UNITED STATES – ANTI-DUMPING AND COUNTERVAILING MEASURES ON LARGE RESIDENTIAL WASHERS FROM KOREA RECOURSE TO ARTICLE 22.6 OF THE DSU BY THE UNITED STATES DECISION OF THE ARBITRATOR
Document: Addendum
Date: 8 February 2019
Document codes: WT/DS464/ARB/Add.1; WT/DS464/ARB.
Complainant: South Korea
Respondent: U.S.
Third parties: Brazil, Canada, China, EU, India, Japan, Norway, Thailand, Turkey, Saudi Arabia, Vietnam
Dispute stage: Implementation & Compliance
Agreements cited: Art. 2.1, 2.4, 2.4.2, 9.3, 9.5, 11.2, 11.3  Anti-dumpingArt. VI:1, VI:2  GATT 1994Art. XVI:4  Agreement Establishing the World Trade OrganizationArt. 1  Anti-dumpingArt. 1.2, 2.2  Subsidies and Countervailing Measures (SCM)Art. VI:3  GATT 1994Art. 19.4  Subsidies and Countervailing Measures (SCM)

UNITED STATES – ANTI-DUMPING AND COUNTERVAILING MEASURES
ON LARGE RESIDENTIAL WASHERS FROM KOREA
RECOURSE TO ARTICLE 22.6 OF THE DSU BY THE UNITED STATES
DECISION OF THE ARBITRATOR
Addendum

This addendum contains Annexes A to D to the Decision of the Arbitrator to be found in document

LIST OF ANNEXES
ANNEX A
WORKING PROCEDURES OF THE ARBITRATOR
Contents Page
Annex A-1 Working Procedures of the Arbitrator 4
Annex A-2 Additional Workin g Procedures of the Arbitrator C oncerning Business
Confidential Information
9
ANNEX B
ARGUMENTS OF THE PARTIES
Contents Page
Annex B-1 Integrated Executive summary of the arguments of the United States 12
Annex B-2 Integrated Executive summary of the arguments of Korea 23

ANNEX C
CALCULATIONS OF THE ARBITRATOR
Contents Page
Annex C-1 Level of Nullification or Impairment for LRWs: Calculations 34
Annex C-2 Level of Nullification or Impairment for Non-LRWs: Derivation of Formula 46
ANNEX D
DECISION OF THE ARBITRATOR CONCERNING A PARTIALLY OPEN HEARING
Contents Page
Annex D-1 Decision of the Arbitrator on the United States' Request for an Open Hearing 60

ANNEX A
WORKING PROCEDURES OF THE ARBITRATOR
Contents Page
Annex A-1 Working Procedures of the Arbitrator 4
Annex A-2 Additional Working Procedures of the Arbitrator concerning Business
Confidential Information
9

ANNEX A-1
WORKING PROCEDURES OF THE ARBITRATOR
Adopted on 21 February 2018

General

1. (1) In this proceeding, the Arbitrator shall follow the relevant provisions of the
Understanding on Rules and Procedures Governing the Settlement of Disputes ("DSU"). In
addition, the following Working Procedures apply.

(2) The Arbitrator reserves the right to modify these procedures as necessary, after
consultation with the parties.

Confidentiality
2. (1) The deliberations of the Arbitrator and the documents submitted to it shall be kept
confidential. Members shall treat as confi dential information that is submitted to the
Arbitrator by another Member which the submitting Member has designated as confidential.

(2) Nothing in the DSU or in these Working Procedures shall preclude a party from
disclosing statements of its own positions to the public.

(3) If a party submits a confidential version of its written submissions to the Arbitrator,
it shall also, upon request of a Member, provide a non -confidential summary of the
information contained in its submissions that could be disclosed to t he public. Non -
confidential summaries shall be submitted no later than ten days after the written
submission in question is presented to the Arbitrator, unless a different deadline is
established by the Arbitrator upon written request of a party showing good cause.

(4) Upon request, the Arbitrator may adopt appropriate additional procedures for the
treatment and handling of confidential information after consultation with the parties.

Submissions

3. (1) Before the substantive meeting of the Arbitrator with the parties, Korea shall transmit
to the Arbitrator and to the United States a communication explaining the basis for its
request, including the methodology and data supporting it, in accordance with the timetable
adopted by the Arbitrator.

(2) Each party to the dispute shall also transmit to the Arbitrator a written submission in
which it presents the facts of the case and its arguments, in accordance with the timetable
adopted by the Arbitrator.

(3) The Arbitrator may invite the parties to make additional submissions in the course of
the proceeding, including with respect to requests for preliminary rulings in accordance with
paragraph 4 below.

Preliminary rulings

4. (1) If the United States considers that the Arbitrator should make a ruling prior to the
issuance of the Decision that certain measures, claims or issues are not properly before the
Arbitrator, the following procedure applies. Exceptions to this procedure shall be granted
upon a showing of good cause.

a. The United States shall submit any such request for a preliminary ruling at the earliest
possible opportunity. Korea shall submit its response to the request at a time to be
determined by the Arbitrator in light of the request.

b. The Arbitrator may issue a preliminary ruling on the issues raised in such a preliminary

ruling request before, during or after the substantive meeting, or the Arbitrator may
defer a ruling on the issues raised by a preliminary ruling until it issues its D ecision to
the parties.

c. In the event that the Arbitrator finds it appropriate to issue a preliminary ruling prior to
the issuance of its Decision, the Arbitrator may provide reasons for the ruling at the
time that the ruling is made or subsequently in its Decision.

(2) This procedure is without prejudice to the parties' right to request other types of
preliminary or procedural rulings in the course of the proceeding, and to the procedures that
the Arbitrator may follow with respect to such requests.

Evidence

5. (1) Each party shall submit all evidence to the Arbitrator no later than the substantive
meeting, except evidence necessary for purposes of rebuttal, or evidence necessary for
answers to questions or comments on answers provided by the other part y. Additional
exceptions may be granted upon a showing of good cause.

(2) If any new evidence has been admitted upon a showing of good cause, the Arbitrator
shall accord the other party an appropriate period of time to comment on the new evidence
submitted.

6. (1) Where the original language of an exhibit or a portion thereof is not in a WTO working
language, the submitting party shall simultaneously submit a translation of the exhibit or
relevant portion into the WTO working language of the submission. The Arbitrator may grant
reasonable extensions of time for the translation of exhibits upon a showing of good cause.

(2) Any objection as to the accuracy of a translation should be raised promptly in writing,
preferably no later than the next filing or the me eting (whichever occurs earlier) following
the submission which contains the translation in question. Any objection shall be
accompanied by a detailed explanation of the grounds for the objection and an alternative
translation.

7. (1) To facilitate the maintenance of the record of the dispute and maximize the clarity of
submissions, each party shall sequentially number its exhibits throughout the course of the
dispute, indicating the submitting Member and the number of each exhibit on its cover page.
For example, exhibits submitted by Korea should be numbered KOR -1, KOR-2, etc. If the
last exhibit in connection with a submission was numbered KOR -5, the first exhibit in
connection with the next submission thus would be numbered KOR-6.

(2) Each party shall provide an updated list of exhibits (in Word or Excel format) together
with each of its submissions, oral statements, and responses to questions.

(3) If a party submits a document that has already been submitted as an exhibit by the
other party, it should explain why it is submitting that document again.

(4) Insofar as a party considers that the Arbitrator should take into account a document
already submitted as an exhibit in the prior panel proceedings, it should resubmit that
document as an exhibit for the purpose of this proceeding. In its list of exhibits, it should
refer to the number of the original exhibit in the original panel proceeding (OP), if applicable
(example: USA-1 (USA-21-OP).

Editorial Guide

8. In order to facilitate the work of the Arbitrator, each party is invited to make its submissions
in accordance with the WTO Editorial Guide for Submissions (electronic copy provided).

Questions

9. The Arbitrator may pose questions to the parties at any time, including:

a. Prior to the meeting, the Arbitrator may send written questions, or a list of topics it
intends to pursue in questioning orally in the course of the meeting. The Arbitrator may ask
different or additional questions at the meeting.

b. The Arbitrator may put q uestions to the parties orally in the course of the meeting,
and in writing following the meeting, as provided for in paragraph 16 below.

Substantive meeting

10. The arbitration hearing will be conducted in closed session, unless the Arbitrator decides
otherwise after consultations with the parties.

11. The parties shall be present at the meetings only when invited by the Arbitrator to appear
before it.

12. (1) Each party has the right to determine the composition of its own delegation when
meeting with the Arbitrator.

(2) Each party shall have the responsibility for all members of its delegation and shall ensure
that each member of its delegation acts in accordance with the DSU and these Working
Procedures, particularly with regard to the confidentiality of the proceeding and the
submissions of the parties.

13. Each party shall provide to the Arbitrator the list of members of its delegation no later than
5.00 p.m. (Geneva time) three working days preceding the first day of each meeting with the
Arbitrator.

14. A request for interpretation by any party should be made to the Arbitrator as early as
possible, preferably at the organizational stage, to allow sufficient time to ensure availability of
interpreters.

15. There shall be one substantive meeting with the parties.

16. The substantive meeting of the Arbitrator with the parties shall be conducted as follows:

a. The Arbitrator shall invite the United States to make an opening statement to present
its case first. Subsequently, the Arbitrator shall invite Korea to present its point of view.
Before each party takes the floor, it shall provide the Arbitrator with a pr ovisional written
version of its statement. In the event that interpretation is needed, each party shall provide
additional copies for the interpreters.

b. Each party should avoid lengthy repetition of the arguments in its submissions. Each
party is invited to limit the length of its opening statement to 75 minutes. If either party
considers that it requires more time for its opening statement, it should inform the Arbitrator
and the other party at least 10 days prior to the meeting, and it should also provide, at the
same time, an estimate of the length of its statement. The Arbitrator will accord equal time
to both parties for their statements.

c. After the conclusion of the opening statements, the Arbitrator shall give each party
the opportunity to make comments or ask the other party questions.

d. The Arbitrator may subsequently pose questions to the parties.

e. Once the questioning has concluded, the Arbitrator shall afford each party an
opportunity to present a brief closing statement, with Korea presenting its statement first.
Before each party takes the floor, it shall provide the Arbitrator and other participants at
the meeting with a provisional written version of its closing statement, if available.

f. Following the meeting:

i. Each party shall submit a final written version of its opening statement no later than
5.00 p.m. (Geneva time) on the first working day following the meeting. At the same

time, each party should also submit a final written version of any prepared closing
statement that it delivered at the meeting.

ii. Each party shall send in writing, within the timeframe established by the Arbitrator
prior to the end of the meeting, any questions to the other party to which it wishes
to receive a response in writing.

iii. The Arbitrator shall send in writing, within the timeframe established by the
Arbitrator prior to the end of the meeting, any questions to the parties to which it
wishes to receive a response in writing.

iv. Each party shall respond in writing to the questions from the Arbitrator, and to any
questions posed by the other party, within the time -frame established by the
Arbitrator prior to the end of the meeting.

Descriptive part and executive summaries

17. The description of the arguments of the parties in the Decision of the Arbitrator shall consist
of executive summaries provided by the parties, which shall be annexed as addenda to the
Decision. These executive summaries shall not in any way serve as a substitute for the
submissions of the parties in the Arbitrator's examination of the case.

18. Each party shall submit one integrated executive summary, which shall summarize the facts
and arguments as presented to the Arbitrator in the party's submissions and statements, and
where possible, its responses to questions and comments thereon following the sub stantive
meeting.

19. Each integrated executive summary shall be limited to 15 pages.

20. The Arbitrator may request the parties to provide executive summaries of facts and
arguments presented in any other submissions to the Arbitrator for which a deadline may not be
specified in the timetable.

Service of documents

21. The following procedures regarding service of documents apply to all documents submitted
by parties in the course of the proceeding:

a. Each party shall submit all documents to the Arbitrator by submitting them with the DS
Registry (office No. 2047).

b. Each party shall submit 2 paper copies of its submissions and 2 paper copies of its
Exhibits to the Arbitrator by 5.00 p.m. (Geneva time) on the due date esta blished by
the Arbitrator. The DS Registrar shall stamp the documents with the date and time of
submission. The paper version submitted to the DS Registry shall constitute the official
version for the purposes of submission deadlines and the record of the dispute.

c. Each party shall also send one e -mail to the DS Registry, at the same time that it
submits the paper versions, attaching an electronic copy of all documents that it submits
to the Arbitrator, preferably in Microsoft Word format. All such e-mails to the Arbitrator
shall be addressed to DSRegistry@wto.org, and copied to the other WTO Secretariat
staff whose e -mail addresses have been provided to the parties in the course of the
proceeding. Where it is not possible to attach all the Exhibits to one e -mail, the
submitting party shall provide the DS Registry with 4 copies of the Exhibits in CD-ROMs
or DVDs.

d. In addition, each party is invited to submit all documents through the Digital Dispute
Settlement Registry (DDSR) within 24 hours following the deadline for the submission
of the paper versions. If the parties have any questions or technical difficulties relating
to the DDSR, they are invited to consult the DDSR User Guide (electronic copy provided)
or contact the DS Registry at DSRegistry@wto.org.

e. Each party shall serve any document submitted to the Arbitrator directly on the other
party. A party may submit its documents to another party in electronic format only,
unless the recipient party has previously requested a paper copy. Each party shall
confirm, in writing, that copies have been served on the parties, as appropriate, at the
time it provides each document to the Arbitrator.

f. Each party shall submit its documents w ith the DS Registry and serve copies on the
other party by 5.00 p.m. (Geneva time) on the due dates established by the Arbitrator.

g. All communications from the Arbitrator to the parties will be via e-mail.

Correction of clerical errors in submissions

22. The Arbitrator may grant leave to a party to correct clerical errors in any of its submissions
(including paragraph numbering and typographical mistakes). Any such request should identify the
nature of the errors to be corrected, and should be made promp tly following the filing of the
submission in question.

ANNEX A-2
ADDITIONAL WORKING PROCEDURES OF THE ARBITRATOR CONCERNING
BUSINESS CONFIDENTIAL INFORMATION

Adopted on 23 February 2018

1. These procedures apply to any business confidential information (BCI) that a party wishes to
submit to the Arbitrator, including BCI that was previously treated by the U.S. Department of
Commerce as confidential or proprietary information protected by Administrative Protective Order in
the course of the anti-dumping and countervailing duty proceedings at issue in this dispute, entitled
Large Residential Washers from the Republic of Korea (A-580-868 and C-580-869). However, these
procedures do not apply to any information that is available in the public domain. In addition, these
procedures do not apply to any BCI if the entity which provided the information in the course of the
aforementioned proceedings agrees in writing to make the information publicly available.
2. If a party considers it necessary to submit to the Arbitrator BCI as defined above from an entity
that submitted that information in one or both of the proceedings at issue, the party shall , at the
earliest possible date, obtain an authorizing letter from the entity and provide such authorizing letter
to the Arbitrator, with a copy to the other party. The authorizing letter from the entity shall authorize
both Korea and the United States to submit in this arbitration, in accordance with these procedures,
any confidential information submitted by that entity in the course of those proceedings.
3. No person may have access to BCI except a member of the Secretariat or the Arbitrator, an
employee of a party, and an outside advisor for the purposes of this arbitration to a party. However,
an outside advisor is not permitted access to BCI if that advisor is an officer or employee of an
enterprise engaged in the production, export, or import of the products that were the subject of the
proceedings at issue in this dispute.
4. Each party shall, at the request of the other party, facilitate the communication to an entity in
its territory of any request to provide an authorization letter referred to in paragraph 2. Each party
shall encourage any entity in its territory that is requested to grant the author ization referred to in
paragraph 2 to grant such authorization. If an entity refuses to grant the authorization referred to
in paragraph 2, a party may bring the situation to the attention of the Arbitrator.

5. A party having access to BCI shall treat it as confidential, i.e., shall not disclose that information
other than to those persons authorized to receive it pursuant to these procedures. Each party shall
have responsibility in this regard for its employees as well as any outside advisors used for the
purposes of this arbitration. BCI obtained under these procedures may be used only for the purpose
of providing information and argumentation in this arbitration and for no other purpose.
6. The party submitting BCI shall mark the cover and/or first page of the document containing
BCI, and each page of the document, to indicate the presence of such information. The specific
information in question shall be placed between double brackets, as follows: [[xx,xxx.xx]]. The first
page or cover of the document shall st ate "Contains business confidential information on pages
xxxxxx", and each page of the document shall contain the notice "Contains Business Confidential
Information" at the top of the page.
7. Where a party submits a document containing BCI to the Arbitrator, the other party referring
to that BCI in its documents, including written submissions and oral statements, shall clearly identify
all such information in those documents. All such documents shall be marked as described in
paragraph 5. In the case of an or al statement containing BCI, the party making such a statement
shall inform the Arbitrator before making it that the statement will contain BCI, and the Arbitrator
will ensure that only persons authorized to have access to BCI pursuant to these procedures are in
the room to hear that statement.
8. The Arbitrator will not disclose BCI, in its decision or in any other way, to persons not authorized
under these procedures to have access to BCI. The Arbitrator may, however, make statements of

conclusion drawn from such information. Before the Arbitrator circulates its final decision to the
Members, the Arbitrator will give each party an opportunity to review the decision to ensure that it
does not contain any information that the party has designated as BCI.

ANNEX B
ARGUMENTS OF THE PARTIES
Contents Page
Annex B-1 Integrated Executive Summary of the Arguments of the United States 12
Annex B-2 Integrated Executive Summary of the Arguments of Korea 23

ANNEX B-1
INTEGRATED EXECUTIVE SUMMARY OF THE ARGUMENTS OF THE UNITED STATES
I. INTRODUCTION
1. Contrary to the requirements of the Understanding on Rules and Procedures Governing the
Settlement of Disputes ("DSU"), the level of suspension of concessions that Korea has requested is
not equivalent to the level of nullification or impairment.
2. Ample evidence demonstrates that, if the WTO-inconsistent aspects of the U.S. antidumping
and co untervailing duty measures on large residential washers ( "LRWs") from Korea had been
brought into compliance as of the expiration of the reasonable period of time ( "RPT"), there would
be no increase in the value of U.S. imports of LRWs from Korea. This is because Samsung and LG,
the Korean producers of LRWs, lack both the interest and the capacity to resume production of LRWs
in Korea for the U.S. market. Instead, they will continue in the short run to supply LRWs from
countries other than Korea while worki ng toward their goal of producing virtually all of the LRWs
they sell in the U.S. market at new production facilities located in the United States. Samsung and
LG expect to be in a position to realize that goal by the end of this year. Accordingly, the level of
nullification or impairment resulting from the maintenance of the WTO -inconsistent aspects of the
U.S. antidumping and countervailing duty measures on LRWs from Korea after the expiration of the
RPT is zero.
3. Furthermore, Korea's Methodology Paper contains errors sufficient by themselves to establish
that the level of suspension of concessions Korea has requested far exceeds the level of nullification
or impairment, contrary to the DSU. For instance, Korea proposes an incorrect counterfactual, uses
an economic model that is wholly inappropriate in this situation, and makes numerous errors when
compiling the data inputs it uses to estimate the level of nullification or impairment. As a result,
Korea overestimates the level of nullification or impairment attributable to the U.S. measures about
which the Dispute Settlement Body ("DSB") adopted recommendations in this dispute.
4. Korea argues that the level of nullification or impairment is $711 million per year as a result
of the maintenance of the WTO-inconsistent aspects of the U.S. antidumping and countervailing duty
measures on LRWs from Korea beyond the expiration of the RPT on December 26, 2017. Korea
further contends that the Arbitrator should determine that the level of suspension of concession s
based on this already excessive level of nullification or impairment should be increased each year
by 5.8 percent.
5. Korea bases its request on the assertion that the counterfactual used must be the termination
of the antidumping and countervailing duty measures on LRWs from Korea following the expiration
of the RPT. In fact, the proper counterfactuals to be applied for the purpose of this proceeding are
reduction – not elimination – of the antidumping duty rate , and, separately, reduction of the
weighted-average countervailing duty rate from 0.58 percent to zero percent.
6. Additionally, while in theory a partial equilibrium model can be employed to determine the
level of nullification or impairment (although not in this proceeding, given that such a model assumes
that suppliers will increase their production and, as demonstrated by the evidence before the
Arbitrator, this is an incorrect assumption here), Korea uses the wrong type of partial equilibrium
model. Korea's economic model assumes that there are only two countries in the world, Korea and
the United States, and further assumes that LRWs are perfectly substitutable. Each of these
assumptions is incorrect and contradicted by evidence, further demonstrating that Korea 's request
is contrary to the DSU.
7. In a situation where suppliers would increase their production, the appropriate partial
equilibrium model would be one that correctly assumes that the products are imperfect substitutes,
such as an Armington-based model, which also would take into account U.S. imports of LRWs from
countries other than Korea and factor in the correct substitution elasticity for LRWs. Using such a
model, the estimated level of nullification or impairment resulting from the maintenance of the WTO-
inconsistent aspects of the U.S. antidumping duty measure on LRWs from Korea after the expiration
of the RPT would be in the range of $18 million to $25 million per year, and the level of nullification
or impairment resulting from the maintenance of the WTO-inconsistent aspects of the countervailing

duty measure on LRWs from Korea after the expiration of the RPT would be no more than $2.32
million per year. This once again demonstrates that Korea 's request of $711 million per year is far
in excess of the equivalent level of nullification or impairment, and thus contrary to the DSU.
8. Korea does not propose a particular level of suspension of concessions resulting from the
application by the U.S. Department of Commerce ("Commerce") of a differential pricing methodology
and the use of zeroing in antidumping proceedings involving products other than LRWs that are
initiated after the expiration of the RPT. Instead, Korea requests authorization to apply the same
conceptually flawed eco nomic framework and derived formula that it proposes for LRWs, so that
Korea can determine for itself the level of suspension related to products other than LRWs . Korea's
proposed level of suspension is contrary to the DSU. The formula that Korea proposes is purely
speculative and not based on sound economic analysis. The selection of an appropriate economic
model or formula is based on a number of critical factors, such as the appropriate estimation
technique to apply (simulation or econometrics), substitu tability of products, and other variables
that could affect demand and supply conditions. Korea addresses none of these issues. Furthermore,
Korea's formula suffers from conceptual flaws and data input problems that are just as problematic
whether the formula is applied to LRWs or products other than LRWs.
II. APPROPRIATE DETERMINATION OF THE LEVEL OF NULLIFICATION OR IMPAIRMENT
FOR THE ANTIDUMPING AND COUNTERVAILING DUTY MEASURES ON LARGE
RESIDENTIAL WASHERS FROM KOREA
A. Article 22 of the DSU Requires th at the Proposed Level of Suspension Be
Equivalent to the Level of Nullification or Impairment
9. Pursuant to Article 22.4 of the DSU, the DSB will not authorize the suspension of concessions
and related obligations unless "the level" of suspension is "equivalent" to the level of nullification or
impairment. Article 22.7 of the DSU further provides that where a matter is referred to arbitration,
the arbitrator "shall determine whether the level of . . . suspension is equivalent to the level of
nullification or impairment." The starting point in the analysis of a suspension request is to determine
the extent to which any WTO -inconsistent measure maintained following the expiration of the RPT
nullifies or impairs benefit s accruing to the complaining party under the relevant covered
agreement(s).
10. Thus, an analysis of the level of nullification or impairment must focus on the "benefit"
accruing to the complaining Member under a covered agreement that is allegedly nullified or
impaired as a result of the breach found by the DSB. Arbitrators in past proceedings have uniformly
based their determinations on hard evidence and have refused to "accept claims that are 'too
remote', 'too speculative', or 'not meaningfully quantified.'" As the arbitrators in EC – Hormones
(US) (Article 22.6 – EC) and EC – Hormones (Canada) (Article 22.6 – EC) found, "we need to guard
against claims of lost opportunities where the causal link with the inconsistent [measure] is less than
apparent, i.e., where exports are allegedly foregone not because of the [inconsistent measure] but
due to other circumstances."
11. Analysis using a counterfactual is appropriate to determine the level of nullification or
impairment caused by the WTO -inconsistent U.S. measures. That is, the appropriate analysis
requires consistent consideration of the present trading relationship between Korea and the United
States (as represented by the 2017 baseline), as well as what that relationship would be if the U.S.
measures had been brought into compliance with the DSB recommendations following the expiration
of the RPT (the counterfactual). The trade differential will be the level of nullification or impairment
attributable to the U.S. measures.

B. The Appropriate Counterf actual in this Proceeding Is Modification, Not
Termination, of the WTO -Inconsistent U.S. Antidumping and Countervailing
Duty Measures on LRWs from Korea
12. At its most basic level, the determination of the trade effects of the disputed measures requires
a comparison between the current value of LRWs exported from Korea to the United States and the
value of exports from Korea that could be expected if the United States had complied with the DSB's
recommendations following the expiration of the RPT.
13. Termination of the antidumping and countervailing duty measures on LRWs from Korea is not
the only option available for compliance with the DSB's recommendations, and a counterfactual that
assumes termination of the measures is not plausible or reasonable. The DSB did not recommend
termination of the measures. Importantly, Daewoo, a Korean producer of LRWs, was assigned a
margin of dumping and a countervailing duty rate based on the applicati on of facts available in the
original antidumping and countervailing duty investigations of LRWs from Korea. The margin of
dumping and countervailing duty rate assigned to Daewoo are not the subject of any DSB
recommendations. For that reason, the U.S. antidumping and countervailing duty measures on LRWs
from Korea would not, in any event, simply be terminated to bring them into compliance with the
DSB's recommendations in this dispute.
14. Additionally, evidence placed before the original Panel in this disput e demonstrates that the
margin of dumping determined for LG in the original antidumping investigation would have been
greater than de minimis , if it had been determined using the average -to-average comparison
methodology (without zeroing). That margin of dumping, if applied to LG following a redetermination
of the results of the original investigation, would be in compliance with the DSB's recommendations
and U.S. WTO obligations. Accordingly, rather than total elimination of the antidumping duty
determined for LG in the original investigation, a more appropriate counterfactual in this proceeding
is reduction of that antidumping duty rate.
15. It is appropriate in this proceeding to express separately the level of nullification or impairment
resulting from the maintenance of the WTO -inconsistent aspects of the U.S. antidumping and
countervailing duty measures on LRWs from Korea after the expiration of the RPT. The antidumping
measure and the countervailing duty measure, while challenged by Korea in the same dispute, are
not related. For the purposes of the analysis of a counterfactual in this submission, the United States
uses a very conservative counterfactual wherein the weighted -average countervailing duty rate is
reduced from 0.58 percent to z ero percent following the expiration of the RPT on December 26,
2017. This is consistent with the counterfactual approach described by Korea in relation to the WTO-
inconsistent aspects of the U.S. countervailing duty measure on LRWs from Korea.
C. Modifying or Terminating the WTO -Inconsistent U.S. Antidumping and
Countervailing Duty Measures on LRWs from Korea following the Expiration of
the RPT Would Not Result in any Increase in the Value of Exports of LRWs from
Korea to the United States; The Level of Nullification or Impairment is Zero
1. The DSU Permits the Arbitrator To Find that a Measure Causes No
Nullification or Impairment
16. Article 3.8 of the DSU plainly provides for the possibility that the Member concerned may
rebut the presumption of the existence of nullification or impairment by putting forth evidence that
a breach of WTO obligations does not have an adverse impact on the complaining Member.
Additionally, nothing in Article 3.8 of the DSU, which is one of the "General Provisions" of the DSU,
limits the opportunity of the Member concerned to make such a rebuttal only during the original
panel phase of a dispute settlement proceeding. The more logical time for a Member concerned to
make such a rebuttal would be in the context of an arbitration under Article 22.6 of the DSU, wherein
the question of the level of nullification or impairment – and indeed, the question of the existence
of any nullification or impairment at all following the expiration of the RPT – is placed squarely before
the decision maker that is tasked by the DSU with evaluating that question and the question of the
level of suspension – i.e., the DSU Article 22.6 arbitrator. If no trade is foregone due to a WTO -
inconsistent measure's continuing existence beyond the expiration of the RPT, i.e., if the estimate
of the trade foregone is zero, then the correct conclusion is that the level of nullification or
impairment is zero.

17. Furthermore, the factual circumstances related to a WTO -inconsistent measure's impact on
the complaining Member might change over time, including after a panel report is circulated and
before a suspension request is made under Article 22.2 of the DSU. In an arbitration under Article
22.6 of the DSU, it is incumbent upon the arbitrator to establish the level of null ification or
impairment following the end of the RPT, so as to ensure that the level of suspension authorized by
the DSB does not exceed the level of nullification or impairment.
18. Accordingly, it is necessary for the Arbitrator to determine in this proceed ing the trade or
economic effects on Korea of the maintenance of the WTO -inconsistent aspects of the U.S.
antidumping and countervailing duty measures on LRWs from Korea after the expiration of the RPT
on December 26, 2017. As Korea suggests in its Methodo logy Paper, the relevant question in this
proceeding is "what the value of Korea's exports of LRWs to the United States would have been had
the United States complied with all the DSB recommendations and rulings at the end of the RPT,
which was 26 December 2017."
2. Ample Evidence Supports Finding that there Is No Nullification or
Impairment in this Situation
19. Ample evidence demonstrates that, if the WTO-inconsistent aspects of the U.S. antidumping
and countervailing duty measures on LRWs from Korea had been brought into compliance as of the
expiration of the RPT, there would be no increase in the value of U.S. imports of LRWs from Korea.
This is because Samsung and LG, the Korean prod ucers of LRWs, lack both the interest and the
capacity to resume production of LRWs in Korea for the U.S. market. Instead, they will continue in
the short run to supply LRWs from countries other than Korea while working toward their goal of
producing virtually all of the LRWs they sell in the U.S. market at new production facilities located
in the United States. Samsung and LG expect to be in a position to realize that goal by the end of
this year.
20. Extensive evidence, provided by Samsung and LG, establishe s definitively that the value of
exports of LRWs from Korea to the United States would not increase by the amount of $711 million
per year (and increasing at a rate of 5.8 percent per year), as Korea claims, if the WTO-inconsistent
aspects of the U.S. anti dumping and countervailing duty measures were brought into compliance
following the expiration of the RPT. Rather, it is clear from this evidence that there would not be any
increase at all in the level of exports of LRWs from Korea to the United States, b ecause Samsung
and LG lack both the interest and the ability to resume production of LRWs in Korea for the U.S.
market.
21. Accordingly, the level of nullification or impairment resulting from the maintenance of the
WTO-inconsistent aspects of the U.S. antidumping and countervailing duty measures on LRWs from
Korea beyond the expiration of the RPT is zero.
D. The Errors in Korea's Economic Analysis Further Establish that the Level of
Suspension Korea Requests Is Not Equivalent to the Level of Nullification or
Impairment
22. An examination of the economic model Korea proposes to use to determine the level of
nullification or impairment provides further proof that Korea 's requested level of suspension is not
equivalent to the level of nullification or impairment.
23. To use a more appropriate economic model, one would need to take the imports of the relevant
LRWs from Korea that are subject to the U.S. antidumping and countervailing duty measures for
which the DSB has made recommendations, and compare those imports on a prospective basis to
the imports that would occur had the WTO -inconsistent aspects of those antidumping and
countervailing duty measures been brought into compliance with U.S. WTO obligations following the
expiration of the RPT. To make that comparison, o ne would look at the actual value of imports of
LRWs into the United States from Korea during the most recent period, full year 2017 (the actual
situation), and then estimate the value of imports of LRWs that would exist during the same period
if the WTO-inconsistent aspects of the U.S. antidumping and countervailing duty measures had been
brought into conformity and all other factors were held constant (the counterfactual).

24. Thus, in this proceeding, the correct "counterfactual" is the estimated value of relevant U.S.
imports of LRWs from Korea that would exist if the antidumping and countervailing duty measures
had been brought into compliance with U.S. WTO obligations, holding all other factors constant, and
the "level of nulli fication or impairment " to Korea is the difference between the value of Korea 's
exports to the United States as reflected in the trade data, and the estimated export value under
the counterfactual scenario.
25. Korea appears to agree with this approach generally. Korea proposes to estimate the level of
nullification or impairment using a "static partial equilibrium model. " However, Korea has used an
inappropriate type of partial equilibrium model in its Methodology Paper.
1. The Correct Partial Equilibrium Model for Determining the Level of
Nullification or Impairment Would Be an Armington -Based Partial
Equilibrium Model (an Imperfect Substitutes Model)
26. The partial equilibrium model Korea uses is not appropriate in this situat ion. Indeed, Korea's
proposed calculation of the level of nullification or impairment cannot seriously be called a partial
equilibrium model because it is not based on sound economic theory or analysis. First, Korea is using
a hypothetical value for the 2017 value of LRWs imports of Korea that is derived using Korea's 2011
import share, rather than truly modeling the effect of a tariff reduction on the actual 2017 value of
LRWs imports from Korea. Second, Korea uses as a "proxy" total import value instead of total
consumption and total domestic production. In doing so, Korea simply misapplies partial equilibrium
analysis. These flaws rest on top of Korea's incorrect assumptions that the United States and Korea
are the only two countries that produce and sell LRWs in the U.S. market, and that there is perfect
substitution between LRWs imported from Korea and U.S. LRWs and, implicitly, no substitution at
all between imports from Korea and non -subject imports. These assumptions are c ontrary to the
evidence before the Arbitrator. Korea's proposed approach is flawed and has no foundation in
economic theory or logic.
27. Under correct economic theory, the effect of the reduction or removal of the WTO-inconsistent
U.S. antidumping and counter vailing duties applied to LRWs from Korea depends on the
substitutability between (1) the domestic like product (LRWs made in the United States), (2) subject
imports (LRWs imported from Korea that are subject to the antidumping and countervailing duties),
and (3) non-subject imports (LRWs imported from countries other than Korea). To properly measure
the effect of the reduction or removal of the antidumping and countervailing duties on LRWs from
Korea, one would need to use an economic model that accounts f or the substitution effects on all
three of these varieties of the product.
28. Though Korea does not use such an economic model itself, Korea has placed before the
Arbitrator an example of a partial equilibrium model that would be appropriate to use. That example
can be found in the 2017 paper by Hallren and Riker, which Korea submitted as Exhibit KOR-15. The
Hallren and Riker paper provides a convenient framework to undertake a partial equilibrium analysis
of the trade effects of removing import tariffs where the imported and domestic goods are imperfect
substitutes and where the tariff is applied to imports from one country but not applied to imports
from other countries. Indeed, the Hallren and Riker paper provides as an "illustrative application" an
example of modeling the effects of "a reduction in the import ad -valorem tariff applied to subject
imports from 5 to 0 percent, " which corresponds to the reduction of duties for purposes of this
discussion. The partial equilibrium model in the Hallren and Riker paper is based on the Armington
approach to trade, where products are differentiated by source countries and consumers view
products from different countries as imperfect substitutes. As explained in A Practical Guide to Trade
Policy Analysis, also provided to the Arbitrator by Korea, "most simulation models use the 'Armington
assumption' whereby varieties of goods are differentiated by country of origin (Armington, 1969)."
29. The model detailed in the Hallren and Riker paper permits the estimation of the "magnitudes
of the changes in the prices of the three varieties of products, the industry's overall price index, and
the quantities of the products as a result of a reduction in the ad valorem tariff on subject imports…."
The goal of the analysis is to quantify these changes given information on the duties and the initial
values of trade and market shares in the LRWs industry.

2. Correct Data Inputs that Would Be Used in Applying an Armington-Based
Partial Equilibrium Model
30. The United States provided to the Arbitrator correct data on the value of U.S. imports of LRWs
from Korea for the period 2011-2017. Like Korea, the United States relies on data queried using the
USITC's online trade statistics and tariff data program, DataWeb. Korea, however, appears to have
queried data using 6 -digit HTS subheadings. That is an error. In querying data using 6 -digit HTS
subheadings, Korea has overstated the value of U.S. imports of LRWs by including products outside
the scope of the U.S. antidumping and counter vailing duty measures on LRWs from Korea. The
United States has queried import data for LRWs using the appropriate 10-digit HTS subheadings.
31. Korea has used data for Korea's share of U.S. imports as a proxy for market share data in its
calculation of the level of nullification or impairment, and Korea also uses 2011 data for Korea 's
import share (with no adjustment for other factors) rather than 2017 import share data. These are
serious errors that contribute to Korea grossly overstating the level of nullification or impairment. If
Korea's import share is included as part of the calculation of the level of nullification or impairment
at all, then Korea's 2017 import share should be used. Using 2011 data would be inconsistent with
the correct counterfactual approach on which the parties agree.
32. In reality, Korea effectively more than double counts the level of nullification or impairment,
because Korea starts with the share of imports of LRWs from Korea in 2011 multiplied by 2017 total
import value, i.e., an assumption of what the value would be unaffected by the U.S. measures.
Korea then applies its incorrect economic model to that figure to estimate how much that figure
would increase if the U.S. measures were removed. But again, the 2011 value of imports is already
not affected by the U.S. measures . So, in effect, Korea is modeling a tariff reduction on an import
value figure that is not subject to the tariffs.
33. The correct data inputs to be used in the calculation of the level of nullification or impairment
would be the 2017 market shares of domestic producers, subject imports, and non-subject imports.
It is possible to derive the necessary market share information using data that are publicly available.
Specifically, one can use data on U.S. imports of LRWs from Korea and from the rest of the world in
combination with data on the total value of the U.S. washing machines market compiled by the
Association of Home Appliance Manufacturers ("AHAM"), appropriately adjusted to reflect the value
of the U.S. LRWs market.
34. Following Korea's approach concerning the source of elasticities to use in the economic model,
the United States has used elasticities of supply published by the USITC. To be consistent with
Korea's representations about its intention to use "recent", "confirmed" information, the elasticities
of supply used should be 6.
35. The United States also follows Korea's approach to use the median of the range of U.S. demand
elasticity reported by the USITC. The USITC estimated the range to be -0.3 to -0.8. Accordingly, the
-0.55 would be used for the price elasticity of total demand in the United States, which is the same
value used by Korea.
36. Still following Korea 's approach concerning the source of elasticitie s to use in the economic
model, the United States has used the elasticity of substitution within the industry published by the
USITC, again in the report issued at the conclusion of the 2017 global safeguard investigation of
LRWs. Using the median of this range, the substitution elasticity in a calculation using an Armington-
based partial equilibrium model would be 4.
37. The elasticity of substitution that the United States proposes the Arbitrator use, like the
elasticities of supply and demand that Korea prop oses be used, are estimates made by the USITC
after analyzing responses from purchasers, producers, and importers to questionnaires concerning
the LRWs market, as well as arguments made by interested parties. These estimated elasticities
were published very recently and they are for the specific product at issue, LRWs. That makes them
particularly well suited for use in a model to estimate the level of nullification or impairment in this
dispute.
38. The United States uses Korea 's calculation of the weighted -average antidumping and
countervailing duty rates to be used to model the reduction of the antidumping duties and the

termination of the countervailing duties that are subject to DSB recommendations following the
expiration of the RPT, i.e. 11.86 percent for the antidumping duty rate and 0.58 percent for the
countervailing duty rate. The appropriate counterfactuals in this proceeding are reduction of the
weighted-average antidumping duty rate from 11.86 percent to [[***]] and reduction of the
weighted-average countervailing duty rate from 0.58 percent to zero percent.
39. Korea proposes that the level of nullification or impairment resulting from the maintenance of
the WTO-inconsistent aspects of the U.S. antidumping and countervailing duty measures on LRWs
from Korea after the expiration of the RPT should be increased each year using a growth rate factor
that assumes an annual rate of growth of the U.S. washing machines market of 5.8 percent. Contrary
to Korea's argument, a proper determination of the level of nullification or impairment resulting from
the maintenance of WTO -inconsistent aspects of the U.S. antidumping and countervailing duty
measures on LRWs from Korea after the expiration of the RPT should not include any growth rate
factor at all.
40. Ample evidence in the form of public statements made by Samsung and LG demonstrates that
the Korean producers of LRWs lack both the interest and the ability to resume production of LRWs
in Korea for the U.S. market. Thus, if the U.S. measures on LRWs were brought into compliance with
U.S. WTO obligations, the value of U.S. imports of LRWs from Korea would not increase at all, and
it certainly would not increase each year in parallel with the projected growth of the market for
washing machines in the United States, as Korea proposes. Given that, as of the end of 2018, "more
than 95 percent of LG and Samsung LRWs will be supplied from the LG and Samsung U.S. LRW
production factories," it is expected that the value of U.S. imports of LRWs from Korea will decline,
not grow.
41. The numerous methodological and data problems with Korea 's estimation of the level of
nullification or impairment discussed above confirm that the level of suspension requested by Korea
is far in excess of the level of nullification or i mpairment. In summary, if Korea 's economic model
were applied at all, which it should not be, the following errors in Korea 's estimation of the level of
nullification or impairment would need to be corrected:
DO NOT USE USE INSTEAD
2011 data for Korea's imports share: 42.9% 2017 data for Korea's imports share: 15.5%
Elasticity of Supply from January 2017: 7 Elasticity of Supply from December 2017: 6
Projected 2017 Import Value Based on 6 -Digit
HTS Subheading: $1,764,569,000
Actual 2017 Import Value Base d on 10 -Digit
HTS Subheadings: $1,573 million
Growth Rate Factor Based on Average Growth
of the U.S. Washing Machines Market in Prior
Years: 5.8%
No Growth Rate Factor

42. When the above errors in Korea's calculation are corrected, the annual level of nullification or
impairment, using Korea's methodologically flawed approach, declines from $711 million per year to
$198.7 million per year. That figure would be even lower if Korea's approach were further corrected
to reflect that the WTO-inconsistent weighted-average antidumping duty rate should be reduced but
not eliminated.
3. The Level of Nullification or Impairment that Would Result from the
Application of an Appropriate Armington-Based Partial Equilibrium Model
43. Simultaneously solving the Armington system of equations using the given data inputs for
each of the three estimates of the total value of the U.S. LRWs market, i.e., using 60 percent of the
total market value reported by AHAM, using 70 percent of the total market value reported by AHAM,
and using 80 percent of the total market value reported by AHAM, yields the following calculations
of the level of nullification or impairment, but with respect to the antidumping measure and the
countervailing duty measure.
44. The level of nullification or impairment resulting from the maintenance of the WTO-
inconsistent aspects of the U.S. antidumping measure on LRWs from Korea after the expiration of

the RPT would range between $18 million and $25 million annually, depending on assumptions made
about the size of the LRWs market.
45. The level of nullification or impairment resulting from the maintenance of the WTO-
inconsistent aspects of the U.S. countervailing duty measure on LRWs from Korea after the
expiration of the RPT would be between $2.28 million and $2.39 million annually, depending on
assumptions made about the size of the LRWs market.
46. The United States considers that the most reasonable estimate of the size of the U.S. LRWs
market, which would ensure that the level of nullification is not overstated by the economic model,
is 70 percent of the total value of the U.S. washing machines market as reported by AHAM.
Accordingly, for purposes of this discussion, the level of nullification or impairment resu lting from
the maintenance of the WTO-inconsistent aspects of the U.S. antidumping duty measure on LRWs
from Korea after the expiration of the RPT would be no more than $18 million to $25 million per
year, and the level of nullification or impairment resul ting from the maintenance of the WTO -
inconsistent aspects of the countervailing duty measure on LRWs from Korea after the expiration of
the RPT would be no more than $2.32 million per year.
III. KOREA'S REQUEST TO SUSPEND CONCESSIONS FOR PRODUCTS OTHER THAN LRWS
ON THE BASIS OF A FORMULA IS CONCEPTUALLY FLAWED AND CONTRARY TO THE
DSU
47. Korea also requests to suspend concessions with respect to products other than LRWs. Rather
than proposing a particular level of suspension, however, Korea requests authorizati on to apply a
formula. Korea explains that the same "formula used for calculating the level of nullification and
impairment [for] LRW imports will also be used to estimate the level of nullification and impairment"
resulting from Commerce's application of a differential pricing methodology and its use of zeroing in
antidumping proceedings involving Korean imports other than LRWs that are initiated after the
expiration of the RPT.
48. Korea's proposed suspension is contrary to the DSU. The formula that Korea proposes is purely
speculative and not based on sound economic analysis. The selection of an appropriate economic
model or formula is based on a number of critical factors, such as the appropriate estimation
technique to apply (simulation or econometrics), substitutability of products, and other variables
that could affect market demand and supply conditions. The use of a single formula for a number of
different products is not feasible without first examining the different industries that produce those
products, and the different markets in which those products are traded, to determine whether it
would be appropriate to use the same economic model or formula to analyze the different products.
Korea has not even attempted to establish the basis for determini ng that the same formula –
premised on the same economic assumptions, which are flawed in the case of LRWs – could be used
to analyze all of the non-LRW products at issue in this dispute. Furthermore, the formula that Korea
proposes to use suffers from the same conceptual flaws and data input problems, whether it is
applied to LRWs or imports other than LRWs.
A. The Formula Korea Proposes To Use To Determine the Level of Nullification or
Impairment for Products Other than LRWs Suffers from the Same Concept ual
Flaws and Data Input Problems as the Formula Korea Proposes To Use for the
Determination for LRWs
49. The "static partial equilibrium model " that Korea proposes to use is inappropriate for use in
determining the level of nullification or impairment result ing from the maintenance of U.S.
antidumping and countervailing duty measures on LRWs from Korea after the expiration of the RPT.
Korea's economic model rests on a number of incorrect assumptions, which renders it also unsuitable
for determining the level of nullification or impairment for Korean imports other than LRWs.
50. First, the particular type of partial equilibrium model that Korea proposes to use "assume[s]
that the world is composed of … two countries only" and that "export supply and import demand are
entirely determined by the domestic conditions in the respondent's and the complainant's markets."
That is an incorrect assumption to make for all the products identified in Appendix B of Korea 's
Methodology Paper. Korea and the United States are not th e only two countries that produce and

sell in the U.S. market the products other than LRWs that are identified in Appendix B of Korea 's
Methodology Paper.
51. Second, the economic model on which Korea's formula is based assumes that there is perfect
substitution between the Korean products and U.S. products and, implicitly, no substitution at all
between imports from Korea and non-subject imports. However, all of the USITC reports identified
in Appendix B of Korea 's Methodology Paper recommend substit ution elasticities for each of the
products examined. Korea's assumption of perfect substitution is incorrect.
52. For these reasons, just as Korea 's static partial equilibrium model is inappropriate for use in
determining the level of nullification or impairment with respect to LRWs, it is equally inappropriate
for use in determining the level of nullification or impairment with respect to all the Korean imports
other than LRWs that are identified in Appendix B of Korea's Methodology Paper.
53. Nor would it be appropriate to determine the level of nullification or impairment using the
Armington-based partial equilibrium model that is described above. The data input issues that the
United States has discussed would be compounded in the application of such an economic model to
so many different products. For example, just as there has been difficulty identifying appropriate
market share data for the specific LRWs market at issue in this dispute (as opposed to the broader
washing machines market), likely there would be similar challenges collecting up -to-date market
share data specific to the precise products other than LRWs that are identified in Appendix B o f
Korea's Methodology Paper. Nothing in Article 22 of the DSU would permit Korea to make
determinations for itself about the proper market share data and other data inputs to be used.
54. Similarly, when calculating the level of nullification or impairment with respect to LRWs, Korea
erred in compiling U.S. import data by using incorrect HTS subheadings in its data query, which
resulted in Korea misstating of the value of U.S. imports of LRWs. Korea proposes to gather import
data for products other than LRWs t he same way. This suggests the strong likelihood that Korea
would make the same errors with respect to those other products. It would be contrary to the DSU
for Korea to suspend concessions with respect to the United States on the basis of an inappropriate
formula applied using erroneous data inputs that results in an overstatement of the level of
nullification or impairment.
55. Finally, the formula Korea has proposed includes a growth rate factor. Korea, however, gives
no evidence to support an assumption of growth, let alone any indication of how that growth rate
factor would be applied to products other than LRWs or from where data would come to determine
the growth rate factor. This is another conceptual and data input failing of Korea's proposed formula
approach.
56. Given these methodological and data problems, Korea's request for authorization to suspend
concessions by applying a formula to determine the level of nullification or impairment for products
other than LRWs should be denied.
B. Korea's Request for Authorization to Suspend Concessions on the Basis of a
Formula in this Dispute Is Contrary to the DSU
57. Despite Korea's assurance that data are "publicly available and can be readily employed by
both Korea and the United States," the issues discussed in the preceding section demonstrate that
the formula approach Korea proposes is inappropriate, impractical, and would result in a level of
suspension of concessions and related obligations that is not equivalent to the level of nulli fication
or impairment. That renders Korea's request for suspension contrary to the DSU, and requires its
rejection.
58. As a general matter, neither the DSU nor subsequent arbitrator decisions preclude the
possibility that the Arbitrator might base the level of suspension of concessions on a formula. That
being said, however, a Member 's right to request and be authorized to suspend obligations on the
basis of a formula is not without any limitation. The arbitrator in US – Offset Act (Brazil) (Article
22.6 – US) reasoned that, as long as the approved level of suspension is equivalent to the level of
nullification or impairment, there is no "reason why these levels may not be adjusted from time to
time, provided such adjustments are justified and unpredictability is not increased as a result." Under
Article 22.4 of the DSU, the level of suspension of concessions "is" to be equivalent to the level of

nullification or impairment. The use of the present tense "is" indicates that the level of suspension
of concessions may need to be determined in a manner that allows it to continue to be equivalent
to the level of nullification or impairment, but, at the same time, the level of suspension of
concessions must never be permitted to exceed the level of nullification or impairment.
59. As explained above, the formula Korea proposes to apply grossly overstates the level of
nullification or impairment resulting from the maintenance of the WTO-inconsistent aspects of the
U.S. antidumping and countervailing duty measures on LRWs from Korea after the expiration of the
RPT. The same would be true if that formula were applied for products other than LRWs. Because
they would greatly exceed the actual level of nullification or impairment, the adjustments to Korea's
level of suspension of concessions that Korea proposes to make using its formula would not be
"equivalent" and thus would not be "justified."
60. Additionally, given the data input problems discussed in the preceding section – including the
difficulty of identifying correct market share information for the particular products subject to
antidumping measures; the errors that Korea has already made querying U.S. import data; and the
entirely unknowable volume and value of imports in future years – the adjustments to Korea's level
of suspension of concessions made using Korea's proposed formula would increase "unpredictability"
substantially. Indeed, the level of suspension under Korea's proposed approach simply could not be
predicted at all.
61. For these reasons, Korea's request for authorization to suspend concessions on the basis of a
formula in this dispute is contrary to the DSU.
IV. CONCLUSION
62. For the reasons set forth in the U.S. written submission, oral statements during the
substantive meeting of the Arbitrator with the parties, and the U.S. written responses to questions
from the Arbitrator, the United States respectfully requests that the Arbitrator find that the level of
suspension of concessions requested by Korea is in excess of the appropriate level of nullification or
impairment, and further find that the level of nullification or impairment is zero. Furthermore, the
United States respe ctfully requests that the Arbitrator distinguish in its decision the level of any
nullification or impairment resulting from the maintenance of the WTO -inconsistent aspects of the
U.S. antidumping duty measure on LRWs from Korea and the level of any nullification or impairment
resulting from the maintenance of the WTO -inconsistent aspects of the U.S. countervailing duty
measure on LRWs from Korea.

ANNEX B-2
INTEGRATED EXECUTIVE SUMMARY OF THE ARGUMENTS OF KOREA
I. INTRODUCTION
1. Korea requested authorization to suspend concessions and other related obligations under the
General Agreement on Tariffs and Trade 1994 ("GATT 1994 ") at the meeting of the Dispute
Settlement Body ( "DSB") on 22 January 2018, pursuant to Article 22.2 of the Understanding on
Rules and Procedures Governing the Settlement of Disputes ("DSU").1 Korea's request, in the
amount of USD 711 million, was based on the United States ' failure to implement the DSB 's
recommendations and rulings as contained in the Panel Report and the Appellate Body Report in the
dispute US – Washing Machines (DS464).
2. The United States was granted the longest reasonable period of time ( "RPT") to bring its
measures into compliance contem plated under the DSU absent any particular circumstances. 2
However, the United States has not even started implementing the DSB 's recommendations and
rulings with respect to the anti-dumping measures of the U.S. Department of Commerce ("USDOC"),
and only i nitiated implementation proceedings relating to the countervailing duty measures
immediately before the expiration of the RPT. Accordingly, as prescribed by Article 22 of the DSU,
Korea is entitled to suspend certain concessions and related obligations at the level equivalent to
the level of the nullification or impairment.
II. PROCEDURAL BACKGROUND
3. On 29 August 2013, Korea requested consultations with the United States concerning the
USDOC's anti-dumping and countervailing duty investigations on large residential washers ("LRWs")
from Korea, and the comparison methodologies used by the USDOC in its anti -dumping
investigations and administrative reviews. 3 In its reports, the Panel and the Appellate Body made
several findings in favor of Korea.4 Pursuant to the DSB's recommendations and rulings, adopted on
26 September 2016, the U.S. measures that must be brought into conformity can generally be
grouped as follows:
a. The differential pricing methodology ("DPM"), which was found to be "as such" inconsistent
with the second sentence of Article 2.4.2 of the Anti-Dumping Agreement;
b. The USDOC's use of zeroing when applying the W -T comparison methodology, which was
found to be "as such" inconsistent with Article 2.4.2 and Article 2.4 of the Anti -Dumping
Agreement, and inconsistent "as such" with Article 9.3 of the Anti-Dumping Agreement and
Article VI:2 of the GATT 1994 when used in administrative reviews;
c. The USDOC's dumping determination in the Washers anti-dumping investigation, because
the USDOC's calculation of dumping margins was inconsistent with Articles 2.4.2 and 2.4 of
the Anti-Dumping Agreement; and
d. The USDOC 's countervailing duty determination in the Washers countervailing duty
investigation and remand determination because the USDOC 's determinat ions were
inconsistent with Articles 2.1(c) and 19.4 of the SCM Agreement and Article VI:3 of the GATT
1994.
4. After the parties to the dispute failed to agree on a period of time for the United States to
implement the DSB 's recommendations and rulings, the Arbitrator determined the RPT to be 15
months pursuant to Article 21.3(c) of the DSU,5 and accordingly, the United States was required to

1 WT/DS464/18.
2 DSU, Article 21.3(c).
3 WT/DS464/1.
4 Panel Report, US – Washing Machines, para. 8.1.b.i and Appellate Body Report, US – Washing
Machines, paras. 6.14 and 6.16.
5 Decision of the Arbitrator, US – Washing Machines (Article 21.3(c)), para. 4.1.

bring its measures into compliance by 26 December 2017. Despite having over a year to implement
the DSB's recommendations and rulings, the United States did not amend even a single measure.
Instead, on 15 December 2017, just eleven days before the expiration of the RPT, the United States
Trade Representative ("USTR") sent a letter to the U.S. Secretary of Commerce requesting that the
USDOC issue a revised determination in light of the DSB 's recommendations and rulings.6 Notably,
while the letter references the Panel and Appellate Body reports, it limits its instructions to the
countervailing duty determination only, and makes no mention of the Panel and Appellate Body 's
recommendations on the anti -dumping investigation or "as such " findings. In accordance with
USTR's instructions, the USDOC subsequently initiated proceedings under Section 129 of the
Uruguay Round Agreements Act ("URAA") only with respect to the countervailing duty proceedings.7
As of the end of the RPT, the USDOC had done nothing more than issue questionnaires to Samsung
and the Government of Korea. 8 The United States has yet to take a single st ep to implement the
DSB's recommendations with respect to its anti-dumping determination.
5. In short, the United States has not modified or terminated the anti-dumping and countervailing
duty orders that were improperly applied, and has made no modifications to the DPM method or W-
T price comparison method. As such, the United States failed to comply with the recommendations
and rulings of the DSB within the RPT. After the failure to reach an agreement on compensation,
Korea had no choice but to request auth orization to suspend concessions and related obligations. 9
On 19 January 2018, pursuant to Article 22.6 of the DSU, the United States objected to the level of
suspension of concessions and related obligations.10
III. ARBITRATOR'S ROLE AND BURDEN OF PROOF
6. An arbitrator's mandate in Article 22.6 arbitration is to determine whether the level of suspension
of concessions or other obligation sought by the complaining party is equivalent to the level of
nullification or impairment.11 The arbitrator's determination of the level of nullification or impairment
should not use an approach that is too remote, too speculative, or not meaningfully qualified. 12 In
order for an arbitrator to find that the level of nullification or impairment at a certain point in time
is "zero," the arbitrator should find that there is "no ‘credible, factual, or verifiable information '
available to quantify the level of nullification or impairment. "13 Thus, if there is credible, factual, or
verifiable information that permits the arbitrator to quantify a level of nullification and impairment,
the arbitrator should not find that the level of nullification or impairment is zero.
7. When counterfactual scenarios have been used to examine the level of suspension of concessions
or other obligations, pas t arbitrators have determined whether the underlying counterfactual is
"plausible" or "reasonable."14 Arbitrators have recognized that it is not an arbitrator 's mandate to
speculate on what "the most likely," or the exact way, of implementing DSB ruling would have been
"as counterfactuals always involve an inherent degree of uncertainty because they represent a
hypothetical scenario."15 Past arbitrators have examined the calculation of the level of nullification
or impairment on the basis of the "plausible" or "reasonable" counterfactual, depending on the
circumstances of the case.16 If the counterfactual proposed by the requesting party is "plausible" or
"reasonable," the arbitrator is obliged to accept this counterfactual.17 Therefore, in determining the
proper level of suspension of concessions in this case, the Arbitrator should analyze whether the

6 Letter from USTR to USDOC (Exhibit KOR-01).
7 Notice of Initiation (Exhibit KOR-02). On 4 June 2018, the USDOC issued its final determination in the
Section 129 countervailing duty proceedings, which did not result in a change in the outcome of the USDOC's
original countervailing duty determination.
8 Questionnaire to Samsung (Exhibit KOR-03); Questionnaire to GOK (Exhibit KOR-04).
9 WT/DS464/18.
10 WT/DS464/19.
11 DSU Article 22.7.
12 Decision of the Arbitrator, US – 1916 Act (EC) (Article 22.6 – US), para. 5.57.
13 Panel Report, EC – Bananas III (Article 21.5 – US), para. 5.250. (emphasis added)
14 Decisions of the Arbitrator, US – Gambling (Article 22.6 – US), paras. 3.26-3.27; EC – Bananas III
(US) (Article 22.6 – EC), para. 7.7; US – Tuna II (Mexico) (Article 22.6 – US), para. 4.5; US – Section 110(5)
Copyright Act (Article 25), paras. 4.7-4.14.
15 Decision of the Arbitrator, US – Gambling (Article 22.6 – US), paras. 3.26 and 3.37; see also Decision
of the Arbitrator, US – Tuna II (Mexico) (Article 22.6 – US), para. 4.5.
16 Decision of the Arbitrator, US – Gambling (Article 22.6 – US), paras. 3.27 and 3.30-3.31.
17 See Korea's Responses to the Arbitrator's Advance Questions, para. 10.

counterfactual proposed by Korea is "plausible" or "reasonable," in light of the circumstances of the
dispute.
8. In an arbitration proceeding under Article 22.6, the burden of proof rests on the party challenging
the proposed level of suspension of concessions. 18 In this proceeding, the United States bears the
burden of establishing a prima facie case that Korea's proposed level of suspension of concessions
is not equivalent to the level of nullification or impairment caused by the United States ' WTO-
inconsistent measures. Past arbitrators have confirmed that the objecting party must engage in the
economic model proposed by the request ing party,19 and must also show that the counterfactual
proposed by the requesting party does not reflect the level of nullification or impairment. 20 Failure
by the United States to make a prima facie case would result in a decision in favor of Korea.
9. Moreover, even if the United States meets its prima facie obligation, it must then successfully
rebut the arguments and evidence presented by Korea. In the event there is equipoise in the
arguments and evidence, the arbitrator must find against the party b earing the burden of proof –
the United States.21
IV. KOREA'S METHODOLOGY
A. Termination of the WTO-inconsistent Measures is a Plausible and Reasonable
Counterfactual Scenario under the Circumstances
10. Article 22.4 of the DSU requires the level of suspension of concessions authorized by the DSB to
be equivalent to the level of nullification or impairment. To calculate this amount, arbitrators have
relied on counterfactual scenarios.22 A counterfactual scenario is used to illustrate the level of exports
that would have been achieved had the responding party complied with the recommendations and
rulings of the DSB at the end of the RPT. Arbitrators have found that an appropriate counterfactual
is one where the WTO-inconsistent measure is removed as of the expiration date of the RPT.23
11. In order to calculate the level of nullification and impairment caused by the United States' failure
to comply with the DSB 's recommendations and rulings by the end of the RPT, Korea applied a
counterfactual scenario in which the WTO -inconsistent anti-dumping and countervailing duties are
terminated as a result of the U.S. compliance with the recommendations and rulings of the DSB.
Under this counterfactual scenario, Korea calculated the additional value of Korea's exports of large
residential washers ( "LRWs") to the United States that could have been achieved had the United
States terminated the anti-dumping and countervailing duty orders on LRWs by 26 December 2017.
12. Not only is Korea 's counterfactual both plausible and reasonable, but it is also the only
counterfactual before the Arbitrator that does not require the Arbitrator to make speculations beyond
its mandate. An appropriate counterfactual scenario is one in which the WTO-inconsistent measure
has been brought fully into compliance with the DSB's recommendations and rulings.24 There is no
doubt that termination of the anti-dumping and countervailing duty measures at issue would bring
the WTO -inconsistent measure into compliance. Moreover, Korea 's counterfactual scenario is
consistent with Article 3.7 of the DSU, which states that the preferred outcome under the dispute
settlement mechanism is to secure withdrawal of the WTO -inconsistent measure, as well as prior
Article 22.6 proceedings, where arbitrators have found that an appro priate counterfactual is one

18 See Decision of the Arbitrator, EC – Hormones (US) (Article 22.6 – EC), para. 9.
19 Decision of the Arbitrator, US – COOL (Article 22.6 – US), para. 4.14.
20 Decision of the Arbitrator, US – Gambling (Article 22.6 – US), para. 3.23.
21 Decision of the Arbitrator, EC – Hormones (US) (Article 22.6 – EC), para. 9.
22 See e.g., Decisions of the Arbitrator, EC – Bananas III (US) (Article 22.6 – EC), para. 7.1; EC –
Hormones (Canada) (Article 22.6 – EC), para. 38; Canada – Aircraft Credits and Guarantees (Article 22.6 –
Canada), para. 3.21; US – COOL (Article 22.6 – US), para. 6.32; US – Tuna II (Mexico) (Article 22.6 – US),
para. 4.10.
23 See e.g., Decisions of the Arbitrator, EC – Hormones (Canada) (Article 22.6 – EC), para. 37; EC –
24 U.S. Written Submission, paras. 24-25.

where the WTO-inconsistent measure is removed as of the expiration date of the RPT.25 Accordingly,
Korea's counterfactual scenario is both plausible and reasonable.
13. The United States has failed to demonstrate that Korea 's counte rfactual is implausible or
unreasonable. The United States relies on the fact that Daewoo 's anti-dumping and countervailing
duty margins were not subject to the underlying Panel and Appellate Body proceedings to argue that
Daewoo's margin would have enabled the USDOC to maintain the anti-dumping and countervailing
duty orders independent of Samsung and LG. 26 However, as Daewoo was not subject to the Panel
and Appellate Body proceedings, it cannot be a basis for determining the correct counterfactual to
be used in this case.
14. Moreover, the United States conflates "implementation" with the "counterfactual," at most
arguing that there could be other ways that the United States implements the DSB 's
recommendations or rulings. The counterfactual need not represent how a Member would have
actually implemented its obligations, and need not even reflect the "most likely" scenario.27 As the
United States has recognized in a prior case, even if there could be other options for implementing
the DSB 's recommendations and ru lings, this does not mean that the withdrawal of the WTO -
inconsistent measure is not an appropriate counterfactual for the purposes of an Article 22.6
arbitration.28 What other actions the United States could have taken to implement the DSB 's
recommendations and rulings is simply irrelevant in the context of selecting a counterfactual for the
purposes of calculating the level of nullification or impairment.
15. In addition, the counterfactual proposed by the United States is not "plausible" or "reasonable."
First, the United States is proposing a counterfactual that does not hypothesize full implementation
of a recommendation to bring a measure into conformity with the covered agreements. 29 As the
United States concedes, its alternative counterfactual only addresses the DSB's "as applied" findings,
and it does not take into account how the "as such" findings would impact the implementation of
the "as applied " findings.30 However, according to the United States ' own statements in the
proceedings under Article 21.3(c), it would not be possible to implement the "as applied" findings
without first implementing the "as such " findings, because the revised approaches and
methodologies that will be developed in implementing the "as such" findings would potent ially be
applied or adapted to the "as applied" implementation measure.31
16. Even in addressing only the "as applied" findings, the United States explains that it would take
the measures described in its counterfactual only after following the procedures it d escribed in the
Article 21.3(c) proceedings, which include requesting comments from interested parties concerning
the appropriate calculation methodology, which the USDOC would then take into account in re -
determining LG 's margin of dumping. 32 Therefore, the U.S. counterfactual, which applies a pre -
determined dumping margin for LG that was already on the record of the proceedings, cannot be
plausible or reasonable as it ignores steps within the implementation process that could lead to a
further revision of the dumping margin.
17. Furthermore, the U.S. counterfactual would require the Arbitrator to examine the WTO -
consistency of the hypothetical measure, which falls outside of the scope of this arbitration. The
requirement for a counterfactual to be WTO-consistent does not mean that the United States enjoys
a presumption of conformity in which its counterfactual will be interpreted in a manner that is
deemed to be WTO -consistent. This is particularly true given the speculative nature of the U.S.
counterfactual, under which the USDOC "might" take certain steps and "might" reach a decision to
use the W -W methodology instead of the WTO -inconsistent W-T methodology.33 That the USDOC
"might" make these determinations can equally be understood to mean that the United States could
also continue to apply the WTO -inconsistent measures if the USDOC does not change its original

25 Korea's Methodology Paper, para. 22; see also Decisions of the Arbitrator, EC – Hormones (Canada)
(Article 22.6 – EC), para. 37; EC – Hormones (US) (Article 22.6 – EC), para. 38; US – COOL (Article 22.6 –
US), para. 6.32; US – Tuna II (Mexico) (Article 22.6 – US), paras. 4.4 and 4.9.
27 Decision of the Arbitrator, US – Gambling (Article 22.6 – US), para. 3.26.
28 Decision of the Arbitrator, US – COOL (Article 22.6 – US), para. 3.11.
29 U.S. Replies to the Arbitrator's Advance Questions, para. 12.
31 Korea's Replies to the Arbitrator's Post-Hearing Questions, paras. 6-8.
32 U.S. Replies to the Arbitrator's Post-Hearing Questions, para. 24.
33 U.S. Replies to the Arbitrator's Post-Hearing Questions, para. 25.

determinations. In fact, even if the Arbitrator were to accept that the USDOC would take these steps
and use the W-W comparison method under the first sentence of Article 2.4.2 rather than the W -T
comparison method under the second sentence, there is no way to ensure that the United States
would apply the W -W methodology in a manner that is WTO -consistent. The Arbitrator cannot
presume that the use of the W -W method would automatically result in WTO -consistent results.
Thus, there is no way for the Arbitrator to ensure that the U.S. counterfactual is WTO-consistent.
18. In short, Korea's counterfactual premised on the termination of import duties is plausible and
reasonable, and in fact, the only indisputably WTO -consistent counterfactual scenario available for
the Arbitrator's consideration. On the other hand, the U.S. counterfactual is irreconcilable with the
United States ' own description of its domestic procedures. It is also speculative, requiring the
Arbitrator to either presume WTO -consistency of the measure, which has no legal basis, or to
examine the WTO-consistency of the hypothetical measure, which falls outside of the scope of this
arbitration. Thus, Korea respectfully requests that the Arbitrator find that termination of the WTO -
inconsistent measures is the appropriate counterfactual scenario in this proceeding.
B. Korea's Economic Analysis Demonstrates that Korea's Proposed Level of
Suspension is Equivalent to the Level of Nullification and Impairment
1. The Bown & Ruta Partial Equilibrium Model is the Most Appropriate Model
to Calculate the Level of Nullification and Impairment
19. Korea calculated the level of suspension of concessions or other obligations by using a partial
equilibrium model based on research conducted by Chad Bown and Michele Ruta to estimate the
trade effects of the United States' failure to comply with the DSB's recommendations and rulings as
of the expiration of the RPT ("Bown & Ruta model"). The Bown & Ruta model is a widely recognized
economic model that explains trade effects under simple yet effective economic frameworks. Indeed,
the United States itself proposed essentially the same methodology in its methodology paper in the
Article 22.6 arbitration of India – Agricultural Products (Article 22.6 – India).34
20. The Bown & Ruta model directly calculates the total amount of the trade effect resulting from
the WTO-inconsistent trade measure. In other words, instead of calculating the level of imports that
would have been achieved if the WTO -inconsistent measure had been withdrawn and subtracting
the actual amount of imports at the end of the RPT, Korea 's model achieves the same effect by
directly calculating the amount of additional imports that would have been achieved if the WTO -
inconsistent measure was removed. The reason that Korea used this method is because it directly
calculates the impact of the trade measure in a manner that excludes external factors that can
distort the impact of the WTO -inconsistent measure. For example, exporters often take action to
overcome unfair anti -dumping and countervailing duty measures at great cost, resulting in an
increase in the actual import value that belies the trade impact of the WTO -inconsistent measure.
The Bown & Ruta isolates the trade impact of the trade measure itself so that these external factors
are not taken into consideration.
21. The formula used by Korea to calculate the level of nullification or impairment for LRWs in the
amount of USD 711 million is as follows:
Trade loss due to the United States' measures: USD 711 million =
(price drop of 11.86% by terminating the application of the second sentence of Article 2.4.2
+ price drop of 0.58% by terminating the application of countervailing duties) x
(The share of imports from Korea of 42.9% as of 2011) x
(Price elasticity of demand 0.55 + price elasticity of supply 7) x
(The entire U.S. import value of USD 1,764,569,000 projected as of 2017)

34 India – Agricultural Products, U.S. Methodology Paper, para. 6 (Exhibit KOR-29) ("Lost U.S. CLQ
exports due to India's import ban are calculated using a static partial equilibrium model, which is described in
detail in sections IV through VI. This analytical framework is grounded in academic literature and has been
used to quantify the trade effects of similar measures. Past Article 22.6 arbitrators have also relied on a partial
equilibrium model.").

22. To calculate the level of nullification and impairment for LRWs for subsequent years, Korea
applied a growth rate that is based on the projected average growth rate for the U.S. LRW market,
under the reasonable assumption that Korea 's imports would increase proportionately with the
growth of the U.S. LRW market.35
23. In this formula, the change in price is calculated based on the price drop of washing machines
from Korea induced by the removal of th e WTO-inconsistent measures. As the measures at issue
are the imposition of tariffs, the level of price drop resulting from the removal of such tariffs is
equivalent to the level of tariffs imposed on LRWs from Korea. This is represented by the weighted
average anti-dumping duty rate of 11.86 percent, and the weighted average countervailing duty
rate of 0.58 percent. Korea further made adjustment to the price drop by multiplying the import
share of washing machines from Korea, in order to correctly reflec t the real impact on the price of
the entire U.S. market caused by the price drop of washing machines from Korea.
24. Through the partial equilibrium model, Korea is able to show that imposition of the anti-dumping
and countervailing duties resulted in artificially higher prices in the U.S. market, and accordingly, a
decreased volume of exports of Korean LRWs in the United States. Removing the WTO-inconsistent
anti-dumping and countervailing duties lowers the price of washing machines in the U.S. market,
which increases the demand for Korean washing machines, causing a reduction in domestic supply.
This change in the demand and supply in the U.S. market creates excess demand which, multiplied
by prices in the U.S. market, is equivalent to the value of additional exports from Korea. This value,
calculated as USD 711 million at the expiry of the RPT, represents the trade loss caused by the
United States' non-compliance.
25. The United States claims that the model is not appropriate because it assumes perfect
substitutability.36 However, perfect substitutability is not an absolute requirement for using the Bown
& Ruta model, as demonstrated by the United States ' own proposal of essentially the same model
to calculate the level of nullification or impairment in the India – Agricultural Products case.37 In
particular, Korea does not consider the substitutability of LRWs to be lower than the substitutability
of the chicken products that were at issue in the India – Agricultural Products case. The fierce price
competition among LRWs in the U.S. market approximates "perfect substitution,"38 while the level
of substitutability between food products that are perceived to be contaminated, and those that are
not, would likely be much lower than the level of substitutability between brands of washing
machines.39
26. In addition, the Bown & Ruta model does not assume that the existence of products only from
two countries. Rather, it isolates the trade effects to these two countries, making it unnecessary to
separately take into account third countries.
27. Finally, the use of import share in Korea 's model as opposed to the total market share in the
India – Agricultural Products model is not a meaningful difference that renders the Bown & Ruta
model inaccurate.
28. Furthermore, the alternative eco nomic model based on Armington specifications proposed by
the United States is not an appropriate model to calculate the level of nullification or impairment.
The Armington model is designed specifically to understate trade effects of WTO -inconsistent
measures, as it assumes that consumers are locked into one of three product varieties, which cannot
be substituted with any other product variety. Because of the presumed lack of substitutability
among LRWs under the Armington model, the model is largely immun e to changes in import
volumes, as these imported products cannot substitute domestic products or non-subject imports.40
29. Moreover, the Armington model is highly sensitive to model parameters, and in particular,
Armington elasticities. In this case, a change in just one digit of the elasticity results in double-digit

35 Korea's Methodology Paper, para. 46; see also Korea's Written Submission, paras. 82-83.
37 Korea's Opening Statement, paras. 57-62.
38 Korea's Replies to the Arbitrator's Advance Questions, para. 82; Korea's Opening Statement,
para. 60.

increases in the level of nullification or impairment. 41 Because of this sensitivity to elasticities, it is
not possible to obtain an accurate calculation using the Armington model based on the elasticity
information on the record – the elasticity information provided in the U.S. International Trade
Commission ("USITC") report. In order to accurately calculate the level of nullification or impairment
using the Armington model, it would be necessary to collect elasticity information that aims to
calculate trade volumes for a very narrowly defined product scope, such as LRWs. To avoid
distortions caused by the Armington model's sensitivity to elasticities, the elasticity information must
be precisely calculated by accurately estimating the specific level of substitution among products
from different origins, and based on market prices and quantity changes for a specific year.42
30. Considering the various theoretical and practical lim itations of the Armington model, it is more
appropriate to employ the Bown & Ruta model in this case, as it provides accurate results using
reasonably available data.
2. Korea's Use of Data Inputs is Reasonable and Accurate
31. Korea's formula for calculating the level of nullification and impairment for LRW products is based
on accurate and reasonably available data. In particular, the use of 2011 import share data using
the Bown & Ruta model is appropriate and necessary to obtain an accurate calculation of the level
of nullification and impairment, based on what Korea's import value would have been had the WTO-
inconsistent measure been removed at the end of the RPT.
32. Korea's approach is consistent with the arbitrator's findings in EC – Hormones (US) (Article 22.6
– EC). The arbitrator in that dispute considered the "pre-ban figures" to be a representative starting-
point for the calculations of total exports under the counterfactual, i.e., assuming the ban would
have been lifted at the end of the RPT.43 Following this reasoning, Korea uses the 2011 import share
data in order to calculate what the value of Korea 's imports would have been had the WTO -
inconsistent measure been brought into conformity at the end of the RPT, under the reasonab le
assumption that Korea would regain the import share that it had prior to the imposition of the WTO-
inconsistent measures.
33. The incorporation of 2011 import data does not mean that the level of nullification or impairment
calculated using Korea 's formula is punitive or seeks to reverse the trade effects of the WTO -
inconsistent measures.44 As an Article 22.6 arbitration is predicated on the responding party not
having brought its measure into compliance by the end of the RPT, it is impossible to know what the
actual effect of removing those measures would be. A reasonable consideration in estimating how
the market would react if the measures were removed is the state of the market before the measures
were imposed. Examination of pre -measure data thus provide s a reasonable proxy of the market
situation in the absence of the WTO-inconsistent measure.
34. In fact, Korea applied the 2011 import share data to 2017 total import value data in order to
estimate what the import value would have been for Korean LRW imports based on 2017 data. The
2011 import share was only incorporated to estimate the proportion of imports that would have been
attributable to Korea without the WTO-inconsistent measure.
35. In addition, the United States challenges the incorporation of a growt h rate in Korea's formula
for nullification and impairment in 2018 and beyond. 45 It is reasonable to take into account the
anticipated growth rate of the relevant industry when calculating the level of nullification and
impairment. Indeed, the growth rate factor has been used in past 22.6 arbitrations. The concept of
nullification and impairment recognizes that benefits would otherwise continue to accrue absent a
WTO-inconsistent measure. If the benefits increase or decrease in the future, it is reasonable t hat
the level of nullification and impairment would also change depending on the level of benefits that
Korea would have otherwise accrued at that time. Therefore, a level of suspension that incorporates
market growth rate would be more accurate and equiva lent to the level of nullification and
impairment. It is reasonable to assume that imports of Korean washing machines will increase at
least in proportion to the size of the market. Furthermore, Korea's projected growth rate is more

42 Korea's Replies to the Arbitrator's Post-Hearing Questions, para. 74.
43 Decision of the Arbitrator, EC – Hormones (US) (Article 22.6 – EC), para. 67.
44 U.S. Replies to the Arbitrator's Post-Hearing Questions, para. 38.
45 U.S. Written Submission, paras. 116-121.

conservative than the actual expected growth rate for both the washing machines industry and for
LG and Samsung products.
36. The United States has pointed to no precedent or authority to support its claim that that growth
rates should not be taken into account. In fact, the United States itself has incorporated the growth
rate factor in its formula in a previous dispute.46 Rather, the only basis of the United States' challenge
to the incorporation of a growth rate is its argument that the business decision of exporters LG and
Samsung to move production facilities out of Korea means that imports from Korea would not
increase in proportion to growth in the U.S. LRW market. However, as discussed further below, the
business decisions of individual companies are not relevant to determining the level of nullification
and impairment suffered by Korea.
C. The United States' Claim that Failure to Bring its Measure into Compliance
Would Not Result in Any Nullification or Impairment is Baseless
37. The United States ' argument that the appropriate level of nullification or impairment in this
arbitration is zero, because LG and Samsung have no interest or ability to produce LRWs in Korea
for the U.S. market, is groundless.47 The U.S. assertion has no basis in the WTO agreements or past
arbitrations under Article 22.6 of the DSU. It is undisputed that the United States violated its
obligations under the Anti-Dumping Agreement, the SCM Agreement, and the GATT 1994, and that
such violations "have nullified or impaired benefits accruing to Korea under those agreements. "48
Where a Member's measure has found to nullify and impair benefits accruing to another Member,
"the level must be something great er than ‘zero, ' and it is a contradiction in terms to suggest
otherwise."49
38. Furthermore, the premise that the United States ' failure to bring its measure into compliance
would result in zero nullification and impairment is simply untrue. Korean producers c ontinue to
export LRWs from Korea into the United States, and the United States has not established that
Korea's export volumes would not recover with the removal of the WTO -inconsistent measures.
Rather, the United States relies on statements made by Sams ung and LG officials in the context of
a separate investigation conducted under separate domestic laws to argue that the companies do
not intend to resume LRW production in Korea for the U.S. market, and that the business decision
is not the result of the WTO-inconsistent anti-dumping and countervailing duty measures.50
39. The United States' claims are baseless for several reasons. First, the DSU makes clear that it is
the Member that is subject to the nullification or impairment of benefits – not individual companies
within the territory of the Member. 51 Thus, the business decisions of individual companies ha ve no
bearing on determining the level of nullification and impairment ca used to Korea. In fact, as a
practical matter, it would be impossible to estimate trade effects if the business considerations of
individual companies had to be taken into account in calculating the level of nullification or
impairment. Trade actions will inevitably cause reactions in companies, and each company may take
a different course of action that effect s their individual trade volumes in different ways. This does
not mean that these companies ' abilities or decisions should dictate the determination of the level
of nullification or impairment. Consideration of such factors would be speculative and unverifiable,
and outside the mandate of the Article 22.6 arbitrator.
40. Second, contrary to the United States ' claim that the exporters ' decisions to move production
facilities out of Korea were unrelated to the WTO-inconsistent anti-dumping and countervailing duty
measures, evidence on the record shows that the USITC itself recognized the temporal correlation
between the imposition of anti -dumping and countervailing duties and the movement of LG 's and
Samsung's production facilities.52 It is clear that the United States considered LG 's and Samsung's
decision to move production facilities out of Korea, and ultimately into the United States, a direct
result of the anti-dumping and countervailing duties imposed by the United States. To the extent
that there was a decline in Korean exports of LRWs into the United States, this decline is attributable

46 India – Agricultural Products, U.S. Methodology Paper, para. 7 (Exhibit KOR-29).
47 U.S. Written Submission, paras. 19 and 51.
48 Panel Report, US – Washing Machines, para. 8.4.
49 Decision of the Arbitrator, US – 1916 Act (EC) (Article 22.6 – US), para. 5.50.
50 U.S. Replies to the Arbitrator's Advance Questions, para. 41.
52 USITC Pub. 4745, fn. 349 (Exhibit KOR-25).

to the United States' imposition of anti-dumping and countervailing duty orders, and it is reasonable
to assume that this downward trend would reverse with the removal of the WTO -inconsistent
measures.
41. In addition, the United States fails to consider the business reality facing the Korean producers.
The statements referred to by the United States indicate that there were significant cost savings in
moving production to the United States to serve the U.S. market. Part of the efficiencies and cost
savings is inevitably the avoidance of anti -dumping and countervailing duties. In this respect, the
need to move production operations into the United States is in itself a form of nullification and
impairment of Korea's benefits, as the U.S. measures unfairly altered the competitive relationship
between Korean and U.S. domestic producers.
42. In sum, the United States provides no credible basis to argue that Korea 's level of nullification
and impairment is zero, and its claim should be dismissed. If the Arbitrator were to agree with the
United States, such an outcome would not only be contrary to the fundamental purpose of the WTO
dispute settlement system, but it would also set a dangerous precedent. It would incentivize other
WTO Members to impose prohibitively high anti-dumping and countervailing duties while prolonging
the WTO dispute settlement process until foreign producers have no choice but to abandon
production in their home countries, and move facilities to the imposing Member 's territories. 53
Therefore, Korea respectfully requests that the Arbitrator apply the level of nu llification and
impairment proposed by Korea.
D. Korea's Calculation of the Level of Nullification and Impairment for Non -LRW
Products as a Result of the United States' "As Such" Violation Is Appropriate
43. In the underlying proceedings, the Panel and Appella te Body ruled that both DPM and the use
of zeroing under the W-T comparison methodology are "as such" inconsistent with the Anti-Dumping
Agreement.54 These findings were not limited to LRWs but impact all other products against which
the USDOC applies the WTO-inconsistent comparison methodologies.
44. The United States' failure to bring its measures into compliance affects not only Korean imports
of LRWs, but all Korean imports that are subject to U.S. anti -dumping proceedings in which these
comparison methods continue to be used. To take a conservative approach, Korea has not included
the trade effects of the WTO -inconsistent measures on non-LRW imports as of the end of the RPT.
In other words, if the investigation or review was initiated prior to the RPT, Korea will not suspend
concessions based on the nullification and impairment to these imports even if the final
determination or results is issued after the RPT. However, Korea proposes to use the same formula
used to calculate the level of nullification and im pairment to LRW imports as of the end of the RPT
to imports of non -LRW products that are subject to new investigations or administrative reviews
initiated after the end of the RPT, for which the WTO-inconsistent methods continue to be used.
45. In this respect , Korea will use individual data for each product at issue. 55 These data will be
derived from, but not limited to, the USITC data for the elasticities of demand and supply of the
products at issue, import statistics of each HS code included in the scope of the proceeding, the
change in price represented by the anti -dumping duty rate determined on the basis of the
WTO-inconsistent DPM and the use of zeroing. 56 Korea will also ensure that it includes in its
calculation of the level of nullification and impairment margins that were calculated based on the
WTO-inconsistent methodologies, and exclude margins and import data for exporters for whom the
USDOC did not a pply DPM or zeroing when applying the W -T methodology (for example, margins
calculated based on the application of total "adverse facts available "). In calculating the level of
nullification and impairment, Korea is relying only on credible, verifiable inf ormation, and not on
speculation.57 The "as such" formula would use the objective data that is used in the "as applied"
formula for each individual product.
46. Past arbitrators found that a formula is an appropriate method to quantify the level of suspension
in such situation where the nullification or impairment has not been calculated yet at the expiration

54 Appellate Body Report, US – Washing Machines, para. 6.3-6.11.
55 See Korea's Methodology Paper, para. 50.
56 See Korea's Methodology Paper, paras. 50-51.
57 Decision of the Arbitrator, US – 1916 Act (EC) (Article 22.6 – US), paras. 5.54, 5.63, and 7.7.

of the RPT, but the implementing Member would violate an "as such" decision in the future. The
reason of including an "as such" formula in Korea's request for suspension of concession follows the
same logic of the arbitrator in US – 1916 Act which considered that, in a case where it was found to
be WTO -inconsistent "as such " and the responding party had not complied with the DSB
recommendations and rulings, the existence and maintenance of the WTO-inconsistent measure "as
such" violates the rights of the complaining party, and each application of such measure increases
the level of nullification or impairment sustained by the complaining party. 58 The situation is also
comparable to that in US – Offset Act (Byrd Amendment) where the arbitrator found that there is
no limitation in the DSU to the possibility of providing for a variable level of suspension as long as
the level of suspension is equivalent to the le vel of nullification or impairment , provided such
adjustments are justified, and unpredictability is not increased as a result.59
47. The United States recognizes that a formula can be used to calculate future level of nullification
or impairment, but argues that the use of a formula is not appropriate in this case. However, the
United States has failed to establish a basis for its claims. Korea has fully demonstrated that all
aspects of its proposed formula are reasonable. Korea has demonstrated that it is re asonable to
assume that a dumping margin that has been calculated based on a WTO-inconsistent method would
be withdrawn, resulting in a margin of zero. In particular, Members are only permitted to maintain
anti-dumping measures if these measures were impos ed in accordance with the Anti -Dumping
Agreement. As the Panel and Appellate Body have confirmed, use of the DPM and zeroing when
applying the W-T method is inconsistent with the Anti -Dumping Agreement. Therefore, the United
States does not maintain the ri ght to impose a dumping margin that has been calculated in
contravention to the Anti -Dumping agreement. Korea has also demonstrated that the formula for
non-LRW products, which is identical to the formula for LRW products, is reasonable and based on
sound economic principles. Korea has demonstrated through its explanations and through samples
that it would be able to obtain the data necessary to conduct the calculations, mostly through public
sources such as U.S. government agencies or trade associations, a nd if necessary, through private
entities.60
48. In sum, Korea 's proposed formula for calculating the level of nullification and impairment for
non-LRW products is reasonable and relies on available data. The United States has not established
that applying the non-LRW formula would result in suspension of concessions in excess of the level
of nullification or impairment. Accordingly, Korea respectfully requests that the Arbitrator authorize
suspension of concessions for future nullification and impairment in th e amount to be calculated
using the non-LRW formula proposed by Korea.
V. CONCLUSION
49. For these reasons, Korea respectfully requests that the Arbitrator determine that the level of
suspension of concessions for LRWs from Korea is USD 711 million, to be adj usted each year
consistent with the formula outlined in Korea's Methodology Paper, and that the level of suspension
of concessions for non-LRW products from Korea is to be calculated based on the formula outlined
in Korea's Methodology Paper.

Arbitrator's Post-Hearing Questions, paras. 107-114.

ANNEX C
CALCULATIONS OF THE ARBITRATOR
Contents Page
Annex C-1 Level of Nullification or Impairment for LRWs: Calculations 34
Annex C-2 Level of Nullification or Impairment for Non-LRWs: Derivation of Formula 46

ANNEX C-1
LEVEL OF NULLIFICATION OR IMPAIRMENT FOR LRWS: CALCULATIONS

Table 1: Anti-dumping duty

ITEM VALUES
Initial anti-dumping duty on Korean LRWs in 2011 0.0%
Anti-dumping duty on Korean LRWs in 2012 11.86%
Projected United States imports of LRWs from Korea in 2012 after
application of anti-dumping duty (millions)
USD [[***]]
Projected Korean market share in United States after duty [[***]]
United States market for LRWs in 2017 (millions) USD 3,718.4
Projected United States LRW imports from Korea in 2017 (millions) USD [[***]]
Counterfactual anti-dumping duty [[***]]
Counterfactual United States LRW imports from Korea (millions) USD [[***]]
Nullification or impairment (millions) USD 74.40

Table 2: Countervailing duty

ITEM VALUES
Initial countervailing duty on Korean LRWs in 2011 0.0%
Countervailing duty on Korean LRWs in 2012 0.58%
Projected United States imports of LRWs from Korea in 2012 after
application of countervailing duty (millions)
USD [[***]]
Projected Korean market share in United States after duty [[***]]
United States market for LRWs in 2017 (millions) USD 3,718.4
Projected United States LRW imports from Korea in 2017 (millions) USD [[***]]
Counterfactual countervailing duty 0.0%
Counterfactual United States LRW imports from Korea (millions) USD [[***]]
Nullification or impairment (millions) USD 10.41

Table 3: General CIF imports value by HTS number for Korea

Source: USITC Dataweb.
HTS
Number
Year Q1 Q2 Q3 Q4
8450110040 2010 455,900 1,005,798 233,194 321,100
8450110080 2010 2,411,181 3,127,637 2,352,108 856,464
8450200090 2010 142,437,357 200,352,678 191,620,967 122,882,409
8450902000 2010 3,165 7,254 12,407 6,403
8450906000 2010 17,221,417 18,859,599 10,099,736 10,200,203
8450110040 2011 5,297,409 2,658,820 508,274 3,645,284
8450110080 2011 2,742,125 3,474,175 3,178,022 4,316,686
8450200090 2011 152,543,185 130,775,593 100,973,206 164,089,821
8450902000 2011 11,483 0 5,835 9,161
8450906000 2011 15,176,653 10,232,980 6,657,471 13,044,517
8450110040 2012 944,025 1,842,228 1,223,156 769,642
8450110080 2012 4,477,326 4,579,619 3,278,981 1,338,362
8450200090 2012 83,202,038 191,090,515 143,698,714 107,883,370
8450902000 2012 134,718 47,418 37,410 7,772
8450906000 2012 6,931,041 13,772,378 15,866,941 11,968,395
8450110040 2013 0 0 0 0
8450110080 2013 2,160,471 2,756,001 3,538,996 3,899,584
8450200090 2013 80,714,166 93,928,512 49,391,822 68,432,414
8450902000 2013 130,369 231,103 110,762 207,085
8450906000 2013 12,843,113 2,474,776 1,564,143 2,580,268
8450110040 2014 0 267,412 55,634 0
8450110080 2014 3,285,580 3,058,525 4,964,255 4,181,821
8450200090 2014 54,756,381 51,941,406 26,031,374 14,575,763
8450902000 2014 288,991 185,152 284,129 103,190
8450906000 2014 2,172,278 1,922,635 1,740,304 1,719,880
8450110040 2015 33,210 0 632,369 3,999,882
8450110080 2015 4,250,557 4,828,466 3,059,896 4,159,627
8450200040 2015 2,381,816 5,470,562 3,364,544 4,305,302
8450200080 2015 13,154,573 15,357,655 10,717,448 19,848,967
8450902000 2015 260,828 322,957 235,073 407,602
8450906000 2015 2,125,548 2,380,446 2,314,134 2,261,598
8450110040 2016 8,295,821 5,943,180 1,975,084 6,665,517
8450110080 2016 5,510,528 3,565,435 3,162,474 3,966,431
8450200040 2016 6,859,967 2,417,464 7,766,322 16,438,224
8450200080 2016 19,848,219 15,905,949 19,066,124 33,735,203
8450902000 2016 172,603 307,169 81,878 240,018
8450906000 2016 1,713,055 1,271,572 1,237,362 2,118,122
8450110040 2017 5,787,934 7,518,135 4,444,110 23,594,408
8450110080 2017 3,544,395 4,924,709 4,573,523 3,803,447
8450200040 2017 24,158,923 28,883,403 19,928,506 68,482,685
8450200080 2017 16,047,488 31,419,135 22,651,803 46,452,573
8450902000 2017 140,111 275,920 192,018 449,749
8450906000 2017 665,364 878,310 848,603 1,394,077
U.S. General Imports
Quarterly data for 2010-2017

Table 4: LRW share of CIF value of general imports

HTS Code FY11 FY12 FY13 FY14 FY15 FY16 FY17

Total *** *** *** *** *** *** ***

Note: The share for any fiscal year is computed as the value of LG and Samsung imports on which
WTO-inconsistent duties were collected by United States' Authorities (information provided by the
United States in Exhibit USA-21 (BCI)) divided by the CIF value of imports extracted from USITC
Dataweb (see Table 3) for the four quarters corresponding to the fiscal year.

Table 5: Estimated LRW imports in 2011

HTS Subheading Q1-Q3 of 2011 Q4 of 2011 Full year 2011

Total *** *** ***

Notes:

(1) For the first three quarters of 2011, the share corresponding to fiscal year 2011 in Table 4 is
used. For the fourth quarter of 2011, the share corresponding to fiscal year 2012 is used.

(2) Shares exceeding 100% are capped at 100%.

TABLE 6: General Algebraic Modeling System (GAMS) code for calculating nullification or
impairment from anti-dumping duty

*==================================
*Instructions
*==================================

*To run the code, press F9 or select "File/Run". This will calculate the level of
*nullification or impairment in two steps. First, the counterfactual Korean import
*share in 2012 is calculated. This share is combined with the market size in 2017 to
*calculate the initial value of imports in 2017. The level of nullification or impairment
*is then calculated as the change in the value of imports (in world prices, net of duties) in 2017

*This value can be written in the output file as NoI and is also written to excel (NoI_AD.xls).

*==================================
*A. Set and parameter declaration
*==================================

SETS

I countries /KOR,USA/

PARAMETERS

*1.Parameters
sigma substitution elasticity
epsilon demand elasticity
eta supply elasticity

*2. Market data
demand2012 total demand 2012
demand2017 total demand 2017
demand total demand
supply(I) supply country
kappa demand shifter I

*3. Duty changes
tarinitial(I) initial ad valorem tariff
tarfinal(I) final ad valorem tariff

*4. Calibration
omega(I) import demand shifter
lambda(I) supply shifter
tar(I) ad valorem tariff

*5. Outcome variables
PE_PRE(I)
VEXP_PRE(I)
VEXP_POST(I)
VEXP_CHANGE(I)
ms_pre(I)
ms_post(I)
NoI;

*==================================
*B. Model parameters
*==================================

sigma=4;

epsilon=-0.55;
eta=6;

*==================================
*C. Variables and model
*==================================

VARIABLES

OBJ objective function

POSITIVE VARIABLES

EXP domestic expenditures
P domestic price index
PE(I) export price
M(I) import demand
X(I) export supply;

EQUATIONS

OBJ_EQ objective equation
EXP_EQ domestic expenditures equation
P_EQ domestic price index equation
M_EQ(I) import demand equation
X_EQ(I) export supply equation
EQ_EQ(I) equilibrium equation;

OBJ_EQ.. OBJ-2=E=0;
EXP_EQ.. EXP-kappa*(P**(1+epsilon))=E=0;
P_EQ.. P**(1-sigma)-SUM(I,(omega(I)**sigma)*((1+tar(I))*PE(I))**(1-sigma))=E=0;
M_EQ(I).. M(I)-(omega(I)**(sigma))*((1+tar(I))*PE(I))**(-sigma)*EXP*(P**(sigma-1))=E=0;
X_EQ(I).. X(I)-lambda(I)*(PE(I)**eta)=E=0;
EQ_EQ(I).. X(I)-M(I)=E=0;

MODEL Armington Armington model /all/;

*==================================
*D. Calculating 2012 market share
*==================================

*1. Initial values
*Base data
demand2012=2653.6;
supply("KOR")=[[***]];

*Duty levels
tarinitial("KOR")=0;
tarinitial("USA")=0;
tarfinal("KOR")=0.1186;
tarfinal("USA")=0;

*2. Calibration
*Parameters and shifters
tar(I)=tarinitial(I);
demand=demand2012;
supply("USA")=demand-supply("KOR")*(1+tar("KOR"));

kappa=demand;
omega(I)=(1+tar(I))*(supply(I)/demand)**(1/sigma);
lambda(I)=supply(I);

*Initial values
EXP.L=demand;
P.L=1;
PE.L(I)=1;
X.L(I)=supply(I);
M.L(I)=X.L(I)*(1+tar(I));

*3. Solve model

*Solve baseline
SOLVE Armington using NLP minimizing OBJ;
PE_PRE(I)=PE.L(I);
VEXP_PRE(I)=PE_PRE(I)*M.L(I);
DISPLAY P.L,PE.L,M.L,X.L;
*(Shows that initial prices are normalized at 1)

*Solve 2012 counterfactual with anti-dumping duty
tar(I)=tarfinal(I);
SOLVE Armington using NLP minimizing OBJ;

*4. Calculate counterfactual value of exports in 2012

VEXP_POST(I)=PE.L(I)*M.L(I);
VEXP_CHANGE(I)=VEXP_POST(I)-VEXP_PRE(I);
ms_pre(I)=VEXP_PRE(I)/demand;
ms_post(I)=VEXP_POST(I)/EXP.L;
DISPLAY VEXP_PRE,VEXP_POST,VEXP_CHANGE,demand,EXP.L,ms_pre,ms_post;

*VEXP_POST gives the counterfactual value of trade in 2012 used to construct the
*import share for 2017.
*VEXP_CHANGE gives the change in the value of exports

*==================================
*E. Calculating 2017 NoI
*==================================

*The 2017 NoI is based on 2012 import shares and 2017 market size

*1. Initial values

* Base data
demand2017=3718.4;
supply("KOR")=(VEXP_POST("KOR")/EXP.L)*demand2017;

* Duty levels
tarinitial("KOR")=0.1186;
tarfinal("KOR")=[[***]];

*2. Calibration

* Parameters and shifters
tar(I)=tarinitial(I);
demand=demand2017;
supply("USA")=demand-supply("KOR")*(1+tar("KOR"));
kappa=demand;
omega(I)=(1+tar(I))*(supply(I)/demand)**(1/sigma);
lambda(I)=supply(I);

*Initial values
EXP.L=demand;
P.L=1;
PE.L(I)=1;
X.L(I)=supply(I);
M.L(I)=X.L(I)*(1+tar(I));

*3. Solve model

*Solve baseline
SOLVE Armington using NLP minimizing OBJ;
PE_PRE(I)=PE.L(I);
VEXP_PRE(I)=PE_PRE(I)*M.L(I);
DISPLAY P.L,PE.L,M.L,X.L;
*(Shows that initial prices are normalized at 1)

*Solve 2017 counterfactual reducing the anti-dumping duty
tar(I)=tarfinal(I);
SOLVE Armington using NLP minimizing OBJ;

*4. Calculate change value of exports

VEXP_POST(I)=PE.L(I)*M.L(I);
VEXP_CHANGE(I)=VEXP_POST(I)-VEXP_PRE(I);
NoI=VEXP_CHANGE("KOR")
DISPLAY VEXP_PRE,VEXP_POST,VEXP_CHANGE,NoI;

*VEXP_CHANGE for Korea gives the change in the value of trade for Korea in 2017,
*thus providing the NoI

*Write to excel
execute_unload 'NoI.gdx',NoI
execute 'gdxxrw.exe NoI.gdx O=NoI_AD.xls par=NoI'

TABLE 7: General Algebraic Modeling System (GAMS) code for calculating nullification or
impairment from countervailing duty

*==================================
*Instructions
*==================================

*To run the code, press F9 or select "File/Run". This will calculate the level of
*nullification or impairment in two steps. First, the counterfactual Korean import
*share in 2012 is calculated. This share is combined with the market size in 2017 to
*calculate the initial value of imports in 2017. The level of nullification or impairment
*is then calculated as the change in the value of imports (in world prices, net of duties) in 2017

*This value can be written in the output file as NoI and is also written to excel (NoI_CVD.xls).

*==================================
*A. Set and parameter declaration
*==================================

SETS

I countries /KOR,USA/

PARAMETERS

*1.Parameters
sigma substitution elasticity
epsilon demand elasticity
eta supply elasticity

*2. Market data
demand2012 total demand 2012
demand2017 total demand 2017
demand total demand
supply(I) supply country
kappa demand shifter I

*3. Duty changes
tarinitial(I) initial ad valorem tariff
tarfinal(I) final ad valorem tariff

*4. Calibration
omega(I) import demand shifter
lambda(I) supply shifter
tar(I) ad valorem tariff

*5. Outcome variables
PE_PRE(I)
VEXP_PRE(I)
VEXP_POST(I)
VEXP_CHANGE(I)
ms_pre(I)
ms_post(I)
NoI;

*==================================
*B. Model parameters
*==================================

sigma=4;

epsilon=-0.55;
eta=6;

*==================================
*C. Variables and model
*==================================

VARIABLES

OBJ objective function

POSITIVE VARIABLES

EXP domestic expenditures
P domestic price index
PE(I) export price
M(I) import demand
X(I) export supply;

EQUATIONS

OBJ_EQ objective equation
EXP_EQ domestic expenditures equation
P_EQ domestic price index equation
M_EQ(I) import demand equation
X_EQ(I) export supply equation
EQ_EQ(I) equilibrium equation;

OBJ_EQ.. OBJ-2=E=0;
EXP_EQ.. EXP-kappa*(P**(1+epsilon))=E=0;
P_EQ.. P**(1-sigma)-SUM(I,(omega(I)**sigma)*((1+tar(I))*PE(I))**(1-sigma))=E=0;
M_EQ(I).. M(I)-(omega(I)**(sigma))*((1+tar(I))*PE(I))**(-sigma)*EXP*(P**(sigma-1))=E=0;
X_EQ(I).. X(I)-lambda(I)*(PE(I)**eta)=E=0;
EQ_EQ(I).. X(I)-M(I)=E=0;

MODEL Armington Armington model /all/;

*==================================
*D. Calculating 2012 market share
*==================================

*1. Initial values
*Base data
demand2012=2653.6;
supply("KOR")=[[***]];

*Duty levels
tarinitial("KOR")=0;
tarinitial("USA")=0;
tarfinal("KOR")=0.0058;
tarfinal("USA")=0;

*2. Calibration
*Parameters and shifters
tar(I)=tarinitial(I);
demand=demand2012;
supply("USA")=demand-supply("KOR")*(1+tar("KOR"));

kappa=demand;
omega(I)=(1+tar(I))*(supply(I)/demand)**(1/sigma);
lambda(I)=supply(I);

*Initial values
EXP.L=demand;
P.L=1;
PE.L(I)=1;
X.L(I)=supply(I);
M.L(I)=X.L(I)*(1+tar(I));

*3. Solve model

*Solve baseline
SOLVE Armington using NLP minimizing OBJ;
PE_PRE(I)=PE.L(I);
VEXP_PRE(I)=PE_PRE(I)*M.L(I);
DISPLAY P.L,PE.L,M.L,X.L;
*(Shows that initial prices are normalized at 1)

*Solve 2012 counterfactual with countervailing duty
tar(I)=tarfinal(I);
SOLVE Armington using NLP minimizing OBJ;

*4. Calculate counterfactual value of exports in 2012

VEXP_POST(I)=PE.L(I)*M.L(I);
VEXP_CHANGE(I)=VEXP_POST(I)-VEXP_PRE(I);
ms_pre(I)=VEXP_PRE(I)/demand;
ms_post(I)=VEXP_POST(I)/EXP.L;
DISPLAY VEXP_PRE,VEXP_POST,VEXP_CHANGE,demand,EXP.L,ms_pre,ms_post;

*VEXP_POST gives the counterfactual value of trade in 2012 used to construct the
*import share for 2017.
*VEXP_CHANGE gives the change in the value of exports

*==================================
*E. Calculating 2017 NoI
*==================================

*The 2017 NoI is based on 2012 import shares and 2017 market size

*1. Initial values

* Base data
demand2017=3718.4;
supply("KOR")=(VEXP_POST("KOR")/EXP.L)*demand2017;

* Duty levels
tarinitial("KOR")=0.0058;
tarfinal("KOR")=0;

*2. Calibration

* Parameters and shifters
tar(I)=tarinitial(I);
demand=demand2017;
supply("USA")=demand-supply("KOR")*(1+tar("KOR"));
kappa=demand;
omega(I)=(1+tar(I))*(supply(I)/demand)**(1/sigma);

lambda(I)=supply(I);

*Initial values
EXP.L=demand;
P.L=1;
PE.L(I)=1;
X.L(I)=supply(I);
M.L(I)=X.L(I)*(1+tar(I));

*3. Solve model

*Solve baseline
SOLVE Armington using NLP minimizing OBJ;
PE_PRE(I)=PE.L(I);
VEXP_PRE(I)=PE_PRE(I)*M.L(I);
DISPLAY P.L,PE.L,M.L,X.L;
*(Shows that initial prices are normalized at 1)

*Solve 2017 counterfactual reducing the countervailing duty
tar(I)=tarfinal(I);
SOLVE Armington using NLP minimizing OBJ;

*4. Calculate change value of exports

VEXP_POST(I)=PE.L(I)*M.L(I);
VEXP_CHANGE(I)=VEXP_POST(I)-VEXP_PRE(I);
NoI=VEXP_CHANGE("KOR")
DISPLAY VEXP_PRE,VEXP_POST,VEXP_CHANGE,NoI;

*VEXP_CHANGE for Korea gives the change in the value of trade for Korea in 2017,
*thus providing the NoI

*Write to excel
execute_unload 'NoI.gdx',NoI
execute 'gdxxrw.exe NoI.gdx O=NoI_CVD.xls par=NoI'

ANNEX C-2
LEVEL OF NULLIFICATION OR IMPAIRMENT FOR NON-LRWS: DERIVATION OF FORMULA

1.1. The following set of equilibrium equations defines the Armington model:
 E =κP1+ε (1)
 P =






 
i=1
J
 ω−σ
i ( )pi ( )1+t
1−σ 1
1−σ
 (2)
 mi =ω−σ
i ( )pi ( )1+t
−σ
Pσ−1E (3)
 xi =λipη
i (4)
 mi =xi (5)
1.2. Equation (1) represents total demand in the importing country with E expenditures and P the
price index. P is defined in equation (2) as a weighted sum over the prices from the different sources.
Equation (3) is the import demand equation with mi the quantity imported, pi the export price and
t the ad-valorem duty rate. Equation ( 4) is the export supply equation and equation ( 5) is market
equilibrium with export supply equal to imp ort demand. ε is the demand elasticity in the domestic
market, η is the export supply elasticity, and σ the substitution elasticity between goods from
different sources.
1.3. The system of equations (1) -(5) can be combined and written in relative changes in ord er to
obtain an expression for the change in the value of imports (exclusive of the duties paid) as a
function of a change in the duty rate. Technically, this requires log differentiating the system of
equations and combining and reorganizing the resulting equations to solve for the change in the
value of imports. Following this procedure, t he level of nullification or impairment for a non -LRW
product i can be written as the product of a coefficient c (which depends on the elasticities and the
market share of the product), the value of imports,
ivimp , the change in the duty rate and a scaling
factor given by the reciprocal of one plus the duty rate:
1.4.
**1
i
i
vimpNI c t t  (6)
1.5. The coefficient c is a function of the import share sh and the different elasticities1:

    11
ic sh
         
   
     (7)

1 Taking the limit of σ going to infinity, gives the expression for the coefficient c in the perfect
substitutes model. Separate derivation of the coefficient c starting from the partial equilibrium perfect
substitutes model would lead to the same result. As such the formula for the perfect substitutes model is a
nested case of the more general formula for the Armington model.

1.6. The next paragraphs provide a detailed derivation of equations (6) and (7).
1.7. Combining equations (1)-(5) leads to the following two equilibrium equations:

  1i i i p t P p
     
 
 (8)
  
1
11
1
1
J
ii
i
P p t




 (9)
1.8. Hat (log) differentiating equations (8)-(9) gives:
  ˆˆˆ
1
i
tp t P t      
= 𝜂𝑝̂𝑖 (10)
1
ˆ ˆˆ
1
J
kk
k
tP sh p t t
  
 (11)
1.9. Rearranging equation (10) for countries whose duty rate t is not changing gives:
ˆˆkpP 

 
 (12)
1.10. Combining equations (11)-(12) then gives:
ˆˆ ˆˆ
1
ik
ki
tP p t sh P t

 
    
 (13)
1.11. Rearranging equation (13) and using that
1ki
ki
sh sh

 leads to:

 
ˆ ˆˆ
111
i
i
i
sh tP p t tsh

   
 (14)

1.12. Substituting equation (14) into equation (10) generates an expression for pi:
 
 
 
 
11
ˆˆ
1
11
i
i
i
i
i
sh
sh tpt sh t
sh
 

 


       
 (15)
1.13. To determine the change in the value of imports of the country whose duty rate will change,
equation (8) is hat differentiated:
    ˆˆˆ ˆ ˆ 1 1
i i i
dvimp t p m p t Pvimp t           
 (16)
1.14. Substituting equations (14)-(15) into equation (16) and rearranging gives (after a couple of
steps of tedious but straightforward algebra) for the percentage change in the value of imports:
    11
ˆ
1
i
i
i
dvimp tsh tvimp t
         
   
       
 (17)
Equation (6) then follows from the definition of a variable with a hat, i.e. 𝑥̂ =
Δ𝑥
𝑥

Table 1: Values of coefficients of formula, by harmonized system chapter2
HS Line Coefficient HS Line Coefficient
1 -1.348 50 -4.360
2 -3.074 51 -5.216
3 -3.282 52 -3.157
4 -3.790 53 -2.202
5 -1.783 54 -4.675
6 -2.026 55 -2.665
7 -3.777 56 -2.620
8 -2.888 57 -2.757
9 -2.401 58 -3.008
10 -2.632 59 -2.338
11 -4.341 60 -3.202
12 -3.078 61 -3.761
13 -1.626 62 -4.168
14 -1.337 63 -3.342
15 -2.362 64 -2.377
16 -3.895 65 -1.881
17 -1.790 66 -1.877
18 -2.470 67 -1.969
19 -3.630 68 -2.620
20 -3.840 69 -3.424
21 -2.394 70 -2.600
22 -4.709 71 -2.378
23 -5.666 72 -3.869
24 -2.597 73 -2.336
25 -1.987 74 -1.817
26 -4.558 75 -1.832
27 -4.994 76 -7.150
28 -3.137 78 -5.300
29 -2.091 79 -1.886
30 -3.147 80 -2.967
31 -3.124 81 -3.266
32 -2.075 82 -1.606
33 -3.928 83 -1.691
34 -1.925 84 -3.568
35 -1.965 85 -2.038
36 -2.015 86 -1.672
37 -2.037 87 -2.294
38 -2.601 88 -4.265
39 -3.034 89 -4.151
40 -5.667 90 -3.147
41 -2.011 91 -3.266
42 -5.290 92 -1.737
43 -3.435 93 -3.274
44 -2.625 94 -1.638
45 -2.916 95 -2.291
46 -1.642 96 -3.187
47 -2.711 97 -1.631
48 -2.786 98 -3.526
49 -2.041 99 -3.524

2 As Chapter 77 is currently empty and reserved for possible future use in the Harmonized System, no
coefficient can be calculated for that Chapter. See World Customs Organization, HS Nomenclature 2017
edition, <http://www.wcoomd.org/en/topics/nomenclature/instrument-and-tools/hs-nomenclature-2017-
edition/hs-nomenclature-2017-edition.aspx>, accessed 17 October 2018.

Table 2: Summary statistics of the coefficients and the inputs to calculate the coefficients

Mean Standard
deviation
Minimum Maximum
Elasticities

Substitution elasticity 4.73 4.26 1.40 35.83
Supply elasticity 7.70 0.00 7.70 7.70
Demand elasticity -0.80 0.19 -0.88 -0.00
Market shares

Share of Korean imports in total imports 2.45% 3.87% 0.00% 20.46%
Share total imports in total demand 23.00% 15.39% 1.67% 74.98%
Share Korean imports in total demand 0.51% 0.84% 0.00% 5.92%
Coefficient -2.96 1.12 -7.15 -1.34

Table 3: Read me file

The following two steps should be taken to calculate the coefficients for the 98 HS -chapters, which
serve as input into the formula to calculate the level of nullification or impairment for non-LRWs:

1. Calculate the price elasticity of demand and the aggregate import share from the GTAP10
database.

Description: This program uses the GTAP10P2 database aggregated to 2 regions (USA a nd ROW)
and calling the tab -file "GTAPv7_ep_imsh.tab ". This is the tab -file of the standard GTAP model
version 7, supplemented with additional lines of code, calculating the share of imports in total sales
and writing it together with the price elasticity to the summary file, "gtapsum_num.har". T he cmf
calls GTAP data from version GTAP102, containing 2014 data on import shares. The own price
elasticity of demand is calculated based on the constant difference elasticity (CDE) utility function
calibrated to estimated income and price elasticities for 10 more aggregated categories in Reimer
and Hertel.

a. Open "Wingem", a utility part of Gempack. In Wingem select "Simulation/Run TG
program". This opens a new window.
• Select for TG Executable "GTAPv7_ep_imsh.exe" , which is in the subfolder
"code"
• Select for Command file "calculate_ey_ep_impsh_2_57.cmf", which is in the
subfolder "cmf".
• Then choose "Run", which will run a numeraire shock and write the results to
"gtapsum_num.har".

b. Write the results to csv-files using the Command Prompt. To do this:
• Double-click on the file "gtapsum_num.har"
• The file opens in Viewhar
• Click on the tab Programs and then on DOS Prompt, this opens the Command
Prompt in the folder "Results"
• Write
har2csv gtapsum_num.har ep.csv ep
and then
har2csv gtapsum_num.har imsh.csv imsh
in the command.

c. Put the newly created files "ep.csv" and "imsh.csv" in the folder "raw_data".

2. Calculate the coefficients for the 98 HS chapters.

Description: This program (do -file) calls the data in folder "raw_data". Except for ep.csv and
imsh.csv discussed in the previous step, this folder contains data collected directly from websites:
a. "elast_LIMLhybrid_hs10.dta". The substitution elasticities calculated by Soderbery
b. conc_hs_comb_gtap.csv. A concordance table from GTAP to hs6_combined, downloaded from
wits.org
c. imports_korea.xlsx and imports_world.xlsx containing value of imports in 2016 and 2017 at
various hs-levels downloaded from US Census
d. imports_hts2_dataweb.xlsx. Imports at hs2 leve l from usitc Dataweb for 2016 and 2017. Serve
as comparison data
The do-file aggregates the substitution elasticities to trade-weighted average elasticities; calculates
aggregate import shares and demand elasticities based on the hs6 -GTAP concordance and h s6 to
section concordance; calculates shares of Korean imports in total imports based on US Census data;
sets the supply elasticity at -7.7; and finally calculates the 98 coefficients. The 98 coefficients are
written to the excel file "coefficient_and_inputs.xls" in the folder "results."

a. Open Stata. Select File/Change Working Directory. Select the folder "non_lrws".
b. Open the do -file "calculate inputs for c_section_averages" located in the folder "code".
Execute the do-file.
c. The results are written into two excel files, "coefficient_and_inputs.xls" and
"summstats.csv", in the folder "results".

Table 4: Command file

!===================================================================
============
! CMF file for running the GTAPv7 model outside of RunGTAP
!===================================================================
============

auxiliary files = ..\code\GTAPv7_ep_imsh;
Solution file = ..\results\numeraire_shock ;
Method = Gragg;
Steps = 2 4 6;
subintervals = 1;
automatic accuracy = no;
accuracy figures = 5;
accuracy percent = 95;
minimum subinterval length = 1.0E-0006;
minimum subinterval fails = stop;
accuracy criterion = Data;
verbal description = numeraire shock to calculate ey and ep;

! -----------
! Input files
! -----------
File GTAPSETS = ..\data\sets.har ; ! constant input
File GTAPDATA = ..\data\basedata.har ; ! updated input
File GTAPPARM = ..\data\default.prm ; ! constant input

! ------------
! Output files
! ------------
File GTAPSUM = ..\results\gtapsum_num.har ; ! output
File WELVIEW = ..\results\welview_num.har ; ! output
File GTAPVOL = ..\results\gtapvol_num.har ; ! output
updated file GTAPDATA = ..\updated\updated_num.har;

Exogenous ! Standard GE closure: psave varies by region, pfactwld is
numeraire
 afall afcom afeall afecom afereg afesec
 afreg afsec
 aintall aintreg aintsec
 ams
 aoall aoreg aosec
 atd atf atm ats
 au
 avareg avasec
 cgdslack
 dpgov dppriv dpsave
 endwslack incomeslack

 pfactwld
 pop profitslack psaveslack
 qe qesf
 tinc
 tm tms to tp
 tradslack tx txs

Rest endogenous;
! End Common Closure file "BASE.CLS"

shock pfactwld = 1;

Table 5: STATA do file

*==========================
*Import trade data
*==========================

*Local path to be added
*cd ""

cd working

set type double, permanently
set more off

import excel ..\raw_data\imports_korea.xlsx, clear firstrow case(lower)

gen sp=strpos(commodity," ")
gen hs=substr(commodity,1,sp-1)
gen hsname=substr(commodity,sp+1,.)
save imports_korea, replace

use imports_korea, clear
keep if length(hs)==2
rename hs hs2
save imports_korea_hs2, replace

use imports_korea, clear
keep if length(hs)==10
save imports_korea_hs10, replace

gen hs2=substr(hs,1,2)
collapse (sum) v2016 v2017, by(hs2)
rename v2016 vv2016
rename v2017 vv2017

merge 1:1 hs2 using imports_korea_hs2, gen(check)
gen cc1=vv2016-v2016
sort cc1
gen cc2=vv2017-v2017
sort cc2

import excel ..\raw_data\imports_world.xlsx, clear firstrow case(lower)

gen sp=strpos(commodity," ")
gen hs=substr(commodity,1,sp-1)
gen hsname=substr(commodity,sp+1,.)
save imports_world, replace

use imports_world, clear
keep if length(hs)==2
rename hs hs2
save imports_world_hs2, replace

use imports_world, clear
keep if length(hs)==10
save imports_korea_hs10, replace

gen hs2=substr(hs,1,2)
collapse (sum) v2016 v2017, by(hs2)
rename v2016 vv2016
rename v2017 vv2017

merge 1:1 hs2 using imports_world_hs2, gen(check)
gen cc1=vv2016-v2016
sort cc1
gen cc2=vv2017-v2017
sort cc2

*We checked here whether the Census data are consistent, i.e. that the HS2 reported
*data are identical to the sum of the HS10 reported data. This is the case.

*=================================
*Import Census data
*=================================

*=================================
*Calculate Korea's market share
*=================================

*Compare Census and USITC Dataweb data
import excel using ..\raw_data\imports_hts2_dataweb.xlsx, clear firstrow
tostring hts, replace
replace hts="0"+hts if length(hts)==1
rename hts hs2
save hs2_dataweb, replace

*Calculate import shares at the Chapter level
use hs2_dataweb, clear
merge 1:1 hs2 using imports_korea_hs2, nogen
rename v2017 korea_census
keep hs2 world Korea commodity korea_census
merge 1:1 hs2 using imports_world_hs2, nogen
rename v2017 world_census
keep hs2 world Korea commodity korea_census world_census

gen mskorea_census=korea_census/world_census
gen mskorea_dataweb=Korea/world
gen check=mskorea_census-mskorea_dataweb
sort check
*The difference between the census and usitc dataweb data is tiny, so we stick
*to one consistent datasource, the census
keep hs2 mskorea_census
sort hs2
save mskorea_census, replace

*=========================================
*Calculate trade-weighted average substitution elasticity
*=========================================

use ..\raw_data\elast_LIMLhybrid_hs10, clear
keep good sigma
rename good hs
merge 1:1 hs using imports_korea_hs10, gen(check)
save elast_liml_hs10, replace

use elast_liml_hs10, clear
gen hs2=substr(hs,1,2)
*Somehow there are no trade data in hs2=46, so we take an unweighted average across
*the estimates hs10-substitution elasticities
replace v2017=1 if hs2=="46"
collapse sigma [iw=v2017], by(hs2)

save sigma_2017, replace

use elast_liml_hs10, clear
gen hs2=substr(hs,1,2)
replace v2016=1 if hs2=="46"
collapse sigma [iw=v2016], by(hs2)
rename sigma sigma16
merge 1:1 hs2 using sigma_2017, nogen
*Difference base year is relatively small, so we take 2017, consistent with use of 2017 data
*for other datasources in the case such as for LRWs for example

*Check collapse
use elast_liml_hs10, clear
gen hs2=substr(hs,1,2)
gen sigmah=sigma*v2017
replace v2017=. if sigma==.
collapse(sum) sigmah v2017, by(hs2)
gen sigma2=sigmah/v2017
merge 1:1 hs2 using sigma_2017, nogen
*(Collapse statement with iw was of course correct)

*For two HSlines there are no substitution elasticity estimates, 98 and 99, so we
*use the trade-weighted average across the other lines for this
use elast_liml_hs10, clear
gen hs2=substr(hs,1,2)
collapse sigma [iw=v2016]
gen hs2="98"
save sigma_98, replace
replace hs2="99"
save sigma_99, replace

use sigma_2017, clear
drop if hs2=="98" | hs2=="99"
append using sigma_98
append using sigma_99
save sigma_2017_final, replace

*=========================================
*Concordance HS2 to GTAP
*=========================================

use imports_korea, clear
keep if length(hs)==6
rename hs hs6
save imports_korea_hs6, replace

import delimited ..\raw_data\conc_hs_comb_gtap, clear
tostring hscombinedproductcode, replace
rename hscombinedproductcode hs6
replace hs6="0"+hs6 if length(hs6)==5
gen hs2=substr(hs6,1,2)
joinby hs6 using imports_korea_hs6
rename gtapproductdescription gtap
gen comm=lower(substr(gtap,1,3))
save conc_h, replace

*=========================================
*Calculate price elasticity of demand and Total import share
*=========================================

import delimited ..\raw_data\ep, clear
keep if comm==v2
keep if reg=="usa"
keep comm value
rename value ep
save ep_usa, replace

import delimited ..\raw_data\imsh, clear
keep if reg=="usa"
keep comm value
rename value imsh
save imsh_usa, replace

use conc_h, clear
merge m:1 comm using ep_usa, gen(check)
merge m:1 comm using imsh_usa, nogen
sort check
keep if check==3
collapse ep imsh, by(hs2)
rename ep ep_unw
rename imsh imsh_unw
save epimsh_unw, replace

use conc_h, clear
merge m:1 comm using ep_usa, gen(check)
merge m:1 comm using imsh_usa, nogen
sort check
keep if check==3
collapse ep imsh [iw=v2017], by(hs2)
merge 1:1 hs2 using epimsh_unw, nogen
*Weighted and unweighted average differ considerably sometimes. We choose to
*work with the hs6 (Korea,US) trade value weighted average, as it is more exact
keep hs2 ep imsh
save epimsh_h, replace

*Generate hs lines 98 and 99
use conc_h, clear
merge m:1 comm using ep_usa, gen(check)
merge m:1 comm using imsh_usa, nogen
sort check
keep if check==3
collapse ep imsh [iw=v2017]
gen hs2="98"
save epimsh_98, replace
replace hs2="99"
save epimsh_99, replace

use epimsh_h, clear
append using epimsh_98
append using epimsh_99
save epimsh, replace

*=========================================
*Merge all results and calculate coefficient
*=========================================

use sigma_2017_final, clear
merge 1:1 hs2 using mskorea_census, nogen
merge 1:1 hs2 using epimsh, nogen
gen se=7.7

gen kor_imsh=mskorea_census*imsh
order hs2 sigma se ep mskorea_census imsh kor_imsh

*Calculate coefficient
gen coefficient = ((se+1)*sigma*(se-ep)/(se+sigma))/(ep-se) ///
 - kor_imsh*((sigma+ep)*se*(se+1)/(se+sigma))/(ep-se)
save coefficient_and_inputs, replace
export excel using ..\results\coefficient_and_inputs, firstrow(variable) replace

*=========================================
*Summary stats
*=========================================

use coefficient_and_inputs, clear
estpost summ sigma se ep mskorea_census imsh kor_imsh coefficient
esttab using .. \results\summstats.csv, replace cells("mean(fmt(3)) sd(fmt(3)) max(fmt(3))
min(fmt(3))")

ANNEX D
DECISION OF THE ARBITRATOR CONCERNING A PARTIALLY OPEN HEARING
Contents Page
Annex D-1 Decision of the Arbitrator on the United States' Request for an Open Hearing 60

ANNEX D-1
DECISION OF THE ARBITRATOR ON THE UNITED STATES' REQUEST FOR AN OPEN HEARING
A. INTRODUCTION
1.1. As noted in section 2.2 ("Procedural Matters") of the Decision, the United States requested that
the Arbitrator's meeting with the parties be opened to other Members and the public. On 5 April
2018, the Arbitrator communicated its decision declining the United States' request, confirming that
the Arbitration hearing would be conducted in closed session. This section sets out the reasons
underlying that decision.
B. ANALYSIS
1.2. The United States initially requested that the Arbitrator's meeting with the parties be open to
observation by other WTO Members and the public "in whole, if Korea's agrees … , or in part, if Korea
does not".1 In its written comments following the organizational meeting, the United States proposed
a set of additional working procedures to conduct an open meeting [hereinafter, "first set of working
procedures"].2 Korea replied that it did not consent to public observation of the meeting3 and further
indicated that, in its view, the first set of working procedures did not "protect Korea's right to
confidentiality as set out under Article 18.2 of the DSU."4 In the event, however, that the Arbitrator
were to allow the United States to disclose its own statements at the hearing, Korea asked the
Arbitrator to adopt delayed -viewing and redaction proc edures, modelled on those adopted by the
arbitrator in US – Tuna II (Mexico) (Article 22.6 – US) [hereinafter, Tuna II].5 Korea subsequently
indicated that its "interests in ensuring protection of BCI and the United States' interests in opening
the hearing to the public can be met by holding a partially open hearing on a recorded or delayed
basis."6
1.3. Reacting to Korea's statements, the United States requested that the Arbitrator "permit[] the
United States to deliver its statements in a partially open hearin g", and indicated that the United
States "did not object to recording the open portion of the hearing with a delayed viewing to allow
for confirming that the recording does not contain business confidential information ('BCI')". 7 The
United States also app ended a second set of additional working procedures to conduct a partially
open meeting [hereinafter, "second set of working procedures"].8
1.4. In light of the foregoing, we recognize that the United States has revised its initial request that
the Arbitrator open the hearing either "in whole … or in part", to ask that the Arbitrator adopt
procedures for a "partially open hearing". This directs us to focus our assessment on the United
States' request for a partially open meeting and its second set of working procedures.9
1.5. The United States' second set of working procedures only provides for the protection, and
redaction, of BCI.10 To Korea, these working procedures "overlook[] important procedures that are

1 See United States' comments on draft timetable and draft working procedures, p. 5.
2 United States' "Additional Working Procedures for the Arbitrator: Open Meeting".
3 Korea's comments on draft timetable and draft working procedures, para. 12.
4 Korea's response to Arbitrator question No. 4 on open hearings, pp. 2-3.
5 Korea's comments on draft timetable and draft working procedures, para. 12 and fn 4. See also
Korea's response to Arbitrator question No. 4 on open hearings, p. 3.
6 Korea's response to Arbitrator question No. 4 on open hearings, p. 3.
7 United States' comments on Korea's response to Arbitrator question Nos. 3 and 5 on open hearings,
paras. 3-4.
8 The United States attached "an example of working procedures for a partially open hearing, based on
those of the Arbitrator in US – Tuna II (Mexico) (Article 22.6 – US)". United States' comments on Korea's
response to Arbitrator question Nos. 3 and 5 on open hearings, fn 4.
9 Throughout this Decision, we indicate when we refer to a specific open hearing modality – partially or
fully open – or to open hearings generally.
10 See United States' "Additional Working Procedures of the Arbitrator on Partially Open Meetings",
paras. 1.1, 3.3-3.4, and 3.8-3.10.

necessary for the protection of confidential information."11 Instead, Korea reiterated its request that
the Arbitrator either adopt working procedures modelled on those in Tuna II or devise a "simplified"
redaction process.12
1.6. Thus, while we understand that the United States and Korea have agreed, in principle, that the
meeting may be partially opened, the parties disagree on how to conduct such a meeting. More
specifically, Korea and the United States differ on what may be disclosed, and, in particular, on
whether the redaction "filter" should catch only BCI or should also catch "other confidential
information".13
1.7. Therefore, we will evaluate the United States' request, along with its supporting reasoning,
that the Arbitrator adopt the proposed second set of working procedures that limit the protection of
confidential information to BCI, and Korea's proposals that extend such protection beyond BCI.
1.8. However, before turning to the parties' arguments on procedures to conduct a partially open
meeting, we wish to address the United States' argument that "Korea's choice to maintain the
confidentiality of its own statements would not be a basis to deny a U.S. request to the Arbitrator to
lift the confidentiality of U.S. statements at the time they are made at the arbitration meeting" under
Article 18.2 of the DSU, since "o ne party to this arbitration does not have a right to prevent the
other party from delivering its statements in open hearing."14
1.9. As background, we recall that the DSU does not "expressly contemplate" open meetings.15 The
working procedures contained in Appen dix 3 of the DSU, paragraph 2, provide that "panels shall
meet in closed session."16 Article 12.1 of the DSU sets forth the possibility for a panel to depart from
those working procedures, if the panel "consult[s] the parties to the dispute." 17 Past WTO
adjudicators – including arbitrators in Article 22.6 proceedings – have done so and opened meetings,
either partially or in full, to public observation in limited circumstances. Where both parties have
agreed to open meetings to public observation, panels and the Appellate Body have granted the
request and adopted appropriate working procedures. 18 Where parties have disagreed, WTO
adjudicators have declined the request in all instances19, except one.20 This practice confirms that it
is the WTO adjudicator that ultimately decides, in due consideration of the parties' positions and the
circumstances of the proceeding, to either open a meeting (in full or in part) or to keep it closed.
1.10. The United States' argument mischaracterizes Article 18.2 of the DSU in relation to the issues
raised by a partially or fully open hearing. The second sentence of Article 18.2 of the DSU states
that "[n]othing in [the DSU] shall preclude a party to a dispute from disclosing statements of its own
positions to the public". We therefore agr ee with the United States and Korea that the second

11 Korea's response to Arbitrator question on United States' second set of working procedures, p. 1.
12 Korea's response to Arbitrator question on United States' second set of working procedures, p. 3.
13 See Korea's response to Arbitrator question No. 4 on open hearings, p. 3; Korea's response to
Arbitrator question on United States' second set of working procedures, p. 1.
14 United States' comments on draft timetable and draft working procedures, p. 6; and United States'
response to Arbitrator question No. 1 on open hearings, para. 4. See also United States' comments on Korea's
comments on draft timetable and draft working procedures, p. 4.
15 Panel Reports, US – Continued Suspension, para. 7.45; and Canada – Continued Suspension,
para.7.43.
16 As the panels in US/Canada – Continued Suspension note, paragraph 2 of Appendix 3 of the DSU also
provides: "The parties to the dispute, and interested parties, shall be present at the meeting only when invited
by the panel to appear before it." There is no reference in that provision to the public or any other participant.
Panel Reports, US – Continued Suspension, para. 7.45; and Canada – Continued Suspension, para. 7.43.
17 Panel Reports, US – Continued Suspension, para. 7.46; and Canada – Continued Suspension,
para. 7.44. Similarly, panels may neither reshape substantive provisions of the DSU nor deviate from the
working procedures in Appendix 3 in a way that would contravene an express prohibition in the DSU. Panel
18 In 2005, the disputing parties requested, for the first time, opening the meetings with the parties to
public observation in the US/Canada – Continued Suspension panel proceedings. The panels accepted the
request. See Panel Reports, US – Continued Suspension, para. 4.2; and Canada – Continued Suspension,
para. 4.2. To date, meetings have been opened in more than 30 disputes.
19 See, e.g. Appellate Body Report, EU – Biodiesel (Argentina), Add.1, Annex D-2, para. 6; and Panel
Report, US – OCTG (Korea), Add.1, Annex E-1, para. 3.4.
20 The Tuna II parallel compliance panel proceedings and Article 22.6 arbitration are and remain the
only examples in which an adjudicator granted one party's request for a "partially" open hearing – but over the
objection of the other party. See Decision by the Arbitrator, US – Tuna II (Mexico) (Article 22.6 – Mexico),
fn 31 and Add.1., Annex A-3.

sentence of this provision confers a right of disclosure to a party of statements of its own position;
however, it does not follow from the mere existence of this right that an arbitrator must open a
meeting, be it in full or in part, in order to provide a "vehicle" for a party to exercise its right of
disclosure under Article 18.2. Article 18.2 does not address the question of whether hearings should
be open or partially open. Further, there is nothing in any other part of the DSU that indicates a
party's right to disclose statements of its position under Article 18.2 must be exercised through
holding a fully or partially open hearing. Accordingly, nothing in the DSU suggests that an arbitrator
– or any ot her WTO adjudicator – is required either to facilitate a Member's exercise of its rights
under Article 18.2 to disclose statements of its positions or to "automatically"21 grant the request to
open a meeting.22 In summary, the text of Article 18.2 of the DSU does not oblige the Arbitrator to
accept a request to partially open a meeting.
1.11. We also disagree with the United States to the extent it suggests that as "the DSU makes no
reference to the confidentiality of Article 22.6 arbitration proceedings … there is even less basis to
determine that one party to an Article 22.6 proceeding may prevent another party from delivering
its statements in open hearing".23 First, we find this view inconsistent with the United States' overall
argument that it has a right to for ego confidentiality of statements of its own position under
Article 18.2, second sentence. Second, as noted above, past arbitrators have determined that the
confidentiality rules of Article 18 of the DSU, which are expressly stated as being applicable to panel
and Appellate Body proceedings, also apply to Article 22.6 proceedings, whether or not textually
indicated.24
1.12. Turning now to the parties' proposed procedures to implement a partially open meeting, we
recall that the United States' second set of workin g procedures limit the scope of what may not be
disclosed to BCI alone – and only BCI would be subject to review and redaction. 25 Korea confirms
that a narrow view of confidentiality limited to BCI is not satisfactory, given Korea's stated concerns
on disclosure of its "other confidential information".26
1.13. We note, in this regard, that Korea proposed amendments to the United States' second set of
working procedures, which we do not view as a separate request but as an attempt, by Korea, to
find common ground b etween it and the United States. Korea indicates that the United States'
working procedures "overlook[] important procedures that are necessary for the protection of
confidential information", namely those redaction procedures in Tuna II .27 Korea's amendments
would re-introduce certain elements of the Tuna II redaction procedure – elements that we note the
United States set aside in its second set of working procedures – to permit redaction of its
"arguments" and "positions".28 As Korea acknowledges29, the United States does not agree to the
Tuna II working procedures, specifically the redaction process, which it criticized as "flawed" 30. No
matter how the Tuna II redaction procedure could hypothetically be reformed, redaction beyond BCI
is oppo sed by the United States. 31 In other words, we find it impossible to reconcile a Tuna II
approach to redact Korea's "other confidential information" with the United States' view of
confidentiality as limited to BCI.
1.14. We further emphasize that, without the agreement of the parties on this fundamental issue –
the scope of confidentiality for the purpose of conducting a partially open meeting in this proceeding
– we cannot do as the parties wish, without, in practice, contravening the parties' respective views
on disclosure and confidentiality.

21 See Decision by the Arbitrator, US – Tuna II (Mexico) (Article 22.6 – Mexico), para. 2.24 and fn 28.
22 Decision by the Arbitrator, US – Tuna II (Mexico) (Article 22.6 – Mexico), para. 2.24.
23 United States' response to Arbitrator question No. 1 on open hearings, para. 6. In its response, the
United States commented on the findings of the Appellate Body in US – Continued Suspension on the scope of
confidentiality in Article 17.10 of the DSU. See ibid. para. 5.
24 See Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US I), para. 1.33.
25 See United States' "Additional Working Procedures of the Arbitrator on Partially Open Meetings".
26 Korea's response to Arbitrator question No. 4 on open hearings, p. 3; and Korea's response to
Arbitrator question on United States' second set of working procedures, p. 1.
27 Korea's response to Arbitrator question on United States' second set of working procedures, pp. 2-3.
28 Korea's response to Arbitrator question on United States' second set of working procedures, pp. 2-3.
29 Korea's response to Arbitrator question on United States' second set of working procedures, p. 3.
30 United States' comments on Korea's comments on draft timetable and draft working procedures, p. 4.
31 United States' comments on Korea's response to Arbitrator question Nos. 3 and 5 on open hearings,
para. 4.

1.15. In light of the foregoing, we decline to adopt the United States' second set of working
procedures on a partially open hearing as well as Korea's proposed amendments thereto.
1.16. In the alternative, Korea asks the Arbitrator to "provide the parties with a simplified redaction
procedure … in which the parties may request redaction of statements that directly or indirectly
disclose exhibits, arguments, and positions of the non-disclosing party."32 Korea offers no guidance
or detail on what may be "simplified".
1.17. In our view, Korea's suggestion that the Arbitrator devise and adopt a "simplified" redaction
procedure would require the Arbitrator to determine what information is confidential and therefore
susceptible to redaction. Notwithstanding the Arbitrator's attempts – through questions – to arrive
at a satisfactory procedural solution, the parties did not compromise their views on the scope of
confidentiality and the attendant redaction procedures. "Simplified" working procedures would fail
to bridge this gap as form cannot compensate for missing substantive agreement.
1.18. Furthermore, other considerations must be accounted for, in particular the prompt settlement
of disputes.33 In this regard, fulfilling Korea's request would place a burden on the Arbitrator, which
goes directly against Korea's stated concern that "administrative burdens must be avoided in the
interest of prompt settlement of a dispute". 34 Relatedly, should we have devised a "simplified"
redaction process, without further direction from Korea, the proponent of the request, guaranteeing
both parties' due process rights – through several rounds of questions and comments – would have
affected the timetable.35
1.19. Accordingly, we abstain from proposing "simplified" procedures due to these time constraints
and the significant differences between the parties' views regarding such procedures.
1.20. In ultimately denying the United States' request to partially open the meeting in this
Arbitration, we are not prohibiting the United States from disclosing its statements of its own position
and thereby depriving the United States of its right under Article 18.2 of the DSU. Members routinely
publish submissions, methodology papers, responses to questions, oral statements, and other
materials on publicly accessible websites, regardless of whether the meetings were opened to the
public.36 Hence, the United States can still exercise its right to disclose statements of its own
positions by other means as it may determine under Article 18.2.
1.21. Finally, we are mindful of the issue of transparency in WTO proceedings, how it has figured
in discussions among Members to improve and clarify the DSU, and its particular significance in the
context of dispute settlement.37 To this point, we consider the conclusion of the panels in US/Canada
– Continued Suspension to apply equally in this Arbitration:

32 Korea's response to Arbitrator question on United States' second set of working procedures, p. 3.
33 The arbitrator in Tuna II identified four factors that guide an evaluation of whether to grant a request
to partially open a meeting: "(a) a non-disclosing party's right to confidentiality protection of statements of its
own position, (b) due process, (c) the prompt settlement of disputes, or (d) the careful and efficient discharge,
or the integrity, of the adjudicative function." Decision by the Arbitrator, US – Tuna II (US) (Article 22.6 –
Mexico), para. 2.31. Both the United States and Korea consider these factors relevant to this proceeding. See
United States' response to Arbitrator question No. 6 on open hearings, para. 14; and Korea's response to
Arbitrator question No. 6 on open hearings, p. 4.
34 Korea's response to Arbitrator question on United States' second set of working procedures, p. 3. The
United States shares this concern, and it is one of the reasons the United States opposes the Tuna II redaction
process, one which, according to the United States, "adds significantly to the burden on the Arbitrator and the
Secretariat". United States' comments on Korea's response to Arbitrator question Nos. 3 and 5 on open
hearings, para. 4.
35 We are aware that this reason has weighed significantly in the decisions of panels and the Appellate
Body in determining whether to partially open meetings and hearings. See, e.g., Appellate Body Report, EU –
Biodiesel (Argentina), Add.1, Annex D-2, para. 6; and Panel Report, US – OCTG (Korea), Add.1, Annex E-1,
para. 3.2.
36 Panel Report, US – Upland Cotton (Article 21.5 – Brazil), para. 8.20. See also Panel Report, US –
37 See Panel Reports, US – Continued Suspension, para. 7.50; and Canada – Continued Suspension,
para. 7.48.

The Panel considers that its role is not to address transparency in general terms, but to
determine whether the DSU as it currently stands permits that, under the circumstances
of this particular case, the Panel hearing be open to public observation.38
1.22. In light of the parties' fundamental disagreement on how to conduct a partially open meeting,
as well as other considerations in this Article 22.6 arbitration proceeding, we have decided, after
consulting with the parties, to conduct the Arbitration hearing in closed session.39