UNITED STATES – CONTINUED DUMPING AND SUBSIDY OFFSET ACT OF
Document: 2000 AB-2002-7 Report of the Appellate Body
Date: 16 January 2003
Document codes: WT/DS217/AB/R; WT/DS234/AB/R
Complainant: Canada, Mexico
Respondent: U.S.
Third parties: Argentina, Australia, Brazil, Costa Rica, EU, Hong Kong, India, Indonesia, Israel, Japan, South Korea, Norway, Thailand
Dispute stage: Implementation & Compliance
Agreements cited: Art. 5.4  Anti-dumpingArt. 5  Subsidies and Countervailing Measures (SCM)Art. VI  GATT 1994Art. 8, 18  Anti-dumpingArt. 11.4, 18, 32  Subsidies and Countervailing Measures (SCM)Art. XVI  Agreement Establishing the World Trade OrganizationArt. 10  Subsidies and Countervailing Measures (SCM)Art. X  GATT 1994Art. 1  Anti-dumping

UNITED STATES – CONTINUED DUMPING AND SUBSIDY OFFSET ACT OF
2000
AB-2002-7
Report of the Appellate Body

APPELLATE BODY
 2000
United States – Appellant
Australia – Appellee
Brazil – Appellee
Canada – Appellee
Chile – Appellee
European Communities – Appellee
India – Appellee
Indonesia – Appellee
Japan – Appellee
Korea – Appellee
Mexico – Appellee
Thailand – Appellee
Argentina – Third Participant
Costa Rica – Third Participant
Hong Kong, China – Third Participant
Israel – Third Participant
Norway – Third Participant
AB-2002-7
Present:
Sacerdoti, Presiding Member
Baptista, Member
Lockhart, Member
I. Introduction
1. The United States appeals certain issues of law and legal interpretations developed in the
Panel Report, United States – Continued Dumping and Subsidy Offset Act 2000 (the "Panel
Report").
1
2. On 12 July 2001, Australia, Brazil, Chile, the European Communities, India, Indonesia,
Japan, Korea and Thailand requested the establishment of a panel to examine the WTO-consistency of
the United States Continued Dumping and Subsidy Offset Act of 2000 (the "CDSOA").

2 A t i t s
meeting of 23 August 2001, the Dispute Settlement Body (the "DSB") established the Panel.
3. On 10 August 2001, Canada and Mexico separately requested the establishment of a panel
with respect to the same matter.
3 At its meeting of 10 September 2001, the DSB agreed to those

1, , 16 September 2002.
2 Referred to in the Panel Report also as the "Byrd Amendment" and the "Offset Act".
3 and

requests and, pursuant to Article 9.1 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes (the "DSU"), referred the matter to the Panel established on 23 August 2001.
4
4. Australia, Brazil, Canada, Chile, the Europe an Communities, India, Indonesia, Japan, Korea,
Mexico and Thailand (the "Complaining Parties") argued before the Panel that the CDSOA is
inconsistent with Articles 18.1 of the Agreement on Implementation of Article VI of the General
Agreement on Tariffs and Trade 1994 (the " Anti-Dumping Agreement "), in conjunction with
Article VI:2 of the General Agreement on Tariffs and Trade 1994 (the "GATT 1994"), and Article 1
of the Anti-Dumping Agreement ; Article 32.1 of the Agreement on Subsidies and Countervailing
Measures (the " SCM Agreement "), in conjunction with Article VI:3 of the GATT 1994 and
Articles 4.10, 7.9 and 10 of the SCM Agreement; Article 5.4 of the Anti-Dumping Agreement and
Article 11.4 of the SCM Agreement; and Article XVI:4 of the Marrakesh Agreement Establishing
the World Trade Organization (the "WTO Agreement"), Article 18.4 of the Anti-Dumping Agreement
and Article 32.5 of the SCM Agreement. In addition, with the exception of Australia, the
Complaining Parties contended that the CDSOA is in violation of Article X:3(a) of the GATT 1994,
Article 8 of the Anti-Dumping Agreement and Article 18 of the SCM Agreement. Furthermore, in a
separate claim, Mexico argued that the CDSOA is in violation of Article 5(b) of the SCM Agreement,
and India and Indonesia asserted that the CDSOA undermines Article 15 of the Anti-Dumping
Agreement.
5. In the Panel Report, circulated to the Members of the World Trade Organization (the "WTO")
on 16 September 2002, the Panel found that the CDSOA is inconsistent with Articles 5.4, 18.1
and 18.4 of the Anti-Dumping Agreement; Articles 11.4, 32.1 and 32.5 of the SCM Agreement ;
Articles VI:2 and VI:3 of the GATT 1994; and Article XVI:4 of the WTO Agreement.

5
6. The Panel concluded that the CDSOA nullifies or impairs benefits accruing to the
Complaining Parties under the Anti-Dumping Agreement, the SCM Agreement and the GATT 1994
to the extent that the CDSOA is inconsistent with those agreements. 6 Consequently, the Panel
recommended that the DSB request the United States to bring the CDSOA into conformity with its
obligations under the Anti-Dumping Agreement, the SCM Agreement and the GATT 1994.

7

4WT/DS234/14.
5Panel Report, para. 8.1.
6Ibid., para. 8.4.
7Ibid., para. 8.5.

7. On 18 October 2002, the United States notified the DSB of its intention to appeal certain
issues of law covered in the Panel Report and certain legal interpretations developed by the Panel,
pursuant to paragraph 4 of Article 16 of the DSU, and filed a Notice of Appeal pursuant to Rule 20 of
the Working Procedures for Appellate Review (the " Working Procedures").

8 On 28 October 2002,
the United States filed its appellant's submission.
9 On 12 November 2002, Australia, Brazil, Canada,
Korea and Mexico each filed a separate appellee's submission.
10 The European Communities, India,
Indonesia and Thailand filed a joint appellees' submission. Japan and Chile also filed a joint
appellees' submission. On the same day, Argentina, Hong Kong, China and Norway each filed a third
participant's submission.

11 Israel and Costa Rica notified the Appellate Body of their intention to
appear at the oral hearing as third participants.
12
8. In a letter dated 22 November 2002, the Director of the Appellate Body Secretariat informed
the participants and third participants that, in accordance with Rule 13 of the Working Procedures,
the Appellate Body had selected Mr. Giorgio Sacerdoti to replace Mr. A.V. Ganesan as Presiding
Member of the Division hearing this appeal. The latter was prevented from continuing to serve on the
Division for serious personal reasons.
9. On 5 November 2002, Canada filed a request for a preliminary ruling in respect of
certain questions of fact and law that it claime d were improperly included in the United States'
appellant's submission, alleging that they were no t included in the Notice of Appeal. The following
day, we invited the United States and the other participants and third participants to comment on the
issues raised by Canada in its request for a preliminary ruling, and set 8 November 2002 as the
deadline for submission of comments. We received comments from the European Communities,
India, Indonesia and Thailand (as joint appellees), Japan and the United States. By letter of
8 November 2002, the Director of the Appellate Body Secretariat informed the participants and third
participants that we had decided not to issue a preliminary ruling, nor to make findings, at that stage,
on the substance of Canada's submissions.

8WT/DS217/8, WT/DS234/16, 22 October 2002.
9Pursuant to Rule 21(1) of the Working Procedures.
10Pursuant to Rule 22(1) of the Working Procedures.
11Pursuant to Rule 24(1) of the Working Procedures.
12Pursuant to Rule 24(2) of the Working Procedures.

10. The oral hearing was held on 28 and 29 November 2002.
13 The participants and third
participants presented oral arguments and responded to questions put to them by the Members of the
Appellate Body Division hearing the appeal.
II. Factual Background
11. The CDSOA was enacted on 28 October 2000 as part of the Agriculture, Rural Development,
Food and Drug Administration and Related Agencies Appropriations Act, 2001.

14 The CDSOA
amended Title VII of the Tariff Act of 1930 (the "Tariff Act"), entitled "Countervailing and
Antidumping Duties", by adding a new Secti on 754 entitled "Continued Dumping and Subsidy
Offset".
15
12. The CDSOA provides that the United States Commissioner of Customs ("Customs") shall
distribute, on an annual basis, duties assessed pursuant to a countervailing duty order, an anti-
dumping duty order, or a finding under the United States Antidumping Act of 1921, to "affected
domestic producers" for "qualifying expenditures".

16 An "affected domestic producer" is defined as a
domestic producer that: (a) was a petitioner or interested party in support of the petition with respect
to which an anti-dumping duty order, a finding under the Antidumping Act of 1921, or a
countervailing duty order has been entered; and (b) remains in operation.

17 The term "qualifying
expenditures" refers to expenditures on specific items identified in the CDSOA, which were incurred

13Pursuant to Rule 27 of the Working Procedures.
14Public Law 106-387, 114 Stat. 1549.
15Section 754 of the Tariff Act corresponds to Section 1675c of Title 19 of the United States Code.
16The CDSOA provides that: "[d]uties assessed pursuant to a countervailing duty order, an antidumping
duty order, or a finding under the Antidumping Act of 1921 shall be distributed on an annual basis under this
section to the affected domestic producers for qualifying expenditures. Such distribution shall be known as 'the
continued dumping and subsidy offset'." (Section 754(a) of the Tariff Act)
17Section 754(b)(1) of the Tariff Act defines "affected domestic producer" as:
… any manufacturer, producer, farmer, rancher, or worker representative
(including associations of such persons) that –
(A) was a petitioner or interested party in support of the petition
with respect to which an anti-dumping duty order, a finding under
the Antidumping Act of 1921, or a countervailing duty order has
been entered, and
(B) remains in operation.
Companies, businesses, or persons that have ceased the production of the
product covered by the order or finding or who have been acquired by a
company or business that is related to a company that opposed the
investigation shall not be an affected domestic producer.

after the issuance of the anti-dumping duty fi nding, or order or countervailing duty order.
18 Those
expenditures must relate to the production of the same product that is subject to the anti-dumping or
countervailing duty order, with the exception of e xpenses incurred by associations which must relate
to the same case.

19
13. The CDSOA, together with its implementing re gulations issued by Customs, provides that
Customs shall establish a special account and a clearing account with respect to each countervailing
duty order, anti-dumping duty order, or a finding under the Antidumping Act of 1921.

20 All anti-
dumping and countervailing duties assessed under such orders or findings are first deposited into a
"clearing account".

21 Transfers from "clearing accounts" to "special accounts" are made by Customs
throughout the fiscal year.
22 Such transfers are made only after the entries
23 in question that are
subject to a countervailing duty order or an anti-dumping order or finding have been properly
"liquidated".

24 Thus, when, and only when, the entries have been liquidated, will the proceeds be
transferred to a special account. Only once there are funds in a special account (not a clearing

18Section 754(b)(4) of the Tariff Act defines the term "qualifying expenditure" as "an expenditure
incurred after the issuance of the antidumping duty finding or order or countervailing duty order in any of the
following categories:
(A) Manufacturing facilities.
(B) Equipment.
(C) Research and development.
(D) Personnel training.
(E) Acquisition of technology.
(F) Health care benefits to employees paid for by the employer.
(G) Pension benefits to employees paid for by the employer.
(H) Environmental equipment, training, or technology.
(I) Acquisition of raw materials and other inputs.
(J) Working capital or other funds needed to maintain production."
19Section 159.61(c) of Title 19, Code of Federal Regulations ("C.F.R.").
20Section 754(e)(1) of the Tariff Act, 19 C.F.R. § 159.64(a)(1)(i).
2119 C.F.R. § 159.64(a)(2).
2219 C.F.R. § 159.64(b)(1)(ii).
23Customs defines "entry" as the process of presenting documentation for clearing goods through
customs following the arrival of the goods at a port. (See United States Import Requirements at
www.customs.gov/impoexpo/import).
2419 C.F.R. § 159.64(b)(1)(ii). The United States explained in its first written submission to the Panel
that "[u]nder United States' law, liquidation is defined as the 'final computation or ascertainment of duties' – it is
Customs' determination of the grand total to be paid by the importer." (United States' first written submission to
the Panel, footnote 12.) Generally speaking, it may be said therefore that the United States uses a
"retrospective" assessment system under which final liability for antidumping and countervailing duties is
determined only after the goods have been imported. (See "Antidumping Duties; Countervailing Duties",
United States Federal Register, 19 May 1997 (Volume 62, Number 96), p. 27392)

account), can distributions to domestic producers under the CDSOA be made.
25 Therefore, if
liquidation of entries has been enjoined, for instan ce, by a court—perhaps pending judicial review of
the determination of dumping or countervailable subsidization—or if liquidation of entries has been
suspended due to an administrative review of those entries, the relevant special account will be empty
and no distribution can be made to domestic producers under the CDSOA.

26
14. Pursuant to the CDSOA, Customs shall distribute all funds (including all interest earned on
the funds) from the assessed duties received in the preceding fiscal year (and contained in the special
accounts) to each affected domestic producer based on a certification by the affected domestic
producer that it is eligible to receive the distribution and desires to receive a distribution for qualifying
expenditures incurred since the issuance of the order or finding.

27 Funds deposited in each special
account during each fiscal year are to be distributed no later than 60 days after the beginning of the
following fiscal year.

28 There is no statutory or regulatory requirement as to how a disbursement is to
be spent.
29 The Panel found that CDSOA distributions to "affected domestic producers" made as of
December 2001 totalled over $206 million.
30
III. Arguments of the Participants and the Third Participants
A. United States – Appellant
1. Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the
SCM Agreement
15. The United States claims that the Panel erred in finding that the CDSOA is a specific action
against dumping and subsidization under Article 18.1 of the Anti-Dumping Agreement and
Article 32.1 of the SCM Agreement.
16. According to the United States, the Panel misapplied the "constituent elements" test as
developed by the Appellate Body in US – 1916 Act . For the United States, the language of the
CDSOA does not include the constituent elements of dumping or of a subsidy, and these constituent

2519 C.F.R. § 159.64(b)(1)(i).
26United States' first written submission to the Panel, para. 13.
27Sections 754(d)(2) and (3) of the Tariff Act.
28Section 754(c) of the Tariff Act.
29"Distribution of Continued Dumping and Subsidy Offset to Affected Domestic Producers", United
States Federal Register, 21 September 2001 (Volume 66, Number 184), p. 48549. See also Panel Report,
para. 7.37.
30Panel Report, para. 7.44.

elements do not form part of the essential components of the statute. The United States maintains
that, unlike the measure at issue in US – 1916 Act , the CDSOA by its terms does not impose
measures on dumped or subsidized products, or impose any form of liability on importers/foreign
producers/exporters when dumping or subsidization is found, and dumping or subsidization is not the
trigger for application of the CDSOA. Rather, the United States argues, the CDSOA provides for the
distribution of money ("triggered" by an applicant's qualification as an "affected domestic producer")
from the United States government to domestic producers.
17. The United States also submits that the CDS OA is not action "in response" to dumping or a
subsidy. The United States characterizes the Panel's approach as suggesting that the CDSOA could
be perceived as action in response to "injury", which is separate from "dumping" or a "subsidy".
According to the United States, the Panel erred in finding that, because the payments follow from the
collection of anti-dumping or countervailing duties, the payments may be made only in situations
presenting the constituent elements of dumping or of a subsidy. The United States claims that, under
the Panel's approach, any expenditure of the collected duties would be specific action against
dumping or subsidies. The United States adds that, if the collected duties were spent for international
emergency relief, according to the Panel's reasoning they would be specific action against dumping or
subsidies, because they would be made only wher e the constituent elements of dumping or of a
subsidy were present. The United States maintains that the only connection that the CDSOA has
with anti-dumping and countervailing duty orders is that the CDSOA limits availability of CDSOA
offset payments to the universe of products covered by an existing or revoked order, and to "affected
domestic producers", namely those who supported the investigation and still produce the particular
product. According to the United States, CDSOA payments can and do occur at times when no order
continues to exist or even when no dumping or subsidization is currently occurring. Thus, the United
States concludes that the Panel's conclusion that there is a "clear, direct and unavoidable
connection"

31 between the determination of dumping or of a subsidy and CDSOA offset payments is
incorrect. Rather, the United States argues that th e CDSOA is an exercise of the intrinsic right of a
WTO Member to provide subsidies.
18. The United States also claims that the Panel failed to read Article 18.1 of the Anti-Dumping
Agreement and Article 32.1 of the SCM Agreement in conjunction with footnotes 24 and 56 thereto
to determine the meaning of "specific action". According to the United States, the footnotes to
Articles 18.1 and 32.1 are an integral part of the Articles' texts and inform the meaning of "specific
action". The effect of these footnotes is to permit action involving dumping or subsidies that is

31Panel Report, para. 7.21.

consistent with the GATT 1994 provisions and that is not addressed by the provisions on dumping or
countervailable subsidies in Article VI of the GATT 1994. The United States argues that the Panel
should have interpreted Articles 18.1 and 32.1 in a manner so as to: (1) give meaning to the footnotes'
express permission to take "actions" authorized under other relevant provisions of the WTO
Agreement; and (2) avoid the creation of any limitations on the sovereign power over fiscal matters
not otherwise specifically proscribed by the WTO Agreements. In the present case, the Panel
examined the CDSOA under the SCM Agreement and, according to the United States, did not find
the CDSOA to violate any limitations set forth in th at Agreement. The United States concludes that
the CDSOA is covered by the footnotes 24 and 56, and, therefore, the CDSOA is not a specific action
prohibited by Article 18.1 of the Anti-Dumping Agreement or Article 32.1 of the SCM Agreement.
19. The United States also claims that the Panel failed to consider the ordinary meaning of the
term "against" in the context in which it is used or in the light of the object and purpose of the Anti-
Dumping Agreement and Article VI of the GATT 1994. With respect to the determination of the
Panel that the CDSOA operates against dumping or a subsidy, in the sense that it has an adverse
bearing on dumping or subsidization, the United States argues that an action can be characterized as
operating "against" dumping within the meaning of Article 18.1 of the Anti-Dumping Agreement, or
"against" a subsidy within the meaning of Article 32.1 of the SCM Agreement, only if it applies
directly to the dumped or subsidized imported good or an entity responsible for the dumped or
subsidized imported goods, and if it burdens the dumped or subsidized imported good, or an entity
responsible for the dumped or subsidized imported good. The United States says that the Panel erred
by finding that the term "against" in Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of
the SCM Agreement encompasses any form of adverse bearing, whether it be direct or indirect, and
by finding that this term does not imply a requirement that the action applies directly to the imported
good or an entity responsible for it and is burdensome.
20. The United States maintains that the Panel erred by concluding that an "adverse bearing" on
dumping is demonstrated by the effect of the CDSOA on the competitive relationship between
dumped/subsidized goods and domestic products. The United States first criticizes the Panel for
failing to provide any explanation for inclusion of such a "conditions of competition" test under
Articles 18.1 and 32.1. The United States goes on to explain that, even though, historically, there has
been a "conditions of competition" test under Article III of the GATT 1994, which is used to
determine whether a measure is applied "so as to afford protection" or accords imports "treatment no
less favorable" than that accorded like domestic products, Article 18.1 of the Anti-Dumping
Agreement and Article 32.1 of the SCM Agreement do not call for a "conditions of competition" test,
as the language in Articles 18.1 and 32.1 is markedly different from the language in Article III of the

GATT 1994. The United States points out that there is no indication in the text of Article 18.1 or
Article 32.1 that use of the words "against dumping" or "against a subsidy" was intended to
encompass a "conditions of competition" test.
21. The United States further submits that, even assuming, arguendo, that a "conditions of
competition" test is applicable to an analysis under Articles 18.1 and 32.1, the CDSOA's impact on
the conditions of competition would be too remote and indirect to result in a violation. The United
States posits several reasons: first, the CDSOA does not mandate that qualifying expenses be based
on costs incurred by domestic producers in compet ing with dumped/subsidized imports subject to an
order; second, there is nothing in the text of the CDSOA that directs, or even provides any incentive
for, domestic producers to spend disbursements to bolster their competitive position over
dumped/subsidized products; third, the CDSOA cannot ensure that, even if domestic producers do
use the distributed money in the production of the product covered by an order, they will be
successful in improving their competitive position vis-à-vis foreign producers/exporters; and fourth,
the CDSOA does not prohibit foreign producers from lowering prices to compete with domestic
products. The United States argues, therefore, that the Panel's conclusion that the CDSOA has an
adverse bearing on the conditions of competition is pure speculation.
22. The United States maintains that the Panel erred in finding that the CDSOA will have
the effect of providing a financial incentive for domestic producers to file, or at least support, a
petition, and that this compounds the CDSOA's adverse bearing on dumping or subsidization, because
the financial incentive will likely result in a greater number of anti-dumping/countervail applications
and investigations, and in a greater number of anti-dumping/countervail orders. According to the
United States, even if the CDSOA were to result in more investigations being initiated and, in turn,
more orders being put in place, such a result could not lead to a violation of Article 18.1 of the Anti-
Dumping or Article 32.1 of the SCM Agreement . This is because the Panel did not find any
provision of United States law relating to the imposition of anti-dumping or countervailing duty
orders to be inconsistent with United States WTO obligations. Thus, any increase in WTO-consistent
investigations and orders cannot result in violations of Articles 18.1 and 32.1. The United States goes
on to state that, even assuming, arguendo, that an increase in WTO-consistent anti-dumping and
countervailing duty investigations and orders could lead to a WTO violation, no evidence was
adduced before the Panel to show that the CDS OA provides a financial in centive that will induce
producers to file or support a petition they otherwise would not file or support. According to the
United States, nor was there any evidence that an y such incentive will lead to an increase in
investigations or orders brought before the Panel.

23. The United States argues that the Panel incorrectly relied on the stated purpose of the
CDSOA to confirm that the CDSOA constitutes specific action against dumping or a subsidy.
According to the United States, debates surroundin g the passage of the CDSOA or the "Findings of
Congress" introducing the CDSOA would be relevant to its interpretation only if the terms of the
CDSOA were ambiguous and its operation unclear. In this case, because there was no allegation that
the CDSOA is ambiguous, the only relevant question before the Panel was whether, by its terms, the
CDSOA constitutes specific action against dumping and subsidization.
24. The United States also submits that the Panel erred in extending the Appellate Body's
reasoning in US - 1916 Act on permissible responses to dumping to the permissible responses to
subsidization under the GATT 1994 and the SCM Agreement . The United States contrasts the
language of Article VI:2 of the GATT 1994 and Article 1 of the Anti-Dumping Agreement with
Article VI:3 of the GATT 1994 and Article 10 of the SCM Agreement. The United States argues that
the conclusion reached by the Appellate Body in US – 1916 Act—that Article VI of the GATT 1994
encompasses all measures taken against dumping—was based on the specific language of Article VI:2
of the GATT 1994 and Article 1 of the Anti-Dumping Agreement. The United States submits that
such a conclusion cannot be extended to the subsidy provisions of Article VI of the GATT 1994 and
of Part V of the SCM Agreement, because their scope is limited to the imposition of countervailing
duties (and by implication, provisional duties and price undertakings).
2. Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the
SCM Agreement
25. The United States claims that the Panel erred in finding a violation of Article 5.4 of the
Anti-Dumping Agreement and Article 11.4 of the SCM Agreement. The United States argues that the
Panel agreed with the United States that those provisions "require[ ] only that the statistical thresholds
be met, and impose[ ] no requirement that the in vestigating authorities inquire into the motives or
intent of a domestic producer in electing to support a petition."
32 The Panel also concluded that the
United States has implemented its obligations under Article 5.4 of the Anti-Dumping Agreement and
Article 11.4 of the SCM Agreement in its domestic laws and that the CDSOA did not in any way
amend or modify such laws. According to the United States, the Panel should have "ended its
inquiry" there.

33

26. The United States further refers to the Panel's finding that the CDSOA is inconsistent with
Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement because it
allegedly undermines the value of those provisions to the countries with whom the United States
trades, and because it allegedly defeats the object and purpose of those articles. In this respect, the
United States emphasizes that the Appellate Body has repeatedly directed panels to the words of the
agreement to determine the intentions of parties and has explained that, as set out in Article 31 of the
Vienna Convention on the Law of Treaties (the " Vienna Convention ")

34, principles of treaty
interpretation do not condone the imputation into a treaty of words or concepts that are not there.
According to the United States, the Panel used the object and purpose of Articles 5.4 and 11.4, rather
than the terms of those provisions, as the basis for finding a violation.
27. The United States submits that a finding of a violation cannot be based solely on the
conclusion that a measure, although consistent with the text of the relevant provisions, "undermines
the value"

35 of those provisions to other trading partners. According to the United States, the Panel in
this case confused the basis for finding a violation of Article 5.4 of the Anti-Dumping Agreement and
Article 11.4 of the SCM Agreement with the basis for making a finding of non-violation nullification
and impairment under Article XXIII:1(b) of the GATT 1994.
28. The United States criticizes the Panel for its finding that the United States may be regarded as
not having acted in good faith. According to the United States, there is no basis in the WTO
Agreement for a panel to conclude that a Member has not acted in good faith, or to enforce a principle
of "good faith" as a substantive obligation agreed to by WTO Members. The United States
emphasizes that dispute settlement panels are subject to clear and unequivocal limits on their
mandate: they may clarify "existing provisions" of covered WTO agreements and may examine the
measures at issue in the light of the relevant provisions of the covered WTO agreements.

36
29. The United States maintains that the Panel erred in conducting an analysis of whether the
CDSOA creates an incentive for a domestic producer to support an investigation, despite its finding
that the texts of Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement
do not impose an obligation to inquire into the motives behind such support. It was thus legal error
for the Panel to conclude that the CDSOA creates a financial incentive to support applications in anti-

34Done at Vienna, 23 May 1969, 1155 U.N.T.S. 331; 8 International Legal Materials 679.
36Ibid., para. 106, referring to Articles 3.2 and 7.1 of the DSU.

dumping and countervailing duty investigations and therefore "in effect mandates"
37 domestic
producers to support such petitions, and then to use this conclusion as a basis for finding that the
CDSOA is inconsistent with Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the
SCM Agreement. Moreover, according to the United States, the Panel's finding was based on
"nothing more than assumption and speculation"

38 that the CDSOA creates a "spectre"
39 of such
investigations being initiated without proper industry support.
30. The United States adds that the Panel's finding is at odds with the CDSOA and the operation
of relevant United States laws. Under those laws, the United States Department of Commerce
("USDOC") alone, and not the United States International Trade Commission ("USITC"), makes a
determination whether there is sufficient domestic industry support for initiation of an anti-dumping
or countervailing duty investigation. The necessary declaration of support to qualify for CDSOA
distributions is made by domestic producers before the USITC, and not before USDOC. Moreover,
the United States notes that the CDSOA declaration of support is not required prior to the initiation
of an investigation, and may contradict previously expressed opposition to an application. The United
States adds that a domestic producer can express support as late as the final injury investigation
questionnaire, which can be issued more than 200 days after an application has been filed.
31. The United States submits that the Panel's "failure to understand the operation of U.S. law is
compounded by its consideration of the only two purported pieces of 'evidence' that have been
advanced in support of complaining parties' claim."

40 One of the pieces of evidence is described as a
letter from a domestic producer in which it reportedly changed its position to express support for an
application to be able to benefit from any pot ential CDSOA distributions. USDOC's decision to
initiate the investigations, however, had been made 294 days before the domestic producer
purportedly changed its position before the USITC. Moreover, an examination of the letter reveals,
according to the United States, that it is not what th e Panel claimed it to be. In fact, the United States
points out that "the company that authored the letter states therein that it is expressing its 'continuing'
support for the petitions (i.e., it is not expressing a change in position)".

41
32. The United States also refers to a letter in which a United States' producer purportedly urged
other domestic producers to support a petition agai nst Canadian softwood lumber imports by citing

38Ibid., para. 113.
39Ibid.
40Ibid., para. 118.
41Ibid., para. 120.

the CDSOA. According to the United States, ex amination of the letter referencing the CDSOA
shows that it was not written by a domestic producer, but instead by a law firm informing domestic
producers of the merits and circumstances of their case, as well as various provisions of United States
law, including the CDSOA. Thus, according to the United States, there was no evidence to support
the Panel's conclusion. As such, there was no evidence on the record with which Complaining Parties
could meet their burden to establish a prima facie case and, as a consequence, the Panel's finding
amounts to a shifting of the burden of proof to the United States.
3. The Combination of Duties and CDSOA Offset Payments
33. The United States alleges that the Panel exceeded its terms of reference by examining claims
concerning the CDSOA in combination with other United States laws and regulations. Citing
Article 7 of the DSU and the Appellate Body Report in India – Patents (US), the United States notes
that a panel's terms of reference are limited to the claims set out in the complaining parties' request for
establishment of a panel. In this case, the United States argues, the Complaining Parties' request for
establishment of a panel set out a challenge to the CDSOA as such, that is, the Complaining Parties
challenged the CDSOA prior to implementation and independent of any other laws. According to the
United States, although the Panel acknowledged that the CDSOA was the measure at issue, the Panel
proceeded to find that the CDSOA violates Article 18.1 of the Anti-Dumping Agreement and
Article 32.1 of the SCM Agreement because the combination of anti-dumping duties (or
countervailing duties) and the CDSOA transfers a competitive advantage to affected domestic
producers.
34. The United States notes, however, that the request did not include a challenge to provisions of
United States laws or regulations relating to the imposition of anti-dumping or countervailing duties,
or a challenge to the CDSOA in conjunction with provisions of United States laws or regulations
relating to the imposition of anti-dumping or countervailing duties. Furthermore, according to the
United States, the Complaining Parties did not even mention in their request for establishment of a
panel the provisions of United States laws or regulations relating to the imposition of anti-dumping or
countervailing duties. Therefore, the United States argues that the Panel's terms of reference were
limited to determining whether the CDSOA, as such, violates identified provisions of the WTO
Agreement.
35. The United States acknowledges that the Panel can review relevant provisions of United
States law for interpretative purposes, but argues that the Panel was not at liberty to examine the
CDSOA together with other provisions of United States law in order to find a WTO violation. In
support of its claim, the United States refers to the Appellate Body Report in US – Certain EC

Products and the Panel Report in US – Section 129(c)(1) URAA . Therefore, the United States
concludes, the Panel exceeded its terms of reference by examining whether the CDSOA, in
combination with United States laws on the imposition of anti-dumping duties (or countervailing
duties), violates Articles 18.1 and 32.1.
4. Article XVI:4 of the WTO Agreement, Article 18.4 of the Anti-Dumping
Agreement, Article 32.5 of the SCM Agreement and Article 3.8 of the DSU
36. The United States requests that the Appellate Body reverse the Panel's finding that the
CDSOA violates Article XVI:4 of the WTO Agreement on the grounds that the CDSOA is consistent
with Articles VI:2 and VI:3 of the GATT 1994, Articles 5.4, 18.1 and 18.4 of the Anti-Dumping
Agreement, and Articles 11.4, 32.1 and 32.5 of the SCM Agreement. For the same reason, the United
States requests the Appellate Body to reverse the Panel's finding that the benefits accruing to the
Complaining Parties under the WTO Agreement have been nullified or impaired.

42
5. The "Advisory Opinion"
37. The United States maintains that the Panel erred by rendering an advisory opinion on a
measure that was not before it. Specifically, the United States appeals the Panel's statement that
"[e]ven if CDSOA offset payments were funded directly from the US Treasury, and in an amount
unrelated to collected anti-dumping duties, we would still be required to reach the conclusion … that
offset payments may be made only in situations presenting the constituent elements of dumping."

43
The United States asserts that there was no measure before the Panel where payments were funded
directly from the United States Treasury and, therefore, there was no basis for the Panel to opine on
what its findings would be if such a measure were presented to it. The United States emphasizes that
this finding should be reversed because the Panel has no authority to make findings on a matter that is
not before it.
6. Article 9.2 of the DSU
38. The United States submits that the Panel erred in denying the request by the United States for
the issuance of a separate panel report in the dispute brought by Mexico. According to the United
States, Article 9.2 of the DSU gives Members an unqualified right to the issuance of separate panel
reports upon request. Specifically, that provision contains no requirement for a party to make its
request for a separate panel report by a certain time in the panel proceeding. Nor does it, according to

43Panel Report, para. 7.22.

the United States, require the requesting party to demonstrate that it would suffer prejudice if its
request is not accepted. Nor does it require that a separate interim report be issued, contrary to what
the Panel stated.
B. Australia – Appellee
1. Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the
SCM Agreement
39. Australia submits that the Panel did not err in concluding that the CDSOA is "specific action"
against dumping or a subsidy. The Panel's position—that a measure that may be taken only in
situations presenting the constituent elements of dumping is clearly specific action in response to
dumping—was not an unexplained assumption. The Pa nel's conclusion was plainly arrived at in the
context of its examination of the scope of the Ap pellate Body's findings concerning the meaning of
the phrase "specific action against dumping" in US – 1916 Act.
40. According to Australia, the Panel did not err in determining that the CDSOA acts specifically
in response to dumping. The Panel correctly applied the rationale of the Appellate Body's finding in
US – 1916 Act in holding that offset payments under the CDSOA are conditioned on a determination
of dumping: offset payments are actions which may be taken only in response to conduct which
presents the constituent elements of dumping. In the view of Australia, the constituent elements of
dumping are built into the essential elements for eligibility under the CDSOA. A determination of
dumping or subsidization is the first requirement for eligibility for offset payments under the CDSOA.
41. Australia contends that the Panel did not err when it concluded that it did not need to examine
footnote 24 to the Anti-Dumping Agreement and footnote 56 to the SCM Agreement. The Appellate
Body's findings in US – 1916 Act are fully dispositive of this matter in this dispute, and the Panel's
finding is fully consistent with them. Having found the CDSOA to be "specific action against
dumping" within the meaning of Article 18.1 of the Anti-Dumping Agreement and "specific action
against a subsidy" within the meaning of Article 32.1 of the SCM Agreement, the Panel correctly
concluded that the CDSOA was governed solely by Articles 18.1 and 32.1. Otherwise, the Panel
would have erroneously treated footnotes 24 and 56 as the primary provisions, and Articles 18.1
and 32.1 as the residual provisions.
42. Australia maintains that the Panel did not err when it concluded that the CDSOA acts
"against" dumping. The Panel's conclusion that action "against" dumping must have some adverse
bearing on dumping, took account of all ordinary m eanings of the word "against". According to
Australia, the Panel did not err when it concluded that there is no requirement that a measure act

directly on an imported dumped product or entities responsible for that product. The Panel correctly
noted that Article 18.1 of the Anti-Dumping Agreement refers only to measures that act against
"dumping" as a practice, and that there is no express requirement that the measure must act against the
imported dumped product, or entities responsible for that product. The Panel similarly noted that
Article 32.1 of the SCM Agreement refers to specific action against "a subsidy", not action against
the imported subsidized product or a responsible entity. In the view of Australia, the notion of
"direct" does not necessarily attach to the term "against". For Australia, the Panel considered both the
meaning and the context of the word "against", was mindful of the Appellate Body's findings in
US – 1916 Act, and correctly concluded that the ordinary meaning of the term "against", which is not
qualified in any way in Article 18.1, encompasses any form of adverse bearing, be it direct or indirect.
43. Australia submits that the Panel did not err in finding that the CDSOA has an adverse
bearing on dumping. The United States argues that the Panel did not examine whether the CDSOA
burdens imports or the entity responsible for their importation, but rather whether the CDSOA
distorts the conditions under which imports compete. However, according to Australia, this argument
is premised on the Panel having erred in concluding that there is no requirement that a measure act
directly on an imported dumped product or a responsible entity. As the Panel did not err in making
that conclusion, the United States' argument is not sustainable. In any case, Australia maintains that
the Panel's conclusion that the CDSOA has an adverse bearing on dumping is correct. Offset
payments to "affected domestic producers" when combined with anti-dumping duties operate to
impose a double remedy in respect of dumped goods. To provide a double remedy is to cross the line
of equilibrium at which point something undesirable is counteracted or removed, and to create a new
situation requiring redress or relief. By its very nature, a double remedy to "affected domestic
producers" is adverse to dumped goods.
44. According to Australia, the Panel did not err in considering that the CDSOA's "legislative
history" confirmed that the CDSOA constitutes "specific action against dumping". The Panel's review
of the intent of United States Congress after it had already concluded that the CDSOA bears adversely
on dumping and therefore acts against dumping, cannot be considered to be reliance on the intent of
United States Congress to reach a finding. It is not an error per se for a panel to review whether the
stated purpose or intent of a law concurs with its own findings.
45. Australia maintains that the Panel did not err when it concluded that the Appellate Body's
interpretation of the provisions of the Anti-Dumping Agreement in US – 1916 Act applies equally to
the provisions of the SCM Agreement. For Australia, the Panel correctly concluded that the only
remedies permitted by the GATT 1994, as interpreted by the SCM Agreement, were countervailing

duties, provisional measures, undertakings and countermeasures, and that to the extent that the
CDSOA may be regarded as a specific action against a subsidy, but not a permissible remedy, it
would be inconsistent with Article 32.1 of the SCM Agreement . Textual differences between
Article VI:2 of the GATT 1994 and Article 1 of the Anti-Dumping Agreement, on the one hand, and
Article VI:3 of the GATT 1994 and Article 10 of the SCM Agreement, on the other hand, do not
render the Panel's conclusion invalid.
2. Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the
SCM Agreement
46. Australia submits that the Panel reached its finding in respect of Article 5.4 of the Anti-
Dumping Agreement and Article 11.4 of the SCM Agreement on the basis of the text of the relevant
provisions. Thus, the Panel did not confuse viola tions of Articles 5.4 and 11.4 with a non-violation
claim of nullification and impairment under Article XXIII:1(b) of the GATT 1994. Australia submits
that the Panel expressly stated that "the first consequence" of the CDSOA's operation is that it
renders the quantitative tests established by those Articles irrelevant, and that it was on this basis that
the Panel found a violation of those Articles.
47. Australia endorses the Panel's application of the principle of good faith in its analysis of
claims made in relation to Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM
Agreement. According to Australia, the Panel's finding is consistent with the general rule of treaty
interpretation set out in Article 31 of the Vienna Convention and the Appellate Body's findings in
US – Gasoline and US – Hot-Rolled Steel . Adopting a measure that renders meaningless a WTO
Member's application of these provisions cannot be consistent with the principle of good faith that
informs them.
48. Australia endorses the Panel's conclusion that the CDSOA creates a financial incentive for
domestic producers to initiate and support petitions. According to Australia, it was not an error for
the Panel to use that conclusion as a basis for its finding that the CDSOA is inconsistent with
Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement.

44
3. The Combination of Duties and CDSOA Offset Payments
49. Australia argues that the Panel did not exceed its terms of reference by examining claims
concerning the CDSOA in combination with other United States laws and regulations. Australia
agrees with the United States that the Complaining Parties' panel request did not include a challenge

to provisions of United States laws or regulations relating to the imposition of anti-dumping or
countervailing duties, or a challenge to the CDSOA in conjunction with provisions of United
States laws or regulations relating to the imposition of anti-dumping or countervailing duties.
However, according to Australia, "[t]he Panel's reference to 'the combination of anti-dumping duties
and offset subsidies' is not a finding concerning the CDSOA in combination with other anti-dumping
laws and regulations of the United States as such."

45 Rather, it is, and "should properly be seen, as a
general reference to 'anti-dumping duties' as a permissible remedy within the meaning of the
Anti-Dumping Agreement."
46
4. Article XVI:4 of the WTO Agreement, Article 18.4 of the Anti-Dumping
Agreement, Article 32.5 of the SCM Agreement and Article 3.8 of the DSU
50. Australia submits that the Panel correctly found that the CDSOA violates Articles 5.4
and 18.1 of the Anti-Dumping Agreement and Articles 11.4 and 32.1 of the SCM Agreement .
Accordingly, the Panel's finding that the CDSOA is inconsistent with Article 18.4 of the Anti-
Dumping Agreement , Article 32.5 of the SCM Agreement and Article XVI:4 of the WTO
Agreement is also correct. Australia goes on to argue that, under Article 3.8 of the DSU, such
violations constitute a prima facie case of nullification or impairment. Because the United States
did not present to the Panel any evidence to rebut such presumption of nullification and impairment,
the CDSOA constitutes a violation of Article 3.8 of the DSU as well.
5. The "Advisory Opinion"
51. Australia submits that the Panel did not exceed its terms of reference by clarifying the scope
of its finding in the first sentence of paragraph 7.22. Australia notes that, in arguing that the Panel
erred in issuing an advisory opinion on a measure outside its terms of reference, the United States has
not entered any argument in relation to the first sentence of paragraph 7.22; rather, the United States'
argument relates strictly to the second sentence of the Panel's statement at paragraph 7.22 of its
Report.

C. Brazil – Appellee
1. Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the
SCM Agreement
52. Brazil submits that the Panel did not err in finding that CDSOA payments violate Article 18.1
of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement. For Brazil, there can be
no question that entitlement to the remedy provided for in the CDSOA is an action
which is taken in response to situations presenting the constituent elements of dumping, precisely the
situation addressed by the Appellate Body in US – 1916 Act. The specific action—distribution of
duties assessed under anti-dumping duty orders to affected domestic producers—is permitted only
when the constituent elements of dumping have been demonstrated. Brazil argues that it is not the
expenditure of the collected anti-dumping duties in a vacuum that constitutes the response to
dumping, but the disbursement to the petitioning parties that make up the industry producing the
product covered by the anti-dumping order.
53. Brazil refers to the United States' argument that, because CDSOA payments can and do occur
at points in time when an order no longer exists and there is no finding that dumping is currently
occurring, they cannot be considered against, or in response to, dumping or subsidization.

47 Brazil
disagrees with this argument. For Brazil, this apparently addresses the delay in disbursement, which
would be more a function of the retrospective nature of the anti-dumping regime in the United States
and the logistics of liquidation and payment, rather than some disconnect between the payments and a
finding of the constituent elements of dumping. The more appropriate question to ask is whether the
payments can be made before a finding of the cons tituent elements of dumping. According to Brazil,
the answer is no.
54. For Brazil, it is indisputable that CDSOA payments constitute specific action against
dumping. This is discerned from a review of Article VI of the GATT 1994, the premise behind the
CDSOA, the actual effect of CDSOA payments, as well as the comparisons to be drawn from the
measure at issue in US – 1916 Act , which the Appellate Body has already found to be a specific
action against dumping. The measure, which the panel and Appellate Body found in US – 1916 Act
to be inconsistent with Article VI of the GATT 1994 and Article 18.1 of the Anti-Dumping
Agreement, included the very same remedy that the Panel in these proceedings found invalid, namely
the awarding of monetary damages to parties that have been found to be injured by dumping. Both

the damages awarded by the CDSOA and the dama ges awarded under the measure at issue in US –
1916 Act are based on a demonstration of the constituent elements of dumping. Brazil adds that the
CDSOA is not simply a decision by the Unite d States government on how to spend revenues
generated by anti-dumping duties. It is, rather, intended to have the effect of providing an additional
remedy for dumping. It provides additional deterrence in that monies paid in the form of dumping
duties by importing parties are distributed in the form of monetary damages to competitors. It also
provides an additional incentive to United States' domestic industries to pursue anti-dumping actions
in that it rewards them with monetary damages.
55. Brazil supports the conclusion of the Panel that an action "against" dumping must have some
adverse bearing on dumping. The term "against" is best understood in the context of Article VI:2 of
the GATT 1994, which states that anti-dumping duties are to be imposed in order to "offset or prevent
dumping". Brazil sees no inconsistency in the Panel's treatment of the term "against" and the object
and purpose of anti-dumping duties. In respect of the United States' contention that the Panel
established a new "conditions of competition" test under Article 18.1 of the Anti-Dumping
Agreement and Article 32.1 of the SCM Agreement, Brazil contends that Article 18.1 of the Anti-
Dumping Agreement refers only to measures that act against "dumping" as a practice; there is no
express requirement in the provision that the measure must act against the imported dumped product,
or entities connected to, or responsible for, the dumped good.
2. Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the
SCM Agreement
56. Brazil endorses the Panel's conclusion that the CDSOA violates Article 5.4 of the Anti-
Dumping Agreement and Article 11.4 of the SCM Agreement. Brazil maintains that the CDSOA
operates in such a manner that United States' investigating authorities are unable to conduct an
objective and impartial examination of the level of support for an application. As a consequence, the
Panel correctly concluded that the CDSOA has undermined the value of provisions of Article 5.4 of
the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement and that the United States
"may be regarded as not having acted in good faith in promoting this outcome."
48 According to
Brazil, the incentive to file or support anti-dumping and countervailing duty petitions created by
CDSOA payments raises the potential for a minority of domestic producers to be able to control and
initiate anti-dumping and/or countervailing dut y proceedings. The numerical thresholds under
Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement have, as their
object and purpose, to prevent this from happening. According to Brazil, "[i]t is this return to the

situation that existed before the Uruguay Round Agreements that implicates and violates the
provisions of Article 5.4 of the AD Agreement and Article 11.4 of the SCM Agreement."
49
3. The Combination of Duties and CDSOA Offset Payments
57. Brazil argues that the Panel did not exceed its terms of reference by examining claims
concerning the CDSOA in combination with other United States laws and regulations. According to
Brazil, the Complaining Parties raise no claims against United States laws or regulations relating to
the imposition of anti-dumping or countervailing duties, because they are not the subject of this
dispute. Rather, Brazil argues, the relationship of those laws and regulations to the claims that the
CDSOA violates Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM
Agreement is incidental to the dispute. Brazil submits that the Complaining Parties do not dispute
that, in as much as they are permitted specific actions, anti-dumping and countervailing duties are
presumably valid under the Anti-Dumping Agreement and the SCM Agreement . Instead, Brazil
claims that the Complaining Parties are disputing the CDSOA payments because they clearly do not
qualify as permissible measures under Article 18.1 and Article 32.1.
D. Canada – Appellee
1. Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the
SCM Agreement
58. Canada submits that the CDSOA is a specific action against dumping or subsidization within
the meaning of Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM
Agreement. According to Canada, neither the text nor context of Article 18.1 or the Appellate Body's
interpretation of that provision in US – 1916 Act indicates that the constituent elements of dumping
must be built into a measure for it to constitute "specific action." A measure is "specific action"
where its operation is contingent upon the existence of constituent elements of dumping or a subsidy.
A WTO Member may not escape its obligations by calling dumping or a subsidy something else, or
by not incorporating the definition of dumping or a subsidy into the measure itself. Where a practice
is clearly defined in national laws, it is not necessary for each and every law targeting that practice to
specifically incorporate the constituent elements of that practice. Requiring that the constituent
elements of dumping or of a subsidy be built into the measure for it to constitute "specific action",
would eviscerate Articles 18.1 and 32.1. This woul d create a loophole for measures that have no
other purpose and effect than to act against dumping or a subsidy, solely because they do not, in
themselves, contain the elements of these practices.

59. Canada maintains that, in fact, the CDSOA does incorporate the constituent elements of
dumping and a subsidy. Offset subsidies are possible only where there is an anti-dumping or
countervailing duty order. Such orders are imposed once there has been a determination of injurious
dumping or a subsidy. Offset subsidies are therefore possible only where there is already a
determination of dumping or a subsidy, and in no other circumstance. As well, offset subsidies are
paid out to "affected domestic producers". These are not domestic producers generally affected by
imports. Rather, they are producers that produce like domestic products and that initiate or support an
anti-dumping or countervailing investigation. Finally, offset subsidies reimburse certain "qualifying
expenditures"; qualifying expenditures must relate to a product covered by an order. Thus, for
Canada, every element of the CDSOA depends, fo r its operation, on a finding of dumping or
subsidization.
60. Canada argues that the "trigger" for the operation of the CDSOA is, by design, an anti-
dumping or countervailing duty order, not simply status as an "affected domestic producer". The very
notion of "affected domestic producer" in this context does not exist separate from, or without the
presence of, dumping or subsidization.
61. Canada contends that the Panel did not need to examine whether the CDSOA was an "action"
within footnotes 24 and 56, because it had already found it was "specific action" within the meaning
of Articles 18.1 and 32.1. "Specific action" is to be distinguished from "action" within the meaning of
the footnotes. A measure is a "specific action" against dumping where the objective reason for the
imposition of the measure is dumping itself. Action triggered by something other than dumping (like
a safeguard based on a serious increase in imports that could have been caused by dumping by foreign
exporters) that nevertheless has an incidental impact on dumping is "action" within the meaning of
footnote 24. In that event, the basis for the imposition of a measure would not objectively be
dumping, but its causes or effects. Canada adds that a measure does not escape the requirements of
Article 18.1 of the Anti-Dumping Agreement on the sole ground that it is otherwise consistent with
the GATT 1994.
62. Canada submits that the Panel decided correctly that the CDSOA is "against" dumping or a
subsidy. The Panel's interpretation of the term "against" is in accordance with the principles of treaty
interpretation. For Canada, a measure that is in some way related to dumping may have but one of
three possible effects on the practice: it may encourage it; be neutral to it; or, discourage it. A
measure is against dumping when it is structured in a way as to discourage the practice of dumping
exports. This interpretation of "against" is supported by the context of Article 18.1. The provisions
of the Anti-Dumping Agreement regulate not only what measures WTO Members may impose in

response to dumping, but also the modalities of that imposition. The Anti-Dumping Agreement
specifically permits duties, provisional duties and undertakings, and prohibits all specific action,
direct or indirect, against dumping that is not one of those remedies. This limitation on specific action
is in keeping with the object and purpose of the Anti-Dumping Agreement to further the substantial
reduction of tariffs and other barriers to trade, to eliminate discriminatory treatment in international
trade relations and to develop a more viable and durable multilateral trading system.
63. Canada further maintains that, in finding adverse bearing in respect of the CDSOA, the Panel
relied on traditional concepts employed by panels: an examination of conditions of competition. In
this regard, the Panel was not reading words into the text of the treaty or proposing a new test. In fact,
the Panel considered "conditions of competition" in giving substance to the proposed definition that a
measure is "against dumping" where it "burdens" imports.
64. Canada contends that the United States' arguments concerning the alleged "remoteness" of the
consequences of the CDSOA or the "speculative" nature of the Panel's analysis, are without merit.
The CDSOA is mandatory legislation that is being challenged as such. The direct and necessary
consequences of the CDSOA are apparent from its design, architecture and underlying structure.
Based on the design, architecture and underlying structure of the CDSOA, the Panel determined that
certain consequences necessarily follow from its operation that tied the offset payments to dumping
and subsidies.
65. Canada submits that Article 32.1 of the SCM Agreement is identical in terminology,
structure and intent to Article 18.1 of the Anti-Dumping Agreement , except for the reference to
subsidy instead of dumping. This identical wording gives rise to a strong interpretative presumption
that the two provisions set out the same obligation or prohibition. In the view of Canada, footnote 35
to Article 10 of the SCM Agreement expressly confirms this presumption. It provides that there are
two sets of "specific action" consistent with the WTO Agreement, and requires that Members may
choose one or the other specific action against a su bsidy: countermeasures under Part II or III and
countervailing duties, undertakings and provisional measures under Part V. For Canada, no other
remedies are contemplated. Article 32.1 is identical in scope to Article 18.1 of the Anti-Dumping
Agreement. Remedies against subsidies are restricted to the three measures governed by Part V of the
SCM Agreement, and to multilaterally-sanctioned countermeasures.

2. Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the
SCM Agreement
66. Canada endorses the Panel's finding that the CDSOA violates Article 5.4 of the Anti-
Dumping Agreement and Article 11.4 of the SCM Agreement.
67. Canada emphasizes that Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the
SCM Agreement require an investigating authority to determine that an application has the support of
the domestic industry, based on an examination of the level of support for an application in the
domestic industry. Canada argues that "[t]his determination and examination is not a mechanical
exercise of toting up the number of producers and their share of domestic production."

50 T h e
requirement is, rather, for an objective and impartial assessment of evidence on the record that
indicates that requisite support exists to initiate an investigation.
68. Canada submits that, under the CDSOA, "the United States pays domestic producers either to
bring or to support applications."
51 According to Canada, providing such a "monetary reward for
producers to support an antidumping application … precludes the possibility of an objective and
impartial determination … of industry support."
52 Canada submits that the CDSOA violates
Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement precisely
because it prevents the United States from complying with its obligations under those Agreements.
69. Canada takes the view that, in arguing for a literal reading of the texts of Article 5.4 of the
Anti-Dumping Agreement and Article 11.4 of the SCM Agreement, the United States ignores the fact
that those provisions "expressly require an authority to examine (enquire into the nature, look closely
or analytically) the evidence as to those thresholds and determine (establish precisely) industry
support."
53 According to Canada, this is "manifestly at variance with the apparent U.S. position that
the sole obligation of a member is to tally up numbers presented by applicants."
54
70. Canada further submits that the Panel's reference to good faith and object and purpose was not
meant to replace the text of Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM
Agreement with either of these principles; but "rather to give a full and effective meaning to the text

51Ibid., para. 106.
52Ibid.
53Ibid., para. 109. (original emphasis)
54Ibid.

in the light of these interpretative principles."
55 Good faith and object and purpose are elements to be
considered in the elaboration of an obligation by virtue of Article 31 of the Vienna Convention .
According to Canada, "[t]his necessarily means that the obligation under Article 5.4 and 11.4 cannot
be met where a Member vitiates its own capacity to make a 'determination', or to undertake an
'examination', by offering inducements that influence the basis for that determination."

56 S u c h a n
inducement, Canada argues, would render the determination partial and subjective.
3. The Combination of Duties and CDSOA Offset Payments
71. Canada argues that the Panel made no findings with regard to United States anti-dumping and
countervailing duty laws outside of the CDSOA; ra ther, the statement of the Panel is clearly with
regard to the operation and effect of the CDSOA in the context of the United States trade remedies
system. According to Canada, when the Panel stated that the combination of anti-dumping duties and
offset subsidies is not merely to level the playin g field, but to transfer the competitive advantage to
affected domestic producers, it was referencing the impact of offset payments in addition to duties
that would also exist. Canada further states that the CDSOA does not operate in a vacuum, and it
constitutes a second remedy against dumped imports.
4. Article XVI:4 of the WTO Agreement, Article 18.4 of the Anti-Dumping
Agreement, Article 32.5 of the SCM Agreement and Article 3.8 of the DSU
72. Canada agrees with the Panel that the CDSOA is inconsistent with Article XVI:4 of the
WTO Agreement, Article 18.4 of the Anti-Dumping Agreement and Article 32.5 of the SCM
Agreement because it violates Articles 18.1 and 5.4 of the Anti-Dumping Agreement, Articles 32.1
and 11.4 of the SCM Agreement, and Articles VI:2 and VI:3 of the GATT 1994. Based on these
findings, Canada also agrees with the Panel's conclusion that the CDSOA constitutes a breach of
Article 3.8 of the DSU, because it nullifies and impairs benefits accruing to the complainants under
the covered agreements.
5. The "Advisory Opinion"
73. Canada takes the view that the Panel did not render an advisory opinion. Instead, it made a
statement in support of its overall argument concerning the operation of the CDSOA. According to
Canada, the Panel did not arrive at a legal conclusion in respect of the payment of duties from the
United States Treasury itself, and so could not have been in legal error. Nor did the Panel offer an

56Ibid., para. 117.

"advisory opinion" on that issue. Canada also po ints out that, in stating that "[e]ven if CDSOA
offset payments were funded directly from the US Treasury, and in an amount unrelated to collected
anti-dumping duties, we would still be required to reach the conclusion … that offset payments may
be made only in situations presenting the constituent elements of dumping"

57, the Panel was merely
responding to specific arguments raised by the United States in the course of the proceedings.
6. Article 9.2 of the DSU
74. Canada argues that Article 9.2 should be interpreted in the context of the other provisions of
the DSU and in the light of the overall object and purpose of that Agreement. Canada refers, in
particular, to Articles 3.2 and 3.3 of the DSU.
75. Canada argues that to interpret Article 9.2 in a manner that permits a WTO Member to ask for
separate reports at any time, including at the end of the panel process, would undermine the prompt
settlement of disputes. Canada submits that such a reading of Article 9.2 would also violate
procedural fairness and impose an additional burden on the rights of parties. Canada concludes that
Article 9.2 of the DSU does not grant an unfettered right to Members to ask for separate reports at any
point in time; rather, where the exercise of such a right amounts to a potential abus de droit, a panel
must have the discretion to refuse to grant the request.
E. European Communities, India, Indonesia and Thailand – Appellees
1. Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the
SCM Agreement
76. The European Communities, India, Indonesia and Thailand, as joint appellees, submit that the
Panel correctly applied the test enunciated by the Appellate Body in US – 1916 Act in determining
that the CDSOA is a specific action against dumping or a subsidy. According to them, this test does
not require the Panel to establish whether the constituent elements of dumping are "explicitly built
into" the CDSOA, but, rather, whether the offset payments are actions that may be taken only
when the constituent elements of dumping are present. This test is met not only when the constituent
elements of dumping are "explicitly built into" the action at issue, but also where they are implicit in
the express conditions for taking the action concerned. They maintain that the CDSOA offset
payments meet this test for the following reasons. First, the offset payments are not made to all
United States' enterprises, or even to all United States' producers "affected" by imports, but only and
exclusively to the United States' producers "affected" by an instance of dumping or subsidization

57Panel Report, para. 7.22.

which has been previously the subject of an anti-dumping or a countervailing duty order, respectively.
Second, the offset payments are paid for "qualifying expenses" incurred by the affected domestic
producers "after" the issuance of an anti-dumping or a countervailing duty order and prior to the
termination of the order. Third, the "qualifying expenses" must be related to the production of a
product that has been the subject of an anti-dumping or countervailing duty order.
77. The European Communities, India, Indonesia and Thailand argue that, to determine whether
the CDSOA is specific, the Panel was not required to examine footnote 24 of the Anti-Dumping
Agreement and footnote 56 of the SCM Agreement. According to them, the scope of Article 18.1 of
the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement and that of the footnotes are
mutually exclusive. Therefore, once it is established that an action is "specific action against
dumping", it is not necessary to make a finding to the effect that such action is not covered by the
footnote. They add that, in any event, offset payments do not constitute "action" under other relevant
provisions of the GATT 1994 within the meaning of footnotes 24 and 56 and that the CDSOA is not
an action taken "under other relevant provisions" of the GATT 1994.
78. The European Communities, India, Indonesia and Thailand contend that the Panel was not
required to further consider whether the CDSOA was action "against" dumping or a subsidy because,
in the light of the test enunciated by the Appellate Body in US – 1916 Act , a conclusion that the
CDSOA offset payments constitute specific action against dumping or a subsidy stems from the
establishment that the offset payments are an action that may be taken only when the constituent
elements of dumping, or of a subsidy, are present. In any event, they submit that the Panel's
interpretation of the term "against", which encompasses action that has an "indirect" adverse bearing
on dumping or subsidization, is in accordance with the rules of treaty interpretation. According to
them, the Panel's interpretation is consistent with the ordinary meaning of the term "against" as it
corresponds to definitions such as "in competition with", "to the disadvantage of", "in resistance to"
and "as protection from"; it would also be borne out by the immediate context of the term "against",
in particular by the surrounding language of Articles 18.1 and 32.1, which does not prohibit specific
action against dumped or subsidized imports, or against the importers of dumped or subsidized
products, but rather against "dumping" and against "a subsidy". Also, they point out that the SCM
Agreement authorizes indirect action in the form of "countermeasures".
79. The European Communities, India, Indonesia and Thailand support the conclusion of the
Panel that the CDSOA has an adverse bearing on dumping and subsidization because it puts
dumped/subsidized imports at a competitive disadvantage. According to the European Communities,

India, Indonesia and Thailand, this conclusion is based exclusively on the interpretation of
Articles 18.1 and 32.1, more specifically of the term "against".
80. The European Communities, India, Indonesia and Thailand submit that the CDSOA operates
"against" dumping/a subsidy because the offset payments are objectively apt to have an "adverse
bearing" on dumping or subsidization. In this vein, they point out that the qualifying expenses under
the CDSOA are costs incurred "in competing with" the dumped/subsidized imports. They add that the
offset payments allow the domestic producers to improve their competitive position vis-à-vis
dumped and subsidized imports, and it is reasonable to expect that, in practice, they will use them for
that purpose.
81. The European Communities, India, Indonesia and Thailand support the Panel's conclusion
that the stated purpose of the CDSOA confirms that it is specific action against dumping. They are of
the view that the stated purpose of the CDSOA is relevant for its interpretation, and they assert that
Section 1002 is an integral part of the terms of the CDSOA.
82. The European Communities, India, Indonesia and Thailand submit that countervailing
measures and countermeasures are the only permitted responses to subsidization. According to them,
the Appellate Body's finding in US – 1916 Act —that the only specific actions against dumping
allowed by Article VI of the GATT 1994, as interpreted by the Anti-Dumping Agreement , are
definitive duties, provisional measures and price undertakings—was not based exclusively on the
presence of the term "measure" in Article 1 of the Anti-Dumping Agreement . They add that
footnote 35 to Article 10 of the SCM Agreement provides contextual confirmation that the
SCM Agreement does not allow the application of other measures against a subsidy. They contend
that, as the wording of Article 32.1 mirrors that of Article 18.1, it is reasonable to assume that both
provisions have a similar object and purpose; consequently, they should have a similar scope.
Furthermore, they submit that the United States' interpretation of Article 32.1 would reduce that
provision to redundancy.
2. Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the
SCM Agreement
83. The European Communities, India, Indonesia and Thailand endorse the finding of the Panel
that the CDSOA is inconsistent with Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of
the SCM Agreement. They assert that, contrary to what the United States maintains, the Panel
reached its conclusion based on the text of those provisions.

84. The European Communities, India, Indonesia and Thailand submit that the examination of
the relevant facts for establishing whether an application is made "by or on behalf of the domestic
industry" must be conducted in an "objective" manner. This is not stated expressly in Articles 5.4
or 11.4, but it is a corollary of the principle of good faith which informs all the covered agreements.
According to them, the CDSOA is incompatible with the obligation to make an "objective"
examination required by Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the
SCM Agreement because, through the offset payments, the United States authorities are "unduly
influencing the very facts which they are required to 'examine'."

58
85. The European Communities, India, Indonesia and Thailand argue that the United States'
reading of Articles 5.4 and 11.4 would lead to absurd and unacceptable results and cannot be correct.
If it did not matter whether an application or an expression of support is "genuine", the authorities
could take any action within their reach in order to coerce or induce the domestic producers to make
or support applications, so as to ensure that the quantitative thresholds of Articles 5.4 and 11.4 are
reached.
86. The European Communities, India, Indonesia and Thailand emphasize that they are not
suggesting that an investigating authority is to ascertain actively in each case the subjective
motivations of a producer in expressing support for an application; but they argue that if there is
evidence calling into question the credibility of a declaration of support, the administrative authorities
cannot ignore such evidence without violating Article 5.4 of the Anti-Dumping Agreement and
Article 11.4 of the SCM Agreement.
87. The European Communities, India, Indonesia and Thailand endorse the Panel's conclusion
that the CDSOA defeats the object and purpose of Article 5.4 of the Anti-Dumping Agreement and
Article 11.4 of the SCM Agreement because it encourages the initiation of investigations in cases
where the domestic industry has no genuine interest in the imposition of anti-dumping or
countervailing duties. The consequence is that United States investigating authorities are prevented
from reaching a proper determination of support before initiating an investigation.
88. The European Communities, India, Indonesia and Thailand submit that Members must
observe the general principle of good faith, recognized by the Appellate Body as a pervasive principle
that informs the covered agreements, in the application and interpretation of the Anti-Dumping
Agreement and the SCM Agreement. They submit that the obligation to perform a treaty obligation

58European Communities', India's, Indonesia's and Thailand's appellees' submission, para. 127.

in good faith means that such obligations "must not be evaded by a merely literal interpretation".
59 It
means also that the parties "must abstain from acts that are calculated to frustrate the object and
purpose of the treaty".

60
89. The European Communities, India, Indonesia and Thailand emphasize that the Panel's finding
that the CDSOA provides a financial incentive to file or support applications is a question of fact, and
not a question of law. They add that the United States has not claimed that, by finding that the
CDSOA provides a financial incentive to file or support applications, the Panel has acted
inconsistently with Article 11 of the DSU; accordingly, in their view, this finding is beyond the scope
of appellate review.
90. In any event, the European Communities, India, Indonesia and Thailand submit that the Panel
correctly concluded that the CDSOA provides a fina ncial incentive to file or support applications.
They submit that the reason why the evidence of "actual effects" of the CDSOA cannot be shown is
because, as a result of the CDSOA, "it has become impossible, both for the U.S. authorities and for
the complainants, to tell whether a domestic producer supports the imposition of measures as such or
the distribution of the offset. The appropriate consequence to be drawn from this is not that the
CDSOA can have no effects on the degree of support, but rather that the U.S. authorities are no longer
in a position to make a proper determination of support, whether positive or negative."

61
91. The European Communities, India, Indonesia and Thailand emphasize that they "have not
claimed that the CDSOA affects the standing determination in each and every case."
62 Rather, their
claim is that "there is a risk that the offset payments will influence the decision of the domestic
producers in an indeterminate number of cases"

63 and that by creating that risk, the United States has
acted inconsistently with the obligation to conduct an objective examination of the level of support.
They submit that "[t]he existence of such risk can be reasonably inferred, as the Panel did, from the
potential amount of the payments made under the CDSOA, as compared to the costs of filing or
supporting applications."

64
92. The European Communities, India, Indonesia and Thailand note that the United States argues
that the declarations of support for the purposes of the distribution of the offset payments can be made

59European Communities', India's, Indonesia's and Thailand's appellees' submission, para. 148.
60Ibid.
61Ibid., para. 163.
62Ibid., para. 164.
63Ibid.
64Ibid.

to the USITC after the initiation of the investigation. They stress that it remains true, however, that
the CDSOA provides an incentive for filing applicat ions or for supporting them before the initiation
of the investigation because domestic producers cannot be sure that the other domestic producers will
file or support an application, and thus whether the thresholds set out in Article 5.4 of the Anti-
Dumping Agreement and Article 11.4 of the SCM Agreement will be met.
3. The Combination of Duties and CDSOA Offset Payments
93. The European Communities, India, Indonesia and Thailand argue that the Panel did not
exceed its terms of reference in the manner alleged by the United States. According to them, the
Panel made findings and recommendations exclusively with respect to the CDSOA. They argue that
the Panel made no finding or recommendation with respect to the WTO-consistency of the United
States laws or regulations relating to the imposition of anti-dumping duties or countervailing duties.
Rather, the European Communities, India, Indonesia and Thailand submit that the Panel treated the
duties imposed pursuant to those laws and regulations as a fact when assessing the WTO-consistency
of the CDSOA. They argue that the Panel correctly took into account those facts when assessing
whether the offset payments had an adverse bearing on dumping and subsidization. According to
them, by doing so, the Panel was merely assessing the effects of the CDSOA against the relevant
factual background, and thus the Panel did not exceed its terms of reference.
4. Article XVI:4 of the WTO Agreement, Article 18.4 of the Anti-Dumping
Agreement, Article 32.5 of the SCM Agreement and Article 3.8 of the DSU
94. The European Communities, India, Indonesia and Thailand argue that the CDSOA is
inconsistent with Article XVI:4 of the WTO Agreement and nullifies or impairs benefits accruing to
the complainants under Article 3.8 of the DSU because the CDSOA is inconsistent with the Anti-
Dumping Agreement and the SCM Agreement.
5. The "Advisory Opinion"
95. The European Communities, India, Indonesia and Thailand note that the statement at issue
was provided in response to a United States' ar gument. They argue that paragraph 7.22, where the
statement in question appears, is part of the Panel's reasoning, and is pertinent and useful in order to
understand the Panel's rationale for considering why the CDSOA constitutes "specific action"
against dumping or a subsidy. Thus, they argue that the statement in question is not beyond the
Panel's terms of reference.

6. Article 9.2 of the DSU
96. The European Communities, India, Indonesia and Thailand argue that, even though
Article 9.2 of the DSU does not set any deadline for requesting a separate panel report, this does not
mean that the parties to a dispute may request a separate report at any time of the proceedings. Citing
the Appellate Body's statement in US – FSC, they argue that WTO Members are under a positive
duty to exercise their procedural rights under the DSU in good faith and may forfeit those rights if
they fail to do so. In the same way as the principle of good faith requires a defendant to raise its
objections "seasonably and promptly"

65, it requires also that the right to a separate report under
Article 9.2 of the DSU be exercised in a timely manner. They conclude that, because the United
States clearly failed to request the report in a timely manner, the Panel was correct in rejecting the
United States' request.
F. Japan and Chile – Appellee
1. Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the
SCM Agreement
97. Japan and Chile, as joint appellees, submit that the CDSOA constitutes a violation of
Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement. They argue
that the United States' assertion that a Members' sovereign power over fiscal matters is totally
unconstrained by its WTO obligations is an overstatement. WTO Members agreed to impose many
limitations on their sovereign powers to promulgate and enforce domestic laws and regulations, even
in fiscal matters. For example, Article III of the GATT 1994 limits the power of Members with
regard to taxation. Article VI of the GATT 1994 and the SCM Agreement restrain the otherwise
sovereign power of Members to provide subsidies. Specifically relevant to this dispute, the United
States has committed not to adopt measures that would constitute specific action against dumping or
subsidization except in accordance with the provisions of the GATT 1994, as interpreted by the Anti-
Dumping Agreement and the SCM Agreement.
98. Japan and Chile contend that the presence of the constituent elements of dumping, as
determined by the United States investigating authorities themselves, is a condition sine qua non of
the application of the CDSOA. This is supported by the text of the law itself, which provides that
duties assessed pursuant to anti-dumping or countervailing duty orders shall be distributed to affected
domestic producers. In US – 1916 Act , the Appellate Body stated that a measure constitutes a

65European Communities's, India's, Indonesia's and Thailand's appellees' submission, para. 188, quoting
Appellate Body Report, US – FSC, para. 166.

specific action if it is taken only in situations presenting the constituent elements of dumping. They
contend that the CDSOA meets this test, as the CDSOA refers explicitly to the requirement of an
anti-dumping order. Thus, the "constituent elements of dumping" can be found in the
CDSOA's textual reference to the prerequisite of an anti-dumping order. According to Japan and
Chile, the CDSOA addresses dumping and subsidizati on as such. As the title of the CDSOA and the
Congressional findings in Section 1002 of the CDSOA make clear, the distribution of duties to the
affected domestic producers offsets continued dumping and subsidization. The CDSOA acts
specifically against dumping because it addresses dumping and subsidization as such, since dumping
or subsidization are its cause and trigger, and because it will apply only when the constituent elements
of dumping or subsidization are present. They add that, in their view, there is a clear connection
between the determination of dumping and CDSOA offset payments.
99. Japan and Chile argue that the text of the CDSOA refutes the United States' claim that the link
between the CDSOA and dumping or subsidization is remote. The findings listed in Section 1002 of
the CDSOA reveal an immediate and clear link between dumping or subsidization and the offset
payments. According to them, the link is evident from the title of the CDSOA— the Continued
Dumping and Subsidy Offset Act.
100. According to Japan and Chile, the Panel corr ectly found that the CDSOA acts "against"
dumping, in the sense that it has an adverse bearing on dumping. For them, there is no textual basis
in either Article 18.1 or 32.1 for the interpretation of the word "against" as requiring a direct contact
or impact on the dumped good or on the entity responsible for it. Therefore, the United States'
argument that action "against" dumping must operate directly on the imported goods or entities
responsible for them is not supported by the ordinary meaning of the phrase "specific action against
dumping" in its context and in the light of the object and purpose of the Anti-Dumping Agreement or
the SCM Agreement. They add that the very rationale underpinning Articles 18.1 and 32.1 is that
Members should not be allowed to modify the conditions of competition between imported and
domestic products that are in a competitive relationship, except to the extent necessary to counteract
dumping and subsidization. They submit that the issue is not whether the CDSOA gives the affected
domestic producers the incentive to use offset payments to bolster their competitive position, or
whether it guarantees that producers will be successful in any attempts to bolster their competitive
positions. The CDSOA gives the affected domestic producers the resources to improve their
competitive positions vis-à-vis dumped imports, and it does so only because the imports are
dumped—not as the United States' argument implies—regardless of the fact that they are dumped.
That is precisely the element that, according to Japan and Chile, renders the CDSOA action against
dumping. They also submit that the CDSOA creates an incentive to file or support applications for

anti-dumping or countervailing investigations, and that a measure that leads to an increased number of
investigations and orders is a measure "against" dumping/a subsidy.
101. According to Japan and Chile, the Panel correctly interpreted and gave full meaning to
footnote 24 of the Anti-Dumping Agreement and footnote 56 of the SCM Agreement. The Panel
explained, in accordance with the decision of the Appellate Body in the US – 1916 Act case, that
"specific action" under Articles 18.1 and 32.1 must be distinguished from "action" under footnotes 24
and 56. Article 18.1 covers "specific action" against dumping. Footnote 24, by contrast, addresses
non-specific action, and clarifies that the prohibition in Article 18.1 does not cover non-specific action
under "other relevant provisions of the GATT", that is, provisions not interpreted by the Anti-
Dumping Agreement. Footnote 24 covers action that addresses the "causes or effects of dumping",
but not action that addresses dumping as such, or which makes dumping the cause for its imposition.
Footnote 56 also refers exclusively to non-specific action.
102. Japan and Chile maintain that the Panel treated the stated purpose of the CDSOA as
confirming evidence of the fact that the CDSOA acts against dumping, a conclusion it had already
reached based on other considerations. According to them, reliance on municipal law as evidence of
facts is accepted under WTO law and general public international law.
103. Japan and Chile argue that the minor textual differences between the text in the Anti-
Dumping Agreement and the SCM Agreement do not undermine the Panel's conclusions regarding
the applicability of the Appellate Body's interpretation of Article 18.1 of the Anti-Dumping
Agreement in the US – 1916 Act to Article 32.1 of the SCM Agreement. They point to footnote 35
of the SCM Agreement, and note that it expressly states that, in certain circumstances, "only one
form of relief
 " against subsidization may be available. Thus, according to them, the text of the SCM
Agreement makes plain that Article VI of the GATT 1994 applies to more than one type of action
against subsidization. They add that, if Article VI of the GATT 1994 and the SCM Agreement
governed only countervailing duties, as the United States alleges, then the prohibition in Article 32.1
would not prohibit effectively specific action against a subsidy and would be rendered meaningless.
The meaning and effectiveness of Article 32.1, like Article 18.1, lie in the fact that it prohibits all
types of specific action against a subsidy, except for the specific actions that are permitted under
Article VI of the GATT 1994 and the SCM Agreement. Japan and Chile also note that Article 18.1 of
the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement are virtually identical, and
that, in US – 1916 Act , the Appellate Body stated that Article 18.1 supports a conclusion that
Article VI of the GATT 1994 is applicable to any "specific action against dumping" of exports. They

argue that, by the same logic, Article 32.1 means that Article VI of the GATT 1994 is applicable to
any specific action against a subsidy.
2. Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the
SCM Agreement
104. Japan and Chile maintain that the language of Article 5.4 of the Anti-Dumping Agreement
and Article 11.4 of the SCM Agreement reflects the intention of WTO Members to ensure that anti-
dumping and countervailing duty petitions have a specified level of support before investigations
based on those petitions are initiated. According to them, the CDSOA distorts the proper expression
and measure of this support by providing a financial incentive to members of an industry to express
their views one way rather than another.
105. Japan and Chile refer to the report of the Appellate Body in US – FSC
 , and in EC – Sardines,
to maintain that WTO Members are required to fulf ill, perform and execute their treaty obligations in
accordance with the "pervasive" principle of good faith. According to them, the Panel correctly found
that the United States ignored its good faith obligations when it adopted the CDSOA.
106. Japan and Chile find support for their conclusion in other provisions of the Anti-Dumping
Agreement and the SCM Agreement. They see, implicit in those provisions, a recognition that even a
properly initiated investigation can impose a severe burden on the parties required to respond.
According to them, those provisions, as well as Article 5.4 of the Anti-Dumping Agreement and
Article 11.4 of the SCM Agreement, seek to limit that burden. The object and purpose of Articles 5.4
and 11.4 was thus to place disciplines on the initiation of burdensome anti-dumping and
countervailing duty investigations and to require that support, within the meaning of those provisions,
be "freely-expressed".

66
107. Japan and Chile agree with the United States that the motives of domestic producers in
deciding whether to support or file an application are not relevant under Articles 5.4 and 11.4. They
submit, however, that the action by the United States to influence those motives through a payment is
relevant.
3. The Combination of Duties and CDSOA Offset Payments
108. Japan and Chile argue that the Panel's finding that the CDSOA has an adverse bearing on the
conditions of competition of dumped or subsidized goods is not based on, nor does it question, the
consistency of the United States laws or regulations relating to the imposition of anti-dumping or

66Japan's and Chile's appellees' submission, para. 101.

countervailing duties. According to them, the CDSOA was the only measure whose consistency
with the GATT 1994, the Anti-Dumping Agreement and the SCM Agreement was examined by the
Panel. In examining whether the CDSOA constitutes a specific action against dumping/a subsidy,
and whether it is consistent with Articles 18.1 and 32.1, they claim it was necessary for the Panel to
consider other relevant United States trade laws in its examination of the CDSOA, since the terms of
the CDSOA incorporate those laws by direct reference to anti-dumping and countervailing duty orders
and to findings under the Antidumping Act of 1921. Nevertheless, none of the Panel's conclusions
depends on any finding regarding the text of laws other than the CDSOA.
109. Japan and Chile also note the United States' reference to footnote 334 of the Panel Report
(referring to the combination of anti-dumping dutie s and offset payment subsidies in the particular
circumstances of the CDSOA). According to them , the purpose of footnote 334 is to reiterate the
Panel's statement in paragraph 7.52, which makes clear that the Panel did not make findings regarding
anti-dumping and countervailing duty orders under the respective United States trade laws that were
outside its terms of reference. They argue that it is inaccurate to assert that the Panel examined other
provisions of United States law in order to find a WTO violation. Rather, they argue that the Panel
made an objective assessment of the facts of the case, which included anti-dumping and
countervailing duty orders issued under applicable United States laws.
4. Article XVI:4 of the WTO Agreement, Article 18.4 of the Anti-Dumping
Agreement, Article 32.5 of the SCM Agreement and Article 3.8 of the DSU
110. Japan and Chile argue that, because the CDSOA is inconsistent with Articles 18.1 and 5.4 of
the Anti-Dumping Agreement , Articles 32.1 and 11.4 of the SCM Agreement , and Articles VI:2
and VI:3 of the GATT 1994, it is also in violation of Article XVI:4 of the WTO Agreement,
Article 18.4 of the Anti-Dumping Agreement and Article 32.5 of the SCM Agreement.
5. The "Advisory Opinion"
111. Japan and Chile submit that the Panel's observations contained in paragraph 7.22 of the Panel
Report are not, as the United States claims, an "adv isory opinion." They point out that the Panel was
merely clarifying the factual basis for its finding that the offset payments under the CDSOA can be
made only in situations where the constituent elements of dumping are present. By stating that it
would have reached the same conclusion had the payments been funded directly from the United
States Treasury, and in an amount unrelated to the collected anti-dumping duties, the Panel, according
to them, was emphasizing that the connection between the offset payments and the determination of

dumping was so clear, direct and unavoidable, that it would remain even if the payments were funded
from another source.
6. Article 9.2 of the DSU
112. Japan and Chile argue that the Panel's decision not to accept the United States' request for
separate panel reports was justified by the right of the Complaining Parties to a prompt settlement of
the dispute and the need to prevent an untimely and abusive exercise of rights on the part of the
United States, which would have prejudiced the complainants. According to them, it is inherent in
every legal precept that confers rights to a party in a proceeding that such rights, either procedural or
substantive, must be exercised in a reasonable and timely manner.
113. Japan and Chile submit that, by rejecting the request for separate panel reports, the Panel did
not diminish the United States' rights under Arti cle 9.2 of the DSU; rather, it protected the
complainants' right under Article 3.3 of the DSU to a prompt settlement of the dispute and also
protected them from an abusive exercise of the United States' rights. They also claim that the Panel
properly determined that acceptance of the United States' request would have delayed the issuance of
the final report and would have prolonged the nul lification and impairment of the rights of the
complainants under the covered agreements caused by the CDSOA. Thus, they conclude, that the
Panel maintained the proper balance between the procedural right of the United States to separate
panel reports and its obligations not to nullify and impair the benefits accruing to the complainants
under the covered agreements.
G. Korea – Appellee
1. Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the
SCM Agreement
114. Korea submits that the CDSOA is a specific action in response to dumping. According to
Korea, the Panel carefully analyzed the structur e and design of the CDSOA, and found that the
CDSOA requires the constituent elements of dumping for its application. It was only on that basis
that the Panel concluded that there is a clear, direct and unavoidable connection between the
determination of dumping and CDSOA offset paym ents, and that the CDSOA is "specific action"
related to dumping.
115. Korea contends that the Panel's definition of "against" was in line with the rules of treaty
interpretation. Korea notes the United States' assertion that "against" implies that an action must
come into contact directly with the imported or subsidized good or importer, exporter or foreign

producer. Korea argues that "in contact with" is an ordinary meaning of "against" when it is used
to describe physical contact, and that it cannot be the ordinary meaning of "against" as it is used in
relevant WTO provisions. Korea adds that the proper context in which the term "against" is used is
"against dumping". It is neither against dumped imports nor against entities connected to the
dumped good.
116. Korea submits that the Panel fully explained why the "conditions of competition" test is
applicable to Article 18.1 and Article 32.1. The Panel found, from the ordinary meaning of
"against", that a measure will act "against" dumping if it has an adverse bearing on the practice of
dumping. The Panel then took note of the fact that "against" is not qualified in any way in
Article 18.1, and thus found that the ordinary meaning of "against" encompasses any form of adverse
bearing, be it direct or indirect. The Panel then proceeded to analyze the structure and design of the
CDSOA to see how the CDSOA distorts the conditions of competition between dumped and domestic
products. From this, the Panel found that the CDS OA distorts the conditions of competition between
domestic and dumped products, which it found to be a form of adverse bearing on dumping.
117. Korea supports the Panel's finding that the CDSOA has an adverse impact on the conditions
of competition. Korea disagrees with the United States that this finding of the Panel is based on mere
suppositions, and argues that it results rather from an analysis of the structure and design of the
CDSOA. Korea contends that the Panel correctly referred to the stated purpose of the CDSOA to
confirm this finding. Korea notes that in Chile – Alcoholic Beverages, the Appellate Body made a
distinction between subjective intentions inhabiting the minds of individual legislators, and the
purpose or objective objectively expressed in the statute itself. According to Korea, although it is not
necessary for the panel to sort through the subjective intentions of legislators, the Appellate Body
found that the purpose or objective objectively expressed in the statute itself are pertinent. The
Appellate Body added that this objective expression can be discerned from the design, the
architecture and the structure of a measure.

67 Korea submits that the Panel's analysis was in full
compliance with such guidance from the Appellate Body.
118. Korea maintains that the Panel correctly found that its findings on claims under Article 18.1
of the Anti-Dumping Agreement apply equally in respect of the claims under Article 32.1 of the
SCM Agreement. According to Korea, the Appellate Body's analysis in US – 1916 Act was not
based on any particular provisions of the Anti-Dumping Agreement in isolation, but on the Anti-
Dumping Agreement as a whole. Also, Korea notes that the Panel stated that it is important to have

67Appellate Body Report, Chile – Alcoholic Beverages, para. 62.

regard to the fact that the types of remedies foreseen by the SCM Agreement are broad, including
countervailing duties and countermeasures.
2. Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the
SCM Agreement
119. Korea endorses the Panel's finding that the CDSOA constitutes a violation of Article 5.4 of
the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement.
120. According to Korea, the peculiarity of Article 5.4 of the Anti-Dumping Agreement and
Article 11.4 of the SCM Agreement is that the object and purpose of those provisions is explicitly
contained in the provisions themselves. Korea concludes that a violation of the "object and purpose"
of those provisions is a violation of the explicit terms of those provisions as well.
121. Korea notes the assertion by the United States that the Panel's finding is not based on a
violation of Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement, but
rather on a violation of the principle of good faith. According to Korea, the United States seems
thereby to assert that, even though "good faith implementation of a treaty provision is a substantive
obligation arising from the Vienna Convention on the Law of Treaties "

68, it is not "part of the WTO
law."
69
122. Korea submits that WTO Members must observe the general principle of good faith,
recognized by the Appellate Body as a pervasive principle that informs the covered agreements, in the
application and interpretation of the Anti-Dumping Agreement and the SCM Agreement.
123. Korea endorses the Panel's finding that the CDSOA provides a financial inducement to
domestic producers to file or support applications for the initiation of anti-dumping and countervailing
duty investigations, because CDSOA payments are made only to those producers that file or support
such applications and because the financial rewards for doing so are significant. Korea submits that
the Panel's findings to this effect were based on a careful examination of the structure and operation of
the CDSOA and not on speculation, as the United States asserts.

69Ibid.

3. The Combination of Duties and CDSOA Offset Payments
124. Korea notes that the United States, in making the claim that the Panel exceeded its terms of
reference by examining the CDSOA in combination with United States laws, does not make any
reference to the Panel Report. Korea argues that the absence of any reference is not because of
inadvertence, but because the Panel did not make such an examination.
125. According to Korea, the CDSOA and anti-d umping (or countervailing) duties are not
bifurcated and independent from each other. On the contrary, the presence of anti-dumping duties is a
sine qua non for the disbursement of CDSOA offset payments. Korea submits that all of the relevant
findings of the Panel were made in relation to the analysis of the CDSOA alone, without any
reference to United States laws on the imposition of anti-dumping (or countervailing) duties.
H. Mexico – Appellee
1. Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the
SCM Agreement
126. Mexico submits that the Panel interpreted Articles 18.1 and 32.1 properly. The Panel applied
the analysis of "constituent elements" used by the Appellate Body in US – 1916 Act and determined
that the CDSOA offset payments acted specifically in response to dumping. The Panel interpreted the
meaning of "against dumping" as "an adverse bearing on dumping" and applied its legal interpretation
to the facts of the dispute in order to determine that the CDSOA was a non-permissible "specific
action against dumping". The Panel also applied its analysis in relation to Article 18.1 of the Anti-
Dumping Agreement to the argument on Article 32.1 of the SCM Agreement , and found that the
CDSOA was a non-permissible "specific action against a subsidy".
127. Mexico contends that it is not necessary for the "constituent elements" of dumping or of a
subsidy to be expressed in the language of the law. Interpreting Article 18.1 as requiring that a law
must explicitly establish the constituent elements of dumping opens up the possibility of
circumventing this provision. Such an interpretation should, therefore, be avoided.
128. Mexico argues that the distribution of CDSOA offset payments is directly related to, and
caused by, the imposition of anti-dumping or countervailing duties, which legally can be imposed
only when the elements of dumping and subsidy are present. According to Mexico, the Panel
correctly found that there is a clear, direct and unavoidable connection between the determination of
dumping and CDSOA offset payments.

129. Mexico adds that there is nothing in the "constituent elements" test that specifies that the
payments and the dumping must occur at the same time. Even though, under certain circumstances,
CDSOA payments may be retrospective, this does not alter the fact that there is an unavoidable
connection between the payments and the dumping or subsidization. By their very structure and
design, CDSOA payments occur after the collection of anti-dumping and countervailing duties.
130. Mexico maintains that the scope of Articles 18.1 and 32.1 on the one hand, and footnotes 24
and 56 on the other, are mutually exclusive. Action prohibited by an article cannot be permitted by a
footnote to that article. According to Mexico, even though the footnotes are relevant to this dispute,
the United States has not established that the CDS OA is action "under other relevant provisions of
GATT 1994". The fact that the measures are not inconsistent with the GATT 1994 does not mean
that they are taken under other relevant provisions of the GATT 1994.
131. Mexico submits that there is no basis for in terpreting the word "against" as meaning that
action must have an adverse bearing on imports or persons "directly" related to the imports. There is
no mention in any part of Articles 18.1 or 32.1 of actions taken "directly" against dumped or
subsidized imports and there is no text or context that imposes this requirement. Those Articles
simply refer to "action against", which may include direct or indirect action. The reference in
Article 18.1 to "dumping of exports" instead of "dumped exports" and the reference in Article 32.1 to
"a subsidy of another Member" instead of "subsidized imports" or "subsidized exports" confirms this.
For Mexico, if those who drafted the two Agreements had wanted to follow the limited interpretation
given by the United States, they would have used other words instead of "dumping of exports" or "a
subsidy of another Member".
132. Mexico contends that the Panel did not interpret Articles 18.1 and 32.1 to include a
"conditions of competition" test. The Panel's reference to conditions of competition was in the
context of evaluating the relevant facts and ci rcumstances of the CDSOA, and whether the CDSOA
has "an adverse bearing" on dumping. For Mexico, the Panel was not creating a new legal test.
Mexico maintains that the distortion of competition between the dumped product and the domestic
product is proof of an adverse bearing on dumping.
133. Mexico submits that the conclusions of the Panel that the CDSOA has a specific adverse
impact on the competitive relationship between domestic products and dumped imports, and that such
dissuasive effect means that the CDSOA bears adversely on dumping, and therefore acts against
dumping, are not the result of speculation and are not based on assumptions or hypothetical examples.
Rather, they are the result of the Panel's analysis of the structure and design of the CDSOA. The real
impact of the CDSOA is shown in the Panel's finding that "[e]xporters/foreign producers know that if

they dump products in the United States, and if those products are subject to an anti-dumping order,
not only will anti-dumping duties be levied, but those duties will be transferred to at least some of
their US competitors in the form of CDSOA offset payments."

70
134. Mexico argues that the Panel is empowered to examine the legislative history of a law when
examining its significance. In US – 1916 Act, the panel considered the text of the measure at issue in
that dispute in the context of its enactment, including the legislative history.
71 I n US –
Countervailing Measures on Certain EC Products, the panel indicated that "when examining internal
legislation, a Panel must look to all the elements that establish its meaning, not just the statutory
language. Therefore, it is also necessary to look at other domestic interpretive tools such as the
legislative history …".

72 I n US – Section 110(5) Copyright Act , the panel stated that "we also
observed that stated public policy purposes could be of subsidiary relevance for drawing inferences
about the scope of an exemption and the clarity of its definition. In our view, the statements from the
legislative history indicate an intention of establishing an exception with a narrow scope."

73 Mexico
adds that the Panel in this case did not base its finding that the CDSOA constitutes "specific action
against dumping" on the legislative history. Rather, it looked to the legislative history of the
CDSOA to confirm its finding.
135. Mexico maintains that the Panel correctly interpreted Article 32.1 of the SCM Agreement.
As noted by the Panel, Article 18.1 and Article 32.1 contain essentially identical language. The
Panel acknowledged the differences between Article 1 of the Anti-Dumping Agreement and Article 10
of the SCM Agreement , but did not see why a different approach should apply in respect of the
permissible responses to subsidization. In the case of the Anti-Dumping Agreement, the permitted
responses to dumping are provisional anti-dumping duties, definitive anti-dumping duties and price
undertakings. In the case of the SCM Agreement, the permitted responses to a subsidy are provisional
and definitive countervailing duties, price undertakings, and countermeasures.

70Panel Report, para. 7.39.
71Panel Report, US – 1916 Act (EC) , paras. 6.120-6.133 and 6.228; Panel Report, US – 1916 Act
(Japan), paras. 6.141-6.151 and 6.289.
72Panel Report, US – Countervailing Measures on Certain EC Products, para. 7.139.
73Panel Report, US – Section 110(5) Copyright Act, para. 6.157.

2. Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the
SCM Agreement
136. Mexico supports the finding of the Panel that the CDSOA is inconsistent with Article 5.4 of
the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement, because it operates in such a
way that the investigating authorities cannot carry out an objective and impartial examination of the
degree of support for the application.
137. Mexico submits that, contrary to the United States' claim, the wording of these provisions
interpreted in good faith and taking into account their context and object and purpose, does not mean
that the only thing WTO Members have to do is to examine whether the statistical thresholds in
Articles 5.4 and 11.4 have been met prior to initiating an investigation. Rather, Articles 5.4 and 11.4
require a positive determination based on the degree of support for an application "by or on behalf of
the domestic industry". Such a determination must be objective and must comply with the principle
of good faith.
138. Mexico submits that, for the thresholds set out in Article 5.4 of the Anti-Dumping Agreement
and Article 11.4 of the SCM Agreement to be meaningful, a WTO Member may not distort the
degree of support for, or opposition to, any particular application. In order to comply with this
obligation, it is not necessary to enquire into the motives or intent of producers that elect to support an
application. Members of the WTO must ensure, however, that no measure increases (or decreases)
the possibility that the domestic industry meets the prescribed threshold, and that the investigating
authority's decision regarding the degree of support is objective and unbiased.
139. Mexico concludes that, "[b]y giving applicants or those supporting applications economic
advantages, the CDSOA prevents the United States investigating authorities from making an objective
and unbiased finding regarding the degree of support for any application."

74 In itself, the CDSOA
"invariably distorts the degree of support for an application"
75 and is therefore inconsistent with
Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement.
140. Mexico further submits that the Panel's analysis of whether or not the CDSOA creates a
financial incentive to support anti-dumping or countervailing duty investigations is relevant with
respect to addressing the issue of whether the United States has maintained measures which prevent
investigating authorities from conducting an objective examination of whether or not an application
has been made "by or on behalf of the domestic industry" within the meaning of Articles 5.4 and 11.4.

75Ibid.

3. The Combination of Duties and CDSOA Offset Payments
141. Mexico argues that the Panel did not exceed its terms of reference by examining the claims
concerning the CDSOA in combination with other laws and regulations. According to Mexico, the
CDSOA is within the Panel's terms of reference. In addition, the complainants did not contest the
consistency of United States legislation on anti-dumping and countervailing duties, so it is not
necessary for this legislation to be identified as the actual measure in dispute in this case. At the same
time, however, the Panel had the authority to examine the context of the CDSOA, which includes
other United States legislation. Mexico also claims that the panel report in US – Section 129(c)(1)
URAA, cited by the United States, does not support th e United States' position, but is rather contrary
to it

4. Article XVI:4 of the WTO Agreement, Article 18.4 of the Anti-Dumping
Agreement, Article 32.5 of the SCM Agreement and Article 3.8 of the DSU
142. Mexico argues that the Panel correctly found that the CDSOA is inconsistent with
Articles 5.4, 18.1 and 18.4 of the Anti-Dumping Agreement, Articles 11.4, 32.1 and 32.5 of the SCM
Agreement, and Articles VI.2 and VI.3 of the GATT 1994. Therefore, the CDSOA is inconsistent
with Article XVI.4 of the WTO Agreement. It also nullifies or impairs the benefits accruing to the
Complaining Parties under these agreements.
5. The "Advisory Opinion"
143. Mexico argues that paragraph 7.22 of the Panel Report is obiter dictum and not a legal
finding by the Panel that has to be upheld, modified or reversed by the Appellate Body.
I. Arguments of the Third Participants
1. Argentina
(a) Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the
SCM Agreement
144. Argentina supports the conclusion of the Panel that the CDSOA is inconsistent with
Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement, because it
induces United States producers to file or to support applications for the petition for the initiation of
anti-dumping and countervailing duty investigations.

145. Argentina emphasizes that the object and purpose of Articles 5.4 and 11.4 should be
considered "just as valid"
76 as the text of those provisions. According to Argentina, Articles 5.4
and 11.4 seek to ensure not only that WTO Members comply with the threshold tests set out in those
provisions, but also that investigations are initiated in proper form and that "unjustified proliferation
of investigations"

77 is avoided. According to Argentina, this "object and purpose" is also reflected in
the requirement contained in those provisions not to initiate investigations when domestic producers
expressly supporting the application account for less than 25 per cent of the domestic industry.
146. Argentina notes that the mere initiation of an investigation brings with it the possibility of
provisional measures being introduced in accordance with Article 7 of the Anti-Dumping Agreement
and Article 12.12 of the SCM Agreement. Argentina submits that a proliferation of investigations
could entail injury to a large number of exporters to the United States' market and disrupt normal
trade flows among WTO Members.
(b) Article XVI:4 of the WTO Agreement , Article 18.4 of the Anti-
Dumping Agreement , Article 32.5 of the SCM Agreement and
Article 3.8 of the DSU
147. Argentina argues that, because the CDSOA is inconsistent with the United States' WTO
obligations under the Anti-Dumping Agreement and the SCM Agreement , it also violates
Article XVI:4 of the WTO Agreement.
2. Hong Kong, China
(a) Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the
SCM Agreement
148. Hong Kong, China submits that the mandate d distribution of offsets under the CDSOA
constitutes specific action against dumping and subsidization under Article 18.1 of the Anti-Dumping
Agreement and Article 32.1 of the SCM Agreement. Although the constituent elements of dumping
are not referred to in the CDSOA, no payments under the CDSOA can be made unless anti-dumping
duties are collected. Anti-dumping duties cannot be collected unless an anti-dumping order is
imposed. An anti-dumping order cannot be imposed unless the constituent elements of dumping
exist. The same is true for subsidization. Notwithstanding the fact that the CDSOA does not
refer to the constituent elements of dumping or subsidization, actions under the CDSOA can be

76Argentina's third participant's submission, para. 7.
77Ibid., para. 8.

taken only if the constituent elements of dumping and/or subsidization are found. Thus, actions under
the CDSOA are clearly "in response" to the constituent elements of dumping and/or subsidization.
149. Hong Kong, China adds that the CDSOA is a specific action against dumping or subsidization
because it places imported goods at a competitive disadvantage relative to domestically-produced
goods, and brings about an adverse impact on the imported goods. The additional burden is a direct
result of the domestic producers of the United States having an increased cash flow that, in turn, is the
result of distribution of funds directly stemming from the existence of an anti-dumping or
countervailing duty order. The mere fact that the United States producers receive a distribution
because an anti-dumping or countervailing duty order is in place is sufficient to render the CDSOA
inconsistent with the Anti-Dumping Agreement and the SCM Agreement.
150. Hong Kong, China says that the Panel has not concluded that there exists a test for conditions
of competition or competitive advantage in Article 18.1 of the Anti-Dumping Agreement and
Article 32.1 of the SCM Agreement. Rather, according to Hong Kong, China, the Panel has used this
analysis only to demonstrate that the CDSOA is a direct burden on imported goods. By offsetting the
effects of dumping and subsidization in addition to the anti-dumping and countervailing duty order,
payments under the CDSOA impermissibly alter the competitive conditions in favour of domestic
producers. According to Hong Kong, China, if anti-dumping and countervailing duties level the
playing field, the CDSOA payments tilt the field back in favour of the domestic producers in the
United States. By definition, CDSOA payments would improve the recipients' competitive position.
Hong Kong, China says that it is, therefore, established, through the conditions of competition
analysis, that the CDSOA results in a "direct" burden on imported goods.
151. Hong Kong, China notes that in the dispute concerning the US – 1916 Act , the Appellate
Body unequivocally restricted permissible responses to dumping to definitive anti-dumping duties,
provisional measures or price undertakings. The Appellate Body's analysis was not based on any
particular provisions in the Anti-Dumping Agreement in isolation, but rather on the Anti-Dumping
Agreement as a whole. In that case, the Appellate Body looked at the overall purpose and meaning of
the Anti-Dumping Agreement and found that only those measures expressly provided for in the
Anti-Dumping Agreement are permissible specific actions against dumping. As far as the present
case on the CDSOA is concerned, Hong Kong, China says that it sees no reason why the same
analysis of examining the overall purpose and meaning of the whole Agreement should not be
adopted in order to decide whether any action that is not expressly provided for in the Agreement is
permissible.

(b) Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the
SCM Agreement
152. Hong Kong, China submits that the object and purpose of Article 5.4 of the Anti-Dumping
Agreement and Article 11.4 of the SCM Agreement is to limit the initiation of investigations to those
instances where the domestic industry has a genuine interest in the adoption of measures against
dumping or subsidization. Hong Kong, China maintains that the CDSOA provides domestic
producers who have not been adversely affected by dumped/subsidized imports with an incentive to
file or to support anti-dumping and countervailing actions, and in doing so, renders the quantitative
thresholds in Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement
meaningless.
3. Israel
(a) Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the
SCM Agreement
153. Israel submits that the CDSOA is a specific action against dumping and subsidization within
the meaning of Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM
Agreement, because it awards monetary damages to parties that have been found to be injured by
dumping or subsidization.
(b) Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the
SCM Agreement
154. Israel endorses the Panel's finding that the CD SOA is inconsistent with Article 5.4 of the
Anti-Dumping Agreement and Article 11.4 of the SCM Agreement, because it operates in such a way
that the investigating authorities are unable to co nduct an objective and impartial examination of the
level of support that exists for an application.
4. Norway
(a) Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the
SCM Agreement
155. Norway submits that the Panel correctly c oncluded that the CDSOA is a non-permissible
specific action against dumping contrary to Article 18.1 of the Anti-Dumping Agreement and that it
is a non-permissible specific action against a subsidy contrary to Article 32.1 of the SCM Agreement.
As Article 32.1 of the SCM Agreement contains parallel language to Article 18.1 of the Anti-
Dumping Agreement, Norway says it agrees with the Panel that the phrase "specific action against a

subsidy" must be understood similarly to encompa ss, at a minimum, action that may be taken only
when the constituent elements of a subsidy are pres ent. Norway adds that a Member's actions with
respect to subsidies are spelled out in Articles VI and XVI of the GATT 1994, as interpreted by the
 SCM Agreement , and limited to one of the following three types of action against subsidization:
"countervailing measures" imposed in accordance with Part V of the SCM Agreement ;
"countermeasures" against a "prohibited subsidy" imposed in accordance with Part II of the
SCM Agreement; or, "countermeasures" against subsidies that cause "adverse effects" to the interests
of the Member concerned, according to Part III of the SCM Agreement. The "specific measures"
available to a WTO Member to meet subsidization are thus limited to the above-mentioned measures.
156. Norway notes that the United States has argued in US – Norwegian Salmon AD that limits
exist with respect to the actions a Member State may take in response to unfair trade practices.
157. Norway contends that the legislative histor y of the CDSOA is a relevant and important
factor to be taken into account when demonstrating that the CDSOA was aimed at creating an
additional specific measure as a response to foreign dumping and subsidization.
(b) Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the
SCM Agreement
158. Norway expresses agreement with the Panel that the CDSOA, by mandating offset payments
to affected domestic producers, provides a strong financial incentive to domestic producers to file
applications for the imposition of anti-dumping or countervailing measures, or to support such
applications made by other domestic producers. In Norway's submission, a domestic producer cannot
be considered to have made an "application", or to have "supported" it, within the meaning of
Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement, if it does so in
order to qualify for offset payments provided under the CDSOA.
159. Norway submits that the CDSOA has the effect of stimulating the filing of applications and
making it easier for applicants to obtain the support of other domestic producers, so as to meet the
quantitative thresholds laid down in Article 5.4 of the Anti-Dumping Agreement and in Article 11.4
of the SCM Agreement. In doing so, the CDSOA operates in a way which prevents the United States'
authorities from conducting an objective examination of whether an application is made "by or on
behalf of the domestic industry" as required by Article 5.4 of the Anti-Dumping Agreement and
Article 11.4 of the SCM Agreement.

(c) Article XVI:4 of the WTO Agreement , Article 18.4 of the Anti-
Dumping Agreement , Article 32.5 of the SCM Agreement and
Article 3.8 of the DSU
160. Norway argues that the CDSOA is inconsistent with Article XVI:4 of the WTO Agreement
and nullifies and impairs benefits accruing to the complainants because it is inconsistent with
Articles 18.1 and 5.4 of the Anti-Dumping Agreement, and with Articles 32.1 and 11.4 of the SCM
Agreement.
IV. Procedural Matters: Arguments of the Participants and the Third Participants
A. Allegation of Flaws in the Notice of Appeal
1. Canada
161. In a letter dated 5 November 2002, Canada requested the Appellate Body to issue a
preliminary ruling that the United States is in breach of Rule 20(2)(d) of the Working Procedures,
because the United States' appellant's submission contains certain arguments, allegations and requests
for ruling that the United States did not include in the Notice of Appeal dated 18 October 2002.
Canada refers explicitly to paragraph 40 of the United States' appellant's submission, in which the
United States argues that the Panel failed to set out "the basic rationale behind" its finding as required
by Article 12.7 of the DSU (by not explaining why it examined the burden the measure creates on
the conditions of competition under which imports compete), and that the Panel failed to conduct an
"objective assessment of the matter before it" as required by Article 11 of the DSU.
162. Canada also refers to Sections IV and VI of the United States' appellant's submission, where
the United States alleges that the Panel exceeded its terms of reference, by examining claims
concerning the CDSOA in combination with other United States laws and regulations, and by issuing
an advisory opinion on a measure outside its terms of reference. According to Canada, these claims
relate to the exercise of jurisdiction by the Panel under Article 7 of the DSU, and the United States
should have included them in its Notice of Appeal.
163. Canada concludes that the United States' cl aims, concerning violations by the Panel of
Articles 7, 11 and 12 of the DSU, are outside the scope of appellate review, because the United States
failed to include them in its Notice of Appeal.

2. United States
164. Responding to the arguments raised by Canada in its request for a preliminary ruling, the
United States argues that its Notice of Appeal "is more than sufficient in setting out the 'findings or
legal interpretations of the Panel' from which the United States is appealing."

78 The United States
submits that, in the first numbered paragraph of its Notice of Appeal, it appeals as erroneous the
Panel's findings that the CDSOA is inconsistent with Article 18.1 of the Anti-Dumping Agreement
and Article 32.1 of the SCM Agreement; and that such findings are based on "erroneous findings of
issues of law and related legal interpretations."

79 According to the United States, each of its
arguments alleged by Canada to be outside the scope of the appeal falls within the matters raised in
this first numbered paragraph of the United States' Notice of Appeal.
165. As regards paragraph 40 of the United States' appellant's submission, the United States notes
that one of the legal bases for the Panel's findings on Article 18.1 of the Anti-Dumping Agreement
and Article 32.1 of the SCM Agreement is the "conditions of competition" test. Because the United
States' claim at issue in paragraph 40 concerns th e "conditions of competition" test, it relates to
Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement. The United
States' Notice of Appeal covers the Panel's findings and related legal interpretations regarding
Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement , and,
therefore, the matters addressed in paragraph 40 "fal l squarely within the matters raised in the first
numbered paragraph of the U.S. notice."

80 The United States also argues that Canada's claim that the
United States' Notice of Appeal should have specifically cited Articles 11 and 12.7 of the DSU is
contrary to the Appellate Body's interpretation of Rule 20 of the Working Procedures. The United
States submits that, under the interpretation of this rule set out by the Appellate Body in US –
Shrimp, the Notice of Appeal need only identify the findings or legal interpretations of the Panel
which are being appealed as erroneous; the Notice of Appeal is not designed to be a summary or
outline of the arguments to be made by the appellant. The United States clarified at the oral hearing
that it does not request the Appellate Body to make a specific finding that the Panel has failed to
comply with Articles 11 or 12.7 of the DSU; the comments on these Articles found in paragraph 40
are simply supportive of the United States' argument that the Panel erred in interpreting Article 18.1
of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement.

78United States' letter of 8 November 2002.
79Ibid.
80Ibid.

166. Turning next to Canada's contentions regarding Section IV of the United States' appellant's
submission, the United States submits that the Panel's findings on Article 18.1 of the Anti-Dumping
Agreement and Article 32.1 of the SCM Agreement were based in part on the Panel's findings
concerning the CDSOA in combination with other United States laws. Because the United States'
claim at issue in Section IV concerns the combin ation issue, it relates to Article 18.1 of the Anti-
Dumping Agreement and Article 32.1 of the SCM Agreement. The United States' Notice of Appeal
covers the Panel's findings and related legal interpretations regarding Article 18.1 of the Anti-
Dumping Agreement and Article 32.1 of the SCM Agreement, and, therefore, the matters addressed
in Section IV "are plainly covered" by the Notice of Appeal.

81
167. As to Canada's contentions on Section VI of the United States' appellant's submission, the
United States submits that the Panel's advisory opinion was made in the context of its findings on
Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement. Section VI
concerns the advisory opinion issue and, therefore, relates to Article 18.1 of the Anti-Dumping
Agreement and Article 32.1 of the SCM Agreement. Because the United States' Notice of Appeal
covers the Panel's findings and related legal interpretations regarding Article 18.1 of the Anti-
Dumping Agreement and Article 32.1 of the SCM Agreement, the matters addressed in Section VI
"are well within the scope"

82 of the Notice of Appeal.
168. The United States also argues that Canada's arguments alleging that due process mandates
that these issues should be included in the Notice of Appeal are without merit. The United States
points out that there is no "notice of appeal" preceding an "other appellant's" submission under the
Working Procedures. Furthermore, an appellee has 15 days to respond to an appellant's submission
(which is preceded by a notice of appeal), but only 10 days to respond to an "other appellant's"
submission (which is not preceded by a notice of appeal). Thus, the United States argues, Canada's
logic regarding due process would suggest that all appeals to date under the WTO in which there has
been an "other appellant's" submission have violated the "fundamental requirements of due process".
3. Australia
169. Australia contends that some allegations of errors by the United States are not properly before
the Appellate Body by reason of insufficiencies of the Notice of Appeal. Australia submits that the
Notice of Appeal does not include any reference to the fact that the Panel may have violated

81United States' letter of 8 November 2002.
82Ibid.

Articles 11 and 12.7 of the DSU. Nor does it include any reference that the Panel may have exceeded
its terms of reference.
4. Brazil
170. According to Brazil, the United States' claim that the Panel exceeded its terms of reference by
examining claims concerning the CDSOA in combination with other United States laws is not
properly before the Appellate Body, because the United States failed to include this claim in its Notice
of Appeal.
5. European Communities, India, Indonesia and Thailand
171. The European Communities, India, Indonesia and Thailand argue that, only if the allegations
of error are adequately identified in the Notice of Appeal, are the other parties to the proceedings in a
position to exercise their rights under the DSU and the Working Procedures. They also recall the
Appellate Body's recognition that Article 3.10 of the DSU commits WTO Members to engage in the
dispute settlement procedures "in good faith" and that the procedural rights under the DSU must
be exercised in a manner that does not prevent other Members from exercising their own rights.
According to the European Communities, India, Indonesia and Thailand, withholding a claim of error
until the filing of the appellant's submission is inconsistent with the requirements of good faith and
due process. Thus, the European Communities, India, Indonesia and Thailand conclude that the
claims identified in Canada's letter dated 5 November 2002 should be excluded from the scope of this
appeal.
6. Japan
172. Japan argues that the claims identified in Canada's letter dated 5 November 2002 as new
claims of error made by the United States cannot be characterized simply as grounds for the current
appeal, as legal arguments in support of an allegation included in the Notice of Appeal, or as
statements of a provision of the covered agreements. Therefore, Japan concludes that the United
States contravened Rule 20(2)(d) of the Working Procedures by including these new allegations in
its appellant's submission.
7. Korea
173. Korea submits that the United States included in its appellant's submission several points not
raised in the Notice of Appeal. According to Korea, this is in violation of Rule 20(2)(d) of the
Working Procedures.

8. Norway
174. Norway contends that some of the allegations in the United States' appellant's submission are
not mentioned in the Notice of Appeal and, therefor e, should be excluded from the scope of appellate
review.
B. Allegations Regarding the Scope of Appellate Review
1. Canada
175. Canada further argues in its request for a preliminary ruling and in its appellee's submission
that the United States' appellant's submission is "inconsistent with Article 17.6 of the DSU, because
it purports to adduce new evidence … and that consideration of such new evidence is outside the
scope of appellate review."

83 According to Canada, Article 17.6 of the DSU prohibits the Appellate
Body from receiving and examining evidence that was not before the Panel in order to impugn the
factual findings of the Panel.
176. Canada submits that in paragraphs 120-121 of the United States' appellant's submission, the
United States purports to impugn evidence on which the Panel relied, namely two letters submitted to
the Panel by Canada. For Canada, this attempt by the United States to impugn the "credibility
and weight"

84 the Panel attached to the two letters is inconsistent with Article 17.6 of the DSU.
Canada also stresses that the United States does so even though it did not comment on this evidence
when the evidence was first brought before the Panel, and even though the Panel gave the United
States ample opportunity to comment on the letters.
177. In addition, Canada submits that in footnotes 148-149 of the United States' appellant's
submission, the United States adduces new evidence that it characterizes as being "available on the
public record". Canada argues that consideration by the Appellate Body of such new evidence would
be contrary to Article 17.6 of the DSU and that such new evidence "should be struck from the
record".

85
2. United States
178. The United States argues that nothing in its appellant's submission requests, or in any way
indicates, that the Appellate Body should do anyt hing but examine the issues of law underlying the

83Canada's letter dated 5 November 2002.
85Canada's letter dated 5 November 2002.

Panel's findings and the associated legal interpretations. According to the United States,
paragraphs 120 and 121 of its appellant's submission, cited by Canada, "go to the core of one of the
legal errors committed by the Panel"

86, namely that the Panel assumed, as a matter of law, without
sufficient basis, that the statute would necessarily result in the initiation of anti-dumping and subsidy
cases with less than the level of support required under the WTO Agreement. The United States
argues that the Panel's erroneous conclusions resulted, in part, from the Panel's "misunderstanding of
two letters"

87, and that paragraphs 120 and 121 of the appellant's submission seek to clarify the
contents of these letters. The United States claims that, in showing that the Panel lacked a basis for its
finding that the CDSOA amounts to a prima facie violation of the WTO Agreement, the arguments
in paragraphs 120 and 121 are entirely appropriate and "well within the scope of the matters to be
examined in this appeal."
88
179. As to footnotes 148 and 149 of its appellant's submission, the United States submits that the
appeal involves a prima facie challenge to the CDSOA and that the issue turns on whether or not the
Panel had a sufficient basis for its legal conclusions. Thus, the United States argues, it "cited to [the
public documents in these footnotes] to provide th e Appellate Body with a greater understanding of
the facts involved in the dispute and to reinforce th e point that the panel lacked a sufficient basis for
its findings."

89
3. Australia
180. Australia submits that, under Article 17.6 of the DSU, paragraphs 120 and 121 of the United
States' appellant's submission, and footnotes 148 and 149 thereto, should be disregarded, as the United
States may not contest the accuracy of, or introduce, factual evidence for the first time in appeal
proceedings.
4. European Communities, India, Indonesia and Thailand
181. The appellees argue that the new factual arguments and the new factual evidence adduced by
the United States at paragraphs 120 and 121 of its appellant's submission, and in the accompanying
footnotes, should be disregarded by the Appellate Body. The new factual arguments in
paragraphs 120 and 121 were not raised during the Panel proceedings. In addition, the footnotes refer
to documents that were not part of the record of the Panel proceedings.

86United States' letter dated 8 November 2002.
87Ibid.
88Ibid.
89Ibid.

5. Japan
182. Japan first recalls that in Canada – Aircraft, the Appellate Body declined to rule on a new
argument made by Brazil on appeal. According to Japan, the Appellate Body's decision was based on
the ground that in order to rule on the new argument, it would have to solicit, receive and review new
facts that were not before the Panel, and that were not considered by it, a scenario excluded by
Article 17.6 of the DSU. Therefore, Japan argu es that the new argument and the new evidence
brought by the United States should be rejected.
6. Korea
183. Korea contends that the United States' appellant's submission is inconsistent with Article 17.6
of the DSU because it adduces new evidence that had not been presented to the Panel.
7. Norway
184. Norway argues that the United States has adduced new factual arguments and new factual
evidence in its appellant's submission that are outside the scope of appellate review.
V. Procedural Matters and Ruling
185. We turn first to the procedural matters raised in this appeal. As we indicated earlier in this
Report
90, Canada, supported by other appellees
91 and one third participant
92, argues that the United
States is in breach of Rule 20(2)(d) of the Working Procedures , because the United States'
appellant's submission allegedly includes claims, allegations and requests for ruling that were not
included in the United States' Notice of Appeal.

93 Canada requests that these claims be struck from
the appeal. In addition, Canada objects, with support from other appellees
94 and one third
participant95, to the inclusion in the United States' appellant's submission of arguments that, in
Canada's view, impugn certain evidence relied upon by the Panel, and to the inclusion of what Canada

90Supra, paras. 161-163.
91Australia, Chile, the European Communities, India, Indonesia, Japan, Korea and Thailand join
Canada in respect of allegations regarding the non-inclusion of claims under DSU Articles 7, 11 and 12.7. In
addition, Brazil joins Canada in respect of allegations regarding the non-inclusion of claims under Article 7 of
the DSU.
92Norway.
93The Notice of Appeal is attached as Annex I to this Report.
94Australia, Chile, the European Communities, India, Indonesia, Japan, Korea and Thailand.
95Norway.

regards as new evidence that was not before the Panel. Canada submits that these arguments and the
alleged new evidence are outside the scope of appellate review by virtue of Article 17.6 of the DSU.
186. Canada requested a preliminary ruling on these issues
96, to which the United States objected
on the grounds that Canada's claims are "meritless"
97 and because neither the DSU nor the
Working Procedures permits such rulings.
98 We denied the request for a preliminary ruling
99
without ruling on the substance of the issues. We will address them here in turn.
A. Allegations of Flaws in the Notice of Appeal
187. Canada, supported by other participants, argues that the United States refers in its appellant's
submission to four issues that were not included in the Notice of Appeal:
• the United States' contention in paragraph 40 of its appellant's submission that the
Panel failed to meet its obligations under Article 11 of the DSU
100 because the
Panel did not undertake an objective assessment of the matter before it;
• the United States' contention in paragraph 40 of its appellant's submission that the
Panel failed to meet its obligations under Article 12.7 of the DSU
101 because the
Panel did not explain why it examined the burden that the measure creates on
conditions of competition;

96Letter dated 5 November 2002 from the Permanent Representative of Canada to the Presiding
Member (hereinafter, Canada's letter dated 5 November 2002). A letter was submitted jointly on 8 November
2002 by the European Communities, India, Indonesia and Thailand, in support of Canada's request for a
preliminary ruling. Japan also filed a letter on 8 November 2002 in support of Canada's request for a
preliminary ruling.
97United States' letter dated 8 November 2002.
98Ibid.
99Letter from the Director of the Appellate Body Secretariat dated 8 November 2002.
100Article 11 states in relevant part:
… a panel should make an objective assessment of the matter before it,
including an objective assessment of the facts of the case and the
applicability of and conformity with the relevant covered agreements, and
make such other findings as will assist the DSB in making the
recommendations or in giving the rulings provided for in the covered
agreements.
101Article 12.7 states in relevant part:
… the report of a panel shall set out the findings of fact, the applicability of
relevant provisions and the basic rationale behind any findings and
recommendations that it makes." (emphasis added)

• the United States' contention in Section IV of its appellant's submission that the Panel
exceeded its terms of reference
102 by examining claims concerning the CDSOA
"in combination" with other United States laws and regulations; and
• the United States' contention in Section VI of its appellant's submission that the Panel
exceeded its terms of reference by issuing an "advisory opinion" on a measure that
was not before it.
188. Canada submits that these "claims, allegations and requests for ruling"
103 are not properly
before us because they were not included in the Notice of Appeal. According to Canada,
Rule 20(2)(d) of the Working Procedures "requires a Notice of Appeal to include 'a brief statement
of the nature of the appeal, including allegations of errors in the issues of law covered in the panel
report and legal interpretations developed by the panel.'"

104 Canada argues that these requirements,
"as well as the requirements of due process, mandate[ ] the United States to include in its Notice of
Appeal all claims of error that the United States intends to raise."

105 Canada submits that "[b]y
failing to include any reference to claims that the Panel violated Articles 7, 11 and 12.7 of the
DSU, the United States is in breach of these requirements."

106 Canada asserts that these claims of
error are very serious allegations that must not be made without proper notification to the appellees in
the Notice of Appeal.
107 Finally, Canada requests that the claims with respect to Articles 7, 11
and 12.7 be struck from this appeal.
189. The United States clarified at the oral hearing that it is not requesting a finding that the Panel
failed to act consistently with Articles 11 and 12.7 of the DSU. The United States explained that the
reference in paragraph 40 of its appellant's submission to the Panel's failure to meet its obligations

102Article 7.1 of the DSU sets out the standard terms of reference for panels:
Panels shall have the following terms of reference unless the parties to the
dispute agree otherwise within 20 days from the establishment of the panel:
"To examine, in the light of the relevant provisions in
(name of the covered agreement(s) cited by the parties to the
dispute), the matter referred to the DSB by (name of party) in
document ... and to make such findings as will assist the DSB in
making the recommendations or in giving the rulings provided for
in that/those agreement(s)."
104Ibid.
105Ibid. (original emphasis)
106Ibid.
107Canada's letter dated 5 November 2002.

under Articles 11 and 12.7 of the DSU is merely an argument in support of its claim that the Panel
erred in interpreting Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM
Agreement.
190. As we have not been asked to make findings under Articles 11 and 12.7, we make no such
findings. However, we observe that paragraph 40 of the United States' appellant's submission refers
explicitly to the Panel's failure to meet its obligations under those provisions. The clear implication is
that the United States was indeed making claims under Articles 11 and 12.7 of the DSU. We also
note that the United States did not suggest in it s letter of 8 November 2002, objecting to Canada's
request for a preliminary ruling on the scope of appeal, that it was not requesting findings under those
provisions. In our view, Canada and the other appellees were therefore justified in interpreting the
United States' appellant's submission as if such clai ms were indeed being made by the United States.
However, given the United States' explanation at the oral hearing that it was not pursuing such claims,
the issue of whether they were notified in the Notice of Appeal has become moot.
191. We look next to the other two matters raised by Canada and other participants as not being in
the Notice of Appeal and hence not properly before us, namely the United States' arguments in
Sections IV and VI of its appellant's submission that the Panel exceeded its terms of reference. The
United States contends

108 that its Notice of Appeal is in accordance with Rule 20(2)(d) and relies on
our interpretation of that Rule in US – Shrimp, where we said:
The Working Procedures for Appellate Review enjoin the appellant
to be brief in its notice of appeal in setting out "the nature of the
appeal, including the allegations of errors". We believe that, in
principle, the "nature of the appeal" and "the allegations of errors"
are sufficiently set out where the notice of appeal adequately
identifies the findings or legal interpretations of the Panel which are
being appealed as erroneous. The notice of appeal is not expected to
contain the reasons why the appellant regards those findings or
interpretations as erroneous. The notice of appeal is not designed to
be a summary or outline of the arguments to be made by the
appellant. The legal arguments in support of the allegations of error
are, of course, to be set out and developed in the appellant's
submission.

109 (original emphasis)

108United States' letter dated 8 November 2002.

192. According to the United States, its Notice of Appeal "is more than sufficient in setting out the
'findings or legal interpretations of the Panel' from which the United States is appealing."
110 T h e
United States contends that the claims regarding the Panel's exceeding its terms of reference are
included in the Notice of Appeal because they fall within the United States' claim set out in the Notice
that the Panel erred in its interpretation of Article 18.1 of the Anti-Dumping Agreement and
Article 32.1 of the SCM Agreement. In any event, the United States stated at the oral hearing that, as
a question of jurisdiction, it is open to the Appell ate Body to examine whether a panel exceeded its
terms of reference even if no such claim is included in the Notice of Appeal.
193. In examining these submissions, we look first to Rule 20(2) of the Working Procedures ,
which prescribes what is to be included in the Notice of Appeal. In addition to the title of the panel
report under appeal, the name of the appellant, and the service address, paragraph (d) states that a
Notice of Appeal shall include:
… a brief statement of the nature of the appeal, including the
allegations of errors in the issues of law covered in the panel report
and legal interpretations developed by the panel.
194. We have examined this provision in previous appeals.

111 Most recently, in US –
Countervailing Measures on Certain EC Products , we said:
[O]ur previous rulings have underscored the important balance that
must be maintained between the right of Members to exercise the
right of appeal meaningfully and effectively, and the right of
appellees to receive notice through the Notice of Appeal of the
findings under appeal, so that they may exercise their right of defence
effectively. …[The] requirements under Rule 20(2) serve to ensure
that the appellee also receives notice, albeit brief, of the "nature of
the appeal" and the "allegations of errors" by the panel.

112
195. The underlying rationale of Rule 20(2)(d) is thus to require the appellant to provide notice of
the claims of error that the appellant intends to argue on appeal.
113

110United States' letter dated 8 November 2002.
111Appellate Body Report, US – Shrimp , paras. 92-97; Appellate Body Report, EC – Bananas III ,
paras. 151-152; Appellate Body Report, US – Countervailing Measures on Certain EC Products, paras. 50-75.
112US – Countervailing Measures on Certain EC Products, para. 62.
113In its letter dated 8 November 2002, the United States points out that, under the Working
Procedures, there is no "notice of appeal" preceding an "o ther appellant's" submission and therefore Canada's
arguments regarding due process are without merit. In our view, the United States' argument is inapposite
because the Working Procedures do not require an other appellant to file a Notice of Appeal. In this respect,
we refer to para. 62 of our Report in US – Countervailing Measures on Certain EC Products and footnote 142
thereto.

196. Turning to the Notice of Appeal filed in this ca se, the United States maintains that "[e]ach of
the U.S. arguments claimed by Canada to be outside the scope of the appeal fall squarely within the
matters raised in the first numbered paragraph of the U.S. notice."

114
197. We examine first the arguments in Section IV of the United States' appellant's submission,
which is entitled "The Panel Exceeded Its Terms of Reference By Examining Claims Concerning The
CDSOA In Combination With Other U.S. Laws And Regulations." In that Section, the United States
submits that the Panel exceeded its terms of reference by examining whether the CDSOA, in
combination with United States laws on the imposition of anti-dumping duties (or countervailing
duties), violate Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM
Agreement.

115 The United States argues that the Panel's terms of reference are limited to examining
whether the CDSOA, as such, is WTO-consistent, and do not permit an examination of whether the
CDSOA, in combination with any other United States law or regulation, violates United States
obligations' under the WTO Agreement.
198. Canada, supported by other appellees
116 and one third participant
117, alleges that Section IV
of the United States' appellant's submission relates to a claim as to "the exercise of jurisdiction by the
Panel under Article 7 of the DSU"

118, and that such claim was not included in the Notice of Appeal.
Canada asks us to exclude this claim from the scope of appeal. The United States responds that
"[b]ecause the U.S. notice of appeal covers the Panel's findings and related legal interpretations
regarding Antidumping Agreement Article 18.1 and SCM Agreement 13.2 [sic], the matters addressed
in Section IV are plainly covered by the notice of appeal."

119
199. A plain reading of the first numbered paragraph of the United States' Notice of Appeal, which
the United States submits includes the claim that the Panel exceeded its terms of reference by ruling
on the CDSOA in combination with other laws, reveals that there is no explicit reference to Article 7
of the DSU. Nor is there any allegation, explicit or implied, that the Panel exceeded its terms of
reference with respect to any of its findings. I ndeed, no such claim is apparent in any of the
paragraphs of the Notice of Appeal.

114United States' letter dated 8 November 2002. For the full text of the United States' Notice of Appeal,
see Annex 1 to this Report.
116Australia, Brazil, Chile, the European Communities, India, Indonesia, Japan, Korea and Thailand.
117Norway.
118Canada's letter dated 5 November 2002.
119United States' letter dated 8 November 2002.

200. We do not agree with the United States' contention that the first numbered paragraph of the
United States' Notice of Appeal, referring generally to the Panel's failure properly to interpret
Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement , "plainly
covers" a claim that the Panel exceeded its terms of reference. As we have said, the Notice of Appeal
"serve[s] to ensure that the appellee also receives notice, albeit brief, of the 'nature of the appeal' and
the 'allegations of errors' by the panel."

120 Generic statements such as that relied upon by the United
States cannot serve to give the appellees adequate notice that they will be required to defend against
a claim that the Panel exceeded its terms of reference. This is particularly so for procedural errors; it
can be especially difficult to discern a claim of procedural error by a panel from general references to
panel findings or from extracts of a panel report, because allegations of procedural error by a panel
may not necessarily be raised until the appellate stage.
201. Therefore, we agree with Canada and other participants that the Notice of Appeal does not
provide adequate notice that a claim that the Panel exceeded its terms of reference in ruling on the
CDSOA in combination with other laws would be argued by the United States on appeal.
202. Canada, supported by other appellees

121 and one third participant
122, also challenges the
United States' arguments set out in Section VI of the United States' appellant's submission as being
outside the scope of appeal because they were not included in the Notice of Appeal. Section VI of the
United States' appellant's submission is entitled "The Panel Erred in Issuing an Advisory Opinion on a
Measure Outside of Its Terms of Reference." The United States contends in that Section that the
Panel rendered an "advisory opinion" by making a finding on a measure that was not before it, when it
said:
Even if CDSOA offset payments were funded directly from the US
Treasury, and in an amount unrelated to collected anti-dumping
duties, we would still be required to reach the conclusion – for the
reasons set forth in the preceding paragraph - that offset payments
may be made only in situations presenting the constituent elements of
dumping.

123
203. The United States argues that because there was no measure before the Panel regarding
payments funded directly from the United States Treasury, the Panel had no authority to make this
finding.

120Appellate Body Report, US – Countervailing Measures on Certain EC Products, para. 62.
121Australia, Chile, the European Communities, India, Indonesia, Japan, Korea, Mexico and Thailand.
122Norway.
123Panel Report, para. 7.22.

204. Canada, supported by other participants, alleges that Section VI of the United States'
appellant's submission relates to a claim as to "the exercise of jurisdiction by the Panel under Article 7
of the DSU"

124, which was not in the Notice of Appeal. Canada requests us to rule that this claim of
the United States is outside the scope of appellate review. The United States responds that "[b]ecause
the U.S. notice of appeal covers the Panel's findings and related legal interpretations regarding
Antidumping Agreement Article 18.1 and SCM Agreement Article 13.2 [sic], the matters addressed in
Section VI are well within the scope of the notice of appeal."

125
205. We have already explained that we see no reference, explicit or implicit, in the Notice of
Appeal regarding the Panel's exceeding its terms of reference. Therefore, our reasoning above applies
equally to the United States' claim regarding the alleged advisory opinion in the Panel Report.
206. Having concluded that the Notice of Appeal does not provide notice to the appellees that the
United States intended to make claims that the Panel exceeded its terms of reference, the next
question is whether we are precluded from examining these claims on appeal. As we have explained,
if an appellee has not received sufficient notice in the Notice of Appeal that a particular claim will be
advanced by the appellant, that claim normally will be excluded from the appeal. However, we
observe that the United States has argued in this appeal that we are entitled to examine questions of
jurisdiction in any event, even if not included in the Notice of Appeal.

126
207. We agree with the United States' position. We have stated previously, in relation to a panel's
obligation to address issues related to its jurisdiction, that:
… panels have to address and dispose of certain issues of a
fundamental nature, even if the parties to the dispute remain silent on
those issues. In this regard, we have previously observed that "[t]he
vesting of jurisdiction in a panel is a fundamental prerequisite for
lawful panel proceedings." For this reason, panels cannot simply
ignore issues which go to the root of their jurisdiction – that is, to
their authority to deal with and dispose of matters. Rather, panels
must deal with such issues – if necessary, on their own motion – in
order to satisfy themselves that they have authority to proceed.

127
(footnote omitted)

124Canada's letter dated 5 November 2002.
125United States' letter of 8 November 2002.
126United States' response to questioning at the oral hearing.
127Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US), para. 36.

208. In our view, the same reasoning applies in this case. As we have said, "[a]n objection to
jurisdiction should be raised as early as possible"
128 and it would be preferable, in the interests of due
process, for the appellant to raise such issues in the Notice of Appeal, so that appellees will be
aware that this claim will be advanced on appeal. However, in our view, the issue of a panel's
jurisdiction is so fundamental that it is appropriate to consider claims that a panel has exceeded its
jurisdiction even if such claims were not raised in the Notice of Appeal.
209. It is convenient to proceed now with a consideration of the United States' claims that the
Panel exceeded its terms of reference "by examin ing claims concerning the CDSOA in combination
with other U.S. laws and regulations" and "in issuing an advisory opinion on a measure outside of its
terms of reference."

129
210. Turning to the first of the United States' contentions, the Panel stated, in connection with its
discussion on whether the CDSOA operates "against" dumping or a subsidy, that:
We agree that dumping over time may be evidence of a competitive
advantage. However, the combination of anti-dumping duties and
offset subsidies is not merely to level the playing field, but to transfer
that competitive advantage to "affected domestic producer".

130
(emphasis added; footnote omitted)
211. In addition, the Panel said in a footnote:
Although our finding that the CDSOA constitutes "specific action
against dumping" and subsidy rests on the adverse impact of the
CDSOA on exporters/foreign producers engaged in dumping, that
adverse impact does not result exclusively from the provision of
offset payment subsidies (or the use of a subsidy). The adverse
impact results from the combination of anti-dumping duties and
offset payment subsidies in the particular circumstances of the
CDSOA.

131 (original underlining)
212. In our view, these statements do not constitute a finding by the Panel that was outside its
terms of reference. The Panel was merely reflecting in its reasoning the fact that the CDSOA does not
operate in a vacuum but, rather, operates in a context that includes other laws and regulations. The
Panel's view was that the combination of anti-dum ping duties (or countervailing duties) and CDSOA
offset payments distorts the competitive relationship between dumped (subsidized) and domestic

129United States' appellant's submission, Sections IV and VI.
130Panel Report, para. 7.36.
131Ibid., para. 7.119 and footnote 334 thereto.

products, to the detriment of dumped (subsidized) products. This led the Panel to find that the
CDSOA—alone—has an adverse bearing on dumping (subsidization) and, therefore, operates
"against" dumping (subsidies) within the meaning of Article 18.1 of the Anti-Dumping Agreement
(and Article 32.1 of the SCM Agreement). Therefore, we dismiss the claim of the United States that
the Panel exceeded its terms of reference by examining claims concerning the CDSOA "in
combination" with other United States laws and regulations.
213. We turn next to the United States' contention that the Panel erred in issuing an "advisory
opinion" on a measure outside of its terms of reference. The United States takes issue with the
following statement by the Panel:
Even if CDSOA offset payments were funded directly from the US
Treasury, and in an amount unrelated to collected anti-dumping
duties, we would still be required to reach the conclusion – for the
reasons set forth in the preceding paragraph - that offset payments
may be made only in situations presenting the constituent elements of
dumping.

132
214. We note that the Panel made this observation in response to the United States' argument that
the fact that CDSOA distributions are funded by proceeds from anti-dumping and countervailing
duties does not render the CDSOA a "specific action against dumping."

133 The Panel reasoned that,
even if the offset payments were funded directly from the United States Treasury, and in an amount
unrelated to the collected duties, it would still "reach the conclusion … that offset payments may be
made only in situations presenting the constituent elements of dumping."

134 We do not agree with the
United States that, in making this statement, the Panel was making a finding on a matter that was
outside the Panel's terms of reference. In our view, the Panel was simply making an observation to
make it abundantly clear that its finding was in no way based on the fact that offset payments are

132Panel Report, para. 7.22.
133Ibid., para. 7.20. See also Panel Report, para. 4.504, which sets out, in relevant part, the United
States' contention in its first oral statement, that "the complaining parties' primary argument is that because the
source of the funds for the distributions under CDSOA are AD/CVD duties, the CDSOA is, on its face,
inconsistent with the Antidumping and SCM Agreements. The reality is that, because money is fungible, the
only real connection between the funds distributed under CDSOA and the orders is that the duties collected
serve to cap or limit the amount of the annual distributions."
134Panel Report, para. 7.22.

funded from collected anti-dumping duties. Therefore, we dismiss the United States' claim that the
Panel issued an "advisory opinion" exceeding its terms of reference.135
B. Allegations Regarding the Scope of Appellate Review Under Article 17.6 of the DSU
215. We turn next to the second procedural issue raised by Canada
136, supported by other
appellees
137 and one third participant
138, namely the issue whether the United States included
arguments and evidence in its appellant's submission that are outside the scope of appellate review by
virtue of Article 17.6 of the DSU. Specifically, Canada points to the comments in paragraphs 120
and 121 of the United States' appellant's submission regarding two letters referred to in
paragraphs 7.62 and 7.45 of the Panel Report. In addition, Canada contends that footnotes 148
and 149 of the United States' appellant's submission refer to evidence that was not before the Panel.
216. In examining these questions, we recall first that Article 17.6 of the DSU provides:
An appeal shall be limited to issues of law covered in the panel report
and legal interpretations developed by the panel.
1. The United States' Comments About Letters Before the Panel
217. In paragraphs 7.45 and 7.62 of the Panel Report, the Panel refers to a letter from a United
States producer
139 which, according to the Panel, demonstrates that that producer changed its position
concerning an application after initiation of the investigation, and decided to express support for the
application to impose anti-dumping and countervailing duties in order to remain eligible for possible
offset payment subsidies.

140 In the same paragraphs, the Panel also referred to a letter from a lawyer
dated 8 January 2001
141, which, according to the Panel, illu strates the potential for the CDSOA to
encourage domestic producers to support applications for the imposition of dumping or countervailing

135We observe that the concept of "advisory opinion" has a special meaning in the context of
international adjudication. A number of international courts and tribunals, including the International Court of
Justice and the European Court of Justice, provide in their statutes or rules for the provision of such opinions
upon the request of States or of certain authorized bodies.
136Canada's letter dated 5 November 2002; Canada's appellee's submission, paras. 149-157.
137Australia, Chile, the European Communities, India, Indonesia, Japan, Korea and Thailand.
138Norway.
139Brief of Fred Tebb & Sons, Inc., dated 22 March 2002, filed by Canada on 27 March 2002 in the
Panel proceedings. (Exhibit CDA-20)
140Panel Report, para. 7.62.
141Letter from J. Ragosta, Dewey Ballantine, dated 8 January 2001, p. 2, attached to a letter from
R. Wood, Chairman of the Coalition for Fair Lumber Imports, regarding an "Important Legal Request on
Subsidized Canadian Lumber Imports", dated 8 January 2001.

duties.
142 The Panel referred to those letters in paragraph 7.62 to support its finding that the United
States failed to comply with its obligations under Article 5.4 of the Anti-Dumping Agreement and
Article 11.4 of the SCM Agreement (more specifically, as regards the issue that the CDSOA operates
as an incentive for domestic producers to support applications for imposition of anti-dumping and
countervailing duties). These letters were also cited in paragraph 7.45 in relation to the finding that
the CDSOA is contrary to Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the
SCM Agreement (more specifically, as regards the question whether the CDSOA operates "against"
dumping or subsidies within the meaning of those provisions).
218. The United States makes the following comments on the letters in paragraphs 120 and 121 of
its appellant's submission:
Moreover, the examination of the letter reveals that the letter is not
what the Panel claimed it to be. It is neither a letter from a "domestic
producer" nor a letter changing positions. In fact, the company that
authored the letter states therein that it is expressing its "continuing"
support for the petitions ( i.e., it is not expressing a change in
position), citing a letter it submitted to the ITC over a month earlier
in which the producer had already expressed support for the petition.
Moreover, the company had entered an appearances before the ITC
and Commerce as a "foreign manufacturer, producer, or exporter, or
the United States importer, of subject merchandise" - not a domestic
producer. Thus, the letter is irrelevant to the issue for which the Panel
cited it. Contrary to the claim of the Panel, the company did not
change its position.

143 (footnotes omitted)

142Panel Report, para. 7.45.

The Panel also cited a letter in which a U.S. producer purportedly
urged other domestic producers to support a petition against
Canadian softwood lumber imports by citing the CDSOA.
Examination of the letter referencing the CDSOA, however, shows
that it was not written by a domestic producer, but instead by a law
firm informing domestic producers of the merits and circumstances
of their case, as well as various provisions of U.S. law including the
CDSOA. Importantly, the letter counsels that petitioners/supporters
cannot count on obtaining funds under the CDSOA. The letter does
not try to use the CDSOA to induce other domestic producers to
support a petition. It certainly does not promise CDSOA
disbursements if domestic producers support the petition.
Furthermore, there is no indication that the letter actually had the
effect of influencing any domestic producers to support the petition,
much less to support a petition it otherwise would not but for the
potential to become eligible for CDSOA offsets.

144 (original
emphasis; footnotes omitted)
219. Canada agrees that the two letters referred in paragraphs 120-121 of the United States
appellant's submission were in evidence before the Panel. Canada's objection is that the United States
is prohibited by virtue of Article 17.6 of the DSU from challenging the "credibility and weight the
Panel attached to the two letters."

145 Canada argues that the Panel's statements about the letters did not
form part of its legal reasoning. Therefore, according to Canada, we cannot consider the United
States' explanations about the nature of the letters because there is "no question of legal
characterisation by the Panel of facts before it in respect of the two letters".
 146
220. We do not regard the United States' comments in paragraphs 120-121 as impugning the
Panel's factual findings on the two letters. In our view, the United States' comments form part of its
challenge to the Panel's legal conclusions that the CDSOA is inconsistent with Article 5.4 of the Anti-
Dumping Agreement and Article 11.4 of the SCM Agreement, as well as with Article 18.1 of the
Anti-Dumping Agreement and Article 32.1 of the SCM Agreement . Whether such findings are
supported by those letters is an issue of law, properly raised by the United States in its Notice of
Appeal, on which we have the authority to decide under Article 17.6 of the DSU.
2. Allegations of New Evidence in Footnotes 148 and 149
221. In footnotes 148 and 149 of the United States' a ppellant's submission, the United States cites
various documents in connection with its challenge to the Panel's conclusions about the import of the

146Ibid.

two letters referred to above, noting that they are "available on the public record".
147 According to
Canada
148, supported by other participants
149, the documents constitute new evidence that was not
before the Panel and, consequently, our consideration of that evidence is beyond the scope of
appellate review by virtue of Article 17.6 of the DSU.
222. We agree with the submission of Canada. It is not disputed that footnotes 148 and 149 of the
United States' appellant's submission refer to documents that were not part of the Panel record. The
United States submits that it referred to the documents "to provide the Appellate Body with a greater
understanding of the facts involved in the dispute".

150 However, Article 17.6 is clear in limiting our
jurisdiction to issues of law covered in panel reports and legal interpretations developed by panels.
We have no authority to consider new facts on appeal. The fact that the documents are "available on
the public record" does not excuse us from the limitations imposed by Article 17.6. We note that the
other participants have not had an opportunity to comment on those documents and, in order to do so,
may feel required to adduce yet more evidence. We would also be precluded from considering such
evidence. We find, therefore, that the documents referred to in footnotes 148 and 149 of the United
States' appellant's submission that were not part of the Panel record, constitute new evidence.
Consequently, by virtue of Article 17.6 of the DS U, we are precluded from taking those documents
into account in deciding this appeal.
VI. Issues Raised in This Appeal
223. The following issues are raised in this appeal:
(a) whether the Panel erred in finding, in paragraphs 7.51 and 8.1 of the Panel Report,
that the Continued Dumping and Subsidy Offset Act of 2000 ("CDSOA") is a non-
permissible specific action against dumping or a subsidy, contrary to Article 18.1 of
the Agreement on Implementation of Article VI of the General Agreement on Tariffs
and Trade 1994 (the "Anti-Dumping Agreement") and Article 32.1 of the Agreement
on Subsidies and Countervailing Measures (the "SCM Agreement");

147United States' appellant's submission, footnotes 148 and 149.
148Canada's letter dated 5 November 2002; Canada's appellee's submission, paras. 149-157.
149Australia, Chile, the European Communities, India, Indonesia, Japan, Korea, Norway and Thailand.
150United States' letter dated 8 November 2002.

(b) whether the Panel erred in finding, in paragraphs 7.66 and 8.1 of the Panel Report,
that the CDSOA is inconsistent with Article 5.4 of the Anti-Dumping Agreement and
Article 11.4 of the SCM Agreement;
(c) whether the Panel erred in finding, in paragraphs 7.93 and 8.1 of the Panel Report,
that the CDSOA is inconsistent with certain provisions of the Anti-Dumping
Agreement and the SCM Agreement and that, therefore, the United States has failed
to comply with Article 18.4 of the Anti-Dumping Agreement , Article 32.5 of the
SCM Agreement and Article XVI.4 of the Marrakesh Agreement Establishing the
World Trade Organization (the "WTO Agreement");
(d) whether the Panel erred in finding, in paragraph 8.4 of the Panel Report, that,
pursuant to Article 3.8 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes (the "DSU"), the CDSOA nullifies or impairs benefits
accruing to the Complaining Parties under those Agreements; and
(e) whether the Panel acted inconsistently with Article 9.2 of the DSU by rejecting, in
paragraph 7.6 of the Panel Report, the request by the United States for a separate
panel report on the dispute brought by Mexico.
VII. Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement
224. We turn now to the United States' appeal of the Panel's conclusion that the CDSOA is a non-
permissible specific action against dumping, contrary to Article 18.1 of the Anti-Dumping
Agreement, and a non-permissible specific action against a subsidy, contrary to Article 32.1 of the
SCM Agreement.

151 We will start by reviewing briefly the Panel's analysis of this issue.
225. The Panel began its analysis by referring to our ruling in US – 1916 Act, where we said:
In our view, the ordinary meaning of the phrase "specific action
against dumping" of exports within the meaning of Article 18.1 is
action that is taken in response to situations presenting the
constituent elements of "dumping". "Specific action against
dumping" of exports must, at a minimum, encompass action that may
be taken only when the constituent elements of "dumping" are
present.

152 (original emphasis; footnote omitted)

151Panel Report, para. 7.51.

226. The Panel decided that this ruling is not conclusive of whether the CDSOA is a specific
action against dumping or a subsidy for three reasons. First, the Panel observed that, in US – 1916
Act, we were not interpreting Article 18.1 of the Anti-Dumping Agreement, as such, but were rather
referring to that Article in order to clarify the scope of application of Article VI of the General
Agreement on Tariffs and Trade (the "GATT 1994").
153 Second, the Panel noted that we were not
required to consider, in deciding that appeal, the meaning of the word "against" as used in Article 18.1
of the Anti-Dumping Agreement, because there was no disagreement between the participants in that
dispute that the measure at issue, which imposed criminal and civil liabilities on importers engaged in
dumping, constituted action "against" dumping.

154 Third, the Panel opined that the category of action
"in response to" dumping is broader than the category of action "against" dumping.
155
227. Having decided that our ruling in US – 1916 Act was not dispositive of the issues in the
present case, the Panel developed the following standard to determine whether a measure is a specific
action against dumping or a subsidy: a measure will constitute specific action against dumping or a
subsidy if: (1) it acts "specifically" in response to dumping or a subsidy, in the sense that the measure
may be taken only in situations presenting the constituent elements of dumping or a subsidy; and (2)
it acts "against" dumping or a subsidy, in the sense that the measure has an adverse bearing on the
practice of dumping or on the practice of subsidization.

156
228. Applying this standard to the CDSOA, the Panel, as a preliminary matter, determined that the
CDSOA is a "specific action related to" 157 dumping or a subsidy. According to the Panel, the
CDSOA meets the first condition of the standard because CDSOA payments may be made only in
situations where the constituent elements of dumping (or of a subsidy) are present. The Panel also
pointed out that CDSOA offset payments follow automatically from the collection of anti-dumping
(or countervailing) duties, which in turn may be collected only following the imposition of anti-
dumping (or countervailing duty) orders, which in turn may be imposed only following a
determination of dumping (or subsidization). The Panel thus determined that the CDSOA is a specific
action related to dumping (or subsidization) because there is a "clear, direct and unavoidable

153Panel Report, para. 7.15.
154Ibid., para. 7.16.
155Ibid., para. 7.17.
156Ibid., para. 7.18. In paragraph 7.18, the Panel refers only to dumping. We understand, however,
that, in the light of the conclusion the Panel reached in paragraph 7.51, the two conditions set out in paragraph
7.18 extend mutatis mutandis to Article 32.1 of the SCM Agreement, which deals with subsidies.
157Panel Report, para. 7.23.

connection"
158 between the determination of dumping (or subsidization) and CDSOA offset
payments.
229. Moving to the question whether the CDSOA acts "against" dumping or a subsidy, in the sense
that it has an adverse bearing on dumping or a subsidy, the Panel affirmed that Article 18.1 of the
Anti-Dumping Agreement (and Article 32.1 of the SCM Agreement ) concerns measures that act
against dumping as a practice (or subsidization as a practice), and do not require that the measure at
issue must act against the imported dumped (or subsidized) product, or entities connected to, or
responsible for, the dumped (or subsidized) product , such as the importer, exporter, or foreign
producer.

159 The Panel added that the term "against" in Article 18.1 of the Anti-Dumping Agreement
and Article 32.1 of the SCM Agreement encompasses measures having a direct, as well as indirect,
adverse bearing on the practice of dumping (or subsidization).
160
230. Two considerations led the Panel to find that the CDSOA operates "against" dumping (or a
subsidy), in the sense that it has an adverse bearing on dumping (or a subsidy). First, according to the
Panel, the CDSOA acts against dumping (or a subsidy) by conferring on affected domestic producers,
which incur qualifying expenses, an offset payment subsidy that would allow them to establish a
competitive advantage over dumped (or subsidized) imports. Second, the Panel was of the view that
the CDSOA has an adverse bearing on dumping (or a subsidy) because it provides a financial
incentive for domestic producers to file anti-dumping (or countervail) applications, or at least to
support such applications, in order to establish their eligibility for offset payments.
231. The Panel noted that, in our Report in US – 1916 Act, we found that Article VI of the
GATT 1994, in particular Article VI:2, read in conjunction with the Anti-Dumping Agreement, limits
the permissible responses to dumping to definitive anti-dumping duties, provisional measures and
price undertakings.

161 The Panel took the view that a similar approach should apply in respect of the
permissible responses to subsidization.
162 The Panel observed that Part V of the SCM Agreement
foresees definitive countervailing duties, provisional measures and undertakings, whereas Part III
foresees countermeasures. According to the Panel, these are the permissible responses to
subsidization.
163 Because the CDSOA does not fall within the range of the permissible responses to

158Panel Report, para. 7.21.
159Ibid., para. 7.33.
160Ibid.
161Ibid., para. 7.7.
162Ibid.
163Ibid.

dumping under Article VI of the GATT 1994 and the Anti-Dumping Agreement, or within the range
of the permissible responses to subsidization under the GATT 1994 and the SCM Agreement, the
Panel concluded that the CDSOA constitutes a no n-permissible specific action against dumping,
contrary to Article 18.1 of the Anti-Dumping Agreement , and a non-permissible specific action
against a subsidy, contrary to Article 32.1 of the SCM Agreement.
232. In addition, the Panel rejected the United Stat es' argument that the CDSOA is an action
permitted by virtue of footnote 24 to Article 18.1 of the Anti-Dumping Agreement and footnote 56 to
Article 32.1 of the SCM Agreement. According to the Panel, a measure that has been characterized as
"specific" under Article 18.1 of the Anti-Dumping Agreement or Article 32.1 of the SCM
Agreement cannot be permitted under those footnotes, because the footnotes cover non-specific
actions against dumping or a subsidy. In other words, the "actions" covered in the provisions and the
"actions" covered in the footnotes are mutually exclusive.
233. On appeal, the United States contends that the Panel erred in finding that the CDSOA
constitutes specific action against dumping within the meaning of Article 18.1 of the Anti-Dumping
Agreement and specific action against a subsidy within the meaning of Article 32.1 of the SCM
Agreement, and asks us to reverse the Panel's finding that the CDSOA is inconsistent with
Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement.
234. We begin our analysis with a review of the relevant provisions. Article 18.1 of the Anti-
Dumping Agreement reads as follows:
Final Provisions
No specific action against dumping of exports from another Member
can be taken except in accordance with the provisions of
GATT 1994, as interpreted by this Agreement.
24
GATT 1994, as appropriate.

235. Article 32.1 of the SCM Agreement reads as follows:
Other Final Provisions
No specific action against a subsidy of another Member can be taken
except in accordance with the provisions of GATT 1994, as
interpreted by this Agreement.56
The first is that a measure must be "specific" to dumping or subsidization. The second is that a
measure must be "against" dumping or subsidization. These two conditions operate together and
complement each other. If they are not met, the measure will not be governed by Article 18.1 of the
Anti-Dumping Agreement or by Article 32.1 of the SCM Agreement. If, however, it is established
that a measure meets these two conditions, and thus falls within the scope of the prohibitions in those
provisions, it would then be necessary to move to a further step in the analysis and to determine
whether the measure has been "taken in accordance with the provisions of GATT 1994", as
interpreted by the Anti-Dumping Agreement or the SCM Agreement. If it is determined that this is
not the case, the measure would be inconsistent with Article 18.1 of the Anti-Dumping Agreement or
Article 32.1 of the SCM Agreement.
A. The Term "Specific" in the Phrase "Specific Action Against" Dumping or a Subsidy
237. We observe that Article 18.1 of the Anti-Dumping Agreement is identical in language,
terminology and structure to Article 32.1 of the SCM Agreement , except for the reference to
dumping instead of subsidy. The Panel analyzed the terms "specific" and "against" in Article 18.1 in
the same manner as it did with respect to their use in Article 32.1. We agree with the Panel's
approach. We also note that the United States does not challenge such approach and that, at the oral
hearing, none of the appellees or third participants expressed the view that the terms, as used in
Article 18.1 should have a different meaning as used in Article 32.1.
238. As mentioned above, in US – 1916 Act , we interpreted the phrase "specific action against
dumping" in Article 18.1 of the Anti-Dumping Agreement. We said:
164

In our view, the ordinary meaning of the phrase "specific action
against dumping" of exports within the meaning of Article 18.1 is
action that is taken in response to situations presenting the
constituent elements of "dumping". "Specific action against
dumping" of exports must, at a minimum, encompass action that may
be taken only when the constituent elements of "dumping" are
present.
66
Given that Article 18.1 of the Anti-Dumping Agreement and 32.1 of the SCM Agreement are
identical except for the reference in the former to dumping, and in the latter to a subsidy, we are of the
view that this finding is pertinent for both provisions.
239. We recall that, in US – 1916 Act , the United States argued that the 1916 Act did not fall
within the scope of Article VI of the GATT 1994 because it targeted predatory pricing, as opposed to
dumping. We disagreed, and determined that the 1916 Act was a "specific action against dumping"
because the constituent elements of dumping were "built into"

165 the essential elements of civil and
criminal liability under the 1916 Act. We also found that the "wording of the 1916 Act … makes
clear that these actions can be taken only with respect to conduct which presents the constituent
elements of 'dumping'."
166 Accordingly, a measure that may be taken only when the constituent
elements of dumping or a subsidy are present, is a "specific action" in response to dumping within the
meaning of Article 18.1 of the Anti-Dumping Agreement or a "specific action" in response to
subsidization within the meaning of Article 32.1 of the SCM Agreement. In other words, the measure
must be inextricably linked to, or have a strong correlation with, the constituent elements of dumping
or of a subsidy. Such link or correlation may, as in the 1916 Act, be derived from the text of the
measure itself.
240. This leads to the question of how to determine what are the constituent elements of dumping
or a subsidy. We recall that, in US – 1916 Act , we said the constituent elements of dumping are
found in the definition of dumping in Article VI:1 of the GATT 1994, as elaborated in Article 2 of the

166Ibid. (original emphasis)

Anti-Dumping Agreement.
167 As regards the constituent elements of a subsidy, we are of the view
that they are set out in the definition of a subsidy found in Article 1 of the SCM Agreement.
168
241. We turn now to determine whether the CDSOA is a "specific action" against dumping or
subsidization within the meaning of Article 18.1 of the Anti-Dumping Agreement or Article 32.1 of
the SCM Agreement.
242. In our view, the Panel was correct in finding that the CDSOA is a specific action related to
dumping or a subsidy within the meaning of Article 18.1 of the Anti-Dumping Agreement and
Article 32.1 of the SCM Agreement.
169 It is clear from the text of the CDSOA, in particular from
Section 754(a) of the Tariff Act 170, that the CDSOA offset payments are inextricably linked to, and
strongly correlated with, a determination of dumping, as defined in Article VI:1 of the GATT 1994
and in the Anti-Dumping Agreement , or a determination of a subsidy, as defined in the SCM
Agreement. The language of the CDSOA is unequivocal. First, CDSOA offset payments can be
made only if anti-dumping duties or countervailing duties have been collected. Second, such duties
can be collected only pursuant to an anti-dumping duty order or countervailing duty order. Third, an
anti-dumping duty order can be imposed only following a determination of dumping, as defined in
Article VI:1 of the GATT 1994 and in the Anti-Dumping Agreement. Fourth, a countervailing duty
order can be imposed only following a determination that exports have been subsidized, according to
the definition of a subsidy in the SCM Agreement. In the light of the above elements, we agree with
the Panel that "there is a clear, direct and unavoidable connection between the determination of
dumping and CDSOA offset payments"

171, and we believe the same to be true for subsidization. In
other words, it seems to us unassailable that CDSOA offset payments can be made only following a
determination that the constituent elements of dumping or subsidization are present. Therefore,
consistent with the test established in US – 1916 Act , we find that the CDSOA is "specific action"

167Appellate Body Report, US – 1916 Act, paras. 105-106 and 130.
168In response to questioning at the oral hearing, th e participants did not dispute that the constituent
elements of dumping refer to the definition of dumping in Article VI:1 of the GATT 1994, as elaborated in
Article 2 of the Anti-Dumping Agreement, and that the constituent elements of a subsidy refer to the definition
of a subsidy found in Article 1 of the SCM Agreement.
169Panel Report, para. 7.23.
170Section 754(a) of the Tariff Act provides:
Duties assessed pursuant to a countervailing duty order, an anti-dumping
duty order, or a finding under the Antidumping Act of 1921 shall be
distributed on an annual basis under this section to the affected domestic
producers for qualifying expenditures. Such distribution shall be known as
the "continued dumping and subsidy offset".
171Panel Report, para. 7.21.

related to dumping or a subsidy within the meaning of Article 18.1 of the Anti-Dumping Agreement
and of Article 32.1 of the SCM Agreement.
243. In its appellant's submission, the United States argues that the CDSOA is not specific action
related to dumping or to a subsidy because, contra ry to the 1916 Act examined in a previous appeal,
the language of the CDSOA does not refer to the c onstituent elements of dumping (or of a subsidy),
and dumping (or subsidization) is not the trigger for application of the CDSOA.
172 The United States
suggested at the oral hearing that the CDSOA is not "specific" because the constituent elements of
dumping or of a subsidy do not form part of the essential components of the CDSOA. In addition,
the United States submits that, according to the Panel's reasoning, any expenditure of collected
anti-dumping (or countervailing) duties, including expenditure for international emergency relief,
would be characterized as specific action against dumping (or a subsidy). For the United States, the
Panel's approach "cannot withstand scrutiny."

173
244. We disagree with these arguments. The criterion we set out in US – 1916 Act for specific
action in response to dumping is not whether the constituent elements of dumping or of a subsidy are
explicitly referred to in the measure at issue, nor whether dumping or subsidization triggers the
application of the action, nor whether the constituent elements of dumping or of a subsidy form part
of the essential components of the measure at issue. Our analysis in US – 1916 Act focused on the
strength of the link between the measure and the elements of dumping or a subsidy. In other words,
we focused on the degree of correlation between the scope of application of the measure and the
constituent elements of dumping or of a subsidy. In noting that the "wording of the 1916 Act also
makes clear that these actions can be taken only with respect to conduct which presents the
constituent elements of 'dumping'"
174, we did not require that the language of the measure include
the constituent elements of dumping or of a subsidy. This is clear from our use of the word "also",
which suggests that this aspect of the 1916 Act was a supplementary reason for our finding, and not
the basis for it. Indeed, we required that the co nstituent elements of dumping (or of a subsidy) be
"present"
175, which in our view can include cases where the constituent elements of dumping and of a
subsidy are implicit in the measure. Thus, we agree with the European Communities, India, Indonesia
and Thailand that the "test" 176 established in US – 1916 Act "is met not only when the constituent
elements of dumping are 'explicitly built into' the action at issue, but also where … they are implicit in

173Ibid., para. 20.
174Appellate Body Report, US – 1916 Act, para. 130. (original emphasis)
175Ibid., para. 122.
176European Communities', India's, Indonesia's and Thailand's appellees' submission, para. 14.

the express conditions for taking such action."
177 In fact, the presence of the constituent elements of
dumping and of a subsidy is implied by the very words of the CDSOA, which refer to "[d]uties
assessed pursuant to a countervailing duty order, an antidumping duty order, or a finding under the
Antidumping Act of 1921 …".
178
245. We also disagree with the submission of the United States that, under the Panel's reasoning,
any expenditure of the collected anti-dumping (or countervailing) duties would be characterized as a
specific action against dumping (or a subsidy). This submission does not take into account the
express terms of Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM
Agreement, which, as we said earlier, contain two conditions precedent, namely that the action be
"specific" to dumping or a subsidy, and that it be "against" dumping or a subsidy. To refer to the
example given by the United States, international emergency relief financed from collected anti-
dumping or countervailing duties would not, in our opinion, be subject to the prohibitions of
Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement, because such
action would have no effect whatsoever on dumping or subsidization and, therefore, could not be
characterized as operating "against" dumping or a subsidy. As the Panel noted, we did not focus on
the word "against" in our ruling in US – 1916 Act, because there was no dispute there that the measure
(imposing civil and criminal liabilities on importe rs) was indeed "against" something—the question
there was whether the action was against dumping, or some other conduct (predatory pricing).
179
B. The Term "Against" in the Phrase "Specific Action Against" Dumping or a Subsidy
246. We move now to an analysis of the term "against" as used in Article 18.1 of the Anti-
Dumping Agreement and Article 32.1 of the SCM Agreement. As mentioned above, Article 18.1 of
the Anti-Dumping Agreement is identical in language, terminology and structure to Article 32.1 of
the SCM Agreement, except for the reference to dumping instead of subsidy, and therefore we will
proceed, as the Panel did, with an analysis of the word "against" on the basis that it has the same
meaning in both provisions. We note that neither the United States nor any of the appellees objects
to this approach.
247. We agree with the Panel that our statement in US – 1916 Act—to the effect that "the ordinary
meaning of the phrase 'specific action against dumpi ng' of exports within the meaning of Article 18.1
is action that is taken in response to situations presenting the constituent elements of 'dumping'"
180—

177European Communities', India's, Indonesia's and Thailand's appellees' submission, para. 14.
178Section 754(a) of the Tariff Act.
179Panel Report, para. 7.16.

is not conclusive as to the nature of the condition flowing from the term "against". The Panel took the
position that an action operates "against" dumping or a subsidy within the meaning of Article 18.1 of
the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement if it has an adverse bearing
on dumping or subsidization.

181 The United States criticizes this approach, contending that an action
is "against" dumping or a subsidy if it is "in hostile/active opposition" to dumping or a subsidy.
182 The
United States puts emphasis on the argument that an action, in order to be characterized as being
"against" dumping or a subsidy, must "come into contact with"

183 dumping or a subsidy, in the sense
of "operating directly"
184 on the imported good, or the entity responsible for the dumped or subsidized
good.
185 In the view of the United States, the Panel erred by finding that the term "against" in
Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement encompasses
any form of adverse bearing, whether it be direct or indirect, and by finding that this term does not
imply a requirement that the action applies directly to the imported good or an entity responsible for
it, and is burdensome.

186 The United States contends that such a requirement derives from the
ordinary meaning of the term "against". Specifically, the United States relies on a definition found in
the New Shorter Oxford English Dictionary , according to which "against" means "in contact
with".

187 In order to identify the ordinary meaning of the term "against" as used in Article 18.1 of the
Anti-Dumping Agreement and Article 32.1 of the SCM Agreement, the United States posits three
definitions of that term: (1) "of motion or action in opposition"; (2) "in hostility or active opposition
to"; and (3) "in contact with".
188
248. In our view, the first and second definitions invoked by the United States could, arguably,
have some relevance in identifying the ordinary meaning of the term "against" as used in Article 18.1
of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement. However, we do not
believe the third definition is appropriate given the substance of Articles 18.1 and 32.1. Indeed, the
third definition refers to physical contact between tw o objects and, thus, in our view, is irrelevant to
the idea of opposition, hostility or adverse effect that is conveyed by the word "against" as used in
Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement. It should be

183Ibid., para. 32.
184Ibid., para. 33.
185Ibid.
186Panel Report, para. 7.33.
188Ibid.

remembered that dictionaries are important guides to, not dispositive statements of, definitions of
words appearing in agreements and legal documents.
249. We also note that the third dictionary definition cited by the United States is incomplete; not
only does that dictionary definition refer to "in contact with", it also refers to "supported by". This
latter element is difficult to reconcile with any idea of opposition, hostility or adverse bearing.

189
250. Therefore, as the definition "in contact with" cannot be used to ascertain the ordinary meaning
of "against" as used in Article 18.1 of the Anti-Dumping Agreement and in Article 32.1 of the
SCM Agreement, we do not believe the United States is justified in using that definition to support its
view that an action against dumping or a subsidy must have direct contact with the imported good, or
the entity responsible for the dumped or subsidized good. More generally, we fail to see how such a
meaning can be given to the term "against", which, given the substance of Article 18.1 of the Anti-
Dumping Agreement and Article 32.1 of the SCM Agreement, must relate to an idea of opposition,
hostility or adverse effect.
251. A textual analysis of Articles 18.1 and 32.1 supports, rather than defeats, the finding of the
Panel that these provisions are applicable to measur es that do not come into direct contact with the
imported good, or entities responsible for the dumped or subsidized good. We note that Article 18.1
refers only to measures that act against "dumping", and that there is no express requirement that the
measure must act against the imported dumped product, or entities responsible for that product.
Likewise, Article 32.1 of the SCM Agreement refers to specific action against "a subsidy", not action
against the imported subsidized product or a responsible entity. The United States' contention is
further contradicted by the contextual consideration that the SCM Agreement authorizes
multilaterally-sanctioned countermeasures "against" a subsidy, which may consist of indirect action
affecting other products.
252. Turning to considerations of object and purpose, we do not consider that the object and
purpose of the Anti-Dumping Agreement and of the SCM Agreement, as reflected in Article 18.1 of
the Anti-Dumping Agreement and in Article 32.1 of the SCM Agreement, support the incorporation
into these provisions, through the term "against", of a requirement that the measure must come into
direct contact with the imported good, or the entity responsible for it. Both provisions fulfil a function

189Further support for our view is found in the examples given by the New Shorter Oxford English
Dictionary in relation to this definition:
17. W. O WEN Under his helmet, up against his pack, . . Sleep took him
by the brow and laid him back. R. C HANDLER There was a bar
against the right hand wall.

of limiting the range of actions that a Member may take unilaterally to counter dumping or
subsidization.
190 Excluding from Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of
the SCM Agreement actions that do not come into direct contact with the imported good or the entity
responsible for the dumped or subsidized good, would undermine that function.
253. We, therefore, agree with the Panel that in Article 18.1 of the Anti-Dumping Agreement and
Article 32.1 of the SCM Agreement, there is no requirement that the measure must come into direct
contact with the imported product, or entities connected to, or responsible for, the imported good such
as the importer, exporter, or foreign producer. We also agree with the Panel that the test should focus
on dumping or subsidization as practices.

191 Article 18.1 refers only to measures that act against
"dumping"; there is no express requirement that the measure must act against the imported dumped
product, or entities responsible for that product. Likewise, Article 32.1 of the SCM Agreement refers
to specific action against "a subsidy", not to action against the imported subsidized product or a
responsible entity.
254. Recalling the other two elements of the definition of "against" from the New Shorter Oxford
Dictionary relied upon by the United States, namely "of motion or action in opposition" and "in
hostility or active opposition to", to determine whether a measure is "against" dumping or a subsidy,
we believe it is necessary to assess whether the design and structure of a measure is such that the
measure is "opposed to", has an adverse bearing on, or, more specifically, has the effect of dissuading
the practice of dumping or the practice of subsidization, or creates an incentive to terminate such
practices. In our view, the CDSOA has exactly those effects because of its design and structure.
255. The CDSOA effects a transfer of financial resources from the producers/exporters of dumped
or subsidized goods to their domestic competitors. This is demonstrated by the following elements of
the CDSOA regime. First, the CDSOA offset payments are financed from the anti-dumping
or countervailing duties paid by the foreign producers/exporters. Second, the CDSOA offset
payments are made to an "affected domestic producer", defined in Section 754(b) of the Tariff Act as
"a petitioner or interested party in support of the petition with respect to which an anti-dumping duty
order, a finding under the Antidumping Act of 1921, or a countervailing duty order has been entered"
and that "remains in operation". In response to our questioning at the oral hearing, the United States
confirmed that the "affected domestic producers" which are eligible to receive payments under the
CDSOA, are necessarily competitors of the foreign producers/exporters subject to an anti-dumping or

190See supra, para. 231.
191Panel Report, para. 7.33.

countervail order. Third, under the implementing regulations issued by the United States
Commissioner of Customs ("Customs") on 21 Septem ber 2001, the "qualifying expenditures" of the
affected domestic producers, for which the CDSOA offset payments are made, "must be related to the
production of the same product that is the subject of the related order or finding, with the exception of
expenses incurred by associations which must relate to a specific case."

192 Fourth, Customs has
confirmed that there is no statutory or regulatory requirement as to how a CDSOA offset payment to
an affected domestic producer is to be spent

193, thus indicating that the recipients of CDSOA offset
payments are entitled to use this money to bolster their competitive position vis-à-vis their
competitors, including the foreign competitors subject to anti-dumping or countervailing duties.
256. All these elements lead us to conclude th at the CDSOA has an adverse bearing on the
foreign producers/exporters in that the imports into the United States of the dumped or subsidized
products (besides being subject to anti-dumping or countervailing duties) result in the financing of
United States competitors—producers of like products—through the transfer to the latter of the duties
collected on those exports. Thus, foreign producers/exporters have an incentive not to engage in the
practice of exporting dumped or subsidized products or to terminate such practices. Because the
CDSOA has an adverse bearing on, and, more specifically, is designed and structured so that it
dissuades the practice of dumping or the practice of subsidization, and because it creates an incentive
to terminate such practices, the CDSOA is undoubtedly an action "against" dumping or a subsidy,
within the meaning of Article 18.1 of the Anti-Dumping Agreement and of Article 32.1 of the
SCM Agreement.
257. We note that the United States challenges what it views as the Panel's incorporation of a
"conditions of competition test" in Article 18.1 of the Anti-Dumping Agreement and in Article 32.1
of the SCM Agreement.

194 In our view, in order to determine whether the CDSOA is "against"
dumping or subsidization, it was not necessary, nor relevant, for the Panel to examine the conditions
of competition under which domestic products and dumped/subsidized imports compete, and to assess
the impact of the measure on the competitive relationship between them. An analysis of the term
"against", in our view, is more appropriately centred on the design and structure of the measure; such

19219 C.F.R. § 159.61(c).
193"Distribution of Continued Dumping and Subsidy Offset to Affected Domestic Producers", United
States Federal Register, 21 September 2001 (Volume 66, Number 184), p. 48549.
194United States' appellant's submission, para. 41. The Panel found that the CDSOA is a measure
against dumping or a subsidy because it "has a specific adverse impact on the competitive relationship between
domestic products and dumped [or subsidized] imports". (Panel Report, para. 7.39) According to the Panel, the
CDSOA is against dumping or a subsidy because it affects competition between, on the one hand, dumped or
subsidized products, and, on the other hand, domestic products, to the detriment of the imported products.

an analysis does not mandate an economic assessment of the implications of the measure on the
conditions of competition under which domestic product and dumped/subsidized imports compete.
258. As mentioned above
195, the finding of the Panel that the CDSOA is a measure against
dumping or a subsidy is also based on the view th at the CDSOA provides a financial incentive for
domestic producers to file or support applications for the initiation of anti-dumping and countervailing
duty investigations, and that such an incentive will likely result in a greater number of applications,
investigations and orders.
196 We agree with the United States that this consideration is not a proper
basis for a finding that the CDSOA is "against" dumping or a subsidy; a measure cannot be against
dumping or a subsidy simply because it facilitates or induces the exercise of rights that are WTO-
consistent. The Panel's reasoning would give Article 18.1 of the Anti-Dumping Agreement and
Article 32.1 of the SCM Agreement a scope of application that is overly broad. For example, the
Panel's reasoning would imply that a legal aid program destined to support domestic small-size
producers in anti-dumping or countervailing duty investigations should be considered a measure
against dumping or a subsidy within the meaning of Article 18.1 of the Anti-Dumping Agreement
and of Article 32.1 of the SCM Agreement , because it could be argued that such legal aid is a
financial incentive likely to result in a greater number or applications, investigations and orders.
259. The United States also argues that the Panel erred in relying on the stated purpose of the
CDSOA, as expressed in the "Findings of Cong ress" set forth in Section 1002 of the CDSOA, to
support its finding that the CDSOA is a measure against dumping or a subsidy.

197 We note that the
Panel referred to the "Findings of Congress", not as a basis for its conclusion that the CDSOA
constitutes a specific action against dumping or subsidies, but rather as a consideration confirming
that conclusion.

198 We agree with the Panel that the intent, stated or otherwise, of the legislators is
not conclusive as to whether a measure is "against" dumping or subsidies under Article 18.1 of the
Anti-Dumping Agreement or Article 32.1 of the SCM Agreement. Thus, it was not necessary for the
Panel to inquire into the intent pursued by United States legislators in enacting the CDSOA and to
take this into account in the analysis. The text of the CDSOA provides sufficient information on the
structure and design of the CDSOA, that is to say, on the manner in which it operates, to permit an
analysis whether the measure is "against" dumping or a subsidy. Specifically, the text of the

195See supra, para. 230.
196Panel Report, para. 7.42.
197United States' appellant's submission, paras. 80-83. The United States, viewing the statutory
provision entitled "Findings of Congress" as legislative history, stated at the oral hearing that a United States'
court will not look to the legislative history of a statute unless that statute is ambiguous.
198Panel Report, para. 7.41.

CDSOA establishes clearly that, by virtue of that statute, a transfer of financial resources is effected
from the producers/exporters of dumped or subsidized goods to their domestic competitors. This
essential feature of the CDSOA constitutes, in its elf, the decisive basis for concluding that the
CDSOA is "against" dumping or a subsidy—because it creates the "opposition" to dumping or
subsidization, such that it dissuades such practi ces, or creates an incentive to terminate them.
Therefore, there was no need to examine the in tent pursued by the legislators in enacting the
CDSOA.

199 In our view, however, the Panel did not err in simply noting that the stated legislative
intent, which appears in the statute itself, confirms the conclusion it had reached as to the scope of the
measure.
C. Footnote 24 of the Anti-Dumping Agreement and Footnote 56 of the SCM Agreement
260. The United States challenges the way the Panel addressed footnote 24 of the Anti-Dumping
Agreement and footnote 56 of the SCM Agreement , arguing that the Panel erred in declining to
examine the import of the footnotes because it had already determined that the CDSOA was a
"specific action" under Article 18.1 of the Anti-Dumping Agreement and under Article 32.1 of the
SCM Agreement. The United States contends that these footnotes permit actions involving dumping
or subsidies consistent with GATT 1994 provisions and not addressed by Article VI of the
GATT 1994, and that these actions are not encompassed by the prohibitions against "specific action"
in Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement. In other
words, according to the United States, an action that falls within footnotes 24 and 56 cannot be
characterized as a "specific action" within the meaning of Article 18.1 of the Anti-Dumping

199We discussed the role of the legislative or regulatory intent in Japan – Alcoholic Beverages II ,
where we examined whether a measure is consistent with Article III:2 of the GATT 1 994. We said:
This third inquiry under Article III:2, second sentence, must determine
whether "directly competitive or substitutable products" are "not similarly
taxed" in a way that affords protection. This is not an issue of intent. It is
not necessary for a panel to sort through the many reasons legislators and
regulators often have for what they do and weigh the relative significance of
those reasons to establish legislative or regulatory intent. If the measure is
applied to imported or domestic products so as to afford protection to
domestic production, then it does not matter that there may not have been
any desire to engage in protectionism in the minds of the legislators or the
regulators who imposed the measure. It is irrelevant that protectionism was
not an intended objective if the particular tax measure in question is
nevertheless, to echo Article III:1, " applied to imported or domestic
products so as to afford protection to domestic production". This is an issue
of how the measure in question is applied. (original emphasis; underlining
added)
(Appellate Body Report, Japan – Alcoholic Beverages II
 , at 119)

Agreement and Article 32.1 of the SCM Agreement, and such action would, therefore, not be WTO-
inconsistent.
200
261. We disagree with this argument. We note, first, that, in US – 1916 Act , we commented on
footnote 24 as follows:
Footnote 24 to Article 18.1 of the Anti-Dumping Agreement states:
This is not intended to preclude action under other
relevant provisions of GATT 1994, as appropriate.
We note that footnote 24 refers generally to "action" and not, as does
Article 18.1, to "specific action against dumping" of exports.
"Action" within the meaning of footnote 24 is to be distinguished
from "specific action against dumping" of exports, which is governed
by Article 18.1 itself.

201
262. The United States' reasoning is tantamount to treating footnotes 24 and 56 as the primary
provisions, while according Articles 18.1 and 32.1 residual status. This not only turns the normal
approach to interpretation on its head, but it also runs counter to our finding in US – 1916 Act. In that
case, we provided guidance for determining whether an action is specific to dumping (or to a
subsidy): an action is specific to dumping (or a subsidy) when it may be taken only when the
constituent elements of dumping (or a subsidy) are present, or, put another way, when the measure is
inextricably linked to, or strongly correlates w ith, the constituent elements of dumping (or of a
subsidy). This approach is based on the texts of Article 18.1 of the Anti-Dumping Agreement and
of Article 32.1 of the SCM Agreement, and not on the accessory footnotes. Footnotes 24 and 56 are
clarifications of the main provisions, added to avoid ambiguity; they confirm what is implicit in
Article 18.1 of the Anti-Dumping Agreement and in Article 32.1 of the SCM Agreement, namely,
that an action that is not "specific" within the meaning of Article 18.1 of the Anti-Dumping
Agreement and of Article 32.1 of the SCM Agreement, but is nevertheless related to dumping or
subsidization, is not prohibited by Article 18.1 of the Anti-Dumping Agreement or Article 32.1 of the
SCM Agreement.

200United States' appellant's submission, paras. 25-29.

D. Whether the CDSOA is in Accordance with the WTO Agreement
263. Having determined that the CDSOA is a "specific action against" dumping or a subsidy
within the meaning of Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the
SCM Agreement, we move to the next step of our analysis, which is to determine whether the action
is "in accordance with the provisions of the GATT 1994, as interpreted by" the Anti-Dumping
Agreement or the SCM Agreement.
1. The Anti-Dumping Agreement
264. We interpreted "provisions of GATT 1994" as referred to in Article 18.1 of the Anti-
Dumping Agreement in US – 1916 Act. In particular, we stated that the "provisions" are, in fact, the
provisions of Article VI of the GATT 1994 concerning dumping:
We recall that footnote 24 to Article 18.1 refers to " other relevant
provisions of GATT 1994". These terms can only refer to provisions
other than the provisions of Article VI concerning dumping.
Footnote 24 thus confirms that the "provisions of GATT 1994"
referred to in Article 18.1 are in fact the provisions of Article VI of
the GATT 1994 concerning dumping.

202
 (original emphasis)
265. We also stated in that appeal that "Article VI, and, in particular, Article VI:2, read in
conjunction with the Anti-Dumping Agreement , limit the permissible responses to dumping to
definitive anti-dumping duties, provisional measures and price undertakings."
203 A s C D S O A
offset payments are not definitive anti-dumping duties, provisional measures or price undertakings,
we conclude, in the light of our finding in US – 1916 Act, that the CDSOA is not "in accordance with
the provisions of the GATT 1994, as interpreted by" the Anti-Dumping Agreement. I t follows that
the CDSOA is inconsistent with Article 18.1 of that Agreement.
2. The SCM Agreement
266. As regards subsidization, the United States argues that Article VI:3 of the GATT 1994, read
in conjunction with Article 10 of the SCM Agreement, does not limit the permissible remedies for
subsidies to duties. The United States submits th at the legal regime governing permissible responses
to dumping is different from that governing the perm issible responses to subsidization. Therefore, it
is inappropriate to rely on the reasoning from US – 1916 Act to determine what is meant by "in

203Ibid., para. 137.

accordance with the provisions of the GATT 1994" as that phrase relates to permissible responses to
subsidies.
267. The United States also submits that the CDSOA is in accordance with Article VI:3 of the
GATT 1994 and the provisions of Part V of the SCM Agreement, because those provisions do not
encompass all measures taken against subsidization; they contemplate only countervailing duties
(and by implication, provisional measures and price undertakings).
204 Thus, it cannot properly be
concluded that the CDSOA violates Article VI:3 of the GATT 1994 or the provisions of Part V of the
SCM Agreement, because the CDSOA offset payments are not countervailing duties (or provisional
measures or price undertakings), and, therefore, do not constitute an action covered by these
provisions. In support of its submissions, the United States contrasts the language of Article VI:2 of
the GATT 1994 and Article 1 of the Anti-Dumping Agreement with Article VI:3 of the GATT 1994
and Article 10 of the SCM Agreement .

205 The United States argues, on the basis of textual
differences, that the conclusion we reached in US – 1916 Act that Article VI of the GATT 1994
encompasses all measures taken against dumping, was based on the specific language of Article VI:2
of the GATT 1994 and Article 1 of the Anti-Dumping Agreement. Therefore, according to the United
States, such a conclusion should not be extended to the textually different subsidy provisions of
Article VI of the GATT 1994 and of Part V of the SCM Agreement, which are limited to the
imposition of countervailing duties (and by implication, provisional duties and price undertakings). In
particular, the United States argues that the permissible responses to dumping are limited to definitive
anti-dumping duties, provisional measures and price undertakings, because Article 1 of the Anti-
Dumping Agreement refers to anti-dumping measures, a generic expression that encompasses all
measures taken against dumping, and not only duties. Article 10 of the SCM Agreement, by contrast,
refers to countervailing duties, and thus only countervailing duties (and, by implication, provisional
duties and price undertakings) are governed by Article VI:3 of the GATT 1994 and Part V of the SCM
Agreement.

204United States' appellant's submission, paras. 84-92.
205The United States contrasts the terms "may levy … an anti-dumping duty" in Article VI:2 with "[n]o
countervailing duty shall be levied" in Article VI:3; the United States also contrasts the reference to an
"antidumping measure" and to "action … taken under anti-dumping legislation or regulations" in Article 1 of the
 Anti-Dumping Agreement with the use of the expression "countervailing duty" and "countervailing duties" in
Article 10 of the SCM Agreement. (United States' appellant's submission, para. 87)

268. We disagree with these submissions for the following reasons. As the Panel noted, our
analysis in US – 1916 Act "was not based on any particular AD provision in isolation, but on the AD
Agreement as a whole."
206 We agree with the Panel that:
Since the Appellate Body's analysis [in US – 1916 Act ] was not
based exclusively on AD Article 1, we fail to see why a different
approach should apply in respect of the permissible responses to
subsidization, simply because of a difference between the text of AD
Article 1 and SCM Article 10. In identifying the permissible
responses to subsidization, we consider it important to have regard
to the type of remedies foreseen by the SCM Agreement.

207 (emphasis
added)
As pointed out above, Article 32.1 of the SCM Agreement is identical in terminology and structure to
Article 18.1 of the Anti-Dumping Agreement, except for the reference to subsidy instead of dumping.
We endorse Canada's contention that "[t]his identical wording gives rise to a strong interpretative
presumption that the two provisions set out the same obligation or prohibition."
208
269. Article VI of the GATT 1994 and the Anti-Dumping Agreement identify three responses to
dumping, namely, definitive anti-dumping duties, provisional measures and price undertakings. No
other response is envisaged in the text of Article VI of the GATT 1994, or the text of the Anti-
Dumping Agreement . Therefore, to be in accordance with Article VI of the GATT 1994, as
interpreted by the Anti-Dumping Agreement, a response to dumping must be in one of these three
forms. We confirmed this in US – 1916 Act. We fail to see why similar reasoning should not apply
to subsidization. The GATT 1994 and the SCM Agreement provide four responses to a
countervailable subsidy: (i) definitive countervailing duties; (ii) provisional measures; (iii) price
undertakings; and (iv) multilaterally-sanctioned countermeasures under the dispute settlement
system. No other response to subsidization is envisaged in the text of the GATT 1994, or in the text
of the SCM Agreement. Therefore, to be "in accordance with the GATT 1994, as interpreted by" the
SCM Agreement, a response to subsidization must be in one of those four forms.
270. We note that interpreting these provisions as limiting the permissible responses to a
countervailable subsidy to the four remedies envisaged in the SCM Agreement and the GATT 1994
is consistent with footnote 35 to Article 10 of the SCM Agreement , and with the function of
Article 32.1 of the SCM Agreement. Footnote 35 reads as follows:

206Panel Report, para. 7.7.
207Ibid.

The provisions of Part II or III may be invoked in parallel with the
provisions of Part V; however, with regard to the effects of a
particular subsidy in the domestic market of the importing Member,
only one form of relief (either a countervailing duty, if the
requirements of Part V are met, or a countermeasure under Articles
4 or 7) shall be available . The provisions of Parts III and V shall not
be invoked regarding measures considered non-actionable in
accordance with the provisions of Part IV. However, measures
referred to in paragraph 1(a) of Article 8 may be investigated in order
to determine whether or not they are specific within the meaning of
Article 2. In addition, in the case of a subsidy referred to in
paragraph 2 of Article 8 conferred pursuant to a programme which
has not been notified in accordance with paragraph 3 of Article 8, the
provisions of Part III or V may be invoked, but such subsidy shall be
treated as non-actionable if it is found to conform to the standards set
forth in paragraph 2 of Article 8. (emphasis added)
It is appropriate to emphasize the phrase "only one form of relief (either a countervailing duty, if the
requirements of Part V are met, or a countermeasure under Articles 4 or 7) shall be available." It
expressly sets out two forms of specific action, and provides that WTO Members may choose to apply
one or the other against a subsidy. The assumption underlying the requirements of footnote 35 is that
remedies under the SCM Agreement are limited to countervailing duties (and, by implication,
provisional measures and price undertakings), explicitly envisaged in Part V of the SCM Agreement,
and to countermeasures under Articles 4 and 7 of the SCM Agreement. Footnote 35 requires WTO
Members to choose between two forms of remedy ; such a requirement would be meaningless if
responses to a countervailable subsidy, other than definitive countervailing duties, provisional
measures, price undertakings and multilaterally-sanctioned countermeasures, were permitted under
the GATT 1994 and the SCM Agreement.
271. Moreover, Article 32.1 of the SCM Agreement limits the range of actions a WTO Member
may take unilaterally to counter subsidization. Restricting available unilateral actions against
subsidization to those expressly provided for in the GATT 1994 and in the SCM Agreement is
consistent with this function. The United States' reasoning would deprive Article 32.1 of the
SCM Agreement of effectiveness. As we have stated on many occasions, the internationally
recognized interpretive principle of effectiv eness should guide the interpretation of the WTO
Agreement

209, and, under this principle, provisions of the WTO Agreement should not be interpreted
in such a manner that whole clauses or paragraphs of a treaty would be reduced to redundancy or

209See Appellate Body Report, US – Gasoline , at 21; Appellate Body Report, Japan – Alcoholic
Beverages II, at 106; Appellate Body Report, US – Underwear, at 24; Appellate Body Report, US – Shrimp ,
para. 131 (referencing various authors); Appellate Body Report, Korea – Dairy , para. 81; Appellate Body
Report, Canada – Dairy, para. 133; and Appellate Body Report, Argentina – Footwear (EC), para. 88.

inutility.
210 Accepting the United States' contention that Article VI:3 of the GATT 1994 and Part V of
the SCM Agreement cover only countervailing duties would render Article 32.1 of the SCM
Agreement redundant or inutile, because, under the United States' approach, Article 32.1 of the SCM
Agreement would not provide additional discipline. Thus, a violation of Article 32.1 would flow only
from a violation of another provision; violating Article 32.1 would be only a mechanical consequence
of a violation of another provision.
272. Furthermore, Article 32.1 of the SCM Agreement would be inutile with respect to "specific
action[s] against a subsidy" other than countervailing duties, as it would be impossible, in such case,
to find a violation of Article 32.1. Given that Article VI:3 of the GATT 1994 and Part V of the SCM
Agreement would, under the United States' reasoning, be limited to countervailing duties, such
specific actions would always be in accordance with Article VI:3 of the GATT 1994 and Part V of the
SCM Agreement and, therefore, consistent with Article 32.1. Consequently, we reject the United
States' contention that Article VI:3 of the GATT 1994 and Part V of the SCM Agreement encompass
only countervailing duties.
273. In our view, Article VI:3 of the GATT 1994 and Part V of the SCM Agreement encompass
all measures taken against subsidization. To be in accordance with the GATT 1994, as interpreted
by the SCM Agreement , a response to subsidization must be either in the form of definitive
countervailing duties, provisional measures or price undertakings, or in the form of multilaterally-
sanctioned countermeasures resulting from resort to the dispute settlement system. As the
CDSOA does not correspond to any of the responses to subsidization envisaged by the GATT 1994
and the SCM Agreement , we conclude that it is not in accordance with the provisions of the
GATT 1994, as interpreted by the SCM Agreement, and that, therefore, the CDSOA is inconsistent
with Article 32.1 of the SCM Agreement.
274. Accordingly, we uphold, albeit for different reasons, the finding of the Panel that the
CDSOA is a non-permissible specific action against dumping or a subsidy, contrary to Article 18.1 of
the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement.

210See Appellate Body Report, US – Gasoline , at 21; Appellate Body Report, Japan – Alcoholic
Beverages II, at 106; Appellate Body Report, Korea – Dairy , para. 80; Appellate Body Report, Canada – Dairy,
para. 133; Appellate Body Report, Argentina – Footwear (EC) , para. 88; and Appellate Body Report,
US – Section 211 Appropriations Act, paras. 161 and 338.

VIII. Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement
275. We turn now to examine whether the CDSOA is inconsistent with Article 5.4 of the Anti-
Dumping Agreement and Article 11.4 of the SCM Agreement.
276. First, we consider the Panel's findings under Article 5.4 of the Anti-Dumping Agreement and
Article 11.4 of the SCM Agreement, and then we examine whether the Panel's interpretation of those
provisions is consistent with the customary rules of interpretation codified in Articles 31 and 32 of the
Vienna Convention on the Law of Treaties (the "Vienna Convention"). In doing so, we begin with the
words of Articles 5.4 and Article 11.4 and then turn to the object and purpose of the Anti-Dumping
Agreement and the SCM Agreement. As a separate matter, we address the Panel's application of the
principle of good faith.
A. The Panel's Findings on the Interpretation of Articles 5.4 and 11.4
277. The Panel's findings under Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of
the SCM Agreement may be summarized as follows. The Panel found that the CDSOA provides a
financial incentive for domestic producers to file or support applications for the initiation of anti-
dumping or countervailing duty investigations, because offset payments are made only to producers
that file or support such applications. Accord ing to the Panel, the CDSOA will result in more
applications having the required level of support from domestic industry than would have been the
case without the CDSOA, and that "given the low costs of supporting a petition, and the strong
likelihood that all producers will feel obliged to keep open their eligibility for offset payments for
reasons of competitive parity, … the majority of petitions will achieve the levels of support
required"

211 under Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM
Agreement. In reaching its conclusion, the Panel relied, inter alia , on a letter in which a "US
producer seeks support from other producers for a proposed countervail application ... and states that
'if the [CDSOA] is … applicable here, the total amount available to US lumber producers could be
very large – easily running into hundreds of millions of dollars a year.'"

212 The Panel also referred to
another letter in which a domestic producer indicates, according to the Panel, that it changed its
position concerning an application by deciding to express support for that application "in order to
remain eligible for possible offset payment subsidies".

213 In the Panel's view, "these letters are

211Panel Report, para. 7.62.
212Ibid., para. 7.45 and footnote 304 thereto.
213Panel Report, para. 7.62.

evidence of the inevitable impact of the CDSOA on the position of the domestic industry vis-à-vis
anti-dumping/countervail applications."
214
278. Notwithstanding these findings, the Panel agreed with the United States' argument that
Article 5.4 of the Anti-Dumping Agreement "requires only that the statistical thresholds be met, and
imposes no requirement that the investigating authorities inquire into the motives or intent of a
domestic producer in electing to support a petition".

215 The Panel went on to conclude, however, that
this argument did not "address the matter at issue" because "the operation of the CDSOA … is
[such] that it renders the quantitative tests included in [Articles 5.4 and 11.4] irrelevant"

216 and
"den[ies] parties potentially subject to the investigation a meaningful test of whether the petition has
the required support of the industry."
217 According to the Panel, in doing so, the CDSOA "recreates
the spectre of an investigation being pursued where only a few domestic producers have been affected
by the alleged dumping, but industry support is forthcoming because of the prospect of offset
payments being distributed."

218 The Panel concluded that the CDSOA "may be regarded as having
undermined the value of AD Article 5.4/SCM Article 11.4 to the countries with whom the United
States trades, and the United States may be regarded as not having acted in good faith in promoting
this outcome."

219
279. Turning to what it identified as the "object and purpose" of Article 5.4 of the Anti-Dumping
Agreement and Article 11.4 of the SCM Agreement, the Panel found that those provisions require
investigating authorities "to examine the degree of support which exists for an application and to
determine whether the application was thus filed by or on behalf of the domestic industry."
220 The
Panel appears to have found that the CDSOA "defeats this object and purpose"
221 by implying a
return to the situation which existed before the introduction of Articles 5.4 and 11.4. According to the
Panel, those Articles were "introduced precisely to ensure that support was not just assumed to exist
but actually existed, and that the support expressed by domestic producers was evidence of the
industry-wide concern of injury being caused by dumped or subsidized imports."

222

214Panel Report, para. 7.62.
215Ibid., para. 7.63.
216Ibid.
217Ibid.
218Ibid.
219Ibid.
220Ibid., para. 7.64.
221Ibid., paras. 7.64-7.65.
222Ibid., para. 7.65.

280. The Panel went on to conclude that the CDSOA "in effect mandates"
223 domestic producers
to support applications for the initiation of anti-dumping and countervailing duties by making such
support "a prerequisite for receiving offset payments"

224 and thus renders the threshold test of
Articles 5.4 and 11.4 "completely meaningless".
225 Accordingly, the Panel found that the CDSOA is
inconsistent with Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM
Agreement.
B. The Meaning of Articles 5.4 and 11.4
281. At the outset, we express our concern with the Panel's approach in interpreting Article 5.4 of
the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement. Specifically, we fail to see
how the Panel's interpretation of those provisions may be said to be based on the ordinary meaning of
the words found in those provisions, and hence we do not believe the Panel properly applied the
principles of interpretation codified in the Vienna Convention. It is well settled that Article 3.2 of the
DSU requires the application of those principles.

226 Article 31(1) of the Vienna Convention provides
in relevant part that:
… [a] treaty shall be interpreted in good faith in accordance with the
ordinary meaning to be given to the terms of the treaty in their
context and in the light of its object and purpose.
Thus, the task of interpreting a treaty provision must begin with the specific words of that provision.
Accordingly, we turn first to the texts of Article 5.4 of the Anti-Dumping Agreement and Article 11.4
of the SCM Agreement. Those provisions are identical and provide, in relevant part, that:

223Panel Report, para. 7.66.
224Ibid.
225Ibid.
226Similarly, Article 17.6 (ii) of the Anti-Dumping Agreement provides that "the panel shall interpret
the relevant provisions of the Agreement in accordance with the customary rules of interpretation of public
international law."

An investigation shall not be initiated … unless the authorities have
determined … that the application has been made by or on behalf of
the domestic industry. The application shall be considered to have
been made "by or on behalf of the domestic industry" if it is
supported by those domestic producers whose collective output
constitutes more than 50 per cent of the total production of the like
product produced by that portion of the domestic industry expressing
either support for or opposition to the application. However, no
investigation shall be initiated when domestic producers expressly
supporting the application account for less than 25 per cent of total
production of the like product produced by the domestic industry.
(footnotes omitted)
282. Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement thus
require investigating authorities to "determine" whether an application for the initiation of an
investigation has been "made by or on behalf of the domestic industry". If a sufficient number of
domestic producers has "expressed support" and the thresholds set out in Articles 5.4 and 11.4 have
therefore been met, the "application shall be considered to have been made by or on behalf of the
domestic industry". In such circumstances, an investigation may be initiated.
283. A textual examination of Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the
SCM Agreement reveals that those provisions contain no requirement that an investigating authority
examine the motives of domestic producers that elect to support an investigation.

227 N o r d o t h e y
contain any explicit requirement that support be based on certain motives, rather than on others. The
use of the terms "expressing support" and "expressly supporting" clarify that Articles 5.4 and 11.4
require only that authorities "determine" that support has been "expressed" by a sufficient number of
domestic producers. Thus, in our view, an "examination" of the "degree" of support, and not the
"nature" of support is required. In other words, it is the "quantity", rather than the "quality", of
support that is the issue.
284. We observe that the Panel appears to have arrived at the same conclusion when it conducted
its examination of the texts of Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the
SCM Agreement. Specifically, the Panel concluded that the United States was correct in arguing that
Article 5.4 of the Anti-Dumping Agreement "requires only that the statistical thresholds be met, and
imposes no requirement that the investigating authorities inquire into the motives or intent of a
domestic producer in electing to support a petition".

228 Thus, it seems that, on the basis of a textual
analysis of Articles 5.4 and 11.4, the Panel did not find that the CDSOA constitutes a violation of

227We note that the parties' submissions do not suggest otherwise.
228Panel Report, para. 7.63.

those provisions. The Panel went on to note, however, that this was not the "matter at issue".
229
Instead, according to the Panel, the question was whether the CDSOA "defeats" what it identified as
the object and purpose of Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM
Agreement.
230
285. As mentioned above, we have difficulty with the Panel's approach. Clearly, the matter at
issue before the Panel included whether the CDSOA is inconsistent with the Anti-Dumping
Agreement and the SCM Agreement in the light of their object and purpose, since interpreting
Articles 5.4 and 11.4 involves an inquiry into the object and purpose of those Agreements. In our
view, however, the Panel dismissed all too quickly the textual analysis of those provisions as
irrelevant.
286. We conclude, therefore, that the texts of Article 5.4 of the Anti-Dumping Agreement and
Article 11.4 of the SCM Agreement do not support the reasoning of the Panel. By their terms, those
provisions require no more than a formal examination of whether a sufficient number of domestic
producers have expressed support for an application.
287. Having said this, we turn next to examine what the Panel identified as the "object and
purpose" of Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement.
288. According to the Panel, Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the
SCM Agreement have as their "object and purpose" to require investigating authorities "to examine
the degree of support which exists for an application and to determine whether the application was
thus filed by or on behalf of the domestic industry".

231 The Panel appears to have found that the
CDSOA defeats this "object and purpose" because it "in fact implies a return to the situation which
existed before the introduction of [Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of
the SCM Agreement
 ]."
232 We understand the Panel to have suggested that the CDSOA "implies a

229Panel Report, para. 7.63.
230Ibid., para. 7.64.
231Ibid.
232Ibid., para. 7.65.

return" to the situation in which an application could be "presumed" to have been made by or on
behalf of the domestic industry.
233
289. We do not agree with the Panel's analysis. By their terms, Articles 5.4 and 11.4 do not permit
investigating authorities to "presume" that indus try support for an application exists. For the
thresholds set out in Articles 5.4 and 11.4 to be met, a sufficient number of domestic producers must
have "expressed support" for an application. The CDSOA does not change the fact that investigating
authorities are required to examine the "degree of support" that exists for an application and that an
application shall be considered to have been made "by or on behalf of the domestic industry" only if
sufficient support has been "expressed".

234 Hence, we do not agree with the Panel that the CDSOA
has "defeated" the object and purpose of Articles 5.4 and 11.4, even if we were to assume that the
Panel's understanding of such object and purpose was correct. For the same reason, we also do not
agree with the Panel that the CDSOA renders the quantitative threshold tests included in Articles 5.4
and 11.4 "irrelevant"

235 and "completely meaningless."
236
290. The Panel also took the view that Articles 5.4 and Article 11.4 "[were] introduced precisely to
ensure … that support expressed by domestic producers was evidence of industry-wide concern of
injury".
237 Although we agree with the Panel that support expressed by domestic producers may be
evidence of an "industry-wide concern of injury", we do not agree that such support may be taken to
be evidence of such concern alone. Nor do we see anything in Articles 5.4 or 11.4 that would require
support to be based on that concern alone. Indeed, there may be a number of reasons why a domestic
producer could choose to support an investigation. For example, it may do so in the expectation that
the protection afforded by future anti-dumping or countervailing duties would improve its competitive
position in relation to importers of like foreign products. The Panel appears, however, to have

233The Panel notes in this respect the argument advanced by the European Communities, India,
Indonesia and Thailand that Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement
"were introduced in response to the controversial practice of the United States authorities of presuming that an
application was made by or on behalf of the domestic industry unless a major proportion of the domestic
industry expressed active opposition to the petition." (P anel Report, para. 7.61, referring to the European
Communities', India's, Indonesia's and Thailand's first written submission to the Panel, footnote 49; underlining
added). In our view, this is not, in itself, sufficient evidence of the "object and purpose" of Articles 5.4
and 11.4.
234In this respect, we note that the United States does not contest that it continues to be bound by the
obligation set out in Articles 5.4 and 11.4 to ensure that anti-dumping and countervailing duty cases are not
initiated unless the levels of support set out in Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of
the SCM Agreement are met. (See United States' second written submission before the Panel, para. 81)
235Panel Report, para. 7.63.
236Ibid., para. 7.66.
237Ibid., para. 7.65. (emphasis added)

considered that certain motives to support an application would be WTO-consistent, whereas others
would not. We see no basis in Articles 5.4 and 11.4 for such an approach.
291. As we have noted, Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the
SCM Agreement contain no requirement for investigating authorities to examine the motives of
producers that elect to support (or to oppose) an application. Indeed, it would be difficult, if not
impossible, as a practical matter, to engage in that exercise.
292. The Panel found that the CDSOA "will result"

238 in more applications having the required
level of support from domestic industry than would have been the case without the CDSOA and
stated that "given the low costs of supporting a petition, and the strong likelihood that all producers
will feel obliged to keep open their eligibility for offset payments for reasons of competitive parity", it
"could conclude that the majority of petitions will achieve the levels of support required under AD
Article 5.4/ SCM Article 11.4."

239 The evidence contained in the Panel record, however, does not
support the overreaching conclusion that "the majority of petitions will achieve the levels of support
required" under Articles 5.4 and 11.4 as a result of the CDSOA. Indeed, we note that, in its first
written submission to the Panel, the United States explained that "it is rare for domestic producers in
the United States not to have sufficient industry support in filing antidumping or countervailing duty
petitions."

240 In support of its statement, the United States submitted to the Panel a survey
241 that
shows, for example, that during the year prior to the enactment of the CDSOA, all of the
applications that were filed met the legal thresholds for support.
242
293. We also believe that the Panel had no basis for stating that the CDSOA as such "in effect
mandates domestic producers to support the application."
243 Even assuming that the CDSOA may

238Panel Report, para. 7.62.
239Ibid. (emphasis added)
240United States' first written submission to the Panel, para. 125.
241Exhibit US-6 before the Panel.
242In paragraph 116 of its appellant's submission, the United States also relies on the argument that a
domestic producer can qualify for receipt of possible offset payments by expressing support as late as "the final
injury investigation questionnaire, which can be issued more than 200 days after a petition is filed." Although
we note that support, for purposes of qualifying for CDSOA distributions, need not necessarily be expressed
 prior to initiation of the investigation, the incentive to express support may well exist at the stage of the
initiation of the investigation. This is because if an investigation is not initiated, for example, due to lack of
support, that investigation cannot, by definition, lead to a finding of dumping or subsidization and later to
CDSOA distributions. This, however, does not affect our conclusion that Articles 5.4 and 11.4 do not require
investigating authorities to determine the motivations of producers that choose to support an anti-dumping or
countervailing duty investigation (or indeed the motivations of producers that choose to oppose such
investigations).
243Panel Report, para. 7.66. (emphasis added)

create a financial incentive for domestic producers to file or to support an application
244, it would not
be correct to say that the CDSOA as such "mandates" or "obliges" producers to do so. The fact that a
measure provides an "incentive" to act in a certain way, does not mean that it "in effect mandates" or
"requires" a certain form of action. Indeed, we are not considering here a measure that would
"coerce" or "require" domestic producers to support an application. Such a measure might well be
found to be WTO-inconsistent. It could be considered, inter alia , to circumvent the obligations
contained in Article 5.6 of the Anti-Dumping Agreement and Article 11.6 of the SCM Agreement
not to initiate an investigation without a written application "by or on behalf of the domestic industry"
except when the conditions set out in those provis ions have been met. However, the CDSOA is not
such a measure.
294. For all these reasons, we reverse the Panel's finding that the CDSOA, as such, is inconsistent
with Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement.
C. The Panel's Conclusion on Good Faith
295. We address now the Panel's conclusion, in paragraph 7.63 of the Panel Report, that "the
United States may be regarded as not having acted in good faith" with respect to its obligations under
Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement. However,
given our conclusion that the CDSOA does not constitute a violation of Article 5.4 of the Anti-
Dumping Agreement and Article 11.4 of the SCM Agreement, the issue of whether the United States
"may be regarded as not having acted in good faith" in enacting the CDSOA does not have the
relevance it had for the Panel.
296. On appeal, the United States maintains that there is "no basis or justification in the WTO
Agreement for a WTO dispute settlement panel to conclude that a Member has not acted in good
faith, or to enforce a principle of good faith as a substantive obligation agreed to by WTO
Members."

245 We observe that Article 31(1) of the Vienna Convention directs a treaty interpreter to
interpret a treaty in good faith in accordance with the ordinary meaning to be given to the terms of the
treaty in their context and in the light of the treaty's object and purpose. The principle of good faith
may therefore be said to inform a treaty interpreter' s task. Moreover, performance of treaties is also
governed by good faith. Hence, Article 26 of the Vienna Convention, entitled Pacta Sunt Servanda,
to which several appellees referred in their submissions
246, provides that "[e]very treaty in force is

244We consider this to be a factual finding of the Panel.
246Canada's appellee's submission, para. 101; the European Communities', India's, Indonesia's and
Thailand's appellees' submission, para. 146; Japan's and Chile's appellee's submission, para. 96.

binding upon the parties to it and must be performed by them in good faith."
247 The United States
itself affirmed "that WTO Members must uphold their obligations under the covered agreements in
good faith".

248
297. We have recognized the relevance of the principle of good faith in a number of cases. Thus,
in US – Shrimp, we stated that:
The chapeau of Article XX is, in fact, but one expression of the
principle of good faith. This principle, at once a general principle of
law and a general principle of international law, controls the exercise
of rights by states.
249
In US – Hot-Rolled Steel, we found that:
… the principle of good faith … informs the provisions of the
Anti-Dumping Agreement , as well as the other covered
agreements.
250
Clearly, therefore, there is a basis for a dispute settlement panel to determine, in an appropriate case,
whether a Member has not acted in good faith.
298. Nothing, however, in the covered agreements supports the conclusion that simply because a
WTO Member is found to have violated a substantive treaty provision, it has therefore not acted in
good faith. In our view, it would be necessary to prove more than mere violation to support such a
conclusion.
299. The evidence in the Panel record does not, in our view, support the Panel's statement that the
United States "may be regarded as not having acted in good faith". We are of the view that the Panel's
conclusion is erroneous and, therefore, we reject it.

247The United States said, in response to questioning at the oral hearing, that it has no difficulty with
the notion that Article 26 of the Vienna Convention expresses a customary international law principle.
248United States' second written submission before the Panel, para. 81. The United States reiterated this
point in response to questioning at the oral hearing. See also, Appellate Body Report, EC – Sardines, para. 278.
249Appellate Body Report, US – Shrimp , para. 158. See also, Appellate Body Report, US – FSC ,
para. 166.
250Appellate Body Report, US – Hot-Rolled Steel, para. 101.

IX. Article XVI:4 of the WTO Agreement , Article 18.4 of the Anti-Dumping Agreement,
Article 32.5 of the SCM Agreement and Article 3.8 of the DSU
300. The United States asks that we reverse the Panel's finding that the CDSOA violates
Article XVI:4 of the WTO Agreement on the grounds that the CDSOA is consistent with
Articles VI:2 and VI:3 of the GATT 1994, Articles 5.4, 18.1 and 18.4 of the Anti-Dumping
Agreement, and Articles 11.4, 32.1 and 32.5 of the SCM Agreement. For the same reason, the United
States requests that we reverse the Panel's finding that the benefits accruing to the appellees under
the WTO Agreement have been nullified or impaired.

251
301. Article 18.4 of the Anti-Dumping Agreement and Article 32.5 of the SCM Agreement
provide that "[e]ach Member shall take all necessary steps, of a general or particular character, to
ensure … the conformity of its laws, regulations and administrative procedures with the provisions of
this Agreement". Similarly, Article XVI:4 of the WTO Agreement provides that "[e]ach Member
shall ensure the conformity of its laws, regulations and administrative procedures with its obligations
as provided in the annexed Agreements", which include the Anti-Dumping Agreement and the SCM
Agreement.
302. As a consequence of our finding that the United States has acted inconsistently with
Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement, we uphold
the Panel's finding that the United States has failed to comply with Article 18.4 of the Anti-Dumping
Agreement, Article 32.5 of the SCM Agreement and Article XVI:4 of the WTO Agreement.
303. Article 3.8 of the DSU provides, in relevant part, that:
In cases where there is an infringement of the obligations assumed
under a covered agreement, the action is considered prima facie to
constitute a case of nullification or impairment.
304. We conclude that, to the extent we have found that the CDSOA is inconsistent with
Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement, the CDSOA
nullifies or impairs benefits accruing to the appellees in this dispute under those Agreements.

X. Article 9.2 of the DSU
305. The United States claims on appeal that the Panel acted inconsistently with Article 9.2 of the
DSU by denying the United States' request for a separate panel report on the dispute brought by
Mexico.
306. The Panel took the view that, although Article 9.2 of the DSU provides a general right to
WTO Members to request a separate report, such requests "should be made in a timely manner, since
any need to prepare separate reports may affect the manner in which a panel organises its
proceedings."

252 The Panel added that, in its view, "such requests should be made at an early juncture
in the panel process, preferably at the time that a panel is established."
253 Turning to the case at
hand, the Panel observed that "the US request was received on 10 June 2002, approximately two
months after issuance of the descriptive part of the Panel's report"

254 and that the United States had
provided "no explanation of why it was unable to submit its request at an earlier date".
255 The Panel
also noted that the United States had not referred to any prejudice that it would suffer if the Panel
were not to issue a separate report on the dispute brought by Mexico.
307. Based on these considerations, the Panel concluded:
… that the preparation of a separate report on the dispute brought by
Mexico would delay issuance of the Panel's interim report. Although
the United States only requested a separate final report, we are not
prepared to issue a separate final report without also issuing a
separate interim report. This is because we are not entitled to issue a
final report on the dispute brought by Mexico without first having
issued an interim report on that dispute. Otherwise Mexico would be
denied its right to request a review of precise aspects of its interim
report (DSU Article 15.2).
256 (original underlining)
Accordingly, the Panel rejected the United States' request.
257
308. The United States appeals this finding of the Panel. The United States submits that
Article 9.2 of the DSU gives WTO Members an "unqualified right to the issuance of separate panel

252Panel Report, para. 7.4.
253Ibid.
254Ibid.
255Ibid.
256Ibid., para. 7.5.
257Ibid., para. 7.6. In paragraphs 6.3-6.5 of its Report, the Panel provides further argumentation for
why it rejected the United States' request.

reports upon request".
258 According to the United States, Article 9.2 contains no requirement for a
party to make its request for a separate panel report by any particular time in the panel proceeding.
Nor does it require any party to demonstrate that it would suffer prejudice if its request is not
accepted.
309. In our analysis of this issue, we begin by examining the ordinary meaning of the text of
Article 9.2 of the DSU which provides, in relevant part, that:
The [ ] panel shall organize its examination and present its findings
to the DSB in such a manner that the rights which the parties to the
dispute would have enjoyed had separate panels examined the
complaints are in no way impaired. If one of the parties to the
dispute so requests, the panel shall submit separate reports on the
dispute concerned. (emphasis added)
310. By its terms, Article 9.2 accords to the requesting party a broad right to request a separate
report. The text of Article 9.2 does not make this right dependent on any conditions. Rather,
Article 9.2 explicitly provides that a panel "shall" submit separate reports "if one of the parties to the
dispute so requests". Thus the text of Article 9.2 of the DSU contains no requirement for the request
for a separate panel report to be made by a certain time. We observe, however, that the text does not
explicitly provide that such requests may be made at any time.
311. Having made these observations, we note that Article 9.2 must not be read in isolation from
other provisions of the DSU, and without taking into account the overall object and purpose of that
Agreement. The overall object and purpose of the DSU is expressed in Article 3.3 of that Agreement
which provides, relevantly, that the "prompt settlement" of disputes is "essential to the effective
functioning of the WTO." If the right to a separate panel report under Article 9.2 were "unqualified",
this would mean that a panel would have the obligat ion to submit a separate panel report, pursuant to
the request of a party to the dispute, at any time during the panel proceedings . Moreover, a request
for such a report could be made for whatever reason—or indeed, without any reason —even on the
day that immediately precedes the day the panel report is due to be circulated to WTO Members at
large. Such an interpretation would clearly unde rmine the overall object and purpose of the DSU to
ensure the "prompt settlement" of disputes.
312. In support of its argument, the United States relied on EC – Bananas III (US) where the panel
granted the European Communities' request for "four separate panel reports". We note, however, as
did the Panel, that the European Communities' request was made at the meeting at which the

DSB established the panel.
259 EC – Bananas III (US) is therefore distinguishable from the present
case. Thus, we cannot agree with the United States that the right contained in Article 9.2 is
"unqualified".

260
313. Our view is supported by our decision in US – FSC, where we observed that:
The procedural rules of WTO dispute settlement are designed to
promote … the fair, prompt and effective resolution of trade
disputes.
261 (emphasis added)
In the somewhat different context of the time by which procedural objections must be raised, we
stated in Mexico – Corn Syrup (Article 21.5 – US), that:
When a Member wishes to raise an objection in dispute settlement
proceedings, it is always incumbent on that Member to do so
promptly. A Member that fails to raise its objections in a timely
manner, notwithstanding one or more opportunities to do so, may be
deemed to have waived its right to have a panel consider such
objections.
262 (emphasis added; footnote omitted)
314. In the case at hand, the United States made its request under Article 9.2 "approximately two
months after the issuance of the descriptive part of the Panel's report"
263 and more than seven months
after the Panel had been composed.
264 It therefore cannot be said that the United States made its
request "promptly" or in a "timely manner, notwithstanding one or more opportunities to do so".
315. Finally we note that the first sentence in Article 9.2 provides that it is for the panel to
"organize its examination and present its findings in such a manner that the rights which the parties to
the dispute would have enjoyed had separate panels examined the complaints are in no way
impaired." Our comments in EC – Hormones about panels' discretion in dealing with procedural
issues are pertinent here:

259Panel Report, para. 6.3.
260United States appellant's submission, para. 138, referring to the Panel Report in EC – Bananas III
(US), para. 7.55.
262Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US) , para. 50. The Appellate Body
also emphasized the need for procedural objections to be made in a timely manner in US – 1916 Act, para. 54.
263Panel Report, para. 7.4.
264The Panel was composed on 25 October 2001. See Panel Report, para. 1.7.

… the DSU and in particular its Appendix 3, leave panels a
margin of discretion to deal, always in accordance with due process,
with specific situations that may arise in a particular case and that are
not explicitly regulated. Within this context, an appellant requesting
the Appellate Body to reverse a panel's ruling on matters of
procedure must demonstrate the prejudice generated by such legal
ruling.

265 (emphasis added)
316. In our view, the Panel acted within its "margin of discretion" by denying the United States'
request for a separate panel report. We do not believe that we should lightly disturb panels' decisions
on their procedure, particularly in cases such as the one at hand, in which the Panel's decision appears
to have been reasonable and in accordance with due process. We observe that, on appeal, the United
States is not claiming that it suffered any prejudice from the denial of its request for a separate panel
report.

266 We also note that the first sentence of Article 9.2 refers to the rights of all the parties to the
dispute. The Panel correctly based its decision on an assessment of the rights of all the parties, and
not of one alone.
317. Accordingly, we reject the United States' cl aim that the Panel acted inconsistently with
Article 9.2 of the DSU by not issuing a separate panel report in the dispute brought by Mexico.
267
XI. Findings and Conclusions
318. For the reasons set out in this Report, the Appellate Body:
(a) upholds the finding of the Panel, in paragraphs 7.51 and 8.1 of the Panel Report, that
the CDSOA is a non-permissible specific action against dumping or a subsidy,
contrary to Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the
SCM Agreement;

265Appellate Body Report, EC – Hormones, footnote 138 to para.152.
266The United States submits that a showing of prejudice is not required by the text of Article 9.2. In
response to questioning at the oral hearing, the United States added that, although it was not aware of any
prejudice that it would have suffered in this case, pr ejudice could have resulted if, for example, Mexico had
chosen to cross-appeal the claim related to Article 5 of the SCM Agreement, which only Mexico raised before
the Panel.
267We express no view on the question whether the Panel was correct in concluding, in paragraph 7.5 of
the Panel Report, that it was "not entitled to issue a final report on the dispute brought by Mexico without first
having issued an interim report on that dispute". In this respect, we note moreover that the United States has
not requested a finding with respect to whether the Panel erred in its interpretation of Article 15.2 of the DSU.

(b) consequently upholds the Panel's finding, in paragraphs 7.93 and 8.1 of the Panel
Report, that the CDSOA is inconsistent with certain provisions of the Anti-Dumping
Agreement and the SCM Agreement and that, therefore, the United States has failed
to comply with Article 18.4 of the Anti-Dumping Agreement , Article 32.5 of the
SCM Agreement and Article XVI:4 of the WTO Agreement;
(c) upholds the Panel's finding, in paragraph 8.4 of the Panel Report, that, pursuant to
Article 3.8 of the DSU, to the extent that the CDSOA is inconsistent with provisions
of the Anti-Dumping Agreement and the SCM Agreement, the CDSOA nullifies or
impairs benefits accruing to the Complaining Parties under those Agreements;
(d) reverses the Panel's findings, in paragraphs 7.66 and 8.1 of the Panel Report, that the
CDSOA is inconsistent with Article 5.4 of the Anti-Dumping Agreement and
Article 11.4 of the SCM Agreement;
(e) rejects the Panel's conclusion, in paragraph 7.63 of the Panel Report, that the United
States may be regarded as not having acted in good faith with respect to its
obligations under Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the
SCM Agreement; and
(f) rejects the claim of the United States that the Panel acted inconsistently with
Article 9.2 of the DSU by not issuing a separate panel report in the dispute brought by
Mexico.
319. The Appellate Body recommends that the DSB request the United States bring the CDSOA
into conformity with its obligations under the Anti-Dumping Agreement, the SCM Agreement, and
the GATT 1994.

Signed in the original at Geneva this 17th day of December 2002 by:
Giorgio Sacerdoti
Presiding Member
_________________________ _________________________
Luiz Olavo Baptista John Lockhart
Member Member
ANNEX 1

22 October 2002
(02-5747)
Original: English
 2000
Notification of an Appeal by the United States
under paragraph 4 of Article 16 of the Understanding on Rules
and Procedures Governing the Settlement of Disputes (DSU)
The following notification, dated 18 October 2002, sent by the United States to the Dispute
Settlement Body (DSB), is circulated to Members. This notification also constitutes the Notice of
Appeal, filed on the same day with th e Appellate Body, pursuant to the Working Procedures for
Appellate Review.
Pursuant to Article 16 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes ("DSU") and Rule 20 of the Working Procedures for Appellate Review, the
United States hereby notifies its decision to appeal to the Appellate Body certain issues of law
covered in the report of the single panel established in response to the requests of Australia, Brazil,
Canada, Chile, the European Communities, India, Indonesia, Japan, Korea, Mexico, and Thailand in
the disputes 2000 (" CDSOA")
(WT/DS217/R and WT/DS234/R) and legal interpretations developed by the Panel.
1. The United States seeks review by the Appellate Body of the Panel's legal conclusion that the
Continued Dumping and Subsidy Offset Act of 2000 ("CDSOA") is inconsistent with Articles VI:2
and VI:3 of the General Agreement on Tariffs and Trade 1994 ("GATT 1994"), Article 18.1 of the
Agreement on the Implementation of Article VI of the General Agreement on Tariffs and Trade 1994
("Antidumping Agreement") and Article 32.1 of the Agreement on Subsidies and Countervailing
Measures ("SCM Agreement"). These findings are in error, and are based on erroneous findings on
issues of law and related legal interpretations with respect to Articles VI:2 and VI:3 of GATT 1994,
Article 18.1 of the Antidumping Agreement and Artic le 32.1 of the SCM Agreement, including, for
example:
(a) the Panel's legal conclusions that the CDSOA acts specifically in response to
dumping, the CDSOA has an adverse bearing on dumping, the CDSOA operates
against dumping, actions objectively capable of offsetting or preventing dumping or
subsidization constitute action against dumping or subsidization, and Article 18.1 of
the Antidumping Agreement and Article 32.1 of the SCM Agreement apply to the
CDSOA or to specific actions that have an adverse bearing on the practice of
dumping or the practice of subsidization;
(b) the Panel's legal conclusion that Article 18.1 of the Antidumping Agreement and
Article 32.1 of the SCM Agreement include a conditions of competition or
competitive advantage test;
(c) the Panel's legal conclusions that the Appellate Body's interpretation of GATT
Article VI:2 and the Antidumping Agreement in US – 1916 Act applies equally to
GATT Article VI:3 and the SCM Agreement, and that Part III and Part V of the SCM
Agreement contain the only permissible remedies for subsidization;
(d) the Panel's legal conclusion that the CDSOA constitutes specific action against the
practice of dumping and specific action against the practice of subsidization;
(e) the Panel's legal conclusion that the CDSOA acts "against" dumping and/or a subsidy
because of a claimed adverse impact on the competitive relationship between
dumped/subsidized imports and the goods produced by "affected domestic
producers," and the improper shifting of the burden of proof to the United States to
prove that the CDSOA does not have an adverse bearing on the competitive
relationship between dumped/subsidized imports and the goods produced by
"affected domestic producers;"
(f) the Panel's legal conclusion that it need not examine footnote 24 of the Antidumping
Agreement and footnote 56 of the SCM Agreement because it had already concluded
that the CDSOA constitutes "specific action" against dumping and subsidization;
(g) the Panel's legal conclusion that the legislative intent of the CDSOA is relevant to
determining whether the CDSOA is consistent with WTO obligations; and
(h) the Panel's legal conclusion that the CDSOA creates a "financial incentive" to file or
support dumping/countervail petitions and therefore acts "against" dumping and/or a
subsidy.
2. The United States seeks review by the Appellate Body of the Panel's legal conclusion that the
CDSOA is inconsistent with Article 5.4 of th e Antidumping Agreement and Article 11.4 of the
SCM Agreement. These findings are in error, and are based on erroneous findings on issues of law
and on related legal interpretations with respect to Article 5.4 of the Antidumping Agreement and
Article 11.4 of the SCM Agreement, including, for example:
(a) the Panel's legal conclusion that the CDSOA violates Article 5.4 of the Antidumping
Agreement and Article 11.4 of the SCM Agreement despite its findings that the U.S.
has implemented these obligations under various provisions of U.S. law, that the
CDSOA does not amend these laws and that U.S. investigating authorities observe
the quantitative thresholds;
(b) the Panel's legal conclusion that the CDSOA renders the quantitative thresholds in
Article 5.4 of Antidumping Agreement and 11.4 of the SCM Agreement meaningless;
(c) the Panel's legal conclusion that the CDSOA violates Article 5.4 of the Antidumping
Agreement and Article 11.4 of the SCM Agreement because it " in effect mandates"
domestic producers to support the initiation of dumping/countervail investigations
and/or creates a financial incentive for domestic producers to support the initiation of
dumping/countervail investigations; and
(d) the Panel's legal conclusion that the United States has not acted in good faith in
enacting the CDSOA.
3. The United States seeks review by the Appellate Body of the Panel's legal conclusion that the
CDSOA violates Article 18.4 of Antidumping Agr eement, Article 32.5 of the SCM Agreement, and
Article XVI:4 of the Marrakesh Agreement Establishing the World Trade Organization.
4. The United States seeks review by the Appellate Body of the Panel's legal conclusion that the
benefits accruing to the Complaining Parties under the WTO Agreement have been nullified or
impaired.
5. The United States seeks review by the Appellate Body of the Panel's legal conclusion that the
Panel has the discretion under Article 9.2 to reject a party's request for the Panel to submit separate
reports.