to
exist" under Article 19.4 of the SCM Agreement if it is calculated in accordance with Article 14 of the
SCM Agreement or subparagraph 15(b) of China's Accession Protocol.

24. As long as the importing WTO Member does not impose countervailing duty in excess of "the
amount of the subsidy found to exist", the duty w ill be in the "appropriate amount", as required by
Article 19.3 of the SCM Agreement.

25. The Panel in EC – Salmon (Norway) interpreted the phrase "appropriate amounts" in largely
the same way under the analogous provision of the Anti-dumping Agreement. The Panel in Argentina
– Poultry Anti-Dumping Duties reached essentially the same conclusion.

V. REGIONAL SPECIFICITY

26. Article 2.2 of the SCM Agreement simply covers subsidies that are limited to a designated
geographical region.

27. Pursuant to Article 2.1 of the SCM Agreement, where access to a subsidy is limited to certain
enterprises, that subsidy shall be specific. Read ing this requirement into Article 2.2 as well would
render Article 2.2 redundant and inutile.

28. Reading Article 2.2 as including both require ments would allow subsidies provided to all
enterprises located in a designated geographi cal region to escape the disciplines of the
SCM Agreement even though these potentially trade-distorting subsidies are not broadly available in
the country.

VI. QUESTIONNAIRES

29. The 30-day requirement in Article 12.1.1 of the SCM Agreement only applies to the initial
questionnaire that the investigating authority sends to respondents.

30. The Panel in Egypt – Steel Rebar addressed this issue in the co ntext of Article 6.1.1 of the
Anti-dumping Agreement , which is analogous to Article 12.1.1 of the SCM Agreement . The panel
found that "the term 'questionnaires' in Article 6.1. 1 [refers] only to the original questionnaires sent to
interested parties at the outset of an investigation".

31. While the requirement in Article 12.1 of the SCM Agreement that parties receive "ample
opportunity" to present evidence in writing applies throughout the course of an investigation,
Article 12.1.1 deals only with a particular instance during an investigation – the issuance of the initial
questionnaire – where what is "ample" is defined by the drafters of the SCM Agreement as at least
30 days.

32. If an investigating authority had to extend a new 30-day response period to a respondent
every time it had a new or follow-up question aris ing from its obligation under Article 12.5 of the
SCM Agreement , it would be very difficult for it to complete the investigation in accordance with
Articles 11.11 and 12.12 of the SCM Agreement.

33. This could have troubling implications for res pondents: pressed to complete an investigation
within the timeframes stipulated in Articles 11.11 a nd 12.12, the investigating authority might refrain
from asking follow-up questions or pursuing new lines of questioning arising from the information it
has gathered, and rely instead on the facts available.

ANNEX B-5

EXECUTIVE SUMMARY OF THE THIRD PARTY SUBMISSION
OF THE EUROPEAN COMMUNITIES

(15 June 2009)

I. INTRODUCTION

1. Whilst not taking a final pos ition on the specific facts of this case, the European Communities
will provide its views on (i) the claims relating to the provision of goods by State-Owned Enterprise
("SOEs"), (ii) some issues relating to the policy loans and the provision of land-use rights (iii) the
simultaneous application of anti-dumping and countervailing measures (iv) due process requirements,
in particular those mentioned in Articles 13.1 and 12.1.1 of the SCM Agreement.

II. PROVISION OF GOODS BY SOEs

A. F
INANCIAL CONTRIBUTION

2. The key question on this point appears to be whether the USDOC's application of majority
ownership as the only factor to establish that SO Es are "public bodies" is consistent with the
SCM Agreement. Whilst not entering into the specific fact s of this case, the European Communities
agrees with the United States that the Working Party Report on China's accession is a relevant
document that the Panel should examine in its assessme nt. To the extent that China might reasonably
be considered to be under an obligation to respond to the specific clarification requested, and China's
silence a reasonable basis on which to construe consen t, this would be a relevant factor, to be taken
into consideration with all the relevant facts and evidence, in the determination by the United States
that the SOEs in this case were "public bodi es" providing financial contributions under
Article 1.1(a)(1) of the SCM Agreement.

3. Leaving aside the particularities of the Wo rking Party Report, the European Communities
considers that a high level of govern ment ownership is a very relevant factor in determining whether
an entity is a "public body" in th e sense of Article 1.1(a)(1) of the SCM Agreement . This factor
should be examined in the light of the specific ci rcumstances of the case in order to establish whether
actions by SOEs can be attributed to the government . In the EC view, a fundamental element in the
financial contribution determinati on is the participation of the government, either directly (as a
government or public body) or indirectly (through priv ate parties). In other words, the action of the
entity at hand must be somehow attributable to the government. In this respect, the
European Communities observes that majority ownershi p has been considered a very relevant factor
(although not the only one) when establishing that ac tions of private bodies were attributed to the
government. Consequently, in order to determine whether the actions of an entity can be attributed to
the government directly or indirectly, the degree of ownership is a highly relevant factor.

4. The European Communities further notes that a test such as the "five-factor" test is not
expressly referred to in the SCM Agreement as a basis on which to determine whether or not an entity
is a public body within the meaning of Article 1(1)(a) of the SCM Agreement. In some cases such a
test may be appropriate. In other cases, depending on the totality of the facts and evidence, and the
particular procedural circumstances, the extent of ownership may have a preponderant role to play in
determining that an entity is a "public body" under Article 1.1(a)(1) of the SCM Agreement . If no
other facts or evidence are available, and the appropriate procedural steps have been followed, or if all

other available facts and evidence confirm the systematic role of the State, then State ownership could
be determinative.

5. As regards the provision of goods by private trading companies, whilst not taking a position
on the facts of this case, the European Communities w ould like to highlight that, in general terms, the
provision of the goods by a trading company can be understood as a mere intermediate act which does
not change the nature of the financial contribution ( i.e., the fact that SOEs are the suppliers of the
inputs which are then incorporated into the subsidised products).

B. B
ENEFIT

1. Selection of Market Benchmarks

6. The European Communities considers that pri ces set by public bodies may not be considered
as a relevant market benchmark in cases where those bodies are also involved as players in the market
concerned. Furthermore, the European Communities considers that the Appellate Body's observations
in US - Softwood Lumber IV would be pertinent to this case. Th ey indicate that the fact that the
government is the predominant supplier of certain goods in the market is likely to be a determining
factor when examining all the relevant facts and ev idence in order to ascertain whether market prices
established by private parties can be used as the benc hmark for the benefit determination, or whether,
exceptionally, another benchmark should be used. If it is demonstrated that domestic prices are
almost fully determined by SOEs representing pub lic bodies and are highly distorted, then an
investigating authority would have a sufficient ground to depart from the general rule of prices in the
country of provision also in light of the above ju risprudence interpreting and applying Article 14 of
the SCM Agreement . Finally, the European Communities c onsiders that China's Protocol of
Accession does not weaken the relevance of the observations made by the Appellate Body in US -
Softwood Lumber IV.

2. Private Trading Companies: Pass-Through

7. Whilst not taking a position on the facts of th is case, the European Communities considers
that insofar as trading companies act as mere interm ediaries in the transaction, without resulting in
any transformation of the product concerned, it would be unnecessary for the U.S. authorities to show
pass-through. Furthermore, as the European Co mmunities understands that USDOC has calculated
the subsidy benefit at the level of the exporters c oncerned, no adjustment at the level of the trading
companies would appear necessary.

3. Denial of Offsets of Benefits Found Wh en Calculating the Amount of Subsidisation
("Zeroing")

8. The European Communities considers that inju rious subsidisation is not investigated on an
individual transaction basis; rather, Article VI:3 of the GATT 1994 and Articles 10, 11.2(ii), 12.9,
12.10, 13.1, 13.2, 13.4, 15.3, 15.5, 16.1, 16.3, 18.6, 19.3, 19.4, 20.1, 20.6, 22 and footnote 36 and 46
of the SCM Agreement refer to "merchandise", "product" or "product under investigation". Since the
purpose of imposing countervailing duties is to offset any subsidy or subsidies given to a product, the
calculation of the total amount of subsidisation granted to a particular product allows for the
aggregation of all subsidies found to have been granted to that product during a particular period of
time ( i.e., the period of investigation or "POI"). Thus , it is undisputed that aggregation of all
subsidies is necessary to offset the total benefits obtained by the subsidised product.

9. However, an issue that arises in the present dispute seems to be whether a similar aggregation
can be done when calculating the amount of subsidi sation in a particular subsidy scheme. In this
respect, the European Communities observes th at, although investigating authorities have

considerable leeway in calculating bene fits in accordance to Article 14 of the SCM Agreement, any
methodology used to calculate the amount of subsidisation must be reasonable. In the EC view, when
calculating the amount of subsidisation in a give n case the question is what amount of benefit has
been given to a particular product through the specific subsidy scheme during a defined period of time
(i.e., period of investigation). Thus, when calculating the amount of injurious subsidisation in a given
case investigating authorities must identify the various subsidy schemes from which a particular
product has benefited from during an established pe riod of time. In doing this exercise, great
importance should be given to how investigating au thorities define the relevant subsidy scheme, the
specific terms and conditions to obtain the subsidy by the recipient as well as the POI. Once the
subsidy scheme has been defined a nd the POI has been selected, investigating authorities must be
coherent with their own selection throughout the investigation when calculating the overall benefit
granted to the product concerned through that subsidy practice in the selected period.

10. In comparing a particular price with a benchmark under the SCM Agreement, in order for the
result of the comparison to be meaningful, the guiding principle is that like must be compared with
like, due adjustment being made where necessary, unl ess there is a justification for doing otherwise.
Accordingly, the terms and conditions and timing of the price should in principle be comparable to
those of the benchmark. Thus, for example, if the price, amount and normal delivery date are fixed
(ex ante) in the contract, then the market benchmark must also be that prevailing ( ex ante) on the date
of the contract, on the same terms and conditions. On the other hand, if the price, amount and normal
delivery date are only fixed subsequent to the contract at the time of order ( ex post), then the market
benchmark must be that prevailing ( ex post ) on the date of the order. Similarly, if the market
benchmark is a monthly average of spot prices, then one would expect that to be compared with a
monthly average of transaction spot prices. Of course, the ideal objective of ensuring comparability
may depend in practice on the facts and evidence that are reasonably available during the municipal
administrative proceedings, which depends on the facts of each case.

III. POLICY LOANS

A. F
INANCIAL CONTRIBUTION

11. The European Communities understands that, in the financial contribution determination, the
USDOC found that SOCBs were "public bodies" in the sense of Article 1.1(a)(1) of the
SCM Agreement, by relying inter alia on the state-ownership of the banking sector, China's legal
framework limiting the SOCB's independence from the government and the continued government
influence in the bank sector and bank lending decisi ons. However, China argues that the SOCBs are
"commercial banks" and not state-policy banks with the express purpose of providing financing for
state-supported projects. As mentioned before, in the case of SOCBs ( i.e., banks more than 50 per
cent owned by the government), it may be easier for the government to influence them to act in a
certain manner. Other factors may also be relevant.

B. B
ENEFIT

12. As regards the calculation of the benef it, the European Communities notes that, the
interpretation followed by the Appellate Body in US – Softwood Lumber IV (although in the context
of Article 14(d) of the SCM Agreement) may be relevant for clarifying the meaning of Article 14(b).
The Appellate Body based its interpretation on the objective of Article 14 of the SCM Agreement ,
which is the "Calculation of the Amount of a Subsidy in Terms of the Benefit to the Recipient". In
view of this objective, if the relevant market conditions are distorted, the comparison contemplated by
Article 14 would become useless. In the case of commercial loans, if it can be shown that the
"comparable commercial loan which the firm could actually obtain on the market" is also distorted
because of the government intervention, then it would follow that having recourse to other
benchmarks could be possible on a reasonable basis.

C. S
PECIFICITY

13. The European Communities would like to add that if a subsidy in the form of a loan can be
obtained by companies of all sizes (as long as they are sufficiently credit-worthy) with respect to
projects across all sectors of the economy, it is unlikely that those loans could be specific under
Article 2.1(a) or Article 2.1(c) of the SCM Agreement. Thus, the fact that a subsidy reaches a wide
number of beneficiaries and industries may call in to question the specificity of the measure.
Furthermore, the European Communities is of the view that the analysis of the specificity of a subsidy
should focus on the characteristics of the measure at issue rather than merely on the disbursements
made thereunder. In other words, it is the subsidy itself which de jure or de facto limits access to an
"enterprise or industry or group of enterprises or industries".

IV. PROVISION OF LAND-USE RIGHTS FOR LESS THAN ADEQUATE
REMUNERATION

14. On the issue of specificity, the European Communities would like to point out that regional
subsidies are not per se specific under the SCM Agreement . Indeed, Article 2.2 of the
SCM Agreement addresses the specificity of subsidies limited to certain enterprises located within a
designated geographical region within the jurisdic tion of the granting authority. By contrast,
subsidies destined to all enterprises in a geographical region are not considered specific under
Article 2.2 of the SCM Agreement . In this respect, the European Communities notes that the text of
Article 2.2 of the SCM Agreement was changed with respect to the Dunkel Draft which would have
rendered all regional subsidies specific. Thus, such a change should have a meaning. Whether such
regional subsidies are specific under Article 2 of the SCM Agreement has to be established by an
integrated reading of Article 2.

15. As regards the calculation of the benefit, the European Communiti es considers that the
Appellate Body's observations in US – Softwood Lumber IV are relevant to the present dispute.
Indeed, if it is found that prices are distorted in the relevant market, it would be necessary to have
recourse to an alternative market benchmark to establish the existence and amount of the benefit
granted. In this respect, the European Communitie s also notes that the fact that a piece of land is
located 3,000 kilometres away is not sufficient re ason alone to conclude that the market benchmark
used is unreasonable.

V. SIMULTANEOUS IMPOSITION OF ANTI-DUMPING AND COUNTERVAILING
MEASURES

16. On this issue, the European Communities understands that sever al arguments can be made in
relation to the simultaneous imposition of anti-du mping duties and countervailing duties in cases
involving NME countries. The European Communities invites the Panel to interpret the relevant
provisions of the covere d agreements involved ( i.e., the GATT 1994 , the Anti-Dumping Agreement
and the SCM Agreement) in an harmonious manner, applying the customary rules of interpretation of
public international law as required by Article 3.2 of the DSU.

VI. DUE PROCESS

A. U.S.
 FAILURE TO REQUEST CONSULTATIONS UNDER ARTICLE 13.1 OF THE SCM AGREEMENT

17. The European Communities considers that Article 13.1 of the SCM Agreement establishes a
temporal moment where the invitation for consulta tions must occur: after an application under
Article 11 is accepted and before the initiation of the investigati on. The specific reference to
Article 11 (entitled "Initiation and Su bsequent Investigation") of the SCM Agreement would seem to
indicate that Article 13.1 deals with the situatio n where the investigating authority has not yet

complied with the substantive requirements mentioned in Article 11 that must be satisfied before an
importing Member may initiate a count ervailing duty investigation. By contrast, Article 13.2 of the
SCM Agreement (which should serve as immediate context ) contains the obligation throughout the
period of investigation to affo rd "a reasonable opportunity to continue consultations, with a view to
clarifying the factual situation and to arriving at a mutually agreed solution" ( emphasis added). This
would seem to indicate that, if investigating aut horities find new subsidy schemes in the course of an
investigation, they may continue the investigation including the new subsidy allegations provided that
due process rights are not disregarded. In this resp ect, the obligation for continued consultations with
the country concerned throughout the investigations would seem to have an identical objective as the
obligation to invite that country for consultations before the initiation of the investigation pursuant to
Article 11: to preserve the Member's due process ri ghts by allowing both parties to clarify the factual
situation and try to reach a solution.

B. U.S.
 FAILURE TO ISSUE NEW QUESTIONNAIRES

18. The European Communities considers that the interpretation of Article 12.1.1 of the
SCM Agreement should be read in light of the chapeau provided by Article 12.1. The
European Communities considers that Article 12.1 of the SCM Agreement calls for an adequate
balance between the rights given to interested partie s (which should be given ample opportunities to
provide the necessary evidence) on the one hand, an d the obligation for the authorities to conclude
investigations in a timely manner, on the other ha nd. Such analysis should be made on a case by case
basis and on reasonable grounds.

ANNEX B-6

EXECUTIVE SUMMARY OF THE THIRD PARTY
SUBMISSION OF JAPAN

(15 June 2009)

I. INTRODUCTION

1. In this third party submission, Japan would like to present its views on systemic aspects of the
following issues: (a) the underlying concept of th e double remedy in Article VI:5 of the General
Agreement on Tariffs and Trade 1994(" GATT 1994 "), and the consistency of the simultaneous
imposition of anti-dumping and countervailing duties with Articles 19.3 and 19.4 of the Agreement on
Subsidies and Countervailing Measures (" SCM Agreement "); (b) the definition of "public body"
under Article 1.1(a) of the SCM Agreement; (c) the consistency of the calculation of benefit with the
SCM Agreement ; and (d) the application of the non-zeroing principle in the context of the
SCM Agreement.

II. DISCUSSION

A. THE
 SIMULTANEOUS IMPOSITION OF ANTI-DUMPING AND COUNTERVAILING
DUTIES

1. Article VI:5 of the GATT 1994 Expresses the Underlying Concept that Members Are
Not Allowed to Impose the Double Remedy with Respect to the Same Subsidy

2. Article VI:3 of the GATT 1994 , which allows an importing Member to impose a
countervailing duty up to the amount of the subsidy at issue, predicates that the export price would be
lowered by the per-unit amount of the export subsid y. If an exporting Member grants a subsidy only
on a product for export, only the export price of the product would be lowered due to the effects of the
export subsidy while the normal value remains unaffect ed. In such a case, if the importing Member
calculates the margin of dumping of such product to impose an anti-dumping duty, the resulting
margin would consist of two parts: (i) the diffe rence between the normal value (which is unaffected
by the export subsidy) and the export price without the effects of the export subsidy; and (ii) the
difference between the export price without the effect s of export subsidy and the actual export price,
which was lowered by the export subsidy. In such a situation, if the importing Member also imposes
a countervailing duty for the amount of the subsidy, the countervailing duty also would remedy the
effect of export subsidization, which already ha d been captured and remedied by the anti-dumping
duty. Article VI:5, therefore, explicitly proh ibits the simultaneous imposition of anti-dumping and
countervailing duties where export subsidization is involved.

3. Article VI:5 of the GATT 1994, however, provides no explicit requirement on the prohibition
of the double remedy in other situations. For ex ample, when a subsidy was conferred on inputs for
the production of a product, and when the product is sold in the home market and for export, both the
home market price and the export price would be lowe red by the same amount due to the effects of
the subsidy. In such a case, if the dumping margin is based on the difference between the actual home
market price and the actual export price, the resultin g margin would not be affected by the subsidy.
Accordingly, a double remedy would not occur in su ch an instance even when the importing Member
also imposes a countervailing duty to account for the per-unit amount of the subsidy at the same time.

In the same situation, however, a double remedy may occur if the margin of dumping is calculated by
adjusting the home market price upward for the per-u nit amount of the subsidy without an adjustment
of the actual export price.

4. Whether the potential double remedy exists in the situation of dumping and subsidization
other than export subsidization depends on how the investigating authority calculates the margin of
dumping. The underlying concept of the prohibition on double remedies may not be disregarded
when an authority imposes the anti-dumping duty and the countervailing duty on the same product
from the same exporting Member at the same time.

2. The Imposition of a Countervailing Duty Must Be Consistent with Articles 19.3 and 19.4
of the SCM Agreement

5. According to China, the countervailing duties on the four products in question are
inconsistent with Article 19.4 of the SCM Agreement because anti-dumping duties on the same
product would already include the amount of subsidies. Article 19.4 concerns the amount of subsidies
found to exist through the countervailing dut y investigation. Article 19.1 of the SCM Agreement
clarifies that the amount of subsidy is based on evidence collected through the countervailing duty
investigation. The provisions of Article 19.4 set forth no further limitation on the maximum amount
of the countervailing duty. This Article is i rrelevant to how an anti-dumping duty would be
determined by the separate anti-dumping investiga tion in accordance with the provisions of the AD
Agreement.

6. China also argues that the imposition of th e countervailing duties in this dispute was not
necessary and thus inconsistent with Article 19.3 of the SCM Agreement . In the context of this
Article, Article 19.2 of the SCM Agreement provides, "the decision whether the amount of the
countervailing duty to be imposed shall be the full am ount of the subsidy or less, are decisions to be
made by the authorities of the importing Member." Article 19.2 clarifies that the investigating
authority of the importing Member has discretion to set the amount of the countervailing duty up to
the full amount of the subsidy found in the counter vailing duty investigation. Article 19.4 confirms
this discipline, setting forth that the maximum amount of the countervailing duty shall be the amount
of the subsidy found to exist dur ing the period of the countervailing duty investigation. In this
context, Article 19.3 accords the importing Member the discretion to impose a countervailing duty
deemed as appropriate to the extent that the duty does not exceed the amount of the subsidy found to
exist. No further obligations are placed on the authority's decision of the "appropriate amount".

B. THE
 DEFINITION OF "PUBLIC BODY" UNDER ARTICLE 1.1(A)(1) OF THE
SCM AGREEMENT

7. China argues that a public body in Article 1.1(a)(1) of the SCM Agreement should be defined
as an entity which "has been empowered by the law of the State to exercise functions of a
governmental or public character", based on Article 5 of the Responsibility of States for
Internationally Wrongful Acts adopted by the International Law Commission ("ILC Articles").

8. Although the ILC Articles might be referred to when interpreting the WTO agreements in
some cases, Article 5 of the ILC Articles is not a "relevant" rule of international law in terms of
Article 31(3)(c) of the Vienna Convention on the La w of Treaties. While the issue in the present case
is the meaning of the term "public body", Article 5 of the ILC Articles neither defines nor uses the
term in any way.

9. As the Vienna Convention clarifies, the meaning of the terms of the SCM Agreement must be
considered in their ordinary me anings in the context of the SCM Agreement and other relevant WTO
Agreements. In this connection, Japan notes that the term of "public body" is undefined in the

SCM Agreement. Japan also notes that the panel in Korea - Commercial Vessels found that an entity
will be recognized as a "public body" in light of the government control over it under the SCM
Agreement.

10. At minimum, no provision of the WTO Agreements suggests that a "public body" under
Article 1.1(a)(1) of the SCM Agreement would be limited to entities wh ich have been empowered by
"the law of the State". A public body under the Artic le may include an entity that is empowered by
other means to exercise an element of the government.

11. The analysis of the term "public body", as discussed above, indicates that the consistency of
the USDOC's finding of public bodies should be ex amined based on the totality of facts of the
respective cases in dispute. On th is aspect, China correctly argues that the mere fact of government
ownership of an entity would not conclusively establi sh that the entity is a public body. It appears
that the United States also takes a similar view by arguing that the USDOC's findings were not solely
based on the mere ownership of the Chinese government.

12. In sum, the consistency of the investi ng authority's finding of public bodies should be
examined in accordance with the particular facts of the underlying investigations.

C. THE CONSISTENCY OF THE USDOC'S BENEFIT DETERMINATION WITH
ARTICLES 14(B) AND (D) OF THE SCM AGREEMENT

1. Article 14(d) of the SCM Agreement

13. If the state-owned enterprises ("SOEs") are f ound to be public bodies, their sales of hot-rolled
steel ("HRS") or petrochemical products, on which China argues that sales prices by SOEs were not
controlled by the Chinese government, would be fina ncial contributions under Article 1.1(a)(1) of the
SCM Agreement . The sales price of a financial contribution by a public body itself cannot be a
benchmark to measure the benefit.

14. The question under Article 14(d) in this dis pute would be whether transaction prices other
than sales by SOEs in China can be a benchmark, or more specifically, whether private prices in the
Chinese market were distorted by the transaction pr ices of financial contributions. The Appellate
Body in US - Softwood Lumber IV stated, "[w]henever the government is the predominant provider of
certain goods, … it is likely that it can affect … the prices of private providers for those goods,
inducing the latter to align their prices to the point where there may be little difference, if any,
between the government price and the private prices." "Thus, while requiring investigating authorities
to calculate benefit "in relation to" prevailing condi tions in the market of the country of provision,
Article 14(d) permits investigating authorities to u se a benchmark other than private prices in that
market."

15. As the Appellate Body clarified, the questi on presented to this Panel is whether the USDOC
had sufficient evidence and facts found in their totality , including adverse inferences, to arrive at its
conclusions that private prices of HRS or petroche mical products in China were distorted and thus
unusable as a benchmark under Article 14(d).

16. Where the evidence on the record shows that th e private prices were distorted by financial
contributions by the government, an investigating au thority has certain discretion to find a reasonable
methodology. This discretion, however, is not un limited. As the Appellate Body has stated in US –
Softwood Lumber IV , the terms "shall" and "guidelines" in the last sentence of the chapeau of
Article 14 "establish mandatory parameters within which the benefit must be calculated". The
USDOC was required to find benchmarks "related or referred to, or were c onnected with, prevailing

market conditions in Canada, (including price, quality, availability, marketability, transportation and
other conditions of purchase or sale)" under Article 14(d).

2. Article 14(b) of the SCM Agreement

17. Should this Panel find that RMB-denominate d loans by the government-owned banks are
financial contributions by the government, such loan s cannot serve as a benchmark. Furthermore, if
such government loans are found to be predominant in the financial market of China, an investigating
authority could disregard the remaining loans by private banks in China as the benchmark.

18. Where the government loan dominates the relevant financial mark et, there would be no
commercial loans "which the firm could actually obt ain on the market," as provided in Article 14(b).

In such a case, as the Appellate Body has stated in Japan - DRAMs (Korea), the authority would have
"some latitude as to the method it chooses to calculate the amount of benefit." Even in such a case,
however, the requirement to identify "a comp arable commercial loan" as a benchmark under
Article 14(b) still remains. As clarified by the Appellate Body in Japan - DRAMs (Korea) ,
"informational constraints do not alter the basic fra mework from which the analysis should proceed."
An investigating authority must find a benchmark, which is "comparable" to the government loan in
question and is "commercial", even where private loans undistorted by government loans are not
available in the domestic market of the exporting Member.

19. In conclusion, the question presented to this Pa nel, therefore, is whether sufficient evidence
and intermediate findings support the USDOC's conclu sion that there were no private loans or private
prices of inputs, which were not distorted by the financial contributions of the government. Should
the Panel find that there were no such benchmarks, the Panel then should further review the USDOC's
adopted benchmark to determine whether they are consistent with the framework of Articles 14 (b)
and (d).

D. THE BENEFIT SHOULD BE EXAMINED ON A SUBSIDY-SPECIFIC BASIS WITHOUT
ZEROING

20. China argues, "[m]ultiple provisions of th e SCM Agreement, including Articles 10, 19.3 and
19.4, likewise make clear that a countervaili ng duty is to be imposed in respect of ' product' under
investigation."

21. A countervailing duty may be imposed to offset the amount of a subsidy if the amount exists
at the time of its imposition, as provided for in footnote 36 and Articles 19.2 and 19.4 of the SCM
Agreement. The question before the investigating authorit y, and accordingly, before this Panel is to
define the scope of "a subsidy".

22. Article 1.1(a)(1) of the SCM Agreement provides that " a subsidy shall be deemed to exit if
there is a financial contribution". Subparagraph (i) then provides that there is a financial contribution
where "a direct transfer of funds" is involved. The paragraph (c) of Article 2.1 of the SCM Agreement
then provides that "a subsidy ... is specific" where it will be granted upon "use of a subsidy program".
These provisions indicate the premise of the SCM Agreement that "a subsidy" may be granted by "a
financial contribution" from the government, such as a direct transfer of funds, under one subsidy
programme.

23. Article 14 of the SCM Agreement does not define what would constitute a subsidy.
Investigating authorities are required to first determ ine the financial contribution, which consist of a
subsidy. The determination of a benefit conferre d on the recipient, including identification of an
appropriate benchmark, follows the determination of the financial contribution.

24. What constitutes a specific financial contribut ion under a subsidy programme is an issue of
fact. For example, a government might agree to sell input materials under certain terms and
conditions for a certain period of time through multiple shipments. In such a case, the entire series of
shipments as a whole may be considered to be a fi nancial contribution. Accordingly, the calculation
of the amount of the subsidy from such a financial contribution should be based on the total value of
all shipments covered by the agreement, rather th an the assessment of the benefit for an individual
shipment based on the value of its shipment.

25. The issue of the amount of a subsidy from the input transactions in question, therefore, must
be based on the finding of one financial contributi on upon an examination of underlying facts of these
transactions.

III. CONCLUSION

26. Japan respectfully requests the Panel to examin e carefully the facts presented by the parties to
this dispute in light of Japan's arguments above to ensure the fair and objective application of the
SCM Agreement and the GATT 1994.

ANNEX B-7

EXECUTIVE SUMMARY OF THE THIRD PARTY
SUBMISSION OF MEXICO

(15 June 2009)

1. Mexico is setting out its views on the interpre tation of certain provisions of the GATT 1994,
the Protocol of Accession of the People's Repub lic of China (the "Protocol"), the Anti-dumping
Agreement ("AD Agreement") and the Agreement on Subsidies and Countervailing Measures ("SCM
Agreement"), given the systemic importance the Panel's conclusions will have.
2. As regards the simultaneous application of an ti-dumping and countervailing duties, we note
that neither the AD Agreement nor the SCM Agreem ent contain any provisions in this respect. On
the other hand, Article VI:5 of the GATT 1994 does explicitly address this point. Indeed, it prohibits
such simultaneous application when both duties are intended to compensate the "same situation". It
does not explain when dumping and export subsidization result in the "same situation", but this can be
deduced from the negotiating history of Article VI:5.
3. According to the negotiating history, the prohibition in Article VI:5 of the GATT 1994 does
not apply to countervailing duties that offset domestic subsidies because these do not result in
dumping. Consequently, Mexico takes the view that when countervailing duties target domestic
subsidies (and not export subsidies), the simulta neous application of anti-dumping and countervailing
duties is consistent with the rules of the WTO.
4. In our view, the Protocol permits such simultane ous application. We note that there is no
basis for assuming that Article VI:5 applies only to Members with market economies. Article 15 of
the Protocol contains specific provisions in add ition to those of GATT Article VI, the AD Agreement
and the SCM Agreement for imports of Chinese origin (normal value, measuring benefit, etc.). With
respect to the AD Agreement, Article 15 re cognizes the surrogate country methodology and
acknowledges that the imports may form the subject of a countervailing duty investigation. If China,
in negotiating its accession, had succeeded in ne gotiating a prohibition on applying simultaneous
duties to its products, this would have been specified in the Protocol. As there is no such provision, it
can only be concluded that Article 15 of the Protocol does
 allow the combined application of
anti-dumping and countervailing duties.
5. Moreover, exempting China from the para llel imposition of anti-dumping duties and
countervailing duties would lead to China's being gi ven preferential treatment relative to all other
Members, to which they can be applied simultane ously under Article VI of the GATT 1994. For us,
China's claim looks like an attempt to obtain from th e dispute settlement system a result that it should
have tried to obtain when negotiating its accession to the WTO.
6. The fact is, that when the negotiators of the WTO agreements considered it necessary to
prohibit the simultaneous application of different mech anisms, they said so expressly, so that there is
no basis whatsoever for assuming that the WTO Ag reements establish such a restriction. Thus,
according to the principle expressio unius est exclusio alterius , as the simultaneous imposition of
countervailing duties and anti-dumping duties calcu lated under the surrogate country methodology
has not been expressly prohibited, it cannot be held that it is contrary to WTO rules.

7. If Members had wanted to prohibit the simu ltaneous imposition of countervailing duties and
anti-dumping duties calculated under surrogate count ry methodology, the SCM Agreement, or failing
that the Protocol, would have included a provision to that effect. In Mexico's opinion, the fact that
such a provision was not incorporated either in th e AD Agreement, in the SCM Agreement or in the
Protocol reinforces the conclusion that such "simu ltaneous imposition" is permitted under the rules of
the WTO.
8. Nor is it acceptable, in Mexico's view, to seek to give the articles of the SCM Agreement a
meaning that they do not have. China claims th at simultaneous imposition violates articles 19.3 and
19.4 of the SCM Agreement. However, as neither of these provisions concerns the matter at issue, we
consider that China's claim has no basis at all. Consequently, we consider that China has not proved
prima facie violation by the United States of these provisions of the SCM Agreement.
9. At the same time, China omits to mention that Article VI:5 of the GATT 1994 deals expressly

with the simultaneous imposition of anti-dumping duties and countervailing duties, and that the
Protocol regulates aspects of the Anti-Dumping Ag reement and the SCM Agreement with regard to
imports of Chinese origin that relate to simultaneous imposition.
10. Article VI:5 of the GATT does not prohibit, nor does the Protocol limit, simultaneous
application as China contends. In fact, what Chin a claims is tantamount to negating Article VI:5 of
the GATT 1994 and Article 15 of the Protocol, which w ould be totally contrary to the principle of
effectiveness recognized in WTO precedent (United States – Gasoline).
11. With regard to the surrogate country met hodology in anti-dumping investigations, China
argues that application of this methodology yields a normal value free from distortions (including
distortions caused by subsidies granted in non-market economy countries).
12. There is no basis for this at all. Application of the surrogate country methodology does not
enable prices and costs adjusted for the distorting effects of the subsidy to be obtained. Consequently,
Mexico sees no reason whatsoever to consider th at the simultaneous imposition of countervailing
duties and anti-dumping duties calculated under the su rrogate country methodology is inconsistent
with the WTO agreements. Thus, we consider that China has not proved prima facie violation by the
United States on the grounds that the surrogate country methodology implies determination of
market-economy normal value adjusted for the effects of subsidies.
13. Basing itself on United States – DRAMs, China claims that for a company owned by the State
to be termed a "public body", the requirements in the Draft Articles 1 of the United Nations
International Law Commission must be met, namely (1) the enterprise must be empowered by the
State to exercise functions of a public character normally exercised by the State, and (2) the conduct
of the entity must concern governmental activity and not other private or commercial activity in which
the entity may engage.
14. Mexico considers China's approach to be errone ous. The definition of the term "public body"
was not addressed in United States – DRAMs. In that case, the Appellate Body examined whether an
act by a private entity could be considered as bei ng instructed by a government to make a financial
contribution and based itself on the Draft Articles. At no time did it say anything about whether the
public character of a body depended on the form in which the body acted.
15. In our view, the function performed by the entity is irrelevant in determining its "public body"
status. That status must be determined on the basis of government shareholdings in the entity in
question, and not on the basis of the intended pur pose of the goods or services it produces or provides

1 Draft Articles on Responsibility of States for Internationally Wrongful Acts, with Commentaries.

(see Korea – Commercial Vessels). In other words, we take the view that government shareholding in
a body is sufficient to consider it public.
16. Moreover, the Draft Articles refer to the concept of "public entity" in the context of "wrongful
acts". The granting of subsidies is not a wrongful act , so that the concept of "public entity" in the
Draft Articles does not apply to this dispute.
17. At the same time, the standard proposed by China is unacceptable. Since State enterprises
which sell goods and services are not established by "t he law of the State to exercise functions of a
public character normally exercised by State orga ns", and their sales of goods and services would not
qualify as "functions relating exclusively to their go vernmental activity and unconnected with private
or commercial activity", State enterprises that sell goods and services would never be considered to be
"public bodies", despite the fact that Article 1. 1(a)(1)(iii) of the SCM Agreement clearly includes
them.
18. As regards the analysis of pass-through of the benefit, China argues that the analysis was
necessary in cases where the inves tigated enterprises bought inputs from private trading companies
which, in their turn, had purchased them from State enterprises. Chin a claims that by failing to carry
out this analysis, the United States acted inconsistently with the WTO agreements.
19. Mexico does not agree with China. As can be seen from several precedents in both the GATT
and the WTO (United States – Pork; United States – Softwood Lumber IV; and Mexico – Olive Oil),
it is clear that this analysis is only needed when the subsidies are given for the production of a good
that is an input for the product under investigation. As in this case the subsidies were granted for the
production of the goods investigated themselves, the pass-through analysis was not required,
regardless of whether the State ente rprises sold to private trading co mpanies which then sold to the
companies under investigation.
20. Regarding the determination of the existence of benefit for the trading companies, it should be
pointed out that the Appellate Body determined (United States – Countervailing Measures on Certain
EC Products ) that a financial contribution may be grante d to a company indirectly. In this case,
because the private trading compan ies were only the vehicle through which the contribution reached
the companies under investigation, they received th e contribution indirectly, so that there was no
reason whatsoever to determine whether these trading companies had obtained a benefit.
21. Concerning the benchmark used by the United St ates, Mexico considers that the standard
applicable is that indicated by the Appellate Body in United States – Softwood Lumber IV , according
to which an investigating authority may indeed use a reference point other than prices in the country
under investigation provided that it is determined that the prices are distorted by the role played by the
government.
22. China claims that the United States failed to establish its benchmark properly and points out
that in the Laminated Woven Sacks investigation, there was no single or uniform government-set
price, that there was no Chinese government agency that set prices for inputs, and that significant
private investment existed in the petrochemical industry in China, so that their internal data had to be
used.
23. In Mexico's view, the points raised by China have nothing to do with the key element for
determining whether the U.S. benchmark was prop er or not, namely whether or not there was
distortion due to the role played by the Chinese government.
24. Thus, Mexico considers that if the U.S. had sufficient evidence of th e existence of such
distortion, the Panel should find that the U.S. acted in conformity with the WTO agreements.

Obviously, since we do not know whether that evidence existed, our opinion is not intended to
prejudge whether the U.S. could, indeed, use the benchmark or whether that benchmark was properly
determined.
25. Mexico is grateful to the Panel for th e opportunity to comment on these questions of
interpretation with systemic implications.

I. INTRODUCTION

1. As a third party to this Norway would like to address the following interpretative issues:

 • The criteria for defining a "public body" under the Agreement on Subsidies and
Countervailing Measures ("SCM Agreement") (chapter II);

 • The use of a "zeroing" methodology when calculating "benefit" received from inputs
provided by State Owned Enterprises (SOEs) (chapter III); and

 • "Double Remedy" (chapter IV).

II. WHETHER STATE OWNED ENTERPRISES ("SOE") AND STATE OWNED
COMMERCIAL BANKS ("SOCB") MUST BE CONSIDERED "PUBLIC BODIES"

A. INTRODUCTION

2. For a measure to constitute a subs idy according to Article 1 of the SCM Agreement: (i) it
must entail a financial contribution or income or price support by a government or a public body; and
(ii) it must confer a benefit.

3. As regards State Owned Enterprises ("SOE") and State Owned Commercial Banks ("SOCB"),
a key issue in the dispute is whether these enterp rises can be considered "public bodies" within the
meaning of Article 1.1(a)1 of the SCM Agreement. Were the Panel to consider that these enterprises
are not
 public bodies, then the United States would ha ve had to show that a non-public body was
nevertheless "entrusted or directed" by the State to provide a financial contribution to the exporter or
producer under investigation. Such analysis was not performed by the United States.1

B. INTERPRETATION OF THE TERM "PUBLIC BODY"

4. The question at issue is whethe r majority state ownership alone is sufficient to conclude that
an enterprise is a "public body" w ithin the meaning of article 1.1 of the SCM Agreement, or whether
"public body" requires a functional relationship to the exercise of some form of governmental
authority when providing the financial benefit.

5. Norway believes that it is important to read the reference to "government or any public body"
also in light of Article 1.1(a)(1)(iv) and its refere nce to situations where the government "entrusts or
directs a private body to carry out one or more of the type of functions ... which would normally be
vested in the government..." (emphasis added).

6. By focussing on situations where a private bod y has been "entrusted or directed" to perform
functions that would normally be vested in the government, Article 1.1(a)(1)(iv) gives a clear
indication that the dividing line between the "public bodies" and the "private bodies" is based on a
functional delimitation where the key element is whether the body in question performs governmental
functions or not. If the body in question does not perform governmental functions, any financial
contribution it provides is only attributable to the State if the government has entrusted or directed it
to provide such contribution.

7. In EC – DRAMS, the Panel noted that "...it should be clear that, in our view, government
ownership, in and of itself , is not suffici ent to establish entrustment or direction under

1 United States, First Written Submission ("US FWS"), para. 65.

Article 1.1(a)(1) of the SCM Agreement."2. The Panel went on to state that "In the case of a 100 per
cent government-owned bank, such as Woori Bank, it thus needs to be demonstrated that the
government actually exercised its shareholder power to direct the bank to support to Hynix." 3 When
government ownership is not sufficient to establish "e ntrustment or direction", Norway submits that it
is even less suited to establish that such companies shall be considered as "public bodies".

8. The same Panel stated, more as an obiter in footnote 129, that "We do not wish to imply that
it would not be possible or justified to treat a 100 per cent government owned entity as a public body,
depending on the circumstances. [...]". Norway submits that the particular circumstance that could
lead to a conclusion that a 100 per cent government owned entity was a public body, would only be
present where the government owned company exercises governmental functions.

9. The Panel in Korea - Commercial Vessels took the opposite view that government 100 per
cent ownership and control could be sufficient to consider that the Korean Export Credit Guarantee
Institute (KEXIM) was a public body.
4 The Panel, however, noted that it also relied on such factors
as government appointment of officers, governme nt approval of budget and operations programme
and Koreas own description of KEXIM as a "special governmental financing institution" and as an
"export credit agency".
5

10. Although the Panel reports are differently wo rded, Norway considers that both reports lend
support to the position that government ownership is no t sufficient in and of itself to determine that a
company is a "public body". Other elements must be present, of which Norway suggests that a key
element would be the exercise of governmental functions.

11. Based on the above, Norway submits that Article 1.1(a)(1) of the SCM Agreement cannot be
interpreted to mean that all companies with more than 50 per cent government ownership are
automatically to be considered "public bodies". Where the body, after a factual analysis of its
functions, is found not to perform governmental functions, it is not a "public body" within the
meaning of Article 1.1(a)(1) – but may well be a private body covered by the SCM Agreement by
virtue of Article 1.1(a)(1)(iv).

III. EXCLUSION OF TRANSACTIONS AT PRICES BELOW THE EXTERNAL BENCH-
MARK IN THE CALCULATION OF OVERALL BENEFIT

A. INTRODUCTION

12. China claims that the United States ac ted inconsistently with Article 14 of the
SCM Agreement and Article VI:3 of the GATT in the calculation of benefit in the OTR CVD
investigation. China argues that the United States would have concluded that there was no benefit, if
it had conducted an aggregate analysis over the whol e period of investigation, without the use of
"zeroing" of certain transactions.
6

B. ANALYSIS

13. The issue before this Panel is whether the r easoning that led Panels and the Appellate Body to
conclude that "zeroing" is prohibited under the Anti-Dumping Agreement and Article VI:1 and VI:2 of

3 Id., para. 7.120.
4 Panel Report, Korea – Commercial Vessels, para. 7.50. Similar statements were made in respect of
four other Korean government agencies.
5 Id, paras. 7.50 – 7.52.
6 China FWS, paras. 142 – 143.

the GATT, applies equally to the benefit calculations under Article 14 of the SCM Agreement and
Article VI:3 of the GATT. Norway will point to two elements that support the claim that the
"zeroing" methodology employed by the United States in this case is inconsistent with Article VI:3 of
the GATT.

14. Article VI:3 of the GATT provides that a countervailing duty is levied on a product, and that
any such countervailing duty shall not be in excess of the benefit (bounty) granted on the
manufacture, production or export of such product. The use of the singular form of the noun makes
clear that the calculation of benefit from inputs received from SOEs must be for all input transactions
during the period of investigation. The reasoning th at led the Appellate Body to find that similar
words in Article VI:2 of the GATT precluded a finding of dumping for individual transactions applies
with equal force to the calculation of benefits derived from single input transactions viewed
separately.

15. Furthermore, as Norway understands the case, the United States created monthly external
benchmark prices to measure benefit from subsidizati on. Using monthly benchmark prices in such a
situation, and "zeroing" monthly results wh ich showed no "benefit", made a finding of a
countervailable subsidy almost certain from the outset. The application of a methodology that is
almost certain to lead to a conclusion of "benefit" and countervailable subsidization in all cases, based
on single transactions compared to a benchmark set by the investigating authorities, cannot be said to
comply with the requirements of Article 14(d) of the SCM Agreement and Article VI:3 of the GATT.

IV. "DOUBLE REMEDY"

A. INTRODUCTION

16. Norway in this part only addresses certain inte rpretative issues related to China's claim that
the U.S. Department of Commerce's use of its Non-Market Economy methodology to determine
normal value in the anti-dumping de terminations, concurrently with a determination of subsidization
and the imposition of countervailing duties on the sa me products, was inconsistent with Articles 10,
19.3, 19.4, and 32.1 of the SCM Agreement and with Article VI of the GATT.
7

B. ANALYSIS

17. Norway does not exclude that it may be perm issible in certain situations to apply anti-
dumping duties and countervailing duties simultaneous ly to the same imports, notwithstanding the
provision of Article VI:5 of the GATT, but to wishes to draw the Panel's attention to certain elements
that may be pertinent to its analysis of the legal issues surrounding simultaneous application of the
two instruments.

18. An investigating authority under the anti-dumpi ng agreement, in its determination of normal
value for the product under consideration, ma y apply a Normal Value based on different
methodologies provided for in Article 2.2 of the Anti-dumping Agreement and in the ad note to
Article VI:1 of the GATT. The choice of metho dology and the cost elements that go into the
calculation of Normal Value can have an important bearing on the issue of subsidization.

19. Where the Normal Value is based on the prod ucer's sales price in his home market in the
ordinary course of trade, that price may have been lowered due to e.g. subsidization of inputs into the
production. In such cases, a dumping duty only o ffsets the dumping itself (the "price differentiation"
between home market price and export price), not the subsidization of his "cost of production".

7 China FWS, para. 468(h) and Section VI(E).

20. Where the Normal Value is based on cons tructed normal value (CNV), the question is
whether CNV is based on the producers actual data fo r the inputs (i.e. subsidized inputs are included
with the subsidized price), or constructed pri ces for the inputs. If CNV is calculated using the
subsidized input prices in its calculation, the CNV will be lower than for non-subsidized production.
In such cases AD + CVD may be applied. If the CN V is not calculated with subsidized prices for the
inputs – but with "non-distorted" or "benchmark" prices for the (otherwise subsidized) inputs, then the
effect of any subsidy is "extinguished" in the CNV calculation and applying an anti-dumping duty up
to the maximum permitted under the Anti-dumping Agreement will provide a remedy for the
subsidization at the same time. In such cases, applying a CVD will neither be appropriate under the
SCM Agreement Article 19.3 of nor permissible under Article 19.4.

21. Where the Normal Value is based on a Third Country Market as benchmark, the same issues
relating to how the benchmark is calculated appli es. China argues, and the United States does not
appear to dispute, that in calculating the constr ucted normal value based on a Third Country Market
benchmark, US DOC avoids the use of any su rrogate value that may itself be subsidized. 8 It would
thus appear that the Chinese producer's export price to the United States is compared to a market
economy cost of production free from any dumping or subsidy distortion. By applying the full anti-
dumping duty up to this Third Country Market benchm ark, all effects of subsidization is extinguished
at the same time. Applying a CVD in such cases will neither be appropriate under Article 19.3 of the
SCM Agreement nor permissible under Article 19.4 of the SCM Agreement.

8 China FWS, para. 371 and corresponding footnote 315.

I. INTRODUCTION

1. The Kingdom of Saudi Arabia has joined as a third party in this dispute to provide its views
on a number of fundamental issues relating to the interpretation of the Agreement on Subsidies and
Countervailing Measures (the SCM Agreement). Th e Kingdom takes no position on the merits of the
claims that are based on the particular facts of this case.

II. STATE OWNERSHIP IS INSUFFICIENT FOR AN ENTITY TO BE CONSIDERED
AS A "PUBLIC BODY" UNDER ARTICLE 1 OF THE SCM AGREEMENT

2. For an entity to be considered a "public body" under Article 1.1(a)(1), it must: (i) be vested
with governmental authority, thus allowing the gover nment to control its activities; and (ii) function
as a governmental entity that serves a public policy objective rather than a commercial objective.

3. The ordinary meaning of the term "public body" denotes a governmental function, not State
ownership. The Kingdom notes that the Spanish version uses the term "organismo público" to refer to
both "public body" as well as to "government agency ." The same is true for the French term
"organisme public" in the French version of the text. In Canada – Dairy the Appellate Body
interpreted these terms to mean an entity which exercises powers vested in it by a government to
perform functions of a governmental character, i.e., to regulate, restrain, supervise or control the
conduct of private citizens. The fact of State owne rship by no means plays a dispositive role in this
interpretation. The Panel should therefore consid er "public body" as synonymous with a government
agency.

4. The context in which the term "public body" appears in Article 1.1 of the SCM Agreement
supports a narrow reading of the term as a government agency. Article 1.1(a)(1) refers to a "financial
contribution by a government or any public body within the territory of a Member ( referred to in this
Agreement as ‘government' )….". Thus, the drafters of the SCM Agreement made clear that a
"public body" is to be regarded as a subset of "government."

5. The SCM Agreement relates to the actions of WTO Members, i.e., to the behaviour of
governments. Indeed, this point is reinforced by the inclusion of the "entrustment or direction"
disciplines set out in Article 1.1(a)(1)(iv). On ly entities possessing some type of governmental
authority are able to "entrust or direct" private bodies to act in a particular manner. Furthermore, even
in the context of "entrustment or direction", St ate ownership plays a relatively limited role. Since
complete government ownership does not suffice to conclude that an entity acts under the entrustment
or direction of the government, then, a fortiori , such government ownership is not sufficient to
consider the entity to be a "public body" ( i.e., the government itself), as such a finding would obviate
the need to determine the existence of entrustment or direction.

6. In US – Countervailing Duty Investigation on DRAMS , the Appellate Body accepted the
International Law Commission conclusion that where corporate entities are owned by the State, their
conduct is not attributable to the State "unless they are exercising elements of governmental
authority."
1 It is important to stress that the Appellate Body's comment was ma de in the context of
Article 1 of the SCM Agreement, and so is highly relevant in the present dispute. A state-owned
enterprise (SOE) that is not "exercising elements of governmental authority" is not a "public body"
under Article 1.

7. The GATS definition of the closely-related term "public entity" reinforces the governmental
nature of a "public body" under Article 1.1(a)(1) of the SCM Agreement. The GATS definition of a

1 Appellate Body Report, US – Countervailing Duty Investigation on DRAMS, para. 112, footnote 179.

"public entity" requires more than simple governme nt ownership or control - the entity's primary
functions must be "governmental."

8. In terms of relevant context, the Kingdom would respectfully caution the Panel against the
use of China's Working Party Repor t as the basis for the interpreta tion of a term as important as
"public body" in the SCM Agreement. China's WPR may contain commitments specific to China. It
cannot, however, serve as the basis for interpreting provisions of the WTO agreements that apply to
all WTO Members, such as Article 1 of the SCM Agreement.

9. The object and purpose of the SCM Agreement further support a narrow interpretation of the
term "public body." The Appellate Body has stated that the object and purpose of the SCM
Agreement is "to strengthen and improve GATT disc iplines relating to the use of both subsidies and
countervailing measures, while, recognizing at the sa me time, the right of Members to impose such
measures under certain conditions."
2 The interpretation of "public body" cannot be so broad as to
allow Members to apply countervailing measures to any sales made by certain entities simply because
they are partially or wholly owned by the State.

10. Finally, the Kingdom is of the view that the Panel Report on Korea – Commercial Vessels
supports a reading of the term "public body" as an en tity that is controlled by government such that it
is acting in a governmental capacity. The Panel in Korea – Commercial Vessels found that an entity
will constitute a "public body" if it is "controlled" by the government, such that its actions may be
attributed to the government. The criterion used by the Panel was "control", not "ownership."
Ownership was simply part of the evidence of such control. The Panel also attached great
importance to the "public policy" objective of an en tity, and the fact that it acted in an "official
capacity." According to the Panel, an entity that is vested with governmental authority and acts in an
"official capacity" is a public body, even if it makes its financial contribution based on commercial
principles.
3

11. In sum, the Kingdom is of the view that the term "public body" in Article 1.1(a)(1) of the
SCM Agreement, based on its ordinary meaning, its context and the Agreement's object and purpose,
refers to an entity vested with governmental aut hority that exercises a governmental function. To
interpret this term to include an entity on the sole ground of State ownership would be an error in
treaty interpretation.

III. THE USE OF ALTERNATIVE BENCHMARKS FOR THE DETERMINATION OF
BENEFIT IS PERMISSIBLE ONLY IN EXCEPTIONAL CIRCUMSTANCES, AND IS
SUBJECT TO STRICT DISCIPLINES

12. The principal benchmark for calculating a bene fit under Article 14(d) of the SCM Agreement
is the domestic market price in the country of pr ovision. The use of an alternative benchmark is
permissible only in exceptional circumstances. If exceptional circumstances necessitating the use of
an alternative benchmark have been established, th en the cost of production of the goods in the
country of provision serves as the most appropriate alternative to domestic market prices.

13. Article 14(d) of the SCM Agreement establis hes domestic market price as the principal
standard for determining whether and to what extent a benefit is conferred by the provision of a good
for the purpose of Part V of the Agreement. Price is foremost among the "prevailing market
conditions" enumerated in Article 14(d) and it should thus be the first reference point used by an
investigating authority to determine benefit.

2 Appellate Body Report, US – Softwood Lumber IV, para. 64.
3 Panel Report, Korea – Commercial Vessels, para. 7.48.

14. In US – Softwood Lumber IV, the Appellate Body made clear that alternative benchmarks may
be used only in exceptional circumstances, and em phasized that the possibility under Article 14(d) for
investigating authorities to use a benchmark other th an private prices in the country of provision is
"very limited."4 The Appellate Body has interpreted Article 14(d) to allow for the use of alternative
benchmarks only as an exception of last resort, wh en it has been established that private prices are
distorted, such that "private suppliers will ali gn their prices with those of the government-provided
goods."5 As stated by the Appellate Body, distortion cannot be presumed to exist simply because the
government is a significant supplier or has a major presence in the market of the goods in question.
Instead, investigating authorities are obliged to est ablish that the prices are actually distorted "on a
case-by-case basis, according to the particular facts underlying each countervailing duty
investigation."6

15. Furthermore, as is clear from the Appellate Body's reasoning in US – Softwood Lumber IV , if
such distortion is established, any alternative benchmark employed by the investigating authority must
properly reflect domestic market conditions in the country in question.

16. In the Kingdom's view, external benchmar ks are an inappropriate alternative for the
calculation of a benefit under Article 14(d) of the SCM Agreement. The nature and extent of the
adjustments that would be required for external ma rket prices to reflect in-country market conditions
make meeting these requirements practically impossi ble in virtually all cases. The Appellate Body
has warned that countervailing measures cannot be used to "offset differences in comparative
advantages between countries."
7
Moreover, the use of external benchmarks is demonstrably
inappropriate with respect to financial contributions in the form of the provision of land.

17. The Kingdom submits that benchmarks based on the domestic cost of production of the goods
or services in question are the most appropriate a nd WTO-consistent alternative to domestic market
prices when an investigating authority has made a de termination that such prices are distorted. The
cost of production benchmark is not only the most reliable possible alternative, but it has also been
supported and endorsed in previous Appellate Body jurisprudence.

IV. AN INVESTIGATING AUTHORITY MUST BASE LOAN BENCHMARKS ON THE
ACTUAL COMMERCIAL BORROWING EXPERIENCE OF A FIRM

18. An investigating authority, in determin ing a benchmark under Article 14(b) of the SCM
Agreement, is required to inquire into the actua l commercial borrowing experience of the recipient
firm in order to determine what comparable commercial loans the firm could "actually obtain."

19. The use of the term "comparable" in Article 14(b) strongly suggests that the benchmark loan
should be a loan that is expressed in the same curre ncy, and subject to the same generally applicable
financial regulations of the country providing the gove rnment loan. The word "commercial" refers to
any transaction that is made in the ordinary course of commerce. Finally, the phrase "which the firm
could actually obtain on the market" imposes a requirement that the benchmark be based on the actual
borrowing experience of the recipient firm.

20. Contrary to what the United States is ar guing, the Appellate Body's interpretation of
Article 14(d) in US - Softwood Lumber IV is not "equally applicable" to the determination of benefit
under Article 14(b) SCM Agreement. The Appellate Body Report in US - Softwood Lumber IV was
demonstrably not "based on the entirety of Article 14", as the United States argues, but rather was

4 Appellate Body Report, US - Softwood Lumber IV, para. 102. Emphasis added.
5 Appellate Body Report, US - Softwood Lumber IV, para. 115.
6 Appellate Body Report, US - Softwood Lumber IV, para. 102.
7 Appellate Body Report, US - Softwood Lumber IV, para. 109.

based on the specific terms of Article 14(d). Moreover, assuming arguendo that the Appellate Body's
reasoning in US - Softwood Lumber IV did apply to Article 14(b), then the Appellate Body's clear
admonitions on the use of outside benchmarks would apply as well.

V. IN CASES OF ALLEGED SUBSIDIZED INPUTS, THE INVESTIGATING
AUTHORITY MUST CONDUCT A "PASS-THROUGH" ANALYSIS TO
DETERMINE IF THE DOWNSTREAM PRODUCER HAS RECEIVED A BENEFIT

21. The issue of "pass-through" relates to a basic principle of WTO disciplines with respect to the
use of countervailing measures: a countervailing du ty can only be levied on a product where an
investigating authority determines that a subsidy has been granted, directly or indirectly, on the
product subject to the duty.

22. The basic principle of GATT Article VI:3 is that an authority may only impose a
countervailing duty on a product to off set a subsidy granted either dir ectly or indirectly to that
product. In case of "arm's length" sales between unrel ated parties, an investigating authority may not
presume that all or part of the benefit was passed through.

23. There is no basis to use a different approach simply because the subsidy has had an alleged
"effect" on the market price for the product sold by the direct recipient of the subsidy. A contrary
approach would render the need for a "pass-through" analysis meaningless, as any subsidy granted to
the upstream producer could have some effect on the market price for its products.

24. The problem caused by an expansive approach to the application of the pass-through concept
would be exacerbated by the use of out-of-country be nchmarks. Investigating authorities could use a
broad pass-through approach to ignore domestic market prices for upstream products which are
allegedly "distorted" by the original subsidy on those products. Instead, the authority would use
market prices in a third country as a benchmark for determining the benefit that upstream inputs
confer on unrelated downstream exporters purchasing the inputs in arm's length transactions at market
prices. This would lead to a finding of subsidiza tion where in fact no subsidies were granted to the
producers of the product subject to the investigation.

VI. CONCLUSIONS

25. The Kingdom respectfully urges the Panel to r esolve this dispute in a manner that maintains
the balance that was clearly intended by the drafters of the Agreement.

ANNEX B-10

EXECUTIVE SUMMARY OF THE THIRD PARTY
SUBMISSION OF TURKEY

(16 June 2009)

I. INTRODUCTION

1. Turkey thanks the Panel for this opportunity to present its views in this proceeding. Although
the dispute between the U.S. and China covers many issues, Turkey will focus on three major subjects
namely "public body determination", use of out -of country benchmark" and "pass through of a
benefit" arise from this dispute.

II. DETERMINATION OF PUBLIC BODY

2. Article 1.1(a)(1) of the Agreement on Subsidies and Countervailing Measures (SCM
Agreement) contains two separate terms "government " and "public body". Therefore in order to
accept that a subsidy is granted, a financial contribution must be provided either by "government" or a
"public body".

3. Since the SCM Agreement used two terms, in Turkey's view, the meanings of these terms
should be construed differently. However, SMC Agreement does not provide any definition with
regard to these two terms. Therefore, what constitutes "government" or "public body" under the
article in question needs to be interpreted. This interpretation should be made in accordance with the
ordinary meanings taken into account in the cont ext, object and the purpose of the SCM Agreement
pursuant to Article 31.1 of the Vienna Convention.

4. China argued that in order to accept an entity as a public body, both an entity should perform
governmental functions and the powers to perform these functions should be vested by the state.
However China's claim to take governmental charact er as a prerequisite to determine an entity as a
public body narrows the actual meaning of the "public body" and equates it to "government". Such an
interpretation would annul the di stinction between the two term s and render the "public body"
meaningless.

5. In Turkey's views, Paragraph 5(c)(i) of th e Annex on Financial Services to the GATS is not
the relevant legal basis to interpret the term public body used in the SCM Agreement. Firstly, while
the SCM Agreement states "public body", the refe rred paragraph of the Annex in question provides
the definition of "public entity", so it is clear that these two terms are not the same. Secondly, it is
clear from the "For the purpose of this Annex … " expression mentioned in the same paragraph that,
the "public entity" definition is only for the scope of the Annex in question.

6. On the other hand Turkey also considers ILC Articles as an irrelevant legal basis for
interpreting the term "public body" for several re asons. First of all ILC Articles are not among the
annexes of the Marrakesh Agreements . In addition, the scope and the application of the ILC Articles
are totally distinct from the SCM Agreement. Furthermore due to the lex specialis clause contained in
the Article 55 of the ILC Articles, it is not possible to apply the ILC Articles to this dispute.

7. Turkey is of the view that "government control" criterion
1 set forth by the Korea -
Commercial Vessels Panel is the most proper criteri a for determining whether an entity is a public
body and Turkey also considers that the ownership is the main indicator of the control of an entity.

III. USE OF EXTERNAL BENCHMARK

8. During its accession to the WTO China acknowledge d the fact that it had a centrally-planned
economy and undertook some commitments in its Accession Protocol including commitments on the
application of trade remedies by other Members.

9. Specifically, in the Article 15(b) of the Acce ssion Protocol, China accepted to be subject to
special rules with regard to subsidies. It is clear from this article that, the Members are allowed to use
appropriate ways to ensure applicability of the rules against subsidies.

10. Besides, Turkey is of the view that the A ccession Protocol is not the only source which allows
using external benchmark. Pursuant to Article 14 of the SCM Agreement external benchmarks may
be used in some cases.

11. Similarly, the Appellate Body also ruled that, even for market economies the primary
benchmarks provided in the Article 14(d) of the SCM Agreement may not work. If the investigating
authority determines that private prices in that co untry are distorted because of the predominant role
of the government, it may use another benchmark.
2 Turkey considers that in cases where the
prevailing market conditions in a Member do not pr ovide an appropriate base to make a meaningful
comparison to determine whether a benefit has b een conferred due to the predominance of the
government in the economy, the rules of the SCM Agreement will still be applicable.

12. In the Accession Protocol, China has al ready accepted that the prevailing terms and
conditions in China may not always be available as appropriate benchmarks. If the investigating
authority uses the private prices as the benchmark while the predominance of the government is a fact,
benefit will probably be artificially low or even zero. As a result, the full extent of the subsidy would
not be captured and the rights of Members to "fully offset, by applying countervailing duties, the
effect of the subsidy as permitted by the SCM Agreement" 3 would be injured.

IV. PASS THROUGH OF A BENEFIT

13. In Turkey's view, the SCM Agreement does not require that the recipients of a benefit and a
financial contribution should be the same. This approach is also in line with the reasoning stated in
Mexico - Olive Oil Panel Report.4 Acceptance of the opposite would lead to the circumvention of the
disciplines on subsidization by including a private party to the chain.

V. CONCLUSION

14. For the reasons stated above, Turkey requests th e Panel, in deciding the dispute, to take into
account observations and comments stated in this submission.

1 Panel Report, Korea – Measures Affecting Trade in Commercial Vessels , WT/DS273/R, adopted
11 April 2005, DSR 2005:VII, 2749, para 7.50
2 Appellate Body Report, United States – Final Countervailing Duty Determination with Respect to
Certain Softwood Lumber from Canada, WT/DS257/AB/R, adopted 17 February 2004, para. 90
3 US - Softwood Lumber CVD Final (AB), Para.95.
4 Panel Report, Mexico - Definitive Countervailing Measures on Olive Oil from the European
Communities, WT/DS341/R, adopted 21 October 2008, para 7.152

ANNEX B-11

THIRD PARTY ORAL STATEMENT OF
ARGENTINA

(7 July 2009)

1. Argentina thanks the Panel and the parties to th is dispute for the opportunity of attending the
hearing today, as a third party, and putting forward its points of view on certain issues that are of
systemic interest.
2. Argentina has already referred to the question of simultaneous application of anti dumping
and countervailing measures on exports from China by the United States Depart ment of Commerce.
In this statement, Argentina will not reiterate the elements already set forth in its written submission,
but will instead refer to complementary elements.
3. Argentina considers that, when deciding whethe r or not determination of an anti-dumping
duty using the surrogate country methodology simultaneously with determination of a countervailing
duty is consistent with the WTO rules, it must be established whether there is any provision in these
rules prohibiting a Member from such simultaneous application. China has not pointed to any express
provision establishing this, nor has Argentina been able to find one in the Articles of the GATT 1994
(GATT), or in the Anti-dumping Agreement (AD Agre ement), or in the Agreement on Subsidies and
Countervailing Measures (SCM Agreement). Moreover, neither Article 19.3 nor Article 19.4 of the
SCM Agreement, on which China implicitly bases its argument, regulate the question of "double
remedy" or duplication in the terms claimed by China.
4. In its first written submission, the United States brings into the discussion Article 15.1 of the
Subsidies and Countervailing Measures Code of the Tokyo Round (SCMC)
1, which expressly
contains a prohibition on the simultaneous determination of anti-dumping and countervailing duties in
the cases covered by paragraph 1.2 of the Note Ad Ar ticle VI of the GATT 1994. This provision was
not retained in the SCM Agreement, which lacks a si milar prohibition. The relevance of Article 15 of
the SCMC is twofold: on the one hand, why shoul d particular significance be attached to the absence
of a similar rule in the SCM Agreement? On th e other, why should this provision, or rather its
absence, be relevant when interpreting Article 19.3 and 19.4 of the SCM Agreement?
5. The wording of Article 19.4 of the SCM Agreement is identical to Article 4.2 of the SCMC of
the Tokyo Round, whereas the first sentence of Article 19.3 of the SCM Agreement, which is the part
put forward by China to substantiate its claim, is reasonably similar to Article 4.3 of the Tokyo Round
SCMC.2 Presumably, if both rules had the scope claime d by China in its assertions to the effect that
in themselves they establish a prohibition on th e simultaneous applicati on of the two measures,
Article 15.1 of the Tokyo Round SCMC would be devoid of meaning and this redundancy cannot be

1 Agreement on Interpretation and Application of Articles VI, XVI and XXIII of the General
Agreement on Tariffs and Trade.
2 The difference between the two texts is limited to use of the singular "appropriate amount" in the
Tokyo Round SCMC and "appropriate amounts" in the current SCM Agreement.

inferred on the basis of the principle of interpre tation which the Appellate Body indicated as a
corollary to the general rule of interpretation of the Vienna Convention.
3
6. In the absence of any express legal prohibition substantiating the argument relating to the
alleged prohibition on the use of both measures simult aneously, China turns to reasoning that equates
the concepts of distortion and subsidization. 4 Following this line of reasoning, China concludes that
"[h]aving made this determination and calculate d anti-dumping duties on this basis, Commerce has
necessarily addressed any allocation of productiv e resources within that economy that was not
determined by market forces, including the provisi on of subsidized resources. A double remedy will
therefore arise in all cases in which Commerce applies the two remedies simultaneously".5
7. Argentina does not agree. Argentina considers th at not every measure involving price or cost
distortion in an economy can be classified a subsidy in the terms of Article 1 of the SCM Agreement.
The Panel adopted this line of reasoning in United States – Measures Treating Export Restraints as
Subsidies, in which it found that the SCM Agreement "was drafted with the express purpose of
ensuring that not every government intervention in the market would fall within the coverage of the
Agreement".6
8. The goal of the surrogate country methodology is to provide an alternative for transparent
prices in situations where there are distortions in the economy, and not to offset any subsidies that
might exist. Even if we could agree with Chin a that subsidies are the quintessence of distortions
7,
they are not the only category of distortions that can affect variables in a market and, in any event,
offsetting them must be done according to the terms of the relevant Agreement.
9. Accordingly, the application of the two me asures – anti-dumping according to the surrogate
country methodology, and countervailing duties – simultaneously, does not in itself imply the
situation of duplication that China claims, and is therefore not inconsistent with the rules of the WTO.
10. Argentina thus concludes its oral submission at this hearing, once again expresses its thanks
for the opportunity given and is ready to answer any questions or expand on the elements it has set out
should the Panel so require.

3 United States – Standards for Reformulated and Conventional Gasoline (WT/DS2/AB/R), report of
the Appellate Body, section IV, page 21 of the English text.
4 First written submission of China (FWS), paragraph 37 3, which states: "Indeed, seen at one level,
one might say that a non-market economy is an economy in which all resources are subsidized, i.e., none of the
productive resources within that economy are allocated according to market forces. Thus, the rationale for using
an NME methodology in an antidumping investigation, necessarily subsumes the rationale for imposing
countervailing duties, i.e., that a government has provided a 'trade distorting' financial contribution that leaves
the recipient of the subsidy 'better-off' than it would have been had it obtained th e same resource on market
determined terms" (emphasis in the original text).
5 FWS of China, paragraph 374.
6 Report of the Panel, WT/DS/194/R, paragraph 8.63.
7 FWS of China, paragraph 373, which states: "A subsidy is the quintessential example of a
government intervention that disrupts the normal allocation of resources".

ANNEX B-12

EXECUTIVE SUMMARY OF THE THIRD PARTY
ORAL STATEMENT OF AUSTRALIA

(17 July 2009)

A. 'PUBLIC BODY' UNDER ARTICLE 1.1(A)(1)

1. Australia is concerned that a definition of ' public body' that would require a body to: (i) be
vested with governmental authority, and (ii) ca rry out governmental functions for governmental
purposes
1, has no basis in the text of the Agreement on Subsidies and Countervailing Measures
(Subsidies Agreement). It instead appears to be created by conflating the test for entrustment or
direction under Article 1.1(a)(1)(iv) and by using external sources of international law 2 which are not
relevant in this instance.

The necessary distinction between 'public body' and the test for entrustment or direction

2. In Australia's view, it is necessary to maintain a distinction between the definition of 'public
body' and the test for entrustment or direction. Fundamentally, the test for entrustment or direction
serves a different purpose; that is, to capture th ose incidents when priv ate bodies are used by
governments to provide a financial contribution. Th is should not be conflated with the definition of
'public body,' which goes to the nature of the body in question.

3. The interpretive context that Article 1.1(a )(1)(iv) provides is a point of contrast and
distinction, not one from which pa rallels or analogies can be drawn.
3 Australia is concerned that
attempts to artificially introduce the concepts of government authority and the exercise of
governmental functions into a definition of 'public body' would undermine the distinction between the
meaning of 'public body' and the test for entrustment or direction.

Recourse to other international texts for interpretative context

4. China has advocated recourse to Articles 5 and 8 of the United Nations International Law
Commission Draft Articles on State Responsib ility for Internationally Wrongful Acts as relevant
context for the interpretation of Ar ticle 1 of the Subsidies Agreement.
4 Australia considers that the
Articles offer no interpretive assistance in this case.

5. Articles 5 and 8 of the ILC Draft Articl es address the 'conduct of persons or entities
exercising elements of government authority' an d 'conduct directed or controlled by a State',

1 See First Written Submission of China paras. 65 and 68; Third Party Submission of the Kingdom of
Saudi Arabia para. 5; Third Party Submission of Norway, paras. 12-13.
2 First Written Submission of China, para. 72.
3 Third Party Written Submission of Norway, para. 12.
4 Article 31(3)(c) of the Vienna Convention on the Law of Treaties: First Written Submission of China,
paras. 72, 77, and 83.

respectively.
5 They do not address the definition of pub lic body. Instead they would appear to
address the situation where an otherwise private or non-state actor's actions can be attributed to a
government - a situation that would more closely mirror entrustment or direction, if any.

6. Similar arguments apply in relation to the atte mpt to use the definition of 'public entity' in
paragraph 5(c) of the GATS Annex on Financial Services.
6 The GATS Annex specifically prefaces
its definition of 'public entity' with the phrase ' For the purpose of this Annex …'. The scope and
purpose of the Annex as stated in paragraph 1(a) is for 'measures affecting the supply of financial
services.' This points to the specialised role of the definition of a 'public entity' within the GATS.

7. More fundamentally, Australia does not agree that an apparent recourse to 'context' for the
purposes of interpretation can be used to transform the scope of a provision in a way that is not
otherwise available from the text. Nor can interpretati ve context be used to in clude an additional test
of exercising government authority that is not apparent from the text, particularly when to include
such a test would undermine a clear distinction betw een the definition of public body and the test for
entrustment or direction.

B. PRIVATE TRADING COMPANIES AND PASS-THROUGH

8. Further to Australia's statements in secti on D of its written submission, Australia considers
that where trading companies act as mere interm ediaries in a transaction, it may be unnecessary to
conduct a full pass-through analysis, particularly where the trading companies appear to have
constituted an indirect route for providing a subsidy to exporters. This approach is consistent with the
Appellate Body statement in US – Softwood Lumber that a 'pass through analysis' is not necessary in
every situation in which a subsidy is provided on the production of an input product.
7

9. Furthermore, Australia considers that in the case of an indirect subsidy, where an intermediate
act does not change the nature of the input, the benef it is most accurately calculated at the level of the
exporters concerned. This approach is cons istent with the Appellate Body's findings in US −
Countervailing Measures that there may be a direct or indirect recipient of the benefit of a financial
contribution.8

C. ARTICLE 14(D) AND THE USE OF BENCHMARKS OTHER THAN PRIVATE PRICES
IN THE HOME MARKET

10. Australia considers that Article 14(d) perm its investigating authorities to use a benchmark
other than private prices in that market so l ong as 'investigating authorities calculate benefit "in
relation to" prevailing conditions in the market of the country of provision.'
9

11. Australia further considers that there is nothing in the Subsidies Agreement to support the
argument that the provision of land should be treat ed differently to the provision of other goods under
Article 14(d). On the contrary, the term 'goods' has been given a broad meaning under

5 Articles 5 and 8 of the Draft Articles on Responsibility of States for Internationally Wrongful Acts ,
United Nations International Law Commission, Report on the Work of its Fifty Third Session (10 August 2001).
6 China First Written Submission, para. 62; Third Party Submission of Saudi Arabia, para. 42-43; Third
7 Appellate Body Report, United States – Final Countervailing Duty Determination with Respect to
Certain Softwood Lumber from Canada, WT/DS257/AB/R, 17 February 2004, para. 141.
8 Appellate Body Report, United States – Countervailing Measures on Certain EC Products ,
9 Appellate Body Report, United States − Softwood Lumber, Ibid, para. 101.

Article 1.1(a)(1)(iii) of the Subsidies Agreement to include immovable property. 10 As the Appellate
Body stated in US - Softwood Lumber , a broad interpretation, as reflect ed in the French and Spanish
language texts, suggests that land is indeed a 'good' for the purposes of the Subsidies Agreement.11

D. POLICY LENDING AND SO CALLED 'DOUBLE REMEDIES'

12. In relation to policy lending, Australia would lik e to reiterate the key point that 'statements of
government policies, plans and intentions are highl y relevant considerati ons in determining the
existence of a subsidy and whether the subsidies are targeted to certain industries or enterprises.'
12

13. In terms of the issue of so-called 'double reme dies', Australia would like to reiterate that anti-
dumping and countervailing duties are two separate re medies under two distinct WTO Agreements.
Nothing in GATT Article VI or elsewhere in the WTO Agreements prevents concurrent or parallel
anti-dumping and countervailing duty investigations with respect to the same product.

10 Appellate Body Report, United States − Softwood Lumber, Ibid, at paras. 59 and 65.
11 Appellate Body Report, United States − Softwood Lumber, Ibid, at paras. 59 and 65.
12 See Third Party Written Submission of Australia, para. 30.

ANNEX B-13

THIRD PARTY ORAL STATEMENT OF BRAZIL

(7 July 2009)

Mr. Chairman, distinguished Members of the Panel,

1. Brazil appreciates the opportunity to present this oral statement as a Third Party in the current
proceedings. The present dispute raises several questions of systemic interest to many WTO
Members, as the number of Third Party Submissions makes evident. Brazil would like to contribute
to this debate by furthering additional elements to some specific issues discus sed in its submission.
The first issue Brazil wishes to address is the definition of the expression "public body" in Article 1 of
the SCM Agreement. Clarification of the meaning and scope of this expressi on will contribute to the
proper application of CVD measures.

2. As indicated in its Third Party Submission, Brazil does not opine on the specific factual
context of this dispute and takes no position on whether the Chinese companies involved in the
present case are encompassed by a proper definition of "public body". This assessment will depend
on the examination of the totality of facts before the panel, which may well include, for instance,
issues related to determinations made in light of non-cooperation on the part of investigated
companies. Such assessment is beyond the remit of this intervention.

3. As regards the legal interpretation of the e xpression "public bodies" in Article 1 of the SCM
Agreement, Brazil does not consider appropriate the classification of enterprises totally or partially-
owned by the State as "public bodies" in CVD investigations based solely on majority state
shareholding. This automatic classification could le ad to regular market transactions involving non-
public state-owned companies being regarded as fi nancial contributions un der the SCM Agreement,
potentially burdening these entities unfairly. It is not infrequent to find state-owned companies
operating in the market with autonomy, indistinguishably from any other private company, despite an
ownership link to the government.

4. For this reason, Brazil advocates the necess ity of a two-tiered evaluation: firstly, the
investigating authority should delve into the eviden ce provided in order to ascertain if the underlying
nature of the entity in question is that of a "public body"; if a negative answer is found, the
examination should instead search for specific inst ances where governmental entrustment or direction
was present.

5. Article 1.1(a)(1)(iv) of the SCM Agreement e xpressly refers to private bodies that carry out
functions "which would normally be vested in the government". This is the more immediate
"context" under which the expression "public body" in the SCM Agreement should be interpreted, as
per the guidelines of treaty interpretation found in th e Vienna Convention. It can be directly inferred
from Art 1.1(a)(1)(iv) that the main dividing line be tween actions determined by public or by private
motivations should be the presence of public interest – be it incidental, as in the case of entrusted or
directed private bodies, or more permanent, as is characteristic in public bodies.

6. Moreover, the Panel in EC-DRAMS1 assumed that even when actions involve entities wholly
owned by the State, it must be demonstrated that the government actually exercised its power over
that entity and directed it to take actions against ma rket logic. As previously stated, non-public state-
owned companies typically enjoy a significant degree of autonomous decision-making in pursuing its
objectives in the marketplace. For obvious reasons, such an analysis is even more important in regard
of partially state-owned enterprises, where private ag ents may be directly affected and therefore exert
an opposing force to a hypothetical governmental intervention.

7. For these reasons, Brazil respectfully submits th at an overly broad definition of the expression
"public body" would disturb the balance of the disciplines of the SCM Agreement.

8. Regarding the alleged "double remedy" i ssue, Brazil contends that, the SCM and AD
Agreements should be treated as independent sets of disciplines, to the extent that there is no
provision establishing cross-references between th em. The only linkage between anti-dumping and
countervailing duty disciplines found in the Covere d Agreements is GATT Article VI.5, which
expressly refers to export subsidies.

9. The possibility of simultaneous application of anti-dumping and countervailing duties on the
same imported product is evident from at least two diff erent perspectives. Firstly, the existence of an
explicit ban in the legal text regardin g export subsidies can be easily read, contrario sensu, to allow
for the concomitant application of both duties in a ll other situations. This is synthesized in the
expressio unius est exclusio alterius general legal principle. Secondl y, this argument is reinforced by
the existence of a specific discipline with in SCM Agreement's predecessor, the GATT Subsidies
Code, which prohibited the simultaneous application of both duties on imports from a certain set of
countries. The fact that this prohibition was not replicated in the current SCM Agreement
underscores the intention of its drafters not to pr ohibit the combined imposition of AD and CV duties
on imports from Members, irrespective of their status as Market or Non-Market Economies.

10. This concludes Brazil's Oral Statement.

ANNEX B-14

THIRD PARTY ORAL STATEMENT OF CANADA

(7 July 2009)

INTRODUCTION

1. Mr. Chairman, distinguished members of the Panel, Canada would first like to express its
appreciation to the Panel and the Secretariat for their work in this dispute.

2. This dispute concerns the imposition of anti-dumping and countervailing duties on Chinese
products. In this connection, Ca nada would like to emphasize the status and importance of China's
Accession Protocol and the commitments made by China that are noted in the Working Party Report
on its accession. Both documents are integral parts of the WTO Agreement. They relate specifically
to China and are central to a finding of WTO-cons istency or inconsistency with respect to certain
issues in this dispute.

3. In this oral statement, I will discuss two i ssues not addressed in Canada's written submission:
pass-through and the offsetting of benefit. I will then make some additional comments on one issue
addressed in Canada's written submission: th e concurrent imposition of anti-dumping and
countervailing duties.

I. PASS-THROUGH

4. I will first deal with issues arising in the context of the successive sales of input goods by
state-owned enterprises to trading companies and by the trading companies to respondent producers.

5. In three of the investigations at issue, th e U.S. Department of Co mmerce found that the sales
by state-owned enterprises constituted financial cont ributions that conferred a countervailable benefit
to respondent producers.

6. China argues that Commerce violated the SCM Agreement by failing to find that the trading
companies themselves provided a financial contribution when they sold the inputs and by failing to
find that the trading companies had received a be nefit from the sale of inputs by the state-owned
enterprises. For its part, the United States alleges that there was no obligation on Commerce to make
these findings.

7. Under Article 1.1 of the SCM Agreement , a subsidy shall be deemed to exist if there is a
financial contribution and a benefit is thereby conferred.

8. To impose a valid countervailing duty on a produc t as a result of the successive sales at issue,
Commerce had to determine that the sales of inputs by the state-owned enterprises to the trading
companies constituted a financial contribution that c onferred a benefit both directly upon the trading
companies and indirectly upon the respondent producers.

9. The possibility that a single financial contribution could confer both a direct and indirect
benefit is confirmed by the Appellate Body's decision in United States – Softwood Lumber IV .
Indeed, the Appellate Body found that the requireme nt for a financial contribution could be fulfilled

where the government made a financial contribution to an input producer who in turn sold the input to
a respondent producer.

10. The Appellate Body did not require that the input producer make a separate financial
contribution to a respondent producer for the purposes of determining whether the respondent
producer is subsidized under Article 1.1 of the SCM Agreement.

11. Similarly, in the current matter, there was no requirement for Commerce to find that the
trading companies made financial contributions to the respondent producers. Finding that the sale of
inputs by state-owned enterprises constituted a financial contribution was sufficient.

12. However, to countervail a subsidy, Comme rce had to demonstrate that the financial
contribution made by the state-owned enterprises ultimately conferred a benefit upon the respondent
producers.

13. China argues that, without a valid finding that the trading companies had received a benefit,
there was no legitimate basis for Co mmerce to conclude that all or some portion of the benefit was
conferred on the respondent producers who purchased the inputs from the trading companies. China
adds that Commerce undertook no examination of the price the trading companies paid for the inputs
they purchased.

14. The United States answers that it was not necessary for Commerce to measure any benefit
that the trading companies may have received.

15. Canada submits that a direct recipient of a benefit cannot pass through to an indirect recipient
a higher amount of benefit than what it received. The amount of benefit conferred on the direct
recipient is the maximum amount of benefit that can pass through to the indirect recipient and be
countervailed.

16. Therefore, in most cases, a precise calcula tion of the amount of bene fit conferred on a direct
recipient is necessary to determine the amount of the benefit that passes through to an indirect
recipient.

17. However, such a precise calculation may no t be necessary if the direct recipient purchases
goods from a government or public body, does not furt her process them, and simply resells them for
at least as much as it purchased them. In that case, the difference between the resale price paid by the
indirect recipient and the benchmark price reflects the extent to which the direct recipient passed the
benefit received from the financial contribution through to the indirect recipient.

II. OFFSETTING OF BENEFIT

18. I now turn to the issue of the proper calcula tion of benefit provided by way of the provision of
goods by a government or public body in a situation where some transactions are made above a
relevant benchmark price.

19. China argues that Commerce should have ta ken such transactions into account. The United
States responds that Commerce was entitled to ignore them.

20. I will make a few general observations on this issue.

21. Article 14(d) of the SCM Agreement is the key provision with respect to the calculation of the
amount of benefit conferred on a recipient throug h the provision of goods. It provides that the
provision of goods by a government or public body must not be considered as conferring a benefit

unless the provision is made for less than adequate remuneration. The adequacy of remuneration will
generally be assessed by comparison with a benchmark price.

22. There is no provision in the SCM Agreement that specifically requires that a benefit conferred
on a recipient through one or more transactions be offset where other transactions between the
recipient and the government or public body are on terms that are less favourable than prevailing
market terms.

23. However, under certain circum stances, the examination of whether the provision of a good
through one or more transactions is made for adequate remuneration ma y require that other
transactions be examined. For example, where there is an on-going contractual relationship between a
government supplier and a purchaser, it may be a ppropriate to take into account a range of
transactions between the same parties concerning th e same goods in order to determine whether one
or more transactions were made for adequate remuneration.

III. CONCURRENT IMPOSITION OF COUNTERVAILING AND ANTIDUMPING
DUTIES

24. Finally, I wish to address the WTO-c onsistency of the conc urrent imposition of
countervailing and anti-dumping duties determined on the basis of prices or costs outside China; that
is, using the so-called "non-market economy methodology".

25. China argues that such concurrent impos ition gives rise to a "double remedy" and is
inconsistent with Articles 19.3 and 19.4 of the SCM Agreement and Article I:1 of GATT 1994. The
United States replies that the c oncurrent imposition of duties is not inconsistent with the WTO
Agreement.

26. Canada demonstrates in its written submission that, in the case of products of Chinese origin,
the concurrent imposition of duties is consistent with Articles 19.3 and 19.4 of the SCM Agreement.

27. It is also Canada's position that neither the use of the "non-market economy methodology"
nor the concurrent imposition of duties on Chinese pr oducts using that metho dology is inconsistent
with Article I:1 of GATT 1994.

28. Article VI:1 of GATT 1994 and Article 2 of the Anti-dumping Agreement require a strict
comparison with domestic prices or costs to establish the normal value of products from "market
economy" Members. However, subparagraph 15(a)(ii) of China's Accession Protocol specifically
allows an importing Member to calculate the normal value of Chinese products using the "non-market
economy methodology". Thus, the application of that methodology to Chinese products does not
amount to an importing Member according an "advant age, favour, privilege or immunity" to "market
economy" Members in breach of Article I:1 of GATT 1994.

29. Nor is Article I:1 breached when an an ti-dumping duty based on the "non-market economy
methodology" is imposed on a Chinese product concurrently with a countervailing duty.
Notwithstanding China's allegation that the concurrent imposition gives rise to a "double remedy",
Section 15 of the Accession Protocol , Article VI of GATT 1994, and the provisions of the SCM
Agreement and the Anti-dumping Agreement permit such concurrent imposition.

30. Moreover, as discussed in Canada's writte n submission, a subsidized and dumped product
from a "market economy" Member is also s ubject to both countervailing and anti-dumping
disciplines. Therefore, the concurrent impos ition on Chinese products of countervailing and anti-
dumping duties, however calculated, is consistent with Article I:1 of GATT 1994.

CONCLUSION

31. Mr. Chairman, distinguished members of the Pa nel, this concludes Canada's oral statement.

ANNEX B-15

THIRD PARTY ORAL STATEMENT OF THE
EUROPEAN COMMUNITIES

(7 July 2009)

Mr. Chairman, distinguished Members of the Panel,

1. In this oral statement the European Comm unities will further comment on one issue: the
concurrent application of anti- dumping and countervailing duties to the "same situation", responding
in particular to certain observations contained in the third party written submissions.
2. We agree with the United States that China has not pursued a claim under Article VI:5 of the
GATT 1994 , which is the only provision in the covere d agreements that expressly addresses the
concurrent application of anti-dumping and countervailing duties.
1 China's silence implies that it does
not challenge the interpretation of that provision ad vanced by the United Stat es. We note that China
does make a claim under the "appropriate" sta ndard referenced in Article 19.3 of the SCM
Agreement2, but we do not see why, as the pleadings sta nd, the Panel need reach the question of the
interpretation of Article VI:5 of the GATT 1994. Accordingly, given that Article VI:5 of GATT 1994
has not been invoked and that the United States appe ars not to have exceeded the amount of subsidy
when imposing countervailing duties, we would inv ite the Panel to reject China's claims under both
Article 19.3 and Article 19.4 of the SCM Agreement.
3. In any event, the European Communities agrees with the Un ited States' interpretation of
Article VI:5 of the GATT 1994.
4. We have carefully noted the observations of a number of third parties with respect to the
interpretation of Article VI:5.3 We agree with the United States4 that the term "export subsidization" is
synonymous with various other terms as used in the covered agreements, such as, notably: "export
subsidization";5 "subsidy … on the … export"; 6 "subsidy … upon … the export"; 7 "export subsidy"
or "export subsidies";8 "subsidy to exports";9 "subsidies contingent, in law or in fact, … upon export
performance";10 and "subsidy … in fact tied-t o … exportation or export earnings" 11 (as evidence of a
subsidy contingent upon export performance).12

1 Request for Consultations, para. (6); Panel Requ est, paras B.1.(f) and B.2; China's First Written
Submission, Section VI; United States First Written Submission, Section VIII.
2 China's First Written Submission, Section VI.
3 For example, Australia's Third Party Written Submission, para. 49; Japan's Third Party Written
Submission, para. 7; Norway's Third Party Written Submission, paras. 41 to 47.
4 For example, United States First Written Submission, paras. 397 and 399.
5 For example, Agriculture Agreement, Article 9(3).
6 For example, GATT 1994, Article VI:3, first sentence and Article XVI, paras. 2, 3 and 4.
7 For example, GATT 1994, Article VI:3, second sentence.
8 For example, GATT 1994, Article XVI, Section B, title; SCM Agreement, footnote 5 and Annex I;
Agriculture Agreement , Article 1(e) (defining "export subsidies" as subsidies contingent upon export
performance).
9 For example, GATT 1994, ad note to Article VI, paragraphs 2 and 3, second paragraph.
10 For example, SCM Agreement, Article 3.1(a).

5. We also agree with the United States that this contingency or tie between the subsidy and the
export is confirmed by the ordinary meaning of the term "export subsidization". 13 The juxtaposition
of these terms, and particularly the choice of the term export as opposed to any other term, implies
such a contingency or tie. In our view, the ordina ry meaning of the term "export subsidisation" does
not extend to the situation in which there is no such contingency or tie – and in particular does not
extend to the situation in which there is a mere allocation of part of a neutral subsidy to exports.
6. We further agree with the United States that this view is well-supported by the context,
including, but not only, the provisions we have refe rred to above, in particular Article VI:3 of the
GATT 1994.14 In particular, we find that the context s uggests that the term "export subsidization" in
Article VI:5 refers back to the term "subsidy … on the … export" in Article VI:3. We believe that
this view is supported by the French and Spanis h versions. Further, we note that the terms
"manufacture" and "production" may overlap; that these terms, together with the term "transportation"
may overlap with the term "export"; and that th ese terms may not describe all possible types of
countervailable subsidies – that being something assure d in any event by the term "indirectly". In
these circumstances, we agree with the United States th at it is significant that the term "export" is
specifically picked out in Article VI:3, suggesting that it refers to a particular type of subsidy – that is,
an export subsidy. Taken together with the other context we have referred to, we find that this
confirms that the term "export subsidization" in Article VI:5 does not include a situation in which a
neutral subsidy (for example, on the "manufacture" or "production" of a product) is partially allocated
to exports. Contrary to what is suggested by some of the other Third Party submissions, this is not
contradicted by the term "indirectly" in Article VI:3 , which rather ensures that all types of subsidy are
captured, and does not suggest that the relations hip between the subsidy and the export for the
purposes of Article VI:5 of the GATT 1994 could be "indirect". Furthermore, contextually, we find it
significant that, whilst Section V of the SCM Agreement, Section A of Article XVI of the GATT 1994
and Section III of the SCM Agreement all contemplate the possibility of neutral subsides having an
effect on exports, none of them use in this context the specific term "export subsidy" or one of its
synonyms.
7. Consequently, we agree with the United States that the mere fact that a countervailing duty
has been imposed does not necessarily mean that a determination has been made that there is "export
subsidization" within the meaning of Article VI:5 of the GATT 1994. A countervailing duty may be
imposed not only to counter a subsidy contingent upon export (which is what Article VI:5 of the
GATT 1994 refers to), but also a neutral subsidy, allocated in part to exports, which does not fall
within the scope of the term "export subsidization" in Article VI:5.
8. Turning to object and purpose , we agree with the United States 15 that the limited scope of
Article VI:5 of the GATT 1994 is explained by the fact that, wh ere normal value is based on sales, a
neutral subsidy may reasonably be considered to press down equally on both sides of the dumping
calculation. The dumping calculation therefore remain s unaffected by the subsidy analysis. On the
other hand, a subsidy contingent upon export may reasonably be assumed to have a direct impact on
the price or quantity of exports – and exports alone. It follows that, since the export contingent
subsidy affects prices or quantities, the anti-dum ping and countervailing dut ies would indeed be
imposed to compensate for the "same situation" (tha t is, a situation in which the subsidy, by reducing
only the export price, or increasing only the export volume, would increase the amount of dumping).
This is what justifies, for example, an adjustment in the rate of anti-dumping duty applied.

11 For example, SCM Agreement, footnote 4.
12 Appellate Body Report, EC - Export Subsidies on Sugar, paras. 279 to 282.
13 For example, United States First Written Submission, para. 397.
14 For example, United States First Written Submission, para. 398.
15 For example, United States First Written Submission, para. 397.

9. We have carefully considered China's argument that, if the normal value is constructed or
derived from an analogue country, and therefore not depressed by that part of the neutral subsidy
allocated to the domestic market of the exporting Me mber, there is no difference, in economic terms,
between an export contingent subsidy of 5 (where an adjustment is required) and a neutral subsidy of
10, of which 5 has been allocated to exports in the countervailing duty determination (where no
adjustment is made).
16 However, as well as failing from the point of view of ordinary meaning 17 and
context,18 we think this argument also fails from the point of view of object and purpose. It appears to
us to assume that the countervailing determination must be taken to mean that a neutral subsidy
allocated in part to exports has necessarily decreased the price or increased the quantity of the exports,
thus falling foul of the "same situation" pa rameter. However, under the terms of the SCM Agreement,
it is only necessary to show a subsidy, injury, and th at the subsidised imports, through the effects of
the subsidies (based particularly on evidence about the volume of subsidised imports and their effect
on prices in the importing Member), cause the injury. It is not necessary to demonstrate any causal
link between the subsidy and the export.
19 Nor is it necessary to demonstrate that the subsidy has
caused the price of the export to decrease – the enquiry is rather what effect the subsidised imports
have had on prices in the importing country. Thus, a neutral subsidy might be used, for example, to
pay for advertising, benefiting both domestic sa les and exports. This might not increase the volume
or decrease the price of exports. But it could force producers in the importing country to reduce their
prices in order to compensate for the unfairly subsidi sed advertising campaign. In such a situation,
we agree with the United States th at the legal conditions for the application of a countervailing duty
would be satisfied; and yet, at the same time, it could not be said that an anti-dumping and
countervailing duty would be imposed to compensate for the "same situation" of dumping or export
subsidization.
10. For these reasons we respectfully invite the Pane l to agree with the United States, and reject
China's claims with respect to this matter.

16 China's First Written Submission, Section VI.
17 See para. V.4 of this Oral Statement.
18 See para. V.5 of this Oral Statement.
19 Appellate Body Report, Japan - DRAMs, paras. 257 to 278.

ANNEX B-16

THIRD PARTY ORAL STATEMENT OF INDIA

(7 July 2009)

Mr. Chairman,

 India thanks the Panel for this opportunity to present its views in these panel proceedings
concerning a disagreement between China and the United States as to the conformity with the covered
agreements of four sets of anti-dumping duty and countervailing duty determinations made by the
United States. India intervenes in this case as a thir d party because of its systemic interest in the
correct interpretation and application of the Ge neral Agreement on Tariffs and Trade 1994 (GATT
1994), the Agreement on Subsidies and Counter vailing Measures (SCM Agreement) and the
Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU).

 While not taking any final position on the fact s of the case, India wishes to express its views
on some of the issues raised in this dispute.

A. THE CONCEPT OF "PUBLIC BODY" IN ARTICLE 1.1(A)(1) OF THE SCM
AGREEMENT

 One of the issues in this dispute is the concep t of 'Public Body' under Article 1.1(a)(1) of the
SCM agreement and the extent to which Government shareholding control is determinative for the
characterization of a company as a 'public body'.

 In India's view the ordinary meaning of the term 'Public body' in Article 1.1(a) (1) does not
warrant a presumption that the shareholding control or ownership by the Government in itself may
lead to a determination that a company is a 'public body' for the purpose of establishing the existence
of a financial contribution.

 India respectfully submits that a high leve l of government ownership may indeed be a
pertinent factor in determining whether an entity is a 'public body' as understood under
Article 1.1(a)(1)of the SCM Agreement. At the sa me time, however, India disagrees that the degree
of government ownership shall in itself be the ne cessary and sufficient condition for considering an
entity as a 'public body'. In previous cases where the Panel has treated an entity as a 'public body' or a
'private body' entrusted with gove rnmental functions on the basis of the extent of government
ownership, it has also looked at other relevant factors.

 The Panel in the EC - DRAMS case, while addressing the issue of whether wholly or partially
owned government banks could be c onsidered to have been entrusted with the function of providing
financial contribution, observed that, " government ownership, in and of itself, is not sufficient to
establish entrustment or direction under Ar ticle 1.1(a)(1) of the SCM Agreement ." It further stated
that, " in case of a 100 percent government owned bank, such as Woori Bank, it thus needs to be
demonstrated that the government actually exerci sed its shareholder power to direct the bank to
support to Hynix."

 In India's view in order to be closely assimila ted to the government, the link of an entity with
the government must go beyond mere ownership and it mu st perform functions or attributions that are
typical of the government.

 In US - CVD DRAMs the Appellate Body noted that 'the conduct of private bodies is
presumptively not attributable to the State' and to support this view the AB quoted that 'since
corporate entities, although owned by and in that sense subject to the control of the State, are
considered to be separate, prima-facie their conduct in carrying out their activities is not attributable
to the State unless they are exercising elements of governmental authority'.

 India considers and submits that when govern ment ownership in th e Panel's own opinion
could not be considered to be sufficient to gua rantee entrustment of governmental functions as under
Article 1.1(a) (1) (iv) of the SCM Agreement, it is even more implausible to argue that ownership
shall in itself lend to the conclusion that an entity is a 'public body'.

B. USE OF OUT OF COUNTRY BENCHMARKS TO CALCULATE THE AMOUNT OF
SUBSIDIY IN TERMS OF THE BENEFIT TO THE RECIPIENT UNDER ARTICLE 14(D)
OF THE SCM AGREEMENT

 On the question of use of out of country benchm arks to calculate the amount of subsidy, U.S.
maintains that the use of alternative market benchmarks outside China is permitted by
paragraph 15(b) of China's Protocol of Accession wh ich allows for use of out of country benchmarks
with reference to China in case of special difficulties in applying provisions contained in
Articles 14(a), 14(b), 14(c) and 14(d) of the SCM Agreement . Further the United States contends that
the fact that government of China was the predom inant owner of production of the inputs concerned
was the only factor which was taken into account. However, the USDOC also contends that they have
examined other evidence, including prices of inputs established by private parties in China and import
data, in order to arrive the conclusion that the pr ices in China were distorted because of government
of China's predominant role as supplier of the input s concerned. However, China argues that sale
prices by SOEs were not controlled by the Chinese government, and therefore did not distort the
market price.

 In India's view the Panel may have to exam ine the contentions of the Parties taking the
existing jurisprudence on Article 1.1(a)(1) of th e SCM Agreement including the facts of the case on
hand to ascertain whether China's SOEs are au thorities or 'public bodies' for the purpose of
Article 1.1(a)(1) of the SCM Agreement.

 With respect to the U.S.'s assertion that use of out of country benchmarks is also permissible
as per the SCM Agreement [Article 14(d)] and the AB decision in US - Softwood Lumber IV
concerned, India believes that the Panel may also have to consider the Appellate Body's decision in
the light of the limitations that the AB itself had expressed while giving its decision. The AB had
inter alia opined that the circumstances in which a Member may use benchmarks other than the
private prices in the country of provision are 'very limited'. It had further stated that:

"The determination of whether private prices are distorted because of the
government's predominant role in the market, as a provider of certain goods, must be
made on a case-by-case basis, according to the facts underlying each countervailing
duty investigation."
 In India's view the Panel should consider U.S. 's use of out of country benchmarks in the
present case in light of the specific limitations th at the Appellate Body had prescribed for using it
while determining the quantum of benefit under Article 14(d) of the SCM Agreement.

C. CONCURRENT IMPOSITION OF ANTIDUMPING AND COUNTERVAILING DUTY IN
CASES WHERE NORMAL VALUE IS DETE RMINED USING PRICES OR COSTS
OUTSIDE THE NON MARKET ECONOMY COUNTRY ('NME')

 India believes that the issue of "double reme dy" has not been dealt with in the past and
therefore requires careful consideration by the Pa nel. China has argued that the United States has
imposed double remedy, in the form of AD as well as CVD, in contravention of Article 19.3 and 19.4
of the SCM Agreement . According to China the United States by using NME methodology in
calculating anti-dumping duties will offset any alleged subsidies through two duties.

 Article VI:3 of GATT 1994 allows Members to apply CVD "equal to the estimated bounty or
subsidy determined to have been granted". The SCM Agreement contains detailed provisions relating
to what constitutes a subsidy, calculation of benefi t and the amount of duty that may be imposed.
Articles 19.3 and 19.4 provide that the CVD shall be in appropriate amoun t and no duty shall be
levied in excess of the amount of subsidy found to ex ist. Further Article VI:5 permits the application
of both AD and CVD on product except
 when the two duties compensate for the same situation of
dumping or export subsidization.

 India notes that whilst it is true that the Appellate Body has confirmed that the WTO
Agreement constitutes a single undertaking, the cont ext of the relevant agreements is potentially
relevant to the process of interpretation of any particular provision. Anti-dumping and Countervailing
duties are two separate remedies to counter two differen t types of situations of trade distortion. The
relevant provision which expressly limits the right of WTO Members to impose both types of duty is
Article VI:5 of GATT 1994.

 India accordingly holds the view that the lega l permissibility for the parallel application of
AD and CVD measures, and its underlying logic apply to investigations conducted both in relation to
'market economy' Members and 'non-market economy' Members.

D. THE USE OF A 'ZEROING' METHODOLOGY WHEN CALCULATING 'BENEFIT'
RECEIVED FROM INPUTS PROVIDED BY STATE OWNED ENTERPRISES ('SOES')

 Mr. Chairman, India's position against the use of "zeroing" methodology is well documented.
India was the original complainant in EC-Bed Linen case where the practice of zeroing was the first
time held to be against the provisions of the AD Agreement and believes that the existence and use of
"zeroing" under SCM Agreement too needs to be reviewed.

 In the case of OTR investigation China alleges th at the United States unlawfully created a
benefit where none existed by including only those transactions that produced a positive benefit, while
excluding those transactions, which did not confer an y benefit. According to China this methodology
cannot be reconciled with Article VI:3 of GATT 1994 as well as multiple provisions of the SCM
Agreement such as Articles 10, 19.3 and 19.4 which suggest that a CVD may be imposed only with
reference to a " product". According to China in order to determine if goods provided for less than
adequate remuneration provided a subsidy to the production or manufacture of the product as a
whole, Commerce was obliged to conduct an aggregate analysis of all the transactions during the
period of investigation.

 The SCM Agreement does not define a period of investig ation. The length of the period of
investigation is upon the discretion of the inv estigating authority. During the said period on
investigation numerous export transaction of the product may be undertaken. According to
Article VI:3 of GATT 1994 the CVD may be "equal to the estimated bounty or subsidy determined to
have been granted". Further as per Article 19.2 of the SCM Agreement the CVD can be up to the full

amount of the subsidy or less. Thus the CVD im posed should be equal or less than the amount of
subsidy found to exist during the period of investigation.

 According to Article 19.2 and 19.4 of the SCM Agreement the investigating authority is
required to calculate " a subsidy ". Further according to the Appellate Body's decision in Canada –
Aircraft a subsidy provided is when a government makes a financial contribution, which subsequently
confers a benefit. In India's view the task of the investigating authority is to determine if a financial
contribution has been made, and if so the benef it should be calculated for all transactions over the
period of investigation and not with reference to isolated transactions, disregarding other transactions.
India believes that an aggregate analysis of all transactions during the period of investigation must be
conducted to determine the "benefit", and not merely of those transactions which confer benefit.

 India appreciates this opportunity to present its views to the Panel and we are confident that
the Panel will apply an appropriate interpretative me thodology and add to its analysis in this very
important dispute, in accordance with the principles set out under Article 3.2 of the DSU.

ANNEX B-17

THIRD PARTY ORAL STATEMENT OF JAPAN

(7 July 2009)

I. INTRODUCTION

1. Mr. Chairman, and distinguished Members of th e Panel, on behalf of the Government of
Japan, I thank you for your attention to this dispute, which involves important systemic issues on the
disciplines of Article VI of the GATT 1994 and the SCM Agreement . Because time is limited,
however, Japan would like to focus on two issues today.
II. DISCUSSION

A. SIMULTANEOUS IMPOSITION OF ANTI-DUMPING AND COUNTERVAILING
DUTIES

2. The first issue is the discipline of the avoi dance of the double remedies when a Member
imposes anti-dumping and countervailing duties simultane ously. In our third party submission, Japan
explained that Article VI:5 of the GATT 1994 is the expression of the underlying concept of the
prohibition on double remedies.
3. Article VI of GATT 1994 provides for two types of trade remedy measures. One is anti-
dumping duties, which an importing Member is permitted to impose in an amount not exceeding the
margin of dumping. The other is countervailing duties, which the importing Member may impose up
to the amount of subsidies. These two trade remedy measures are aimed to counteract different types
of practices in the exporting Member. As the Appellate Body correctly found, "the concept of
dumping relates to the pricing behaviou r of exporters or foreign producers".
1 On the other hand, the
countervailing duties relate to the actions by the g overnment of the exporting Member. So far as each
measure captures their object and does not go beyond its scope, no overlap of the two measures would
occur, and accordingly, no double remedies would occur.
4. In certain situations, however, as the matte r of dumping margin calculation methodology set
forth in Article VI:1 of the GATT 1994, the dumping margin captures not only the dumping behaviour
of exporters, but also the effects of financial contribu tions by the government. In such a situation, if
the importing Member also imposes a countervailing duty, the Member would counteract the effects
of the financial contribution by the government tw ice. Such a double remedy unavoidably occurs in
the case of export subsidies. Article VI:5 of the GATT 1994 therefore explicitly prohibits the
simultaneous imposition of antidumping and countervailing duties on export subsidies.
5. Although Article VI:5 of the GATT 1994 does not prohibit the simultaneous application of
antidumping and countervailing duties in any other s ituations in which a double remedy may occur,
Japan believes that Members should give due re gards to the underlying concept to avoid the
imposition of double remedies.

1 The Appellate Body report, US – Zeroing (Japan) (WT/DS322/AB/R), para. 156.

B. SELECTION OF BENCHMARKS UNDER ARTICLE 14 OF THE SCM AGREEMENT

6. The second issue is the requirements that the SCM Agreement imposes on investigating
authorities in their selecting benchmarks to calculate the amount of subsidy.
7. Article 14 of the SCM Agreement sets forth "guidelines", which provide "the 'framework
within which this calculation is to performed'."
2 The Appellate Body found that "calculating benefit
consistently with the guidelines is mandatory". 3 It also found that "the use of the term 'guidelines' in
Article 14 suggests that paragraphs (a) through (d) should not be interpreted as 'rigid rules that purport
to contemplate every conceivable factual circumstances'". 4 In a case of the provision of goods by a
government, for example, investigating authorities ar e required to find benchmarks, which "related or
referred to, or were connected with, prevaili ng market conditions" in an exporting country, 5 as the
Appellate Body has stated, "any comparative adva ntage would … have to be taken into account and
reflected in the adjustments made to any met hod used for the determination of adequacy of
remuneration." 6 The reference to "any" method in the chapeau of Article 14, on the other hand,
"provides a WTO Member with some latitude as to the method it chooses to calculate the amount of
benefit." 7
8. The interpretation of Article 14 must also be ma de "in the light of its object and purpose" as
Article 31.1 of the Vienna Convention provides. In this connection, the Appellate Body has correctly
stated that Part V of the SCM Agreement is "aimed at striking a balance between the right to impose
countervailing duties to offset subsidization that is causing injury, and the obligations that Members
must respect in order to do so." 8 The guidelines as provided in paragraph (a) though (d) must be
interpreted in a manner that does not upset this deli cate balance. For example, an interpretation of
Article 14(d) that it requires an investigating authority to replicate market conditions prevailing in the
exporting country at a level practically too high to comply, would ignore this delicate balance.
9. Japan does not take any specific position on whether the USDOC's choices of benchmarks in
the specific factual settings in the disputed inves tigations are consistent with the provisions of
Article 14. Japan respectfully requests this Pa nel to review whether the USDOC's choices were
reasonable in light of the latitude given to investigating authorities under Article 14.
III. CONCLUSION

10. In conclusion, Japan respectfully requests the Panel to examin e carefully the facts presented
by the parties in this dispute in light of the ar guments presented in Japan's submission and this oral
statement. Japan is happy to answer any questions that the Panel or parties in dispute may have.

2 Appellate Body Report, US – Softwood Lumber IV, para. 92.
3 Appellate Body Report, US – Softwood Lumber IV, para. 92.
4 Appellate Body Report, US – Softwood Lumber IV, para. 92.
5 Appellate Body Report, US – Softwood Lumber IV, para. 116.
6 Appellate Body Report, US – Softwood Lumber IV, para. 109.
7 Appellate Body Report, Japan – DRAMs (Korea), para. 191. Also see, Appellate Body Report, US –
Softwood Lumber IV, paras. 91 and 92.
8 Appellate Body Report, US – Carbon Steel, para. 74.

ANNEX B-18

THIRD PARTY ORAL STATEMENT OF MEXICO

(7 July 2009)

1. In its submission as a third party, Mexico set out its views on the interpretation of certain
provisions of the GATT 1994, the Protocol of A ccession of the People's Republic of China (the
"Protocol"), the Anti-dumping Agreement ("AD Ag reement") and the Agreement on Subsidies and
Countervailing Measures ("SCM Agreement"), given th e systemic importance the Panel's conclusions
will have.
2. As regards the simultaneous application of anti-dumping and countervailing duties ,
Article VI.5 of the GATT 1994 prohibits the simu ltaneous application of anti-dumping duties and
countervailing duties to offset export subsidies
 insofar as both duties are intended to remedy the
"same situation". In Mexico's view, this prohibition does not apply to countervailing duties that offset
domestic subsidies because these do not result in dumping. Consequently, when countervailing duties
offset domestic subsidies, simultaneous application is consistent with the rules of the WTO.
3. In this dispute, we are not faced with a case of double remedies for the same situation. On the
contrary, in this case anti-dumping duties were imposed in order to offset the effect of dumping by
Chinese exporters, and countervailing duties to offset the effect of the domestic subsidies granted by
China, which artificially lower prices both within Chin a and for export. We are, therefore, not facing
a single situation, affected by two types of remedy, but rather two prejudicial situations offset through
the remedy applicable to each of them.
4. Moreover, we consider that if China had succeed ed in negotiating a prohi bition on applying
simultaneous duties to its products, this would have been specified in the Protocol. As this is not the
case, the Protocol does allow the combined application of anti-dumping and countervailing duties. In
addition, when the negotiators of the WTO Ag reements considered it necessary to prohibit the
simultaneous application of different mechanisms, th ey said so expressly. As there is no prohibition
on simultaneous application of duties, we must thus c onclude that such applica tion is consistent with
WTO rules.
5. As regards the provisions of Article 19.3 and 19.4 of the SCM Agreement, Mexico considers
that they do not regulate the simultaneous application of duties, therefore China's claim in this respect
has no basis at all. We consider that China has not proved prima facie violation of these provisions
by the United States. Claiming that Article 19.3 a nd Article 19.4 regulate simultaneous application is
tantamount to negating Article VI.5 of the GATT 1994 and Article 15 of the Protocol, which would
be contrary to the principle of effectiveness recognized in United States – Gasoline.
6. With regard to the surrogate country methodology in anti-dumping investigations, contrary
to what China and Norway
1 assert, Mexico considers that this methodology does not enable prices and
costs adjusted for the distorting effects of the subsid y to be obtained. We do not therefore agree with
their claim that the simultaneous applicati on of countervailing duties and anti-dumping duties
determined using this methodology is inconsistent with the WTO rules. Once again, we consider that
China has not proved prima facie violation by the United States in this respect.

1 Submission by Norway as third party, paragraph 46.

7. In an anti-dumping investigation, the authority has no way of knowing – precisely because it
is an anti-dumping investigation – whether the pr ices or costs for a surrogate country do or do not
reflect the effects of the subsidization that may have been granted in this surrogate country.
Consequently, when calculating the normal valu e in accordance with the surrogate country
methodology, the authority takes the prices or costs in that country just as they are and does not
 adjust
them to take into account these subsidies because, as we have stated, it does not know whether these
prices and cost reflect the subsidies.
8. Let us suppose that the authority is certain that the surrogate country does not grant subsidies
and, therefore, its prices and costs have not been "c ontaminated" by this concep t. Even in this case,
the prices and costs of the surrogate country woul d be "subsidy free" only as far as the surrogate
country itself is concerned, but would not reflect the prices or costs of the exporting country, already
free of the subsidies granted by the exporting country . In other words, the surrogate country
methodology would yield the prices and costs which the exporting country would have if it had a
market economy and did not grant subsidies, but doe s not reflect the prices and costs of the exporting
country already adjusted upwards in order to offset the subsidies granted by this exporting country.
9. Regarding the question of " public body ", China bases itself on United States – DRAMs to
claim that for a company owned by the State to be termed a "public body", the requirements in the
Draft Articles
2 of the United Nations International Law Commission must be met, namely (1) the
enterprise must be authorized by th e State to exercise functions normally exercised by the State, and
(2) the conduct of the entity must concern governmental activities.
10. Mexico does not agree. The definition of the term "public body" was not addressed in United
States – DRAMs. In this case, the Appellate Body examin ed whether an act by a private entity could
be considered as being instructed by a government to make a financial contribution and based itself on
the Draft Articles. At no time did it determine whether the public character of a body depended on
the form in which the body acted . For Mexico, the action of the entity is not relevant for the purpose
of determining whether this entity is a public body. In any event, ascertaining whether or not it acted
consistently with market principles could be im portant when concluding whether a benefit was
granted, but this is irrespective of the public character of the body.
11. Mexico shares the view of Argentina, Au stralia, Canada and Japan that, as found in Korea –
Commercial Vessels, an entity is a public body when it is controlled by the government or by another
public entity. The fact that the government has c ontrol of a company is sufficient justification to
consider it to be a "public body", provided that there is proof 3 that the government has in practice
exercised control over the enterprise rather than playing the role of a passive investor.
12. Obviously, the degree of control is not always directly in proportion to the degree of
ownership. This depends on the way in which the shares have been organized. 4 Nevertheless, China
does not question the United States determination that the Chinese Government controls certain
companies because it holds the majority . What China questions is that the determination that the
Chinese Government controls these companies has led to a subsequent determination that these
companies are "public bodies" within the meaning of the SCM Agreement. To put it another way,
China agrees that these companies are controlled by its Government, but claims that this does not

2 Draft Articles on Responsibility of States for Internationally Wrongful Acts, with Commentaries.
3 For example, the government has appointed the members of the Board of Directors, the chief
executives, the enterprise's activities and/or budget are subject to government approval, or the State enterprises
must follow industrial development plans that set growth targets. Any of these fact ors by itself suffices to
determine this status.
4 In some schemes, majority ownership may result in minority control, or vice versa (as in the case of
the so-called "golden shares").

make them "public bodies". So the key point is whether the fact that the Government controls a
company suffices to consider th e company to be a "public body " according to the SCM Agreement.
We recall that, in Korea – Commercial Vessels , control by the government was indeed sufficient to
consider a company to be a "public body".
13. The purpose of Article 1.1(a)(1)(iii) of the SCM Agreement is to prevent the granting of
financial contributions in the form of goods or services – through entities that are not "government"
entities – remaining outside the scope of the SCM Agreement. Consequently, in our view the
definition to be adopted by this Panel in relation to the term "public body" must be sufficiently broad
to enable Article 1.1(a)(1)(iii) of the SCM Agreement to be applied to State enterprises which produce
goods and/or services.
14. The standard proposed by China, Brazil, Norway and Saudi Arabia would prevent
Article 1.1(a)(1)(iii) of the SCM Agreement from being applied to State enterprises which produce
goods or services, which is contrary to the purpose of this Article. In effect, such enterprises would
be unable to meet the criteria of being established by "the law of the State to exercise functions of a
public character normally exercised by State organs"; to "perform functions and exercise powers of a
governmental character"; to "exercise powers vested in it by the government to … regulate, restrain,
supervise or control the conduct of individuals"; or that their sales of goods should not be
governmental activities "unconnected with private or commercial activity". Because it cannot fulfil
these criteria according to the standard proposed by these countries, Article 1.1(a)(1)(iii) of the
SCM Agreement could not apply to State enterp rises which produce goods or services, which is
unacceptable.
15. We note that Saudi Arabia holds that in Canada – Dairy , the Appellate Body interpreted
"public body" in accordance with Article 9.1(a) of the Agreement on Agriculture and that this is the
line of reasoning that the Panel should follow in interpreting the term "public body" under the
SCM Agreement. Mexico does not agree. Th e fact that an expression appears in several
WTO Agreements does not imply that its meaning is the same in all the Agreements. According to
the rules of interpretation adopted by the WTO, if the ordinary meaning of a term is not conclusive,
the context and purpose of the rule in which it appears must be taken into account. For example, the
words "like product" have different meanings in Articles 2.1, 3.1 and 5.8 of the AD Agreement.
Similarly, "like product" has other meanings in Ar ticles I, III, IX and XIII of the GATT 1994. If we
accept Saudi Arabia's approach, the term "like product" would have to be interpreted in the same way
in all these provisions, irrespective of the context and purpose of each provision.
16. To summarize, in Mexico's view an en tity is a "public body" according to the
SCM Agreement if: (1) the government controls the entity (because it holds the majority); and
(2) there is evidence that the government has not played the role of passive investor but has in practice
exercised control. Likewise, we consider that an y definition of "public body" adopted by this Panel
should be sufficiently broad to enable Article 1.1( a)(1)(iii) of the SCM Agreement to apply to State
enterprises supplying goods and services.
17. As regards the analysis of pass-through of the benefit , Mexico does not agree with China.
As can be seen from several precedents in both the GATT and the WTO 5, it is clear that this analysis
is only needed when the subsidies are given for the production of a good that is an input for the
product under investigation (in other words, upstream). As in this case the subsidies were granted for
the production of the goods investigated themsel ves (the industries which produced the exported
goods received subsidies in the form of inputs at pr ices lower than the market price), the pass-through
analysis was not required.

5 United States – Pork; United States – Softwood Lumber IV; and Mexico – Olive Oil.

18. Regarding the determination of the existence of benefit for the trading companies, it should
be pointed out that the Appellate Body determined
6 that a financial contribution may be granted to a
company indirectly. In this case, because the private trading companies were only the vehicle through
which the contribution reached the companies under investigation, they received the contribution
indirectly. It was thus not necessary to undertake a pass-through analysis.
19. Concerning the benchmark used by the United States , Mexico considers that the standard
applicable is that indicated by the Appellate Body in United States – Softwood Lumber IV , according
to which an investigating authority may indeed use a reference point other than prices in the country
under investigation provided that it is determined that the prices are distorted by the role played by the
government. Consequently, in order to determin e whether the benchmark is contrary to the
WTO rules, the essential factor to be analysed is the presence or absence of distortions caused by the
role of the Chinese Government. The points raised by China in order to claim that the benchmark was
contrary to the WTO rules, however, are in no way related to this essential factor.
20. Mexico considers that, if the United States had sufficient evidence that the Government
played a predominant role in Chinese markets, then the intern al prices of suppliers in China could
be rejected as a point of reference when determining the existence of the benefit. As we do not know
whether this evidence existed, Mexico cannot e xpress an opinion on whether in this case the
United States could use this benchmark or whether it was properly determined.
21. Mexico thanks the Panel for this opportunity to express the foregoing comments.

6 United States – Countervailing Measures on certain EC Products.

ANNEX B-19

THIRD PARTY ORAL STATEMENT OF SAUDI ARABIA

(7 July 2009)

Mr. Chairman, members of the Panel,

1. The Kingdom of Saudi Arabia welcomes this opportunity to express our views on some of the
key systemic issues raised in this dispute. We a ffirm all of the positions that were set out in our
written Third Party submission, although we need not repeat them today. Instead, we wish to reiterate
some of the essential points that the Panel shoul d keep in mind when interpreting the relevant
provisions of the SCM Agreement.

I. A PUBLIC BODY IS AN ENTITY THAT IS VESTED WITH GOVERNMENTAL
AUTHORITY AND FUNCTIONS LIKE A GOVERNMENTAL ENTITY

2. We begin with the "public body" issue. For the reasons explained in our Third Party
submission, the Kingdom considers that for an entity to be considered a "public body", it must:

• be vested with governmental authority, thus allowing the government to control its activities;
and

• function as a governmental entity that serves a public policy objective rather than a
commercial objective.

3. It follows from this basic proposition that the mere fact of State ownership – even majority
ownership – cannot determine whether an enterprise is a public body.

4. In its ordinary meaning, "public body" denotes a governmental function , not merely State
ownership. The Spanish version of the SCM Agreem ent, which is equally authentic, is instructive on
the ordinary meaning of "public body." The Span ish version uses the term "organismo público" to
refer a "public body" in Article 1.1. The Appellate Body has interpreted this term in the context of the
Agreement on Agriculture to mean an entity that ex ercises powers vested in it by a "government" for
the purpose of performing functions of a "governmental" character. The Appellate Body has made
clear that there is a very close relationship betw een the subsidies disciplines of the Agreement on
Agriculture and the SCM Agreement.

5. The relevant question is whether there is an ything in the context of the SCM Agreement that
would argue in favour of a different, broader interp retation to be given to the same terms based on
mere State ownership. The answer is demonstrably no.

6. Article 1.1 of the SCM Agreement equa tes "public body" with "government" when it
expressly references both by the use of the term "government." This common reference is consistent
with an understanding that both terms (govern ment and public body) share the same essential
characteristics of entities that possess or act under governmental authority and perform governmental
functions. It is consistent with the conclusion that the drafters considered the terms to be equivalent −
the two terms refer to different aspects of governmental authority.

7. The SCM Agreement provides that public bodies can entrust or direct private bodies to
provide a financial contribution. That means that public bodies, by definition, are vested with
governmental authority. A private body cannot be "e ntrusted or directed" by any entity that does not
have governmental authority itself.

8. There is no support in the SCM Agreement or in the other WTO Agreements for an
interpretation of the term "public body" based on mere government ownership. Those who claim
otherwise have essentially advanced a single argument to support their position: that this Panel should
follow the approach supposedly taken by the Panel in Korea – Commercial Vessels . As this is the
only Panel ruling on the "public body" issue in the SCM context, it is of critical importance to be clear
about what the Korea – Commercial Vessels Panel did – and did not – decide.

9. First, the criterion actually applied by the Korea – Commercial Vessels Panel was "control",
not ownership. The Panel did not find that an entity owned by the government was necessarily a
public body. None of the Korean entities were considered by that Panel to be public bodies merely by
virtue of governmental ownership.

10. Second, in applying the test of government "control", the Korea – Commercial Vessels Panel
considered a range of factors, including – but by no means limited to – government ownership. Other
equally relevant factors taken into consideration by the Panel included the extent of government
involvement in the operational policy of the entities, in their day-to-day operations, and in the
direction of their investments. All of this the Panel considered relevant under the test of "control."

11. Third, it is not correct to say that the Panel rejected the relevance of the public policy
objective when examining an entity's "public body" na ture. The Panel did not accept the argument of
Korea that where a specific transaction was comme rcially reasonable and not motivated by a public
policy objective, the providing entity was not a "p ublic body." The Panel correctly noted that the
question of whether an entity was a "public body" went to the nature of the entity, and was not
determined on a case-by-case basis, or whether the pa rticular financial contribution was commercially
reasonable.

12. Indeed, the Panel was right to point out that a public policy objective alone does not suffice.
It is the combination of a governmental authority with the governmental function and public policy
objective of the entity that determines the entity's nature as a "public body." This is consistent with the
two-part test that the Kingdom has offered for the identification of a public body and is in line with
the Appellate Body's definition of this term.

13. Mr. Chairman, the determination of whet her an entity is a public body is of crucial
importance to the first part of the definition of a subsidy - whether a financial contribution has been
provided by the government. The next issue of systemic importance that the Kingdom wishes to
highlight today concerns the second part of the subsidy definition – the determination of benefit.

II. THE USE OF ALTERNATIVE BENCHMARKS FOR THE DETERMINATION OF
BENEFIT IS PERMISSIBLE ONLY IN EXCEPTIONAL CIRCUMSTANCES, AND IS
SUBJECT TO STRICT DISCIPLINES

14. Article 14(d) of the SCM Agreement is quite clear in establishing that the principal
benchmark for calculating a benefit is the domestic market price in the country of provision. The use
of an alternative benchmark is permissible onl y in very exceptional circumstances and only after
actual distortion of the domestic market is found. Presumptions based on indirect evidence or on
theoretical economic deductions are insufficient to meet this requirement. This includes any

presumption of distortion based on the mere fact that the government is a significant supplier or has a
major presence in the market in question.

15. If exceptional circumstances necessitating the use of an alternative benchmark have been
established, then the cost of production of the g oods in the country of provision serves as the most
appropriate alternative to domestic market prices. Fi rst, the cost of production is a direct result of the
"prevailing market conditions… in the country of provision", consistent with the language of
Article 14(d). Second, cost of production avoids th e inevitable practical pitfalls of an out-of-country
benchmark. The cost of production benchmark is not only the most reliable possible alternative, but it
has also been supported and endorsed in previous Appellate Body jurisprudence.

III. AN INVESTIGATING AUTHORITY MUST BASE LOAN BENCHMARKS ON THE
ACTUAL COMMERCIAL BORROWING EXPERIENCE OF A FIRM

16. With respect to the loan benchmark under Article 14(b), the Kingdom is of the view that a
"comparable commercial loan that the firm could actually obtain" should be a loan that is expressed in
the same currency, and subject to the same generally-applicable fina ncial regulations of the country
providing the government loan. By this exp licit standard, constructed out-of-country loan
benchmarks that are only theoretically available are not a permissible benchmark under Article 14(b).

IV. IN CASES OF ALLEGED SUBSIDIZED INPUTS, THE INVESTIGATING
AUTHORITY MUST CONDUCT A "PASS-THROUGH" ANALYSIS TO
DETERMINE IF THE DOWNSTREAM PRODUCER HAS RECEIVED A BENEFIT

17. Finally, we would like to comment briefly on the issue of "pass-through." This issue relates
to a basic principle of WTO disciplines with r espect to the use of countervailing measures. A
countervailing duty may be levied on a product only wh ere an investigating authority determines that
a subsidy has been granted, directly or indirectly, on the product subject to the duty.

18. The Kingdom wishes to underline the fundamental rule that in case of "arm's length" sales
between unrelated parties, the Agreement do es not permit an investigating authority to presume that
all or part of the benefit has been passed through.

19. Mr. Chairman, this concludes the Kingdom's in tervention at today's meeting. We would be
pleased to respond to any questions the Panel or any of the parties may have for us. Thank you.

ANNEX B-20

THIRD PARTY ORAL STATEMENT OF TURKEY

(7 June 2009)

Esteemed Panelists,

Distinguished Representatives of the Parties to the Present Panel Hearing,

1. I am glad to present you with the views of Turkey at this stage of the panel proceedings
regarding the complaint launched by People's Repub lic of China. I will summarize Turkish position
on the subject, to the extent possible, by refraini ng from repetition of details presented in our written
submission.

2. Although the dispute covers many issues, I will focus on three major subjects namely "public
body determination", use of out-of country benchmark" and "pass through of a benefit" arise from this
dispute.

3. Article 1.1(a)(1) of the Agreement on Subsidies and Countervailing Measures (SCM
Agreement) contains two separate terms "government " and "public body". Therefore in order to
accept that a subsidy is granted, it is clear that a financial contribution must be provided either by
"government" or a "public body".

4. Since the SCM Agreement used two terms, in Turkey's view, the meanings of these terms
should be construed differently. However, SCM Agreement does not provide any definition with
regard to these two terms. Therefore, what constitutes "government" or "public body" under the
article in question needs to be interpreted. This interpretation should be made in accordance with the
ordinary meanings taken into account in the cont ext, object and the purpose of the SCM Agreement
pursuant to Article 31.1 of the Vienna Convention.

5. China argued that in order to accept an entity as a public body, both an entity should perform
governmental functions and the powers to perform these functions should be vested by the state.
However China's claim to take governmental charact er as a prerequisite to determine an entity as a
public body narrows the actual meaning of the "public body" and equates it to "government". Such an
interpretation would annul the di stinction between the two term s and render the "public body"
meaningless.

6. In Turkey's views, Paragraph 5(c)(i) of th e Annex on Financial Services to the GATS is not
the relevant legal basis to interpret the term public body used in the SCM Agreement. Firstly, while
the SCM Agreement states "public body", the refe rred paragraph of the Annex in question provides
the definition of "public entity", so it is clear that these two terms are not the same. Secondly, it is
clear from the "For the purpose of this Annex…" expression mentioned in the same paragraph that,
the "public entity" definition is only for the scope of the Annex in question.

7. On the other hand Turkey also considers ILC Articles as an irrelevant legal basis for
interpreting the term "public body" for several re asons. First of all ILC Articles are not among the
annexes of the Marrakesh Agreements . In addition, the scope and the application of the ILC Articles

are totally distinct from the SCM Agreement. Furthermore due to the lex specialis clause contained in
the Article 55 of the ILC Articles, it is not possible to apply the ILC Articles to this dispute.

8. Consequently, Turkey is of the view that "government control" criterion set forth by the
Korea-Commercial Vessels Panel is the most proper criteria for determining whether an entity is a
public body and Turkey also considers that the owne rship is the main indicator of the control of an
entity.

9. During its accession to the WTO China acknowledge d the fact that it had a centrally-planned
economy and undertook some commitments in its Accession Protocol including commitments on the
application of trade remedies by other Members.

10. Specifically, in the Article 15(b) of the Acce ssion Protocol, China accepted to be subject to
special rules with regard to subsidies. It is clear from this article that, the Members are allowed to use
appropriate ways to ensure applicability of the rules against subsidies.

11. Besides, Turkey is of the view that the A ccession Protocol is not the only source which allows
using external benchmark. Pursuant to Article 14 of the SCM Agreement external benchmarks may
be used in some cases.

12. Similarly, the Appellate Body also ruled that, even for market economies the primary
benchmarks provided in the Article 14(d) of the SCM Agreement may not work. If the investigating
authority determines that private prices in that co untry are distorted because of the predominant role
of the government, it may use another benchmar k. Turkey considers that in cases where the
prevailing market conditions in a Member do not pr ovide an appropriate base to make a meaningful
comparison to determine whether a benefit has b een conferred due to the predominance of the
government in the economy, the rules of the SCM Agreement will still be applicable.

13. In the Accession Protocol, China has al ready accepted that the prevailing terms and
conditions in China may not always be available as appropriate benchmarks. If the investigating
authority uses the private prices as the benchmark while the predominance of the government is a fact,
benefit will probably be artificially low or even zero. As a result, the full extent of the subsidy would
not be captured and the rights of Members to "fully offset, by applying countervailing duties, the
effect of the subsidy as permitted by the SCM Agreement" would be injured.

14. In Turkey's view, the SCM Agreement does not require that the recipients of a benefit and a
financial contribution should be the same. This approach is also in line with the reasoning stated in
Mexico - Olive Oil Panel Report. Acceptance of the opposite would lead to the circumvention of the
disciplines on subsidization by including a private party to the chain.

15. Turkey wishes to thank the Panel for the opportunity to submit its views during this hearing.