UNITED STATES – COUNTERVAILING MEASURES CONCERNING CERTAIN PRODUCTS FROM THE EUROPEAN COMMUNITIES
Document: Recourse to Article 21.5 of the DSU by the European Communities Final Report of the Panel
Date: 17 August 2005
Document codes: WT/DS212/RW
Complainant: EU
Respondent: U.S.
Third parties: Brazil, China, India, South Korea, Mexico
Dispute stage: Implementation & Compliance
Agreements cited: Art. 1, 10, 14, 21.1, 32.5  Subsidies and Countervailing Measures (SCM)Art. XVI:4  Agreement Establishing the World Trade OrganizationArt. 19.1, 19.3, 19.4, 21.2, 21.3  Subsidies and Countervailing Measures (SCM)Art. VI:3  GATT 1994

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

Recourse to Article 21.5 of the DSU by the European Communities

Final Report of the Panel

I. INTRODUCTION
1.1 On 17 March 2004, the European Communities requested consultations with the United States
pursuant to Articles 4 and 21.5 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes (DSU) and Article 30 of the Agreement on Subsidies and Countervailing
Measures (SCM Agreement ) with respect to the United States' new privatization methodology, its
application to the determinations set out in the request and the findings in the sunset reviews of:
Certain Corrosion-Resistant Carbon Steel Flat Products from France (C-427-810) (Case No. 9); Cut-
to-Length Carbon Steel Plate from United Kingdom (C–412–815) (Case No. 8); and, Cut-to-Length
Carbon Steel Plate from Spain (C–469–804) (Case No. 11)1
1.2 The request was circulated in document WT /DS212/14 of 19 March 2004. Consultations
were held on 24 May 2004 and, although they a llowed a better understanding of respective positions,
they failed to settle the dispute.
1.3 On 16 September 2004, the European Communitie s requested the Dispute Settlement Body
(DSB) to establish a panel pursuan t to Articles 6 and 21.5 of the DSU, Article 30 of the SCM
Agreement, and Article XXIII of the General Agreement on Tariffs and Trade 1994 (GATT 1994 ).
The request did not include the United States' new privatization methodology.2
1.4 At its meeting on 27 September 2004, the DSB de cided, in accordance with Article 21.5 of
the DSU, to refer to the original panel the matter raised by the European Communities in document

1.5 At that meeting, the parties to the dispute agr eed that the Panel should have standard terms of
reference. The Panel's terms of reference are, therefore, the following:
"To examine, in the light of the relevant provisions of the covered agreements cited
by the European Communities in document WT/DS212/15, the matter referred to the
DSB by the European Communities in that do cument, and to make such findings as
will assist the DSB in making the recommendations or in giving the rulings provided
for in those agreements".
3
1.6 The Panel was composed of the original members:
 Chairman: Mr Gilles Gauthier

 Members: Ms Marie-Gabrielle Ineichen-Fleisch
 Mr Michael Mulgrew

1.7 Brazil, China and Korea reserved their rights to participate in the Panel's proceedings as third
parties.
1.8 The Panel met with the parties on 1-2 March 2005. It met with the third parties on
2 March 2005.

1 WT/DS/212/14, p.2.
2 WT/DS/212/15, p.2.
3 WT/DS/212/16, p.1.

II. BACKGROUND
2.1 This dispute concerns the parties' disagreement as to the existence or consistency with the
SCM Agreement and the GATT 1994 of measures taken by the United States to comply with the DSB
recommendations and rulings in the dispute US – Countervailing Measures on Certain EC Products.
A.
MEASURES SUBJECT TO THE ORIGINAL PROCEEDINGS
2.2 The original panel and Appella te Body proceedings concerne d the WTO-consistency of 12
countervailing duty determinations by the United States, which included original investigations,
administrative reviews, and sunset reviews. 4 The imposition of countervailing duties in these 12
determinations was based on the application by the USDOC of two different change-in-ownership
methodologies (the so-called "gamma" and "same person" methodologies). The current Article 21.5
proceedings only concern three of the four sunset reviews in the original panel 5: Certain Corrosion-
Resistant Carbon Steel Flat Products from France (C-427-810) (Case No. 9); Cut-to-Length Carbon
Steel Plate from United Kingdom (C–412–815) (Case No. 8); and, Cut-to-Length Carbon Steel Plate
from Spain (C–469–804) (Case No. 11).6
2.3 The European Communities also brought a clai m in the original proceedings concerning
Section 771(5)(F) of the US Tariff Act of 1930.
B. PANEL AND APPELLATE BODY FINDINGS IN THE ORIGINAL PROCEEDINGS
2.4 The original panel found that the 12 counter vailing duty determinations were inconsistent
with Articles 10, 14, 19.4, 21.1 and 21.3 of the SCM Agreement. It also found that Section 1677(5)(F)
was inconsistent with the Unite d States' obligations under the SCM Agreement and Article XVI:4 of
the WTO Agreement.7
2.5 The Appellate Body upheld the Panel's findings that the determinations of
United States' Department of Commerce (USDOC ) in the 12 countervailing duty cases were
inconsistent with the SCM Agreement because the USDOC had failed to ascertain the continued
existence of a benefit following the privatization of recipients of prior non-recurring financial
contributions. However, it reversed the Panel' s finding that an investigating authority must always
conclude that a benefit no longer exists for a firm th at has been privatized at arm's length and for fair
market value (FMV). The Appellate Body also re versed the Panel's finding that the relevant United

4 From the 12 countervailing duty determinations, six are original investigations: Stainless Sheet and
Strip in Coils from France (C-427-815) (Case No. 1); Certain Cut-to-Length Carbon Quality Steel from France
(C-427-817) (Case No. 2); Certain St ainless Steel Wire Rod from Italy (C-475-821) (Case No. 3); Stainless
Steel Plate in Coils from Italy (C-475-823) (Case No. 4); Stainless Steel Sheet and Strip in Coils from Italy (C-
475-825) (Case No. 5); Certain Cut-to-Length Carbon-Quality Steel Plate from Italy (C-475-827) (Case No. 6);
two are administrative reviews: Cut-to-Length Carbon Steel Plate from Sweden (C -401-804) (Case No. 7);
Grain-oriented Electrical Steel from Italy (C-475-812) (Case No. 12) and four are sunset reviews: Cut-to-Length
Carbon Steel Plate from United Kingdom (C-412-815) (Cas e No. 8); Certain Corrosio n-Resistant Carbon Steel
Flat Products from France (C-427-8 10) (Case No. 9); Cut-to-Length Carb on Steel Plate from Germany (C-428-
817) (Case No. 10); and Cut-to-Length Carbon Steel Plate from Spain (C-469-804 ) (Case No. 11). See

5 The European Communities and the United States settled the fourth sunset review, concerning cut-to-
length carbon steel plate from Germany.
6 WT/DS212/14, p.2.
7 Panel Report on US – Countervailing Measures on Certain EC Products, para. 8.2.

States internal legislation was, as such, inconsis tent with the United States' obligations under the
 SCM Agreement and Article XVI:4 of the WTO Agreement.8
C. CURRENT PROCEEDINGS
2.6 On 8 January 2003, the DSB adopted the Appe llate Body Report and the Panel Report, as
modified by the Appellate Body. The resulting DSB rulings included the recommendation that the
United States brings its administrative practice (the "same person" methodology) and the twelve
individual determinations found to be inconsistent with the SCM Agreement and the GATT 1994 into
conformity with its WTO obligations.
2.7 On 27 January 2003, the United States informed the DSB that it intended to implement the
recommendations and rulings of the DSB in a manne r consistent with its WTO obligations. The
parties agreed under Article 21.3(b) of the DSU that the United States had until 8 November 2003 to
implement the recommendations and rulings of the DSB.
2.8 In June 2003, the United States finalized a new privatization methodology, published in the
US Federal Register. 9 The new methodology was then applie d to the 12 individual determinations
found to be inconsistent with the SCM Agreement and the GATT 1994. On 17 November 2003, the
USDOC published in the US Federal Register a Notice of Implementation for these 12 countervailing
duty determinations. 10 According to this Notice, only in four of these re-determinations, which
concerned sunset reviews, did the USDOC maintain the existing countervailing duties. In the other
re-determinations, the measures were either reduced or revoked. At the DSB meeting of 7 November
2003, the United States stated that it had fully co mplied with the DSB recommendations and rulings
on this issue. The European Communities did not agree.
2.9 On 17 March 2004, the European Communities re quested consultations under Article 21.5 of
the DSU. In that request, the European Communiti es claimed that both the new privatization
methodology and its application to three of the above-mentioned sunset review re-determinations 11
were inconsistent with Article VI:3 of GATT 1994 and Articles 10, 14, 19.4, 21.1 and 21.3 of the SCM
Agreement.
2.10 After consultations had failed, the Eur opean Communities submitted a request for
establishment of a panel under Article 21.5 of the DSU on 16 September 2004 this time challenging
only the USDOC's re-determinati on of the sunset reviews on Certain Corrosion-Resistant Carbon
Steel Flat Products from France; Cut-to-Length Carbon Steel Plate from United Kingdom; and, Cut-
to-Length Carbon Steel Plate from Spain. This Panel was established pursuant to that request on
27 September 2004.

8 Appellate Body Report on US – Countervailing Measures on Certain EC Products, para. 161.
9 Notice of Final Modification of Agency Practice Under Section 123 of the Uruguay Round
Agreements Act, 68 Fed. Reg. 37125 (23 June 2003) (Exhibit EC-1) (Modification Notice).
10 Notice of Implementation Under Section 129 of the Uruguay Round Agreements Act; Countervailing
Measures Concerning Certain Steel Products from the European Communities, 68 Fed. Reg. 64858 (17
November 2003) (Notice of Implementation).
11 Certain Corrosion-Resistant Carbon Steel Flat Products from France (C-427-810) (Case No. 9);
Cut-to-Length Carbon Steel Plate from United Kingdom (C–412–815) (Case No. 8); Cut-to-Length Carbon
Steel Plate from Spain (C–469–804) (Case No. 11).

III. PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS
A. T
HE EUROPEAN COMMUNITIES
3.1 The European Communities requests the Panel to find that:
• The United States has failed to implemen t the recommendations and rulings of the
DSB and acted inconsistently with its oblig ations under Articles 10, 14, 19.4, 21.1,
and 21.3 of the SCM Agreement and Article VI:3 of the GATT 1994 because it did not
determine properly whether the privatized French company Usinor in Certain
Corrosion-Resistant Carbon Steel Flat Products from France continued to receive
any benefit from financial contributions previously bestowed on state-owned
producers;

• The United States has acted inconsistently w ith its obligations under Article 21.3 of
the SCM Agreement because it failed to consider evidence on the record in Cut-to-
Length Carbon Steel Plate from the United Kingdom and Cut-to-Length Carbon Steel
Plate from Spain demonstrating that the benefits from programmes found to confer
countervailable subsidies no longer existed;

• The United States has failed to implemen t the recommendations and rulings adopted
by the DSB and acted inconsistently with its obligations under Articles 10, 14, 19.4,
21.1, and 21.3 of the SCM Agreement and Article VI:3 of the GATT 1994 by refusing
to examine whether, and for failing to find that, the privatizations of BS plc in Cut-to-
Length Carbon Steel Plate from the United Kingdom and Aceralia in Cut-to-Length
Carbon Steel Plate from Spain were at arm’s length and for FMV; and, that

• The United States has failed to meet it s obligations under Article 21.3 of the SCM
Agreement because it did not examine in Certain Corrosion-Resistant Carbon Steel
Flat Products from France , Cut-to-Length Carbon Steel Plate from the United
Kingdom and Cut-to-Length Carbon Steel Plate from Spain whether expiry of the
duty would be likely to lead to continuation or recurrence of material injury.
12

B. THE UNITED STATES
3.2 The United States contends that it has fully im plemented the recommendations and rulings of
the DSB in this dispute. With respect to Usinor's privatization – the only substantive matter that, in
the view of the United States, is properly before this Panel – the USDOC’s conclusion that the
employee sales did not satisfy the arm’s-length/FMV standard comports with the recommendations
and rulings of the DSB, as does USDOC’s finding that a corresponding amount of the remaining
benefit from pre-privatization subsidies was not exti nguished by the privatization. Thus, the United
States believes that the European Communities' claims against implementation of the DSB
recommendations and rulings are not meritorious. Th e United States therefore requests this Panel to
find that the United States properly implemented those recommendations and rulings.
13

IV. ARGUMENTS OF THE PARTIES
A. FIRST WRITTEN SUBMISSION OF THE EUROPEAN COMMUNITIES
1. Introduction
4.1 In the view of the European Communities, the me asures taken with respect to the three sunset
reviews at issue in this case failed to bring the United States into compliance with the DSB
recommendations and rulings. 14 The mandate of the present Panel is to determine the consistency of
the measures taken to comply with the provision or provisions cited in the Panel request.15
2. Certain corrosion-resistant carbon steel flat products from France
4.2 In its France Section 129 determination, the USDOC found that "with the exception of the
employee offering, which constituted 5.16 per cent of the sale, the privatization of Usinor was at arm's
length and for fair market value" 16 . It nevertheless concluded that the "revocation of the order on
[corrosion-resistant carbon steel flat products from Fr ance] would be likely to lead to continuation or
recurrence of a countervailable subsidy". 17 There had been no basis for the USDOC's conclusion.
The SCM Agreement obliges a Member to determine whether a privatized producer received a benefit
from the financial contribution previously bestow ed on state-owned producers. This cannot be
deduced by considering a small part of a sale of shares in isolation.
4.3 It is clear under WTO case law 18, that in determining the likelihood of continuation or
recurrence of a subsidization, a Member must de termine whether the privatized producers received
any benefit from the financial contributions previous ly granted to state-owned producers and that the
producers were presumed not to have received any be nefit if the privatization had been at arm's
length, for FMV, and under conditions that did not seriously distort the market in which the
privatization occurred. As discussed below, the pr ivatized producers did not receive any such benefit
following Usinor's privatization.
(a) The privatization of Usinor as a whole was at arm's length and for FMV
4.4 In its Section 129 determination, the USDOC cons idered whether the sale of Usinor had been
at arm's length and for FMV from the perspective of four separate categories of purchasers. Such an
evaluation was not conclusive regarding whether the privatized firm as a whole received a benefit as
required under WTO case law. The investigating auth ority must consider whether the entire firm had
been sold for FMV, not just whet her the sales to an individual category of purchasers were at FMV.
The record demonstrates that the privatization of Usinor as a whole had been for FMV, because the
average price paid for Usinor's shares exceeded the average price per share recognized by the
Privatization Commission as necessary to recoup th e value of the company. Excluding shares
retained by or sold to the Govern ment of France (GOF), directly or indirectly, the total price paid for
[XXX] shares in Usinor's privatization was FF [XXX], for an average price of FF [XXX] per share. 19
This price exceeds the average minimum price recommended by the Privatization Commission for
Usinor, FF 84.43, based on the total number of sh ares to be offered, 186,544,395, at the minimum

14 Appellate Body Report on US – Countervailing Measures on Certain EC Products, para. 161(a).
15 Appellate Body Report on Canada – Aircraft (Article 21.5 – Brazil), paras. 41-42.
16 French Section 129 determination, p. 12 (Exhibit EC-4).
17 French Section 129 determination, p. 12 (Exhibit EC-4).
18 Appellate Body Report on US – Countervailing Measures on Certain EC Products, para.126 and 149
19 Table of Payments Received in Usinor's Privatiza tion, submitted in GOF/Us inor 2 September 2003
Questionnaire Response, Appendix 7 (Exhibit EC-5). The numbers in brackets in the attached exhibit and in the
text above contain business confidential information. The European Communities requests that this information
not be used in the final report or made public.

price of FF 15,750 billion.
20 The average price per share was also within the range recognised by the
USDOC as constituting the market clearing price ( i.e., between FF 86 to 89 per share). 21 Further, if
the GOF's sale of 7.7 per cent of Usinor shares in 1997 were included in the calculation, the average
price per share would increase to FF [XXX].22
4.5 Thus, when considered in the context of the privatization as a whole, there had been no doubt
that Usinor shares were sold at FMV. Such a finding was consistent with the USDOC's own findings
in two parallel proceedings in which the USDOC fo und that the privatization of Usinor had taken
place at arm's length and for FMV. 23 As there had been no evidence that the GOF distorted the
broader market conditions in any way, and the USDOC had not so found 24, it follows that the
privatized producers did not receive any benefit from the previous financial contributions to the state-
owned producers.
(b) The shares sold through the employee/retiree offering were at arm's length and for FMV
4.6 The European Communities believed that the a bove analysis was sufficient to demonstrate
that the USDOC wrongly decided to continue the measures. Even considering, on an alternative
basis, the employee/retiree offering independently, th e evidence demonstrated that the shares sold to
this category of purchasers were at arm's lengt h and for FMV. WTO case law does not provide
guidance on what type of transactions are considered to be at "arm's length". As an illustration of the
meaning of an "arm's-length" transaction, therefore, the European Communities referred to the Black's
Law Dictionary which defines "arm's length" as "[o]f or re lating to dealings between two parties who
are not related or not on close terms and who are presumed to have roughly equal bargaining power;
not involving a confidential relationship".
25 For the following reasons, the employee/retiree offering
did not involve related parties, and, therefore, constituted an arm's-length transaction.
4.7 At the time of Usinor's privatization, the company had been wholly owned, directly or
indirectly, by the GOF.26 The buyers in the employee/retiree offering included employees of Usinor -
not the GOF. 27 Although the GOF participated in share holder meetings and oversaw the financial
management of the company, it did not "intervene in the day-to-day management of the Company,
and the Company ... conducted its day-to-day operati ons in a manner similar to that of other major
international non-state controlled steel producers".28 Thus, the employee purchasers, including former
employees, were at least two steps removed from having any relationship with the GOF. Even if
some type of relationship existed between the selle r and the buyers in this case, it would not have

20 "Opinion Rendered by the Privatization Commission in Regard to the Minimum Value of Usinor-
Sacilor," submitted in GOF/Usinor 2 September 2003 Questionnaire Response, Appendix 4B.
21 French Section 129 determination, p. 9 (Exhibit EC-4).
22 The United States Court of International Trade, in its review of the USDOC's remand determination
in the Allegheny Ludlum case, found that the USDOC had correctly an alysed the GOF's sale of the shares in
1997 as part of the privatization process. See Allegheny Ludlum, 246 F. Supp. 2d, p. 1311.
23 Appellate Body Report on US – Countervailing Measures on Certain EC Products , footnote 4
(stating that "[t]he USDOC analyzed the sales conditions of the privatizations in two of the underlying sunset
reviews (Case Nos. 8 and 10) and three of the original investigations (Case Nos. 1, 2, and 4), concluding that
those five privatizations took place at arm's length and for fair market value," and citing, among others, the
remand determinations in Allegheny Ludlum and GTS).
24 French Section 129 determination , p. 12 (Exhibit EC-4) (concluding that "petitioners have not
sufficiently demonstrated that French or European market conditions at the time of Usinor's privatization were
distorted such that the relevant transaction price did not reflect fairly and accurately the subsidy benefits").
25 Black's Law Dictionary 82 (7th ed. 2000).
26 International Offering Prospectus, p. 25, submitted in GOF/Usinor 2 September 2003 Questionnaire
Response, Appendix 4G ("International Offering Prospectus").
27 The employee offering also included employees of affiliates in which Usinor held, directly or
indirectly, a majority interest. See International Offering Prospectus, p. 21.
28 International Offering Prospectus, p. 26.

affected the price at which the GOF sold Usi nor shares which had been based on independent
analyses of the valuation of the company. 29 In conducting its privatization analysis in the Section 129
determination, the USDOC concluded that "the em ployees of Usinor were related to Usinor" and,
therefore, "sales of shares to Usinor employees ... did not constitute an arm's-length transaction". 30
The USDOC did not even consider the relationship between the former employees of Usinor (or its
affiliates) and the seller in its analysis. Thus, th ere was no basis for the USDOC's conclusion that the
employee offering had not been at arm's length, and, in fact, evidence on the record indicates
otherwise.
4.8 Further, the sale of Usinor shares in the empl oyee/retiree offering had also been at FMV. As
discussed in the USDOC's Section 129 determinatio n, the eligible purchasers had two options: (1)
they could purchase the shares at the French public offering price of FF 86 per share; or (2) they could
pay a discounted price of FF 68.80 per share, with an extended payment period, if they agreed to hold
the shares for a minimum of two years.31 The discount offered to employees and former employees of
Usinor reflects the risk assumed by the buyers for the resale restrictions on the shares purchased. That
is, because the shares purchased by employees/former employees were less liquid, they were less
valuable on the market since it was unclear whether, after two years, the price for the shares would be
greater or lower. Thus, the price offered to employees/former employees had been at FMV,
accounting for the risk assumed by the purchasers for the non-liquidity of the shares.
32
(c) The United States is not in compliance with its WTO obligations with respect to the USDOC
determination in the French case
4.9 As indicated above, the SCM Agreement requires investigating authorities to examine the
conditions of a privatization and to determine wh ether the privatized producers received any benefit
from the prior subsidization to the state-owned prod ucers before deciding to continue to countervail
pre-privatization, non-recurring subsidies in sunset reviews. Where a privatization is at arm's length
and for FMV, there is a presumption that the bene fit provided to the state-owned producer has been
extinguished. Here, that presumption was warrante d and had not been rebutted. Accordingly, by

29 As indicated in the GOF's and Usinor's submi ssion in the Section 129 proceedings, the USDOC
noted in its Remand Redetermination in the Stainless Steel Sheet and Strip from France investigation that "in
setting the share values, the Ministry of Economic Affairs and Finance and th e French Privatization
Commission were guided by independent analyses of th e value of the shares. Objective and independent
valuations of a company will frequently provide a measure of the privatized company's full value". GOF/Usinor
28 July 2003 Questionnaire Response, Vol. I, p. 14 (quotation omitted).
30 French Section 129 determination, p. 6 (Exhibit EC-4).
31 French Section 129 determination, p. 6 (Exhibit EC-4); see also Ministry of Economic Affairs and
Finance, "Order of June 26, 1995 Whereby Terms for th e Privatization of Usinor-Sacilor Are Defined," Art. 3,
submitted in GOF/Usinor 2 September 2003 Questionnaire Response, Appendix 4F.
32 It is also common among public offerings throughout the world – including in the context of
privatizations – to offer shares to employees or former employees at a specific rate. See Steven L. Jones,
William L. Megginson, Robert C. Nash, and Jeffry M. Nette r, "Share issue privatizations as financial means to
political and economic ends," 53 J. Fin. Econ. 217, 238 (1999); accord Simon Leary, "Privatization Issue 12:
Key Steps in a Successful Public Offering,", p. 2, available at
http://www.pwcglobal.com/extweb/manissue.nsf/DocID/00727EB5FD8A54BE85256A64002FAC91 (last
visited 10 November 2004). In a study by the US General Accounting Office ("GAO") on privatization
practices in major developed countries, the GAO noted that the governments of these countries, in particular the
UK and France, have routinely offered set specific pri ces for employees in their privatizations, without
suggesting that such offerings were in any way exceptional. See US General Accounting Office, "Budget
Issues: Privatization/Divestiture Practices in Other Nations ,", p. 5-6, 13-14 (1995). In France, the privatization
law itself provides for the offering of a specific rate to employees and former employees so long as those shares
are retained for at least two years. See French Privatization Law of 1986, as amended, Art. 11, submitted in
GOF/Usinor 2 September 2003 Questionnaire Response, Appendix 4. Thus, the offering of shares at specific
prices to employees and former employees of a company in the context of privatization is common practice.

failing to revoke the countervailing duties imposed on corrosion-resistant carbon steel flat products
from France, the United States had acted inconsistently with its obligations under Article VI:3 of the
GATT 1994 and Articles 10, 14, 19.4, 21.1, and 21.3 of the SCM Agreement, and had failed to
implement the recommendations and rulings of the DSB.
3. Cut-to-length Carbon Steel (CTL) Plate from the UK and from Spain
4.10 The USDOC's "likelihood" determinations w ith respect to the UK and Spain were
inconsistent with the SCM Agreement and the GATT 1994 because the USDOC refused to consider:
(a) evidence on the record demonstrating that in bot h cases subsidies would not continue or recur; and
(b) whether, under the new privatization methodology, BS plc had been privatized in a manner that
extinguished the benefit conferred by non-recurring pre-privatization subsidies.
(a) The United States breached its WTO obligations by finding a likelihood of continuation or
recurrence on the basis of insufficient evidence
4.11 In both the UK and Spanish cases, the USDOC failed to meet its obligations under Article
21.3 of the SCM Agreement. Had the USDOC performed its "lik elihood" determination as required
under the SCM Agreement and considered all of the evidence on the record, it would have determined
that the subsidy programmes on which it relied ha d expired. In the UK case, Corus and the
Government of the UK (GUK) submitted evidence showing that Glynwed
33 no longer produced the
product under review.34.
4.12 This point was reiterated in the European Co mmunities' submission, which explained that
"[w]ith regard to any alleged non-recurring subsidies, Glynwed sold its facilities for producing
'universal wide flats' to the United States' compan y Niagara LaSalle, well before the sunset review.
This was an arms-length sale between two private companies, and would therefore have removed the
benefit of any prior subsidies to the buyer". 35 Moreover, Corus and the GUK also submitted evidence
to the USDOC in the Section 129 proceeding dem onstrating that all the subsidy programmes not
specific to BS plc, on which the USDOC may have relied in calculating the original CVD rate for
Glynwed, had been abolished or were no longer avai lable to the UK steel industry. Specifically, they
reviewed the four UK programmes36 that were not specific to British Steel, and which therefore could
have been included in the USDOC's calculation of Glynwed's subsidization rate in 1993.

33 Corus/GUK Section 129 determination, p. 5-6.
34 Glynwed was a UK producer of steel bar products, and apparently the width of one of its bar
products had fallen within the scope of the CTL Plate petition in 1992. However, on 21 May 1999, Glynwed
sold the equipment, inventory, and certain other assets of its bar-producing businesses to an unaffiliated US
producer, Niagara LaSalle.
35 European Communities Letter, p. 4.
36 The first of these programmes involved U.K. regional development grants under the Industry Act of
1972 and the Industry Development Act of 1982. Corus/GUK stated that "no regional grants under the two
statutes ... have been provided to Glynwed/Niagara LaSalle since 1988". Moreover, pursuant to Commission
Decision 2496/96 of December 18, 1996 , "as a matter of law regional deve lopment grants provided by HMG
were no longer available to steel producers as of 1997". "Accordingly, there is no prospect that, if the plate
order is revoked, any U.K. producer of plate could obtain a regional development grant under the two U.K.
industrial acts".
36 The second programme involved regional development grants under the European Regional
Development Fund ("ERDF"). Here again, Corus/GUK pointed out that "steel companies are no longer eligible
to receive ERDF regional development grants from the EC ". Accordingly, if the order were revoked, no U.K.
producer of plate could obtain subsidies under this programme. The third programme involved the European
Coal and Steel Community ("ECSC") Article 54 loans and interest rebates. As Corus/GUK explained, as of 23
July 2002, the ECSC no longer exists, so such loans and interest rebates can no longer be provided. Moreover,
the last ECSC Article 53 loan had been reimbursed in 1988. The final programme involved preferential
transportation rates provided by the government-owned British Rail. As Corus/GUK explained, "[t]he

4.13 These explanations as to the abolition of all th e subsidy programmes not specific to British
Steel, on which the original finding of subsidiza tion for Glynwed may have been based, remain
entirely unrebutted, and they eliminate any support for the assertion that the subsidization of Glynwed
by either the GUK or the European Communities w ould continue or recur if the CVD order on CTL
Plate were revoked. 37 For these reasons, the USDOC acted in consistently with the United States'
obligations under Article 21.3 of the SCM Agreement by refusing to consider evidence on the record
indicating that the non-privatized producer (G lynwed) no longer manufactured the product under
review and that the subsidy programmes found to be countervailable in the original investigation no
longer existed or were no longer available to steel producers.
4.14 The same was true for the Spanish case. The Government of Spain (GOS) and the European
Communities both submitted documents during the sunset review stating that: "most of the schemes
countervailed no longer exist or have ceased to pr ovide any meaningful benefits to the current
exporters of the product concerned[,] especially in view of the fact th at in the meantime most of the
subsidy would have been amortized".38 The European Communities then reviewed the schemes 39 that
had originally been countervailed, and noted that they no longer existed or would shortly cease to
exist.
4.15 As in the UK case, the abolition of the programmes that had been found to confer subsidies on
Aceralia entirely eliminated any support for the assertion that the s ubsidization of the privatized
Spanish producer by either the GOS or the Europe an Communities would continue or recur if the
CVD order on CTL Plate were revoked. For these r easons, the USDOC acted inconsistently with the
United States' obligations under Article 21.3 of the SCM Agreement by refusing to consider evidence
on the record that demonstrated that the subs idy programmes found to be countervailable in the
original investigation no longer existed or were no longer available to steel producers.
4.16 The USDOC justified its failure to consider th is evidence on the ground that in a Section 129
proceeding, it need only deal with the specific issue in which the WTO found a lack of compliance. 40
But this restrictive interpretation of the USDOC's role in bringing its practice into conformity with the
WTO's findings was based on a serious misundersta nding of a Member's obligations following a
determination that one of its measures was inconsistent with the SCM Agreement. It is not sufficient
for a Member merely to eliminate one erroneous aspect of the measure at issue, if to do so exposes
additional failures to comply with the obligations imposed by the SCM Agreement . Nor may the
Member refuse to attempt to bring those additiona l failures into compliance on the ground that they

privatization of British Rail was completed in 1997. Si nce the Government of the United Kingdom no longer
owns the rail service, there can no longer be any countervailable subsidies provided by the Government to steel
companies as a result of preferential rail transportation rates". (See Corus/GUK Section 129 Comments 7-10)
37 Moreover, as Corus/GUK explained in their Section 129 Comments, even if the USDOC were to take
the position that some of the subsidies allegedly received by Glynwed prior to 1991 were non-recurring, so that
the benefits continued until fully amortised, the level of unamortised benefits that would have remained at the
time of the sunset review POR (1999) would have been de minimis. See Corus/GUK Section 129 Comments, p.
10 n.14. Accordingly, this reasoning, which was not adopted by the USDOC in any event, cannot provide a
basis for asserting that subsidization would continue or recur if the CTL Plate order were revoked.
38 Response of the European Commission, sunset review: Countervailing Duty Proceeding on Cut-to-
Length Carbon Steel Plate from Spain, p. 3 (30 September 1999) ("EC Sunset -Review Response on Spain").
Accord Response of the Kingdom of Spain, Sunset Revi ew: Countervailing Duty Proceeding on Cut-to-Length
Carbon Steel Plate from Spain, p. 3 (30 September 1999).
39 Royal Decree 878/81 and the 1984 Council of Ministers Meeting, and the 1987 Government
Delegated Commission on Economic Affairs, no longer a pplied to the steel industry (the Law 60/78), or would
shortly cease to exist (Article 54 ECSC Loans) The latter programme in fact had since ceased to exist in light of
the expiry of the ECSC itself in July 2002. These points were reiterated to the USDOC by the GOS and the
European Communities in the Section 129 proceeding.
40 Spain Section 129 determination , p. 5 (Exhibit EC-3); UK Section 129 determination , p. 5 (Exhibit
EC-2).

were not considered in previous stages of the WT O dispute settlement proceedings. To the contrary,
as discussed above, in an Article 21.5 proceeding, the Panel's mandate is to "examine whether the new
measure ... [is] in conformity with, adhering to the same principles of[,] or compatible with" the WTO
Agreement cited by the complaining Member in its Panel Request.
41 Accordingly, a Member's duty
remains, throughout such proceedings, to ensure that the challenged measures were brought into
compliance with the Member's obligations under the WTO.
(b) The United States also breached its WTO obligati ons by failing to examine the privatizations
of BS plc and Aceralia
4.17 The USDOC also failed to act consistently with the SCM Agreement in these two Section 129
determinations, because it refused to examine whether the privatizations of BS plc and Aceralia were
at arm's length and for FMV. In light of the arguments presented above, the USDOC could not have
arrived at a conclusion of likelihood or recurrenc e of subsidization wit hout having examined the
nature of the UK and Spanish privatizations. Because it found independent bases for its likelihood
determinations, the USDOC did not even consider whet her the privatizations of BS plc or of Aceralia
were at arm's length and for FMV pursuant to the methodology set forth in its Modification Notice.
The USDOC's reasons for its failure were insu fficient to satisfy its obligations under the SCM
Agreement.
4.18 The undisputed evidence before the USDOC in fact demonstrated that the privatizations of BS
plc and Aceralia were at arm's length and for FMV, and that, therefore, the pre-privatization subsidies
granted to those companies had been extinguished. Indeed, in the Section 129 determination in the
UK case, Corus and the GUK submitted comments expl aining that in a prior proceeding, the USDOC
had "concluded that the privati zation of British Steel was an arm's length, fair market value
transaction".42 Based on this conclusion, the Appellate Body noted that "[t]he USDOC analyzed the
sales conditions of the privatizations in two of the underlying sunset reviews [citing, inter alia, the
CTL Plate from UK sunset review] and three of the original investigations ... , concluding that those
five privatizations took place at arm's length and for fair market value". 43 Similarly, in the Spanish
case, the evidence on the record showed that the privatization of Aceralia occurred at arm's length and
for FMV. The GOS stated in the Section 129 proceedings that "[n]one of the purchasers [in the
privatization] was related to the seller (the Spanish State) in any manner" and, therefore, "[t]he sale
was at arm's length".
44 As to FMV, the record indicated that three categories of purchasers of
Aceralia's shares participated in the privatizati on process: (1) 35 per cent of Aceralia's shares were
sold to the Arbed Group of Luxembourg; (2) 12.2 per cent of its shares were sold to the Spanish
industrial groups Corporación J.M. Aristrain and Corporación Gestamp S.L.; and (3) 52.76 per cent of
Aceralia's shares were sold to the general public by public offering.45 The share price paid by the first
two categories was € 17.75, while the share pr ice of the public offering was ESP 2080 (€ 12.50). 46
When the number of shares that were purchased by each of the three categories was multiplied by

41 Appellate Body Report on Canada – Aircraft, para. 37 (quotation omitted).
42 Corus/GUK 22 August 2003 Supplemental Questionnaire Response, Cover Letter, p. 2, citing
USDOC, Final Results Redetermination Pursuant to Court Or dered Remand on General Issue of Privatization,
British Steel plc v. United States , Consol. Ct. No. 93-09-00550-CVD, Slip Op. 95-17 and Order (CIT Feb. 9,
1995), p. 18 (17 July 1995). The USDOC had reached this conclusion in a court-ordered remand of the original
investigation, in which it determined th at "the UKG's sale of BS plc was at arm's length, for fair market value
and consistent with commercial considerations because the BS plc shares were offered to private investors
worldwide, the offering price was based on valuations of independent consultants, and private investors
purchased nearly the entire share offering".
43 Appellate Body Report on US – Countervailing Measures on Certain EC Products, footnote.4.
44 GOS 28 July 2003 Questionnaire Response, p. 5.
45 GOS 28 July 2003 Questionnaire Response, p. 2 and 10-11; GOS 5 September 2003 Questionnaire
Response, p. 6-7.
46 GOS 28 July 2003 Questionnaire Response, p. 11 and 22.

their respective share prices, the resulting total value at which the company was privatized was
approximately € 1,871,488,430. This amount was at the high end of the range of valuations obtained
from independent experts at the commencement of the privatization process, at the request of the GOS
– which ranged from € 1296.08 million to € 1895.69 million.47
4.19 By refusing to examine the privatizations of BS plc and Aceralia in its Section 129
determinations, despite the undisputed evidence that they had occurred at arm's length and for FMV,
the USDOC's determinations were not in complia nce with the conclusion of the Appellate Body
upholding the Panel's finding that the United States acted inconsistently with its obligations under
Articles 10, 14, 19.4, 21.1, and 21.3 of the SCM Agreement by "imposing and maintaining
countervailing duties without determining whether a 'benefit' continues to exist ... ".48
4. Failure to consider injury
4.20 Finally, the European Communities noted that the United States had maintained the above
three measures without examining whether expiry of the duty would be likely to lead to continuation
or recurrence of material injury as required by Article 21.3 of the SCM Agreement. This was a further
violation of the SCM Agreement and a further reason why the United States had failed to bring all
three of the measures into conformity with its obligations under the SCM Agreement.
B. F
IRST WRITTEN SUBMISSION OF THE UNITED STATES
1. Claims not properly before the Panel
4.21 The European Communities had improperly adva nced claims regardi ng both injury and
subsidization which are aspects of the determinati ons other than the "measure taken to comply" and
therefore the Panel should reject them.
(a) Injury
4.22 The European Communities' injury argument consists of one paragraph that simply asserts the
United States erred by not examining whether the expiry of the duty would be likely to lead to
continuation or recurrence of injury in accordance with Article 21.3 of the SCM Agreement. The ITC
did conduct this examination as part of the original sunset review, but the European Communities did
not, in the original proceedings, challenge this examination, nor, consequently, did the DSB issue
rulings relating to this determina tion. Therefore, there was no b asis for the European Communities'
claim, which had not been properly brought in the context of this Article 21.5 proceeding. The
recommendations and rulings made by the DSB in the underlying proceeding do not pertain to the
ITC determination. Thus, there can be no "mea sure taken to comply" with respect to the ITC
determination. As the Appellate Body stated in EC – Bed Linen (Article 21.5 – India) : "we do not see
why that part of a redetermination that merely inco rporates elements of the or iginal determination ...
would constitute an inseparable element of the meas ure taken to comply with the DSB rulings in the
original dispute".
49 Further, in that dispute, "India [sought ] to challenge an aspect of the original
measure which has not changed, and which the Eu ropean Communities did not have to change, in
order to comply with the DSB recommendations a nd rulings to make that measure consistent". 50
Likewise, in this dispute, the ITC determination had not changed, nor did the United States have to
change it in order to comply with the DSB recomm endations and rulings. Therefore, the European

47 GOS 28 July 2003 Questionnaire Response, p. 6-7; GOS 5 September 2003 Questionnaire Response,
p. 1-2.
48 Appellate Body Report on US – Countervailing Measures on Certain EC Products, para. 161(a).
49 Appellate Body Report on EC – Bed Linen (Article 21.5 – India), para. 86
50 ibid., para. 87

Communities' claim regarding injury was not within the terms of reference of this Article 21.5
proceeding.
4.23 The United States notes that the Panel and th e Appellate Body made their findings in EC –
Bed Linen in response to arguments advanced by the European Communities. For example, the
European Communities argued that: "India did not challenge these aspects of the original
determination in the original dispute, that the European Communities therefore had no
implementation obligation with respect to those aspect s of its original determination, and that the
European Communities therefore did not modify them in the redetermination".
51 Before the Appellate
Body, the European Communities argued that "it was under no obligation to correct ... its findings . . .
because the original panel had not ruled that these findings were inconsistent with Article 3.5". 52 The
European Communities' logic as expressed in EC – Bed Linen and adopted by the DSB was equally
applicable in this dispute.
(b) Subsidization
4.24 The European Communities had argued that USDOC 's findings in the revised sunset reviews
about Glynwed in the UK case and the recurring subsidy programmes in the Spanish case were
inconsistent with the SCM Agreement. The findings that subsidies continued to benefit Glynwed and
that there were recurring subsidy programs in the Spanish case were made in the original sunset
reviews. The European Communities did not cha llenge these aspects of the USDOC determinations
during the proceedings before the original panel, and neither the original panel nor the Appellate
Body made any findings concerning these programs, which did not involve use of the privatization
methodology. As the Appellate Body in EC – Bed Linen noted – and argued there by the European
Communities – a "measure taken to comply" does not include unchanged findings from the original
determination. Because the findings concerning Gl ynwed and the recurring subsidy program in Spain
were unchanged, and because the recommendations and rulings did not require them to be changed,
the European Communities cannot use the Article 21.5 process to challenge them now.
4.25 The European Communities had argued that the mand ate of an Article 21.5 panel is to review
the revised measure for its consistency with the agreement in question and that the Panel is not limited
to reviewing only the matters on which the DSB ad opted recommendations and rulings. In support of
this proposition, the European Communities refers to the Appellate Body report in the Article 21.5
proceedings in Canada – Aircraft and the Panel report in the Article 21.5 proceedings in EC –
Bananas (Ecuador). However, the European Communities misunderstands the relevance of Canada –
Aircraft and fails to take into account the Appe llate Body's further clarifications in EC – Bed Linen .
In Canada – Aircraft, for example, the Panel correctly evaluated whether the measure taken to comply
was consistent with the Member's WTO obligations ; however, as noted above, the measure taken to
comply does not include unchanged aspects of a measure not covered by the recommendations and
rulings of the DSB. Similarly, in EC – Bananas (Ecuador) , the Panel also evaluated whether the
measure taken to comply had been consistent. In this dispute, USDOC's findings regarding Glynwed
and the recurring subsidy programs in Spain were unchanged and did not have to be changed in
response to DSB rulings and recommendations. Therefore, they were not "measures taken to comply"
and were not subject to Article 21.5.
4.26 The United States also notes that the European Communities' panel request states its claim
under Article 21.5 as follows: "The United States faile d to properly determine whether, in these cases,
there was continuation or recurrence of subsidization and injury, because it did not examine the nature
of the privatizations in question and their impact on the continuation of the alleged subsidization".
53

51 Panel Report on EC – Bed Linen (Article 21.5 – India), para. 6.30
52 Appellate Body Report on EC – Bed Linen (Article 21.5 – India), para. 77
53 WT/DS212/15

Thus, the European Communities explicitly recognized that the privatization analysis had been the
sole basis for its Article 21.5 challenge to the new sunset determination. Th e privatizations and their
impact on the continuation of subsidization were precisely the matters that USDOC examined in the
revised sunset determinations in response to th e DSB recommendations and rulings. The European
Communities' claims in the present proceeding regarding Glynwed and the recurring subsidy
programs in Spain do not involve USDOC's treatment of the Br itish and Spanish privatizations, or
their impact and thus were not within the scope of the European Communities' Article 21.5 panel
request or this proceeding.
2. The European Communities bears the burden of proving its claims
4.27 It has been well established that the complaini ng party in a WTO dispute bears the burden of
coming forward with argument and evidence that estab lish a prima facie case of a violation. If the
balance of evidence and argument is inconclusive w ith respect to a particular claim, the European
Communities, as the complaining party, must be found to have failed to establish that claim. The
European Communities had not met its burden, for the reasons described as follows. Article 11 of the
DSU sets forth the standard of review for this Panel. With respect to disputes involving a
determination made by a domestic authority based upon an administrative record, the Appellate Body,
in US – Cotton Yarn , summarized the role of a panel under Article 11. 54 Thus, it was clear that the
Panel's task was not to determine whether the priva tization had been at arm's-length or for FMV, but
rather whether USDOC properly established the f acts and evaluated them in an unbiased and
objective way. Put differently, the Panel's task was to determine whether a reasonable, unbiased
person, looking at the same evidentiary record as the USDOC, could have – not would have – reached
the same conclusions.
3. USDOC's application of its new privatization methodology to the revised French sunset
review is consistent with the SCM Agreement and the DSB recommendations and rulings
4.28 As noted above, both parties accepted the genera l principle that non-recurring subsidies may
be allocated over time. The DSB found, however, that where the subsidy recipient is privatized in an
arm's-length sale for FMV, the benefit stream is presumed to be extinguished. The terms "arm's
length" and "fair market value" were not used in the text of the SCM Agreement and were not to be
interpreted as though they were treaty text. As demonstrated below, USDOC's revised determination
in the corrosion-resistant steel from France case was entirely consistent with the DSB
recommendations and rulings, and was supported by th e evidence on the record before USDOC. This
Panel should reject the European Communities' claims in their entirety.
(a) USDOC's analysis of the Usinor privati zation is entirely consistent with the SCM Agreement
and the DSB recommendations and rulings
4.29 If the investigating authority finds that a priva tization was at arm's length and for FMV, then
in making its subsidy determination, it must find, absent evidence to the contrary, that the pre-
privatization subsidy benefits have been extin guished. USDOC's new privatization methodology
implements these principles verbatim. Because the arm's-length/FMV test was not found in the text
of the SCM Agreement , that Agreement does not provide a methodology for analyzing whether a
transaction is at arm's-length or for FMV. It is therefore within a Member's discretion to develop a

54 "[P]anels must examine whether the competent authority had evaluated all relevant factors; they must
assess whether the competent authority had examined all the pertinent facts and assess whether an adequate
explanation had been provided as to how those facts support the determination; and they must also consider
whether the competent authority's explanation addresses fully the nature and complexities of the data and
responds to other plausible interpretations of the data. However, panels must not conduct a de novo review of
the evidence nor substitute their judgement for that of the competent authority".

reasonable methodology for addressing these issues. Mo reover, because of the fact-intensive nature
of the inquiry, the appropriate analytical appro ach may vary from case to case. Nevertheless, the
European Communities argued that USDOC wa s obligated to evaluate whether the average price for
all of the French privatization transactions was at FMV. In the European Communities' view,
therefore, it was impermissible for USDOC, in exam ining the French privatization transactions, to
take into account the evidence that these transactions were accomplished by means of four distinct
groupings of purchasers. There was simply no basis for this view. To the contrary, USDOC analyzed
the issue of whether Usinor was sold at arm's le ngth and for FMV in a manner that had been entirely
consistent with those concepts as used by the Panel and the Appellate Body.
4.30 If a privatization at arm's length and for FM V extinguishes the subsidy benefit, it follows
logically that the benefit from a non-recurring financial contribution continues if a portion of the
company was not sold at arm's length and for FMV. This had been precisely the approach USDOC
took in the Usinor case. The Usinor privatization had been divided into four separate and distinct
parts, each targeting a different group of investors and resulting in a different price. One of those
groups was comprised of company employees. As discussed further below, USDOC found that the
relationship between the company and its employe es was not at arm's length. Moreover, USDOC
found that the privatization processes were different for each of the four groups and that the 5.16 per
cent of Usinor's shares sold to its employees were sold for less than FMV. Thus, USDOC determined
that the 5.16 per cent of the allo cated pre-privatization benefit wa s not extinguished. The remaining
94.84 per cent of the allocated benefit was found to be extinguished by the sale of the remaining
portion of the company in arm's-length transactions for FMV.
4.31 The analytical approach describ ed above was entirely consistent with the Panel's finding that
pre-privatization subsidies were extinguished wh ere the privatized producer, an amalgam of the
company and its new owners, receives "nothing for fr ee". To the extent that a portion of the company
was sold for less than FMV, th e privatized producer received something "for free". USDOC's
analysis of the Usinor privatization established th at the privatized Usinor did, in fact, receive
something "for free" to the extent that some of the purchasers – Usinor employees – did not pay FMV
for the so-called "preferential" shares. It was therefore entirely reasonable for USDOC to determine
that a corresponding portion of the pre-privatization benefit continues.
4.32 The European Communities had failed to provid e any basis for its claim that USDOC was
obligated to use an "average price" analysis. Th e European Communities' argument, in fact, ignores
the fundamental importance of determining that the privatization was at arm's length and for FMV.
There was simply no basis to conclude that USDOC had been required to disregard, for purposes of
the privatization analysis, the no n-arm's-length/non-FMV sale of shares to the employees of Usinor.
As demonstrated below, USDOC properly consider ed those transactions and its conclusions were
supported by the evidence.
(b) USDOC properly found that the sale of shares to Usinor's employees was not at arm's length
4.33 The evidence on record amply demonstrates that sales to Usinor's employees were not at arm's
length. To the contrary, the sales were openly acknowledged to be preferential. Moreover, the
evidence that the employees did not pay FMV for the portion of the company they acquired was
overwhelming. The European Communities' arguments to the contrary were premised on assumptions
about what constitutes an arm's-lengt h sale that have no basis in the SCM Agreement , or in the
recommendations and rulings of the DSB. The SCM Agreement does not refer to "arm's length", and
neither the Panel nor the Appellate Body provided an y elaboration on this term . The "arm's-length"

definition55 applied by USDOC is, however, entirely cons istent with the ordinary understanding of
that term.
4.34 Consistent with this definition, to determine wh ether sales of Usinor's shares were at arm's-
length, USDOC first considered the existence of relationships that would indicate the sales were not at
arm's length. USDOC found such a relationship with respect to Usinor employees. USDOC's
approach recognizes that the respective interests of employers and employees may not be
distinguishable and that members of the "corporat e family" often treat each other more favourably
than they do others outside the family – a point bo rne out by the admittedly preferential nature of the
employees stock purchases in this case. USDOC th en proceeded to examine the terms of the
transaction between Usinor and its employees to de termine whether those terms would have existed
had the transaction been between unrelated pa rties. As USDOC explained these purchasers
[employees] had two options: (1) they could purch ase shares at the French public offering price of
FF 86 per share, or (2) they could pay a discounted price of FF 68.80, with an extended payment
period, if they agreed to hold the shares for two y ears. Additionally, they were eligible to receive
bonus shares if they held the shares for specified periods. Thus, the employee offering was clearly
distinguishable from the public offerings and was op enly characterized as "preferential" in Usinor's
Prospectus.
4.35 Because there had been a preferential option available to employees that had not been
available to unrelated parties, USDOC concluded th at the terms of the transaction were different as a
result of the relatedness of the parties and, hence, th at the transactions were not at arm's length. The
European Communities maintained that USDOC's arm's-length analysis had been in error because
USDOC confused the company (Usinor) and its ow ner (the GOF), finding only that Usinor's
employees were related to Usinor, not to the GOF. The facts, however, indicate that the GOF offered
preferential share prices to the employees of a company that it entirely owned, demonstrating that it
did not deal with those employees at arm's length for purposes of the privatization. Moreover, the
DSB rationale for finding that a benefit may be ex tinguished by an arm's length, FMV privatization
hinges on the assumption that there was little distin ction between the company and its new owners.
Ironically, the European Communities now appears to argue that, for purposes of determining whether
a privatization transaction is at arm's length, ther e is a significant distinction between a company and
its owners.
(c) USDOC properly found that the sale of shares to Usinor's employees was not for FMV
4.36 USDOC's finding that the sale of shares to Usinor's employees had not been for FMV was
reasonable and overwhelmingly supported by th e evidence on the record . Once again, the SCM
Agreement does not contain this term. In its determination, USDOC considered what the "full amount
that the company or its assets (including the value of any subsidy benefits) were actually worth under
the prevailing market conditions was paid, and paid through monetary or equivalent compensation".
One means of performing that analysis might be to find market benchmarks in the form of actual sales
of comparable companies. In those circumstances, USDOC found none and based its examination of
FMV on various aspects of the transaction process. Specifically, USDOC examined the "process
factors" set forth in the Modification Notice: objective analysis, artificial barriers to entry, acceptance
of the highest bid, and committed investment. US DOC's approach to the FMV analysis is supported
by Article 14 of the SCM Agreement, which defines the benefit from government equity infusions in
terms of whether the government ac tion is consistent with "the us ual investment practice (including

55 "In considering whether the evidence presented demonstrates that the transaction had been conducted
at arm's length, the United States would be guided by th e SAA's definition of an arm's-length transaction, noted
above, as a transaction negotiated between unrelated par ties, each acting in its own interest, or between related
parties such that the terms of the transaction are those that would exist if the transaction had been negotiated
between unrelated parties. " Modification Notice

for the provision of risk capital) of private investors in the territory of that Member [the Member that
is bestowing the benefit]".
4.37 Because the Usinor privatization was not accomplished through a bidding process, USDOC
did not consider whether the GOF accepted the high est bid. Rather, USDOC considered the sales
process and whether the GOF received a price that maximized its return. Further, regarding the
committed investment factor, i.e. whether buyers of Usinor's shares were required to undertake certain
post-sale investments, or observe certain post-sale restrictions, USDOC found that there was no
evidence to indicate that any of the committed invest ments distorted the amount that the buyers were
willing to pay.
4.38 USDOC found that the GOF had conducted an objective analysis that it used in structuring the
Usinor privatization. That analysis indicated a minimum value of FF 15,750 billion for Usinor.
Minimum value and FMV are, however, distinctly different concepts. FMV is based on the results of
a market process, not merely on a pre-sale appraisal. USDOC therefore never considered the
minimum value to be the FMV of the company. Regarding artificial barriers to entry for the
employee sales, USDOC found that the employee shar es could be purchased only by current and past
employees of Usinor. Hence, by the very te rms defining the employee pool, numerous potential
purchasers were excluded from purchasing these shar es. Unlike the terms defining the employee
pool, the international offering and the French offe ring did not involve meaningful limitations on the
competition for shares.
4.39 As to purchase price, USDOC's general approach was to look to see whether the GOF charged
a market-clearing price for its shares of Usinor. A market-clearing price is one that equates the supply
of shares to the demand for shares. If the GOF set the offering price for Usinor's shares too low, the
offering would have been oversubscr ibed and many people seeking shares would have been unable to
obtain them. Conversely, if the GOF set the offeri ng price too high, the offering would have been
undersubscribed. Given the oversubscription to the Fren ch offering at the FF 86 price, the fact that
shares were moved from the international offering to the French offering, and the number of shares
sold at each of the two prices, USDOC found that the market-clearing price for Usinor's shares was
between FF 86 and 89. Usinor's employees, on the other hand, had the opti on of purchasing shares
for FF 68 per share – well below the market-clearing price. Based on these uncontested facts,
USDOC concluded that the sale of shares to Usi nor employees had not been for FMV, both because
of the limitations in the purchaser pool and the failure of Usinor to set the share price for employees at
anything close to a market-clearing level.
4.40 The European Communities main tained that USDOC's FMV an alysis had been in error
because "[t]he discount offered to employees and former employees of Usinor reflects the risk
assumed by the buyers for the resale restrictions on the shares purchased". Resale restrictions per se
provide no explanation for the subs tantial discount afforded Usinor's employees. To the contrary,
resale restrictions in the Usinor privatization were not limited to company employees. Purchasers in
the French offering as well as the stable sharehol ders were subject to similar restrictions.
Nevertheless, the share prices for the latter two grou ps were well above the preferential price for the
employees. Moreover, if the European Communities' argument were correct, one would expect the
European Communities to be able to provide ev idence that employees were equally (or virtually
equally) likely to participate in the French public of fering as they were to participate in the employee
offering. The European Communities had offere d no such evidence. Nor had the European
Communities offered any demonstration of how the discount offered to employees was supposed to
reflect the risk assumed by the buyers for the re sale restrictions. In sum, USDOC reasonably
concluded that the sale of shares to Usinor's employees had not been at arm's length or for FMV.
These conclusions should therefore be affirmed by the Panel.

4. In the revised UK and Spain sunset revie ws, USDOC assumed that all allocable pre-
privatization subsidies had been extinguished by the privatizations in question and
thereby implemented the DSB recommendations
4.41 In the revised sunset review determinations in the UK and Spanish cases, USDOC assumed
for purposes of its analysis that the pertinent pr ivatizations had extinguished all allocable pre-
privatization subsidies. USDOC nevertheless concl uded that, in both of those cases, there remained
an affirmative likelihood of continuation or r ecurrence of a countervailable subsidy. Those
determinations were based on evidence wholly unrelated to pre-privatization subsidies. For example,
in the UK case, one company (Glynwed) was never owned by the UK government. Glynwed
therefore continued to benefit from all subsidies that had been bestowed upon it. In the Spanish case,
there were also recurring (nonallocable) subsidies to the privatized company (Aceralia) that continued
after privatization. Despite the fact that USDOC di d not rely on pre-privatization subsidies to these
companies in determining that they would continue to benefit from subsid ies if the countervailing
duty orders were revoked, the European Communiti es challenged the revised determinations on the
grounds that USDOC failed to examine whether th e UK and Spanish privatizations were at arm's
length and for FMV. The European Communities' argument elevated form over substance. USDOC
assumed that the privatizations in the UK and Spain were at arm's-length and for FMV. Because
USDOC did not rely on pre-privatization subsidi es, its revised determination simply cannot be
inconsistent with the DSB recommendations.
C. S
ECOND WRITTEN SUBMISSION OF THE EUROPEAN COMMUNITIES
1. The Panel's terms of reference for this Article 21.5 proceeding
4.42 The United States asserted that the European Communities had improperly advanced claims
regarding both injury and subsid ization, because these claims concern part of the United States'
original sunset determinations in 2000, and that, ha ving failed to raise those issues before the original
panel and Appellate Body, the European Commun ities was now foreclosed from doing so in this
Article 21.5 proceeding.56 For the following reasons, the United States' assertion was incorrect:
(a) The Section 129 determinations concerning th e UK and Spain were new measures based on
new reasoning
4.43 The Section 129 determinations at issue in this proceeding were measures taken by the United
States to comply with the recommendations and rulin gs of the DSB. The United States admitted this
in its First written submission: The United States attempted to dissociate certain aspects of these
determinations – the failure to examine the evidence in respect of the UK and Spanish cases and the
failure to re-examine injury – from the "measur es taken to comply". The legal claim that the
European Communities made in the original WT O proceedings was that the United States, in
maintaining countervailing duties without properly analysing the likelihood of continuation or
recurrence of subsidization, violated, inter alia , Article 21.3 of the SCM Agreement . This was
confirmed by the Panel who found that the measures challenged in the original proceeding were based
on insufficient determinations by the USDOC. Th e United States could continue to maintain the
challenged measures only if it were to find alterna tive, sufficient grounds on which they could be
based. Therefore, the USDOC responded by issui ng what the United States itself acknowledged were
"new determinations"57, based on a revised analysis of the UK and Spanish programmes, comprising
"measures taken to comply with the recommendations and rulings" of the DSB.

56 US First written submission, paras. 14-21

4.44 The United States asserted that an aspect of a measure which was before the original panel
and Appellate Body and which had not changed was not properly before an Article 21.5 panel, relying
for its support on the Appellate Body's decision in EC – Bed Linen .
58 However, in EC – Bed Linen ,
India raised in the Article 21.5 proceeding the same claim as it had in the original proceedings
regarding a component of the implementing measure that remained unchanged from, and was part of,
the original measure, and which had been " not found to be inconsistent with WTO obligations ".59
Whereas, in the present case, the European Communities had raised new claims concerning
components of the new measures which were not part of the or iginal measure. Indeed, the situation
before the present Panel was more akin to the situation which faced the 21.5 panel in Canada –
Aircraft (Article 21.5 – Brazil) . Contrary to the assertions in the US First written submission, the
Section 129 determinations as to the UK and Spain were "new" sunset review determinations based
on different reasoning. In both of the original s unset review determinati ons, the USDOC concluded
that there was a likelihood of continuation or recurrence because none of the producers/exporters
concerned participated in the review. Because of their non-cooperation, the USDOC made the
adverse assumption that there was a likelihood of con tinuation or recurrence of subsidization, without
examining any of the facts put on the record by the Governments of Spain and the United Kingdom
and the European Commission respectively, and w ithout revisiting its analysis of any of the
programmes at issue, 60 rather relying on findings it had made in the original investigations of the
existence of certain subsidy programmes. 61 Thus, the reasoning of th e Section 129 determinations,
based on the existence of certain subsidies purporting to justify a finding of likelihood of continuation
of recurrence, was different from the USDOC's reas oning in the original sunset reviews, where the
finding of likelihood of con tinuation or recurrence was based on assumptions drawn from the
respondents' failure to cooperate. Consequently, the Section 129 dete rminations were new measures
based on new reasoning.
(b) The factual findings purporting to justify the reasoning in the UK and Spanish case s are
clearly different
4.45 Even assuming, arguendo, that the two forms of reasoning ( i.e., the likelihood of continuation
or recurrence arising from the respondents' non- cooperation, and that ar ising from the alleged
existence of certain subsidy programmes) could be considered unchanged, the underlying bases -- that

58 US First written submission, paras. 15-20
59 Appellate Body Report on EC – Bed Linen (Article 21.5 – India), para. 89 (emphasis added); see also
id. at paras. 80-88.
60 Issues and Decision Memo for th e Expedited Sunset Review of the Countervailing Duty Order on
Cut-to-Length Carbon Steel Plate from the United Kingdom; Final Results (29 March 2000), p. 12-14 (" Sunset
Review of CTL Plate from the UK ") (Exhibit EC-6). This document was submitted in the original panel
proceeding as Exhibit EC-18. See also Issues and Decision Memo for the Expedited Sunset Review of the
Countervailing Duty Order on Cut-to-Length Carbon Steel Plate from Spain; Final Results (29 March 2000 )
("Sunset Review of CTL Plate from Spain"), p. 16-18. (Exhibit EC-7). This document was submitted in the
original panel proceeding as Exhibit EC-22.
The Appellate Body has recently ruled that the assumption of the likelihood of continuation or
recurrence of dumping in the event of non-cooperation is inconsistent with Article 11.3 of the Anti-Dumping
Agreement (the equivalent of Article 21.3 of the SCM Agreement) because an investigating authority has an
"obligation" to "arrive at a reasoned conclusion on the basis of positive evidence". See Appellate Body Report,
US – Oil Country Tubular Goods Sunset Reviews, para. 234 (citation and quotation omitted).
61 In the UK case, the USDOC found, that, even assu ming the British Steel privatization to be at arm's
length and fair market value, "we would still make an affirmative likelihood determination based on the
determination in the Final Sunset Results
 that programs previously determined to provide countervailable
subsidies and/or benefit streams from such products continue to benefit Glynwed, the other producer/exporter of
the subject merchandise". UK Section 129 determination , p. 4 (Exhibit EC-2). In the Spanish case, USDOC
held, making similar assumptions for Aceralia, that "we would still make an affirmative likelihood
determination based on the fact that subsidy programs that have provided recurring, non-allocable subsidies at
above de minimis rates continue to exist". Spanish Section 129 determination, p. 3 (Exhibit EC-3).

is, the factual findings purporting to justify the reaso ning -- were clearly different in the two cases. In
the original sunset review determinations in both the UK and the Spanish case s, although the
determination of likelihood was made because of the non-cooperation of the producers/exporters, the
information the USDOC reported to the United Stat es International Trade Commission regarding the
"nature of the subsidies" allegedly provided, and which were thus examined for a causal link to injury,
concerned a different company or a different set of programmes from those relied upon by the
USDOC in the Section 129 determinations. In its Section 129 determination in the UK case, for
example, the USDOC focused exclusively on pr ogrammes that benefited Glynwed, because it
assumed that all countervailable benefits that had previously been conferre d upon BS plc had been
extinguished through the company's privatization. 62 In contrast, in the sunset review determination
considered in the original WTO proceedings, th e USDOC identified exclusively programmes that
benefited BS plc.63 There was no reference in the USDOC's anal ysis of the nature of the subsidies to
Glynwed at all.64 Thus, assuming, arguendo, that the original sunset determination was not based on
an assumption triggered by the producer/exporters' non-cooperation, but on a finding purporting to be
positive evidence, the exclusive b asis upon which the USDOC reached its finding in the Section 129
determination was distinct from that upon which it reached its conclusion in the sunset review at issue
in the original WTO proceedings.
4.46 Likewise, in the Spanish case, the determinati on at issue in the original WTO proceedings
was based primarily on thirteen subsidy progr ammes that allegedly conferred non-recurring and
recurring benefits.65 In contrast, the determination at issu e in this Article 21.5 proceeding was based
exclusively on programmes that allegedly provided recurring subsidies, and the USDOC had only
specified one such programme.66 Thus, the bases upon which the USDOC focused its determinations
regarding the UK and Spanish cases in its original sunset review and its Section 129 determination
were distinct and, therefore, the measures at issue were "different".
4.47 Because the measures at issue in this Article 21.5 proceeding were "new" and "different" from
those considered in the original WTO proceedings and because they were taken to comply with the
recommendations and rulings of the DSB, the fu nction and scope of Article 21.5 proceedings
discussed by the Appellate Body in Canada – Aircraft (Article 21.5 – Brazil) were applicable to this
dispute. Accordingly, the new claims presented by the European Communities concerning the "new"
and "different" measures at issue in this Article 21.5 proceeding were properly before this Panel.
4.48 Likewise, the European Communities' injury argum ent was properly before this Panel. In the
Section 129 determinations regard ing the UK and Spain, the USDOC assumed for the first time that
the privatizations of BS plc and Aceralia were at arm's length and for FMV. This had the effect of
significantly lowering the level of the countervailable subsidies that were found by the USDOC to be
likely to continue or recur in the event that th e countervailing duty orders were revoked. In the UK
case, the USDOC measured the countervailable subsidies provided to Glynwed at 0.73 per cent.
67 As
to Spain, the USDOC had previously measured the al legedly recurring subsidies provided to Aceralia
at 1.73 per cent.68 These figures were far lower than the 12.00 per cent for "all others"69 and 36.86 per

62 UK Section 129 determination, p. 3-4 (Exhibit EC-2).
63 Sunset review of CTL Plate from the UK, p. 17-19 (Exhibit EC-6).
64 Sunset review of CTL Plate from the UK, p. 17-19 (Exhibit EC-6).
65 Sunset review of CTL Plate from Spain, p. 16-18 (Exhibit EC-7).
66 Spanish Section 129 determination, p. 3 (stating that even if the USDOC were to determine that non-
recurring, allocable subsidies received by Aceralia prior to the 1997 privatization would not continue through or
after the period of review, "we would still make an affi rmative likelihood determination based on the fact that
subsidy programs that have provided recurring, non-allocable subsidies at above de minimis rates continue to
exist") (Exhibit EC-3).
67 Sunset review of CTL Plate from the UK, p. 19 (Exhibit EC-6).
68 In the Spanish determinations, the USDOC did not expressly indicate which subsidy programmes
were considered recurring in its Section 129 determinati on or in the original sunset review. In the original

cent
70 figures, respectively, which the USDOC had issu ed in the original sunset determinations.
However, because such changes to the subsidy ra tes resulted from the USDOC's revised subsidization
findings, the European Communities logically could not have argued at an earlier stage of WTO
proceedings that the USDOC's redetermination of th e subsidy rates required a reconsideration of the
injury determination. Had the USDOC properly analysed the UK and Spanish programmes at issue in
its Section 129 determinations, the USDOC would ha ve found that no subsidies would be likely to
continue or recur and that, therefore, the continua tion of countervailing duties was not warranted. In
an analogous situation, the Appellate Body in EC – Bed Linen (Article 21.5 – India) determined that it
was appropriate for the complaining party to raise the issue of injury in an Article 21.5 proceeding
where the investigating authority revised its findi ngs regarding the amount of imports found to be
dumped. Likewise here, the reduc tions in subsidy rates which the USDOC found in its revised
Section 129 determinations would likely have an impact on the United States' finding of injury.
Therefore, the United States was required to reconsider its injury determination.
(c) The claims raised by the European Communitie s concerning the UK and Spain are within the
scope of its panel request
4.49 The European Communities noted that in its requ est for the establishment of a panel in this
Article 21.5 proceeding, it had challenged the propriety of the United States' determinations in the UK
and Spanish case s that there was a "likelihood of continua tion or recurrence of subsidization and
injury". That is, that the United States had failed to meet its obligations, inter alia, under Article 21.3
of the SCM Agreement. This claim was based on a number of arguments, including that the USDOC
had failed to examine the nature and also the "impact [of the privatizations] on the continuation of the
alleged subsidization".
71 The European Communities challenged the USDOC's finding of a likelihood
of continuation or recurrence in light of the USDOC 's assumptions in its Section 129 determinations
that the privatizations of BS plc and Aceralia we re at arm's length and for FMV. Thus, the United
States' contention that the European Communities' claims in this proceeding regarding the UK and
Spain were "not within the scope of the Eu ropean Communities' Article 21.5 panel request" 72 was
incorrect.
2. Certain corrosion-resistant carbon steel flat products from France
(a) The privatization of Usinor was at arm's length and for FMV
4.50 The United States has asserted that the USDOC's revised determination in the French case
was consistent with the DSB recommendations and rulings and was supported by the evidence before
the USDOC.73 For the following reasons, the United States' assertions are incorrect.
(i) The SCM Agreement requires that a privatization be measured as to the company as a whole
4.51 Before determining that pre-privatization, no n-recurring subsidies are likely to continue, an
investigating authority in a sunset review would be obliged under the SCM Agreement to examine the
conditions of the privatization to determine whether the privatized producer continued to receive a

investigation, the USDOC only expressly indicated that one programme provided recurring subsidies – the Fund
for Employment Promotion and Early Retirement. The USDOC measured the recurring subsidies provided to
Aceralia in that programme at 1.73 per cent. See Final Affirmative Countervailin g Duty Determinations:
Certain Steel Products From Spain, 58 Fed. Reg. 37374, 37378 (1993).
69 Sunset review of CTL Plate from the UK, p. 19 (Exhibit EC-6).
70 Sunset review of CTL Plate from Spain, p. 18 (Exhibit EC-7).
71 US – Countervailing Measures on Certain EC Products , Recourse to Article 21.5 of the DSU by the
European Communities, Request for the Establishment of a Panel, WT/DS212/15 (17 September 2004), p. 2.
73 US First written submission, paras. 28-47.

benefit from prior subsidization to the state-owned producer. As the Appellate Body stated in this
case:
"the obligation under Article 21.2 of the SCM Agreement ... requires an investigating
authority in an administrative review, upon receiving information of a privatization
resulting in a change in ownership, to de termine whether a "benefit" continues to
exist. In our view, the SCM Agreement, by virtue of Articles 10, 19.4, and 21.1, also
imposes an obligation to conduct such a dete rmination on an investigating authority
conducting a sunset review. As we observe d earlier, the interplay of GATT Article
VI:3 and Articles 10, 19.4 and 21.1 of the SCM Agreement prescribes an obligation
applicable to original investigations as well as to reviews covered under Article 21 of
the SCM Agreement to limit countervailing duties to the amount and duration of the
subsidy found to exist by the investigating authority."
74
4.52 A privatization that occurs at arm's length and for FMV creates the presumption that any
"benefit" from prior subsidization to the state-owne d producer was extinguished and, therefore, that
continuation of the countervailing duties was not warranted. As the Appellate Body explained:
"The effect of such a privatization [at ar m's length and for FMV] is to shift to the
investigating authority the burden of iden tifying evidence which establishes that the
benefit from the previous financial contribution does indeed continue beyond
privatization. In the absence of such proof, the fact of the arm's length, fair market
value privatization is sufficient to comp el a conclusion that the "benefit" no longer
exists for the privatized firm, and, theref ore, that countervailing duties should not be
levied."
75
4.53 Although this Panel and the Appellate Body did not specify a methodology for determining
under what circumstances a privatization has occurred at arm's length and for FMV, these factors
were nevertheless discussed in the cont ext of the privatization of the firm as a whole. The Panel and
Appellate Body did not discuss whether each component of a privatization was at arm's length and for
FMV, contrary to the USDOC's incorrect method in its Section 129 determination and contrary to the
United States' suggestion in its First written submission.
76
4.54 For example, the Panel stated:
"[w]e believe that privatization calls for a (re)determination of the existence of a
benefit to the privatized producer, and th at fair market value payment by the
privatized producer (and its owners) extinguishes the benefit resulting from the prior
financial contribution (subsidization) bestowed upon the state-owned producer,
because no advantage or benefit accrued to that privatized producer over and above
what market conditions dictate pursuant to Article 14 of the SCM Agreement."77
The Panel also stated that:

"if upon privatization, fair market valu e is paid for all productive assets, goodwill,
etc. employed by the state-owned producer , the Panel fails to see how the subsidies

74 Appellate Body Report on US – Countervailing Measures on Certain EC Products , para. 149
(citations and emphasis omitted).
75 Appellate Body Report on US – Countervailing Measures on Certain EC Products, para. 126.
76 French Section 129 determination , p. 3-12 (Exhibit EC-4); see also US First written submission,
paras. 28-33.
77 Panel Report on US – Countervailing Measures on Certain EC Products , para. 7.77 (emphasis
added)

bestowed to the state-owned producer could subsequently be considered to still confer
a "benefit" on the privatized producer (in the sense of the company together with its
owners) who has paid fair market value for all the shares and assets, reflecting, we
must assume, the value of past subsidization."
78
4.55 Likewise, quoting from its Report in US – Lead and Bismuth II , the Appellate Body stated
that "the Panel made factual findings that UES and BS plc/BSES paid FMV for the productive assets,
goodwill, etc. they acquired from BSC and subsequent ly used in the production of leaded bars
imported into the United States in 1994, 1995 and 1996".79
4.56 Moreover, considering whether the "p rivatized producer (and its owners)" 80 as a whole paid
FMV, rather than whether each component of th e sale of the company was at FMV, was the only
correct interpretation of the obligations established by the SCM Agreement . The contrary
interpretation would allow countervailing duties to c ontinue to be applied notwithstanding the fact
that the value received by the producer as a whole was greater than or equal to the FMV of the
company. The USDOC, however, reached this conclu sion without taking into account the fact that a
significant proportion of the purchasers of Usinor's shares ( i.e., the stable shareholders) actually paid
prices that were greater than the prices identified by the USDOC as market-clearing prices, and that
most purchasers paid prices that were within the market-clearing range. Had the USDOC evaluated
the privatization as a whole by, for example, evaluating the average price paid per share overall, the
unavoidable conclusion would have been that the privatization of Usinor was for FMV.
(ii) The USDOC previously found and accepted before th e Appellate Body that the privatization
of Usinor was at arm's length and for FMV
4.57 The finding by the USDOC in the French case th at the privatization of Usinor was not at
arm's length and for FMV was particularly troubling in light of the fact that the USDOC in two other
cases reached precisely the opposite conclusion. As stated by the Appellate Body, "[t]he USDOC
analyzed the sales conditions of the privatization of Usinor, in the remand determinations in Allegheny
Ludlum (Case No. 1) and GTS (Case No. 2), concluding that those five privatizations took place at
arm's length and for FMV."
81 Further, the United States did not contest before the Panel and the
Appellate Body that "the sales [ i.e., all the privatizations] were at arm's length and for fair market
value".82 The United States has, in this proceeding, failed to offer any explanation whatsoever for
these contradictory outcomes.
Arm's length
4.58 In considering whether a privatization has occurre d at arm's length, an investigating authority
must focus on the degree of post-privatization independence from the government of the purchasers of
the company's shares. In the current case, it was clea r that after the privatization of Usinor, there was
no relationship whatsoever between the seller, the GOF, and the buyers, the employees/retirees of
Usinor. After the privatization, the GOF held only an insignificant interest in Usinor, and, therefore,
the relationship between GOF and the employees/re tirees of Usinor was unque stionably independent
(the European Communities maintains that the rela tionship was, in any event, independent, even
before the privatization).

78 Panel Report on US – Countervailing Measures on Certain EC Products , para. 7.72 (emphasis
added).
79 Appellate Body Report on US – Countervailing Measures on Certain EC Products , para. 142
(emphasis added and omitted).
80 Panel Report on US – Countervailing Measures on Certain EC Products, para. 7.77.
81 Appellate Body Report on US – Countervailing Measures on Certain EC Products, footnote.4.
82 Appellate Body Report on US – Countervailing Measures on Certain EC Products, para. 84.

4.59 Even assuming arguendo that the concept of "arm's length" refers to the non-existence of
some type of special relationship between the government and the purchasers at the time of the sale, it
was clear that the USDOC's analysis was inadequa te. The USDOC appears to have merely assumed
that the employees/retirees of Usinor and the seller of Usinor's shares (the GOF) were related because
"the employee offering was clearly distinguish able from the public offerings and was openly
characterized as 'preferential'."
83 However, the mere fact that Usinor shares were offered at allegedly
preferential rates to employees/retirees of Usinor per se does not mean that the seller and the buyers
of the shares were related. Purchasers in the Fren ch public offering, for exam ple, were also offered
preferential treatment (i.e. a certain number of shares for free). 84 The USDOC found that the
purchasers of the French public offering "were not related to the seller" and that, therefore, those sales
"constituted arm's-length transactions".85
4.60 The United States, in its first written submi ssion, alleged that because the GOF offered
preferential share prices to employees of a company that it owned, it did not deal with those
employees at arm's length.
86 However, just because Usinor was owned by the GOF at the time of the
sale of the shares does not lead to the conclusi on that Usinor's employees were employees of the
Government. In fact, according to the Internati onal Offering Prospectus , despite its ownership
interest, the GOF was not involved in the day-to -day management of Usinor. Therefore, the
employee purchasers were at least two steps remo ved from having any direct relationship with the
GOF, the seller of Usinor shares.87 Further, the employee offering included former, as well as current,
employees of Usinor. There was no evidence whatso ever that any relationship existed between the
former employees of Usinor and the GOF that co uld support a conclusion that the sales to this
category of purchasers were not at "arm's length".
4.61 In conducting its privatization analysis in its Section 129 determination, the USDOC failed to
evaluate how or why the employees of Usinor were allegedly related to the seller. It just assumed that
they were. Additionally, the USDOC did not even consider the former employees. In light of the
above, it follows that there was no basis for th e USDOC's conclusion that the employee/retiree
offering was not at arm's length, and, in fact, evidence on the record suggests otherwise.
Fair market value (FMV)
4.62 Further, the sale of Usinor shares in the empl oyee/retiree offering was at FMV. That this was
so was evident from the fact that the discount offered to employees and retirees of Usinor reflects the
risk assumed by the buyers for the resale restric tions on the shares purchased. The United States'
argument that resale restrictions per se "provide no explanation for th e substantial discount afforded
Usinor's employees"88 is unpersuasive. The restrictions pl aced upon the French public offering and
the stable shareholder offering, to the extent they were applicable, were not as restrictive as those
required of the employees/retirees of Usinor. The resale restrictions imposed on purchasers in the
French public offering were applicable only where purchasers acquired free shares and were less
severe than for the purchasers in the employee/retir ee offering who chose to purchase the shares at a
discount rate ( i.e., required holding period of 18 months v. 24 months). Similarly, the resale
restrictions imposed on the stable shareholders were not as severe as they were in the

83 French Section 129 determination, p. 6 (Exhibit EC-4).
84 International Offering Prospectus for Usinor Privatization, p. 22, submitted in GOF/Usinor 2
September 2003 Questionnaire Response, Appendix 4G (indicating that "[i]n the French Public Offering,
individuals will be entitled to receive from the French State a certain number of free Shares based on the number
of Existing Shares purchased by such individuals and held for a period of at least 18 consecutive months")
("International Offering Prospectus") (Exhibit EC-8).
85 French Section 129 determination, p. 5 (emphasis added) (Exhibit EC-4).

employee/former employee offering they were only prohibited from selling all of the shares for the
first 3 months and were then able to sell a li mited number of shares for the next 15 months.
Thereafter, they were able to sell their shares to any third party.
89 In light of these facts, there was no
merit to the United States' argument that resale r estrictions did not provide a basis for offering a
20 per cent discount to Usinor's employees/retirees, or that the sales of shares to the
employees/retirees were not FMV.
(b) The United States is not in compliance with its obligations under the WTO
4.63 By failing to revoke the countervailing duties imposed on certain corrosion-resistant carbon
steel flat products from France in light of the fact that the privatization (whether considered as a
whole or, alternatively, from the perspective of the employee/retiree offering) occurred at arm's length
and for FMV, the United States has acted inconsiste ntly with its obligations under GATT Article VI:3
and Articles 10, 14, 19.4, 21.1 and 21.3 of the SCM Agreement and has failed to implement the
recommendations and rulings of the DSB.
3. CTL plate from the UK and from Spain
4.64 The United States, in its first written submi ssion, argued that the European Communities'
claims challenging the USDOC's findings that subs idies continued to benefit the producers of the
products involved in the sunset reviews in the UK and Spanish case s were not properly before this
Panel.90 As discussed above, the United States' assertions were unfounded. 91 Moreover, the United
States failed to challenge the merits of the Eur opean Communities' arguments regarding the USDOC's
subsidy findings. Nevertheless, it was clear that the United States breached its WTO obligations by
finding a likelihood of continuation or recurrence on th e basis of insufficient evidence. In both the
UK and Spanish cases, the USDOC failed to consider evidence on the record demonstrating that the
programmes found to confer countervailable benefits no longer existed and/or no longer applied to the
steel industry. 92 No contradictory evidence whatsoever exists on the record; the USDOC simply
refused to consider the point. The USDOC also failed to consider evidence on the record that
Glynwed, the UK producer to which the privatization issue did not apply, had sold off certain of its
assets and no longer produced the product under review. 93 Had the USDOC performed its likelihood
determinations as required under the SCM Agreement, that is, had it considered all of the evidence on
the record, it would have found no likelihood of continuation or recurrence of countervailable
subsidies regarding CTL plate from the UK and Spain.
4.65 In light of the fact that the United States admitted in its first written submission that the
USDOC had assumed that the privatizations of BS plc and Aceralia were at arm's length and for
FMV,94 the USDOC's sole basis for finding a likelihood of continuation or recurrence of subsidization
was its reliance on programmes allegedly found to c onfer benefits to Glynwed and apparently one
programme allegedly found to confer recurring benefits in Spain. However, because the United States
had failed to consider evidence on the record de monstrating that these programmes no longer existed
or applied to steel producers and that Glynwe d no longer produced the product under review, the
United States had acted inconsistently with its obligations under Article 21.3 of the SCM Agreement.

89 International Offering Prospectus, p. 23-24 (Exhibit EC-8).
90 US First written submission, paras. 18-20.
91 See discussion supra paras. 9-22.
92 EC First written submission, paras. 53-62.
93 EC First written submission, paras. 51-52.
94 See, e.g., US First written submission, para. 49.

4. Injury
4.66 In its first written submission, the United States failed to dispute on the merits the European
Communities' argument that the United States was ob liged to examine whether the revocation of the
countervailing duty orders in the UK and Spanish case s would be likely to lead to continuation or
recurrence of material injury as required by the SCM Agreement . The European Communities,
however, maintained that Article 21.3 of the SCM Agreement obliges investigating authorities in
sunset reviews to determine that the expiry of th e duty would be likely to lead to continuation or
recurrence of injury, separately from the determin ation as to the likelihood of continuation or
recurrence of subsidization. Further, Article 21.1 of the SCM Agreement requires that "[a]
countervailing duty rate shall remain in force only as long as and to the extent necessary to counteract
subsidization which is causing injury".95
4.67 Given the USDOC's findings in these Section 129 de terminations that the applicable subsidy
rates would be substantially lower than those in the original sunset reviews, 96 it was highly likely that
the USDOC's revised determinations would affect the causal link between those subsidies and a
finding of continuation or recurrence of injury to the domestic industry.
97 Accordingly, by failing to
reconsider its injury determination in the UK and Spanish case s, the United States violated its
obligations under Articles 21.1 and 21.3 of the SCM Agreement . Alternatively, in light of the
possibility of a finding of zero subsidies ( i.e., if, as discussed above, the USDOC had properly
considered all of the evidence on the record), 98 the need for an inquiry into the likelihood of
continuation or recurrence of injury would have been obviated.
D. SECOND WRITTEN SUBMISSION OF THE UNITED STATES
1. Introduction
4.68 Since, according to the schedule established by the Panel, the rebuttal submission of the
European Communities had been due to be submitted simultaneously with this submission, and the
third-party submissions were not due to be submitted until after this submission, the United States
effectively had nothing to rebut. Therefore, this submission would be limited to a few additional
comments regarding the EC First written submission.
4.69 At the outset, the United States wished to emph asize the Appellate Body's finding that, where
the authorities examine "a benefit resulting from a prior non-recurring financial contribution bestowed
on a state-owned enterprise," 99 they must take into account a full privatization at arm's length and for
FMV without regard to the ordinary legal di stinction between a company and its owners. 100 T h e
USDOC's revised privatization methodology was fully consistent with the Appellate Body's finding.
In determining whether a full privatization has extinguished the benefit from prior, non-recurring
financial contributions, USDOC no longer makes a di stinction between a company and its owners.
Thus, the focus of USDOC's new methodology was on whether the privatization transaction had
extinguished the benefit from allocable, pre-privatization subsidies such that the "privatized producer"
– meaning the company and its new owners 101 – had received no benefit. Consistent with the findings

95 Emphasis added. The Appellate Body in US – Countervailing Measures on EC Products found that
the provisions in Article 21.1 of the SCM Agreement set out obligations of Members that are applicable not only
in original investigations but also in administrative and sunset reviews. See Appellate Body Report, US –
Countervailing Measures on Certain EC Products, para. 139.
96 See discussion supra para. 23.
98 See discussion supra paras. 51-57.
99 Appellate Body Report on US – Countervailing Measures on Certain EC Products, para. 117
100 Appellate Body Report on US – Countervailing Measures on Certain EC Products, paras. 118-119.
101 Panel Report on US – Countervailing Measures on Certain EC Products, paras. 7.54 and 7.72

of the Appellate Body, USDOC does not perform a new benefit calculation.
102 Rather, if the entire
privatization is at arm's length and for FMV, US DOC presumes that the benefit from allocable, pre-
privatization subsidies has been extinguished. 103 If the entire privatization is not arm's-length/FMV,
then all of the benefit from allocable, pre-privatization subsidies remains countervailable (except to
the extent that it had already been countervailed). 104 Where only a portion of the company is not sold
in an arm's-length/FMV transaction, it follows that only a corresponding portion of the benefit
remains countervailable. The privatized producer in the latter two situations has received something
"for free" in that the government did not require FMV for all, or part, of the company.105
2. In the revised French sunset review, USDO C properly found that a benefit continued to
be countervailable
4.70 In implementing the recommendations and rulings of the DSB in the revised French sunset
review – which involved the Usinor privatization – USDOC found that the privatized Usinor received
something "for free" in that the so-called "prefere ntial" shares offered to Usinor's employees were
sold at less than FMV in a non-arm's-length transac tion. Therefore, USDOC reasonably determined
that a corresponding portion of the allocated benefit continued to be countervailable after
privatization. As explained in the U.S.' firs t written submission, the European Communities had
failed to demonstrate that USDOC's finding of a non-arm's-length transaction at less than FMV had
been in error. Moreover, there is nothing in the text of the SCM Agreement or the DSB
recommendations and rulings that would require USDOC to follow the European Communities'
suggested method for considering FMV; i.e., averaging out the prices paid for all shares and, then,
comparing the average price with FMV to make a singular judgment about the privatization.
106
4.71 The European Communities attempted to buttress its unwarranted claim that all of the shares
in Usinor were sold for FMV by asserting that: "S uch a finding is consistent with the USDOC's own
findings in two parallel proceedings concerning th e privatization of Usinor in which the USDOC
found that the privatization of Usinor took pl ace at arm's length and for fair market value". 107 The
findings to which the European Communities refe rred were two remand de terminations made by
USDOC in domestic litigation concerning counter vailing duty orders other than the order on
corrosion-resistant carbon steel flat products from France. 108 The European Communities also
asserted that it was a "common" practice for privatiz ing governments to set aside shares for company
employees.109 Both European Communities assertions were misplaced. The methodology applied by
USDOC in the two prior remand determinations was not the methodology described in the
Modification Notice and applied in the revised French sunset review. Hence, the results of those
determinations have no relevance to the present proceeding. In particular, in the remand
determinations cited by the European Commun ities, USDOC treated Usinor's employees as "new

102 Appellate Body Report on US – Countervailing Measures on Certain EC Products, para. 117
103 That presumption may be rebutted with evidence demonstrating that broader market conditions were
severely distorted by government action. See Modification Notice, p. 37,127.
104 Modification Notice, p. 37,127.
105 Panel Report on US – Countervailing Measures on Certain EC Products, para. 7.72
106 EC First written submission, paras. 37-38. The European Communities' argument is akin to arguing
that if a government provides a comp any with a subsidy in the form of a below-market-rate loan, that subsidy
can be excused if the government also provides the company with a loan at a higher rate.
108 Results of Redetermination Pursuant to Court Remand in GTS Indus. S.A. v. United States , No. 00-
03-00118, slip op. 02-02 (Court of International Trade, January 4, 2002) ("Determination on Remand in GTS
Indus. S.A. v. United States ") (copy attached as Exhibit US-1); Results of Redetermination Pursuant to Court
Remand in Allegheny Ludlum Corp. v. United States , No. 99-09-00566, slip op. 02-01 (Court of International
Trade, January 4, 2002) ("Determination on Remand in Allegheny Ludlum Corp. v. United States")
109 European Communities first written submission, footnote. 71.

owners," distinguishable from the company. 110 For this reason, USDOC, while finding that the
employees paid a subsidized price for their shares, di d not take that into account in analyzing whether
Usinor had been sold for FMV.111
4.72 On the other hand, in implementing the recommendations and rulings of the DSB in the
revised French sunset review, USDOC properly took into account the fact that shares were offered to
Usinor's employees in a non-arm's-length transaction for less than FMV; since, consistent with the
findings of the Appellate Body, its new methodology required it to consider the privatized company
and its new owners together as the privatized producer. 112 Furthermore, it was irrelevant whether it
was a common practice when privatizing enterprises for governments to set aside shares for company
employees. The only relevant issue was whether th e privatized producer, Usinor and its new owners,
received something "for free" by not having to pay FM V in an arm's-length transaction. In short, the
European Communities had not demonstrated that USDOC erred in finding that the employee sales
were not at arm's length and for FMV. Cons equently, there was no basis for the European
Communities' claim that USDOC erred in finding that the subsidy benefit associated with those sales
had not been extinguished by the Usinor privatization, and the Panel should reject that claim.
3. In the revised UK sunset review, USDOC properly found that countervailable subsidies
were likely to continue or recur
4.73 With respect to the sunset review in the UK case, in implementing the recommendations and
rulings of the DSB, USDOC assumed that the UK privatization extinguished entirely the allocated
subsidy benefit from pre-privatization subsidies. By making that assumption, and by revising the
sunset review in accordance with that assu mption, USDOC fully complied with the DSB
recommendations and rulings. USDO C nevertheless found that counter vailable subsidies were likely
to continue or recur in the event of revocation, for reasons explained in its first written submission. 113
The European Communities cited an earlier remand determination to suggest that USDOC did not
perform the proper revised analysis 114, but the reliance is misplaced. What USDOC found previously
regarding the nature of the privatization of Britis h Steel plc cannot in any way render more complete
USDOC's assumption in the revised sunset determin ation that the privatization of British Steel plc
extinguished the benefit from allocable, pre-priv atization subsidies. Moreover, USDOC's new
privatization methodology was not applied in th e remand determination cited by the European
Communities.115 For that reason, even if there had been an open issue in this proceeding as to whether
the privatization of British Steel plc should have been treated as satisfying the arm's-length/FMV
standard – and there was not – the remand determination in question would not be germane.

110 Determination on Remand in GTS Indus. S.A. v. United States ; Determination on Remand in
Allegheny Ludlum Corp. v. United States.
111 See, e.g., Determination on Remand in Allegheny Ludlum Corp. v. United States ("Accordingly, the
Department has conducted a thorough analysis of the facts and circumstances of Usinor's privatization to
determine whether the purchasers (i.e., the new owners) pa id full value for the company. ... While we find that
the Usinor employees who purchased the small per centag e of remaining shares paid less than the full fair
market value of those shares and, thus, did receive a subsidy from th e French Government, this subsidy is not
countervailable because these purchase rs are distinct individuals who ar e not, in their individual capacity,
engaged in production of the subject merchandise".).
112 Modification Notice, p. 37,137.
113 USDOC made a similar finding in the revised sunset review on cut-to-length carbon steel plate from
Spain, another determination that is presently challenged by the EC.
115 Final Results of Redetermination Pursuant to Court Ordered Remand on General Issue of
Privatization in British Steel plc v. United States , Consol. Ct. No. 93-09-00550-CVD, slip op. 95-17 (Court of
International Trade, February 9, 1995) (copy attached as Exhibit US-3).

V. ARGUMENTS OF THE THIRD PARTIES
A. W
RITTEN SUBMISSION OF BRAZIL
1. The France Section 129 determination
5.1 In the French Section 129 sunset review, the USDOC determination that subsidies were likely
to continue or recur if the order were revoked, w as premised on a finding that little more than 5 per
cent of the shares in the privatization at issue in the review were not sold at arm's-length and FMV. 116
Brazil found the USDOC Section 129 determin ation to be inconsistent with the SCM Agreement and
the rulings and recommendations of the DSB.
(a) The USDOC determination that the sale of shares to Usinor employees/former employees was
not at arm's-length is inconsistent with the SCM Agreement and the Appellate Body's findings
and recommendations
5.2 The USDOC found that because 5.16 per cent of Usinor shares were made available at a
discount to the general offering price, the employee/former employee share offering transactions were
not at arm's length. 117 Brazil took exception to the US argument on a number of grounds. First,
USDOC never established that Usinor employees/form er employees were related to the seller, the
GOF, merely offering a one sentence conclusion that the employees were related to Usinor. 118 There
may be no definition of "arm's-length" contained in the SCM Agreement , but the USDOC had to
explain its conclusions in order to allow this Panel to consider its rationale, consistent with the Panel's
standard of review under Article 11 of the DSU. The United States offered only post hoc justification.
Brazil further agreed with the reasons offered by the European Communities as to why Usinor
employees/former employee were in fact not related to the seller, the GOF. 119 The principal United
States' argument in response is that drawing dis tinctions between the company and the owner of the
company in this situation is inconsistent with the DSB assumption that there is little distinction
between the company and its owners. Brazil found the argument was simply misplaced. 120 The Panel
and Appellate Body were addressi ng whether benefits may be bestowed on a company through
indirect subsidies to its owners, not whether there is an affiliation between an owner and prospective
purchaser. Moreover, the Panel and Appellate Body never found that the company and the owner
were one and the same for all purposes and in all instances.121
5.3 Second, even if affiliation somehow existe d between the employees/former employees of
Usinor and the GOF, this is not dispositive with r espect to the continuation of benefit. The arm's-
length test reflects a general understanding th at transactions between affiliated parties may not always
be on commercial terms. Thus, a closer review of the actual terms is warranted where affiliation
exists to determine if the terms reflect usual commercial practice.122 If they do, then the transaction at

116 Issues and Decision Memorandum for the Section 129 Determination: Corrosion-Resistant Carbon
Steel Flat Products from France: Final Results of Expedited Sunset Review of Countervailing Duty Order (23
October 2003) ("France Section 129 determination"), p. 12. (Exhibit EC-4).
117 Id., p. 6.
118 France Section 129 determination, p. 6.
119 EC First written submission, paras. 41-42; EC Second written submission, paras. 40-45.
120 US First written submission, para. 38, citing US – CVDs on Certain European Communities
Products (Panel) , paras. 7.54 and 7.72 and US – CVDs on Certain European Communities Products (AB) ,
paras. 113-115.
121 Panel Report on US – Countervailing Measures on Certain EC Products , paras. 7.54 and 7.72 and
US – CVDs on Certain European Communities Products (AB), paras. 113-115.
122 See, e.g., US First written submission, para. 40. (USDOC will consider "the usual private practice"
as to the sale of companies). We note that the Panel in this case already found that the United States in practice
essentially does not distinguish between the terms "arm's length" and "fair market value," underscoring the US

issue is presumptively consistent with market prin ciples and the terms should not be used to impugn
the transaction as not representing FMV. Unfortunat ely, the United States did not follow through on
its own apparent understanding. The United States wa nts to colour the employee share discount as an
anomaly and highly unusual, not reflecting common commercial practice whereas, in reality, such
offering discounts are extremely common.
(b) The USDOC determination that the Privatization of Usinor was not for FMV is inconsistent
with the SCM Agreement and the Appellate Body's findings and recommendations
5.4 The facts of the Usinor privatization are that th e market value of the firm was established, and
a determination made on what was necessary to recoup the value of the company. As it turns out, the
total price paid for the company and the average share price met or exceeded the recommendations of
the appraisal, as well as the "market clearing price" calculated by the USDOC.
123 The USDOC
disregarded this fact and looked at just 5 per cent of the total sale to find that non-recurring subsidy
benefits were not extinguished in the transaction. Brazil found that the approach taken by the
USDOC was inconsistent with the ruling of the Appellate Body in Canada – Aircraft, as reiterated by
the Appellate Body in this dispute. The Appellate Body explicitly noted: "once a fair market price is
paid ... [the] market value is redeemed".124
(c) The USDOC failed to limit countervailing duties to the amount and duration of the subsidy in
existence
5.5 Because the USDOC failed to properly consider both the arm's-length nature of the Usinor
privatization and the market value of the transacti on, its Section 129 sunset review determination in
this case is also inconsistent with GATT Artic le VI:3 and Articles 10, 19.4 and 21.1 of the SCM
Agreement. Specifically, the USDOC did not establish a proper basis for determining the amount and
duration of the subsidy at issue in the review a nd thus it was impossible to act in accordance with
these particular provisions, as interpreted by the Pa nel and Appellate Body, to limit the countervailing
duties under the respective orders by the amount and duration of the subsidy it found to exist.
2. The UK and Spain Section 129 determinations
(a) The USDOC assumptions that the UK and Spanish privatization transactions were at arm's-
length and for FMV do not constitute determinations
5.6 In its Section 129 sunset review determinati ons of the UK and Spanish countervailing duty
orders, the USDOC found "even assuming arguendo" that privatization in the two cases did
extinguish pre-privatization subsidy benef its, it was not obliged to take any action. 125 Brazil recalled
that the Appellate Body resolved that a "determinati on" must be made with respect to the effects of
privatization on pre-privatization benefit streams. 126 The word "determination" denotes an official
ruling; a sense of certainty and finality to a particular issue. This is not what the USDOC offered in
its Section 129 determinations in the UK and Spanish case s. An assumption is not sufficient to
implement the rulings and recommendations of the DSB in this case. It does not matter whether other
types of subsidies or other subsidized producers we re involved in the sunset review. The explicit

consideration of the close relationship between the two terms. At the same time, the Panel noted the terms could
represent different concepts. See Panel Report on US – Countervailing Measures on Certain EC Products, para.
6.39. Brazil agrees. "Arm's length" reflects more of a process-oriented concept, as opposed to the valuation
concept inherent in the term "fair market value". Nonetheless, the "arm's length" test ultimately provides the
context for, and otherwise informs, the decision on "fair market value".
123 Id., para. 38.
124 Appellate Body Report on US – Countervailing Measures on Certain EC Products, para. 102.
125 Id.
126 Appellate Body Report on US – Countervailing Measures on Certain EC Products, para. 149

finding of the Appellate Body is that an authority must render a determination on the effect of a
privatization. In this regard, the United States had not brought its measures into compliance with its
obligations under the SCM Agreement and Article VI:3 of GATT 1994, as elaborated by the Panel and
Appellate Body.
(b) The USDOC failed to limit countervailing duties to the amount and duration of the subsidy in
existence
5.7 If the United States chose to stand by the USDOC "assumptions" regarding the effect of the
privatizations at issue in the UK and Spanish sunset reviews as something more than mere argument,
then the USDOC Section 129 determinations in th ese cases would be inconsistent with GATT Article
VI:3 and Articles 10, 19.4 and 21.1 of the SCM Agreement. Specifically, the USDOC should have, on
the basis of its assumptions, limited the counter vailing duties applied unde r the reviewed orders,
taking into account the elimination of benefits resulting from the privatizations.
B. W
RITTEN SUBMISSION OF CHINA
1. European Communities' allegation that USDOC shall consider the evidence about
Glynwed
5.8 The "measures taken to comply" should be in terpreted broadly enoug h to accommodate the
measures that a challenged Member should take to comply with the DSB recommendations and
rulings. The USDOC was not obliged to consider the evidence about Glynwed in a Section 129
proceeding. Such a consideration is not a "measure taken to comply". Otherwise, the certainty of an
administrative determination would be ruined. A respondent may not be allowed to cure its
deficiencies in the original sunset review by having a "second-chance". The European Communities'
allegation seemed to suggest that once an aspect of a sunset review was found to be inconsistent with
the WTO Agreement, the investigating authority is ob liged to render an entirely new review. We see
no merits of this argument. We agree with th e European Communities th at a Member should not
implement a DSB recommendation in a "formalistic" ma nner. However, we believe that the scope of
"measures taken to comply" includes both the me asures the challenged Member has actually taken
and the measures the challenged Member should have taken. Because China believes that
investigating authorities should not take evidence pr esented before them after the closure of record,
China did not think the consideration of evidence in relation to Glynwed was a "measure taken to
comply". More specifically, China did not thi nk it was a measure the USDOC should have taken.
Therefore, China believed that the European Comm unities' allegation in relation to Glynwed should
not be considered by this panel.
2. European Communities' allegation that USDOC shall consider the evidence of
abolishment of certain subsidy programs by the Spanish government
5.9 China may shortcut its analysis by relyi ng on the reasoning of the Appellate Body in EC –
Bed Linen (Article 21.5 – India). In that case, India raised the non-attribution issue before the original
panel but, as found by the Panel, failed to pursue it. The Appellate Body in that case denied India's
claim to include such an issue in a 21.5 proceeding by reasoning that that issue does not "constitute an
inseparable element of a measure taken to comply". 127 China believed that if an issue had no
connection with the DSB recommendations and rulings, it would not be a "measure taken to comply".
Again, review of all the evidence in the original sunset review was not a measure that the challenged
Member should have taken; and, accordingly, it w as not a measure taken to comply. The European
Communities' rationale, similarly, seemed to suggest that the investigating authority should render a
new sunset review if an aspect of the review is found inconsistent with the WTO Agreement. China

127 Appellate Body Report on EC – Bed Linen (Article 21.5 – India), para.86

similarly could not agree. If th e European Communities intended to argue that issue, it may well
initiate a new, fresh panel. An Article 21.5 proceeding was not a proper forum.
3. European Communities' allegation that USITC shall consider injury
5.10 In accordance with United States law, the US DOC should provide the USITC with a net
countervailable subsidy which it did in its original sunset reviews for both the UK and the Spanish
cases.128 The net countervailable subsidy for the UK case was 0.73 per cent for Glynwed and 12 per
cent for all other producers/exporters. 129 In the Spanish case, it was 36.86 per cent for all producers/
exporters.130 In the proceedings before the original panel and the Appellate Body, non-recurring
allocable subsidies had been found presumably extinguished by an arm's length privatization
transaction for FMV.
131 In the Section 129 determinations for the UK and Spanish cases, the USDOC
assumed that the privatization was at arm's length and for FMV. 132 In this situation, it was reasonable
to conclude that the USDOC would have had to calculate a new countervailable subsidy because
certain programmes had been found to have exti nguished. By examination of the Section 129
determinations for the UK and Spanish case s, China found that the USDOC did not do so. The
primary reason for the USDOC not to calculate this net countervailable subsidy rate was that the
likelihood determination would be made on an order-wide basis. 133 However, even if it was assumed
that the calculation of a net countervailable subs idy rate had no impact on the USDOC's likelihood
determination because it was made on an order-w ide basis, the USDOC failed to consider the
potential impact of this rate on the USITC's determination.
5.11 Accepting the rationale of the Appellate Body in the original appeal for this case, China
would have deemed the net rate communicated by the USDOC to USITC in the original sunset review
inaccurate. In this situation, a portion of the US ITC's original likelihood determination with respect
to injury could be inferred as inconsistent with the recommendations and rulings of the Panel and the
Appellate Body. This portion is where the USITC reli ed for its determination on the rate provided by
the USDOC. USDOC's determination in a Section 129 proceeding not to provide the USITC with a
new net countervailable subsidy ra te rendered its effort to comply with the DSB recommendations
and rulings incomplete. USITC's failure to "correct" the relevant portion of its likelihood
determination was also a failure to bring its me asures into conformity. The separation of the
investigating authorities did not immunise the USIT C from taking actions to bring its measures into
conformity. Both the USDOC's provision of a new net countervailable subsidy rate to the USITC and
the USITC's correction of its original likelihood de termination or a portion thereof, were measures
taken to comply and, therefore, were within the terms of reference of the compliance panel.
C. WRITTEN SUBMISSION OF KOREA
1. The United States failed to satisfy its WTO ob ligations by refusing to consider evidence
demonstrating the invalidity of its Sectio n 129 likelihood determinations concerning
Spain and the UK
5.12 The United States has argued that it need not c onsider evidence submitted in the course of the
Section 129 proceedings demonstrating that the revi sed measures generated new inconsistencies with

128 65 F.R. 18,307, 18,308, and 65 F.R. 18,309, 18,310.
129 65 F.R. 18,309, 18,310.
130 65 F.R. 18,307, 18,308.
131 Appellate Body Report on US – Countervailing Measures on Certain EC Products, para.127.
132 Decision Memorandum on §129 Determination: Final Results of Expedited Sunset Review of Cut-
to-Length Carbon Steel Plate from the United Kingdom; and Decision Memorandum on §129 Determination:
Final Results of Expedited Sunset Review of Cut-to-Length Carbon Steel Plate from Spain.
133 Id.

the WTO Agreements. Korea submits that the Un ited States' argument is incorrect, because it is
derived from an erroneous interpretation of a Member's obligations under Article 21.5 of the DSU.
5.13 When undertaking measures intended to comply with the recommendations and rulings of the
DSB, a Member may not merely correct the errors identified by the DSB but rely on other grounds to
reaffirm its determination. While refusing to consider arguments that have been raised before it, it
could focus on other grounds which may create new in consistencies with the covered Agreements. In
its Section 129 determinations on Spain and the UK, the USDOC relied on grounds that had not been
the basis of its original sunset determinations in d eciding that, despite the privatizations of BS plc and
Aceralia, there was a likelihood of continuation or recurrence of subsidization.
134 In the Spanish case,
the USDOC based its determination on the assertion that, independent of the non-recurring subsidies
whose benefits were assumed to be extinguished by the privatization of Aceralia, "there are
countervailable recurring, non-allocable subsidies provi ded pursuant to programs that to the best of
our knowledge continue to exist". 135 And as to the UK case, the USDOC based its determination on
the assertion that in the original investigation, it had found a countervailable subsidy rate for Glynwed
Steels Ltd. ("Glynwed"). 136 In both of the Section 129 determinations, while relying on these
alternative bases for its conclusion that there wa s a likelihood of continuation or recurrence of
subsidization, the USDOC refused to consider evidence submitted by the European Communities and
the Governments of Spain and the UK demonstrating that the alternative bases no longer existed and,
therefore, could not support its determinations. The USDOC did so on the basis of an understanding
of its duty to implement that is incorrect. Moreov er, the United States failed to satisfy its obligations
under Article 21.3 of the SCM Agreement to exercise an active role 137 when the USDOC refused to
consider the evidence submitted by the European Communities, Spai n and the UK that the bases for
its Section 129 determinations were flawed.
5.14 In the current case, Korea was not familiar w ith the subsidy programs that the USDOC relied
on in its Section 129 determinations, and, ther efore, took no position as to the accuracy of the
arguments that those programs had been abolished or no longer applied to steel production. However,
Korea submitted that the United Stat es acted inconsistently with its obligations under Article 21.3 of
the SCM Agreement when the USDOC, in the Section 129 dete rminations, "remain[ed] passive in the
face of possible shortcomings in the evidence submitted", 138 and disregarded evidence on the record
demonstrating that the alternative bases on whic h the USDOC made its likelihood determinations no
longer existed.

134 Korea notes that the United States asserts that the grounds providing the basis for its Spain and UK
Section 129 Determinations are "unchanged and did not have to be changed in response to DSB rulings and
recommendations. Therefore, they are not 'measures taken to comply' and are not subject to Article 21.5". US
First written submission, para. 20 (8 December 2004). Ho wever, Korea agrees with the reasoning presented by
the European Communities as to why this assertion is in correct. EC Second written submission, paras. 9-26 (7
January 2005)
135 Spain Section 129 determination, p. 3.
136 UK Section 129 determination, p. 4.
137 Panel Report on US – Carbon Steel , para. 8.117 ( quoting Appellate Body Report on US – Cotton
Yarn, para. 73 (in turn quoting Appellate Body Report on US – Wheat Gluten , para. 55)). Similarly, the
Appellate Body has explained that Article 11.3 of the Agreement on Implementation of Article VI of the General
Agreement on Tariffs and Trade 1994 , which contains nearly identical language to that of Article 21.3 of the
SCM Agreement , "makes clear that it envisages a process combining both investigatory and adjudicatory
aspects. In other words, Article 11 .3 assigns an active rather than a passive decision-making role to the
authorities". Appellate Body Report on US – Corrosion-Resistant Steel Sunset Review , para. 111 (emphasis in
orgiinal).
138 Panel Report on US – Carbon Steel, para. 8.117.

2. The USDOC improperly determined that th ere is a likelihood of continuation or
recurrence of subsidization in the France Section 129 determination
5.15 Korea recognized that, in these proceedings, the European Communities and the United States
disputed whether the USDOC was correct in finding that the sales of shares in the employee offering
were not at arm's length and for FMV. Even assu ming for the purpose of this submission that the
USDOC's factual finding was correct, Korea submitte d that the USDOC erred in its legal conclusion
that the privatization of the company did not extinguish the benefit conferred by the non-recurring
pre-privatization subsidies and that, therefore, th ere was a likelihood of continuation or recurrence of
subsidization. One of the flaws in the USDOC's reasoning is the lack of any connection between its
factual finding regarding the non-arm's length/FMV sale of a very small proportion of the company's
shares and its legal conclusion that the benefit conf erred by the pre-privatization subsidies was not
extinguished. The France Section 129 determination c ontains nothing but the bare assertion that such
a connection existed which is insufficient to satis fy a Member's obligation "to make a finding on
subsidization, i.e., whether or not the subsidy continues to exist",
139 as required by the Appellate
Body.
5.16 Furthermore, the lack of an explanation as to a connection between the factual finding and the
legal conclusion is particularly troublesome because of the insignificant proportion of the company's
shares that were found by the USDOC to be sold at non-arm's length/FMV conditions. Korea did not
understand that the Appellate Body intended that th e "rebuttable presumption" that a privatization
extinguishes the benefits from pre-privatization s ubsidies would arise only in cases in which 100 per
cent of the privatized company's sh ares are sold at arm's length and FMV. To the contrary, Korea
submitted that in a case such as this, in which the overwhelming majority of the shares (almost 95 per
cent) were concededly sold at arm's length and for FMV, the burden remained upon the Member to
"identify[ ] evidence which establishes that the be nefit from the previous fi nancial contribution does
indeed continue beyond privatization". 140 The USDOC failed to satisfy this burden in its France
Section 129 determination.
5.17 In addition, Korea agreed with the Europ ean Communities that a proper evaluation of a
privatization must be performed for the company as a whole. 141 Small individual elements of a
privatization cannot be evaluated in isolation to determine whether the privatization had the effect of
extinguishing the benefit conferred by pre-privatiza tion subsidies. The contrary method of analysis
adopted by the USDOC in this proceeding would perm it an investigating authority to conclude that a
privatization failed to extinguish such benefits on the basis of non-arm's length/FMV sales of a de
minimis proportion of the company's shares, regardless of the conditions surrounding the sales of the
vast majority of the company's shares – a situati on closely approached in the current case. Korea
agreed with the European Communities that, if the privatization of the company, when viewed as a
whole, occurred at FMV, then the United States had failed to satisfy its burden "of identifying
evidence which establishes that the benefit from th e previous financial contribution [did] indeed
continue beyond privatization".142
5.18 Finally, in a cryptic comment to this Pane l, the United States asserted that the USDOC
"determined that the [sic] 5.16 per cent of the allocated pre-privatization benefit" – i.e., the same per
centage as the proportion of the company's shares fo und not to be sold at arm's length and for FMV –
"was not extinguished. The remaining 94.84 per cent of the allocated benefit was found to be
extinguished by the sale of the remaining portion of the company in arm's-length transactions for fair

139 Appellate Body Report on US – Lead and Bismuth II, para. 54 (emphasis in orgiinal).
140 Appellate Body Report on US – Countervailing Measures on Certain EC Products, para. 126.
141 EC Second written submission, paras. 30-34.
142 Appellate Body Report on US – Countervailing Measures on Certain EC Products, para. 126.

market value".
143 Such a determination regarding the proportional extinguishment of the pre-
privatization benefit, however, cannot be found in the USDOC's France Section 129 determination.
Moreover, if a determination that the vast majo rity of the pre-privatization benefit had been
extinguished were in fact included in the USDOC's Section 129 determination, it becomes even less
clear how the USDOC could nonetheless reach the conclusion that there was a likelihood of
continuation or recurrence of subsidization sufficient to warrant continuation of the CVD order.
3. The United States erred in failing to reco nsider whether there was a likelihood of
continuation or recurrence of injury
5.19 Even assuming, for the sake of argument, that some countervailable subsidies or benefits
remained unaffected by the privatizations of Aceralia and BS plc, the effect of the United States'
concessions before this Panel is that the remain ing countervailable subsidy rates reported to the
USITC must be revised significantly. The UK case provided a particularly stark example – with the
elimination of the 12.00 per cent rate for "all othe r" producers, the only remaining subsidy rate was
Glynwed's 0.73 per cent – a rate so low that it was considered de minimis for investigations under
Article 11.9 of the SCM Agreement.
5.20 Korea agreed with the European Communities that in failing to reconsider the likelihood of
the continuation or recurrence of injury in light of the USDOC's revised subsidy determinations for
the UK and Spain, the United States had failed to satisfy its obligations under the SCM Agreement
.144
As the Appellate Body stated in the para llel situation involving anti-dumping duties in EC – Bed
Linen (Article 21.5 – India) : "[t]he amount of dumped imports will, of course, have an impact on the
assessment of the effects of the 'dumped imports' for the purposes of determining injury. It is clear,
therefore, that the revised findings on dumping a nd injury could have a bearing on whether a causal
link exists between dumping and injury". 145 Thus, when a Member's investigating authority revised
its conclusions regarding the factual predicates underl ying its injury determination, its obligation to
ensure that it maintained countervailing duties only to the extent necessary to counteract subsidization
that was causing injury required th at the injury determination be reconsidered in light of those
changed factual conclusions. Only by doing so could the Member ensure that it was properly
discharging its obligations under Articles 21.1 and 21.3 of the SCM Agreement.
VI. INTERIM REVIEW
6.1 On 29 April 2005, the Panel issued its Interim Re port to the parties. On 13 May 2005, both
the European Communities and the United States subm itted written requests for the Panel to review
several aspects of the Interim Report. On 20 May 2005, both parties submitted written comments on
the other party's request for interim review. Neither party requested an interim review meeting with
the Panel.
6.2 The Panel has carefully reviewed the arguments and proposed amendments to the text of the
Interim Report and addresses them below. Where necessary, the Panel has also made certain
revisions to the Report.
A. REQUEST OF THE EUROPEAN COMMUNITIES
6.3 The European Communities has asked the Panel to address three points. First, the European
Communities questions the accuracy of the comparison of the restrictions and incentives applicable to
the French public offering and the employee shar e offering. The European Communities then

143 US First written submission, para. 31 (footnote omitted).
144 See EC First written submission, para. 71; EC Second written submission, paras. 58-60.
145 Appellate Body Report on EC – Bed Linen (Article 21.5 – India), para. 86 (emphasis omitted).

proposes to amend paragraph 7.153 of the Interi m Report (paragraph 7.153 of this Report). 146 The
United States also proposes to amend the paragra ph and states that its version follows the Panel's
original draft more closely.147
6.4 The Panel considers that the description of the various restrictions and incentives applicable
to both share offerings in paragr aph 7.153 of its Interim Report w as not inaccurate although brief.
The Panel does not object to expanding its descripti on as requested by the parties and has therefore
amended paragraph 7.153 of the Interim Report (paragraph 7.153 of this Report) accordingly.
6.5 Second, as regards paragraphs 7.175 and 7.176 of the Interim Report (paragraphs 7.175 and
7.176 of this Report), the European Communites ar gues that the Panel's reasoning that the US action
is further justified by the fact that it has a retr ospective system of duty collection and exporters can
request annual or changed circumstances reviews is errone ous and dangerous. 148 The European
Communities argues that an investigating author ity's obligation to conduct periodic reviews is
independent of the obligation to properly conduct a sunset review under the SCM Agreement. The
European Communities contends that distinguishing between systems of duty collection suggests that
an investigating authority in a retrospective system can take certain actions that an investigating
authority in a prospective system cannot. In addition, the European Co mmunities asserts that the
United States never argued the points at issue in pa ragraphs 7.175 and 7.176 and thus request that the
Panel delete paragraph 7.175 and a portion of paragraph 7.176. 149 The United States disagrees and
believes the European Communities' proposed deletion is inappropriate. The United States maintains
that the Panel is not implying that a retrospective system permits a Member to derogate from its

146 The European Communities proposes the following paragraph:

"Based on the evidence from th e record, employees and retirees can either participate in the
public offering or buy shares with a discount of 20per cent, but then with the obligation to
hold them for 24 months. They can then obtain a free share for the first 71 shares purchased
and 1 free share per subsequent 5 shares purchased. Persons taking part in the public offering
are not subject to an obligation to hold their shares for any amount of time unless they want to
obtain one free extra share for each 10 shares purchased (up to a ceiling of 30 000 francs for
the purchased shares). The required duration for holding shares is then 18 months. As a result,
for the first 100 shares, shareholders under th e discounted employee offering receive 6 free
shares, while shareholders under the French public offering receive 10 free shares provided
that the shareholders in both cases agree to the holding restrictions."

EC Request for interim review, pp. 1-2.
147 The United States proposes the following paragraph:

"Based on the evidence on the record, under both the employee offering and the French public
offering, purchasers may receive free shares. The condition is that purchasers under the
employee offering must hold their shares for 24 months. Purchasers under the French public
offering must only hold their shares for 18 months. While purchasers under the discounted
employee offering get 1 free share for the fi rst 71 shares purchased and 1 free share per
subsequent 5 share purchased, the purchasers under the French public offering get 1 free share
per 10 shares purchased (up to a ceiling of 30 000 francs for the purchased shares). For the
first 100 shares, a shareholder under the discou nted employee offering receives 6 free shares
while a shareholder under the French public offering receives 10 free shares."

US Comments on EC request for interim review, para. 2.
148 EC Request for interim review, p. 2.
149 The European Communities requests that the Panel delete the text "and given the fact that the
United States is not relying on the sunset review as a ba sis for collecting duties at a particular rate" in paragraph
7.176. EC Request for interim review, p. 2.

obligations relating to sunset reviews.
150. The United States emphasizes that the Panel does not mean
that Members with prospective systems incur great er obligations than those with retrospective
systems. Instead, the United States understands the Pa nel to mean that the margin established in the
original investigation is not necessarily the rate at which duties are collected because the exporter has
the option to seek review to establish that rate. 151 In addition, the United States disagrees with the
European Communities' statement that paragraph 7.175 of the Interim Report (paragraph 7.175 of this
Report) is unnecessary to the Panel's reasoning. The United States insists that it did argue throughout
the proceedings that assessment re views, as opposed to sunset review s, are the means by which an
individual company can obtain a modified assessment rate. 152 Finally, the United States disagrees
with the European Communities' proposal to delete a phrase in paragraph 7.176 and explains that the
reasoning in paragraph 7.176 is rela ted to sunset reviews and does not have to be deleted even upon
the deletion of paragraph 7.175, which the United States considers as related to the original
investigation.153
6.6 Contrary to the European Communities' charact erization of the Panel's reasoning, the Panel
does not consider that the United States' retrospective assessment system somehow further justifies
the USDOC's continuation of the measure. In pa ragraphs 7.175 and 7.176, the Panel is simply
addressing the issue of whether the continuation of th e measure is inconsistent with Article VI:3 of
GATT 1994 and Articles 10, 19.4 and 21.1 of the SCM Agreement as regards the obligation to ensure
that the duties collected are limited to the amount and duration of the subsidy found to exist by the
investigating authority. We note that the Pane l had already concluded in paragraph 7.172 of the
Interim Report (paragraph 7.172 of this Report) that the USDOC's consideration of Usinor's
privatization when making its likelihood-of-subsidiza tion analysis is not inconsistent with Articles 14
and 21.3 of the SCM Agreement. If the Panel would have found that, on the contrary, the USDOC's
consideration of Usinor's privatization was inconsistent with Articles 14 and 21.3 of the SCM
Agreement, then the measure at issue would automatic ally be inconsistent with the provisions
requiring the United States to limit the duties collected to the amount of subsidization; at that point,
any duty would be unjustified. However, having found that the USDOC's consideration of Usinor's
privatization is not inconsistent with Articles 14 and 21.3 of the SCM Agreement, the Panel went on to
analyse the European Communities' claim that th e United States acted inconsistently with its
obligations under Article VI:3 of the GATT 1994 and Articles 10, 19.4 and 21.1 of the SCM
Agreement. In doing so, the Panel does not find that a retrospective system somehow renders the
USDOC's affirmative likelihood-of-subsidization re-det ermination not inconsiste nt with the relevant
provisions of the GATT 1994 and the SCM Agreement. Rather, the Panel notes that the United States'
retrospective system functions in a way that ensu res that excess duties are not collected pursuant to a
sunset review. Moreover, the Panel never states th at an investigating authority in a retrospective
system can take certain actions that an investigati ng authority in a prospective system cannot. On the
contrary, an investigation authority in a prospectiv e system can always adopt a mechanism to ensure
that excess duties are not collected pursuant to a su nset review. Given the nature of a prospective
system, that mechanism would probably be different from that of the United States, for example, a

150 (footnote original) The United States would furt her note that the Panel found that the United States
had respected the obligations relating to sunset reviews, based in large part on the persuasive reasoning of
Appellate Body reports. Therefore, paragraph 7.175 is not a justification for a derogation from obligations but
rather confirmation that the European Communities has sough t to attach obligations to Article 21.3 that simply
do not exist.
151 US Comments on EC request for interim review, para. 3.
The United States also notes that the reference in footnote 281 of the Interim Report (footnote 328 of
this Report) should refer to paragraph 33 of the Eu ropean Communities' first written submission instead of
paragraph 32. US Comments on EC request for interim review, para. 3, footnote 2. The Panel disagrees,
considers that paragraph 32 reflects the arguments made in the paragraph cited, and therefore will not amend the
footnote.
152 US Comments on EC request for interim review, para. 4.
153 US Comments on EC request for interim review, para. 5.

refund mechanism. The Panel, therefore, has not deleted the contested portions of paragraphs 7.175
and 7.176 as requested by the European Communities. However, to further clarify this Panel's ruling,
we have amended the text of the relevant paragraphs accordingly.
6.7 Finally, the European Communities identifies the erroneous numbering of an exhibit as "EC
Exhibit-11" instead of "EC Exhibit-10" in footnotes 375, 377, 378, 379, and 380, and a line of typing
error in footnote 390 of the Interim Report (footnotes 422, 424, 425, 426, 427, and 437 of this
report).154
6.8 The Panel has amended the text of the relevant footnotes to correct these typographical errors.
B. REQUEST OF THE UNITED STATES
6.9 In its request for interim review, the Unite d States comments on several portions of the
Interim Report. The United States does not, however, suggest any specific amendments to it.
6.10 Regarding paragraphs 7.16-7.17 of the Interim Report (paragraphs 7.16-7.17 of this Report),
the United States submits that the Interim Report provides no explanation as to how the USDOC had
"changed the basis" of its affirmative likelihood- of-subsidization finding in the Spain Section 129
determination.
155 Regarding paragraph 7.293 of the Interi m Report (paragraph 7.293 of this Report),
the United States again submits that paragraph 7.293 and paragraphs 7.16-7.18, which are referenced
therein, contain no analysis of how the basis of th e affirmative finding changed in the Spain Section
129 determination.156
6.11 The Panel notes that paragraphs 7.289 and 7.2 90 of the Interim Report specifically indicate
that, in the Spain Section 129 determination, th e USDOC based its likelihood-of-subsidization re-
determination on the existence of recurring subsidies to Aceralia, whereas in the original sunset
determination, the USDOC based its like lihood-of-subsidization determination on the insufficiency of
evidence due to lack of cooperation from foreign producers. The Panel however notes the comment
of the United States and has amended paragraph 7.17 of this Report to further clarify the changed
bases of the affirmative likelihood-of-subsidisation re-determinations as set out in the UK Section 129
determination and the Spain Section 129 determin ation. Having done this, the Panel does not
consider that paragraph 7.293, which cossreferences paragraph 7.17, needs further clarification.
6.12 Regarding paragraph 7.69 of the Interim Repor t (paragraph 7.69 of this Report), the United
States submits that the European Communities ne ver identified any new evidence placed on the
record during the Spain Section 129 proceedings 157 and that, regarding the UK Section 129
determination, it is "inaccurate to state that the evidence regarding Glynwed’s cessation of production
is 'new evidence, which could not have been presented before.'".158 The United States also argues that
the Panel inaccurately character ized the UK Section 129 determination and the Spain Section 129
determination when the Panel stated that the dete rminations are based on different reasoning than the
original sunset reviews. The United States challe nges the Panel's statement that the different or
relative "weight" given to the evidence in the re-d etermination regarding Glynwed's subsidisation is
an aspect of the measure taken to comply. Th e United States emphasizes that the Report does not
provide any reasoning as to how the Spain Sec tion 129 determination was based on different
reasoning.159 The European Communities disagrees an d proposes inserting the phrase "or evidence

154 EC Request for interim review, pp. 1-2.
155 US Request for interim review, paras. 2, 19.
156 US Request for interim review, para. 23.
157 US Request for interim review, para. 4.
158 US Request for interim review, para. 5.
159 US Request for interim review, paras. 6-8.

which was not considered in the original sunset reviews was re-submitted" after "was submitted" in
the sixth sentence of paragraph 7.69.
160
6.13 The Panel agrees with the United States that the European Communiti es has not identified
any new evidence that was submitted during the Sp ain Section 129 proceedings. As regards the
evidence on Glynwed's sale of its production facilities, the Panel considers it as new evidence since,
as submitted by the European Communities161 and not contested by the United States, it was presented
for the first time during the Section 129 proceedi ngs. Whether the evidence could have been
submitted before has no bearing on whether it is new evidence submitted for the first time during the
Section 129 proceedings. The Panel has nevert heless amended paragraph 7.69 to remove its
statement that the relevant evidence "which could not have been submitted before". As regards the
United States' comments on the Panel's findings on the relevance of the weight given to the evidence
during the Section 129 determinations, the Panel c onsiders that it has sufficiently explained its
reasoning in the Report.
6.14 Regarding the analysis of the Panel's manda te in paragraph 7.71 of the Interim Report
(paragraph 7.71 of this Report), where the Panel st ates that the United States introduced the issue of
the treatment of evidence by revising the dete rmination and by changing the legal basis of the
determination, the United States insists that th e USDOC did not change the legal basis of the
affirmative determination.162
6.15 The Panel considers that it has sufficiently addressed this issue in paragraph 6.11 above.
6.16 Regarding paragraphs 7.214-7.215 of the Interi m Report (paragraphs 7.214-7.215 of this
Report), the United States argues that Article 21.3 of the SCM Agreement requires a sunset review
determination, not a privatizati on determination, and the Interim Report does not explain how an
analysis of privatization is equivalent to an analysis of a sunset review.163
6.17 The Panel recalls that, as explained in paragr aphs 7.199 and 7.209 below, the Appellate Body
upheld this Panel's findings in the original proceedings that, before deciding to continue to countervail
pre-privatization, non-recurring subsidies, the USDOC is required to examine the conditions of the
privatization and to determine whether the priva tised producer continues to benefit from pre-
privatization, non-recurring subsidies. 164 In paragraphs 7.214-7.215 of its Report, the Panel has
referred to this finding from the original proceedi ngs. Given the existence of the privatizations
concerned, the USDOC is obliged to examine the conditions of these privatizations and to determine
whether the privatised producer received any bene fit from the financial contributions bestowed on the
state-owned producers. In other words, the latter "determination" is one specific determination as
required by Article 21.3 in cases of sunset reviews involving privatizations.
6.18 Regarding paragraph 7.216 of the Interim Repor t (paragraph 7.216 of this Report), the United
States notes that there is no textual analysis to support a statement of the Panel, which the United
States interprets as requiring "that a determination mu st be made in a sunset review for purposes of
assisting respondent interested parties in an assessment proceeding".165

160 EC Comments on US request for interim review, p. 1.
161 See EC Response to Panel question No. 43.
162 US Request for interim review, para. 9.
163 The United States takes issue with the Panel' s statement: "'Nor was there a 'determination' on
whether the privatized producers received any benefit ... . The Panel considers that there is a difference between
'assumption' and 'determination' ... . In this regard, what Article 21.3 explicitly requires is a 'determination'. ...'"
US Request for interim review, paras. 10-11.
164 Appellate Body Report on US – Countervailing Measures on Certain EC Products, para. 149.
165 US Request for interim review, para. 12.

6.19 The Panel disagrees with the United States' interpretation of the Panel's reasoning in
paragraph 7.216 of this Report. Requiring the USDOC to examine the conditions of the privatisation
and determine whether the benefit continues is not for purposes of assisting respondent interested
parties in an assessment proceeding. The reference to the situation where an assessment is requested
is used simply to illustrate the legal uncertainty that would arise from an assumption. .
6.20 Regarding paragraphs 7.234-7.238 of the Interi m Report (paragraphs 7.234-7.238 of this
Report), the United States asserts that the Panel is "imputing the requirements necessary to make a
determination of likelihood to a finding regarding the effects of privatization".
166 The United States
argues that neither Article 11.3 of the Anti-Dumping Agreement nor the Appellate Body addressed
"the issue of whether an administering authority may make an assumption where there are sufficient
other bases for making the likelihood determination in question". 167 The United States insists that the
assumption about privatization does not compromise or affect the overall likelihood-of-subsidization
determination; therefore, the assumption about privatization did not prevent the USDOC from making
its likelihood-of-subsidization dete rmination on the basis of positiv e evidence. Consequently, the
United States maintains "that it is inaccurate to conclude that Commerce erred in assuming, rather
than determining, that privatization extinguished the benefit".168
6.21 The Panel notes that paragraphs 7.234-7.238 si mply review a number of Appellate Body and
panel reports regarding the lega l requirements on the treatment of evidence during sunset reviews
conducted under Articles 21.3 of the SCM Agreement and Article 11.3 of the Anti-Dumping
Agreement. The issue of why an assumption is not sufficient to meet the requirement of making a
determination is a different issue and has been analysed in paragraphs 7.198 to 7.217 below.
6.22 Regarding paragraph 7.245 of the Interim Repor t (paragraph 7.245 of this Report), the United
States raises two issues. First, the United States ch aracterizes as inaccurate the Panel’s statement that
the USDOC based its affirmative likelihood-of-subsidization re-determination in the UK Section 129
determination on a finding from the original inves tigation that there was a subsidy benefit to
Glynwed.169 The United States argues that the findings in the UK Section 129 determination were
based on the evidence and findings from the original sunset review proceedings, not the original
investigation. In the United States' view, the finding in the original sunset review determination that
there was insufficient evidence to conclude that th e benefit had been extinguished is the same as the
finding in the UK Section 129 determinati on that a subsidy continued for Glynwed. 170 Second, the
United States also characterizes as inaccurate th e Panel's statement that the insufficiency of
information on the termination of subsidy programmes due to the non-cooperation of respondents was
the basis of the original sunset review determination and that this basis is different than the basis of
the UK Section 129 determination. The United Stat es emphasizes that the affirmative finding in the
original sunset review was based on the fact that there was no evidence that the benefit had been
extinguished; respondents' non-cooperation is only one of the reasons for th e absence of evidence
since any other interested party could have put forth evidence. 171 The European Communities
disagrees and asserts that the USDOC did not a ssess the evidence provided by the European
Commission and the GOUK. The European Communiti es insists that the only explanation for the
USDOC's refusal to asses the information provided by the European Communities and the GOUK is
that the relevant exporters/producers had not participated.172

166 US Request for interim review, para. 13
167 US Request for interim review, para. 13.
168 US Request for interim review, para. 13.
169 US Request for interim review, para. 14.
170 US Request for interim review, paras. 14-16.
171 US Request for interim review, paras. 17-18.
172 EC Comments on US request for interim review, p. 2.

6.23 As regards the first comment, the Panel notes th at the original sunset review determination
focused almost exclusively on the benefit to BS plc. The text of the original sunset review
determination only mentioned Glynwed in a descrip tion of findings from the original countervailing
duty order and as part of the description of the domestic interested parties' arguments, never in the
USDOCs analysis. While the USDOC also restat ed the rate for Glynwed at the end of the
determination, the USDOC explained that it normally selects the rate from the original
investigation.
173 Moreoever, the programme descriptions provided by the USDOC only mention the
subsidization of BS plc, not Glynwed. 174 In addition, the reasoning of the original sunset review
determination as set out in "The Department's Position" focused only on the "subsidy programmes"
and the insufficiency of evidence demonstrating that some programmes had been fully amortized. 175
Therefore, the Panel considers that the "basis" or the "reasoning" of the original sunset determination
as set out in "The Department's Position" was not specifically that a benefit continued to exist for
Glynwed.176 In the UK Section 129 determination, however, the USDOC focused solely on the
benefit to Glynwed. 177 The Panel therefore disagrees with the United States' assertions. As regards
the Unites States' second comment, the Panel notes that the respondents' non-cooperation is one of the
reasons for the insufficiency of evidence in the original sunset review. Since nevertheless the focus of
the Panel's statement was the insufficiency of ev idence, we agree to delete the reference to non-
cooperation in paragraph 7.245 of this Report.178
6.24 Regarding the United States' comments on paragraphs 7.248 179 and 7.281 180 of the Interim
Report (paragraphs 7.248 and 7.281 of this Repor t), the Panel has addressed these concerns in
paragraph 6.11 above.
6.25 As regards the United States' comments on para graph 7.252 of the Interim Report (paragraph
7.252 of this Report)181, the Panel refers to its comments in paragraph 6.13 above.
6.26 Regarding paragraph 7.291 of the Interim Repor t (paragraph 7.291 of this Report), the United
States characterizes as inaccurate the Panel's statement that "the 1987 Government Delegated
Commission on Economic Affairs: Fund For Employ ment Promotion and Early Retirement was the
programme that the USDOC found to be 'recurring' and that the USDOC used as the basis for its
affirmative likelihood-of-subsidi zation determination in the Spai n Section 129 determination".
Quoting page three of the UK Sunset Review Issues and Decision Memo, the United States insists that
the programme is an example of a recurring subsidy programme.
182 The European Communities
comments that the United States identified no other programme as recurring and therefore proposes
amending paragraph 7.291 as follows: "was the only programme that the USDOC found
 identified to
be as 'recurring'".183

173 Issues and Decision Memo for the Expedited Suns et Review of the Countervailing Duty Order on
Cut-to-Length Carbon Steel Plate from the United Kingdom; Final Results, p. 14-15, 19 (7 April 2000) (Exhibit
EC-6) ("UK Sunset Review Issues and Decision Memo").
174 UK Sunset Review Issues and Decision Memo, footnote 173 above, pp. 17-19.
175 UK Sunset Review Issues and Decision Memo, footnote 173 above, pp. 2, 12-14.
176 US Request for interim review, para.18.
177 Issues and Decision Memorandum: Section 129 Determination: Final Results of Expedited Sunset
Review of Cut-to-Length Carbon Steel Plate from the United Kingdom, p. 4 (24 October 2003) (Exhibit EC-2).
178 US Request for interim review, paras. 17-18.
179 The United States reiterates that similar conclusion s in paragraphs 7.16 and 7.17 are also incorrect.
US Request for interim review, para. 19.
180 US Request for interim review, para. 21.
181 US Request for interim review, para. 20.
182 US Request for interim review, para. 22.
183 EC Comments on US request for interim review, p. 2.

6.27 The Panel notes the United States' clarification that the recurring subsidy programmes
collectively form the basis of the Spain Section 129 determination, even though the USDOC has not
identified any other recurring programmes in the determ ination. The Panel has therefore clarified this
point in paragraph 7.291of this Report.
6.28 Regarding paragraph 7.291, footnote 492 of the Interim Report (paragraph 7.291, footnote
539 of this Report), the United States notes that page 17 of the Issues and Decision Memorandum
cited does not exist.
184 The European Communities states that it does exist. 185 The Panel has verified
that the page exists and therefore does not need to amend footnote 539 of this Report.
6.29 Regarding paragraph 7.296 of the Interim Repor t (paragraph 7.296 of this Report), the United
States characterizes as inaccurate the Panel's stat ement that the USDOC rejected evidence on the
termination of subsidy programmes as insufficient due to the non-cooperation of respondents. Citing
page thirteen of the Spain Sunset Review Issu es and Decision Memo, the United States emphasizes
that the determination states that no evidence of termination was provided and therefore the
respondents' arguments were unsubstantiated.
186 The European Communities disagrees and asserts
that the USDOC did not assess the evidence pr ovided by the European Commission and the
Government of Spain. The European Communitie s insists that the non-cooperation of respondents
was the only reason that the USDOC provided for not assessing the evidence at issue.187
6.30 The Panel notes that in the original sunset review determination, the USDOC summarized the
European Communities and the GOS ' arguments that a number of subsidy schemes no longer existed
and that the subsidization of the steel sector was prohibited since 1997 following the adoption of a
series of European Commission Decisions. In th e section entitled "The Department's Position", the
USDOC did mention that "the Department did not receive a response from the foreign
producer/exporter and, pursuant to section 351.2 18(d)(2)(iii) of the Sunset Regulations, this
constitutes a waiver of participation". 188 Immediately following this statement, the USDOC stated
"[b]ecause there have been no administrative re views of this order and no evidence has been
submitted to the Department demonstrating the te rmination of the countervailable programs, the
Department assumes that these programs continue to exist and are utilized." 189 The USDOC further
based its affirmative determination on the fo llowing grounds: "[ absence of] evidence that the
programs have been terminated, [absence of evid ence] that the benefits from programs for which
benefits are allocated over time will not continue be yond this sunset review, or [lack of] participation
in this review of a foreign producer/exporter...". 190 It remains unclear which of those grounds are the
ones on which the USDOC relied in this case. In any event, the Panel will delete the reference to non-
cooperation in paragraph 7.296 of this Report and will add a footnote referring to those grounds.

184 US Request for interim review, para. 22.
185 EC Comments on US request for interim review, p. 2.
186 US Request for interim review, para. 24.
187 EC Comments on US request for interim review, p. 2.
188 Issues and Decision Memo for the Expedited Suns et Review of the Countervailing Duty Order on
Cut-to-Length Carbon Steel Plate from Spain; Final Results, p. 13 (7 April 2000) (Exhibit EC-7) ("Spain Sunset
Review Issues and Decision Memo").
189 Spain Sunset Review Issues and Decision Memo, footnote 188 above, p. 13.
190 Spain Sunset Review Issues and Decision Memo, footnote 188 above, pp. 13-14.

VII. FINDINGS
A. G
ENERAL CONSIDERATIONS FOR THIS DISPUTE
1. The Panel's mandate
7.1 Article 21.5 of the DSU provides that "[w]here there is di sagreement as to the existence or
consistency with a covere d agreement of measures taken to co mply with the recommendations and
rulings", an Article 21.5 panel shall decide the dispute. We note that the Appellate Body in EC – Bed
Linen (Article 21.5 – India) emphasized that an Article 21.5 proceeding is similar to the original
proceedings and thus, the "matter" at issue consists of the same elements: the specific "measures" at
issue and the legal basis of the complaint, i.e. the claims.191 The mandate of an Article 21.5 panel is
therefore to determine (i) whether measures have been taken to comply and, if so, (ii) whether such
measures are fully consistent with the covered agreements, as disputed by the legal claims included in
the Panel request.192
7.2 Both the identity and scope of the measures take n to comply as well as the claims that can be
considered by this Panel have been the object of co ntroversy between the parties to this dispute. We
will therefore consider both elements of the matter before us in order to identify the measures taken to
comply and the legal claims properly before this Panel.
(a) The measures taken to comply in these proceedings
(i) Arguments of the parties
7.3 At first, the parties seemed to agree that th e measures taken to comply by the United States
were the three Section 129 determinations (France, UK and Spain), each including a revision of the
likelihood-of-subsidization determination from the original sunset review. However, during the
proceedings it became patent that the parties do not agree on either the identity or the scope of the
measures taken to comply.
7.4 After having said that it was "treating the USDOC's failure to revoke [the three countervailing
duty] orders as the purported 'implementation' of the USDOC's findings" 193, the European
Communities asserted in its Second wr itten submission that the "Sec tion 129 determinations at issue
in this proceeding are measures taken by the Unite d States to comply with the recommendations and
rulings of the DSB". 194 Yet in response to a question by this Panel, the European Communities
clarified its position and insisted that the measures taken to comply are "the maintenance of (or in
other words the failure to revoke or amend) th e countervailing duties" and that the Section 129
determinations constitute the statement of reasons for the maintenance of the duties.195
7.5 The United States' position is very different. It argues that the "measure" taken by USDOC to
comply with the recommendations and rulings of th e DSB relates only to the treatment of allocable,
pre-privatization subsidies.196 All other aspects of the Section 129 determinations such as USDOC's
findings regarding subsidies to Glynwed in the UK case and the recurring subsidy programmes in the
Spain case are unchanged aspects of the measure that were not addressed by the DSB
recommendations and rulings and therefore are not with in the scope of the "measure taken to comply"

191 Appellate Body Report on EC – Bed Linen (Article 21.5), para. 78.
192 Appellate Body Report on EC – Bed Linen (Article 21.5), para. 79.
195 EC Response to Panel questions Nos. 17, 21.

in the Article 21.5 proceedings. 197 Further to a question by the Pane l, the United States clarified that
the measures taken to comply are those aspects of the Section 129 determinations that represent
revisions to the original determinations in or der to comply with the DSB recommendations and
rulings. With respect to these revised determinations, the revised privatization analysis of Usinor is a
measure taken to comply. By contrast, the United States argues, any findings regarding Glynwed and
the Spanish subsidy programmes in the revised s unset review are not measures taken to comply
because they are unchanged aspects of the original determination that have nothing to do with
privatization and therefore did not need to be ch anged to comply with the DSB recommendations and
rulings.
198
(ii) Evaluation by the Panel
7.6 The concept of "measures taken to comply" has been interpreted by the Appellate Body in
Canada – Aircraft (Article 21.5 – Brazil) as referring to those "measures which have been, or which
should be, adopted by a Member to bring about complia nce with the recommendations and rulings of
the DSB".199 In other words, a complaining Member can challenge either a Member's implementing
actions, i.e. "measures which have been… adopted," or their omissions, i.e. "measures which should
be[]… adopted".
7.7 Establishing which are the measures taken to comp ly is a necessary step in these proceedings
since, as expressed by the Appellate Body in EC – Bed Linen (Article 21.5 – India), an Article 21.5
panel can only consider measures that are taken to comply: "If a claim challenges a measure which is
not a 'measure taken to comply', that claim cannot properly be raised in Article 21.5 proceedings."200
As it provides the basis for including or excluding legal claims, identifying the "measures taken to
comply" is therefore of primary importance.
7.8 Deciding what constitutes a "measure taken to comply" in an Article 21.5 proceeding is a
matter subject to decision by the panel, not by the parties. 201 As affirmed by the Appellate Body 202,
the panel in EC – Bed Linen (Article 21.5 – India) concluded that it is for an Article 21.5 panel to
decide whether certain measures have been "tak en to comply" with a DSB recommendation or
ruling.203 The Panel request, while providing a point de départ, does not require an Article 21.5 panel
to consider all the measures contained therein as measures taken to comply. Therefore, while the

197 US First written submission, paras. 19-20.
198 US Response to Panel question 21.
199 Appellate Body Report on Canada – Aircraft (Article 21.5 – Brazil), para. 36 (emphasis added).;
200 Appellate Body Report on EC – Bed Linen (Article 21.5), para. 78 (emphasis in orgiinal).
201 The Panel in Australia – Salmon (Article 21.5 – Canada) ruled:

"We note that an Article 21.5 panel cannot leave it to the full discretion of the implementing
Member to decide whether a measure is one 'taken to comply'. If one were to allow that, an
implementing Member could simply avoid any sc rutiny of certain measures by a compliance
panel, even where such measures would be so clearly connected to the panel and Appellate
Body reports concerned, both in time and in resp ect of the subject-matter, that any impartial
observer would consider them to be measures 'taken to comply'".

Panel Report on Australia – Salmon (Article 21.5 – Canada), para. 7.10, subparagraph 22. See also
Panel Report on Australia – Automotive Leather II (Article 21.5 – US), paras. 6.4-6.5.
202 "We agree with the Panel that it is, ultimately, for an Article 21.5 panel – and not for the
complainant or the respondent – to determine which of the measures listed in the request for its establishment
are 'measures taken to comply'." Appellate Body Report on EC – Bed Linen (Article 21.5), para. 78.
203 Panel Report on EC – Bed Linen (Article 21.5 – India), para. 6.15.

parties dispute the scope of the measures taken to co mply, it is ultimately up to this Panel, not the
parties, to identify which measures in the Panel request are the measures taken to comply.
204
7.9 As the first step in determining which measur es are the "measures taken to comply" by the
United States in these proceedings, we shall look at the measures identified by the European
Communities in the Panel request since it defines the outer limits of our mandate.205
7.10 In the Panel request, the European Commun ities identifies three out of the twelve
countervailing duty determinations that were the subject of the original panel proceedings. All three
are sunset reviews:
(a) Certain Corrosion-Resistant Carbon Steel Flat Products from France (C-427-810)
(Case No. 9);.
(b) Cut-to-Length Carbon Steel Plate from United Kingdom (C–412–815) (Case No. 8);
(c) Cut-to-Length Carbon Steel Plate from Spain (C–469–804) (Case No. 11).206
7.11 In footnotes 1 through 3 of its Panel request, whic h cite each of the three sunset reviews, the
European Communities further refers to three un published memoranda that the USDOC had issued
and posted on its website. 207 It is these memoranda that contain the revised likelihood-of-
subsidization determinations for the sunset reviews conducted by the USDOC pursuant to Section 129
of the Uruguay Round Agreements Act ("Section 129").208
7.12 Section 129 is the US procedure aimed at rendering an administering authority's action, which
was previously found WTO-inconsistent by the DSB, " not inconsistent with the findings of the panel
or the Appellate Body".209 We shall therefore examine the three Section 129 determinations issued by

204 Appellate Body Report on EC – Bed Linen (Article 21.5 – India), para. 78.
205 In US – Carbon Steel, the Appellate Body stated that the request for establishment governs a panel's
terms of references and must cont ain the specific measures at issu e. Appellate Body Report on US – Carbon
Steel, paras. 124-125.
206 Request for establishment, p. 2. In the back ground information provided earlier in the Request
itself, the European Communities stated that the Unite d States had finalized a new "change-in-ownership"
methodology and subsequently issued new determinations in which the United States had applied this
methodology to the twelve determinations challenged by the European Communities in the original proceedings.
Request for establishment, p. 1; see Notice of Final Modification of Agen cy Practice Under Section 123 of the
Uruguay Round Agreements Act, 68 Fed. Reg. 37125 (23 June 2003) (Exhibit EC-1) (Modification Notice).
The Panel notes that the United States' ne w privatization methodology as such is not part of the current
proceedings. Request for establishment, p.2; EC First written submission, para. 2.
207 Request for establishment, p.2, footnotes 1-3.
208 See Issues and Decision Memorandum for the Section 129 Determination: Corrosion-Resistant
Carbon Steel Flat Products from France; Final Results of Expedited Sunset Review of Countervailing Duty
Order (23 October 2003) ("France Section 129 determination") (Exhibit EC-4); Issues and Decision
Memorandum: Section 129 Determination: Final Results of Expedited Sunset Review of Cut-to-Length Carbon
Steel Plate from the United Kingdom (24 October 2003) ("UK Section 129 determination") (Exhibit EC-2);
Issues and Decision Memorandum: Section 129 Determination: Final Results of Expedited Sunset Review of
Cut-to-Length Carbon Steel Plate from Spain (24 October 2003) ("Spain Section 129 determination") (Exhibit
EC-3).
209 The relevant excerpt of Section 129 reads as follows:

"Notwithstanding any provision of the Tariff Act of 1930 (19 U.S.C. 1202 et seq.), the
administering authority shall, within 180 days after receipt of a written request from the Trade
Representative, issue a determination in connectio n with the particular proceeding that would

the USDOC to determine what the United States has done to implement the DSB rulings and
recommendations.
7.13 The wording of two of the three Section 129 dete rminations at issue (UK, Spain) specifically
refers to the USDOC's task of implementing the Appellate Body findings:210
"This memorandum constitutes our Secti on 129 Determination regarding the
affirmative likelihood determination in the final results of the expedited sunset review
of the order on cut-to-length carbon steel plate (“CTL Plate”) from [the United
Kingdom or Spain]...
…
Section 129 of the URAA is the applicable provision governing the nature and effect
of determinations issued by the [USDOC] to implement findings by WTO panels and
the Appellate Body. Specifically, section 129(b)(2) provides that '{n}otwithstanding
any provision of the Tariff Act of 1930 . . .,' within 180 days of a written request from
the US Trade Representative (“USTR”), th e [USDOC] shall issue a determination
that would render its actions not inconsistent with an adverse finding of a WTO panel
or the Appellate Body.
211
…
The [USDOC's] duty, in rendering a de termination in this case under Section
129(b)(2) of the URAA, is not to reconduct the original sunset review in its totality,
but to render it not inconsistent with the findings of the Appellate Body…"
212
7.14 The above wording is not present in the France Section 129 determination. However, this
determination does refer to the change in the priv atization methodology further to the adoption of the
Appellate Body report in the original proceedings and to the application of that new methodology to
Usinor's privatization pursuant to Section 129.213
7.15 Both the legal basis of the three Section 129 determinations at issue and the above wording
indicate that these determinations were intended as the means of rendering the original sunset reviews
“not inconsistent” with the DSB recommendations and rulings in the original proceedings. The
United States argues that the measures taken to co mply have a narrow scope and only include those
aspects of the Section 129 determinations that revise portions of the original sunset reviews in order to

render the administering authority's action described in paragraph (1) not inconsistent with the
findings of the panel or the Appellate Body."

Section 129(b)(2) of the Uruguay Round Agreements Act; 19 U.S.C. Section 3538(b)(2) (2003)
(emphasis added).
210 In response to a question by the Panel, the Unite d States confirmed that the USDOC's intention was
to render the original sunset reviews not inconsistent with the DSB recommendations and rulings, meaning both
the Appellate Body findings and this Panel's findings as modified by the Appellate Body. US Response to Panel
question 16.
211 UK Section 129 determination, footnote 208 above, pp. 1-2; Spain Section 129 determination,
footnote 208 above, pp. 1-2.
212 UK Section 129 determination, footnote 208 above, p. 9. The language in the Spain Section 129
determination is virtually identical. Spain Section 129 determination, footnote 208 above, p. 6.
213 France Section 129 determination, footnote 208 above, pp. 1-2.

comply with the DSB recommendations and rulings.
214 Specifically, the United States insists that the
revisions only concern the privatization analysis.
7.16 The Panel agrees with the United States that th ose aspects of the Section 129 determinations
that represent revisions to the original dete rminations in order to comply with the DSB
recommendations and rulings are measures taken to comply. The Panel does not however agree with
the United States that the revisions only concern the privatization analysis.
7.17 The Panel notes that the United States often refe rs in its submissions to these determinations
as "revised" sunset reviews.215 However, the "revision" undertaken by the United States consists of an
affirmative re-determination of the likelihood of continuation or recurrence of subsidization, as set out
in each of the three Section 129 determinations. 216 In the France Section 129 determination, the
USDOC does examine Usinor’s privatization a nd makes a re-determination of likelihood of
continuation or recurrence of subsidization on the basis of that examination. 217 In the UK and Spain
Section 129 determinations though, the USDOC does not analyse the privatizations at issue and
instead revises its likelihood-o f-subsidization determination by changing the basis f or its affirmative
conclusion,i.e. the subsidies benefiting Glynwed inst ead of the non-recurring subsidies to BS plc, in
the UK case, and the recurring subsidies benefiting Aceralia instead of the non-recurring subsidies
benefiting that same producer.
218 In the latter two Section 129 de terminations, USDOC's "revisions"
thus are not restricted to the privatization aspects of the likelihood-of-subsidization determination in
the Section 129 determinations.
7.18 The Panel therefore considers that the measures taken to comply in these proceedings are not
limited to the privatization aspects of the Sectio n 129 determinations. The Panel finds that the
affirmative likelihood-of-subsidization analysis as set out in the Section 129 determinations in the UK
and Spain cases, is a measure taken to comply in each case.
7.19 The parties dispute two main issues regarding the scope of the measures taken to comply.
Both issues are intrinsically relate d to whether this Panel can consider certain legal claims. These
issues concern the USDOC's treatment of evidence in the likelihood-o f-subsidization determination in
the UK and Spain Section 129 determinations and the likelihood-of-injury determination in the three
sunset reviews at issue.219
The USDOC's treatment of evidence in the likelihood-of-subsidization determination
7.20 Regarding the treatment of evidence, we not e that, as already indicated, the affirmative
likelihood-of-subsidization re-determinations set out in the Section 129 determinations, are measures
taken to comply. The Panel understands that the ev idence at issue concerns aspects of the likelihood-
of-subsidization analysis pertaining to the re-deter minations since it refers to matters regarding the
changed basis for the affirmative conclusions. Spec ifically the evidence in question relates to the
termination and/or non-application of various s ubsidy programmes other than the pre-privatization
non-recurring programmes, and to whether one of the UK producers, Glynwed, stopped producing the
product concerned. The Panel al so understands that the respondents invoked this evidence during the

214 US Response to Panel question 21.
215 US First written submission, paras. 2, 11, 13, 18, 21 , 48; US Second written submission, paras. 2, 5,
7-8, 13-14; US Oral statement, paras. 23, 28-29; US Response to Panel questions 3, 21, 28, 33, 36, 39, 41, 51.
216 France Section 129 determination, footnote 208 above; UK Section 129 determination, footnote 208
above; Spain Section 129 determination, footnote 208 above.
217 France Section 129 determination, footnote 208 above, pp. 3-12.
218 UK Section 129 determination, footnote 208 above, pp. 3-4; Spain Section 129 determination,
footnote 208 above, p. 3.
219 The Panel notes that while the USDOC conducts the likelihood-of-subsidization analysis, it is a
different agency, the USITC, that conducts the likelihood-of-injury analysis.

Section 129 proceedings for both the UK and Spain Section 129 determinations 220 and submitted new
evidence in the UK Section 129 proceedings.221
7.21 Since the whole of the affirmative likelihood-o f-subsidization re-determinations, as set out in
the Section 129 determinations at issue, are measu res taken to comply in these proceedings, the Panel
considers that the treatment of the evidence re lating to the subsidy programmes upon which that
affirmative re-determination is based, is also part of the measures taken to comply.
The likelihood-of-injury determination
7.22 As regards the likelihood-of-injury determination, none of the Section 129 determinations at
issue includes a revision of the likelihood of continuation or recurrence of injury. 222 The European
Communities claims that the United States should ha ve re-determined the likelihood of continuation
or recurrence of injury further to revising its lik elihood-of-subsidization determination. The United
States, on the contrary, argues that the measures take n to comply in these proceedings are only those
aspects of the Section 129 determinations that revise portions of the original sunset reviews in order to
comply with the DSB recommendations and rulings.223
7.23 The question is therefore whether the failure to re-determine the likelihood of continuation or
recurrence of injury is also a measure taken to co mply or represents the failure of taking a measure
necessary to comply. In principle, an omission a ttributable to a WTO Member can be a measure of
that Member for purposes of dispute settlement proceedings. 224 Specifically in the context of an
Article 21.5 review, as stated above, the concept "measures taken to comply" refers to those
"measures which have been, or which should be , adopted by a Member to bring about compliance
with the recommendations and rulings of the DSB". 225 Hence, the Panel arguably has the authority to
identify omissions that could render the United Stat es' implementation inconsistent with the covered
agreements.
7.24 The United States invokes the Appellate Body's reasoning in EC – Bed Linen (Article 21.5 –
India) to argue that the measures taken to comply exclude any unchanged aspects of the original
sunset determinations, such as, in this case, the injury analysis.
7.25 In EC – Bed Linen (Article 21.5 – India) , to comply with the DSB recommendations and
rulings in the original proceedings, the Europ ean Communities issued a complete anti-dumping
regulation that encompassed not only the revisions of certain aspects of the dumping, injury and

220 UK Section 129 determination, footnote 208 above, pp. 6-7; Spain Section 129 determination,
footnote 208 above, p. 6.
221 UK Section 129 determination, footnote 208 above, pp. 8-9.
222 See France Section 129 determination, footnote 208 above, p. 12: UK Section 129 determination,
footnote 208 above, p. 9; Spain Section 129 determination, footnote 208 above, p. 9.
223 US Response to Panel question 21.
224 In particular, the Appellate Body stated that:

"any act or omission attributable to a WTO Me mber can be a measure of that Member for
purposes of dispute settlement proceedings. The acts or omissions that are so attributable are,
in the usual case, the acts or omissions of the organs of the state, including those of the
executive branch." Appellate Body Report on US – Corrosion-Resistant Steel Sunset Review ,
para. 81. In a footnote, the Appellate Body specified that "[b]oth specific determinations
made by a Member's executive agencies and re gulations issued by its executive branch can
constitute acts attributable to that Member. ..."

Appellate Body Report on US – Corrosion-Resistant Steel Sunset Review, footnote 79.
225 Appellate Body Report on Canada – Aircraft (Article 21.5 – Brazil), para. 36 (emphasis added).

causality analysis, but also the remaining aspects of those analyses from the original regulation that
the European Communities had not been asked to br ing into conformity with WTO law and thus had
not revised. India challenged the re-determination on the grounds that the European Communities did
not also re-examine the impact of the reduced amount of dumped imports on the effects of "other
factors", for the purpose of the injury analysis.
226
7.26 The Article 21.5 panel, however, declined to consider India's claim on the "other factors"
analysis after finding that the original panel dismissed the claim and India did not appeal. 227 T h e
Appellate Body affirmed, explaining that there is no reason to conclude that a "part of the
redetermination that merely incorporates elements of the original determination ... would constitute an
inseparable element of a measure taken to comply w ith the DSB rulings in the original dispute". The
"other factors" analysis was such an element – an unrevised aspect of the original measure – that "the
investigating authorities of the European Commun ities were able to trea t ... separately" when
conducting the re-determination. 228 Therefore, it fell outside the scope of the measures taken to
comply.
7.27 While the findings and reasoning in EC – Bed Linen (Article 21.5 – India) may seem tailored
to this dispute, the facts and circumstances are not entirely similar. Like EC – Bed Linen (Article 21.5
– India), the likelihood-of-injury analysis is an unrevised aspect of the original sunset review. Unlike
EC – Bed Linen (Article 21.5 – India) , however, the likelihood-of-injury analysis was never
incorporated in the Section 129 determ inations. Moreover, unlike India in EC – Bed Linen (Article
21.5 – India), the European Communities never raised any claims on the issue of injury in the original
proceedings.
7.28 Distinct from the issue of whether an unrevised aspect is part of the measure taken to comply,
EC – Bed Linen (Article 21.5 – India) also stands for the proposition that the effects of the
investigating authorities' actions are relevant to identifying the scope of the measures taken to comply.
To comply with the DSB recommendations and ruli ngs in the original proceedings, the European
Communities' investigating authorities recalculated the dumping margins without relying on zeroing,
found that two producers were no longer dumping, thereby reducing the amount of dumped imports,
and evaluated whether this reduction had an impact on the effect of dumped imports for the purpose
of determining injury. Since the revised dumping an d injury findings may have had an impact on the
causal link, the investigating authorities also exam ined whether the causal link between two revised
elements – dumping and injury – still existed. The investigating authorities, however, did not
reconduct the "other factors" analysis since it was unaffected by the revisions. India challenged the
European Communities' failure to r econduct this analysis. The Article 21.5 panel refused to consider
the issue, concluding that the issue was not properly before it. India appealed. The Appellate Body
affirmed the panel and explained that the reductio n in the amount of dumped imports would have an
impact on the effect of dumped imports for the purposes of determining injury, which would then
have a bearing on whether a causal link exists. The Appellate Body, however, could not find any
reason to conclude that a reduction in the amount of dumped imports would also have an impact on
the effect of "other factors" for the purposes of determining injury. The Appellate Body therefore
concluded that the European Communities did not have to reconduct the "other factors" analysis as it
was unaffected by the reduction in dumping. Hence, the Appellate Body concluded that the issue was
not properly before the panel.
229

226 Panel Report on EC – Bed Linen (Article 21.5 – India), paras. 2.6-2.11.
227 Panel Report on EC – Bed Linen (Article 21.5 – India) , para. 6.53; see Appellate Body Report on
EC – Bed Linen (Article 21.5 – India), para. 75.
228 Appellate Body Report on EC – Bed Linen (Article 21.5 – India), para. 86.
229 The Appellate Body used the terminology "impact on" and "bearing upon" to refer to the effects of
one aspect on another:

7.29 Following that line of reasoning, it therefore a ppears that whether the failure to revise the
likelihood-of-injury analysis is necessarily part of a measure taken to comply depends on the potential
effect of the re-determination of the likelihood-of-subsidization on the likelihood-of-injury analysis.
7.30 Whether a change in the likelihood-of-subsidi zation determination can affect the likelihood-
of-injury analysis is not an easy issue to decide in the abstract. If we look at the circumstances of this
dispute, we note that the USDOC conducted an expe dited sunset review on an order-wide basis. The
USDOC did not recalculate the rate of subsidization in either the original sunsets or in Section 129
determinations and did not make any sep arate calculation for each producer/exporter. 230 Both the
practice of conducting sunset reviews on an order-wide basis 231 and the absence of the requirement to
recalculate subsidization margins in sunset reviews 232 have been condoned by the Appellate Body in

"We agree with India that the investigating authorities of the European Communities were
required to revise the original determination of dumping and injury in order to comply with
the DSB recommendations and rulings. Towards this end, the European Communities
recalculated the dumping margins without applying the practice of 'zeroing' that had been
found to be inconsistent with WTO obligations in the original dispute. According to the
recalculation, two of the individually examined Indian producers were not dumping.
 The
investigating authorities deducted the imports attributable to those two producers from the
 volume of dumped imports, and, accordingly, the volume of dumped imports in the
redetermination was lower than in the original determination. According to EC Regulation
1644/2001, the investigating authorities of the European Communities also 're-examined'
whether a causal link between the two revised elements – dumped imports and the injury to
the domestic industry – still existed, and the Panel reviewed that re-examination.

The amount of dumped imports will, of course, have an impact on the assessment of the
effects of the 'dumped imports' for the purposes of determining injury. It is clear, therefore,
that the revised findings on dumping and injury could have a bearing on whether a causal link
exists between dumping and injury. But whilst a revised finding of dumping will, in all
likelihood, have an impact on the 'effect of dumped imports', we see no reason to conclude as
well that this revised finding would have any impact on the 'effects … of known factors other
than the dumped imports' in this dispute. Accordingly, we are of the view that the
investigating authorities of the European Communities were not required to change the
determination as it related to the 'effects of other factors' in this particular dispute. Moreover,
we do not see why that part of the redetermina tion that merely incorporates elements of the
original determination on 'other factors' woul d constitute an inseparable element of a measure
taken to comply with the DSB rulings in the original dispute. Indeed, the investigating
authorities of the European Communities were able to treat this element separately.
Therefore, we do not agree with India that the redetermination can only be considered 'as a
whole new measure'".

Appellate Body Report on EC – Bed Linen (Article 21.5 – India) , paras. 85-86 (original footnotes
omitted).
230 The Panel recalls, as stated in footnote 219 above, that while the USDOC conducts the likelihood-
of-subsidization analysis, it is a different agency, the USITC, that conducts the likelihood-of-injury analysis.
231 We note that the requirement to calculate company-specific rates in original investigations of the
Anti-dumping Agreement does not exist in the SCM Agreement. Nevertheless, in the context of anti-dumping
sunset reviews, the Appellate Body has ruled that the sunset review provision does not oblige investigating
authorities in a sunset review to make "company-specific" likelihood determinations. Appellate Body Report on
US – Corrosion-Resistant Steel Sunset Review , paras. 149-150; see also Appellate Body Report on US – Oil
Country Tubular Goods Sunset Reviews, para. 231.
232 The Appellate Body in US – Corrosion-Resistant Steel Sunset Review analysed the extent of an
investigating authority's obligation under Article 11.3 of the Anti-Dumping Agreement and concluded that:

"Article 11.3 does not expressly prescribe any specific methodology for investigating
authorities to use in making a likelihood determination in a sunset review. ... Thus,

previous disputes. Furthermore, the Appellate B ody has ruled that since the United States has chosen
to conduct its sunset reviews on an order-wide basi s, the consistency of th e likelihood determination
must be evaluated in the context of an order-wide determination. Indeed, in US – Oil Country
Tubular Goods Sunset Reviews , the Appellate Body ruled that "because the United States has chosen
to make order-wide determinations in sunset reviews, an allegation that a measure prevents the United
States from making a likelihood determination consistent with Article 11.3 [of the Anti-Dumping
Agreement] must be evaluated by reference to the relevance of that measure for the order-
wide determination."
233 We will therefore analyse the potentia l effect of a likelihood-of-subsidization
determination on the likelihood-of-injury determinati on in the context of a sunset review conducted
on an order-wide basis and without recalculating the rate of subsidization.
7.31 The result of a likelihood-of-subsidization dete rmination conducted on an order-wide basis,
without calculating the subsidization rate per producer /exporter, can only be a "yes" or "no" decision.
If the decision is "no", there would be no need to proceed any further because there would be no
subsidized imports to cause injury. If the decision is "yes", the Panel finds it difficult to see how the
likelihood-of-injury analysis would necessarily be af fected. Where no new rate of subsidization is
calculated and no exporter-specific decision on li kelihood-of-subsidization is made, as here, we can
see no basis for concluding that the re-determination of the likelihood of recurrence or continuation of
subsidization affects the likelihood-of-injury analysis. 234 The Panel therefore considers that

Article 11.3 neither explicitly requires author ities in a sunset review to calculate fresh
dumping margins, nor explicitly prohibits them from relying on dumping margins calculated
in the past. This silence in the text of Article 11.3 suggests that no obligation is imposed on
investigating authorities to calculate or rely on dumping margins in a sunset review."

Appellate Body Report on US – Corrosion-Resistant Steel Sunset Review , paras. 123-24; see also
Appellate Body Report on US – Oil Country Tubular Goods Sunset Reviews, para. 178. Although the Appellate
Body examined an investigating authorities' obligations under the Anti-Dumping Agreement, the jurisprudence
regarding an investigating authorities' obligations applies equally to identical or almost identical provisions on
sunset reviews under the SCM Agreement . In US – Corrosion-Resistant Steel Sunset Review , the Appellate
Body stated that:

"Article 11.3 is textually iden tical to Article 21.3 of the SCM Agreement, except that, in
Article 21.3, the word "countervailing" is used in place of the word "anti-dumping" and the
word "subsidization" is used in place of the word "dumping". Given the parallel wording of
these two articles, we believe that the explanation, in our Report in US – Carbon Steel, of the
nature of the sunset review provision in the SCM Agreement also serves, mutatis mutandis,
as an apt description of Article 11.3 of the Anti-Dumping Agreement . (Appellate Body
Report on US – Carbon Steel , paras. 63 and 88)."

Appellate Body Report on US – Corrosion-Resistant Steel Sunset Review, para. 104, footnote 114.
233 Appellate Body Report on US – Oil Country Tubular Goods Sunset Reviews, para. 231.
234 We note that in the Anti-Dumping Agreement, the "the magnitude of the margin of dumping" is
listed as an injury factor in Article 3.4. There is, however, no correspondi ng provision on the amount or rate or
margin of subsidization in Article 15.4 of the SCM Agreement. Thus, while the amount of subsidization could
be considered in both an original injury determination and in a likelihood-of-injury determination, this Panel
understands that the failure to do so does not violate any specific provision of the SCM Agreement . Even
assuming that the rate of subsidization is relevant to the likelihood-of-injury analysis, the USDOC conducted its
affirmative re-determination on an order-wide basis and without recalculating the rate of subsidization.
Therefore, the rate of subsidization is unchanged and has no effect on the volume aspects of the likelihood-of-
injury determination.

As to the potential implication of a reduced amount of subsidized imports, this Panel considers that it is
only relevant if it is clear that a change in the subsidy benefit to BS plc and Acera lia necessarily affected the
volume of likely subsidized imports and only where it is necessary as a legal matte r to make company-specific
determinations of the likelihood of subsidization. By analogy to Article 11.3 of the Anti-Dumping Agreement,

reconducting a likelihood-of-injury determination, give n the particular circumstances in this dispute,
is not a measure that should be adopted by the United States to bring about compliance with the
recommendations and rulings of the DSB and thus the failure to reconduct the likelihood-of-injury
determination is not an aspect of the measures taken to comply.
Other issues
The failure to revoke the countervailing duty orders as the measure taken to comply
7.32 As indicated above, the European Communities al so argues that it is treating the USDOC’s
failure to revoke the countervailing duty orders in all three sunset reviews as the purported
implementation taken by the United States to comply with the DSB recommendations and rulings. 235
In response to questions by the Panel, the European Communities clarified that the measures taken to
comply are "the maintenance of (or in other word s the failure to revoke or amend) the countervailing
duties" and that the Section 129 determinations constitute the statement of reasons for the
maintenance of the duties.236
7.33 The Panel disagrees with the European Communities' characterization of the measure taken to
comply as the USDOC’s failure to revoke the count ervailing duty orders. As explained above, the
measures taken to comply are the affirmative likel ihood-of-subsidization re-determinations as set out
in the three Section 129 determinations at issue. The maintenance of the duties is a consequence of
the affirmative re-determination of the likelihood of continuation or recurrence of subsidization.
Whether the United States should have reached a different conclusion on likelihood and revoked or
amended the countervailing duties as part of the implementation process relates to the adequacy of the
measures taken to comply rather than their scope.
The implementation status of the Section 129 determinations at issue
7.34 While the Panel considers the affirmative like lihood-of-subsidization re-determinations as set
out in the three Section 129 determinations as the measures taken to comply, the Panel must address
the possibility that these determinations may not have been implemented and consequently not
"taken"237 by the United States. The European Communities drew our attention to the possible lack of
implementation in its First written submission, where it indicated that "[i]f the USDOC in fact refused
to implement its findings in its Section 129 issu es and decision memoranda for the three sunset
reviews at issue here, there is all the more reason for this Panel to find that the United States has failed
to comply with the recommendations and rulings of the Dispute Settlement Body." 238 While none of
the parties pursued the issue, the apparent lack of implementation concerns this Panel as it might
mean that the Section 129 determina tions are not and will never be in force and that the United States
has not actually "taken" any measures to comply.
7.35 In an Article 21.5 proceeding, the measure or measures taken to comply go to the heart of
panel's mandate. The Appellate Body has ruled th at panels have a duty to examine issues of a
"fundamental nature", issues that go to the root of their jurisdiction, on their own motion if the parties

however, there is no such obligation in Article 21.3 of the SCM Agreement. In the absence of company-specific
determinations of the likelihood of subsidization, the USDOC's order-wide-based conclusion that subsidization
is likely to continue or recur seems to apply to the entire volume of likely imports, as no imports were explicitly
excluded.
235 EC First written submission, para. 8; see paragraph 7.4 above.
236 EC Response to Panel questions 17, 21 (emphasis added).
237 We recall that the Appellate Body in Canada – Aircraft (Article 21.5 – Brazil) considered that
measures taken to comply are measures which have been or should be adopted. See paragraph 7.6 above.
238 EC First written submission, para. 8, footnote 10.

to the dispute remain silent on those issues.
239 Therefore, even though the parties have not argued this
issue, we must determine whether the three S ection 129 determinations, despite the absence of
direction by the USTR to implement, still constitute measures "taken" to comply.
7.36 The Notice of Implementation to which the Eur opean Communities refers in its First written
submission indicates that "[b]ecause the US Trade re presentative declined to direct the [USDOC] to
implement the revised determinati ons with regard to the four sunset reviews involved in the WTO
dispute, we are not implementing these Section 129 Determinations. See sections 129(b)(4) and
129(c)(1)(B) of the URAA". 240 This wording appears to indi cate that the three Section 129
determinations at issue were not implemented in the sense that they did not enter into force.
7.37 The fact that a measure may not be in for ce does not impede it from being challenged in
dispute settlement proceedings. As indicated by the panel in Turkey – Textiles , "[i]t is customary
practice of GATT/WTO dispute settlement procedures to address applied measures". However, the
panel also stated that "previous adopted GATT pa nels have always considered that mandatory
legislation of a Member, even if not yet in force or not applied 241, can be challenged by another WTO
Member."242 The wording of the Notice of Implementa tion does not however indicate that the three
Section 129 determinations are binding.
7.38 In response to a question by the Panel, the Unite d States clarified that the absence of direction
from the USTR to implement is due to the fact th at no specific implementation was needed. In US
administrative law terms, this means that the USDOC did not have to order US Customs to change the
deposit rates as these were maintained at the same levels as before. 243 The United States thus
confirmed that the three Section 129 determinations are in force.
7.39 Since the United States confirmed that the three Section 129 determinations are in force and
the European Communities did not contest this fact , the Panel considers the affirmative likelihood-of-
subsidization re-determinations as set out in the three Section 129 determinations as the measures
“taken” by the United States to comply with the DSB rulings and recommendations.

239 Appellate Body Report on Mexico – Corn Syrup (Article 21.5) , para. 36; see also Appellate Body
Report on US – Carbon Steel, para 123.
240 S ee Notice of Implementation Under Section 129 of the Uruguay Round Agreements Act;
Countervailing Measures Concerning Certain Steel Products from the European Communities, 68 Fed. Reg.
64858, 64859 (17 November 2003) (emphasis added) (Notice of Implementation).
241 (footnote original) See for instance the Panel Report on United States – Taxes on Petroleum and
Certain Imported Substances, adopted on 17 June 1987, BISD 34S/136 (" US – Superfund"), paras. 5.2.1-5.2.2;
Panel Report on EEC – Regulation on Imports of Parts and Components , adopted on 16 May 1990,
BISD 37S/132, paras. 5.25-5.26; Panel Report on United States – Measures Affecting Alcoholic and Malt
242 Panel Report on Turkey – Textiles, para. 9.37.
243 The United States refers to an excerpt from the Statement of Administrative Action which reads as
follows:

"The Trade Representative may decline to request implementation of the [revised]
determination. This might be the case, for example, if [the USDOC] issued a final affirmative
subsidy determination and a WTO panel subsequently finds that [the USDOC's] analysis was
not consistent with the Subsidies Agreement. On making a new determination at the Trade
Representative's direction, [the USDOC] could co rrect the analytical fl aw found by the panel
without changing the original outcome. In such a case, there would be no need to implement
the new determination as a matter of domestic law."

Statement of Administrative Action, p. 356 (Exhibit US-7) ("SAA").

7.40 The Panel therefore finds that the measures ta ken to comply in these proceedings are the
affirmative re-determinations of the likelihood of continuation or recurrence of subsidization, as set
out in the three Section 129 determinations at issue.
(b) Scope of the claims in these proceedings
(i) Arguments of the parties
7.41 The United States argues that the European Communities has improperly advanced claims
regarding both the non-pre-privatization subsidy and injury aspects of the original sunset review
determinations. According to the United States, th ese aspects were not challenged during the original
panel proceedings and remained unchanged in the Section 129 process and re-determinations.
244 For
the United States, the measures taken by the USDO C to comply with the DSB recommendations and
rulings relate only to the treatment of allocable, pre-privatization subsidies. 245 All other aspects of the
Section 129 determinations, which rela te to aspects of the original sunset review determinations that
were not addressed by the DSB, fall outside the scope of the "measure taken to comply" in the Article
21.5 proceedings. 246 In its Oral statement, the United States insisted that "[a] 'measure taken to
comply' consists of those aspects of a determination that implement the findings and
recommendations of the DSB". 247 For the United States, the cl aims on the evidence regarding non-
pre-privatization subsidies and injury raised by the European Communities are outside this Panel's
mandate.248
7.42 The United States cites the Appellate Body in EC – Bed Linen (Article 21.5 – India) as
support for its position that claims other than those re garding the privatization analysis fall outside the
Panel's mandate. 249 The United States asserts that according to Appellate Body jurisprudence, an
investigating authority's findings that are "uncha nged" during the original proceedings cannot be
challenged in Article 21.5 proceedings.250
7.43 The European Communities considers that the factual circumstances in EC – Bed Linen
(Article 21.5 – India) are different from those in the current proceedings. The European Communities
maintains that it raised new claims concerning components of the new measures which were not part
of the original measure and therefore were not and could not have been before the Panel and
Appellate Body in the original proceedings.251
7.44 The European Communities argues that the panel' s mandate in an Article 21.5 proceeding is
to examine whether the new measure is consistent with the provisions of the covered agreements cited
by the complaining Member in its panel request. In its view, it is not sufficient to eliminate only one
erroneous aspect of the measure if doing so exposes additional inconsistencies with the obligations of

246 See US First written submission, paras. 2, 5, 15-16, 18-20; US Oral statement, paras. 3, 8-9, 15.
247 US Oral statement, para. 3 (emphasis added).
248 US Response to Panel question No. 21.
249 US First written submission, para . 16. The United States refers inter alia to two excerpts from the
Appellate Body Report: "we do not see why that part of a redetermination that merely incorporates elements of
the original determination... would constitute an inseparable element of the measure taken to comply with the
DSB rulings in the original dispute"; and "India [sought] to challenge an aspect of the original measure which
has not changed, and which the European Communities did not have to change, in order to comply with the
DSB recommendations and rulings to make that measure consistent...." Appellate Body Report on EC – Bed
Linen (Article 21.5), paras. 86 and 87, respectively.
250 US First written submission, paras. 16, 18-20; see US Oral statement, paras. 3-5.

the SCM Agreement .
252 In the European Communities' view , the Section 129 determinations are
measures taken by the United States to comply with the DSB recommendations and rulings.253 Hence,
these determinations are new measures based on new reasoning254 and on new factual findings.255 The
European Communities thus has raised new clai ms concerning components of these new measures
which were not before the panel and the AB in the original proceedings.256
7.45 The European Communities argues that its cl aims challenging the lack of injury re-
determinations in the UK and Spain cases are properly before this Panel. It is in these two Section
129 determinations that the USDOC assumed for the firs t time that the privatizations of British Steel
plc (BS plc) and Aceralia were at arm's length and for fair market value (FMV). In its view, these
assumptions would significantly lower the levels of subsidization from those in the original sunset
reviews, which in turn may require a reconsiderat ion of likelihood of injury in the two Section 129
determinations.
257
(ii) Evaluation by the Panel
7.46 The parties dispute the scope of the legal claims that this Panel can consider. Specifically,
regarding the French case, the parties disagree wh ether the United States should have revised the
likelihood-of-injury determination made by the USITC in the original sunset reviews, in addition to
revising its likelihood-of subsidization analysis of the USDOC. As regards the UK and Spain cases,
the parties dispute whether the Panel should consid er the European Communities' claims challenging
the USDOC's alleged failure to adequately consid er evidence in the likeli hood-of-subsidization re-
determinations and the United States’ alleged failure to revise the likelihood-of-injury determination.
New claim not included in the Panel request
7.47 The United States argues in a footnote to its First written submission that the European
Communities' claim that the United States shoul d have reconsidered the likelihood-of-injury
determination in the French case is outside this Pane l's terms of reference because it is not included in
the Panel request.258 The European Communities, which only a ddressed this point in its First written
submission, disagrees. In response to a question by the Panel, the European Communities asserts that
"[t]he claim is made in paragraph 1 of th e second paragraph on page 2 of the Request for
Establishment. It is there that the EC claims th at the US is maintaining duties inconsistently, with,
inter alia, Articles 21.1 and 21.3. Those provisions requi re that subsidies be maintained only where
subsidization is causing injury." In a footnote to the second sentence, th e European Communities
insists that "[a] claim is an allegation that particular measures are inconsistent with specific provisions
of the covered agreements."259
7.48 As indicated above, the Appellate Body has ruled that panels have a duty to examine issues of
a "fundamental nature", issues that go to the root of their jurisdiction, on their own motion if the
parties to the dispute remain silent on those issues. 260 Whether a claim falls within our terms of
reference is clearly an issue that goes to the root of our jurisdiction. Therefore, even though the

254 EC Second written submission, paras. 14, 17.
257 EC Second written submission, paras. 23, 25.
258 US First written submission, para. 15, footnote 19.
259 EC Response to Panel question 25; see Request for establishment, p. 2.
260 Appellate Body Report on Mexico – Corn Syrup (Article 21.5) , para. 36; see also Appellate Body
Report on US – Carbon Steel, para 123.

parties have barely argued this issue, we must de termine whether this claim is within our terms of
reference.
7.49 The Panel notes that the Panel request includes the following text describing the claims on the
French case:
"That in the sunset review Certain Corrosion-Resistant Carbon Steel Flat Products
from France (C-427-810) (Case No. 9), the United States failed to properly examine
the existence, continuation or likelihood of r ecurrence of subsidization. In particular,
with regard to the privatization concerne d, it improperly analysed whether the price
for employees and retirees' shares cons tituted a subsidy or that it led to any
continuation of a countervailable subsidy. Th is is inconsistent with Articles 10, 14,
19.4, 21.1 and 21.3 of the SCM Agreement and Article VI: 3 of GATT 1994."261
7.50 Unlike the UK and Spain cases, where the word "injury" is explicitly mentioned when making
the claims pursuant to Articles 10, 14, 19.4, 21.1, and 21.3 of the SCM Agreement and Article VI:3 of
GATT 1994 262, the claims for the French case do not cont ain the word "injury". The text does,
however, explicitly refer to the likelihood-of-s ubsidization determination. The European
Communities' argument that the mere listing of one provision covering both likelihood-of-
subsidization and likelihood-of-injur y determinations is sufficient to imply the particular violation
claimed cannot stand in this case. In Korea – Dairy , the Appellate Body explained that the mere
listing of the articles of an agreement alleged to have been breached may not necessarily be sufficient
for the purposes of Article 6.2 of the DSU. The Appellate Body opined that such a case may arise
"where the articles listed establish not one single, di stinct obligation, but rather multiple obligations.
In such a situation, the listing of articles of an agreement, in and of itself, may fall short of the
standard of Article 6.2".263 Article 21.3 of the SCM Agreement contains at least two obligations, one
referring to the likelihood of subsidization, the ot her to the likelihood of injury. The claim on the
likelihood of subsidization is identified in the Pa nel request but there is no mention of the likelihood-
of-injury aspect. 264 The Panel considers that this is one of the cases where the mere listing of an
article, coupled with the reference to only one of the obligations provided for in that article, falls short
of meeting the requirements in Article 6.2 of the DSU. Thus, in our view, the European Communities
failed to state a claim regarding the likelihood of injury in the Panel request.
7.51 The fact that the European Communities argue d this claim in its First written submission
cannot cure the absence of a suffici ently specified claim in the Pane l request. We recall that the
Appellate Body in EC – Bananas III ruled that:
"Article 6.2 of the DSU requires that the claims, but not the arguments, must all be
specified sufficiently in the request for th e establishment of a panel in order to allow

261 Request for establishment, p. 2.
262 In this regard, the Request for establishment reads as follows: "[t]he United States failed to properly
determine whether, in these cases, there was continuation or recurrence of subsidization and injury". Request
for establishment, p. 2 (emphasis added).
263 Appellate Body Report on Korea – Dairy, para. 124.
264 The Appellate Body in India – Patents (US) stated that:

"[t]he jurisdiction of a panel is established by that panel's terms of reference, which are
governed by Article 7 of the DSU. A panel may consider only those claims that it has the
authority to consider under its terms of reference. A panel cannot assume jurisdiction that it
does not have."

Appellate Body Report on India – Patents (US) , para. 92; see also Appellate Body Report on US –
Shrimp (Article 21.5 – Malaysia), paras. 87-88.

the defending party and any third parties to know the legal basis of the complaint. If
a claim is not specified in the request for the establishment of a panel, then a faulty
request cannot be subsequently 'cured' by a complaining party's argumentation in its
first written submission to the panel or in any other submission or statement made
later in the panel proceeding."
265
7.52 Therefore, since we have concluded that it is not properly specified in the Panel request, the
Panel finds that the claim on the failure to revise the likelihood-of-injury determination regarding the
France Section 129 determination falls outside this Pa nel's terms of reference and thus we cannot rule
on it.
Other disputed new claims
7.53 As regards the UK and Spain cases, the parties dispute whether the Panel should consider the
European Communities' legal claims that challe nge the USDOC's alleged failure to adequately
consider evidence in the likelihood-of-subsidizati on re-determination and the United States' alleged
failure to reconsider the likelihood-of-injury determination.
7.54 We have already concluded in paragraph 7.18 above that the measures taken to comply in
these proceedings are the affirmative likelihood-of-s ubsidization re-determinations. We have also
concluded in paragraphs 7.21 and 7.31 above that the measures ta ken to comply include the treatment
of evidence by the USDOC and that the alleged failur e to re-determine the likelihood of injury is not
an aspect of the measures taken to comply.
7.55 A legal claim is properly before an Article 21. 5 panel if it challenges the measures taken to
comply on the basis of inconsiste ncy with the covered agreements. 266 A panel is thus not limited to
the claims raised in the original proceedings. In stead, as the Appellate Body has confirmed, Article
21.5 panels can consider " new claims, arguments, and factual circumstances different from those
raised in the original proceedings, beca use a 'measure taken to comply' may be inconsistent with
WTO obligations in ways different from the original measure". The Appellate Body explained that
"an Article 21.5 panel could not pr operly carry out its mandate to asse ss whether a 'measure taken to
comply' is fully consistent with WTO obligations if it were precluded from examining claims
additional to, and different from, the clai ms raised in the original proceedings". 267 Article 21.5 panels
appear to have a broad mandate, a mandate almost ak in to the original panel, and thus can consider
any properly-raised new claims regarding the measures taken to comply.
7.56 A closer look at the Appellate Body’s reasoning, however, indicates that an Article 21.5
panel's mandate is not as broad as it seems. The Appe llate Body reasons that new claims should fall
within the scope of an Article 21.5 panel's manda te because the measure taken to comply may be
inconsistent with WTO obligations in ways different from the original measure. The question before
us here is whether this reasoning should also apply to new claims that allege that the measures taken
to comply are inconsistent in ways identical to the original measure and were not raised or resolved in
the original proceedings. The Appellate Body has stressed that the utility of Article 21.5 proceedings
as an expedited verification of im plementation would be seriously unde rmined if a panel was limited
to examining the measure taken to comply from the perspective of the claims, arguments, and facts in
the original proceedings because an Article 21.5 pa nel would not be capable of examining fully the

265 Appellate Body Report on EC – Bananas III, para. 143
266 EC – Bed Linen (Article 21.5 – India), paras. 78-79.
267 Appellate Body Report on EC – Bed Linen (Article 21.5) , para. 79 (emphasis in orgiinal); see also
Appellate Body Report on Canada – Aircraft (Article 21.5 – Brazil) , para. 41; Appellate Body Report on US –
Shrimp (Article 21.5 – Malaysia), paras. 86-87.

consistency of the measure taken to comply with the covered agreements. 268 The question is whether
this utility principle requires that all new claims must be considered by Article 21.5 panels, even if the
claims regard unchanged aspects of the original meas ure and thus could have been raised, but were
not, in the original proceedings.
7.57 To determine which claims an Article 21.5 pa nel can consider, the Panel has followed the
same analytical process as the Appellate Body in EC – Bed Linen (Article 21.5 – India) by examining
the facts and circumstances in previous Article 21.5 proceedings and by reviewing the Appellate
Body's conclusions in those cases.
7.58 In Canada – Aircraft (Article 21.5 – Brazil) , the Appellate Body examined whether an
Article 21.5 panel could consider a new claim269 that challenges an aspect of the measure taken to
comply which was not part of the original measure and had not been, and could not have been,
previously raised before the pa nel in the original proceedings. 270 The Appellate Body explained that
an Article 21.5 panel is not limited solely to ex amining whether the Member complied with the DSB
recommendations and rulings, but rather must examin e the consistency of the new measure with the
relevant provisions of the SCM Agreement .271 The Appellate Body, invoking the utility of Article
21.5 proceedings, concluded that the panel therefore should have considered Brazil's new claim.272
7.59 In US – FSC (Article 21.5 – EC) , the Appellate Body upheld a ruling on a new claim
challenging an aspect of the measure taken to comp ly that was a revision of the original measure. 273
Although neither the panel nor the Appellate Body explicitly considered the issue of whether an
Article 21.5 panel can consider a new claim, both analysed the substance of the claim and made
findings, which indicates that they believed the claim was properly before them.
274 As in Canada –
Aircraft (Article 21.5 – Brazil) , the new claim in US – FSC (Article 21.5 – EC) could not have been
raised in the original panel proceedings because the allegedly inconsistent aspect first appeared during
the implementation process. The same argument regarding the utility of Article 21.5 proceedings
would therefore seem to apply.275

268 Appellate Body Report on Canada – Aircraft (Article 21.5 – Brazil), para. 41.
269 In Canada – Aircraft (Article 21.5 – Brazil) , the Appellate Body refers to Brazil's claim as an
"argument" when it is in fact a new claim. Although Br azil challenged the same provision, Article 3.1(a) of the
SCM Agreement, it alleged new grounds for the violation that render it a new claim. See Appellate Body Report
on Canada – Aircraft (Article 21.5 – Brazil), paras. 27-31.
270 In the original proceedings of Canada – Aircraft , the DSB adopted findings that a Canadian
programme is inconsistent with Article 3.1(a) SCM on the grounds that the qualification for a subsidy
programme is based on export performance and therefor e constitutes a prohibited export subsidy. The DSB
recommendations and rulings required Canada to withdr aw the inconsistent aspects of the programme, which
Canada did. Canada then revised the programme. In the Article 21.5 proceedings, Brazil challenged the
consistency of the revised programme with Article 3.1(a) SCM, arguing, inter alia, that the revised programme
was inconsistent with Article 3.1(a) SC M because it targeted the aircraft indu stry only because of the industry's
export-orientation. The Article 21.5 panel refused to consider the new claim, explaining that it was unrelated to
the panel's reasoning in th e original proceedings and unrelated to the DSB recommendations and rulings. The
Appellate Body reversed. Appellate Body Report on Canada – Aircraft (Article 21.5 – Brazil), paras. 25, 27-28,
33-34 and 42.
271 Appellate Body Report on Canada – Aircraft (Article 21.5 – Brazil), para. 40.
272 Appellate Body Report on Canada – Aircraft (Article 21.5 – Brazil), para. 41.
273 Appellate Body Report on US – FSC (Article 21.5 – EC), para. 222.
274 Panel Report on US – FSC (Article 21.5 – EC) , paras. 8.123-8.159; Appellate Body Report on US –
FSC (Article 21.5 – EC), paras. 197-222. Compare Panel Report on US – FSC, para. 3.2 (including no claim on
Article III:4 of GATT 1994) with Panel Report on US – FSC (Article 21.5 – EC), para. 3.1 (including a claim on
Article III:4 of GATT 1994).
275 See Appellate Body Report on Canada – Aircraft (Article 21.5 – Brazil), para. 41.

7.60 In EC – Bed Linen (Article 21.5 – India) , which both parties cited repeatedly, the Appellate
Body examined whether an Article 21.5 panel could consider the same claim raised in the original
proceeding challenging an aspect of the measure taken to comply that was unchanged from the
original measure and had been previously dismisse d by the panel in the original proceedings. The
parties have discussed extensively whether the circumstances in EC – Bed Linen (Article 21.5 – India)
are similar to this dispute.
7.61 In EC – Bed Linen (Article 21.5 – India) , India raised a claim regarding an aspect of the
measure taken to comply that was unchanged from the original measure: the European Communities'
evaluation of the relevance of "other factors" in its injury analysis. The original panel had already
considered the claim, found that India failed to estab lish a prima facie case, and dismissed the claim.
India never appealed the finding. By adopting the panel and Appellate Body reports, the DSB
effectively resolved this issue. The Article 21. 5 panel therefore concluded that India was precluded
from raising an issue that had already been decided.
276
7.62 India appealed, asserting that the new measure before the Article 21.5 panel should be
considered as a whole and not separated into elemen ts. India argued that given the revised dumping
and injury findings, the European Communities also had to re-examine the “other factors” analysis. 277
After analyzing the re-determination, the Appellate Body found that the investigating authorities were
required to change some aspects of the original determination, but not others. Thus, while the
causation analysis was a new aspect of the measure taken to comply with the DSB recommendations
and rulings, the “other factors” analysis remained unchanged from the original determination. The
Appellate Body affirmed the panel's finding, explaining that the unchanged aspects were not
inseparable elements of the measure taken to comply.278
7.63 The Appellate Body upheld the Article 21.5 pa nel's finding that a claim which was "disposed
of" by the original panel and not appealed was out side its terms of reference. The Appellate Body
explained that based on other provisions of the DSU, namely Articles 16.4, 19.1, 21.1, 21.3 and 22.1,
"an unappealed finding included in a panel report that is adopted by the DSB must be treated as a
final resolution to a dispute between the pa rties in respect of the particular claim and the specific
component of a measure that is the subject of that claim." This occurs, it sai d, "in the same way and
with the same finality as a finding included in an Appellate Body Report adopted by the DSB".279

276 Panel Report on EC – Bed Linen (Article 21.5 – India) , para. 6.53; see Appellate Body Report on
EC – Bed Linen (Article 21.5 – India), para. 75.
277 Appellate Body Report on EC – Bed Linen (Article 21.5 – India), paras. 75, 82.
278 Appellate Body Report on EC – Bed Linen (Article 21.5 – India), para. 86.
279 In particular, the Appellate Body reasoned as follows:

"... an unappealed finding included in a panel report that is adopted by the DSB must be
treated as a final resolution to a dispute between the parties in respect of the particular
claim and the specific component of a measure that is the subject of that claim. This
conclusion is supported by Articles 16.4 and 19.1, paragraphs 1 and 3 of Article 21, and
Article 22.1 of the DSU. Where a panel conc ludes that a measure is inconsistent with a
covered agreement, that panel shall recommend, according to Article 19.1, that the Member
concerned bring that measure into conformity with that agreement. A panel report, including
the recommendations contained therein, shall be adopted by the DSB within the time period
specified in Article 16.4 – unle ss appealed. Members are to comply with recommendations
and rulings adopted by the DSB promptly, or within a reasonable period of time, in
accordance with paragraphs 1 and 3 of Article 21 of the DSU. A Member that does not
comply with the recommendations and rulings adopted by the DSB within these time periods
must face the consequences set out in Article 22.1, relating to compensation and suspension of
concessions. Thus, a reading of Articles 16.4 and 19.1, paragraphs 1 and 3 of Article 21, and
Article 22.1, taken together, makes it abundantly clear that a panel finding which is not

7.64 This analysis of the Appellate Body decisions l eads us to conclude that an Article 21.5 panel
can consider a new claim on an aspect of the meas ure taken to comply that constitutes a new or
revised element of the original measure, which clai m could not have been raised in the original
proceedings. This was the case in both Canada – Aircraft (Article 21.5 – Brazil) and US – FSC
(Article 21.5 – EC) . On the other hand, an Article 21.5 pa nel cannot consider the same claim on an
aspect of the measure taken to comply that is an unchanged element of the original measure and was
already challenged in the original proceedings and di smissed in an adopted report. This was the case
in both EC – Bed Linen (Article 21.5 – India) and US – Shrimp (Article 21.5 – Malaysia).280
7.65 None of these Appellate Body reports explicitly addresses the situation in this dispute:
Contrary to EC – Bed Linen (Article 21.5 – India) , where the same claim was raised, the claims on
treatment of evidence and likelihood of injury ra ised by the European Co mmunities are new claims,
meaning claims that were not raised in the original proceedings. Contrary to Canada – Aircraft
(Article 21.5 – Brazil) and US – FSC (Article 21.5 – EC) , although we are dealing with new claims,
the new claims in this dispute refer to aspects of the original measure that were not changed by the
United States during the implementation, although, allegedly, they should have been changed.
7.66 We will therefore examine whether these new claims fall within this Panel’s mandate.
New claim on evidence
7.67 As regards the claim on evidence, the parties differ on whether the claim concerns a changed
or unchanged aspect of the original measure and whether it should have been raised during the
original proceedings. The United States argues that the consideration of the evidence by the USDOC
in the sunset review was not re vised in the UK and Spain Section 129 determinations and thus the
claim on evidence regards an unchanged aspect of the original measure. The United States insists that
the European Communities could have and should have raised this claim during the original
proceedings.281 The European Communities counters that the measures taken to comply are based on
new reasoning282 and on new factual findings 283, and therefore the new claims refer to aspects of the
original measures that were revised in the im plementation process. The European Communities
insists that it has raised "new claims concerning components of the new measures which were not part
of the original measure and therefore were not and could not have been before the Panel and
Appellate Body in the proceedings arising from the original sunset determinations". 284 The European
Communities argues that it could not have raised the claim on the treatment of evidence in the original

appealed, and which is included in a panel report adopted by the DSB, must be accepted by
the parties as a final resolution to the dispute between them, in the same way and with the
same finality as a finding included in an Appellate Body Report adopted by the DSB – with
respect to the particular claim and the specific component of the measure that is the subject of
the claim."

Appellate Body Report on EC – Bed Linen (Article 21.5), para. 93.
280 The United States seems to suggest that an Article 21.5 panel cannot consider a claim that the
domestic investigating authority considered and dismissed. US First written submission, paras. 18-20. The
scope of an Article 21.5 panel's mandate, however, is only limited by a prior panel or Appellate Body decision,
not by a decision of a Member's investigating authority.
281 See US First written submission, paras. 16, 18-20; US Oral statement, paras. 5-6, 17-22; US
Response to Panel question No. 1.
282 EC Second written submission, paras. 14, 17.

proceedings because the legal and factual basis for the original affirmative sunset review
determination are different from those of the Section 129 determination.
285
7.68 The Panel considers the claim on evidence to be a new claim since it was not raised during the
original proceedings. Whether this new claim regards changed or unchanged aspects of the measures
taken to comply is more complex. At first si ght, the USDOC's treatment of the evidence in the
measures taken to comply might appear to be unchange d if compared to the original sunset reviews.
In the original sunset reviews, the USDOC found that respondents i.e. the European Communities and
the national governments at issue, failed to pr ovide substantive eviden ce because there were no
cooperating exporters/producers and thus the USDOC could not verify whether the benefit from some
of the programmes at issue had been fully amortized. 286 During the Section 129 proceedings, further

286 The USDOC concluded as follows:

"The Department notes that, although the EC and GOUK assert that these programs have been
terminated, as they involved sp ecific governmental action, and th at subsidization of the steel
sector in the EU is strictly prohibited following the adoption of the EC Decision, the
Department normally will determine that a countervailable subsidy will continue to exist
where the benefit stream will continue beyond the end of the sunset review. Without evidence
that some programs have been fully amortized, or participation in this review of a foreign
producer/exporter, we determine that counterv ailable subsidy programs continue to confer
benefits above de minimis, and that revocation of the countervailing duty order is likely to lead
to continuation or recurrence of a countervailable subsidy."

Issues and Decision Memo for the Expedited Sunset Review of the Countervailing Duty Order on Cut-
to-Length Carbon Steel Plate from the United Kingdom; Final Results, p. 13 (7 April 2000) (Exhibit EC-6)
("UK Sunset Review Issues and Decision Memo"); see also Cut-to-Length Carbon Steel Plate From the United
Kingdom; Final Results of Expedited Sunset Review of Countervailing Duty Order, 65 Fed. Reg. 18309 (7 April
2000) (Exhibit US-4) ("UK Sunset Review Final Results").

"Although the EC and GOUK claim that some programs noted above, in accordance with the
EC Commission Decision, can no longer provide countervailable benefits to
producers/exporters of subject merchandise, they did not provide substantive evidence to the
Department with respect to the termination of these programs."
UK Sunset Review Issues and Decision Memo, p. 16.

In the original Spain sunset review, the USDOC concluded in the same vain:

"The Department notes that, although the EC and GOS assert that these programs have been
terminated as they involved sp ecific governmental action and subs idization of the steel sector
in the EU that it is strictly prohibited following the adoption of the EC Commission Decision,
the Department normally will determine that a countervailable subsidy will continue to exist
until it is fully amortized. Without evidence that the programs have been terminated, that the
benefits from programs for which benefits are allocated over time will not continue beyond
this sunset review, or participation in this review of a foreign producer/exporter, we determine
that revocation of the countervailing duty order is likely to lead to continuation or recurrence
of a countervailable subsidy."

Issues and Decision Memo for the Expedited Sunset Review of the Countervailing Duty Order on Cut-
to-Length Carbon Steel Plate from Spain; Final Results, pp. 13-14 (7 April 2000) (Exhibit EC-7) ("Spain Sunset
Review Issues and Decision Memo"); see also Cut-to-Length Carbon Steel Plat e From Spain; Final Results of
Expedited Sunset Review of Countervailing Duty Order, 65 Fed. Reg. 18307, 18308 (7 April 2000) (Exhibit
US-5) ("Spain Sunset Review Final Results").

"Although the EC and GOS claim that some programs, including Law 60/78 , the Royal
Decree 878/8 and the 1984 Counsel of Minister's Meeting , no longer exist to provide

to the USDOC's issuance of the draft determinati ons where the basis for the affirmative likelihood-of-
subsidization had changed and was now subsidy programmes othe r than pre-privatization non-
recurring programmes, the respondents invoked the ev idence submitted during the sunset review plus,
in the UK case, additional evidence regarding Glynwe d's sale of relevant production facilities. The
USDOC refused to consider the evidence in the Section 129 proceedings, stating that it was not
reopening issues that were resolved in the sunset re view and were not found by the Appellate Body to
be inconsistent with the SCM Agreement.287
7.69 In this Panel's view, the relative importance of the evidence concerning non-pre-privatization
subsidies and Glynwed's sale of relevant production facilities has changed as a consequence of the
new basis for the affirmative likelihood- of-subsidization re-determinations. In Canada – Aircraft
(Article 21.5 – Brazil) , the Appellate Body explained that an Article 21.5 panel should be able to
consider new claims where "the relevant facts be aring upon the 'measure taken to comply' may be
different from the relevant facts relating to the measure at issue in the original proceedings".288 In this
dispute, the affirmative likeli hood-of-subsidization re-determinati ons are now based on different
reasoning and different factual circumstances than tho se in the original sunset review. As discussed
in Sections VII.C and VII.D below, the affirmativ e likelihood-of-subsidizati on determination in the
original sunset reviews rested only upon the con tinuation of the benefit from pre-privatization, non-
recurring subsidies, while the affirmative likelih ood-of-subsidization determination in the UK and
Spain Section 129 determinations rested only upon subsidy programmes other than pre-privatization
non-recurring programmes. Thus, the weight given in the re-determination to the subsidy
programmes to which the evidence relates is necessarily different than in the original sunset review.
In addition, the fact that new evidence w as submitted during the UK Section 129 proceedings
289 also
indicates that this aspect of the measure taken to comply has changed vis-à-vis the original measure.
We also note that in the UK Section 129 proceedings, Corus, one of the exporters/producers,
cooperated during the Section 129 proceedings. Th erefore, under these circumstances, we consider
that the new claims on evidence refer to aspects of the measure taken to comply which have changed
in respect of the original measure.
7.70 In addition, the European Communities could not have meaningfully raised the treatment of
evidence in the original proceedi ngs because the basis for the affi rmative likelihood-of-subsidization
determination in the original sunset review was di fferent than that in the affirmative likelihood-of-
subsidization re-determination set out in the Sectio n 129 determinations. Nevertheless, even if the

countervailable benefits to producers/exporters of subject merchandise, they did not provide
substantive evidence to the Department with respect to the termination of these programs."
Spain Sunset Review Issues and Decision Memo, p. 15 (emphasis in orgiinal).
287 The USDOC concluded:

"The Department's duty, in rendering a determination in this case under section 129(b)(2) of
the URAA, is not to reconduct the original sunset review in its totality, but to render it not
inconsistent with the findings of the Appellate Body. The Department has done this by
determining that, based on the conclusions in the sunset review regarding Glynwed, an
affirmative likelihood determination continues to be appropriate.
The Department is not reopening issues in this determination that were resolved in the sunset
review and were not found by the Appellate Body to be inconsistent with the SCM
Agreement. The result, as explained above, is that we continue to find on an order-wide basis
that revocation of the order would likely lead to the continuation or recurrence of a
countervailable subsidy."

UK Section 129 determination, footnote 208 above, p. 9. The text of the Spain Section 129
determination is similar. Spain Section 129 determination, footnote 208 above, p. 6.
288 Appellate Body Report on Canada – Aircraft (Article 21.5 – Brazil), para. 41.
289 See EC Response to Panel question No. 43.

European Communities could have raised a claim on the USDOC's treatment of the evidence in the
original proceedings, this would not affect the Pa nel's conclusion since the new claim challenges the
treatment of the evidence in the Section 129 determin ations, which concerns an aspect of the measure
taken to comply that has changed relative to the original measure. An Article 21.5 proceeding aims to
ensure the effective resolution of disputes by prov iding the complaining Member with an expeditious
procedure to challenge the implementation of th e DSB recommendations and rulings. This Article
21.5 Panel can therefore consider new claims arising from the implementation.
290
7.71 When determining whether to consider a new claim, however, an Article 21.5 panel should
also consider the impact on the parties' due process rights. In this dispute, permitting the claims on
the treatment of evidence does not unduly deprive the United States of its due process rights. The
United States itself introduced the issue of treatment of evidence by revising the entire likelihood-of-
subsidization determination and by changing the legal basis of the affirmative conclusion of
likelihood of continuation or recurrence of subsid ization. The United States therefore could have
anticipated a claim on the USDOC's treatment of evid ence. Accordingly, the Panel concludes that the
European Communities' claim on evidence falls within this Panel's mandate.
New claim on likelihood-of-injury
7.72 The parties also dispute whether the Panel can consider the claim on the failure to re-
determine the likelihood of continuation or r ecurrence of injury. This claim is also a new claim.
However, as found in paragraph 7.31 above, the likeli hood-of-injury determination is not an aspect of
the measures taken to comply, but an aspect of th e original measures in the UK and Spain cases. As
explained above, the Appellate Body has ruled that an Article 21.5 panel can only consider those
claims relating to a measure taken to comply. 291 Since this Panel has c oncluded in paragraph 7.31
above that the failure to reconduct the likelihood-o f-injury determination is not an aspect of the
measure taken to comply in the UK and Spain cases, we cannot therefore consider the European
Communities' claim on failure to reconsider likelihood of injury.
7.73 Even if we were to consider that the likeli hood-of-injury analysis were an aspect of the
measures taken to comply , we would nevertheless still concl ude that the European Communities'
claim on failure to reconsider likelihood of injury is not within our mandate. The Appellate Body
jurisprudence summarized in EC – Bed Linen (Article 21.5 – India) seems to indicate that the
European Communities is not precluded from raising claims that it did not raise in the original
proceedings, provided that these claims concern the measures taken to comply and are included in the
Panel request. We recall that the Appellate Body’s reasoning for the inclusion of new claims in the
scope of Article 21.5 proceedings was that "the 'measure taken to comply' may be inconsistent with
WTO obligations in ways different from the original measure". 292 The question here is whether this
conclusion should also apply to new claims where the measure taken to comply is unchanged from the
original measure and thus allegedly inc onsistent with WTO obligations in ways identical to ( not
different from) the original measure.

290 Article 21.5 panels can consider " new claims, arguments, and factual circumstances different from
those raised in the original proceedings, because a 'measure taken to comply' may be inconsistent with WTO
obligations in ways different from the original measure". The Appellate Body explained that "an Article 21.5
panel could not properly carry out its mandate to assess whether a 'measure taken to comply' is fully consistent
with WTO obligations if it were precluded from examining claims additional to, and different from, the claims
raised in the original proceedings". Appellate Body Report on EC – Bed Linen (Article 21.5) , para. 79
(emphasis in orgiinal).
291 Appellate Body Report on EC – Bed Linen (Article 21.5), para. 78.
292 Appellate Body Report on EC – Bed Linen (Article 21.5) , para. 79. (emphasis added); see also
Appellate Body Report on Canada – Aircraft (Article 21.5 – Brazil) , para. 41; Appellate Body Report on US –
Shrimp (Article 21.5 – Malaysia), paras. 86-87.

7.74 In this dispute, this Panel confronts the issue of whether to consider new claims on aspects of
the original measure that are unchanged and were not challenged in the original proceedings. The
purpose of Article 21.5 is to provide an expeditio us procedure to establish whether a Member has
properly implemented the DSB recommendations a nd rulings. Admitting such a new claim would
mean providing the European Communities with a second chance to raise a claim that it failed to raise
in the original proceedings. The Appellate Body , however, has found that a party cannot cure the
failure to include a claim in the panel request by raising the claim in subsequent submissions or
statements.293
7.75 Moreover, the Panel is concerned that allowi ng a new claim on the likelihood-of-injury in the
current proceedings may jeopardize the principles of fundamental fairness and due process. In our
view, it would be unfair to expose the United States to the possibility of a finding of violation on an
aspect of the original measure that the United Stat es was entitled to assume w as consistent with its
obligations under the relevant agreement given the ab sence of a finding of violation in the original
report.294

293 In EC – Bananas III, the Appellate Body explained that:

"Article 6.2 of the DSU requires that the claims, but not the arguments, must all be specified
sufficiently in the request for the establishment of a panel in order to allow the defending party
and any third parties to know the legal basis of the complaint. If a claim is not specified in the
request for the establishment of a panel, then a faulty request cannot be subsequently 'cured'
by a complaining party's argumentation in its first written submission to the panel or in any
other submission or statement made later in the panel proceeding."

Appellate Body Report on EC – Bananas III , para. 143; see also Appellate Body Report on Brazil –
Desiccated Coconut, p. 22, DSR 1997:I, p. 167, at p. 186 (stating that a claim falls outside a panel's terms of
reference unless it is identified in the document specifying the panel's terms of reference); Appellate Body
Report on India – Patents (US) , para. 88 (emphasizing the difference between the claims, which must be
included in the request for establishment as they estab lish the panel's terms of reference, and the arguments,
which are set out and clarified in the written submissions and oral statements throughout the panel proceedings).
294 The Panel notes that in EC – Bed Linen (Article 21.5 – India) , the panel explained that, in such a
situation, a defending Member would not have the opportunity to bring the measure into conformity. Panel
Report on EC – Bed Linen (Article 21.5 – India) , para. 6.40. Indeed, there is no provision for a "reasonable
period" to implement the ruling in an Article 21.5 dispute. Thus, an Article 21.5 panel ruling on such a new
claim may immediately give rise to rights for compensation or suspension of concessions under Article 22 DSU.
Moreover, the parties do not have the same opportunity to present evidence and arguments in Article 21.5
proceedings.

The circumstances of the present case illustrate the potential procedural unfairness. The European
Communities did not agree that the United States could submit consecutive rebuttals and required that the
rebuttals be simultaneous. Therefore, the United Stat es could only rebut the arguments in the European
Communities' Second written submission during the sole m eeting with the parties. Consequently, important
facts and issues continued to surface quite late into the Article 21.5 proc eedings, proceedings that are already
abbreviated. In addition, we note that the record of the original proceedings does not even include evidence
regarding the likelihood-of-injury determinations which, as noted above, were made by a different agency than
the likelihood-of-subsidization determinations at issue in the original dispute. Thus, were we to consider the
injury claim as within our mandate, we would have an extremely limited evidentiary basis on which to rule.
Finally, the shorter timeline significantly limits both the pa nel's opportunity to interact with the parties and the
panel's time to deliberate. The panel typically has only one opportunity to meet with the parties, unlike the
normal proceedings where two substantive meetings take place.

7.76 In sum, permitting the European Communities to introduce a new claim on an aspect of the
original measure that was never challenged and re mained unchanged raises serious issues regarding
the United States' due process rights. On balance, the utility of an Article 21.5 proceeding should not
override the basic due process rights of the parties to a dispute.
295
Conclusion
7.77 The Panel therefore concludes that the Europ ean Communities' claims on the failure to re-
determine the likelihood of continuation or r ecurrence of injury in the three Section 129
determinations are not properly be fore this Panel. The Panel al so concludes that the European
Communities' claims on evidence are properly before this Panel.
2. Standard of review
7.78 The standard of review applicable to SCM Agreement -related disputes is the general
"objective assessment" standard of Article 11 of the DSU. In EC – Hormones , the Appellate Body
clarified that "the applicable standard [pursuant to Article 11 of the DSU] is neither de novo review as
such, nor 'total deference', but rather the 'objective assessment of the facts'".296
7.79 In US – Cotton Yarn , the Appellate Body indicated that its Reports in Argentina – Footwear
(EC), US – Lamb and US – Wheat Gluten , all concerning disputes under the Agreement on
Safeguards, "spell out key elements of a panel's st andard of review under Article 11 of the DSU in
assessing whether the competent authorities complie d with their obligations in making their
determinations". The Appellate Body stated:
"This standard may be summarized as follo ws: panels must examine whether the
competent authority has evaluated all relevant factors; they must assess whether the
competent authority has examined all th e pertinent facts and assessed whether an
adequate explanation has been provided as to how those facts support the
determination; and they must also c onsider whether the competent authority's
explanation addresses fully the nature and co mplexities of the data and responds to
other plausible interpretations of the data . However, panels must not conduct a de
novo review of the evidence nor substitute thei r judgement for that of the competent
authority."
297
7.80 Precisely, in the context of the analysis of Us inor's privatization, we note that the United
States, with reference to the Appellate Body Report in US – Cotton Yarn , argues that the Panel’s task
under Article 11 of the DSU is not to determine whether the privatization was at arm’s-length or for
FMV, but rather whether the USDOC properly esta blished the facts and evaluated them in an
unbiased and objective way. "Put differently, the Pane l’s task is to determine whether a reasonable,

295 As indicated by the Panel in EC – Bed Linen (Article 21.5 – India):

"[s]uch an outcome would not seem to be consistent with the overall object and purpose of the
DSU to achieve satisfactory resolution of disp utes, effective functioning of the WTO, to
maintain a proper balance between the rights and obligations of Members, and to ensure that
benefits accruing to any Member under covered agreements are not to nullified or impaired."

Panel Report on EC – Bed Linen (Article 21.5 – India), para. 6.40.
296 Appellate Body Report on EC – Hormones, para 117.
297 Appellate Body Report on US – Cotton Yarn, para. 74.

unbiased person, looking at the same evidentiary record as [the USDOC], could have – not would
have – reached the same conclusions."298
7.81 The Panel notes that several panels and the A ppellate Body have addressed the scope of a
panels' task in the specific context of sunset re views. Most of these disputes concerned the anti-
dumping sunset review provision under Article 11.3 of the Anti-Dumping Agreement . We note that
the Appellate Body has considered that its interpretation of Article 21.3 of the SCM Agreement
applies mutatis mutandis to Article 11.3 of the Anti-Dumping Agreement due to the provisions’
(almost) identical wording. 299 We also note that the Declaration on Dispute Settlement Pursuant to
the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994
or Part V of the Agreement on Subsidies and Countervailing Measures recognizes "the need for the
consistent resolution of disputes from an ti-dumping and countervailing duty measures". 300 O n t h i s
basis, the Panel considers that the following d escription of a panel’s task in considering the
investigating authorities' behaviour, even if refe rring to anti-dumping sunset reviews, should also
apply to sunset reviews under the SCM Agreement.
7.82 In this respect, the Appellate Body in US – Oil Country Tubular Goods Sunset Reviews cited
with approval the panel's description of the investig ating authority's duties in an anti-dumping sunset
review in US – Corrosion-Resistant Steel Sunset Review . 301 According to this description, Article
11.3 of the Anti-Dumping Agreement imposes an obligation on the investigating authority to make a
determination on the basis of positive evidence and w ith sufficient factual basis to allow it to draw
reasoned and adequate conclusions concerning the likelihood of such continuation or recurrence. 302
The Appellate Body concluded that a panel must eval uate the investigating authority's sunset review
determination in light of that obligation and asses whether the investigating authorities properly
established the facts and evaluated them in an unbiased and objective manner:
"These obligations of investigating authoriti es inform the task of a panel called upon
to evaluate the consistency of an inv estigating authority's determination with

299 In US – Corrosion-Resistant Steel Sunset Review, the Appellate Body stated:

"Article 11.3 is textually identical to Article 21.3 of the SCM Agreement, except that, in
Article 21.3, the word 'countervailing' is used in place of the word 'anti-dumping' and the word
'subsidization' is used in place of the word 'dumping'. Given the parallel wording of these two
articles, we believe that the explanation, in our Report in US – Carbon Steel, of the nature of
the sunset review provision in the SCM Agreement also serves, mutatis mutandis, as an apt
description of Article 11.3 of the Anti-Dumping Agreement. (Appellate Body Report on US
– Carbon Steel, paras. 63 and 88)."

Appellate Body Report on US – Corrosion-Resistant Steel Sunset Review, para. 104, footnote 114.
300 We note that, in US – Softwood Lumber VI , the panel was called on to consider a case involving a
single injury determination with respect to both subsidized and dumped imports. The claims therefore involved
identical or almost identical provisions of the SCM Agreement and the Anti-Dumping Agreement. The panel
concluded that given its understanding of the applicable standards of review under Article 11 of the DSU and
Article 17.6 of the Anti-Dumping Agreement , it nonetheless did not consider that it was either necessary or
appropriate to conduct separate analys es of the injury determination under the two agreements. In arriving to
this conclusion, the panel relied on the Declaration on Dispute Settlement Pursuant to the Agreement on
Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 or Part V of the Agreement
on Subsidies and Countervailing Measures. Panel Report on US – Softwood Lumber VI, para. 7.18.
301 Appellate Body Report on US – Oil Country Tubular Goods Sunset Reviews, paras. 179, 321. In US
– Corrosion-Resistant Steel Sunset Review , the Appellate Body considered that the "Panel's description of the
obligations of investigating authorities in conducting a su nset review closely resembles our own, and we agree
with it". Appellate Body Report on US – Corrosion-Resistant Steel Sunset Review, para. 115.
302 Panel Report on US – Corrosion-Resistant Steel Sunset Review, para. 7.271.

Article 11.3 of the Anti-Dumping Agreement . The task of the panel is to assess
whether the investigating authorities prope rly established the facts and evaluated
them in an unbiased and objective manner.
303 We agree with the Panel that '[its] task
[was] not to perform a de novo review of the information and evidence on the record
of the underlying sunset review, nor to subs titute [its] judgment for that of the US
authorities'.304 If the panel is satisfied that an investigating authority's determination
on continuation or recurrence of dumping or injury rests upon a sufficient factual
basis to allow it to draw reasoned and ade quate conclusions, it should conclude that
the determination at issue is not inc onsistent with Article 11.3 of the Anti-Dumping
Agreement.
305"306
7.83 We shall therefore apply the above standard of review when evaluating the affirmative
likelihood-of-subsidization re-determinations at issue in these proceedings.
3. Burden of proof
7.84 The Appellate Body summarised its prior findings on the burden of proof in US – Wool Shirts
and Blouses , indicating that the burden of proof rests upon the party, whether complaining or
defending, who asserts the affirmative of a particular claim or defence. If that party adduces evidence
sufficient to raise a presumption that what is claimed is true, the burden then shifts to the other party,
who will fail unless it adduces sufficient evidence to rebut the presumption.307
7.85 The Appellate Body also specifically considered the application of the burden of proof in the
context of an Article 21.5 proceeding. In Canada – Aircraft (Article 21.5 – Brazil) , it ruled that the
examination of "measures taken to comply" must be based on the relevant facts proved by the
complainant to the Article 21.5 panel during the panel proceedings. 308 In its sister case, Brazil –
Aircraft (Article 21.5 – Canada) , the Appellate Body confirmed that the fact that the measure at issue
was 'taken to comply' with the 'recommendations an d rulings' of the DSB does not alter the allocation
of the burden of proving a defence.309
7.86 In determinations on subsidization, we r ecall that in the original proceedings in US –
Countervailing Measures on Certain EC Products , the Appellate Body found that, when the
investigating authority determines that a privati zation has taken place at arm's length and for FMV,
the investigating authority has the burden to prove that the benefit still passed through to the
privatized producer:
"We understand the Panel to be stating that privatization at arm's length and for fair
market value privatization presumptively extinguishes any benefit received from the
non-recurring financial contribution bestowed upon a state-owned firm. The effect of

303 (footnote original) Anti-Dumping Agreement, Article 17.6(i).
305 ( footnote original ) There are analogies between this description of the panel's task and what the
Appellate Body stated in US – Lamb in the context of the application of safeguard measures. In that case, the
Appellate Body recalled that the applicable standard is neither de novo review, nor total deference, but rather
the objective assessment of the fact s. (Appellate Body Report on US – Lamb , para. 101) The Appellate Body
went on to state that "[f]irst, a panel must review whether competent authorities have evaluated all relevant
factors, and, second, a panel must review whether the authorities have provided a reasoned and adequate
explanation of how the facts support their determination." ( Ibid., para. 103) (original emphasis; footnote
omitted)
306 Appellate Body Report on US – Oil Country Tubular Goods Sunset Reviews, para. 322.
307 Appellate Body Report on US – Wool Shirts and Blouses, p. 14, DSR 1997:I, p. 323, at p. 335.
308 Appellate Body Report on Canada – Aircraft (Article 21.5 – Brazil), para. 38.
309 Appellate Body Report on Brazil – Aircraft (Article 21.5 – Canada), para. 66.

such a privatization is to shift to the inv estigating authority the burden of identifying
evidence which establishes that the benefit from the previous financial contribution
does indeed continue beyond privatization. In the absence of such proof, the fact of
the arm's-length, fair market value privati zation is sufficient to compel a conclusion
that the 'benefit' no longer exists for th e privatized firm, and, therefore, that
countervailing duties should not be levied. Th is is an accurate characterization of a
Member's obligations under the SCM Agreement.
... Privatization at arm's length and for fair market value may result in extinguishing
the benefit. Indeed, we find that there is a rebuttable presumption that a benefit
ceases to exist after such a privatization. Nevertheless, it does not necessarily do so.
There is no inflexible rule requiring that investigating authorities, in future cases,
 automatically determine that a 'benefit' derive d from pre-privatization financial
contributions expires following privatization at arm's length and for fair market value.
It depends on the facts of each case."
310
4. Panel's approach
7.87 Having concluded that the measures taken to comply in these proceedings are the affirmative
likelihood-of-subsidization re-determinations set out in the three Section 129 determinations at issue,
we will address the claims raised by the Europ ean Communities concerning each of these three re-
determinations.
B. CERTAIN CORROSION-RESISTANT CARBON STEEL FLAT PRODUCTS FROM FRANCE
1. Background
7.88 On 8 January 2003, the DSB adopted the origin al panel and Appellate Body Reports. The
Panel found that the sunset review determination on Certain Corrosion-Resistant Carbon Steel Flat
Products from France (C-427-810) (Case No. 9), which was based on the so-called gamma
methodology, was inconsistent with the SCM Agreement, since the USDOC did not examine whether
the privatization, that occurred after the origin al imposition of countervailing duties, was at arm's
length and for FMV and had failed to determine whether the privatized producer received any benefit
from the financial contributions previously b estowed on the state-owned producer. The Panel
considered that by failing to determine the likelihood of continuation or recurrence of a subsidization,
prior to its decision to maintain countervailing duties, the United States had violated Articles 14, 19.4,
21.1 and 21.3 of the SCM Agreement, which prohibit a Member, pursuant to a sunset review, from
maintaining countervailing duties where there has not been any determination of likelihood of
continuation or recurrence of subsid ization and thus of a continued need for countervailing duties. It
also concluded that, since the United States had maintained countervailing duties that were
inconsistent with Articles 14, 19.4, 21.1 and 21.3 of the SCM Agreement, it had also violated Article
10 of the SCM Agreement which requires that countervailing duties be imposed or maintained
consistently with the SCM Agreement.311 The Appellate Body upheld these Panel findings.312
7.89 Following the adoption of the Panel and Appe llate Body Reports by the DSB, the USDOC
published a new privatization methodology ("Modification Notice"), which is not being challenged by
the European Communities in these proceedings. 313 The USDOC also reviewed its determination of

310 Appellate Body Report on US – Countervailing Measures on Certain EC Products, paras. 126-127.
311 Panel Report on US – Countervailing Measures on Certain EC Products, para. 8.1(c).
312 Appellate Body Report on US – Countervailing Measures on Certain EC Products, para. 161(a).
313 The new privatization methodology includes a "baseline presumption" that non-recurring subsidies
benefit the recipient over a period of time, usually th e average useful life of the recipient's assets, and are

the likelihood of continuation or recurrence of subsid ization contained in the original sunset review,
which had been found to be inconsistent with the SCM Agreement and the GATT 1994. Accordingly,
the USDOC issued its Issues and Decision Memorandum for the Section 129 Determination:
Corrosion-Resistant Carbon Steel Flat Products fr om France; Final Results of Expedited Sunset
Review of Countervailing Duty Order of 23 October 2003 ("France Section 129 determination").
314
7.90 In the France Section 129 determination, the USDOC applied its new privatization
methodology to Usinor's privatization. Accord ing to the France Section 129 determination, the
Government of France ("GOF") incrementally priva tized Usinor over a three-year period (July 1995-
August 1998). Prior to the privatization, the GOF wholly owned Usinor, holding 80 per cent directly
and 20 per cent through the government-controlled Créd it Lyonnais (or later, its division, Clindus). 315
In effectuating the privatization, the GOF issued four types of share offerings to four different classes
of purchasers: 1) French resident nationals a nd European Communities or European Economic Area
nationals in France ("French public offering"); 2) current and qualifying former employees of Usinor
throughout the world ("employee/former employee offering"); 3) stable shareholders comprising
various institutional investors, both public and priv ate ("stable shareholder offering"); and 4) the
general public in the French and international fina ncial markets ("internati onal offering"). The GOF
subjected the four types of share offerings to different restrictions.316

therefore allocable over that period of time, i.e. the allocation period. With an adequate showing, however, the
recipient of the subsidy can rebut this baseline presumption and demonstrate that a privatization extinguished all
pre-sale benefits. To do so, the recipient must prove th at the government sold "all or substantially all" of its
assets during the allocation period; that the government retains no control over the privatized company or its
assets; and that the sale was at arm's length and for FMV. In determining whether the sale was at arm's length,
USDOC follows the definition of "arm's length" provided in the Statement of Administrative Action.
Specifically, USDOC examines whether the "transaction [was] negotiated between unrelated parties, each acting
in its own interest, or between related parties such that the terms of the transaction are those that would exist if
the transaction had been negotiated between unrelated parties." Modification Notice, footnote 206 above,
p. 37127 (quoting SAA, footnote 243 above, p. 258).

In determining whether the sale was for FMV, the USDOC asks whether the purchaser(s) paid "the full
amount that the company or its assets (including the value of any subsidy benefits) were actually worth under
the prevailing market conditions." Payment can be through either monetary or equivalent compensation. As
part of this analysis, the USDOC examines "whether the government, in its capacity as seller, acted in a manner
consistent with the normal sales practices of private, commercial sellers in that country." A primary indicator of
"acting in a manner consistent with the normal sales practice" is whether the government maximized its return
on the sale. To ascertain whether a government maximized its return, the USDOC considers information on the
sale process and any comparable benchmark prices. Th e USDOC also analyzes a non-exhaustive list of factors:
whether the government conducted an objective analysis of appropriate sale price; wh ether artificial barriers to
entry exist, i.e. placing unreasonably burdensome requirements in bidding; whether the government accepted the
highest bid; and whether the government required a comm itted investment, i.e. offered inducement in exchange
for promise of future investment.

Finally, if the recipient establishes that the priv atization occurred at arm's length and for FMV, the
injured party can still prove the benefit was not extinguished by showing that broader market conditions were
not present or were distorted by the government. To do so, the injured party must either demonstrate the
absence of basic conditions for a properly functioning ma rket or the existence of legal/fiscal incentives that
distort terms of sale. Modification Notice, footnote 206 above, pp. 37127-37128.
314 France Section 129 determination, footnote 208 above.
315 France Section 129 determination, footnote 208 above, p. 3.
316 International Offering Prospectus for Usinor Privatisation, pp. 21-24, 84-86 (Exhibit EC-8) ("Usinor
Prospectus"); Order of the French Minister of Economic Affairs and Finance: Order of June 26, 1995 Whereby
Terms for the Privatization of Usinor-Sacilor Are Defi ned (26 June 1995) (Exhibit EC-10) ("Order Defining
Terms for the Usinor Privatization"). A table describing the different conditions and restrictions attached to
each of the four share offerings is included in paragraph 7.150 below.

7.91 According to the France Section 129 determinati on, by the end of 1995, private shareholders
held the majority of shares with over 75 per cent. The GOF and Clindus had reduced their holdings to
9.8 per cent and 2.5 per cent, respectively. Stable shareholders held 15.8 per cent. Of those stable
shareholders, three were directly or indirectly go vernment-controlled ("public stable shareholders").
Usinor employees held only 3.55 per cent.317
7.92 Also according to the France Section 129 determ ination, the USDOC stated that in January
1997, the GOF delivered approximately 1.2 per cent of total Usinor shares to French individual
shareholders and employees who had complied with the share restrictions. In October 1997, the GOF
sold another approximately 7.7 per cent of tota l Usinor shares. By year-end 1997, private
shareholders held over 85 per cent of total Usinor shares. The GOF held 0.93 per cent directly.
"Clindus and the public stable shareholders rema ined unchanged at 2.5 per cent and 10.1 per cent,
respectively".
318 Usinor employees held 5.16 per cent. 319 In August 1998, the GOF completed the
privatization by delivering the remaining 0.93 per cent to shareholders as free shares. The GOF no
longer held any direct ownership in Usinor.320
7.93 After analysing Usinor's privatization in the France Section 129 determination, the USDOC
found that the privatization of Usinor was at ar m’s length and for FMV with the exception of the
employee/former employee offering, which constituted 5.16 per cent of the sale. The USDOC
therefore reaffirmed the affi rmative likelihood determination in its original sunset review, indicating
that "[t]he sale of shares to Usinor employees at prices below fair market value did not extinguish
certain allocable, nonrecurring, pre-privatization subsidies that continue at an above de minimis rate
beyond the original sunset review".
321 The USDOC affirmed its orig inal likelihood-of-subsidization
determination, which reported the net countervailable subsidy rate likely to prevail upon revocation of
the order as an ad valorem country-wide countervailing duty rate of 15.13 per cent.322

317 France Section 129 determination, footnote 208 above, p. 3. The Panel notes that the USDOC
provided these values in its Section 129 determination and these values appear to add up to 106.65 per cent.
The parties, however, do not dispute the precise per centa ges. Therefore, the Panel considers it unnecessary to
address this particular discrepancy.
318 The Panel notes that it is unclear whether the public stable shareholders held 10.1 per cent of total
shares or 10.1 per cent of the 15.8 per cent stable shareholder portion, which would be 1.6 per cent of total
shares. See France Section 129 determination, footnote 208 above, p. 3. Again, as the parties do not dispute the
precise per centages, the Panel considers it unnecessary to address this particular discrepancy.
319 France Section 129 determination, footnote 208 above, p. 3.
320 France Section 129 determination, footnote 208 above, p. 3.
321 France Section 129 determination, footnote 208 above, p. 12.
322 France Section 129 determination, footnote 208 above, p. 16. The Panel understands that the
USDOC first issued a final determination in July 19 93, where the USDOC found countervailable subsidies to
exist and determined the country-wide ad valorem cash deposit rate to be 15.49 per cent. Final Affirmative
Countervailing Duty Determinations: Certain Steel Products From France, 58 Fed. Reg. 37304, 37314 (9 July
1993). We also note that the USDOC subsequently recalculated this cash deposit rate to correct ministerial
errors before issuing the order in August 1993 to countervail subsidies at the revised country-wide ad valorem
cash deposit rate of 15.12 per cent. Countervailing Duty Order and Amendment to Final Affirmative
Countervailing Duty Determination: Certain Steel Pro ducts from France, 58 Fed. Reg. 43759, 43760-61 (17
August 1993). In April 2000, the USDOC published the final results of its sunset review and maintained the
order based on its finding that the "revocation of the countervailing duty order would be likely to lead to
continuation or recurrence of the subsidy". Corrosion- Resistant Carbon Steel Flat Products from France; Final
Results of Expedited Sunset Review of Countervailing Duty Order, 65 Fed. Reg. 18063, 18064 (6 April 2000).
In the Issues and Decision Memo, the USDOC explaine d that it was taking the cash deposit rate from the
original investigation because that was the "only calcula ted rate that reflects the behaviour of exporters and
foreign governments without the discipline of an order or suspension agreement in place". Issues and Decision
Memo for the Sunset Review of the Countervailing Du ty Order on Certain Corrosion-Resistant Carbon Steel
Flat Products from France; Final Results, pp. 7-8 (6 April 2000). We note that the countervailing duty rate

2. The measure taken to comply
7.94 As concluded in paragraph 7.18 above, the measure taken to comply as regards Certain
Corrosion-Resistant Carbon Steel Flat Products from France is the affirmative likelihood-of-
subsidization re-determination set out in the France Section 129 determination.
3. The claims
7.95 The European Communities clai ms that, by failing to revoke the countervailing duties on
Certain Corrosion-Resistant Carbon Steel Flat Products from France , the United States failed to
implement the DSB recommendations and acted inconsistently with its WTO obligations.
323 I n
particular, the European Communities claims that the USDOC failed to properly determine whether
the privatized French company Usinor continued to receive any benefit from financial contributions
previously bestowed on the state-owned producer. 324 The European Communities, referring to the
findings of this Panel and the Appellate Body in th e original proceedings, argues that, in determining
the likelihood of continuation or recurrence of subs idization, a Member must determine whether the
privatized producers received any benefit from the fina ncial contributions previously granted to state-
owned producers. Where a privatization is at arm’s length, for FMV and under conditions that did not
seriously distort the market in which the privatiza tion occurred, it argues, there is a presumption that
the benefit provided to the state-owned producer has been extinguished. In its view, the privatized
producers did not receive any such benefit following Us inor’s privatization, so that presumption is
warranted and has not been rebutted. In the alte rnative, the European Co mmunities also challenges
the USDOC's maintenance of countervailing duties based on the France Section 129 determination on
the grounds that the USDOC's finding that 5.16 per cent of the benefit passes through does not justify
such a maintenance.325
7.96 Accordingly, the European Comm unities requests that this Panel finds that the United States
has failed to implement the recommendations and rulings of the DSB and acted inconsistently with its
obligations under Articles 10, 14, 19.4, 21.1, and 21.3 of the SCM Agreement and Article VI:3 of the
GATT 1994.326
7.97 The United States contests these allegations and re quests the Panel to affirm that the USDOC
reasonably concluded that the sale of shares to Usinor’s employees was not at arm’s length or for
FMV. It argues that the Eur opean Communities has not demonstr ated that the USDOC erred in
making that finding and in maintaining the duties on those bases, and that therefore the Panel should
reject the European Communities' claims.
327
7.98 We recall that we have found in paragraph 7. 52 above that the European Communities' claim
on the USDOC's alleged failure to revise the likelih ood-of-injury determination in this case does not
fall within this Panel's terms of reference.

likely to prevail in the sunset review is 15.13 per cent, which is 0.01 per cent higher than the rate provided in the
amended final determination. The USDOC explained that it revised the rate from the original investigation as a
result of domestic court rulings. Corrosion-Resistant Ca rbon Steel Flat Products from France; Final Results of
Expedited Sunset Review of Countervailing Duty Order, 65 Fed. Reg. 18063, 18064 (6 April 2000).
323 EC First written submission, paras. 30, 46 and , 72; Second written submission, para. 50.
324 EC Request for establishment, p. 2.
325 EC First written submission, paras. 36.
326 EC Request for establishment, p. 2; EC Firs t Written submission, paras. 30, 46 and 72; Second
written submission, para. 50.

4. Whether the measure taken to comply is incons istent with Articles 10, 14, 19.4, 21.1 and
21.3 of the SCM Agreement and Article VI:3 of the GATT 1994
7.99 The European Communities claims that the USDOC failed to examine the conditions of
Usinor's privatization and to determine whether Usinor continued to benefit from non-recurring, pre-
privatization subsidies. This claim rests upon two main grounds: First, the European Communities
alleges that the USDOC wrongly applied its new methodology to Usinor's privatization by performing
a segmented analysis instead of analysing the pr ivatization as a whole. Second, the European
Communities asserts that the USDOC did not prope rly evaluate whether the sales of shares to
employees/former employees were at arm's length and for FMV. In the alternative, the European
Communities also challenges the maintenance of c ountervailing duties on the basis of a finding that
5.16 per cent of the benefit passed through.328
7.100 We shall examine these grounds one at the time. We recall that, as explained in
paragraph 7.79 above, the task of this Panel is to assess whether the USDOC properly established the
facts and evaluated them in an unbiased and objectiv e manner. In doing so, we are not to perform a
de novo review of the information and evidence on the r ecord of the determination, nor to substitute
our judgement for that of the USDOC.
(a) Whether the privatization analysis must be done for the whole company
(i) Arguments of the parties
7.101 The European Communities argues that when vi ewed in the context of the company as a
whole, the privatization of Usinor occurred at arm's length and for FMV. 329 The European
Communities contends that the privatization of Usinor as a whole occurred at FMV because the
average price paid for Usinor’s shares exceeded the average price per share recognised by the
Privatization Commission as necessary to recoup the value of the company and fell within the market-
clearing price range that the USDOC identified. 330 The European Communities maintains that the
United States should have therefore conclude d that because the privatization overall was at FMV, no
benefit from pre-existing non-recurring subsidies could be attributed to the newly privatized
producer.331 In its First written submission, the Europ ean Communities emphasizes that regardless of
the minimum value or the price paid within an in dividual share offering, "the total price paid for
[XXX] shares in Usinor’s privatization was FF [XXX], for an average price of FF [XXX] per
share".332 The European Communities argues that th e United States should have compared the
market-clearing price range, FF 86 to FF 89, whic h the USDOC identified in the France Section 129
determination333, with this actual average price per share obtained, instead of with the price per
category of share offering as set out in the Usinor prospectus. The European Communities maintains
that as a result of the comparison of the market-cl earing price range with this actual average price per
share obtained, the USDOC would have been obliged to conclude that the entire privatization was for
FMV.
7.102 The European Communities asserts that the USDOC's analysis constitutes a kind of “zeroing”
because the USDOC considers that if one portion is so ld at less than FMV, a benefit for the company
as a whole survives the transaction even if other portions are sold at prices that ensure that the whole

329 EC First written submission, paras. 37-39; EC Se cond written submission, paras. 30-36; EC Oral
statement, para. 5.
330 EC First written submission, paras. 37-38; EC Second written submission, para. 36.
331 EC Oral Statement, para. 5.
332 EC First written submission, para. 38. The European Communities has asked the Panel to treat
these figures as confidential information.
333 France Section 129 determination, footnote 208 above, pp. 8-9.

transaction is for FMV.
334 In the European Communities’ view, although this Panel and the Appellate
Body did not specify a methodology for determin ing under which circumstances a privatization has
occurred at arm’s length and for FMV, these factors we re nevertheless discussed in the context of the
privatization of the firm as a whole.335 The European Communities argues that the consistent finding
made by this Panel was that what mattered w as whether the privatized producer, comprising the
company and its owners, had received something for free. It emphasizes that privatizations frequently
involve the sale of shares to different groups of persons at different prices. Nonetheless, no
suggestion was made that if one of the new owners paid less than FMV, the whole transaction would
be regarded as not occurring under FMV conditions.336
7.103 The United States disagrees with the European Communities and contends that nothing
prevents the United States from conducting an analys is of four distinct categories of purchasers to
determine whether Usinor was sold for FMV. In its view, the European Communities cannot oblige
the USDOC to use an "average price" analysis. 337 In fact, the United States emphasises that neither
the DSB recommendations and rulings nor the SCM Agreement prescribe a particular methodology for
analysing a privatization. 338 The United States therefore contends that it is within a Member’s
discretion to develop a "reasonable" methodology.339
7.104 The United States also argues that the Eu ropean Communities’ averaging methodology
insufficiently incorporates the arm’s length and FMV analyses. Specifically, the United States argues
that the averaging of share values ignores the arm’s length issue and treats FMV as a purely
quantitative analysis. The United States insists that the USDOC’s FMV analysis is not purely
quantitative, but instead encompass es several “process-oriented” factors, e.g. limitations on the
purchaser pool and the nature of the bidding process. 340 In the United States' view, if a portion of the
company was not sold at arm's length and for FMV, logically, the benefit from a non-recurring
subsidy remains countervailable. 341 The United States asserts that the rationale of the panel's finding
is that pre-privatization subsidies are extinguished where the privatized producer receives nothing "for
free". Therefore, it argues, to the extent that a portion of the company was sold for less than FMV,
the privatized producer received something "for free". If the entire privatization is not arm’s-
length/FMV, then all of the benefit from allocable, pre-privatization subsidies remains countervailable
(except to the extent that it has already been countervailed). 342 Where only a portion of the company
is not sold in an arm’s-length/FMV transaction, it follows that only a corresponding portion of the
benefit remains countervailable. 343 In this case, the Usinor employees did not pay FMV for the
preferential shares and therefore, Usinor received something “for free” and that corresponding portion
of the pre-privatization benefit continues.344
(ii) Evaluation by the Panel
7.105 The European Communities challenges the United States' "segmented" analysis of Usinor's
privatization. It argues that the USDOC should ha ve examined Usinor's privatization as a whole
because the segmented analysis does not take into account the fact that FMV was paid for the whole

334 EC Oral Statement, para. 5.
335 EC Second written submission, paras. 30-33.
336 EC Oral Statement, para. 6.
337 US First written submission, paras. 29, 33; US Second written submission, para. 5; US Oral
statement, para. 27.
338 US Oral statement, para. 27.
339 US First written submission, paras. 28-29.
340 US Oral statement, para. 28.
341 US First written submission, para. 3; US Oral statement, paras. 25-26.
342 US Oral Statement, para. 25.
343 US Oral Statement, para. 26.
344 US First written submission, para. 32; US Oral statement, paras. 26.

of the company.345 For the European Communities, because the average price per share obtained falls
within the range of market-clearing prices, th e USDOC should have concluded that the entire
privatization occurred for FMV. 346 The United States disagrees a nd justifies its "segmented"
methodology on the grounds that both the selling methods and the price of the shares were different
for each category of share offering.
347 It also argues that the Eu ropean Communiti es’ averaging
methodology ignores the arm’s-length issue and trea ts FMV as a purely quantitative analysis. The

345 EC First written submission, para. 37; EC Second written submission, paras. 35-36. Regarding the
privatization as a whole, the European Communities also argued that the USDOC had already found in two prior
domestic remand determinations that the very same privatization of Usinor was at arm's length and for FMV and
that, therefore, the benefits conferred by the pre-priva tization subsidies had been extinguished. EC First written
submission, para. 12, footnote 19; EC Second written submission, para. 37; see Results of Redetermination
Pursuant to Court Remand, GTS Industries S.A. v. United States , No. 00-03-00118, Remand Order (Ct. Int'l.
Trade, 4 January 2002) (Exhibit US-1); Results of Redetermination Pursuant to Court Remand, Alleghany
Ludlum Corp., et al v. United States, No. 99-09-00566, Remand Order (Ct. Int'l. Trade, 4 January 2002) (Exhibit
US-2). The European Communities also referred to th e Panel and Appellate Body's findings not contested by
the United States whereby "the sales [i.e., all the priva tizations] were at arm's length and for FMV." EC Second
written submission, para. 37; see Appellate Body Report on US – Countervailing Measures on Certain EC
Products, para. 84.

The United States countered that the prior remand determinations are inapposite since they apply a
methodology that was found to be inconsistent with the covered agreements. US Second written submission,
paras. 6-7. The United States also insists that it made no admissions as to the conditions of sale surrounding
these privatizations in the underlying proceedings. US Oral statement, para. 29.

In the Comments to the France Section 129 determin ation, the USDOC actually addresses the issue of
the two remand determinations and disagrees with the respondent's contentions regarding the relevance of these
precedents. The USDOC explains that it did not consider in those determinations whether the sale was at arm's
length or whether the broader market conditions were distorted. Moreover, the USDOC never found that all
four share offerings were at arm's length and for FMV. In fact, the USDOC foun d that the employee share
offering was restricted and served to limit potential purchasers, and that Usinor employees paid less than full
FMV. In addition, the USDOC also states that both Stainless Remand and CTL Remand were under review by
the Court of Appeals for the Federal Circuit at the time and therefore do not constitute a final and conclusive
decision regarding the legality of the change-in-ownership methodology used by the USDOC in those cases.
France Section 129 determination, footnote 208 above, p. 14.

The Panel notes that, in those remand investigations, the USDOC was applying the same person
methodology, which this Panel found inconsistent with the SCM Agreement in the original proceedings. As the
Panel explained at the time, the same person methodology presented a different legal issue, i.e. whether the pre-
privatized and the privatized companies were the same person. By applying this methodology, the USDOC did
not consider whether the privatization of Usinor was at arm's length and for FMV, it just found that, because the
state-owned Usinor and the privatized Usinor were not the same person, the benefit received by the state-owned
Usinor did not pass through to the employees.
346 EC First written submission, para. 38; EC Comment on US response to Panel question No. 32.

A third-party to these proceedings suggests that the approach taken by the USDOC may be inconsistent
with the ruling of the Appellate Body in US – Countervailing Measures on Certain EC Products , where the
Appellate Body explicitly noted, "once a fair market price is paid ... [the] market value is redeemed." Appellate
Body in US – Countervailing Measures on Certain EC Products, para. 102 (emphasis in orgiinal). The third-
party feels that the Appellate Body did not say that an investigating authority could dissect a broader transaction
where the market value is recouped in order to rend er a contradictory determination. Brazil Third-party
submission, para. 22. This Panel, however, does not believe that this excerpt either prescribes or precludes any
particular methodology for analysing a privatization.
347 France Section 129 determination, footnote 208 above, p. 5.

United States insists that the USDOC’s FMV analys is is not purely quantitative, pointing to the
“process-oriented” factors in its methodology.
348
7.106 We are therefore called upon to decide whether the USDOC was obliged to examine Usinor's
privatization as a whole, as claimed by the European Communities.
7.107 We shall first examine how the USDOC conducted its analysis of Usinor's privatization as set
out in the France Section 129 determination. We note that the USDOC separately considered the
sales transactions pertaining to the four different categories of share offerings (international offering,
French public offering, employee/former employ ee offering and stable shareholder offering). 349 The
USDOC then applied its new privatization methodolog y to the four categories of share offerings to
evaluate whether the sales transactions in each sh are offering occurred at arm’s length and for FMV
and to thus determine whether the privatizati on had extinguished the benefit from non-recurring pre-
privatization subsidies.
7.108 To determine whether the privatization of Us inor was conducted at arm’s length, the USDOC
applied the definition of arm's length provided in the Modification Notice. 350 The United States
analysed the four categories of transactions individually, explaining that it was necessary to analyse
them individually because both the selling methods and the share price differ among categories. 351
The USDOC found that all categories except the empl oyee/former employee share offering were at
arm's length.352
7.109 The USDOC explained that in examining whet her Usinor was privatized for FMV, the
USDOC first considered whether there was a cont emporaneous, benchmark pr ice. Concluding there
was no such price, the USDOC stated that it would then analyse the sales process according to several
factors on the non-exhaustive list in the Modifica tion Notice: objective analysis, purchase price,
artificial barriers to entry, committed investment and concurrent subsidies.353
7.110 When examining the valuation of Usinor, the USDOC concluded that "the GOF
commissioned and followed the recommendations of objective analyses of the value of Usinor". 354
The Privatization Commission determined the averag e minimum share price to be FF 84.43, based on
the total number of shares to be offered, 186, 544,395, at the minimum price of FF 15,750 billion. 355
Looking at the USDOC's analysis, the Panel understa nds that the USDOC found that the Privatization
Commission based this minimum value on independen t evaluations of Usinor's value and therefore
found that the formulation of Usinor's value was based on objective analysis.356

348 US Oral statement, para. 28.
349 Usinor Prospectus, footnote 316 above, pp. 21-24, 84-86.
350 The USDOC cites the definition of "arm's length" in the Statement of Administrative Action, which
provides that an arm's length transac tion is "a transaction [that was] nego tiated between unrelated parties, each
acting in its own interest, or between related parties such that the terms of the transaction are those that would
exist if the transaction had been negotiated between unrelated parties." Modification Notice, footnote 206
above, p. 37127 (quoting SAA, footnote 243 above, p. 258).
351 French Section 129 determination, footnote 208 above, p. 5.
352 French Section 129 determination, footnote 208 above, pp. 5-6.
353 France Section 129 determination, footnote 208 above, pp. 6-11.
354 France Section 129 determination, footnote 208 above, p. 10.
356 In evaluating whether there was an objective analysis of FMV, the USDOC explained that:

"[t]he decision to privatize Usinor and the terms of privatization were executed through an
order of the Ministry of Economic Affairs and Finance, based on an opinion by the
Privatization Commission, both issued in June 1995. Share prices were set by the Ministry,

7.111 When analysing the purchase price, however, th e USDOC explained that the analysis focuses
on whether the GOF obtained a market-clearing pri ce, not whether it obtained the minimum value.
The USDOC emphasized that the market-clearing price, not the minimum value, reflects FMV, i.e.
the price at which the GOF maximised its return.
357 The USDOC defined the market-clearing price as
"one that equates the supply of shares with the demand for shares". 358 The USDOC explained that if
the Government of France had set the price too low or too high for a particular share offering, that
share offering would be over-subscribed or unde r-subscribed, respectively. The USDOC then
determined that the market clearing price fell between FF 86 and FF 89 because that is the price range
at which supply balanced demand for the French pub lic offering and the international offering. The
USDOC found that the shares for the international offering and French public offering were within the
market-clearing price, the stable shareholder offering was above the market-clearing price, and only
the employee share price was below the market-clearing price.359
7.112 Further to its "segmented" analysis, the USDOC found that:
"[t]he evidence presented on the record of [the Section 129] determination
demonstrates that, with the exception of the employee offering, which constituted
5.16 per cent of the sale, the privatization of Usinor was at arm’s length and for fair
market value. While certain aspects of th e sales process for stable shareholders made
the process less open, the price paid by the stable shareholders was an arm’s-length
price and it exceeded [the USDOC’s] measure of fair market value, FF 86 - 89.
Regarding the shares sold to Usinor’s em ployees, [the USDOC] determine[s] that
these sales were not at arm’s length. Nor can the sales at FF 68 be considered
transactions at fair market value."
360
7.113 The USDOC therefore determined that ever y share offering except the employee/former
employee share offering was at FMV. 361 The USDOC thus reaffirmed the affirmative likelihood
determination in its original sunset review, indicating that "[t]he sale of shares to Usinor employees at
prices below fair market value did not extinguish certain allocable, nonrecurring, pre-privatization
subsidies that continue at an above de minimis rate beyond the original sunset review".362

based on the opinion of the Privatization Commission, in consultation with Banque S.G.
Warburg ("Warburg") and the other Global Coordinators of the share offerings, and in
accordance with the privatization law. The Privatization Commission stated that it relied upon
various valuation methodologies for Usinor including, inter alia , stock-exchange-based
comparisons and net liquidity flows. Based on its analysis, the Commission recommended a
minimum value for Usinor of FF 15,750 billion. ... The minimum value set by the
Privatization Commission was consistent with the range of values established in the Warburg
valuation. ... Given the number of shares the GOF expected to sell and the prices for those
shares, the expected revenue was consistent with the various valuations."

France Section 129 determination, footnote 208 above, pp. 6-7.
357 France Section 129 determination, footnote 208 above, pp. 8-9. In its response to a Panel question,
the United States emphasized that the appraised value pr ovided by the Privatization Commission is a minimum
value, not a fair market value. US Response to Panel question No. 32.
358 France Section 129 determination, footnote 208 above, p. 8; US First written submission, para. 44.
359 France Section 129 determination, footnote 208 above, pp. 8-9; see also US Oral statement,
para. 33.
360 France Section 129 determination, footnote 208 above, p. 12.
361 France Section 129 determination, footnote 208 above, pp. 8-9; see also US Oral statement,
para. 33.
362 France Section 129 determination, footnote 208 above, p. 12. The USDOC also referred to new
subsidy allegations "timely submitted" by the petitioners but decided not to pursue th em because, in its view, it
would have no impact on the outcome of the determination. France Section 129 determination, footnote 208

7.114 When considering whether the USDOC was require d to consider Usinor's privatization as a
whole, we note that the SCM Agreement does not provide a particular methodology for analysing
whether a privatization is conducted at arm' s length and for FMV. Article 14 of the SCM Agreement
only provides that " any" method used by investigating authori ties to calculate th e benefit to the
recipient shall be provided for in a WTO Member's legislation or regulations, and it requires that its
application be transparent and adequately explained. As f ound by the Appellate Body in US –
Softwood Lumber IV , "[t]he reference to ' any' method... clearly implies that more than one method
consistent with Article 14 is av ailable to investigating authorities for purposes of calculating the
benefit to the recipient".
363
7.115 Moreover, neither this Panel nor the Appellate Body addressed this issue in the original
proceedings. Instead, the Appellate Body, paraphrasing the Panel, ruled that, "in sunset reviews, the
investigating authority, before deciding to conti nue to countervail pre-privatization, non-recurring
subsidies is obliged to 'examine the conditions of such privatizations and to determine whether the
privatized producers received any benefit from the prior subsidization to the state-owned
producers'.364"365 Neither the panel nor the Appellate Body established a precise methodology for an
investigating authority to follow when examining the conditions of the privatization at issue.
7.116 The European Communities, although conceding that the Panel and the Appellate Body in the
original proceedings did not require a particular methodology, argues that the factors – arm's length
and FMV – were nevertheless discussed in the context of the privatization of the firm as a whole. The
European Communities refers to the Panel Report where the Panel explained that the payment of
FMV by the privatized producer and its owners extinguishes the benefit of non-recurring, pre-
privatization benefits that were bestowed upon the state-owned company because no benefit can
accrue to the privatized producer beyond what market conditions dictate.
366 The European

above, p. 13. We note that the US DOC also found that there were no concurrent subsidies at the time of the
privatization. France Section 129 determination, footnote 208 above, p. 10.
363 Appellate Body Report on US – Softwood Lumber IV, para. 91.
364 (footnote original) Panel Report [on US – Countervailing Measures on Certain EC products ,] para.
7.116.
365 Appellate Body Report on US – Countervailing Measures on Certain EC products, para. 149.
366 EC Second written submission, paras. 30-33.

The Panel stated:

"that privatization calls for a (re)determination of the existence of a bene fit to the privatized
producer, and that fair market value payment by the privatized producer (and its owners)
extinguishes the benefit resulting from the prior financial contribution (subsidization)
bestowed upon the state-owned producer, because no advantage or benefit accrued to that
privatized producer over and above what mark et conditions dictate pursuant to Article 14 of
the SCM Agreement."

Panel Report on US – Countervailing Measures on Certain EC Products, para. 7.77 (emphasis added).

The Panel explained that:

"if upon privatization, fair market value is paid for all productive assets, goodwill, etc.
employed by the state-owned producer, the Panel fails to see how the subsidies bestowed to
the state-owned producer could subsequently be considered to still confer a 'benefit' on the
privatized producer (in the sense of the company together with its owners) who has paid fair
market value for all the shares and assets, re flecting, we must assume, the value of past
subsidization."

Panel Report on US – Countervailing Measures on Certain EC Products, para. 7.72 (emphasis added).

Communities emphasized that the Panel’s most important finding was that the primary factor for
consideration is whether the privatized produ cer, comprising the company and its owners, had
received something for free.367
7.117 The Panel, however, fails to see how this refere nce, which emphasises the fact that FMV was
paid by the privatized producer meaning the comp any and its owners, enge nders an obligation to
exclusively examine the conditions of the privatization by looking at the company as a whole. In the
Panel’s view, these excerpts neither require an anal ysis of the conditions of the privatization as a
whole nor preclude segmenting such an analysis.
7.118 In the absence of a legally prescribed methodol ogy, the Panel agrees with the United States
that it is within a Member's discretion to develop a reasonable methodology which, as required by
Article 14 of the SCM Agreement , must be applied in a transparent manner and be adequately
explained. Again, we recall that the task of th is Panel is to asses whether the USDOC examined all
the pertinent facts and adequately explained its conclusion. The Panel's task is neither to perform a de
novo review of the information and evidence on the reco rd of the determination, nor to substitute our
judgement for that of the USDOC. 368 Accordingly, the issue before this Panel is not whether the
Panel would have preferred that the USDOC analy se Usinor’s privatization as a whole but whether
the USDOC’s segmented analysis of Usinor’s pr ivatization is reasonable and was transparently
applied and adequately explained.
7.119 The Panel does not find that the USDOC’s indi vidual analysis of each category of share
offering is unreasonable. On the contrary, the US DOC’s segmented analysis appears rather logical
and systematic given the conditions of the privatiza tion. As described in paragraphs 7.90-7.92 above,
instead of a single transaction, the GOF incrementall y privatized Usinor over a period of three years
through a multitude of sales transactions grouped in f our share offerings that were each subject to
distinct conditions and restrictions.369 The organization of the USDOC’s analysis of the conditions of
Usinor's privatization actually mirrored that of the share offerings. We also consider that the USDOC
applied its methodology in a transparent manner: the USDOC published a description of its new
methodology in the Federal Register and then applied it accordingly. 370 The adequacy of the
USDOC's explanation of its conclusions, however, is not entirely satisfactory, as we will see when
examining the USDOC's arm's-length analysis on the employee/former employee share offering.
7.120 We note that the United States argues th at the European Communities’ averaging
methodology ignores the arm’s-length issue. We ag ree with the United States. Indeed, given the
diversity of the purchasers and sales conditions, the Panel has difficulty formulating an arm’s length
analysis for Usinor's privatization as a whole.
7.121 The United States also argues that the Europ ean Communities’ averaging methodology treats
FMV as a purely quantitative analysis and ignores its “process-oriented” factors. We note that, in
conducting its FMV analysis, the USDOC states that it is "weighing these various factors" – including
objective analysis, artificial barriers to entry, pur chase price, committed investment and concurrent
subsidies. However, it later appears to neverthel ess take the finding of the non market-clearing price
for the employee/former employee share offering as definitive.
371 Although the USDOC insists that

367 EC Oral statement, para. 6.
368 See discussion in paragraphs 7.78-7.83 above.
369 France Section 129 determination, footnote 208 above, pp. 3-4. See the table describing the
conditions applicable to each share offering in paragraph 7.150 below.
370 See Modification Notice, footnote 206; France Section 129 determination, footnote 208 above,
pp. 3-12.
371 The USDOC concluded:

it conducted a qualitative FMV analysis, its relia nce on the non market-clearing price for the
employee share offering indicates that the conclusion is actually heavily quantitative. The Panel thus
considers that unlike the case of the arm's length an alysis, the FMV analysis could have been done
either in a segmented manner or as a whole, as suggested by the Europ ean Communities. The
USDOC could have just as easily compared the aver age price obtained to the market-clearing price in
its analysis of the privatization as a whole, as it co mpared the individual price of each share offering
to the market-clearing price in its segmented an alysis. The Panel, however, cannot find any legal
basis to require the USDOC to conduct its analysis in a particular manner.
7.122 Consequently, given the complexity of the priv atization process, we find that the USDOC’s
segmented analysis of the conditions of Usinor's privatization is not unreasonable and was applied in a
transparent manner.
(b) Whether the sales of shares to employees/former employees were at arm's length and FMV
7.123 The European Communities has argued that , even considering the employees/former
employees share offering independently, the evidence demonstrates that the sales of Usinor's shares to
this category of purchasers were nevertheless at arm's length and for FMV.
372 The United States
disagrees. We shall therefore examine the USDOC' s analysis of the sales transactions pertaining to
the employees/former employees share offering. We shall commence by explaining the USDOC's
arm's length analysis, followed by the FMV analysis.
(i) Whether the sales of shares to employees/former employees were at arm's length
Arguments of the parties

7.124 The European Communities argues that the shares sold through the employees/former
employees offering were at arm's length. The European Commun ities refers to the Black’s Law
Dictionary definition of arm's length as a term "[o]f or relating to dealings between two parties who
are not related or not on close terms and who are presumed to have roughly equal bargaining power;
not involving a confidential relationship" 373 to support its view that the employees/former employee
offering did not involve related parties, and, therefore, did constitute an arm’s-length transaction.374
7.125 The European Communities also argues that the United States wrongly examined whether a
pre-privatization relationship existed rath er than a post-privatization relationship. 375 In addition, the

"Based on our review of the factors relevant to FMV, the privatization of Usinor presents a
somewhat mixed picture. On the one hand, there were some barriers in the bidding process
that might have limited the number of potential purchasers. On the other hand, there is
substantial record evidence that the privatiza tion of Usinor was accomplished through a fair-
market-value transaction, wi th the exception of the empl oyee offering. First, the GOF
commissioned and followed the recommendations of objective analyses of the value of
Usinor. Second, the value/cost of any committed investment was known to bidders and
reflected in the prices offere d. Third, the GOF set and recei ved a market-clearing price for
Usinor's shares, except in the employee offering which constituted only 5.16 per cent of the
sale; in the stable shareholder offering, the GOF set and received an above market-clearing
price. After weighing these various factors, we determine that, with the exception of the
employee offering, FMV was paid for Usinor."

France Section 129 determination, footnote 208 above, pp. 10-11.
373 EC First written submission, para. 41 ( citing Black's Law Dictionary (West Group, 1999), 7 th ed.,
p. 82).

European Communities argues, altho ugh Usinor was wholly-owned, directly or indirectly, by the
GOF, the buyers in the employee/retiree offering included employees of Usinor, not employees of the
GOF. In its view, although the GOF participated in shareholder meetings a nd oversaw the financial
management of the company, it did not “intervene in the day-to-day management of the Company,
and the Company ... conducted its day-to-day operati ons in a manner similar to that of other major
international non-state controlled steel producers.”
376 Thus, it argues, the employee purchasers were
at least two steps removed from having any relationship to the GOF. 377 Furthermore, it contends, the
employee/former employee offering also included former employees of Usinor. 378 There is no
evidence whatsoever that there was any relationship between the former employees of Usinor and the
GOF. Even if some type of relationship existed be tween the seller and the buyers in this case, it was
not the type of relationship that would affect the price at which the GOF sold Usinor shares. 379 The
European Communities points out that the France Section 129 determination contains no
explanation/reasoning as to how and why employees/fo rmer employees are related to the GOF, just a
conclusion that they are related to Usinor.
380
7.126 The United States disagrees, arguing that the SCM Agreement does not refer to “arm’s
length,” and neither the Panel nor the Appellate Body provided any elaboration on this term. 381 I t
contends that the “arm’s-length” analysis applied by the USDOC is, however, entirely consistent with
the ordinary understanding of that term. The United States quotes the New Shorter Oxford Dictionary
and Black's Law Dictionary in support.382
7.127 The United States also argues that the Europ ean Communities misconstrued the logic of the
USDOC’s arm’s-length finding. Contrary to the European Communities’ assertion, the United States
insists that the “preferential” rate offered to the employees was not the sole basis of the USDOC’s non
arm’s-length finding.383 The United States explains that the USDOC’s arm’s length test consists of
two steps. 384 The first step is to evaluate the relations hip between the parties, i.e. the relationship
between the company, Usinor, and its employees. Th e United States concludes that in this case, the
employees are inarguably affiliated to Usinor. 385 The United States argues that the USDOC's
approach recognizes that the respective inter ests of employers and employees may not be
distinguishable and that members of the “corporate family” often treat each other more favourably
than they do others outside the family; and that this point is demonstrated by the admittedly
preferential nature of the employee stock offering.
386 The United States further explains that after
evaluating the relationship, the USDOC proceeds to the second step to examine the terms of the

376 EC First written submission, para. 42 ( quoting Usinor Prospectus, footnote 316 above, p. 26); see
377 EC Oral statement, para. 8.
378 In addition to including former employees of Usinor, the employee offering included former
employees of affiliates in which Usinor held, directly or indirectly, a majority interest. See Usinor Prospectus,
footnote 316 above, p. 21.
379 EC First written submission, paras. 40-44.
382 US First written submission, para. 35 ( citing The New Shorter Oxford English Dictionary (Oxford
University Press, 1993), Thumb Index Edition, Vol. I, p. 114 (at arm's length: "without undue familiarity; (of
dealings) with neither party controlled by the other.") and Black's Law Dictionary (West Group, 1999), 7
th ed.,
p. 103 ("Of or relating to dealings between two parties who are not related or not on close terms and who are
presumed to have roughly equal bargaining power; not involving a confidential relationship. ...")).
383 US Oral statement, para. 31.
384 US Oral statement, para. 31; see US First written submission, paras. 36-37.
385 US Oral statement, para. 31; see US First written submission, para. 36 (where the US characterises
this step in the analysis somewhat differently as "consider[ing] the existence of relationships that would indicate
the sales were not at arm's length").

transaction between Usinor and its employees to de termine whether those terms would have existed
had the transaction been between unrelated parties.
387 In other words, to determine "whether the price
charged the affiliated party was different from wh at it would have been absent the affiliation". 388 The
United States argues that it was at this step of the analysis that the USDOC relied on the "preferential"
nature of the employee share offering to explain the lower share price. 389 Because there was a
preferential option available to employees that was not available to unrelated parties, the USDOC
concluded that the terms of the transaction were di fferent as a result of the relatedness of the parties
and, hence, that the transactions were not at arm’s length. 390 The United States emphasises that the
evidence on the record amply supports the conclusion that the sales were not at arm’s length;
specifically, "the sales were openly acknowledged to be preferential".
391 The United States also
insists that the European Communities provided no factual basis to contradict the USDOC’s
conclusion that the "preferential" nature of the relationship resulted in a lower share price.392
7.128 The United States disagrees with the European Communities’ argument that the USDOC’s
arm’s-length analysis was in error because it confused the company (Usinor) and its owner (the GOF),
finding only that Usinor’s employees were related to Usinor, not to the GOF. 393 The United States
contends that the facts indicate that the GOF offe red preferential share prices to the employees of a
company that it entirely owned, demonstrating that it did not deal with those employees at arm’s
length for purposes of the privatization. 394 Moreover, it argues, the DSB rationale for finding that a
benefit may be extinguished by an arm’s length, FMV privatization hinges on the assumption that
there is little distinction between the company and its new owners. 395 In its view, that fact that the
new methodology requires the USDOC to consider the privatized company and its owners as a single
privatized producer is consistent with the findings of the Appellate Body.396
7.129 The United States disputes the European Co mmunities’ argument that the USDOC should
have considered the relationship after the privati zation. The United States explains that the DSB
recommendations and rulings focused on whether the transaction extinguished the benefit. What
occurs after the privatization is therefore irrelevant.397
Evaluation by the Panel
7.130 The European Communities is challenging the USDOC's finding that Usinor’s employees and
former employees are related to Usinor and that, in view of the preferential nature of the share
offering, the sales transactions pertaining to the employee/former employee share offering were not at
arm's length.
7.131 We are therefore called upon to examine whet her the USDOC properly determined that the
sales transactions pertaining to the employee/former employee share offering were not at arm's length.

388 US Oral statement, para. 31.
389 US Oral statement, para. 31.
392 US Oral statement, para. 31.
393 US First written submission, para. 38; US Oral statement, para. 32; see also EC First written
submission, para. 42.
394 US First written submission, para. 38; see also EC First written submission, para. 42 (where the
European Communities states that Usinor was wholly owned, directly or indirectly, by the GOF).
395 US First written submission, para. 38. The United States refers to the Panel Report on US –
Countervailing Measures on Certain EC Products, paras. 7.54 and 7.72 and the Appellate Body Report on US –
Countervailing Measures on Certain EC Products, paras. 113-115.
397 US Oral statement, para. 30.

We shall commence by looking at the USDOC's analysis and conclusions as set out in the France
Section 129 determination.
7.132 In the France Section 129 determination, as al ready explained, the USDOC applied its new
privatization methodology and found that the sales transactions in all share offerings except the
employee/former employee share offering were at arm's length. 398 In the case of Usinor's
employees/former employees, the USDOC found:
"Finally, an even smaller number of sh ares (eventually comprising 5.16 per cent)
were sold exclusively to current and qualifying former Usinor employees. These
purchasers had two options: (1) they could purchase shares at the French public
offering price of FF 86 per share, or (2) they could pay a discounted price of FF
68.80, with an extended payment period, if they agreed to hold the shares for two
years. Additionally, they were eligible to receive bonus shares if they held the shares
for specified periods. Thus, the employee offering was clearly distinguishable from
the public offerings and was openly charact erized as 'preferential' in Usinor’s
International Offering Prospectus (“Prospectus”).
We determine that the employees of Usinor were related to Usinor and that the sales
of shares to Usinor employees at the discounted price did not constitute an arm’s-
length transaction."
399
7.133 We note that neither the SCM Agreement nor prior reports have defi ned the concept of "arm's
length". The parties have referred to various dictionary definitions of "arm's length" to support their
positions. For instance, the Black’s Law Dictionary defines arm's length as “[o]f or relating to
dealings between two parties who are not related or not on close terms and who are presumed to have
roughly equal bargaining power; not involvi ng a confidential relationship”. The New Shorter Oxford
Dictionary defines arm’s length as "without undue fam iliarity; (of dealings) with neither party
controlled by the other".400
7.134 The United States contends that the definition contained in its new privatization methodology
corresponds to the ordinary meaning of arm's length. 401 The definition provides that an arm's-length
transaction is "a transaction negotiated between unrelat ed parties, each acting in its own interest, or
between related parties such that the terms of th e transaction are those that would exist if the
transaction had been negotiated between unrelated parties". 402 This definition appears to coincide
with the above dictionary definitions in that all hi ghlight the independence of the parties in an arm's
length transaction: either the parties have equal barg aining power, neither party controls the other, or
each party is acting in its own interest.
7.135 In any case, the European Communities has not challenged the definition of arm's length in
the USDOC's new privatization methodology, but its application to the sales transactions pertaining to
Usinor's employee/former employee share offering. Therefore, determining whether the definition on
the new privatization methodology corresponds to the ordinary meaning of the concept, as described
in the above dictionaries, is not our task. We are asked to examine the appropriateness of the
USDOC's analysis and conclusion on arm's length that results from the application of that definition
to the sales transactions involving the employee/former employee share offering.

398 France Section 129 determination, footnote 208 above, pp. 4-6.
399 France Section 129 determination, footnote 208 above, p. 6.
400 US First written submission, para. 35, footnote 44.
402 Modification Notice, footnote 206, p. 37127 (quoting SAA, footnote 243 above, p. 258).

7.136 As shown in paragraph 7.132 above, the USDO C analysis as regards the employees/former
employees share offering consists of a description of the conditions of that offering, followed by a
conclusion that "the employees of Usinor were related to Usinor and that the sales of shares to Usinor
employees at the discounted price did not constitute an arm’s-length transaction".
403
7.137 The Panel considers that the USDOC's arm's-le ngth analysis in the France Section 129
determination fails to ask and respond to the basic question in an arm's-length test, i.e. whether the
purchaser is related to the seller . The France Section 129 determination contains no reasoned
conclusion that the purchasers of the shares pert aining to the employees/former employees share
offering are related to the seller of those shares, i.e the GOF. It only contains a conclusion that
Usinor's employees are related to Usinor. 404 One could be entitled to assume that an employee is
related to his/her employer; the same goes for a former employee (for example, a retiree's pension
may depend on the employer's performance). But from there, a conclusion that the employees/former
employees are related to another entity that owns the employer company requires at least some
explanation. We recall that Article 14 of the SCM Agreement requires that the method to determine
the existence of a benefit be adequately explained.
405 The USDOC should have therefore explained
why by being related to their employer, the empl oyees/former employees are somehow related to the
GOF.
7.138 The Panel therefore concludes that the USDOC did not properly establish that the sales
transactions pertaining to Usinor's employee/former employee share offering were not at arm's length
because the USDOC failed to provide an ade quate and reasoned conclusion on why Usinor's
employees and former employees were related to the GOF.
7.139 The European Communities also argues that the United States wrongly examined whether a
pre-privatization relationship existed rath er than a post-privatization relationship. 406 The United
States disagrees and contends that the DSB reco mmendations and rulings focused on whether the
transaction extinguished the benefit. In its view, what occurs after the privatization is therefore
irrelevant.407 The Panel agrees that the arm's length anal ysis should focus on the relationship between
the seller and the purchaser at the time of the tran saction, since the purpose of the analysis is to
determine whether the terns of that transaction are affected by the relation between those parties.
7.140 Notwithstanding the absence of an adequate a nd reasoned conclusion, the Panel notes that
whether Usinor's employees are related to the GOF is not dispositive with respect to the continuation
of a benefit. The Panel agrees that the arm’s-length test is an ancillary exam ination that provides the
context for, and otherwise informs, the decision on FMV. The arm’s-length test by itself is not a
bright-line test for determining whether a benefit is eliminated. Rather, the arm’s length test reflects a
general understanding that transac tions between related parties may not always be on commercial
terms.408 Therefore, the arm's-length test merely aff ects the level of scrutiny for the FMV analysis.
Where a relationship exists, a closer analysis of the actual terms is warranted to determine if the
transaction at issue is consistent with market prin ciples. Thus, regardless of whether the transaction
occurred at arm's length, an investigating authorit y must analyse whether the privatization was for
FMV to ultimately determine whether a benefit pas sed through. We shall therefore examine whether
the USDOC appropriately found that the employee/former employee shares were not sold for FMV.

403 France Section 129 determination, footnote 208 above, p. 6.
404 The Panel notes that the conclusion does not mention Usinor's former employees.
405 Appellate Body Report on US – Softwood Lumber IV, para. 91.
407 US Oral statement, para. 30.
408 See Brazil Third-party submission, para. 19.

(ii) Whether the sales of shares to employees/former employees were for FMV
Arguments of the parties
7.141 The European Communities challenges the US DOC's conclusion that the employee share
offering was not at FMV. The European Commun ities argues that the discount offered to Usinor
employees and former employees reflects the risk assumed by the buyers for the resale restrictions on
the shares purchased. Because the shares purch ased by some Usinor employees and former
employees were less liquid, they were less valuable on the market since it was unclear whether, after
two years, the price for the shares would be higher or lower. 409 The European Communities argues
that the restrictions placed upon the French public offering and the stable shar eholders, to the extent
they were applicable, were not as restrictive as t hose on the employee/former employee offering. The
French public offering restricted sales only wh ere purchasers acquired free shares. The stable
shareholders were precluded from selling shares for th ree months, allowed to sell a limited number of
shares for the following 15 months, and no longer precluded from selling shares after 15 months.410
7.142 The European Communities argues that it is also common among public offerings throughout
the world, including in the context of privatizations, to offer shares to employees or former employees
at a specific rate.411
7.143 The United States contests the European Co mmunities' arguments by asserting that resale
restrictions per se provide no explanation for the substantia l discount afforded Usinor’s employees.
To the contrary, it argues, resale restrictions in th e Usinor privatization were not limited to company
employees. Purchasers in the French offering as we ll as the stable shareholders were subject to
similar restrictions. Nevertheless, it argues, the sh are prices for the latter two groups were well above
the preferential price for the employees. In its view, were the European Communities’ argument
correct, one would expect the European Communities to be able to provide evidence that employees
were equally (or virtually equally) likely to particip ate in the French public offering as they were to
participate in the employee/former employee offering. 412 The European Communities, it argues, has
offered no such evidence nor has the European Communities offered any demonstration of how the
discount offered to employees was supposed to reflect the risk assumed by the buyers for the resale
restrictions.413 Moreover, the United States alleges, th e European Communities avoids explaining
how it calculated the employee share price, there by failing to contextualize the seller’s basis for
characterizing the employee share offering as "preferential". 414 It also contends that it is irrelevant

411 The Panel notes that the European Communities explicitly refers to the term "specific" and not to
the term "preferential". The European Communities cite s Steven L. Jones, William L. Megginson, Robert C.
Nash, and Jeffry M. Netter, "Share issue privatizations as financial means to political and economic ends," 53 J.
Fin. Econ. 217, 238 (1999); accord Simon Leary, "Privatization Issue 12: Key Steps in a Successful Public
Offering," at 2, available at http://www.pwcglobal.com/extweb/manissue.nsf/DocID/. The EC also indicates
that, in a study by the US General Accounting Office ("GAO") on privatization practices in major developed
countries, the GAO noted that the governments of these countries, in particular the UK and France, have
routinely offered set specific prices for employees in their privatizations, without suggesting that such offerings
were in any way exceptional. See US General Accounting Office, "Budget Issues: Privatization/Divestiture
Practices in Other Nations," at 5-6, 13-14 (1995). In France, the privatization law itself provides for the offering
of a specific rate to employees and former employees so lo ng as those shares are retained for at least two years.
See French Privatization Law of 1986, as amended, Art. 11, submitted in GOF/Usinor 2 September 2003
Questionnaire Response, Appendix 4. Thus, the offering of shares at specific prices to employees and former
employees of a company in the context of privatiza tion is common practice. EC First written submission,
footnote 71; see EC Oral statement, paras. 6-7.
414 US Oral statement, para. 33.

whether it is common practice for a government to set aside shares for government employees when
privatizing an enterprise.
415
Evaluation by the Panel
7.144 The European Communities claims that the sales of shares to Usinor's employees and former
employees were for FMV and argues that the discount offered to this category of buyers reflects the
risk they assumed for the resale restrictions on the shares purchased. Specifically, the European
Communities maintains that the share price reflects the 24-month resale restriction and its
accompanying risk. In its view, this restriction is stricter than those on the French public offering and
the stable shareholders offering so the risk is accordingly higher and the share price lower. The
United States disagrees.
7.145 We shall therefore examine whether the USDOC reasonably concluded that the sales
transactions pertaining to the employee/former employee share offering were not for FMV. To this
end, we shall commence by examining the USDOC 's FMV analysis in the France Section 129
determination.
7.146 In the France Section 129 determination, th e USDOC explained that in examining whether
Usinor was privatized for FMV, the USDOC first considered whether there was a contemporaneous,
benchmark price. Concluding there was no such price, the USDOC stated that it would then analyse
the sales process according to several factors on the non-exhaustive list in the Modification Notice:
objective analysis, artificial barriers to entry, pu rchase price, committed investment, and concurrent
subsidies.
416 The USDOC then proceeded to analyse each category of share offering separately within
each factor to determine whether the sales in each category were at FMV.
7.147 We note that during the FMV analysis, the US DOC examined the employee/former employee
share offering within the context of several of th e factors listed above. Specifically, when examining
artificial barriers to entry, the USDOC found that th e sales process was restricted with respect to the
employee pool because it excluded numerous potential purchasers who were not employees/former
employees.
417 When analysing purchase price, the USDOC focused on the conditions of the French
public offering and the international offering and determined that the prices for those two share
offerings, FF 86 and FF 89, respectively, set the range for the market-clearing price, i.e. "[the price]
that equates the supply of shares with the demand for shares". 418 The USDOC, however, performed

416 France Section 129 determination, footnote 208 above, pp. 6-11.
417 France Section 129 determination, footnote 208 above, p. 7.
418 The USDOC explained that

"[i]n regard to the price, we have sought to determine whether the GOF charged a market-
clearing price for it shares of Usinor. A market-clearing price is one that equates the supply of
shares with the demand for shares . If the GOF had set the prices for Usinor's shares too low,
the offering would have been over-subscribed and many people seeking shares would not have
been able to purchase them in the initial offeri ng. Conversely, if the prices were set too high,
the offering would have been under-subscribed and the GOF would not have been able to sell
as many shares as it had planned.

As noted above, the prices in the French and international public offerings were FF 86 and FF
89, respectively. The evidence on the record shows that because of the high level of demand,
the number of shares made availa ble in the French offering had to be increased. First, shares
were moved from the international offering to the French offering. Additional shares
subsequently were made available... Regarding the international offering, shares were
originally moved from there to the French offering but, subsequently, the number of shares
sold under the international offering was increased. ...

no qualitative analysis of the conditions of the employee/former employee offering and simply
concluded that the FF 68 price for the employee/former employee share offering fell outside this
range of market-clearing prices.
419 The USDOC also analysed whet her the conditions/restrictions of
the employee/former employee share offering c onstituted a committed investment. The USDOC
concluded that since the restrictions were known pr ior to purchase, they were fully reflected in the
share price. 420
7.148 The USDOC concluded that the employee/former employee share offering was not at FMV
because the employee/former employee share offeri ng was subject to "some barriers in the bidding
process that might have limited the number of pot ential purchasers" and because the Government of
France did not set or receive a market-clearing price for the employee/former employee share
offering.421
7.149 The parties dispute whether the "preferential" terms, including the 20 per cent discount that
the GOF offered Usinor's employees and form er employees, justify a finding that the
employee/former employee share offering was not at FMV. As indicated above, the European
Communities argues that the 20 per cent discount reflects the actual risk assumed by the
employees/former employees for the resale restrictions on the shares purchased.
422 The United States
contests this argument and contends that if this were the case, the European Communities should have
provided the USDOC with sufficient evidence during the Section 129 proceedings to demonstrate that
the additional restrictions on the employee/former employee share offering account for the 20 per cent
discount.423
7.150 To assess this issue, it may be worth clarifying the different conditions applicable to each of
the share offerings. The following table displays these conditions and the price per share of each
offering:

Given the over-subscription at the FF 86 price, the fact that shares were moved from the
international offering to the French offering, an d the number of shares sold at each of the two
prices, it appears that the market clearing price for Usinor's shares was between FF 86 and 89.
Therefore, we determine that the GOF maximized its return on the shares sold in the French
and international public offerings."

France Section 129 determination, footnote 208 above, pp. 8-9.
419 France Section 129 determination, footnote 208 above, p. 9.
420 France Section 129 determination, footnote 208 above, pp. 9-10.
421 France Section 129 determination, footnote 208 above, pp. 10-11.
422 See EC Response to Panel questions Nos. 30, 34 and 36; see generally Usinor Prospectus, footnote
316 above, pp. 21, 23 (providing the general conditions of the employee share offering); Order Defining Terms
for the Usinor Privatization, footnote 316 above, art. 3 (specifying the terms of the employee share offering).
423 See US Response to Panel question No. 30.

Combined
Offering
Factors Affecting Share Price: Restrictions/Incentives/Sale Mechanism Price Per Share (FRF)
International
Offering424
Sale mechanism: Underwritten by three regional groups (France, US, Rest of the
World), collectively referred to as th e International Underwriters, under the
following conditions:
 Payment by GOF, Clindus, and Usinor of a management commission and
underwriting commission of .60 per cent of the aggregate international offering
price;
 Payment by GOF, Clindus, and Usinor of a selling concession of 1.80 per cent
of the aggregate international offering price;
 Payment by GOF, Clindus, and Usinor of FRF 2,000,000 for certain expenses;
and
 Indemnification by GOF, Clindus, and Usinor against certain liabilities
89

French Public
Offering425
Restrictions/Incentives:
 Holding period: A minimum holding period of 18 months applies;
 Free shares: Shareholders receive 1 free share for each 10 shares purchased after
the minimum holding period

Sale mechanism: Terms pursuant to the French OPV Underwriting Agreement
86
Employee
Offering426
Restrictions/Incentives:
 Purchase price:
o At the French public share offering price of FF 86, or
o At a 20 per cent discount on the price of the French public share offering,
which is FF 68.8;
 Holding period: Only the shares purchased at the discount price are subject to a
24-month holding period;
 Free shares:
o At the French public share offering price, 1 free share for each 3 shares
purchased, or
o At a 20 per cent discount on the price of the French public share offering, 1
free share for the first 71 shares purchased and 1 free share per five
purchased from the 72nd share onwards;
 Delayed payment terms:
o At the French public share offering price, immediate payment in cash, or
o At a 20 per cent discount on the price of the French public share offering,
either immediate payment in cash or 30 per cent at purchase, 30 per cent
after 1 year, and remaining 40 per cent after 2 years.

Sale mechanism: No underwriter
86 or 68.8 (20 per cent
discount on the
French public
offering price)
Stable
Shareholders427
Restrictions: Stable shareholders signed an agreement ("Protocole") agreeing to
 Hold all existing shares for three months from the date of publication of the
French Public Offering results;
 After those three months, sell a maximum of 20 per cent;
 Hold the remaining 80 per cent for anot her 15 months or sell only to another
Stable Shareholder; and
 After the 15 months (a tota l 18 months), respect the other Stable Shareholders'
pre-emption rights when selling to third parties.

Sale mechanism: No underwriter
90.78
(102 per cent of the
International
Offering Price)

7.151 The above table shows that different degrees and/or types of restrictions apply to each of the
four share offerings. We recall that our task is to evaluate whether the USDOC has examined all the

424 Usinor Prospectus, pp. 21-24, 84-86; see Order Defining Terms for the Usinor Privatization,
footnote 316 above.
425 Usinor Prospectus, pp. 21-24, 84-86; see Order Defining Terms for the Usinor Privatization,
footnote 316 above.
426 Order Defining Terms for the Usinor Privatization, footnote 316 above, art. 3.
427 Usinor Prospectus, pp. 21-24, 84-86; see Order Defining Terms for the Usinor Privatization,
footnote 316 above.

pertinent facts and to assess whether the USDOC provided an adequate and reasoned explanation as to
how those facts support its determination.
7.152 In contesting the European Co mmunities' argument that the 20 per cent discount on the
employee/former employee share price is a risk prem ium for the resale restrictions, the United States
asserts that purchasers in other categories, namely the French public offering and the stable
shareholders, were subject to similar restrictions as the employee/former employee share offering.428
7.153 Based on the evidence on the record, under bot h the employee/former employee offering and
the French public offering, purchasers may receive free shares and be subject to holding restrictions.
Employees and retirees can either participate in the French public offering or buy shares with a
discount of 20 per cent, but then with the obliga tion to hold them for 24 months. They can then
obtain a free share for the first 71 shares purchased and one free share per subsequent five shares
purchased. Purchasers taking part in the French pub lic offering are not subject to an obligation to
hold their shares for any amount of time unless they want to obtain one free extra share for each
ten shares purchased (up to a ceiling of 30 000 fra ncs for the purchased shares). The required
duration for holding shares is then 18 months. As a result, for the first 100 shares, shareholders under
the discounted employee/former employee offering receive six free shares, while shareholders under
the French public offering receive ten free shares pr ovided that the shareholders in both cases agree to
the holding restrictions.
7.154 The Panel notes that the USDOC never actually analysed the effect of the different
restrictions and instead merely asserted that the "[r]esale restrictions per se provide no explanation for
the substantial discount afforded Usinor's employees." 429 We recall that the Appellate Body has
assigned an active rather than a passive decision-making role to an investigating authority performing
a sunset review.430 The question is whether this active role obliges the USDOC, in this case, to search
for evidence that provides the basis for the 20 pe r cent discount beyond the evidence on the record, or

428 US First written submission, para. 46; US Response to Panel question No. 30.

In addition, we note that the Usinor Prospectus describes the terms of an international underwriting and
selling agreement for the International Share Offering. This agreement required the GOF, Clindus and Usinor to
pay the International Underwriters a management commission, an underwriting commission, a selling
concession, and FRF 2,000,000 to cover certain expenses. The GOF, Clindus and Usinor also agreed to
indemnify the International Underwriters against certain liabilities. Usinor Prospectus, footnote 316 above,
pp. 84-86.

We also note that the French Share Offering was underwritten with terms provided in a French
Underwriting Agreement, which is not detailed in the Usinor Prospectus. The Em ployee Share Offering and
Stable Shareholders were not underwritten. Usinor Prospectus, footnote 316 above, pp. 23-24, 84.
430 The Appellate Body indicated:

"This language in Article 11.3 makes clear that it envisages a process combining both
investigatory and adjudicatory aspects. In other words, Article 11.3 assigns an active rather
than a passive decision-making role to the authorities. The words 'review' and 'determine' in
Article 11.3 suggest that authorities conducting a sunset review must act with an appropriate
degree of diligence and arrive at a reasoned conclusion on the basis of information gathered as
part of a process of reconsideration and examination. In view of the use of the word 'likely' in
Article 11.3, an affirmative likelihood determination may be made only if the evidence
demonstrates that dumping would be probable if the duty were terminated – and not simply if
the evidence suggests that such a result might be possible or plausible."

Appellate Body Report on US – Corrosion-Resistant Steel Sunset Review , para. 111 (footnotes
omitted).

whether it was for the respondents to justify that discount. In a subsidy case such as this one, the
government that is privatising its own company is best placed to provide specific information
regarding the conditions of that privatization. It is therefore reasonable to conclude that it is
incumbent on the GOF to provide the justification for the 20 per cent discount on the employee share
offering. The Panel has closely examined the France Section 129 determination and failed to find that
the respondents provided such evidence. We have also asked the European Communities to specify
which evidence it provided. Even after a specific question by the Panel, however, the European
Communities declined to submit any additional evid ence or explanation and merely reiterated its
argumentation that the 20 per cent discount reflects a risk premium.
431
7.155 The European Communities also argues that the USDOC should have considered normal
commercial practices in this context. The Eu ropean Communities asserts that it is common among
public offerings throughout the world, including in the context of privatizations, to offer shares to
employees or former employees at a specific rate. 432 The Panel does not consider this to be a valid
argument. Whether it may be common practice to make shares available to one's employees/former
employees at non-FMV prices is irrelevant. The issue is whether the transactions at issue occurred at
FMV or not.
7.156 The Panel therefore concludes that, given the evidence in the record of the France Section 129
determination, the USDOC's analysis and subseque nt conclusion that the employee/former employee
share offering was not for FMV was not unreasonable.
(iii) Conclusion
7.157 We have found that the USDOC did not properly establish that the sales transactions
pertaining to Usinor's employee/former employee share offering were not at arm's length because the
USDOC did not provide an adequate and reasone d explanation as to why Usinor's employees and
former employees were related to Usinor and, more importantly, to the GOF. However, we have also
explained that the USDOC's conclusion on arm's length is not dispositive with respect to the
continuation of benefit since the arm’s-length test is an ancillary examination linked to the concept of
FMV, which ultimately provides the context for, and otherwise informs, the decision on FMV.
7.158 We have also found that, given the evidence on the record of the France Section 129
determination, the USDOC's analysis and subsequent conclusion that the sale transactions pertaining
to the employee/former employee share offering were not for FMV was not unreasonable. Therefore,
we conclude that, although the USDOC failed to pr ovide an adequate and reasoned explanation as to
why Usinor's employees and former employees were re lated to Usinor and, more importantly, to the
GOF, the USDOC's analysis of the conditions of Us inor's privatization, specifically whether the
employee/former employee share offering occurre d at arm's length and for FMV, was neither
inadequate nor unreasonable.
(c) Whether the maintenance of the existing countervailing duties is inconsistent with Articles 10,
14, 19.4, 21.1 and 21.3 of the SCM Agreement and Article VI:3 of the GATT 1994
7.159 Having found that the USDOC's conclusion that the employee/former employee share
offering was not at arm's length and for FMV was not inadequate or unreasonable, we shall examine
whether the United States, by maintaining the count ervailing duties on the basis of that finding, acted
inconsistently with its obliga tions under Article VI:3 of the GATT 1994 and Articles 10, 14, 19.4,
21.1, and 21.3 of the SCM Agreement, and has therefore failed to implement the recommendations
and rulings of the DSB.

431 EC Response to Panel question No. 30.
432 EC First written submission, footnote 71; EC Oral statement, para. 6.

7.160 We shall commence by examining the USDOC’ s affirmative conclusion to maintain the
countervailing duties on the grounds that there is a likelihood of continuation or recurrence of
subsidization if these duties were to be revoked. The USDOC states the following in the France
Section 129 determination:
“The evidence presented on the record of th is determination demonstrates that, with
the exception of the employee offering, whic h constituted 5.16 per cent of the sale,
the privatization of Usinor was at arm’s length and for fair market value. While
certain aspects of the sales process for st able shareholders made the process less
open, the price paid by the stable shar eholders was an arm’s-length price and it
exceeded our measure of fair market value, FF 86 - 89. Regarding the shares sold to
Usinor’s employees, we determine that these sales were not at arm’s length. Nor can
the sales at FF 68 be considered transactions at fair market value."433
7.161 The USDOC further concluded that "[t]he sale of shares to Usinor employees at prices below
fair market value did not extinguish certain allo cable, nonrecurring, pre-privatization subsidies that
continue at an above de minimis rate beyond the original sunset review. Under these circumstances,
the [USDOC] finds that countervailable subsidies ar e likely to continue or recur in the event of
revocation".434 The Panel finds the scope of this conclusion unclear.
7.162 We note that, in response to respondent's comments, the USDOC explains:
“In this determination, we have applied the approach laid out in our Modification
Notice, which states that, where we find th at the baseline presumption is not rebutted
because a transaction was not made at arm’s length and for fair market value, or
because of severe market distortions, 'we will find that the company continues to
benefit from the prior subsidies in the full amount of the remaining unallocated
balance of the subsidy benefit'."
435
7.163 Although the USDOC never explicitly identified the remaining unallocated balance, it did
find that only 5.16 per cent of the shar es was not sold at arm's length/FMV. 436 Therefore, it seems
reasonable to conclude that the remaining unallocated balance of the subsidy benefit consisted of the
5.16 per cent.437 The United States confirmed this underst anding through its written submissions and
later in response to a question by the Panel.438

433 France Section 129 determination, footnote 208 above, p. 12.
434 France Section 129 determination, footnote 208 above, p. 12.
435 France Section 129 determination, footnote 208 above, p. 15.
436 France Section 129 determination, footnote 208 above, p. 12.
437 The Panel notes that the USDOC issued two Section 129 determinations concerning the Usinor
privatization on two original investiga tions subject to this Panel during the original proceedings. In both cases,
the USDOC revised its analysis of Usinor's privatization further to its new privatization methodology and found
that the privatization was at arm's length/FMV except for 5.16 per cent of the sales transactions that pertained to
the employee share offering. The USDOC concluded that only 5.16 per cent of the benefit passed through to the
privatized company and recalculated th e rates of subsidization to exclude the pre-privatization subsidies found
to be non-countervailable. Sin ce the recalculated rates were de minimis , the USDOC decided to revoke the
countervailing duties. Issues and Decision Memorandum for the Section 129 Determination: Final Affirmative
Countervailing Duty Determination: Stainless Steel Sheet and Strip in Coils from France, pp. 11-12 (24 October
2003); Issues and Decision Memora ndum for the Section 129 Determinati on: Final Affirmative Countervailing
Duty Determination: Certain Cut-to-Length Carbon Quality Steel Plate from France, p. 12 (23 October 2003).
438 US First written submission, paras. 31, 32; US Oral statement, paras. 24-26; US Response to Panel
question No. 33.

7.164 Having found that only 5.16 per cent of the benefit continues, the question is why the United
States maintained the duties at the original level. We recall that the USDOC conducted an order-wide
review where no company-specific calculations took place. As explained in paragraphs 7.30-7.31
above, in the absence of recalculation, the finding that any subsidization remains serves as the basis of
an affirmative conclusion of likelihood of continuation or recurrence of subsidization.
7.165 We shall now examine whether the maintenan ce of the existing countervailing duties on the
basis of a finding that only 5.16 per cent of the be nefit passes through is inconsistent with Articles 10,
14, 19.4, 21.1 and 21.3 of the SCM Agreement and Article VI:3 of the GATT 1994, as claimed by the
European Communities. It is useful to recall briefly these provisions:
7.166 Article 10 of the SCM Agreement provides that "Members shall take all necessary steps to
ensure that the imposition of a countervailing duty on any product of the territory of any Member
imported into the territory of another Member is in accordance with the provisions of Article VI of
GATT 1994 and the terms of this Agreement."
439 (footnote omitted) Article VI:3 of GATT 1994
precisely permits Members of the WTO to impose a "countervailing duty" on products imported from
other Members of the WTO "for the purpose of offs etting any bounty or subsidy bestowed, directly,
or indirectly, upon the manufacture, production or export of any merchandise."
440
7.167 Article 14 of the SCM Agreement requires that "any method used by the investigating
authority" of a WTO Member "to calculate the benef it to the recipient … shall be provided for in the
national legislation or implementing regulations of the Member concerned and its application to each
particular case shall be transparent and adequately explained."441
7.168 Article 19.4 of the SCM Agreement further provides that "[n]o countervailing duty shall be
levied on any imported product in excess of the amount of the subsidy found to exist, calculated in
terms of subsidization per unit of the subsidized and exported product".
7.169 Article 21.1 of the SCM Agreement reads: “[a] countervailing duty shall remain in force only
as long as and to the extent necessary to counteract subsidization which is causing injury”.
7.170 Article 21.3 of the SCM Agreement further emphasizes the exceptional character of
countervailing measures by providing for the general ru le of termination of the CVDs no later than
five years from imposition, with one exception i.e., the likelihood of continuation or recurrence of
subsidization and injury to be established by means of a review investigation:
"[n]otwithstanding the provisions of paragraphs 1 and 2, any definitive countervailing
duty shall be terminated on a date not later than five years from its imposition ... ,
unless the authorities determine, in a review initiated before that date ... that the
expiry of the duty would be likely to lead to continuation or recurrence of
subsidization and injury." (Footnote omitted.)
7.171 In this regard, the Appellate Body in the orig inal proceedings agreed with this Panel that,
under Article 21.3 of the SCM Agreement, regardless of whether administrative reviews under Article
21.2 of the SCM Agreement had been requested since the original investigation, the importing
Member is obliged to consider ev idence before it relating to subsidi zation and obliged to determine
whether a "benefit" continues to exist following the privatization of the investigated firm before
concluding "whether subsidization exists and is likely to continue or recur". The Appellate Body also
agreed with this Panel in that, in sunset review s, the investigating authority, before deciding to

439 Article 10 of the SCM Agreement.
440 Article VI:3 of the GATT 1994.
441 Article 14 of the SCM Agreement.

continue to countervail pre-privatization, non-recurring subsidies, is obliged to examine the conditions
of such privatizations and to determine whether the privatized producers received any benefit from the
prior subsidization to the state-owned producers.442
7.172 We have found in paragraph 7.122 above that the USDOC's segmented analysis of Usinor's
privatization was not unreasonable. We have furt her concluded in paragra phs 7.138 and 7.140 above
that, although the USDOC did not provide an ade quate and reasoned explanation on arm's length, the
arm's length test is merely an ancillary examina tion that provides the context for, and otherwise
informs, the decision on FMV. In addition, in pa ragraph 7.156 above, we concluded that the USDOC
provided a reasoned and adequate conclusion on whether the employee/former employee share
offering occurred for FMV. Therefore, the USDO C has not failed to examine the conditions of
Usinor's privatization and to determine that the pr ivatized Usinor continued to receive some benefit
from pre-privatization subsidization to the state- owned Usinor. We therefore find that the United
States did not act inconsistently with Articles 14 and 21.3 of the SCM Agreement as regards the
consideration of Usinor's privatization when making its likelihood-of-subsidization analysis.
7.173 We shall now examine whether the continuation of the measure is inconsistent with Article
VI:3 of the GATT 1994 and Articles 10, 19.4 and 21.1 of the SCM Agreement , as claimed by the
European Communities. In this regard, the Appellate Body found in the original proceedings that the
interplay of Article VI:3 of the GATT 1994 and Articles 10, 19.4 and 21.1 of the SCM Agreement
prescribes an obligation to limit countervailing duties to the amount and duration of the subsidy found
to exist by the investigating authority. It also conc luded that this obligation applies to both original
investigations as well as revi ews covered by Article 21 of the SCM Agreement, thus including sunset
reviews under Article 21.3 of the SCM Agreement , such as the re-determinations at issue in this
dispute.443
7.174 The Panel is conscious that the Appellate Body has condoned the practice of order-wide
sunset reviews and that it has actually ruled that since the United States has chosen to conduct its
sunset reviews on an order-wide basis, the cons istency of the likelihood determination must be
evaluated in the context of an order-wide determination. 444 In that context, the Panel understands that
where no recalculation of the rate of subsidization as found in the original investigation is made, the
finding that a small part of the benefit passes thr ough to the privatized producer can serve as the basis
of the affirmative likelihood-of-subsidization conclusion and thus the maintenance of the duties.
7.175 However, this does not mean that the Un ited States will necessarily be collecting
countervailing duties at the level set by the original order. We recall that the United States has a
retrospective system for the assessment and collection of duties. 445 In the context of this system, the
Panel understands that an exporter can request an annual or changed circumstances review.
Accordingly, the Panel has no reason to believe that the USDOC finding that 5.16 per cent of the
benefit from pre-privatization, non-recurring subsidie s passed through to the privatized producer, will
not be reflected in the level of any countervailing duty actually imposed on Usinor.446

442 Appellate Body Report on US – Countervailing Measures on Certain EC Products , paras. 148-149;
Panel Report on US – Countervailing Measures on Certain EC Products, paras. 7.114–7.116.
443 Appellate Body Report on US – Countervailing Measures on Certain EC Products , para. 149; see
Panel Report on US – Countervailing Measures on Certain EC Products, paras. 7.114–7.116.
444 See paragraphs 7.30-7.31 above.
445 See 19 U.S.C. § 1671 (2003) (concerning the imposition of countervailing duties); 19 U.S.C. §
1675(a) (2003) (concerning administrative reviews); 19 U.S.C. § 1675(b) (2003) (concerning changed
circumstances reviews); 19 U.S.C. § 1505 (2003) (concerning the deposit of estimated duties); 19 U.S.C. § 1520
(2003) (concerning the refund of excess deposits).
446 The Panel notes that it is not finding that a retrospective system somehow renders the USDOC's
affirmative likelihood-of-subsidization re-determination no t inconsistent with the relevant provisions of the

7.176 Therefore, in the absence of an obligation to recal culate a rate of subsidization in the context
of a sunset review and given the fact that the Unite d States is not relying on the sunset review as a
basis for collecting duties at a particular rate , the Panel finds that the USDOC’s affirmative
likelihood-of-subsidization re-determination as set out in the France Section 129 determination is not
inconsistent with Articles 10, 14, 19.4, 21.1 and 21.3 of the SCM Agreement and Article VI:3 of the
GATT 1994 in regard to the obligation to limit counterva iling duties to the amount and duration of the
subsidy. Therefore, the United States has not failed to implement the recommendations and rulings of
the DSB.
C. C
UT-TO-LENGTH CARBON STEEL PLATE FROM UNITED KINGDOM
1. Background
7.177 On 8 January 2003, the DSB adopted the reports of the original panel and the Appellate Body.
The Panel found that the sunset review determination on Cut-to-Length Carbon Steel Plate From the
United Kindom was inconsistent with Articles 10, 14, 19.4, 21.1 and 21.3 of the SCM Agreement.447
The Appellate Body subsequently affirmed the Panel's conclusion.448
7.178 As indicated in paragraph 7.89 above, following the adoption of the original panel and
Appellate Body reports by the DSB on 8 January 20 03, the USDOC issued the Modification Notice,
which the European Communities did not challenge in th is dispute. It also reviewed its determination
on the likelihood of continuation or recurrence of s ubsidization contained in the original sunset
review, which had been found inconsistent with the SCM Agreement . Accordingly, the USDOC
issued its Issues and Decision Memorandum: Section 129 Det ermination: Final Results of Expedited
Sunset Review of Cut-to-Length Carbon Steel Plate From the United Kingdom ("UK Section 129
determination") on 24 October 2003.
7.179 The original countervailing duty on these produc ts from the UK was imposed on 17 August
1993 with a countrywide ad valorem rate of 12 per cent and a company-specific ad valorem rate for
Glynwed of 0.73 per cent. 449 The sunset review determination, published on 7 April 2000, found that
"revocation of the countervailing dut y order would be likely to lead to continuation or recurrence of a
subsidy". The USDOC reported to the USITC that the net countervailable subsidy rate likely to
prevail was 0.73 per cent for Glynwed and 12 per cent for all other British producers and exporters.450
2. The measure taken to comply
7.180 As concluded in paragraph 7.18 above, the measure taken to comply as regards Cut-to-Length
Carbon Steel Plate From the United Kingdom is the affirmative likelihood-of-subsidization re-
determination set out in the UK Section 129 determination.
3. The claims
7.181 With respect to the UK Section 129 determin ation, the European Communities requests the
Panel to make the following findings:

GATT 1994 and the SCM Agreement. Rather, the Panel notes that the United States' retrospective system
functions in a way that ensures that excess duties are not collected pursuant to a sunset review.
447 Panel Report on US – Countervailing Measures on Certain EC Products, para. 8.1(c).
448 Appellate Body Report on US – Countervailing Measures on Certain EC Products, para. 161(a).
449 Countervailing Duty Order: Certai n Steel Products from the United Kingdom, 58 Fed. Reg. 43748,
43749 (17 August 1993); see Final Affirmative Countervailing Duty Determination: Certain Steel Products from
the United Kingdom, 58 Fed. Reg. 37393, 37399 (9 July 1993).
450 Cut-to-Length Carbon Steel Plate From the United Kingdom; Final Results of Expedited Sunset
Review of Countervailing Duty Order, 65 Fed. Reg. 18309, 18310 (7 April 2000) (Exhibit US-4).

(i) that the United States has failed to implement the recommendations and
rulings adopted by the DSB and acted inc onsistently with its obligations under
Articles 10, 14, 19.4, 21.1, and 21.3 of the SCM Agreement and Article VI:3 of the
GATT 1994 by refusing to examine whether, and for failing to find that, the
privatization of BS plc in Cut-to-Length Carbon Steel Plate from the United Kingdom
was at arm's length and for FMV.
(ii) that the United States has acted in consistently with its obligation under
Article 21.3 of the SCM Agreement because it failed to consider evidence on the
record in Cut-to-Length Carbon Steel Plate from the United Kingdom demonstrating
that the benefits from programmes found to confer countervailable subsidies no
longer existed.
(iii) that the United States failed to meet its obligations under Articles 21.3 of the
SCM Agreement because it did not examine in, inter alia, Cut-to-Length Carbon Steel
Plate from the United Kingdom , whether expiry of the duty would be likely to lead to
continuation or recurrence of material injury.
451
7.182 The United States rejects all the claims that the European Communities raised arguing that the
USDOC assumed that the privatization of BS plc wa s at arm's length and for fair market value and
that it was not required to consider the evidence submitted during the Section 129 proceedings for the
purpose of rendering the sunset review determinatio n "not inconsistent" with the recommendations
and rulings of the DSB. It was also not obliged to make a new likelihood-of-injury determination.
7.183 The Panel recalls its findings in paragraphs 7. 31 and 7.72-7.76 above that the likelihood-of-
injury determination is not part of the measure ta ken to comply and that therefore the claim on the
failure to re-determine the likelihood of continuation or recurrence of injury is not part of this Panel's
mandate. Thus, the Panel will not address the Eur opean Communities' injury claim in these Article
21.5 proceedings.
7.184 In light of the European Communities' claims and parties' debates on these claims during the
Panel proceeding, the Panel will proceed to examin e each one of the two claims in the following
sections for the purpose of reaching conclusion s on the consistency of the UK Section 129
determination with the recommendati ons and rulings of the DSB and the relevant provisions of the
covered agreements as invoked by the European Communities in its Panel request.
4. Whether the USDOC's failure to examine the pr ivatization of BS plc and to determine
whether the privatization occurred at arm's length and for FMV is inconsistent with
Articles 10, 14, 19.4, 21.1 and 21.3 of the SCM Agreement and Article VI:3 of the GATT
1994
(a) Arguments of the parties
7.185 The European Communities argues that the USDO C refused to consider in the UK Section
129 determination whether, under the modified privatization methodology, BS plc had been privatized
in a manner that extinguished the benefits confe rred by the non-recurring subsidies bestowed to the
state-owned producer prior to its privatization.452
7.186 The European Communities submits that there was evidence in the record demonstrating that
the privatization of the BS plc was conducted at arm's length and for FMV. Article 21.3 of the SCM

Agreement obliges authorities to evaluate all evidence on the record in determining whether subsidies
are likely to continue or recur, not merely to assume that the likelihood of continuation or recurrence
exists. By refusing to consider evidence of priv atization which demonstrated that the benefit no
longer existed, the United States acted inconsistently with Article 21.3 of the SCM Agreement.
453
7.187 The European Communities also argues that Articles 10, 14, 19.4, 21.1 and 21.3 of the SCM
Agreement as well as Article VI:3 of the GATT 1994 require that an investigating authority examine,
in a sunset review, whether a benefit continues to exist after privatiza tion before imposing or
maintaining a duty. By refusing to examine the priv atization, the United States acted inconsistently
with its obligations under these provisions.454
7.188 In this regard, the European Communities cit es the original panel report conclusion, in
paragraph 8.1(c), which was upheld by the Appella te Body Report in paragraph 153, that in the
original sunset review determinations, the USDOC "did not examine whether the privatizations, that
occurred after the original imposition of countervailing duties, were at arm's length and for fair market
value. Thus the United States failed to determin e whether the privatized producers received any
benefit from the financial contributions previously bestowed to the state-owned producers. By failing
to determine the likelihood of continuation or recurre nce of a subsidization, prior to its decision to
maintain countervailing duties, the United States has violated Articles 14, 19.4, 21.1 and 21.3 of the
SCM Agreement".
455 The European Communities also points out the original Panel's finding,
confirmed by the Appellate Body, that because the United States had maintained countervailing duties
that were inconsistent with these provisions, th e United States also violated Article 10 of the SCM
Agreement which requires that countervailing duties must be imposed or maintained consistently with
the SCM Agreement.456
7.189 The European Communities also argues that by refusing to examine the privatization, the
Section 129 determination is not in compliance w ith the conclusion of the Appellate Body in
paragraph 161 (a) that the United States acted inconsistently with its obligations under Articles 10, 14,
19.4, 21.1 and 21.3 of the SCM Agreement by "imposing and mainta ining countervailing duties
without determining whether a 'benefit' continue to exist".457
7.190 The United States argues that the USDOC assumed for purpose of its likelihood
determination that the privatization of BS plc was conducted at arm's length and for FMV and entirely
extinguished all benefits from pre-privatization, non-recurring subsidies in question. Therefore, the
USDOC did not rely on any benefit from allocable, pre-privatization subsidies in determining whether
subsidization was likely to continue or recur if the order were revoked.458
7.191 Rather, the United States argues that the UK Section 129 determination was based on
evidence wholly unrelated to the (allocable, non-recu rring) pre-privatization subsidies. One private
company Glynwed continued to benefit from all subsidies that had been bestowed upon it.459
7.192 The United States points out that despite the f act that the USDOC did not rely on the non-
recurring pre-privatization subsidies to the stat e-owned companies in determining whether the
privatized company would continue to benefit fro m subsidies if the countervailing duty order were

453 EC First written submission, paras. 47-50; EC Second written submission, paras. 7, 53, 57, 61.
455 Panel Report on US – Countervailing Measures on Certain EC Products , para. 8.1(c); Appellate
Body Report on US – Countervailing Measures on Certain EC Products, para. 153.
456 EC First written submission, paras. 66-67.
457 EC First written submission, para. 70 ( quoting Appellate Body Report on US – Countervailing
Measures on Certain EC Products, para. 161(a)).
458 US First written submission, paras. 4, 48; US Second written submission, para. 11.

revoked, the European Communities nevertheless challenges the UK Section 129 determination on the
ground that the USDOC failed to examine whether the privatization was at arm's length and for FMV.
In the view of the United States, the Eur opean Communities' argument elevates form over
substance.
460
7.193 The US argues that because the USDOC assumed that the privatization of the BS plc was at
arm's length and for FMV, and that thus it did not rely on pre-privatization subsidies in making the
determination, the revised determination can not be inconsistent with th e DSB recommendations and
rulings.461
7.194 The United States argues that the original sunset review in the UK case expressly stated that
Glynwed continued to be subsidized, and that the European Communities did not challenge that
aspect of the original sunset review determination in the original proceedings. Therefore, neither the
original panel nor the Appellate Body considered the issue in the underlying proceedings. Because
the European Communities did not challenge that co nclusion in the original proceedings, the United
States maintains that it cannot ask this Panel to exam ine this aspect of the orig inal sunset review for
the first time in these Article 21.5 proceedings.462
7.195 The USDOC explained in its UK Section 129 determination that as the sunset review
determination was made on an order-wide rath er than company-speci fic basis, examining
privatization was not necessary for the USDOC to arrive at an affirmative sunset likelihood
determination with respect to the order as a whole.463
(b) Evaluation by the Panel
7.196 The European Communities argues that the USDOC refused to ex amine the privatization of
BS plc and to determine whether the privatization was at arm's length and for FMV and consequently
extinguished the benefit of pre-privatization subsidies. It claims that the failure to examine and to
determine these issues is inconsistent with Articles 10, 14, 19.4, 21.1 and 21.3 of the SCM Agreement
and Article VI:3 of the GATT 1994 . In response, the United St ates contends that the USDOC
assumed that the privatization of BS plc was at arm's length and for FMV. However, the United
States argues, the affirmative likelihood-of-subs idization determination in the UK Section 129
determination was made on anothe r basis, namely, that another private firm, Glynwed, was still
benefiting from non-recurring subsidy programmes. Th erefore, in its view, the determination cannot
be inconsistent with the recommendations and rulings of the DSB.
7.197 With these arguments in mind, the Panel considers that it is appropriate to first have recourse
to the relevant findings of the original panel and the Appellate Body to identify the specific
requirements imposed by the SCM Agreement on the investigating authorities regarding the
privatization analysis during a sunset review. Based on these requirements, the Panel will then
determine whether these requirements were actually met in the UK Section 129 determination.
(i) The United States' obligations pursuant to the fi ndings in the original proceedings regarding
the USDOC's privatization analysis
7.198 The Appellate Body found in the original pro ceedings that where an investigating authority
receives information regarding a privatization in the process of an administrative or sunset review,

462 US Oral statement, paras. 18, 22.
463 UK Section 129 Determination, footnote 208 above, p. 5.

the investigating authority is under an obligation to make a finding on whether a subsidy benefit
continues to exist:
"We have already determined, in US – Lead and Bismuth II , that the gamma method
is inconsistent with the oblig ation under Article 21.2 of the SCM Agreement . That
obligation requires an investigating authority in an administrative review, upon
receiving information of a privatization resulting in a change in ownership, to
determine whether a 'benefit' continues to exist. In our view, the SCM Agreement, by
virtue of Articles 10, 19.4, and 21.1, al so imposes an obligation to conduct such a
determination on an investigating authority conducting a sunset review."
464
It is clear from this finding that such an obligation is imposed by Articles 10, 19.4 and 21.1 of the
SCM Agreement in the case of a sunset review.

7.199 More specifically, the Appellate Body also upheld the Panel's finding that, when informed of
a privatization, the authority is required, by Articles 10,19.4, and 21.1 of the SCM Agreement as well
as Article VI:3 of the GATT 1994, to examine the conditions of privatization and to determine whether
the privatised producer continues to benefit from non-recurring pre-privatization subsidies before
deciding to countervail those subsidies:
"As we observed earlier, the interplay of GATT Article VI:3 and Articles 10, 19.4,
and 21.1 of the SCM Agreement prescribes an obligation applicable to original
investigations as well as to reviews covered under Article 21 of the SCM Agreement
to limit countervailing duties to the amount and duration of the subsidy found to exist
by the investigating au thority. Consequently, we see no error in the Panel's finding
that, in sunset reviews, the investigating authority, before deciding to continue to
countervail pre-privatization, non-recurring s ubsidies, is obliged to 'examine the
conditions of such privatiza tions and to determine wheth er the privatized producers
received any benefit from the prior subsidiz ation to the state-owned producers'.
Therefore, we agree with the Panel that th e 'four determinations made in the context
of sunset reviews and based on the gamma methodology are inconsistent with the
SCM Agreement [because] the United St ates failed to determine whether the
privatized producers received any benefit fro m the financial contributions previously
bestowed to the state-owned producers."
465
In fact, here the Appellate Body upheld the original panel's conclu sion that the inconsistency of the
four sunset review determinations, wh ich were based on the gamma methodology 466, with relevant

464 Appellate Body Report on US – Countervailing Measures on Certain EC Products , para. 149
(emphasis added).
465 Appellate Body Report on US – Countervailing Measures on Certain EC Products , para. 149
(emphasis added).
466 As indicated in paragraph 7.198 above, the Appellate Body already upheld a panel finding that the
gamma methodology was inconsistent with the SCM Agreement in US – Lead and Bismuth II . Appellate Body
Report on US – Lead and Bismuth II , paras. 62, 75(b). The gamma methodology was also one of the measures
at issue during the original proceedings. In the original proceedings, the Appellate Body explained:

"The gamma method was formerly used by the USDOC to determine the extent to which a
non-recurring financial contribution provided to a state-owned enterprise should be amortized
over time to arrive at a countervailable subsidy rate, particularly after sale of the subsidized
entity to a private firm. In applying this method, the USDOC employed an 'irrebuttable
presumption' that the benefits of the financial contribution would remain with the recipient
over a standard period of time, such that 'USDOC does not undertake an inquiry into whether
and, if so, to what extent the subsidy continues to benefit production at any subsequent point

provisions of the SCM Agreement was exactly because of the absence of a determination on whether
the privatized producer received any benefit from th e pre-privatization subsidies given to the state-
owned enterprises.

7.200 On the issue of how the examination of conditio ns of privatization bears on the determination
of whether a "benefit" continues to exist for the privatized producer, the Appellate Body found that an
arm's-length and FMV privatization establishes a rebuttable presumption that benefits from pre-
privatization subsidies bestowed to the state-owned company cease to exist for the privatized
producer:
"The effect of such a privatization is to sh ift to the investigating authority the burden
of identifying evidence which establishes that the benefit from the previous financial
contribution does indeed continue beyond privatization. In the absence of such proof,
the fact of the arm's-length, fair market valu e privatization is sufficient to compel a
conclusion that the 'benefit' no longer exists for the privatized firm, and, therefore,
that countervailing duties should not be levied. This is an accurate characterization
of a Member's obligations under the SCM Agreement."
467
7.201 The original panel made the following conclusi on with regard to the four sunset review
measures (including the sunset reviews regarding UK, Spain and France):
"The four determinations made in the c ontext of sunset reviews and based on the
gamma methodology are inconsistent with the SCM Agreement, since the US
Department of Commerce did not examine whether the privatizations , that occurred
after the original imposition of countervailing duties, were at arm's-length and for
fair market value . Thus the United States failed to determine whether the privatized
producers received any benefit from the financial contribut ions previously bestowed
to the state-owned producers. By failing to determine the likelihood of continuation
or recurrence of a subsidization, prior to its decision to maintain countervailing
duties, the United States has violated Articles 14, 19.4, 21.1 and 21.3 of the SCM
Agreement, which prohibit a Member, pursuant to a sunset review, from maintaining
countervailing duties where there has not b een any determination of likelihood of
continuation or recurrence of subsidiza tion and thus of a continued need for
countervailing duties. Since the United St ates has maintained countervailing duties
that are inconsistent with Articles 14, 19. 4, 21.1 and 21.3 the United States has also
violated Article 10 which requires that countervailing duties be imposed or
maintained consistently with the SCM Agreement.
Therefore, the countervailing duty orders in
– Cut-to-Length Carbon Steel Plate from United Kingdom (C-412-815)
(Case No. 8);
– Certain Corrosion-Resistant Carbon Steel Flat Products from France
(C-427-810) (Case No. 9);

of time. Rather the USDOC simply will countervail the amount of the subsidy originally
allocated to the year' under review."

Appellate Body Report on US – Countervailing Measures on Certain EC Products, para. 12.
467 Appellate Body Report on US – Countervailing Measures on Certain EC Products , para. 126
(emphasis added).

– Cut-to-Length Carbon Steel Plate from Germany (C-428-817) (Case No. 10);
and
– Cut-to-Length Carbon Steel Plate from Spain (C-469-804) (Case No. 11).
are inconsistent with Articles 10, 14, 19.4, 21.1 and 21.3 of the SCM Agreement."
468
7.202 This conclusion of the original panel on the four sunset review measures was upheld by the
Appellate Body in its conclusion stating that it:
"upholds the Panel's findings, in paragraphs 8. 1 (a), (b) and (c) of the Panel Report,
that the United States has acted inconsiste ntly with Articles 10, 14, 19.1, 19.4, 21.1,
21.2 and 21.3 of the SCM Agreement, by imposing and maintaining countervailing
duties without determining whether a 'benefit' continues to exist in the following
countervailing duty determinations..."469
7.203 From these findings of the Appellate Body and the original panel, it is clear that in a sunset
review process involving privatization informatio n, the investigating authority is obliged under
Articles 10, 14, 19.4, 21.1 and 21.3 of the SCM Agreement to examine whether the privatization was
at arm's length and for FMV in order to dete rmine whether the benefit from the non-recurring
subsidies bestowed upon a pre-privatized company c ontinues to exist for the privatized producer and
to maintain the countervailing duties after making an affirmative likelihood of continuation or
recurrence of subsidization determination.
(ii) The Panel's assessment of the USDOC's analysis in the UK Section 129 determination
7.204 With these findings of the original panel and th e Appellate Body in mind, the Panel will now
examine the UK Section 129 determination to determ ine whether these obligations were met in the
USDOC's privatization analysis. Under the head ing "Privatization of British Steel plc", the UK
Section 129 determination begins with a general description of the privatization process:
"In December 1987, 470 the UK Secretary of State for Trade and Industry announced
that the GOUK 471 intended to privatize the British Steel Corporation (“BSC”). In
order to comply with corporate laws in the United Kingdom, BSC was reorganized as
British Steel plc (“BS plc”). In Novemb er 1988, the GOUK sold two billion shares,
at 125p per share, of BS plc to UK citizens and UK institutions. The GOUK also sold
shares on equity markets in th e United States, Canada, Japan, and Europe at the same
price. The GOUK retained one special shar e which gave it the authority to prohibit
any person or persons acting in concert fro m acquiring more than 15 per cent of the
shares. Employees of BS plc received a nominal amount of free shares and

468 Panel Report on US – Countervailing Measures on Certain EC Products , para. 8.1(c) (emphasis
added).
469 Appellate Body Report on US – Countervailing Measures on Certain EC Products , para. 161
(emphasis added).
470 ( footnote original ) All factual statements contained in this section regarding the privatization of
British Steel plc ("BS plc") were derived from National Audit Report, Report by the Comptroller and Auditor
General entitled "Department of Trade and Industry: Sale of Government Shareholding in British Steel plc,"
February 8, 1990 (submitted July 28, 2003 as Exhibit 12 of the Response of the United Kingdom and Corus
Group plc to the Department's Questionnaire of July 2, 2003 in Cut-to-Length Carbon Steel Plate from the
United Kingdom).
471 GOUK stands for Government of the United Kingdom.

preferential treatment in obtaining shares. Pensioners of the company also received
preferential treatment in obtaining shares."472
7.205 Then, the UK Section 129 determination goes on to explain the main elements of the new
privatization methodology in the Modification Notice. Following this, the UK Section 129
determination does not apply the new methodology to the privatization of the BS plc. Rather, the
following statement is made:
"However, even assuming arguendo, that, pursuant to an analysis under section
129(b)(2) of the URAA, the [USDOC] were to find that the privatization of BS plc
met all the criteria for rebutting the baselin e presumption set forth in the [USDOC's]
Modification Notice
, such a finding would not affect the results in the instant
determination that there would be a like lihood of continuation or recurrence of a
countervailable subsidy if the order were revoked."473
7.206 The UK Section 129 determination then refers to the legislative history of the URAA and the
USDOC's Sunset Policy Bulletin of 1998 to clarify that pursuant to Section III.A.2 of the Sunset
Policy Bulletin, the determination of likelihood would be made on an "order-wide" basis. It then
addresses the subsidies to Glynwed and concludes:
"During the underlying CVD investigation, the [USDOC] investigated another UK
producer of subject merchandise, Glynwed , and determined a subsidy rate for
Glynwed that was above de minimis . In the Final Sunset Results , the [USDOC]
determined that countervailable subsidies w ould likely continue or recur in the event
of revocation. ... Even if we were to determine, pursuant to an analysis under the
privatization methodology set forth in the Modification Notice , that subsidies
received by BS plc prior to the sale of shares would not continue through or after the
POR of the sunset review , we would still make an affirmative likelihood
determination based on the determination in the Final Sunset Results that programs
previously determined to provide countervailable subsidies and/or benefit streams
from such programs continue to benefit Glynwed , the other producer/exporter of the
subject merchandise, for whom privatization is not an issue."474
7.207 In sum, the USDOC made an affirmative likelihood of continuation or recurrence of
subsidization determination based on the reason th at the subsidy programmes continued to benefit
another company, Glynwed. The US argues that the revised sunset review was based on an
"assumption" that the BS plc privatization was conducted at arm's length and for FMV and that the
benefit from the pre-privatization subsidies were entir ely extinguished for the privatized firm BS plc.
The phrases used in the UK Section 129 determination include "even assuming arguendo...", and
"even if we were to determine...".
7.208 In fact, the last paragraph of the UK Sec tion 129 determination states that the arm's
length/FMV issue on the privatization of British Steel plc was not addressed in this determination:
"The [USDOC] has received allegations that the privatization here was affected by
'market distortions' such that any arm's length/fair market value findings would not
warrant a determination that countervaila ble subsidies were extinguished by the
privatization. We do not need to a ddress the market distortion allegations, because

472 UK Section 129 determination, footnote 208 above, p. 3.
473 UK Section 129 determination, footnote 208 above, p. 3.
474 UK Section 129 determination, footnote 208 above, pp. 3-4 (emphasis added).

we have not–for the reasons explained abo ve–addressed the arm's length/fair market
value issue."
475
7.209 In this regard, the Panel recalls the findings of the original panel which were upheld by the
Appellate Body stating that the original sunset review regarding UK was in consistent with Articles
10, 14, 19,4, 21.1 and 21.3 of the SCM Agreement because the USDOC " did not examine whether the
privatizations, that occurred after the original imposition of countervailing duties, were at arm's-
length and for fair market value therefore the United States " failed to determine whether the
privatized producers received any benefit from the financial contributions previously bestowed to the
state-owned producers and which resulted in the failure to make an affirmative likelihood of
subsidization determination prior to the decision to maintain the countervailing duties."476
7.210 The Panel considers that the issue here is whether an assumption, if indeed such an
assumption was made, meets the obligation set out by the original panel and the Appellate Body for a
sunset review determination involvi ng privatization, which is, "to ex amine the privatization" and to
"determine whether the privatized producer, the BS plc, received any benefit" from the non-recurring
subsidies bestowed to the state-owned producer.
7.211 The Panel notes in this regard, that the Appe llate Body interpreted the words "review" and
"determine" in the context of an anti-dumping sunset review as requiring that the authority must act
with an appropriate degree of diligence and ar rive at a reasoned conclusion on the basis of
information gathered as part of the process of reconsideration and examination:
"This language in Article 11.3 makes clear that it envisages a process combining both
investigatory and adjudicatory aspects. ... Article 11.3 assigns an active rather than a
passive decision-making role to the authorities. The words 'review' and 'determine' in
Article 11.3 suggest that authorities conductin g a sunset review must act with an
appropriate degree of diligence and arrive at a reasoned conclusion on the basis of
information gathered as part of the process of reconsideration and examination."477
7.212 The Appellate Body also stated that the ordi nary meaning of the word "determine" includes
"[c]onclude from reasoning or i nvestigation, deduce" as well as "[s]ettle or decide (a dispute,
controversy, etc., or a sentence, conclusion, issue, etc.) as a judge or arbiter".478
7.213 Considering the similarity of the text of Article 11.3, the anti-dumping sunset review
provision, and that of Article 21.3, the counterva iling duty sunset review provision, as well as the
similarity in their functions in the Anti-Dumping Agreement and the SCM Agreement, respectively, the
Panel considers that the same meaning of the word "determine" in Article 11.3 of the Anti-dumping
Agreement also applies to the wo rd "determine" under Article 21.3 in the context of countervailing
duty sunset review. Therefore, the authorities cond ucting a countervailing duty sunset review must
act with an appropriate degree of diligence and arrive at a reasoned conclusion.
7.214 Turning back to the UK Section 129 determination, the USDOC stated that "we have not – for
the reasons explained above – addressed the arm's le ngth/fair market value issue". Therefore, it is
clear that there was no "examination" on " whether the privatization was at arm's length and for fair
market value ". Nor was there a "determination" on whether the privatized producers received any
benefit from the financial contributions previously bestowed to the state-owned producers " because
there was no analysis in the UK Section 129 determination to that effect.

475 UK Section 129 determination, footnote 208 above, p. 4 (emphasis added).
476 See pararaph 7.27 above.
477 Appellate Body Report on US – Corrosion-Resistant Steel Sunset Review, para. 111.
478 Appellate Body Report on US – Corrosion-Resistant Steel Sunset Review, para. 110.

7.215 The Panel considers that there is a difference between "assumption" and "determination" in
that a determination is required to be based on sufficient evidence and adequate reasoning 479 whereas
an "assumption" needs not to be supported by evidence or reasoning. 480 In this regard, what Article
21.3 explicitly requires is a "determination", an obligation more burdensome for the investigating
authority than that of an "assumption".
7.216 In practice, the legal certainty of an assumption would also be different from that of a
determination to the interested parties. The Un ited States argues that the USDOC "assumed" that the
privatization was at arm's length and for FMV and that the privatization therefore extinguished the
benefit from the non-recurring subsidies bestowed on the state-owned enterprise. However, for
example, if BS plc were to request an assessment re view in the future, it is not clear whether such an
assumption would be treated as a determination that the privatization was conducted at arm's length
and for FMV and that the subsidy benefit was extinguished for BS plc.481
(iii) Conclusion
7.217 For the reasons set out above, the Panel finds th at the United States failed to examine and to
determine whether the privatization was at arm's length and for FMV and whether the benefit from the
non-recurring subsidies bestowed to the state-owned producer extinguished for the privatized BS plc.
By failing to properly determine the likelihood of con tinuation or recurrence of subsidization prior to
its decision to maintain countervailing duties, the Un ited States acted inconsistently with obligations
under Articles 10, 14, 19.4, 21.1 and 21.3 of the SCM Agreement and Article VI:3 of the GATT 1994
and therefore failed to implement the recommendations and rulings of the DSB.
5. Whether the USDOC's treatm ent of evidence on the record during the Section 129
proceedings is inconsistent with Article 21.3 of the SCM Agreement
(a) Arguments of the parties
7.218 The European Communities argues that during the UK Section 129 proceedings, the USDOC
refused to consider evidence in the Corus/GOUK Section 129 Comments which demonstrated that the
subsidies would not continue or recur with respect to Glynwed. Those Comments showed that (i)
Glynwed no longer produced the product subject to review because that component of its business had
been sold to another private company, Niagara La Salle Corp., in 1999; (ii) there is no evidence that
Glynwed had been benefiting from subsidies even at the time of the original countervailing duty
investigation in 1993; and (iii) most importantly, all of the subsidy programmes that were not specific
to BS plc (i.e., that could have been applied to Glynwed) either no longer existed or were no longer
available to the UK steel industry.482
7.219 In particular, the European Communities argues that Corus and GOUK submitted evidence in
the Section 129 proceeding indicating that all of the subsidy programmes not specific to BS plc, on
which the USDOC might have relied in calculating th e original countervailing duty for Glynwed, had
been abolished or were no longer available to the UK steel industry. Specifically, they explained in

479 See paragraphs 7.211 -7.213 above.
480 The ordinary meaning of "assumption" is, inter alia, "[t]he action or an act of taking of something
for granted; the taking of something as being true, for the sake of argument or action; something so assumed; a
supposition". The New Shorter Oxford English Dictionary , The New Shorter Oxford English Dictionary
(Oxford University Press, 1993), 4th ed.,, Vol. I, p 134.
481 In this regard, the US clarified in its replies to Panel questions that imports from BS plc were still
treated as subsidized imports and countervailing duties we re levied against BS plc even after the UK Section
129 determination. To change that, the privatized firm, BS plc, would have to request an assessment review.
See US Replies to Panel questions Nos. 41-42.
482 EC First written submission, paras. 17, 51-53.

their Comments the non-availability of four subsid ies programs to Glynwed, namely, the UK regional
development grant under the Industry Act of 1972 a nd the Industry Development Act of 1982, the
European Regional Development Fund, the ECSC Ar ticle 54 loans and interest rebates, and the
preferential transportation rates provided by the government-owned British Rail.
483
7.220 The European Communities also indicates in its reply to a Panel question that it also
submitted evidence during the Section 129 proceedings on the privatization of BS plc to support its
claim that the privatization extinguished the prior non-recurring privatization benefit.484
7.221 The European Communities cites the panel in US – Carbon Steel, where the panel stated that
the authority's determination under Article 21.3 "shoul d rest on the evaluation of the evidence that it
has gathered during the original investigation, the intervening reviews and finally the sunset
review"485 and that "[t]heir 'duties of investigati on and evaluation preclude them from remaining
passive in the face of possible shortcomings in the evidence submitted.' They 'must undertake
additional steps, when the circumstances so require, in order to fulfil their obligation to evaluate all
relevant factors.'"486 Therefore, in the European Communiti es' view, Article 21.3 requires more than
merely assuming that the likelihood of subsidization exists; rather, the conclusion to that effect must
be based on the information gathered in the process. 487 The European Communities also cited the
Appellate Body's statements on standard of review for anti-dumping sunset re view determinations in
US – Corrosion- Resistant Steel Sunset Review and US – Oil Country Tubular Goods Sunset Reviews
to argue that an investigating authority conduc ting a sunset review must "arrive at a reasoned
conclusion" on the basis of "positive evidence".488
7.222 The European Communities argues that the USDOC did not consider all of the evidence on
the record, and that by refusing to consider evidence indicating that privatization of BS plc was at
arm's length and for FMV and evidence demonstrati ng that subsidies no longer exist or were no
longer available, it failed to meet the obligation un der Article 21.3 that authorities evaluate all the
evidence on the record in making a li kelihood-of-subsidization determination. 489 In particular, the
European Communities argues th at the USDOC failed to consider evidence on the record
demonstrating that subsidy programs found to confer benefits no longer exis ted or no longer applied
to the UK steel industry and that Glynwed had sold off the relevant assets and no longer produced the
subject merchandise.490
7.223 The United States argues that as the USDOC assu med that the pertinent privatization had
extinguished all allocable pre-privatization subs idies, the affirmative likelihood-of-subsidization
determination in the UK Section 129 determination was based on ev idence wholly unrelated to pre-
privatization subsidies. It points out that the company Glynwed continued to benefit from all
subsidies that had been bestowed on it.491
7.224 The United States argues that neither the Appella te Body nor the original panel made any
findings concerning these subsidy programs, which di d not involve the privatization methodology.

483 EC First written submission, paras. 53-57.
484 EC Response to Panel question No. 42.
485 EC First written submission, para. 47 (quoting Panel Report on US – Carbon Steel, para 8.95).
486 EC First written submission, para. 48 (quoting Panel Report on US – Carbon Steel , para 8.117)
(footnotes omitted); see also Appellate Body Report on US – Cotton Yarn, para. 73.
488 EC Second written submission, para. 55 (citing Appellate Body Report on US – Corrosion-Resistant
Steel Sunset Review , para. 114 ( quoting Panel Report on US – Corrosion-Resistant Steel Sunset Review , para.
7.271) and Appellate Body Report on US – Oil Country Tubular Goods Sunset Reviews, para. 234).
489 EC First written submission, paras. 47, 50, 58; EC Second written submission, paras. 53, 56-57.

The USDOC findings concerning Glynwed in the UK case were unchanged in the UK Section 129
determination from the original sunset determination . Because the recommendations and rulings of
the DSB did not require them to be changed, th e European Communities ca nnot use the Article 21.5
process to challenge them.492
7.225 In the UK Section 129 determination, the USDOC explained the refusal to consider the issue
regarding Glynwed with its understanding that the duty of the authority in a Section 129
determination is not to re-conduct the original su nset review in its totality, but to render it not
inconsistent with the findings of the Appellate Body. The USDOC has done this and based on the
conclusion regarding Glynwed in the original sunset review, the likelihood-of-subsidization
determination in the UK Section 129 determination was proper. In the view of the USDOC, it did not
need to reopen issues that were resolved in the original sunset review and were not found to be
inconsistent with the SCM Agreement.493
7.226 In particular, the United States argues that the European Communities' arguments regarding
Glynwed are not properly before th is Article 21.5 Panel because these arguments have nothing to do
with privatization. The United States submits th at the USDOC had decided in the original sunset
review that Glynwed continued to receive count ervailable subsidies and the USDOC relied on that
conclusion in its revised determination. The fact that the European Communities did not challenge
the conclusion regarding Glynwed in the original panel proceedings prevents this Panel from
examining the Glynwed issue for the first time as a part of these Article 21.5 proceedings.494
7.227 The European Communities argues that as the Appellate Body stated in Canada – Aircraft
(Article 21.5 – Brazil) that an Article 21.5 panel's mandate is to examine whether the new measure is
in conformity with the WTO agreement cited by the complaining Member in its panel request. It is
therefore not sufficient for a Member merely to eliminate one erroneous aspect of the measure, if
doing so exposes additional failures to comply with the SCM Agreement, nor may the Member refuse
to bring those additional failures into compliance on the ground that they were not considered in
previous stages of the WTO proceedings.495
7.228 The European Communities also argues that it was impossible for the European Communities
to raise issues regarding the expiry of the subsidy programs in the original panel proceedings as this
issue only arose in the UK Section 129 determinat ion when the USDOC relie d on the application of
these subsidy programmes to a specific firm as the basis of its likelihood-of-subsidization
determination. Whereas the legal basis for the orig inal affirmative sunset review determination was
the assumption that there would be a likelihood of co ntinuation or recurrence of subsidisation because
of the non-cooperation of the producers concerned.496
7.229 The European Communities contends that its arguments regarding the non-existence of
certain subsidies and those regarding the necessity of fresh likelihood-of-injury findings made during
the current proceedings are warranted since they are different from the situation in the EC – Bed Linen
(Article 21.5 – India) case, where the complaining party raised, in the Article 21.5 proceedings, a
claim that had already been dismissed by the original panel in that dispute.497

493 UK Section 129 determination, footnote 208 above, p. 7.
494 US Oral Statement, paras. 15, 18-20.
495 EC First written submission, para. 62 ( citing Appellate Body Report on Canada – Aircraft
(Article 21.5 – Brazil), para. 37).
497 EC Oral statement, paras. 12-13.

(b) Evaluation by the Panel
7.230 The Panel recalls that we found in paragraphs 7.18 and 7.71 above, that the measure taken to
comply with the recommendations and rulings of the DSB is the affirmative likelihood-of-
subsidization re-determination set out in the UK Section 129 determination and that the European
Communities 's new claim regarding the treatment of evidence by the USDOC during the Section 129
proceeding is within the mandate of this Panel.
7.231 Given that the European Communities' evidence claim is made under Article 21.3 of the SCM
Agreement, the Panel considers it suitable to first iden tify the obligations under Article 21.3 of the
SCM Agreement regarding the treatment of evidence by the investigating authority during the sunset
review process. After that, the Panel will assess whether the treatment of evidence by the USDOC in
the UK Section 129 determination is consistent with such an obligation.
(i) The United States' obligations under Artic le 21.3 of the SCM Agreement regarding the
USDOC's treatment of evidence
7.232 The Panel notes that in US – Corrosion-Resistant Steel Sunset Review, the Appellate Body
elaborated on the specific requirements of Article 11.3 of the Anti-Dumping Agreement, a provision
that is almost identical to Article 21.3 of the SCM Agreement . The requirements imposed on the
investigating authority in the process of conducting a sunset review are as follows:
"This language in Article 11.3 makes clear that it envisages a process combining
 both investigatory and adjudicatory aspects. In other words, Article 11.3 assigns an
active rather than a passive decision-ma king role to the authorities. The words
"review" and "determine" in Article 11.3 suggest that authorities conducting a sunset
review must act with an appropriate degree of diligence and arrive at a reasoned
conclusion on the basis of information gathered as part of a process of
reconsideration and examination. In view of the use of the word "likely" in
Article 11.3, an affirmative likelihood determination may be made only if the
evidence demonstrates that dumping would be probable if the duty were terminated –
and not simply if the evidence suggests th at such a result might be possible or
plausible."
498
7.233 The Appellate Body in US – Corrosion-Resistant Steel Sunset Review also upheld the panel's
findings on the duty of an investigating authority:
"The text of Article 11.3 contains an obligation "to determine" likelihood of
continuation or recurrence of dumping and in jury. The text of Article 11.3 does not,
however, provide explicit guidance regarding the meaning of the term "determine".
The ordinary meaning of the word "determine" is to "find out or establish precisely"
or to "decide or settle". The requirement to make a "determination" concerning
likelihood therefore precludes an investigating aut hority from simply assuming that
likelihood exists. In order to continue the imposition of the measure after the expiry
of the five-year application period, it is clear that the investigating authority has to
determine, on the basis of positive evidence , that termination of the duty is likely to
lead to continuation or recurrence of dumping and injury. An investigating authority
must have a sufficient factual basis to allow it to draw reasoned and adequate

498 Appellate Body Report on US – Corrosion-Resistant Steel Sunset Review , para. 111 (emphasis
added).

conclusions concerning the likelihood of such continuation or recurrence. (footnotes
omitted)."499
7.234 The Panel considers that the same requirement s given to the term "determine" under Article
11.3 of the Anti-Dumping Agreement are also applicable to the same term in a countervailing duty
sunset review process by virtue of Article 21.3 of the SCM Agreement, given the fact that the texts of
these two provisions are almost identical and so are the functions of these two provisions. The
obligation of an investigating authority in conducti ng a countervailing duty sunset review is therefore
to make a likelihood-of-subsidization determina tion based on positive evidence, not on assumption,
and to arrive at a reasoned and adequate conclusion with the support of sufficient factual basis.
7.235 The Panel also notes that the panel in US – Carbon Steel reached the same conclusion
regarding the evidentiary requirements under Article 21.3 of the SCM Agreement, that:
"[A] determination of likeli hood under Article 21.3 must rest on a sufficient factual
basis.
An investigating authority's determinati on of the likelihood of continuation or
recurrence of subsidization should rest on the evaluation of the evidence that it has
gathered during the original investigation, the intervening reviews and finally the
sunset review."500
7.236 The original panel in this dispute also stated that the investigating authority is obliged to
consider all evidence provided by any interested party in a sunset review:
"[I]n a sunset review investigation the im porting Member is obliged to examine at
least all the evidence provided by any inte rested party, not just the importing
producer, and relating to the existence or removal of the subsidization forming the
basis for the countervailing measures; only then can the investigating Member be able
to conclude whether subsidization exists and is likely to continue or recur."501
7.237 From the review of the findings of the Appellate Body and the panels in relevant previous
cases, it is clear that under Article 21.3 of the SCM Agreement , the investigating authority has an
obligation in sunset review proceedings to cons ider all evidence placed on its record to make a
likelihood of subsidization and likelihood of injury determination. The Panel considers that the same
obligation also applies to the Section 129 proceedings regarding the UK in the present dispute since it
was designed to make revised sunset review determinations.
7.238 The Panel therefore concludes that an investigating authority has the obligation to consider all
evidence placed on the record in making a likelihoo d of continuation or recurrence of subsidization
re-determination. Without so do ing, the investigating authority could not ensure that the new
measure, that is, the likelihood-of-subsidizati on re-determination set out in the Section 129
determination, is based on a sufficient factual re cord and therefore satisfies the requirements of
Article 21.3 of the SCM Agreement.

499 Appellate Body Report on US – Corrosion-Resistant Steel Sunset Review, para. 114 ( citing Panel
Report on US – Corrosion-Resistant Steel Sunset Review, para. 7.271) (emphasis added).
500 Panel Report on US – Carbon Steel, paras. 8.94-8.95.
501 Panel Report on US – Countervailing Measures on Certain EC Products, para. 7.114.

(ii) The Panel's assessment of the USDOC's trea tment of evidence in the UK Section 129
determination
7.239 The Panel notes that the affirmative likelihood of subsidization re-determination in the UK
Section 129 determination was solely based on subsidies provided to Glynwed:
"Even if we were to determine, pursuant to an analysis under the privatization
methodology set forth in the Modification Notice
, that subsidies received by BS plc
prior to the sale of shares would not conti nue through or after the POR of the sunset
review, we would still make an affirma tive likelihood determination based on the
determination in the Final Sunset Results that programs previously determined to
provide countervailable subsidies and/or benefit streams from such programs
continue to benefit Glynwed , the other producer/exporter of the subject merchandise,
for whom privatization is not an issue."502
7.240 With regard to Glynwed, the Corus group and the GOUK presented comments and evidence
to the USDOC during the Section 129 proceedings to support their argument that Glynwed no longer
benefited from any subsidy programmes because the se programmes either no longer existed or were
no longer available to the UK steel industry. In pa rticular, they alleged the non-availability of four
subsidy programmes to Glynwed, namely, the UK regional development grants under the Industry Act
of 1972 and the Industry Development Act of 1982, the European Regional Development Fund, the
ECSC Article 54 loans and interest rebates, as well as the preferential transportation rates provided by
the government-owned British Rail.
503
7.241 The USDOC did not consider the evidence produced by Corus and the GOUK during the
Section 129 proceedings. The Section 129 determination explained the reason for this refusal:
"The [USDOC's] duty, ... is not to re-conduct th e original sunset review in its totality,
but to render it not inconsistent with th e findings of the Appellate Body. The
[USDOC] has done this by determining that , based on the conclusions in the sunset
review regarding Glynwed, the [USDOC 's] sunset likelihood determination was
proper.
The [USDOC] is not reopening issues in this determination that were resolved in the
sunset review and were not found by the A ppellate Body to be inconsistent with the
SCM Agreement."504
7.242 The United States also argued during these proceedings that the USDOC had decided in the
original sunset review that Glynwed continued to receive countervailable subsidies and that the
USDOC had merely relied on that conclusion in the UK Section 129 determination. Since the
European Communities did not challenge the conclu sions regarding Glynwed in the original panel
proceedings, the United States contended that the European Communities' claim does not constitute a
part of the mandate of this Article 21.5 Panel.505
7.243 The European Communities argues that it coul d not have raised a claim regarding the
evidence pertaining to Glynwed because the determination in the original sunset review was based not

502 UK Section 129 determination, footnote 208 above, p. 4 (emphasis original).
503 EC First written submission, paras. 53-57.
504 UK Section 129 determination, footnote 208 above, p. 7.
505 US Oral statement paras. 15, 18-20.

on subsidies to Glynwed, but on the assumption of likelihood of continuation or recurrence of
subsidization because of the non-cooperation of the producers/exporters.506
7.244 The Panel notes that in the original sunset re view determination, the USDOC stated that it
received responses from the GOUK and the Europ ean Communities, but not from any foreign
producers/exporters because they did not par ticipate in the original sunset review. 507 The domestic
interested parties argued, inter alia, that the subsidy program, "Regional Development Grants", had
benefit streams for Glynwed that continued up to the year 2004 and that Glynwed could benefit from
the "Interest Rebates Article 54 Loans" in the fu ture. The European Communities and the GOUK, on
the other hand, argued that most of the schemes countervailed no longer existed or had ceased to
provide meaningful benefits to the cu rrent exporter of the subject merchandise. 508 However, the
USDOC's reasoning for its likelihood de termination in the original sunset review did not mention the
name of any specific firm:
"[A]lthough the EC and GOUK assert that th ese programmes have been terminated,
as they involved specific governmental action, and that subsidization of the steel
sector in the EU is strictly prohibited fo llowing the adoption of the EC Decision, the
[USDOC] normally will determine that a c ountervailable subsidy will continue to
exist where the benefit stream will continue beyond the end of the sunset review.
Without evidence that some programs have been fully amortized, or participation in
this review of a foreign producer/exporter, we determine that countervailable subsidy
programs continue to confer benefits above de minimis , and that revocation of the
countervailing duty order is likely to lead to continuation or recurrence of a
countervailable subsidy."509
7.245 The Panel observes that no specific name of the subsidy recipient was mentioned in the
findings of the original sunset determination. Give n the fact that Glynwed had been determined to be
one of the subsidy recipients during the origin al countervailing duty determination, the Panel
therefore understands that the USDOC actually used its findings regarding a subsidy benefit to
Glynwed, which the USDOC made in the original countervailing duty determination, as the basis for
its affirmative likelihood-of-subsidization re -determination set out in the UK Section 129
determination. Therefore the basis of the UK S ection 129 determination, that a subsidy benefit
continued for Glynwed, is different from the basis of the original sunset review determination, that
there was insufficient evidence to conclude that the benefit stream from subsidy programmes had
ceased to exist. In other words, the factual circ umstance relating to the new measure, that is, the
continuation of a subsidy benefit to Glynwed as th e basis of the new measure, is different from the
factual circumstance in the original sunset review measure, where the insufficiency of information on
the termination of subsidy programmes from foreign producers/exporters was the basis of the sunset
determination.
7.246 As for the US argument that the new evidence was not considered because whether there was
a subsidy benefit to Glynwed was not a part of th e DSB recommendations and rulings in the original
dispute, the European Communities responds that th e Panel's mandate is to determine whether the
new measure is in conformity with the covered agre ements as cited in the Panel request, therefore, it
is not sufficient for the new measure to merely elim inate one erroneous aspect of the measure, if to do
so would expose additional failures to comply with the obligations of the SCM Agreement.510

507 UK Sunset Review Issues and Decision Memo, p. 4.
508 UK Sunset Review Issues and Decision Memo, pp. 7-8.
509 UK Sunset Review Issues and Decision Memo, p. 13.

7.247 In this regard, the Panel notes that there is a difference in the "factual circumstances" in the
the UK Section 129 determination as compared with th e original sunset review determination. This
difference, which concerns the subsidies other than pr e-privatization subsidies to BS plc., includes: (i)
the participation of the private firm Corus in th e Section 129 proceedings as compared with the non-
participation of the foreign producers/exporters in the original sunset proceedings; and (ii) the
provision by the interested parties of new eviden ce during the Section 129 pr oceedings demonstrating
that Glynwed no longer produced the product concerned.
7.248 The Panel recalls its previous findings in para graphs 7.16-7.18 above that in the UK Section
129 determinations, the USDOC revised its likelihood-of-subsidization determination by changing the
basis for its affirmative conclusion. Since the revisi on was not limited to the privatization analysis,
the "measure taken to comply" by the Unite d States in the UK case encompasses the whole
affirmative likelihood-of-subsidization analysis as set out in the UK Section 129 determination. The
Panel also found in previous para graphs 7.69-7.71 above that the European Communities' new claim
on the treatment of evidence concerns the change d aspect of the measure taken to comply and
therefore it is within the mandate of this Article 21.5 Panel.
7.249 On the obligation of Members in implementing the recommendations and rulings of the DSB,
the Panel recalls that Article 21.5 of the DSU obl iges the implementing Member to ensure that the
"new measures taken to comply" with such recommendations and rulings are not inconsistent with the
relevant covered agreement. Con sequently, the investigating authorit y is obliged to ensure that the
UK Section 129 determination meets the requirement of Article 21.3 of the SCM Agreement in respect
of the treatment of evidence.
7.250 In examining the treatment of evidence by the USDOC during the Section 129 proceedings,
the Panel considers it necessary to distinguish two ca tegories of evidence, na mely, the evidence that
the European Communities and the GOUK already submitted during the original sunset proceedings
and the USDOC rejected as insufficient, and the ne w evidence that the interested parties submitted
during the Section 129 proceedings.
7.251 Regarding the evidence that the Europ ean Communities and the GOUK had already
submitted during the original sunset review and which was rejected by the USDOC as insufficient, the
Panel is of the view that, given that this evidence has not changed and that the treatment of this
evidence by the USDOC was neither contested by the European Communities nor addressed during
the original proceedings, the US DOC was not obligated to re-examine this evidence during the
Section 129 proceedings. Therefore, the Panel finds that the USDOC’s refusal to re-consider
evidence in the UK Section 129 determination that it had already considered and rejected during the
original sunset review is not inconsistent with Article 21.3 of the SCM Agreement.
7.252 Regarding the second category of evidence, name ly, evidence provided for the first time by
the interested parties during the Section 129 pro ceedings, the Panel notes that Corus and the GOUK
provided new evidence during the Section 129 proceedings to demonstrate that Glynwed sold the
business of the production of the product concerned to another company, Niagara, LaSalle Corp.;
therefore, it no longer pr oduced the product concerned. 511 The Panel notes that there might be other
new evidence that the interested parties may have presented during the Section 129 proceedings.512

512 The Panel understands that the European Communities and the GOUK provided some evidence
during the original sunset review proceedings relating to the non-availability of a benefit from certain subsidy
programmes. They also provided evidence during the Section 129 proceedings to demonstrate the non-existence
of a number of subsidy programmes. However, from the text of the sunset determination and the text of the
Section 129 determination as well as the information availa ble to this Panel, it is not possible to clearly identify

7.253 The Panel recalls its previous findings in pa ragraph 7.238 above that Article 21.3 of the SCM
Agreement imposes an obligation on the investigating authority during sunset review or revised sunset
review proceedings to take into account all th e evidence placed on its record in making its
determination of likelihood of continuation or recurrence of subsidization.
7.254 The Panel considers that by refusing to take into account the evidence that the respondents
provided for the first time in the Section 129 proceedings 513, which was not evidence already
considered and rejected with reason during the original sunset review, the USDOC may have
precluded the consideration of evidence that could have been essential to the determination of the
existence of a subsidy benefit. The Panel consider s that by refusing to consider such evidence, the
USDOC findings on the continuation of a subsidy bene fit to Glynwed and therefore its conclusion on
the likelihood of continuation or recurrence of subsidisation in the UK Section 129 determination may
be based on an insufficient, or even an incorrect factual basis.
(iii) Conclusion
7.255 Therefore, the Panel finds that the refusal to consider new evidence presented during the
Section 129 proceedings as well as the findings regard ing the continuation of the subsidy benefit to
Glynwed in the UK Section 129 determination are inconsistent with the requirement of Article 21.3 of
the SCM Agreement.
D. CUT-TO-LENGTH CARBON STEEL PLATE FROM SPAIN
1. Background
7.256 On 8 January 2003, the DSB adopted the reports of the original panel and the Appellate Body.
The panel found that the sun set review determination on Cut-to-Length Carbon Steel Plate From
Spain was inconsistent with Articles 10, 14, 19.4, 21.1 and 21.3 of the SCM Agreement .514 T h i s
conclusion of the Panel was upheld by the Appellate Body in its report.515
7.257 As indicated in paragraph 7.89 above, following the adoption of the original panel and
Appellate Body Reports by the DSB on 8 January 2003, the USDOC issued the Modification Notice,
which the European Communities did not challenge in th is dispute. It also reviewed its determination
on the likelihood of continuation or recurrence of subsidization contained in the original sunset review
results, which had been found to be inconsistent with the SCM Agreement. Accordingly, the USDOC
issued its Issues and Decision Memorandum: Section 129 Det ermination: Final Results of Expedited
Sunset Review of Cut-to-Length Carbon Steel Plate from Spain ("Spain Section 129 determination")
on 24 October 2003.516

whether the European Communities, the GOUK or Corus have provided any new evidence during the Section
129 proceedings relating to the expiry of any specific subsidy programmes.
513 In paragraph 7.252 and footnote 512, the Panel mentioned the possibility of the existence of new
evidence provided during the Section 129 proceedings relating to the expiry of specific subsidy programmes, in
addition to the evidence demonstrating the sale of the business concerned by Glynwed. Were it the case, the
Panel considers that it should also be treated as new evidence provided for the first time by the interested parties
during the Section 129 proceedings.
514 Panel Report on US – Countervailing Measures on Certain EC Products, para. 8.1(c).
515 Appellate Body Report on US – Countervailing Measures on Certain EC Products, para. 161(a).
516 The USDOC then published a Noti ce of Implementation in the Federal Register on 17 November
2004 indicating that the USTR dec lined to direct the USDOC to impl ement this revised sunset review
determination. Notice of Implementation, footnote 240, p. 64859. The US considers that the issuance of the
Section 129 determination itself satisfies the obligation of bringing the measure into conformity with the
recommendations and rulings of the DSB. The US in its reply to Panel questions explained that the USTR

7.258 The original countervailing duty on these produc ts from Spain was imposed on 17 August
1993 with a countrywide ad valorem rate of 36.82 per cent.
517 The sunset review determination,
published on 7 April 2000, found that "revocation of the count ervailing duty order would be likely to
lead to continuation or recurrence of the subsidy" . The USDOC reported to the USITC that that the
net countervailable subsidy rate likely to prevail was 36.86 per cent for all producers and exporters
from Spain.518
2. The measure taken to comply
7.259 As concluded in paragraph 7.18 above, the measure taken to comply as regards Cut-to-length
Carbon Steel Plate From Spain is the affirmative likelihood-of-s ubsidization re-determination as set
out in the Spain Section 129 determination.
3. The claims
7.260 With respect to the Spain Section 129 determination regarding Final Results of Expedited
Sunset Review of Cut-to-Length Carbon Steel Plate from Spain , the European Communities requests
the Panel to make the following findings:
(a) that the United States has failed to im plement the recommendations and rulings
adopted by the DSB and acted inconsisten tly with its obligations under Articles 10,
14, 19.4, 21.1, and 21.3 of the SCM Agreement and Article VI:3 of the GATT 1994 by
refusing to examine whether, and for failing to find that, the privatization of Aceralia
in Cut-to-Length Carbon Steel Plate from Spain was at arm's length and for fair
market value;
(b) that the United States has acted inconsiste ntly with its obligation under Article 21.3
of the SCM Agreement because it failed to consider evidence on the record in Cut-to-
Length Carbon Steel Plate from Spain demonstrating that the benefits from
programmes found to confer countervailable subsidies no longer existed;
(c) that the United States failed to meet its obligations under Articles 21.3 of the SCM
Agreement because it did not examine in, inter alia, Cut-to-Length Carbon Steel Plate
from Spain, whether expiry of the duty would likely to lead to continuation or
recurrence of material injury.
519
7.261 The Panel recalls its findings in paragraphs 7.27-7.31 that the likelihood of injury
determination is an unrevised aspect of the origin al sunset review, which was not challenged during
the original panel proceedings and that there is no basis for concluding that the re-determination of
the likelihood of continuation or recurrence of subsidization affects the likelihood-of-injury
determination, therefore, the failure to re-conduc t a likelihood-of-injury determination is not a
measure that the United States should have taken to comply with the DSB rulings and
recommendations. Moreover, as the Panel found in pa ragraphs 7.73-7.77, even if the likelihood-of-
injury analysis were an aspect of the measure taken to comply, the European Communities' claim on
the failure to re-determine the likelihood of conti nuation or recurrence of injury in the Spain Section

exercised discretion not to direct the implementation as there was no need for a change as a matter of US law in
the implementation of the determinations. See US Response to Panel questions Nos. 18-20.
517 Countervailing Duty Order: Certain Steel Products From Spain, 58 Fed. Reg. 43761, 43762 (17
August 1993) (finding a countrywide ad valorem rate of 36.82 per cent); see Final Affirmative Countervailing
Duty Determinations: Certain Steel Products From Spain, 58 Fed. Reg. 37374, 37385 (9 July 1993) (finding a
countrywide ad valorem rate of 36.86 per cent).
518 Spain Sunset Review Final Results, footnote 286 above, p. 18308.

129 determination is not properly before this Panel. Therefore, the Panel will not address the
European Communities' injury claim in this Article 21.5 proceedings. With this in mind, the Panel
will proceed to examine each one of the other two claims in the following paragraphs.
4. Whether the USDOC's failure to examine the privatization of Aceralia and to determine
whether the privatization occurred at arm's length and for FMV is inconsistent with
Articles 10, 14, 19.4, 21.1 and 21.3 of the SCM Agreement and Article VI:3 of the GATT
1994
(a) Arguments of the parties
7.262 The European Communities makes similar arguments on this issue as those made with respect
to the UK Section 129 determination as reflected in paragraphs 7.185-7.189 above. It mainly argues
that the USDOC refused to consider in the Sp ain Section 129 determination whether under the
modified privatization methodology, Aceralia had be en privatized in a manner that extinguished the
benefits conferred by the non-recurring subsidies b estowed to the state-owned producer prior to its
privatization.520
7.263 The European Communities also argues that Articles 10, 14, 19.4, 21.1 and 21.3 of the SCM
Agreement as well as Article VI:3 of the GATT 1994 require that an investigating authority examine
in a sunset review, whether a benefit continues to exist after privatization before imposing or
maintaining a duty. By refusing to examine the priv atization, the US acted inconsistently with its
obligations under these provisions.521
7.264 The European Communities also argues that by refusing to examine the privatization, the
USDOC's Spain Section 129 determination is not in compliance with the conclusion of the Appellate
Body in paragraph 161(a) of its report that the Un ited States acted inconsistently with its obligations
under Articles 10, 14, 19.4, 21.1 and 21.3 of the SCM Agreement by "imposing and maintaining
countervailing duties without determining whether a 'benefit' continues to exist...".522
7.265 The United States argues that the USDOC assumed for purpose of its likelihood-of-
subsidization determination that the privatization of Aceralia wa s conducted at arm's length and for
FMV and entirely extinguished all benefits from th e pre-privatization, non-recurring subsidies in
question. Therefore, the USDOC did not rely on any benefit from allocable, pre-privatization
subsidies in determining whether subsidization was likely to conti nue or recur if the order were
revoked.523
7.266 Rather, the United States argues that the Spain Section 129 determination was based on
evidence wholly unrelated to the (allocable, non-recurring) pre-privati zation subsidies. In the Spain
Section 129 determination, the basis of its likelihoo d of subsidization determination was that there
were recurring (non-allocable) subsidies to the priv atized company Aceralia that continued after
privatization.524
7.267 The United States argues that because the USDOC a ssumed that the privatization of Aceralia
was at arm's length and for FMV, and that the USDO C did not rely on pre-privatization subsidies in

521 EC First written submission, paras. 63-65.
522 EC First written submission, paras. 70.
523 US First written submission, paras 4, 48; US Second written submission, para. 11.

making the determination, the revised determin ations cannot be inconsistent with the DSB
recommendations and rulings.
525
(b) Evaluation by the Panel
(i) The United States' obligations pursuant to the fi ndings in the original proceedings regarding
the USDOC's privatization analysis
7.268 The Panel summarized the findings of the orig inal panel and of the Appellate Body in
paragraphs 7.198-7.203 above. These findings make clear that an investigating authority is obliged
under Articles 10, 14, 19.4, 21.1, and 21.3 of the SCM Agreement to examine whether the
privatization was at arm's length and for FMV in order to determine whether the benefit from the non-
recurring subsidies bestowed upon a pre-privatized company continues to exist for the privatized
producer. These findings also make it clear that, in a sunset review, countervailing duties can only be
maintained after making an affirmative likelihood of continuation or recurrence of subsidization
determination.
(ii) The Panel's assessment of the USDOC's analysis in the Spain Section 129 determination
7.269 The privatization analysis that the USDOC adopted in this case was the sa me as it used in the
UK case. Under the heading "Priva tization of Aceralia", the Spain Section 129 determination begins
with a general description of the privatization process in 1997. Then the determination states that the
USDOC's privatization analysis, as provided for in the Modification Notice, is predicated on a
baseline presumption that "allocable, non-recurring subsidies can benefit the recipient over a period of
time normally corresponding to the average useful lif e of the recipient's assets". To rebut this
presumption, a party is required to demonstrate that the privatization was conducted through an arm's-
length transaction for FMV.
7.270 After that, without addressing the details of the privatization of Acera lia, the determination
states:
"However, even assuming arguendo, that, pursuant to an analysis under Section
129(b)(2) of the URAA, the [USDOC] were to find that the privatization of
ACERALIA met all the criteria for rebutting the baseline presumption set forth in the
[USDOC's] Modification Notice
, such a finding would not affect the results in the
instant determination that there would be a likelihood of continuation or recurrence of
a countervailable subsidy if the order were revoked."526
7.271 The determination then refers to the legislative history of the URAA and the USDOC's Sunset
Policy Bulletin of 1998 to clarify that pursuant to Section III.A.2 of the Sunset Policy Bulletin, the
determination of likelihood would be made on an "order-wide" basis. It then concludes:
"In the Final Sunset Results , our affirmative likelihood de termination was based, in
part, on our determination that there are countervailable recurring, non-allocable
subsidies provided pursuant to programs that to the best of our knowledge continue to
exist, including, for example, the 1 987 Government Delegated Commission on
Economic Affairs: Fund for Employme nt Promotion and Early Retirement . Even if
we were to determine, pursuant to an analysis under the privatization methodology
set forth in the Modification Notice , that non-recurring, allocable subsidies received
by ACERALIA prior to the 1997 privatization would not continue through of after the

526 Spain Section 129 determination, footnote 208 above, p. 3.

period of review ("POR") of the sunset review , we would still make an affirmative
likelihood determination based on the fact th at subsidy programs that have provided
recurring, non-allocable subsidies at above de minimis rates continue to exist."527
7.272 In sum, the USDOC made an affirmative lik elihood-of-subsidization determination based on
the reason that recurring subsidy programs, such as the 1987 Government Delegated Commission on
Economic Affairs: Fund for Employment Promotion and Early Retirement continued to exist and to
benefit Aceralia. The United States argues that the Spain Section 129 determination was based on an
assumption that the privatization of Aceralia w as conducted at arm's length for FMV and that the
benefit from the non-recurring pre-privatization subs idies was entirely extinguished for the privatized
firm, Aceralia. The phrases used in the determination include "even assuming arguendo..." and
"even if we were to determine...".
7.273 The Panel recalls its previous analysis of the original panel and the Appellate Body's findings
in this regard in paragraphs 7.198- 7.203, and its conclusion that the investigating authority is obliged
by Articles 10, 14, 19.4, 21.2 and 21.3 of the SCM Agreement to "examine" whether the privatization
was conducted at arm's length and for FMV in order to "determine" whether the privatized producer
received any benefit from the financial contributi ons previously bestowed to the state-owned
producers and to maintain the countervailing duti es only after making an affirmative likelihood of
continuation or recurrence of subsidization determination.
7.274 The Panel is of the view that in order to meet the obligation set out for a sunset review
determination involving privatizati on, which is "to examine" the pr ivatization and "to determine"
whether the privatized producer Aceralia continue d to receive subsidy benefit, the investigating
authority is required to make definite findings, rather than assumptions.
7.275 As the Panel has discussed above, in paragraphs 7.213, 7.214 and 7.215, the obligations to
"examine" and to "determine" in the context of c ountervailing duty sunset review require that the
investigating authority act with an appropriate de gree of diligence and arrive at a reasoned conclusion
on the basis of information in the record of the proceedings, rather than simply make an assumption.
7.276 In the Spain Section 129 determination however , the last paragraph of the privatization
analysis states the following:
"[T]he [USDOC] has received allegations that the privatization here was effected by
'market distortion' such that any arm's length/fair market value findings would not
warrant a determination that countervaila ble subsidies were extinguished by the
privatization. We do not need to a ddress the market distortion allegations, because
we have not–for the reasons explained abo ve–addressed the arm's length/fair market
value issue."
528
7.277 It is clear to the Panel that the USDOC did not examine whether the privatization of Aceralia
was at arm's length and for FMV because it did not address this issue. Nor did the USDOC make a
"determination" that non-recurring pre-privatization subsidies ceased to benefit Aceralia as there was
no language to that effect in the Spain Section 129 determination.
7.278 The Panel considers that there is a difference between "assumption" and "determination" in
that a determination is required to be based on sufficient evidence and adequate reasoning whereas an
assumption need not be supported by evidence or reasoni ng. In this regard, what Article 21.3 of the

527 Spain Section 129 determination, footnote 208 above, p. 3 (emphasis added).
528 Spain Section 129 determination, footnote 208 above, p. 4 (emphasis added).

SCM Agreement explicitly requires is a "determination" , an obligation more burdensome for the
investigating authority than that of an assumption.
7.279 In practice, the legal certainty of an assumption would also be different from that of a
determination to the interested parties involved. The United States argues that the USDOC assumed
that the privatization extinguished non-recurring pre-privatization subsidies to Aceralia. However, for
example, if Aceralia were to request an assessment review in future, it is not clear whether such an
assumption would be treated as a determination that the privatization was conducted at arm's length
and for FMV and that the non-recurring subsidy benefit was extinguished for Aceralia.
(iii) Conclusion
7.280 For these reasons, the Panel finds that the United States
 failed to examine whether the
privatization of Aceralia was at arm's length and for FMV and to determine whether the benefit from
non-recurring subsides bestowed to the state-owned producer extinguished for the privatized Aceralia.
By failing to properly determine the likelihood of continuation or recurrence of subsidization
determination prior to its decision to mainta in countervailing duties in its Spain Section 129
determination, the United States acted inconsistently with the obligations under Articles 10, 14, 19.4,
21.1 and 21.3 of the SCM Agreement and Article VI:3 of the GATT 1994 and therefore failed to
implement the recommendations and rulings of the DSB.
5. Whether the USDOC's treatm ent of evidence on the record during the Section 129
proceedings is inconsistent with Article 21.3 of the SCM Agreement
7.281 We recall that in paragraph 7.18 above, we found that the measure taken to comply as regards
Cut-to-length Carbon Steel Plate from Spain is the affirmative likelihood-of-subsidization re-
determination set out in the Spain Section 129 determination. In paragraph 7.71 above, we also found
that the European Communities' new claim regard ing the treatment of evidence by the USDOC
during the Section 129 proceeding is within the manda te of this Panel. The Panel will therefore
proceed to examine the European Communities 's claim on the USDOC's treatment of evidence.
(a) Arguments of the parties
7.282 The European Communities argues that in the Spain Section 129 determination, the USDOC
made its affirmative findings of likelihood of c ontinuation or recurrence of subsides based on the
"recurring" subsidies provided to Aceralia desp ite evidence on the record in the Section 129
proceedings, which consisted of statements by the Government of Spain (GOS) and the European
Communities that the specific programme cite d by the USDOC, namely, the 1987 Government
Delegated Commission on Economic A ffairs measures, no longer existed. 529 The European
Communities indicates that both the European Communities and the GOS had explained in
submissions during the original sunset review that other recurring, non-allocable subsidies found to
exist at the time of original investigation in 1993 were no longer granted. They explained that these
programs included, the 1987 Government Delega ted Commission on Economic Affairs measures (no
longer in existence), Law 60/78 (no longer applied to the steel sector); Royal Decree 878/8 and the
1984 Council of Ministers Meeting programme (no longer in existence); and Article 54 ECSC loans
(would shortly cease to exist 530).531 In sum, the European Comm unities argues that it had already

530 The Panel notes that the USDOC issued the Spai n Sunset Review Final Results on 29 March 2000,
before the expiry of this subsidy. Spain Sunset Review Final Results, footnote 286 above.
531 EC First written submission, para. 24, footnote 44.

explained during the original sunset review that most of the schemes no longer existed or had ceased
to provide a meaningful benefit.532
7.283 The European Communities and the GOS reite rated these arguments to the USDOC during
the Section 129 proceedings and confirmed the fact that the ECSC Article 54 loan programme expired
in July 2002. The European Co mmunities argues that the USDOC nevertheless based its Section 129
determination on a finding that was demonstrated by the evidence on the r ecord to be palpably
incorrect .533
7.284 The European Communities' arguments that Article 21.3 of the SCM Agreement requires an
investigating authority to consider all evidence in its record also apply to the Spain Section 129
determination, as do the US arguments to the effect th at it is not under an obligation to reopen issues
already resolved in the original sunset review. These arguments are reflected in paragraphs 7.221-
7.229 above.
7.285 The United States argues that as the USDOC assume d that the privatization of Aceralia had
extinguished all allocable, pre-privatization subs idies, the affirmative likelihood-of-subsidization
determination in the Spain Section 129 determination was based on evidence wholly unrelated to pre-
privatization subsidies. It cited the recurring subsidies benefiting Aceralia in the Spain case.534
7.286 The United States also argues that neither the Appellate Body nor the original panel made any
findings concerning these subsidy programmes, which di d not involve the priva tization methodology.
The USDOC's findings concerning the recurring subs idy programme for Aceralia in the Spain case
are unchanged. Because the recommendations and rulings of the DSB did not require them to be
changed, the European Communities cannot use the Article 21.5 process to challenge them.535
7.287 In the Spain Section 129 determination, the USDOC explained its refusal to consider the
issue of recurring subsidy on its understanding that the duty of the authority in Section 129
determination is not to re-conduct the original su nset review in its totality, but to render it not
inconsistent with the findings of the Appellate Body. The USDOC stated that it was not reopening
issues that had been resolv ed in the original sunset review and had not been found by the Appellate
Body to be inconsistent with the SCM Agreement.
536
(b) Evaluation by the Panel
(i) The United States' obligations under Artic le 21.3 of the SCM Agreement regarding the
USDOC's treatment of evidence
7.288 As the Panel concluded in pa ragraph 7.238 above, an investigating authority has the
obligation to consider all evidence placed on the r ecord in making a likelih ood of continuation or
recurrence of subsidization re-determination. Otherwi se, in the view of this Panel, the investigating
authority could not ensure that the new measu re, that is, the likelihood-of-subsidization re-
determination set out in the Section 129 determinat ion, is based on a sufficient factual record and
therefore satisfies the requirement of Article 21.3 of the SCM Agreement.

533 EC First written submission, paras. 24, 59.
536 Spain Section 129 determination, footnote 208 above, p. 6.

(ii) The Panel's assessment of th e USDOC's treatment of evidence in the Spain Section 129
determination
7.289 The Panel notes that in the revised sunset review determination, i.e., the Spain Section 129
Determination, the USDOC based its likelihood determination on the existence of "recurring
subsidies" to Aceralia found to exist in the orig inal sunset review but only specified one subsidy
program that was found to be "recurring":
"In the Final Sunset Results
, our affirmative likelihood de termination was based, in
part, on our determination th at there are countervailable recurring, non-allocable
subsidies provided pursuant to programs that to the best of out knowledge continue to
exist, including, for example, the 1987 Government Delegated Commission on
Economic Affairs: Fund For Employment Promotion and Early Retirement . Even if
we were to determine, pursuant to an analysis under the privatization methodology set
forth in the Modification Notice , that non-recurring, allocable subsidies received by
ACERALIA prior to the 1997 privatization w ould not continue through or after the
period of review ("POR") of the sunset re view, we would still make an affirmative
likelihood determination based on the fact th at subsidy programs that have provided
recurring, non-allocable subsidies at above de minimis rates continue to exist."537
7.290 The Panel also notes that during the original sunset review, the European Communities and
the GOS argued and provided evidence to the US DOC to demonstrate that subsidy programmes no
longer existed or were no longer available to the steel sector. The USDOC made an affirmative
likelihood of continuation or recurrence of subsidiza tion determination in its original sunset review
determination and listed si x subsidy programs as the basis of the affirmative sunset determination.
The main reason for this affirmative determination was that the subsidies had not been fully amortized
and the evidence of termination of the subsidy progr ams or subsidy benefit was not sufficient due to
the non-participation of the producers/exporters:
"The [USDOC] notes that, although the EC and the GOS assert that these programs
have been terminated as they involved specific governmental action and subsidization
of the steel sector in the EU that is strictly prohibited following the adoption of the
EU Commission Decision, the [USDOC] normally will determine that a
countervailable subsidy will continue to exist until it is fully amortized. Without
evidence that the programs have been terminated, that the benefits from programs for
which benefits are allocated over time will not continue beyond this sunset review, or
participation in this review of a foreign producer/exporter , we determine that
revocation of the countervailing duty order is likely to lead to continuation or
recurrence of a countervailable subsidy."
538

537 Spain Section 129 determination, footnote 208 above, p. 3 (emphasis added).
538 Spain Sunset Review Issues and Decision Memo, footnote 286 above, pp. 13-14 (emphasis added).
This original sunset determination also stated in another paragraph:

"In addition to considering the guidance on likelihood cited above, section 751(c)(4)(B) of the
Act provides that the Department shall determine that revocation of an order is likely to lead
to continuation or recurrence of a countervailable subsidy where a respondent interested party
waives its participation in the sunset review. In the instant review, the Department did not
receive a response from the foreign producer/exporter and, pursuant to section
351.218(d)(2)(iii) of the Sunset Regulations
, this constitutes a waiver of participation."

Spain Sunset Review Issues and Decision Memo, footnote 286 above, p. 13.

7.291 It is noteworthy that, among the six listed s ubsidy programmes found to still exist in the
original sunset determination, the 1987 Gove rnment Delegated Commissi on on Economic Affairs:
Fund For Employment Promotion and Early Retirem ent was the programme that the USDOC later
found to be "recurring" and that the USDOC used as the basis for its affirmative likelihood-of-
subsidization determination in the Spain Section 129 determination. We note that the Section 129
determination does not identify other recurring subsidy programmes although it implies their
existence.539
7.292 The United States argues that it is not required to reopen issues that were resolved in the
original sunset review and that the aspect of the recurring subsidies to Aceralia, which was not raised
by the European Communities in the original panel proceedings, is not properly within the mandate of
this Panel.540 The European Communities responds that the mandate of this Panel, pursuant to Article
21.5, is to determine whether the measure is in conf ormity with the covered agreements as cited in the
Panel request. The European Communities further argu es that it is not sufficient to merely eliminate
one erroneous aspect of the measure, if to do so wo uld expose additional failures to comply with the
obligations of the SCM Agreement.541
7.293 In this regard, the Panel recalls its previous fi ndings in paragraphs 7.16-7.18 above that in the
Spain Section 129 determinations, the USDOC revi sed its likelihood-of-subsidization determination
by changing the basis for its affirmative conclusion. Since the revision was not limited to the
privatization analysis, the "measure taken to co mply" by the United States in the Spanish case
encompasses the whole affirmative likelihood-of-subsidization analysis as set out in the Spain Section
129 determination. The Panel also found in para graphs 7.69-7.71 above, that the European
Communities' new claim on the treatment of evidence concerns the changed aspect of the measure and
therefore it is within the mandate of this Article 21.5 Panel.
7.294 Turning back to the European Communities' claim that the refusal to consider evidence in the
record of the Spain Section 129 determinati on is inconsistent with Article 21.3 of the SCM
Agreement, the Panel recalls its findings in paragraph 7. 238 above, that the obligation in the Section
129 proceeding is for the investigating authorities to consider all evidence plac ed on the record of
that proceeding in making a likelihood of continuation or recurrence of subsidization determination.
Under Article 21.3 of the SCM Agreement, if the investigating authority fails to do so, it cannot ensure
that the new measure, that is, the Section 129 determ ination is based on a sufficient factual record and
therefore satisfies the requirement of Article 21.3 of the SCM Agreement.
7.295 On the issue of the submissi on of evidence, the European Communities argues that the
European Communities and GOS presented evidence th at they had already provided in the original
sunset review regarding the non-existence of s ubsidy programmes or the non-availability of these
programmes to the Spanish steel industry during the Section 129 proceedings. The European
Communities argues that it also confirmed the actua l expiry of the ECSC Article 54 loan programme
in 2002 during the Spain Section 129 proceeding.
7.296 In particular, the Panel understands that th e European Communities provided statements and
documents to the USDOC during the original sunset review demonstrating that the programme "1987
Government Delegated Commission on Economic Affairs" no longer existed. This evidence was
rejected by the USDOC in the original sunset determination as insufficient.
542 The European

539 See Spain Sunset Review Issues and Decision Memo, footnote 286 above, p. 17.
540 See parties arguments in paras. 7.285-7.287; US First written submission, para. 18.
542 The Panel notes that the USDOC based its affirm ative likelihood-of-subsidisation determination on
the following grounds: "[absence of] ev idence that the programs have been terminated, [absence of evidence]
that the benefits from programs for which benefits ar e allocated over time will not continue beyond this sunset

Communities and the GOS reiterated these argumen ts to the USDOC during the Section 129
proceedings. The USDOC refused to reconsider this evidence and relied on the abovementioned
recurring subsidy programme as the basis for th e affirmative likelihoo d-of-subsidization re-
determination set out in the Spain Section 129 determination.
7.297 In examining the treatment of evidence by the USDOC during the Spain Section 129
proceedings, the Panel, as in the UK case, disti nguishes between two categories of evidence: the
evidence that the European Co mmunities and the GOS had already submitted during the original
sunset review and which the USDOC had rejected as insufficient; and any new evidence that the
interested parties may have submitted for the first time during the Spain Section 129 proceedings.
7.298 Regarding the evidence that the European Communities and the GOS had already submitted
during the original sunset review and which was re jected by the USDOC as insufficient, the Panel is
of the view that, given that this evidence has not changed and that the treatment of this evidence by
the USDOC was neither contested by the Europ ean Communities nor addressed during the original
proceedings, the USDOC was not obligated to re -examine this evidence during the Section 129
proceedings. Therefore, the Panel finds that th e USDOC’s refusal to re-consider evidence in the
Spain Section 129 determination that it had already c onsidered and rejected during the original sunset
review is not inconsistent with Article 21.3 of the SCM Agreement.
7.299 Regarding the second category of evidence, i.e. evidence that may have been provided for the
first time by the interested parties during the Sec tion 129 proceedings, the Panel considers that, in line
with its previous findings in paragraph 7.238 above , Article 21.3 of the SCM Agreement imposes an
obligation on the investigating authority during th e sunset review to account for all the evidence
placed on its record in making its likelihood of continuation or recurrence of subsidization
determination. Therefore, the USDO C was obliged under Article 21.3 of the SCM Agreement to
consider such new evidence, if any, during the Spai n Section 129 proceedings. However, the Panel is
not aware, from the information available to this Panel, of any new evidence presented by the
European Communities or the GOS during the Spain Section 129 proceedings.
(iii) Conclusion
7.300 The Panel therefore concludes that the Europ ean Communities failed to demonstrate that the
USDOC's treatment of evidence in the Spain Secti on 129 determination is inconsistent with the
obligation under Article 21.3 of the SCM Agreement.

review, or [lack of] participation in this review of a foreign producer/exporter". Spain Sunset Review Issues and
Decision Memo, footnote 286 above, p. 13-14.

VIII. CONCLUSIONS AND RECOMMENDATIONS
8.1 In light of the findings contained in Section VII above, we therefore conclude that:
(a) the affirmative likelihood-of-subsidization re -determinations set out in each of the
Section 129 determinations at issue are th e measures taken to comply by the United
States with the DSB recommendations and rulings in the original proceedings;
(b) regarding the UK and Spain Section 129 de terminations, the European Communities'
claims on the treatment of evidence in the likelihood-of-subsidization analyses are
properly before this Panel;
(c) regarding all three Section 129 determinati ons, the European Communities' claims on
the failure to re-determine the likelihood of continuation or recurrence of injury are
not properly before this Panel;
(d) regarding the France Section 129 determin ation, since the USDOC did not fail to
examine the conditions of Usinor's privatiza tion and did not fail to determine that the
privatized Usinor continued to receive some benefit from pre-privatization
subsidization of the state-owned Usinor, th e United States did not act inconsistently
with Articles 14 and 21.3 of the SCM Agreement as regards the USDOC's
consideration of Usinor's privatization in its likelihood-of-subsidization analysis.
In the absence of an obligation to recalculate a rate of subsidization in the context of a
sunset review and given the fact that the United States is not relying on the sunset
review as a basis for collecting duties at a particular rate, the Panel finds that the
USDOC’s affirmative likelihood-of-subsidiza tion re-determination as set out in the
France Section 129 determination is not inc onsistent with Articles 10, 14, 19.4, 21.1
and 21.3 of the SCM Agreement and Article VI:3 of the GATT 1994 in regard to the
obligation to limit countervailing duties to the amount and duration of the subsidy and
therefore, the United States has not failed to implement the recommendations and
rulings of the DSB;
(e) regarding the UK Section 129 determination, the USDOC failed to examine whether
the privatization of BS plc was at arm's length and for FMV and failed to determine
whether the privatized producer received any benefit from the prior non-recurring
subsidization of the state-owned BS plc. By failing to properly determine the
likelihood of continuation or recurrence of subsidization, prior to its decision to
maintain countervailing duties, the United St ates acted inconsistently with Articles
10, 14, 19.4, 21.1 and 21.3 of the SCM Agreement and Article VI:3 of the GATT 1994
and therefore failed to implement the recommendations and rulings of the DSB;
(f) regarding the Spain Section 129 determin ation, the USDOC failed to examine
whether the privatization of Aceralia was at arm's length and for FMV and failed to
determine whether the privatized producer received any benefit from the prior non-
recurring subsidization of the state-owned A ceralia. By failing to properly determine
the likelihood of continuation or recurrence of subsidization, prior to its decision to
maintain countervailing duties, the United St ates acted inconsistently with Articles
10, 14, 19.4, 21.1 and 21.3 of the SCM Agreement and Article VI:3 of the GATT 1994

and therefore failed to implement the recommendations and rulings of the DSB;

(g) regarding the UK Section 129 determination, the USDOC’s refusal to re-consider
evidence that it had already considered and re jected during the original sunset review
is not inconsistent with Article 21.3 of the SCM Agreement;
(h) regarding the UK Section 129 determination, the USDOC’s refusal to consider new
evidence submitted during the UK Section 129 proceedings is inconsistent with the
obligations under Article 21.3 of the SCM Agreement;
(i) regarding the Spain Section 129 determina tion, the European Communities failed to
demonstrate that the USDOC's treatment of evidence in the Spain Section 129
determination is inconsistent with Article 21.3 of the SCM Agreement.
8.2 Since Article 3.8 of the DSU provides that "[i]n cases where there is an infringement of the
obligations assumed under a covered agre ement, the action is considered prima facie to constitute a
case of nullification or impairment", we conclude that to the extent the United States has acted
inconsistently with the SCM Agreement and the GATT 1994 it has nullified or impaired the benefits
accruing to the European Communities under those agreements.
8.3 The Panel recommends that the Dispute Settlement Body requests the United States to bring
its measures into conformity with its obligations under the SCM Agreement and the GATT 1994.

ANNEX A

RESPONSES OF THE EUROPEAN COMMUNITIES
TO QUESTIONS BY THE PANEL

SCOPE OF THE PANEL'S MANDATE

Question 2: In reference to the European Communities' argument on judicial economy, is the
European Communities stating that it did not argue the injury claim in the original proceedings
because it was already attacking the change-in-ownership methodology and that doing so obviates the
need to make any claims on injury? (European Communities)

Answer: Yes. The European Communities does not consider that complaining parties are required to
attack all inconsistencies in a proceeding and s till less inconsistencies that may only arise once
another inconsistency has been established (such as is the case with the injury findings).

 Just as the objective of prompt settlement of disputes expressed in Article 3.2 DSU justifies
judicial economy by Panels, so also does it justify a similar restraint by complaining parties.

Question 5: If by implementing the DSB recommendations and rulings, another inconsistency arises,
do the parties believe that an investigating authority is obligated to address this further inconsistency
in the context of the DSB recommendations and rulings ? Please comment in light of the following
excerpt from paragraph 79 of the Appellate Body Report in EC – Bed Linen:

"... It is to be expected, therefore, that the claims, arguments, and factual
circumstances relating to the "measure taken to comply" will not, necessarily, be the
same as those relating to the measure in the original dispute.
 543 Indeed, a
complainant in Article 21.5 proceedings may well raise new claims, arguments, and
factual circumstances different from those raised in the original proceedings, because
a "measure taken to comply" may be incons istent with WTO obligations in ways
different from the original measure. In our view, therefore, an Article 21.5 panel
could not properly carry out its mandat e to assess whether a "measure taken to
comply" is fully consistent with WTO obligations if it were precluded from
examining claims additional to, and different fr om, the claims raised in the original
proceedings. 544" (European Communities/United States)
Answer: Yes. The European Communities believes that this excerpt speaks for itself.

543 (footnote original) Ibid.
544 (footnote original) As we put it in Canada – Aircraft (Article 21.5 – Brazil):

Indeed, the utility of the review envisaged under Article 21.5 of the DSU would be seriously
undermined if a panel were restricted to exam ining the new measure from the perspective of
the claims, arguments and factual circumstances th at related to the original measure, because
an Article 21.5 panel would then be unable to examine fully the "consistency with a covered
agreement of the measures taken to comply", as required by Article 21.5 of the DSU.

(Appellate Body Report, Canada – Aircraft (Article 21.5 – Brazil) , para. 41) We defined the function
of Article 21.5 proceedings in the same vein in our Report in US – Shrimp (Article 21.5 – Malaysia) (para. 87).

SECTION 129 PROCEEDINGS

 [No questions for the European Communities]

US SUNSET REVIEWS

Question 17: In its Request for establishment, the Eu ropean Communities seems to focus on three
sunset reviews as the relevant measures taken to comply.
545 In the background information provided
earlier in the Request itself, however, the European Communities also states that the United States
finalized a new "change-in-ownership" methodology and subsequently issued new determinations in
which the United States applied this methodology to the twelve determinations challenged by the
European Communities before the original Panel. 546 Moreover, in footno tes 1 through 3, the
European Communities refers to three unpublished memoranda that the USDOC issued and posted on
its website.547 Then, in its First written submission, th e European Communities clarifies that it "is
requesting the Panel to review the measures ta ken by the United States concerning the sunset
reviews."548 Later in the same submission, the Euro pean Communities states that it "is treating the
USDOC's failure to revoke [the th ree countervailing duty] orders as the purported 'implementation'
of the USDOC's findings".549 Yet in its Second written submission, the European Communities clearly
states that the "Section 129 determinations at issu e in this proceeding are measures taken by the
United States to comply with the recomm endations and rulings of the DSB". 550 In its Oral Statement,
however, the European Communities argued that the me asures taken to comply by the US are the
failure to revoke the CVD orders. Can the Euro pean Communities please clarify which are the
measures taken to comply in these proceedings and where in the Request for establishment these
measures are identified? (European Communities)

Answer: The "measures taken to comply" are the mainte nance of (or in other words the failure to
revoke or amend) the countervailing duties in the three proceedings.

 The "measures taken to comply" must relate to the duties (rather than the determinations)
since the findings of the Panel that were adopted by the DSB and were required to be implemented
concerned the countervailing duties imposed on exports from the three EC Member States concerned.

 It is therefore these duties that were declared WTO-inconsistent and were required to be
brought into conformity with the SCM Agreement.

 The Section 129 determinations constitute the st atement of reasons for this maintenance of
these duties. The EC identified these measures (that is the sunset reviews in the three proceedings) in
the second paragraph on page 2 of its Request for Establishment.

 Where a "measure taken to comply" is necessary (and in this case the US admits that it was
and indeed has claimed to have taken such a me asure), maintenance or confirmation of the pre-
existing measures may in certain cases constitute a sufficient implementation, where there are new
findings, determinations or explanations as to why this is so. The maintenance or confirmation cannot
be judged in isolation from the reasons on which it is based (especially where a reasoned explanation
is a WTO obligation as is the case of countervailing duty measures). The "measure taken to comply"
can also be considered to be the maintenance or confirmation combined with the statement of reasons.

545 Request for establishment, p.2.
546 Request for establishment, p.1.
547 Request for establishment, p.2, footnotes 1-3.
548 EC First written submission, para. 3. The EC lists the three cases by case number. Id.

IMPLEMENTATION

Question 18: How did the United States implement th e DSB recommendations and rulings in the
three sunset reviews at issue? In the Notice of Im plementation, the USDOC indicates that "[b]ecause
the US Trade Representative declined to di rect the Department to implement the revised
determinations with regard to the four sunset revi ews involved in the WTO dispute, [the USDOC is]
not implementing these Section 129 Determinations". What constitutes "implementation" in these
cases? (European Communities/United States)

Answer: The European Communities, like the Panel, would appreciate clarification from the United
States on how the United States considers that it implemented the DSB recommendations and rulings
in the three sunset reviews at issue.

 The European Communities set out in respon se to Question 17 above what it considers the
measures taken to comply are in the sunset reviews.

Question 21: Do the parties agree that the three Secti on 129 determinations at issue are the
measures taken to comply in these Article 21.5 proceedings? (European Communities/United States)

Answer: See answer to Questions 17 and 18.

Question 24: Does the European Communities suggest that because of the significant impact of the
new privatization methodology, the United States sh ould not make its likelihood determination on an
order-wide basis in the sunset reviews at issue? (European Communities)

Answer: The European Communities does not consider that the "order-wide" approach of the United
States is sufficient to ensure proper compliance in th is case. At the same time, even if the "order-
wide" approach is taken, the European Commun ities does not consider that the United States has
acted consistently with the SCM Agreement.

 The findings of the Panel that were adopted by the DSB and were required to be implemented
concerned the failure of the United States to ensure that any countervailing duties which were applied
were limited to an amount corresponding to injurious subsidization (Article 21.1 of the SCM
Agreement makes it clear that duties must "remain in force only as long and to the extent necessary
 to
counteract subsidization which is causing injury"). In particular, the Panel focussed on the issue of
privatization, finding that an investigating authority must examine the effect of a privatization in order
to ensure that any duties applied corresponded to th e amount of injurious subsidization. The United
States has failed to respect this obligation in its "arguendo findings", in respect of the British and
Spanish cases.

FRENCH CASE

Question 25: The United States alleges that the claim on likelihood of injury as regards the French
Section 129 determination is outside this Panel's mandate because it is not included in the Request for
establishment. Can the European Communities confir m that this is the case? If not, could the
European Communities indicate where in the Requ est for establishment this claim is included?
(European Communities)

Answer: The claim is made in paragraph 1 of the second paragraph on page 2 of the Request for
Establishment. It is there that the EC claims th at the US is maintaining duties inconsistently, with,

inter alia, Articles 21.1 and 21.3.
551 Those provisions require that subsidies be maintained only where
subsidization is causing injury.

Question 26: Did the four classes of share offering result in different classes of shares, one common
stock, or some combination? (European Communities)

Answer: Usinor has only one class of shares. According to the International Offering Prospectus, all
shareholders have the right to participate in gene ral meetings and to vote according to the number of
shares they hold. Each share confers on the holder the right to one vote. There is no distinction on
the basis of the share offering in which the specific shares were purchased.
552

Question 30: Did the European Communities provide informa tion related to the effect of different
incentives and restrictions on the respective risk premiums of the four classes of share offering? If so,
did the USDOC take this informatio n into account? Plea se see the Usinor Prospectus, inter alia, at
pages 21-24. (European Communities/United States)

Answer: In the French Section 129 proceeding, the G overnment of France (GOF) and Usinor put on
the record information regarding the effect of the different incentives and restrictions on the
respective prices of the shares. For example, in its comments on the USDOC's preliminary
determination in the Section 129 proceeding, Usinor indicated that "the sale of Usinor shares to
employees included restrictions on resale that entailed the purchasers to bear increased risks of loss in
the market." According to Usinor, "the fair mark et value of these shares was naturally lower than the
Usinor shares sold without similar resale restrictions."
553

 The EC finds no reference to such ev idence in the USDOC determination.

Question 31: Where can the Panel find more specific informa tion than that provided in the Usinor
Prospectus on the terms of the employee share offering? (European Communities)

Answer: The European Communities has provided the Pane l the Order of the French Minister of
Economic Affairs and Finance of 26 June 1995 Wher eby the Terms for the Privatization of Usinor-
Sacilor Are Defined.554 This order provides in its Article 3:

anciens salariés d'Usinor-Sacilor et de ses f iliales visés à l'article 11 de la loi du 6
août 1986 modifiée susvisée.
Les actions ainsi réservées seront cédées au prix de l'offre publique de vente ou avec
acquises avec un rabais de 20 p. 100 ne pourront être cédées pendant deux ans."

551 A claim is an allegation that particular measures are inconsistent with specific provisions of the
covered agreements.
552 "International Offering Prospectus", p. 78, submitted in GOF/Usinor 2 September 2003
Questionnaire Response, Appendix 4G.
553"Comments of Usinor, S.A.," 1 October 2003, p. 3, n.6. Note that the GOF and/or Usinor had
submitted similar information in other proceedings before the DOC.
554 Exhibit EC- 10. This document was provided to USDOC as Appendix 4F to the response of the
French Government in the s129 Determination. The original of the document provided, and its English
translation, are provided for the facility of the Panel.

 Article 2 concerns the gene ral public offer and states:

gratuite pour dix actions acquises directement de l' Etat à l'occasion de la présente offre, dans
qu'elles aient été conservées au moins dix-huit mois."
Question 32: At page 6 of the French Section 129 determination, the USDOC states:

"The decision to privatize Usinor and th e terms of privatization were executed
through an order of the Ministry of Economic Affairs and Finance, based on an
opinion by the Privatization Commission, both issued in June 1995. Share prices
were set by the Ministry, based on the opini on of the Privatization Commission, in
consultation with Banque S.G. Warburg ("Warburg") and the other Global
Coordinators of the share offerings, and in accordance with the privatization law.
The Privatization Commission stated that it relied upon various valuation
methodologies for Usinor including, inter alia, stock-exchange-based comparisons
and net liquidity flows. Based on its analysis, the Commission recommended a
minimum value for Usinor of FF 15,750 billion."
 Do the parties consider that this price of FF 15,750 billion is the fair market value (FMV) for
Usinor? For what price did the Govern ment of France actually sell Usinor? (European
Communities/United States)
Answer: Based on various objective criteria, including th ose identified by the USDOC in its Section
129 determination discussed above, the Privatization Co mmission determined that the value of Usinor
was not less than FF 15,750 billion. This price, therefore, represents the minimum value of the
company on the market. The price for Usinor iden tified by the Privatization Commission was for the
sale of 186,544,395 shares, for an average minimum price of FF 84.43.
 By 1997, [XXX] shares had been transferred by the GOF, directly or indirectly, to the
public.
555 The total price paid for the shares transfe rred, directly or indirectly, by the GOF was
FF [XXX]. Thus, the average price paid for Usi nor shares FF [XXX] exceeded the average minimum
price recommended by the Privatization Commission, noted above, of FF 84.43.556

Question 34: The Panel understands that the employee/retiree offering was characterised as
"preferential" by the Government of France itself. Was this term "preferential" only used to
characterize the employee/retiree share offering? (European Communities)

Answer: The term "preferential" was used in the International Offering Prospectus in reference to the
employee/retiree share offering. The European Communities does not believe that the Government of
France referred to other share offerings as "preferen tial." However, it clearly considered other share
offerings provided advantages (see, e.g. the referenc e to certain shareholders who had retained their
shares, benefiting from free shares - cited in para. 19 above, response to Question 31)

555 This figure includes shares sold in 1997 which we re considered to be part of the privatization of
Usinor. The US Court of International Trade, in its review of the USDOC's remand determination in the
Allegheny Ludlum case, found that the USDOC had correctly analysed the GOF's sale of the shares in 1997 as
part of the privatization process. See Allegheny Ludlum Corp. v. United States , 246 F. Supp. 2d. 1304, 1311
(CIT 2002).
556 The numbers in brackets in the text above contain business confidential information. The European
Communities requests that this information not be used in the final report or made public.

Question 35: Did most Usinor employees participate in the employee share offering? (European
Communities)

Answer: Yes. Around 35,000 out of Usinor's workforce of 61,000 participated in the
employee/retiree offering. Around 30per cent of th e company's retirees purchased shares under this
offering.
Question 36: In the French Section 129 determination, the USDOC concludes that the employee
share price was "preferential", i.e. lower than the market-clearing price. Yet it also concludes that
the employee share resale restriction, together with restrictions on the French offering and the stable
shareholders offering, constituted a "committed investment" because these restrictions "were aimed at
encouraging the purchasers to hold onto their shares for a period of time".
557 The USDOC stated that
"there is no evidence indicating that these commitmen ts distorted the amount that share purchasers
were willing to pay"; therefore it concluded that "a ny committed investments were fully reflected in
the share price". Do these findings indicate that the employee share price accurately and fully
reflects the employees' willingness to hold onto the shares for a minimum period? Please explain how
these findings relate. (European Communities/United States)

Answer: The European Communities would be grateful for an explanation from the United States as
to how these two findings relate, after which it will be in a position to offer more specific comments.

UK CASE

Question 41: Which subsidy programmes is the United States currently countervailing? Which
recurring programmes form the basis of the USDOC' s affirmative determination of likelihood of
continuation or recurrence of subsidisation in the UK Section 129 determination? (European
Communities/United States)

Answer: The European Communities would, like the Panel, welcome clarification from the United
States on these issues.

Question 42: What evidence did the European Communities/UK Government/Corus provide
regarding recurring subsidisation? When did they prov ide it? In the Section 129 determination? In
the sunset review? Please distinguish between evidence on general programmes and those specific to
either British Steel or Glynwed, if applicable. In the Section 129 determination, did they provide any
evidence on the same programmes additional to that evi dence already provided in the sunset review?
Did the evidence regarding non applicable/non lo nger available subsidy programmes submitted
during the sunset review concern the count ervailed subsidy programmes benefiting Glynwed?
(European Communities/United States)

Answer: The European Communities, the UK Gove rnment and Corus provided evidence
demonstrating that: (i) Glynwed no longer produ ced the subject merchandise; (ii) the benefits
conferred by certain of the subsidy programmes that were not specific to BS plc were entirely
amortised, and (iii) the subsidy programmes that were not specific to BS plc had been abolished or
were no longer available to the UK steel industry.
558 This evidence was submitted in the Section 129
proceeding, after the USDOC issued its draft S ection 129 determination on 24 September 2003. Prior
to the USDOC's issuance of its draf t Section 129 determination (i.e., in the sunset review and in the
early stages of the Section 129 proceedings), the enti re focus by both the USDOC and the parties had

557 France Section 129 determination, p. 9.
558 See EC FWS, paras. 51-58.

been on the privatization of BS plc and its impact on the subsidies that had previously been found to
confer a benefit on the government-owned entity.
 The Panel's question also asks whether eviden ce was also submitted regarding the subsidies
bestowed upon BS plc. However, the evidence rega rding that entity submitted in the sunset review
and the Section 129 proceeding focused on its pr ivatization, and whether the privatization
extinguished the prior non-recurring subsidies that it had received when it was a government-owned
entity.

Question 43: When did Glynwed stop production of the product at issue? When did respondents first
submit this evidence? Why didn't the respondents provide this evidence during the sunset review
investigation? (European Communities)

Answer: At the time of the investigation in 1993, Glynwed was primarily a producer of steel bar
products, which are outside the scope of the in vestigation and the count ervailing duty order.
However, the width of one of its bar products appe ared to fall within the scope of the CTL Plate
petition filed in 1992. On 21 May 1999, Glynwed so ld the equipment, inventory, and certain other
assets of its bar-producing businesses to an unaffiliated US producer, Niagara LaSalle.
559 After that
date, Glynwed no longer produced merchandise that could have fallen within the scope of the
countervailing duty order.

 This evidence was submitted in the Section 1 29 proceeding, after the USDOC issued its draft
Section 129 determination on 24 September 2003. Prior to the USDOC's issuance of its draft Section
129 determination (i.e., in the sunset review and in the early stages of the Section 129 proceedings),
the entire focus by both the USDOC and the parties had been on the privatization of BS plc and its
impact on the subsidies that had previously been found to confer a benefit on the government-owned
entity.

 The USDOC was certainly aware that Niagara- LaSalle had purchased equipment, inventory
and other assets from Glynwed. In fact, as early as November 1999, the USDOC determined that
Niagara-LaSalle was the successor-i n-interest to Glynwed in an antidumping and countervailing duty
review concerning hot-rolled lead and bismuth carbon steel products from the UK.
560

Question 45: What is the cash deposit rate(s) for the relev ant products in this case? Is the legal
basis for this cash deposit rate(s) the original inves tigation, the original sunset review, or the revised
sunset review provided in the Section 129 determination? (European Communities/United States)

Answer: The cash deposit rates for imports of the subject merchandise remain 0.79per cent for
Glynwed and 12.00 per cent for "all other" manufacturers/exporters.

Question 49: Given the text of Article 21.1 SCM, which provides that "a countervailing duty shall
remain in force only as long as and to the extent necessary to counteract subsidisation which is
causing injury", could one assume that a change in circumstances, especially one affecting the level
of subsidised imports, would require an authority to revaluate injury? What is the relationship
between the obligations in Article 21.1 SCM and Article 21.3 SCM? (European Communities/United
States)

559 See EC FWS, paras. 51-52.
560 See: (Case C-412-810) Certain Hot-Rolled Lead and Bismuth Carbon Steel Products From the
United Kingdom: Final Results of Changed- Circumstances Antidumping and Countervailing Duty
Administrative Review; Decision of 30 November 1999 (64 FR 66880) (Exhibit EC-11).

Answer: The European Communities believes that Article 21.1 is a general rule which finds specific
expression in Article 21.3.
561 There is, therefore, in the circumst ances before the Panel, an obligation
to revaluate injury.

SPANISH CASE

Question 50: In its First written submission, the United States argues that "USDOC assumed that the
privatization[] in ... Spain [was] at arm's-length and for fair market value"
562 Can the United States
identify in the text of the Spain Section 129 determ ination the facts and circumstances on the basis of
which the USDOC "assumed" that the privatization of Aceralia was at arm's length and for
FMV? (United States)

Question 51: Which subsidy programmes is the United States currently countervailing? Which
recurring programmes form the basis of the USDOC' s affirmative determination of likelihood of
continuation or recurrence of subsidisa tion in the Spain Section 129 determination? (European
Communities/United States)

Answer: The European Communities would, like the Panel, welcome clarification from the United
States on these issues.

Question 52: What evidence did the European Communities/Government of Spain provide regarding
recurring subsidisation? When did they provide it? In the Section 129 determinations? In the sunset
reviews? Please distinguish between evidence on general programmes and those specific to Aceralia.
In the Section 129 determination, did they provid e any evidence on the same programmes additional
to that evidence already provided in the sunset review? (European Communities/United States)

Answer: The European Communities and the Government of Spain provided evidence as to the
"recurring subsidies", which demonstrated that the programmes that had been found to be
countervailable by the USDOC in the investigation had been abolished or had ceased to provide any
meaningful benefits to the exporters of the s ubject merchandise. Specifically, the European
Communities reviewed the programmes that had origin ally been countervailed in the investigation,
and noted that they either no longer existed (the Royal Decree 878/81 and the 1984 Council of
Ministers Meeting, and the 1987 Government Delegated Commission on Economic Affairs), no
longer applied to the steel industry (the Law 60/78) , or would shortly cease to exist (Article 54 ECSC
Loans).
563 The latter programme in fact has since ceased to exist in light of the expiry of the ECSC
itself in July 2002.

 The European Communities and the Government of Spain submitted this evidence to the
USDOC in the sunset review, and reiterated these points in the Section 129 proceeding, after the
USDOC issued its draft Section 129 determination.564

 Although the Panel's question also asks to distinguish between evidence on general
programmes and those specific to Aceralia, the info rmation submitted specifically regarding Aceralia
focused on the privatization of the former govern ment-owned entity and whether the privatization
extinguished the prior non-recurring subsidies bestowed upon that entity. In addition, as noted above,
the Government of Spain and the European Communities had provided information to the USDOC
demonstrating generally that the programs that ha d previously been identified as providing recurring

561 See paras. 7.107 and 7.108 of the Panel's original report.
563 EC Sunset Review Response on Spain, p. 3.
564 See EC FWS, paras. 24, 59.

subsidies to the government-owned entity, had be en abolished or ceased to provide meaningful
benefits to the exporters of th e subject merchandise. This info rmation had been provided to the
USDOC in both the sunset review and the Section 129 proceeding.

Question 53: What is the cash deposit rate(s) for the relev ant products in this case? Is the legal
basis for this cash deposit rate(s) the original inves tigation, the original sunset review, or the revised
sunset review provided in the Section 129 determination? (European Communities/United States)

Answer: The cash deposit rate for imports of the su bject merchandise remains 36.86per cent for both
Aceralia and "all other" manufacturers/exporters.

ANNEX B

RESPONSES OF THE UNITED STATES
TO QUESTIONS BY THE PANEL

SCOPE OF THE PANEL'S MANDATE

Question 1: In its written submissions, the United States refers inter alia to two excerpts from the
Appellate Body Report in EC- Be d Linen: "we do not see why that part of a redetermination that
merely incorporates elements of the original determination ... would constitute an inseparable
element of the measure ta ken to comply with the DSB rulings in the original dispute"; and "India
[sought] to challenge an aspect of the original measure which has not changed, and which the
European Communities did not have to change, in order to comply with the DSB recommendations
and rulings to make that measure consistent ... . " Given the specific facts and circumstances in EC –
Bed Linen, please explain how the Appellate Body ruli ng applies to this dispute. In other words, how
do the relevant facts and circumstances in EC – Bed Li nen apply to the facts and circumstances of the
three Section 129 determinations at issue? (United States)

Answer: In EC – Bed Linen , India sought to use the Article 21.5 proceeding to have the Panel
address issues that were not related to compliance with the Dispute Settlement Body's ("DSB")
recommendations and rulings in the underlying dis pute. The European Communities ("EC") opposed
India's efforts and explained why permitting India to advance such claims in an Article 21.5
proceeding would be "manifestly unfair":

"Article 21.5 advances the purpose of achievi ng a 'prompt' settlement of the disputes
by providing an expeditious procedure to establish whether a Member has properly
implemented the DSB recommendations and rulings ... . The accelerated process
provided for in Article 21.5 is not necessary, however, with respect to claims that
could have already been pursued before th e original panel. Article 21.5 is not
intended to provide a 'second service' to complaining parties which, by negligence or
calculation, have omitted to raise (or argue) certain claims during the original
proceeding.
India's reading of Article 21.5 would diminish the procedural rights of defendants for
no good reason, thereby altering the balan ce of rights and obligations of Members
which the DSU purports to maintain. In th e first place, the deadlines are shorter in
Article 21.5 proceedings, thus rendering mo re difficult the defence. Second, and
more importantly, the defending party woul d not be entitled to a "reasonable period
of time", with the consequence that ... 'A Member ... might, depending on the nature
of the violation, be subjected to suspension of concessions'.
In so far as India did not pursue a claim with respect to a finding set out in the
original measure before the original pane l, the EC could assume legitimately that
such finding was WTO consistent and did not need to be corrected. It would be
manifestly unfair to expose the EC to th e possibility of an immediate suspension of
concessions under Article 22 of the DSU in response to a violation which the EC
could not have anticipated when the impl ementing measures were taken and which it
will be given no opportunity to correct."565

565 Appellee Submission of the European Communitie s, paras. 139-142 (citations omitted) (Exhibit
US-6).

 The EC argued that "the right to make a claim must be exercised promptly, with the
consequence that Article 21.5 of the DSU must be interpreted as excluding the possibility to raise or
argue for the first time a claim before an Article 21.5 Panel when the same claim could have been
pursued before the original panel." 566 In short, the EC did not appear to believe, when it was a
respondent, that the limitations inherent in an Article 21.5 proceeding were a "technicality," a position
the EC is now adopting as a complainant.

 The Appellate Body agreed with the position th e EC adopted at that time, and which the EC
appears to disagree with now, i.e., that unchanged parts of an original measure, which did not have to
be changed in order to comply with the DSB reco mmendations and rulings, are not subject to Article
21.5 proceedings. The quotation in the Panel's question confirms that point.

 The facts of this dispute conform precisely to the scenario in EC – Bed Linen. Just as the EC
argued that India should not be permitted to use Article 21.5 to advance claims that "could have
already been pursued before the original panel" because the EC "could assume legitimately that such
finding was WTO consistent and did not need to be corrected," so the EC should not be permitted to
do so here.

 In this dispute, the DSB recommendations and rulings concerned privatization and
privatization alone. With respect to the Britis h sunset review, the EC's arguments concerning
Glynwed are unchanged findings from the original proceeding. In the original sunset review, USDOC
determined that subsidization was likely to cont inue or recur not only because of British Steel, but
also because of Glynwed. USDOC's conclusion regarding Glynwed was not predicated on a
privatization analysis.
567 Therefore, USDOC's finding regarding Glynwed is an aspect of the original
determination that did not change and did no t have to change to comply with the DSB
recommendations and rulings. As the EC noted in EC – Bed Linen, "the re-determination confirmed,
without making any changes, the findings made in th e original determination ... . That confirmation
was made for reasons of transparency and legal certainty and was not, from a legal point of view,
strictly necessary ... ." 568 The same is true for the finding rega rding Glynwed. As a result, consistent
with EC – Bed Linen , an Article 21.5 proceeding is not the appropriate forum to address any
grievances the EC might have regarding USDOC's Glynwed findings.

 The posture of the Spanish sunset review is th e same. In the original sunset review, USDOC
determined that subsidization was likely to continue or recur not only because USDOC concluded that
the privatization of Aceralia did not extinguish the benefit from non-recurri ng (and hence allocable),
pre-privatization subsidies, but because of the exis tence of other subsidy pr ograms that do not confer
allocable subsidies (because they provide recurring subsidies). 569 Therefore, USDOC's finding
regarding the other subsidy programs is an aspect of the original determination that did not change
and did not have to change to comply with the DSB recommendations and rulings and, as the EC
argued in EC – Bed Linen, is not subject to Article 21.5 proceedings.

566 Appellee Submission of the European Communities, para. 147 (Exhibit US-6). Indeed, the EC even
went so far as to suggest that permitting a compla ining Member to advance a claim in an Article 21.5
proceeding when that claim could have been brought in the original proceeding implicated the "requirement to
engage in dispute settlement procedures in good faith." Id., para. 143.
567 Issues and Decision Memorandum in Cut-to-Length Carbon Steel Plate from the United Kingdom:
Final Results of Expedited Revi ew of Countervailing Duty Order , 65 Fed. Reg. 18309 (April 7, 2000) (Exhibit
EC-6).
568 Appellee Submission of the European Communities, para. 131 (Exhibit US-6).
569 Issues and Decision Memorandum in Cut-to-Length Carbon Steel Plate from Spain , p. 13-14
(Exhibit EC-7).

 With respect to arguments about the Interna tional Trade Commission's ("ITC") likelihood of
injury determination, the EC in EC – Bed Linen again provides an apt assessment of the situation.
"Those elements of the original determination that were not addressed in the re-determination ... are
not part of the measure 'taken to comply'. Instead, they are part of the original measure and, as such,
cannot be challenged before an Ar ticle 21.5 Panel but only before an ordinary Panel established in
accordance with Article 4.7 of the DSU."
570 The United States agrees, as did the Appellate Body
when it confirmed that unchanged parts of a measure that did not have to be changed to comply with
the DSB recommendations and rulings are not properly part of an Article 21.5 proceeding.

 The United States is not arguing that all of the EC 's claims are beyond the scope of this Panel.
For the sunset review from France, the United States ag rees that it is proper for this Panel, as part of
its Article 21.5 jurisdiction, to review USDOC's re vised privatization analysis of Usinor. USDOC's
revised privatization analysis was not part of the original determination and was a change necessary to
comply with the DSB recommendations and rulings.

 In the words of the EC, to permit consider ation of the claims regarding Glynwed, the
recurring Spanish subsidy programs, and injury in this forum would provide a "second service" to a
complaining party that, "by negligence or calculation" omitted to raise the claims during the original
proceeding; it would "diminish the procedural rights" of the United States "for no good reason;" and
would deprive the United States of a "reasonable period time" to come into compliance. The United
States "could assume legitimately" that these findings were "WTO consistent and did not need to be
corrected." It would be "manifestly unfair to e xpose" the United States to the "possibility of an
immediate suspension of concessions ... in response to a violation which the" United States "could not
have anticipated when the implementing measu res were taken and which it will be given no
opportunity to correct." Thus, the ma terial facts and circumstances of EC – Bed Linen are perfectly
analogous to the facts and circumstances in this dispute.

 The EC has argued that EC – Bed Linen is factually distinct from the present dispute because
in the former India advanced the same claim in both the original proceeding as well as the Article 21.5
proceeding. However, as the excer pts from the EC's appellee submission in that dispute confirm, the
argument the EC advanced, and which the Panel a nd the Appellate Body accepted, was not limited to
situations in which the "same claim" was being a dvanced; the EC logically argued that a claim that
could have been brought in the original proceeding could not for the first time be brought in an Article
21.5 proceeding. Indeed, the fact that India was a ttempting to raise the same claim merely provided,
in the EC's view, " additional grounds"
571 – not the only grounds – for considering India's claim
beyond the scope of an Article 21.5 proceeding. Th e Appellate Body's conclusions, as quoted by the
Panel in this question, demonstrate that its c onclusions regarding the scope of an Article 21.5
proceeding are not limited to situations in which th e same claim is advanced . Instead, they apply
more broadly to situations in which a Member raises a claim that does not pertain to the measure
taken to comply.

Question 3 : Is the USDOC asserting that the change-o f-ownership methodology had no material
effect on the other elements of the sunset review determination? Is the USDOC arguing that even if
the new change-of-ownership methodology resulted in a changed amount of subsidisation, this finding
would not require the USDOC to revise the entire determination? (United States)

Answer: The United States does assert that application of its new privatization methodology did not
change the challenged subsidy likelihood determinati ons – those determinations remained affirmative
despite the reexaminations performed in the revised sunset reviews. In addition, the United States

570 Appellee Submission of the European Communities, para. 134 (Exhibit US-6).
571 Appellee Submission of the European Communities, para. 149 (Exhibit US-6) (Emphasis added).

disputes, for the reasons explained below, that th e revised sunset reviews could have resulted in a
changed amount of subsidization.

 Article 21.3 of the SCM Agreement provides that a definitive countervailing duty must be
terminated after five years unless the authorities determine that the "expiry of the duty would be likely
to lead to continuation or recurrence of subsidizati on and injury." The focus of a sunset review under
Article 21.3 is thus on future behavior, i.e., whether subsidies and injury are likely to continue or
recur in the event of expiry of the duty.

 USDOC's subsidy likelihood determination is not dependent on the magnitude of the subsidy
rate in any prior segment of the countervailing duty proceeding, and USDOC does not calculate a
subsidy rate for purposes of the subs idy likelihood determination itself.
572 Further, USDOC conducts
its subsidy likelihood determinati on on an order-wide, not company-specific, basis, unlike certain
determinations in investigations and assessment reviews.573

 In sum, application of USDOC's new privati zation methodology to the revised sunset review
determinations cannot ha ve had any impact on subsidy calcu lations. Application of the new
privatization methodology did not result in the elimination of subsidization on an order-wide basis. In
the British review, the analysis of Glynwed's subsidies was not based on the privatization
methodology; similarly, in the Spanish review, the analysis of the recurring Spanish subsidy programs
was not based on any privatization methodology.

Question 4: Does the United States consider that the amount of subsidisation is relevant for the
purpose of determining injury? Is the same cons ideration also relevant in the context of a Sunset
review? (United States)

Answer: Nothing in Article 15 of the SCM Agreement requires investigating authorities to consider
the level of subsidization in an injury analysis . Nor does Article 21.3 require that the authorities
consider the level of likely subsidization in determini ng whether injury is likely to continue or recur.
If the Panel is asking about the relationship between Article 15 and Article 21.3, the United States
notes that Article 3 of the Antidumping Agreement does not apply to sunset reviews under Article
11.3 of that Agreement;
574 by direct analogy, Article 15 of the SCM Agreement does not apply to
Article 21.3 sunset reviews of countervailing duty orders.

Question 5: If by implementing the DSB recommendations and rulings, another inconsistency arises,
do the parties believe that an investigating authority is obligated to address this further inconsistency
in the context of the DSB recommendations and rulings? Please comment in light of the following
excerpt from paragraph 79 of the Appellate Body Report in EC – Bed Linen:

"... It is to be expected, therefore, that the claims, arguments, and factual
circumstances relating to the "measure taken to comply" will not, necessarily, be the
same as those relating to the measure in the original dispute.
575 Indeed, a
complainant in Article 21.5 proceedings may well raise new claims, arguments, and
factual circumstances different from those raised in the original proceedings, because
a "measure taken to comply" may be incons istent with WTO obligations in ways

572 Appellate Body Report, United States – Sunset Review of Anti-Dumping Duties on Corrosion-
Resistant Carbon Steel Flat Products from Japan, WT/DS244/AB/R, adopted 9 January 2004, para. 127 (the
authorities in an antidumping sunset review need not "calculate or rely" on dumping margins).
573 Id. at paras. 155-158 (Sunset likelihood determination may be made on an order-wide basis).
574 See, Appellate Body Report, United States – Sunset Reviews of Antidumping Measures on Oil
Country Tubular Goods from Argentina, WT/DS268/AB/R, adopted December 17, 2004, para. 280.
575 (footnote original) Ibid.

different from the original measure. In our view, therefore, an Article 21.5 panel
could not properly carry out its mandat e to assess whether a "measure taken to
comply" is fully consistent with WTO obligations if it were precluded from
examining claims additional to, and different fr om, the claims raised in the original
proceedings.
 576 (European Communities/United States)
Answer: At the outset, the United States notes that the f actual situation put forth in the question is
not the factual situation before the Panel. The newly alleged inconsistenc ies did not arise in the
implementation of the DSB recommendations and rulings. USDOC's findings regarding Glynwed,
the Spanish subsidy programs, and the ITC's likelih ood of injury determination were unchanged parts
of the original measure. Therefore, the EC's claims in that regard are not alleged "inconsistencies"
"arising" out of implementation of the recommenda tions and rulings but rather are aspects of the
original determination that are simply, in the words of the EC, "confirmed, without making any
changes ... for reasons of transparency" in the revised determination.
577

 In the Bed Linen quotation that the Panel cites a bove, the Appellate Body cited to Canada –
Aircraft. The quotation from Canada – Aircraft makes clear that if the measure taken to comply is
itself WTO-inconsistent, then an Article 21.5 pane l may review the measure taken to comply for
WTO-inconsistencies. Article 21.5 provides two b ases for review of a "measure taken to comply" –
either there is a claim that no such measure exists, or there is a claim that the measure is inconsistent
with a covered agreement. In either case, though, the Panel is reviewing only
 a "measure taken to
comply." There is no reference in Article 21.5 to any other type of measure, and therefore there is no
jurisdiction under Article 21.5 to review any othe r measure. Accordingly, a panel's review under
Article 21.5 of a measure taken to comply is not limited to the DSB recommendations and rulings; if
inconsistencies with WTO obligations other than those addressed in the DSB recommendations and
rulings arise with respect to those aspects of the determination that changed to comply with the
recommendations and rulings, then an Article 21.5 panel would have jurisd iction to review those
changed aspects for WTO consistency.

Question 6: Which laws and regulations govern a Sec tion 129 proceeding? How does the Section
129 procedure work in practice? Please explain the respective responsibilities of the USTR and the
USDOC in Section 129 proceedings and how these agencies interrelate. (United States)

Answer: Section 129(b) of the Uruguay Round Agreemen ts Act, codified at 19 U.S.C. 3538(b),
addresses instances in which the DSB has found that an action taken by USDOC in an antidumping or
countervailing duty proceeding is inconsistent with US obligations under the AD or SCM
Agreement.578 In such an instance, USTR may ask USDOC to issue a determination that would render
that agency's action not inconsistent with the r ecommendations and rulings of the DSB. USTR plays
no role in that determination. USDOC will then is sue the revised determination within 180 days of
receiving the request from USTR.

576 (footnote original) As we put it in Canada – Aircraft (Article 21.5 – Brazil):
Indeed, the utility of the review envisaged under Article 21.5 of the DSU would be seriously
undermined if a panel were restricted to examini ng the new measure from the perspective of the claims,
arguments and factual circumstances that related to the original measure, because an Article 21.5 panel would
then be unable to examine fully the "consistency with a covered agreement of the measures taken to comply", as
required by Article 21.5 of the DSU.
(Appellate Body Report, Canada – Aircraft (Article 21.5 – Brazil) , para. 41) We defined the function
of Article 21.5 proceedings in the same vein in our Report in US – Shrimp (Article 21.5 – Malaysia) (para. 87).
577 Appellee Submission of the European Communities, para. 131 (Exhibit US-6).
578 See United States – Section 129(c)(1) of the Uruguay Round Agreements Act, WT/DS221/R,
adopted August 30, 2002.

 Section 129(b) also provides that USTR ma y direct USDOC to "implement" its revised
determination for purposes of US law. The Statement of Administrative Action provides an
explanation of what this language means in the context of the statute:

"The Trade Representative may decline to request implementation of the [revised]
determination. This might be the case, for example, if USDOC issued a final
affirmative subsidy determ ination and a WTO panel subsequently finds that
USDOC's analysis was not consistent with the Subsidies Agreement. On making a
new determination at the Trade Representa tive's direction, USDOC could correct the
analytical flaw found by the Panel without changing the original outcome. In such a
case, there would be no need to implement the new determination as a matter of
domestic law."
579
 The circumstances discussed in this passage de scribe precisely the situation in the Article
21.5 matter before the Panel.

 The present dispute involves three sunset review s. Under the US system, a sunset review
only determines whether an order is continued or revoked. It does not affect companies on an
individual basis except if the order is revoked. W ith respect to these three reviews, USDOC's revised
determinations were affirmative and the orders were therefore con tinued. For that reason, companies'
entries were not affected by the revised determination, and there was no need to "implement" for
purposes of US law.

Question 7: What are the implications if the USTR do es or does not direct implementation? (United
States)

Answer: In the case of the three reviews at hand, th e absence of a direction to implement has no
implications. Under US law, there was no need to implement because the revised determinations did
not affect the outcome; for example, the revised de terminations did not result in revocation of the
order. Therefore, USTR exercised its discretion not to direct implementation.

Question 8: Does the USDOC have the discretion to implement DSB recommendations and rulings
on its own initiative? Has the USDOC done so on any occasion? If so, under which circumstances?
(United States)

Answer: USDOC has no independent authority to implement DSB recommendations and rulings on
its own initiative. The Section 129 process is th e standard procedure through which USDOC revises
determinations to come into compliance.

Question 9: Does the USDOC have the discretion to recalcul ate the margin of subsidisation in a
Section 129 proceeding? If so, under which c onditions could a revised margin lead to a new
likelihood-of-injury determination? (United States)

Answer: As stated above, USDOC does not, and is not required to, recalculate margins of
subsidization in sunset reviews. Consequently, an y revisions to USDOC's sunset determinations that
might be occasioned by a proceeding under Section 129 cannot result in any recalculations to margins
of subsidization.

579 Statement of Administrative Action, p. 356 (Exhibit US-7).

Question 10: Does the USDOC have the discretion to open the record and consider new evidence in
a Section 129 proceeding? Has the USDOC done so on any occasion? If so, under which
circumstances? (United States)

Answer: USDOC may consider new evidence where it is relevant to the measure taken to comply,
which in this case involved the application of US DOC's new privatization methodology. Under the
Modification Notice, a number of factual issues must be resolved when USDOC applies its new
privatization methodology. Consequently, wher e it was necessary for USDOC to apply the new
methodology for purposes of resolving those factual issues, USDOC gave the interested parties an
opportunity to submit new evidence, and USDOC considered that evidence.

Question 11: In a Section 129 proceeding, does the USDOC have the discretion to reconsider
evidence already on the record in the underlying determination? Has the USDOC done so on any
occasion? If so, under which circumstances? (United States)

Answer: In a proceeding under Section 129, USDOC may consider relevant evidence from the
underlying determination. USDOC may, however, either take action on its own to move such
evidence onto the record of the Section 129 proceedi ng or offer interested parties the opportunity to
place such evidence on the record. Evidence from the underlying determinations was placed on the
record of several of the Section 129 proceedings occasioned by the DSB recommendations and
rulings in this case – including all of the revised Fr ench and Italian reviews – and USDOC considered
that evidence.
580

Question 12: What are the main features of an "expedite d" sunset review? How does this compare
to other types of sunset reviews? (United States)

Answer: In an "expedited" sunset review under sec tion 751(c)(3)(B) of the Tariff Act of 1930, as
amended ("Act"), USDOC normally will issue a fina l determination within 120 days of the initiation
of the sunset review; in a "full" sunset review, USDOC's deadline is 240 days under section
751(c)(5)(A) of the Act.

 The additional difference between "expedited" and "full" sunset reviews at USDOC is that, in
the case of the latter, USDOC will issue preliminary results before issuing final results in the review.
Question 13: In a sunset review, as a matter of practice, does the USDOC make a finding on the rate
of subsidisation? (United States)

Answer: No. See Response to Question 3.

Question 14: Does US law require the USDOC to determ ine a rate likely to prevail and report this
rate to the ITC in the sunset review? For what purpose? (United States)

580 See, for example, Issues and Decision Memorandum for the Determination Under Section 129 of the
Uruguay Round Agreements Act: Countervailing Duty Administrative Review: Grain-Oriented Electrical Steel
from Italy (24 October 2003), p. 4 (Exhibit US-8) (USDOC looked at new evidence in concluding that
privatization extinguished the benefit).

Answer: In a sunset review, US law requires that USDOC report to the ITC a rate likely to prevail in
the event of revocation. That rate is not calculate d in the sunset review, and it is not used for the
imposition, collection, or assessment of duties. Nor does USDOC use it to determine whether
countervailable subsidization is likely to continue or recur in the event of revocation. The ITC may
consider the rate in making its likelihood of injury determination. In these reviews, the ITC did not
rely on the rates.

Question 15: Does the USDOC have the discretion to open the record and consider new evidence in
an expedited sunset review? Does the USDOC have the discretion to open the record and consider
new evidence in other types of sunset reviews? (United States)

Answer: During the course of a sunset review, exped ited or otherwise, USDOC solicits and accepts
information from parties, all of which is then considered in making a final determination. For
expedited sunset reviews, see 19 C.F.R. §351.308(f); 19 C.F.R. §351.218(d)(3). For sunset reviews in
general, see 19 C.F.R. §351.218(e)(2); 19 C.F.R. §351.218(d)(3).

Question 16: At page 7 of the UK Section 129 determi nation the USDOC states: "The Department's
duty, in reaching a determination under Section 129(b)(2) of the URAA for this case, is not to
reconduct the original sunset review in its totality, but to render it not inconsistent with the findings of
the Appellate Body." Does the UK Section 129 de termination also intend to render the original
sunset review not inconsistent with the adopted findings of the Panel? (United States)

Answer: USDOC's Section 129 determination was intended to render the original sunset review not
inconsistent with the recommendations and rulings of the DSB. The DSB adopted both the Appellate
Body report and the Panel report as modified by the Appellate Body.

Question 18: How did the United States implement the DSB's recommendations and rulings in the
three sunset reviews at issue? In the Notice of Im plementation, the USDOC indicates that "[b]ecause
the US Trade Representative declined to di rect the Department to implement the revised
determinations with regard to the four sunset revi ews involved in the WTO dispute, [the USDOC is]
not implementing these Section 129 Determinations". What constitutes "implementation" in these
cases? (European Communities/United States)

Answer: As a previous panel has noted, terms used in a Member's municipal law and those used in
WTO provisions "do not necessarily have the same meaning."
581 In this dispute, the United States
implemented the recommendations and rulings of th e DSB by revising the determinations to render
them not inconsistent with those recommendations and rulings. However, for purposes of US law,
USTR determined that it was unnecessary to "imple ment" the revised determinations because, as
discussed in greater detail above, the revisions coul d not have resulted in re vocation of any of the
orders.

Question 19: If the Section 129 determinations constitute "i mplementation" in the four sunset cases,
what is the relevance of the fact that the USTR declined to direct implementation? Does the absence
of the USTR's direction to implement affect the legal status of the three Section 129 determinations at
issue? If so, to what extent? (United States)

581 United States – Sections 301-310 of the Trade Act of 1974, WT/DS152/R, adopted January 27, 2000,
para. 7.20.

Answer: As noted above, the United States implemen ted for purposes of the WTO by revising the
determinations in question. However, because complying with the DSB recommendations and rulings
did not require the United States to change the out come of the determinations, there was no need,
under US law, for USDOC to "imp lement." Accordingly, the ab sence of USTR direction to
implement means that the three determinati ons remain unimplemented under US law, but
implementation would not have resulted in the revocation of any of the orders.

Question 20 : Why did the USTR direct the USDOC to implement eight of the twelve Section 129
determinations and then decline to direct the US DOC to implement the other four Section 129
determinations? (United States)

Answer: Bringing eight of the twelve determin ations into compliance with the DSB
recommendations and rulings resulted in either a cha nge to the cash deposit rate or revocation of the
order. Therefore, USTR "directed" USDOC to implem ent in order to modify the cash deposit rate or
revoke the order. Bringing the remaining four determinations into compliance only required USDOC
to correct – as the SAA describes it – an "analytical flaw" (the privatization methodology) and did not
affect the outcome of the review. As a result, there was no need to implement as a matter of US law.

Question 21: Do the parties agree that the three Secti on 129 determinations at issue are the
measures taken to comply in these Article 21.5 proceedings? (European Communities/United States)

Answer: Those aspects of the Section 129 determinations that represent revisions to the original
determinations in order to comply with the DS B recommendations and rulings are the measures taken
to comply in these proceedings. With respect to these revised determinations, the revised
privatization analysis of Usinor is a measure take n to comply. By contrast, any findings regarding
Glynwed and the Spanish subsidy programs in the revised sunset review are not measures taken to
comply because they are unchanged aspects of the or iginal determination ha ving nothing to do with
privatization, and they therefore did not need to be changed in order to come into compliance with the
DSB recommendations and rulings.

Question 22: During the meeting, the United States said it understood its obligation to implement the
DSB recommendations and rulings in respect of privatization as requiring it to "remove the taint".
What did the United States mean by the term "remove the taint"? What impact does it have on the
revised sunset determinations? (United States)

Answer: The DSB recommendations and rulings addr essed the WTO-consistency of USDOC's
privatization methodology. The Panel and the Appe llate Body concluded that USDOC's analysis of
the continuing benefit inuring to British Steel after its privatization was not consistent with US WTO
obligations.

 As the Panel stated, the sunset reviews "b ased on the gamma methodology" are inconsistent
with the SCM Agreement .
582 Thus, USDOC eliminated its reliance on a flawed privatization
methodology by assuming that the privatization of Br itish Steel extinguished any continuing benefit.
As the United States has noted, USDOC's original dete rmination to continue the sunset order was not
based solely on findings resulting from use of the flawed methodology; the Issues and Decision
Memorandum in the original sunset determination noted that Glynwed also benefited from a subsidy
program, and Glynwed's subsidization was not subject to a privatization analysis. 583 Therefore, the

582 Panel, para. 8(1)(c).
583 Issues and Decision Memorandum in Cut-to-Length Carbon Steel Plate from the United Kingdom:
Final Results of Expedited Revi ew of Countervailing Duty Order , 65 Fed. Reg. 18309 (April 7, 2000) (Exhibit
EC-6), p. 6, 13.

revised determination is no longer based on the flawed methodology, and the United States has
thereby complied with the recommendations and rulings of the DSB.

 The same is true of the Spanish review, where the original sunset determination was based not
only on the existence of non-recurring subsidies, but al so on the existence of recurring subsidies. The
latter are not affected by privatization and theref ore were not subject to the DSB recommendations
and rulings.

Question 23: Does the United States argue that it has complied with the DSB recommendations and
rulings by referring a respondent company to an alternate procedure, i.e. an administrative review, to
obtain a company-specific rate based on the new privatization methodology? (United States)

Answer: No. The DSB recommendations and rulings a ddressed the following issue: Whether the
privatization methodology then used by the United States was consistent with US WTO obligations
and whether the US decision, in the context of a sunset review, to continue the order was WTO-
consistent in light of the fact that it was based on a flawed analysis of whether the benefit survived the
privatization. The Appellate Body confirmed in Japan Sunset that order-wide Sunset reviews are
permissible and that the United States is not obligated to make company-specific determinations in
those reviews.
584 If British Steel wishes to obtain a re vised company-specific rate, then the
appropriate venue, under US law, is for British Steel to seek an administrative review. However, that
would be unrelated to the question of complying with the DSB recommendations and rulings.

Question 27: Can the United States clarify to whom Usinor's employees/retirees are related? Are
they related to Usinor, as indicated in the Fr ench Section 129 determination, and/or to the
Government of France, as argued in the written submissions? (United States)

Answer: For purposes of the application of the new privatization methodology, USDOC does not
distinguish between the company and its owner. As employees of Usinor, the employees are related
to (or affiliated with) Usinor and, therefore, rela ted to (or affiliated with) the seller, the combined
Usinor/Government of France entity.

Question 28: In its Oral Statement, the United States refe rred for the first time to the concept of
"affiliation" to describe the alleged relation between Usinor and its employees/retirees. Could the
United States explain what this concept means from a legal point of view? Could the United States
provide a citation to US law? Where does the concep t of affiliation appear in the French Section 129
determination? (United States)

Answer: "Affiliation" appears in section 771(33) of the Act. It informs USDOC's interpretation of
the term "related" as that term was applied in the revised French sunset review under Section 129 in
that section 771(33) of the Act makes it clear that the relationship between employers and employees
is one of "affiliation." In fact, Question 8 in the questionnaire sent to French respondents in the
Section 129 proceeding referred both to relatedness and affiliation in setting forth possible criteria for
determining whether the privatization transaction was at arm's length.

 Regardless of whether one uses the term "rel ated" or "affiliated," the issue before USDOC
was whether there was a relationship between buyer and seller such that it would be prudent to
investigate whether that relationship had an impact on the result of the sales process. USDOC
concluded that the relationship betw een Usinor and its employees did necessitate further inquiry. In
this regard, the United States notes that Article 15.4 of the Customs Valuation Agreement provides
that employers and employees are considered to be related parties. USDOC's view that the

584 Appellate Body Report, United States – Sunset Review of Anti-Dumping Duties on Corrosion-
Resistant Carbon Steel Flat Products from Japan, WT/DS244/AB/R, adopted 9 January 2004, para. 150.

relationship between employer and employee might influence the price is not without precedent.
Thus, for purposes of customs valuation, Members have already agreed that a relationship between an
employee and its employer can be grounds for further examination as to whether the price actually
paid whether the price actually paid was influen ced by the relationship between the buyer and the
seller. Similarly, in the French privatization, the fact that USDOC considered the employer and
employee – the buyer and the seller – related (or a ffiliated) simply led to further examination of
whether the price the employees paid for the shares, which the seller described as "preferential," was
in fact at arm's length and for fair market value.

Question 29: In the French Section 129 determination the USDOC states: "We determine that the
employees of Usinor were related to Usinor...".
585 Can the United States indicate the excerpt(s) in
this French Section 129 determination where the reasoning for such a conclusion lies? (United
States)

Answer: US law provides that employers and employees ar e to be considered affiliated (related).
The fact that USDOC finds parties to be affilia ted (related) does not result in a conclusion about
whether the transaction was for fair market value; instead, that finding suggests that the transaction
merits further scrutiny. USDOC made this precise finding in the draft determination, and no one,
including the interested parties, challenged the conclusion.

Question 30: Did the European Communities provide informa tion related to the effect of different
qincentives and restrictions on the respective risk premiu ms of the four classes of share offering? If
so, did the USDOC take this inform ation into account? Please see th e Usinor Prospectus, inter alia,
at pages 21-24. (European Communities/United States)

Answer: The EC never provided USDOC with evidence demonstrating that the "costs" of any
restrictions on the different share classes fully accoun t for the differences in the prices offered to the
buyers. Most especially, the EC never provi ded USDOC with evidence demonstrating how
restrictions on the employee shares might have fu lly accounted for the special ("preferential") price
offered to the employees. Rather, as here, the EC provided USDOC with nothing more than
conclusory allegations.

Question 32: At page 6 of the French Section 129 Determination, the USDOC states:

"The decision to privatize Usinor and th e terms of privatization were executed
through an order of the Ministry of Economic Affairs and Finance, based on an
opinion by the Privatization Commission, both issued in June 1995. Share prices
were set by the Ministry, based on the opini on of the Privatization Commission, in
consultation with Banque S.G. Warburg ("Warburg") and the other Global
Coordinators of the share offerings, and in accordance with the privatization law.
The Privatization Commission stated that it relied upon various valuation
methodologies for Usinor including, inter alia, stock-exchange-based comparisons
and net liquidity flows. Based on its analysis, the Commission recommended a
minimum value for Usinor of FF 15,750 billion."
 Do the parties consider that this price of FF 15,750 billion is the fair market value (FMV) for
Usinor? For what price did the Government of France actually sell Usinor? (European
Communities/United States)

Answer: No. That was an appraised value, not a fair market value. An appraised value is – by
definition – only an pre-sale estimate. It is not the result of a market process. See Modification

585 French Section 129 Decision Determination, p. 6.

Notice, 68 FR at 37131. Moreover, as pointed out in the Issues and Decision Memorandum for the
Section 129 Determination: Corrosion-Resistant Car bon Steel Flat Products from France at 7, this
particular appraised value was treated by the seller as a "minimum value," not even an estimated sales
price.

Question 33: In its First written submission, the United States argues that "although approximately
95 percent of the benefit from previously a llocated subsidies was extinguished by the privatization of
Usinor, the remaining 5 percent of the allocated s ubsidy continued to benefit the privatized entity".
586
In its Second written submission, it further st ates that "USDOC reasonably determined that a
corresponding portion of the allocated benefit continued to be countervailable after privatization".587
During the meeting with the Panel, the United States argued that the privatization extinguished
approximately 95 percent of the pre- privatization, non-recurring subsidies. Can the United States
please indicate to the Panel the excerpt of the S ection 129 determination wh ere that finding can be
found? How does the United States reconcile this with the USDOC's position in the Section 129
determination? Specifically, please see the USDOC's st atement at page 15 of the French Section 129
determination where the USDOC explains:

"In this determination, we have applied the approach laid out in our Modification
Notice, which states that, where we find that the baseline presumption is not rebutted
because a transaction was not made at arm' s length and for fair market value, or
because of severe market distortions, "we will find that the company continues to
benefit from the prior subsidies in th e full amount of the remaining unallocated
balance of the subsidy benefit." See Modific ation Notice, 68 FR at 37138." (United
States)
Answer: USDOC found that the benefit associated solely with the employee shares was a sufficient
basis for an affirmative subsidy likelihood finding in the revised French sunset review – USDOC took
the 95 per cent of the shares that were not sold to Usinor employees out of the analysis because the
benefit associated with those shares had been exti nguished by an arm's-length/fair market value
privatization. See Issues and Decision Memorandum for the Section 129 Determination: Corrosion-
Resistant Carbon Steel Flat Products from France; Final Results of Expedited Sunset Review of
Countervailing Duty Order, at 10 ("Third, the GOF set and received a market-clearing price for
Usinor's shares, except in the employee offering whic h constituted only 5.16 per cent of the sale. ...");
and at 16 ("As described in the 'Conclusion' section a bove [p.12], we have determined that the sale of
shares to Usinor employees permitted the contin uation of certain allocable, non-recurring, pre-
privatization subsidies at an above de minimis rate beyond the original sunset review. On this basis,
we reaffirm our original likelihood determination. ...").

 These findings are entirely consistent with USDOC's statement from page 15 of the France
Section 129 determination. The statement quoted by the Panel was USDOC's response to the
respondent's argument that, where something less than fair market value (but greater than zero) is paid
for a share, the continuing benefit amount should only be the difference between the price actually
paid and the fair market value. USDOC had alread y rejected that approach when formulating its new
privatization methodology. Modification Notice, 68 FR at 37138. Rather, under USDOC's new
methodology, where less than fair market value is paid for a share, the en tire remaining allocable
subsidy benefit attributable to that share continues to be countervailable.

Question 36: In the French Section 129 determination, the USDOC concludes that the employee
share price was "preferential", i.e. lower than the market-clearing price. Yet it also concludes that
the employee share resale restriction, together with restrictions on the French offering and the stable

shareholders offering, constituted a "committed investment" because these restrictions "were aimed at
encouraging the purchasers to hold onto their shares for a period of time".
588 The USDOC stated that
"there is no evidence indicating that these commitmen ts distorted the amount that share purchasers
were willing to pay"; therefore it concluded that "a ny committed investments were fully reflected in
the share price". Do these findings indicate that the employee share price accurately and fully
reflects the employees' willingness to hold onto the shares for a minimum period? Please explain how
these findings relate. (European Communities/United States)
Answer: In responding to this question, it is necessar y first to clarify the general purpose and scope
of USDOC's examination of potential "committed investments." We direct the Panel's attention to the
thorough explanation of this issue in the Modification Notice, 68 FR at 37133. A fundamental
concern underlying USDOC's examination of committed investments is transparency, that is, whether
the parties to the privatization were aware of the committed investment requirements. If the facts of a
particular privatization demonstr ate the requisite level of transparency, USDOC will generally find
that the presence of committed inv estment requirements is not a basis for finding that the sale was for
less than fair market value.
 In the revised French sunset review, by finding that the committed investment met the
enumerated criteria, USDOC found that any restric tions and requirements were fully known to the
potential buyers and, thus were fully reflected in the "amount that share purchasers were willing to
pay." This finding was only intended to indicate th at the existence of committed investments did not
provide an additional reason for concluding that th e transaction was not for fair market value, over
and above USDOC's other findings with respect to fair market value.
 In sum, USDOC's determination that any restri ctions or requirements were reflected in the
employee sales price does not mean, and was not intended to mean, that the entire discount or extent
of the "preference" in the employee share price is fully accounted for by such restrictions or
requirements.
Question 37: In its First written submission, the United States argues that "USDOC assumed that the
privatization[] in the UK ... [was] at arm's-length and for fair market value".
589 Can the United
States identify in the text of the UK Section 129 determination the facts and circumstances on the
basis of which the USDOC "assumed" that the privatization of British Steel was at arm's length and
for FMV? (United States)

Answer: The United States assumed that the privatization of British Steel was at arm's length and at
fair market value based on the recognition that this issue could not affect the outcome of the sunset
review, given that the continuation of the order i ndependently relied on the subsidization of Glynwed.
As the United States has noted, its task was to bring its measure into compliance with the DSB
recommendations and rulings. In doing so, USDOC revi ewed the bases for continuation of the order.
Because one of the bases for continuing the order w as the subsidization of Glynwed, which did not
involve privatization and therefore was not affect ed by the DSB recommendations and rulings, an in-
depth privatization analysis of British Steel coul d not have changed the outcome. Therefore, USDOC
simply assumed that the privatization was at arm's length and for fair market value.7 Because USDOC
conducts its sunset reviews on an order-wide basis, the outcome of the sunset review would not have
been affected had USDOC instead made a "determination" regarding British Steel, as opposed to
simply assuming the privatization was at arm's length and for fair market value.

588 France Section 129 determination, p. 9.

Question 38: On the issue of privatization, Brazil cited the following Appellate Body finding:

"We have already determined, in US – Lead and Bismuth II, that the gamma method
is inconsistent with the obligation under Article 21.2 of the SCM Agreement. That
obligation requires an investigating author ity in an administrative review, upon
receiving information of a privatization resulting in a change in ownership, to
determine whether a "benefit" continues to exist. In our view, the SCM Agreement, by
virtue of Articles 10, 19.4, and 21.1, al so imposes an obligation to conduct such a
determination on an investigating authority conducting a sunset review. As we
observed earlier, the interplay of GATT Article VI:3 and Articles 10, 19.4 and 21.1 of
the SCM Agreement prescribes an obligation ap plicable to original investigations as
well as to reviews covered under Article 21 of the SCM Agreement to limit
countervailing duties to the amount and duration of the subsidy found to exist by the
investigating authority. Consequently, we see no error in the Panel's finding that, in
sunset reviews, the investigating authority, before deciding to continue to countervail
pre-privatization, non-recurring subsidies, is obliged to 'examine the conditions of
such privatizations and to determine whether the privatized producers received any
benefit from the prior subsidisation to the state-owned producers'."
590
 In the UK Section 129 determination, the USDOC assumes arguendo that the privatization
was at arm's length and for FMV. Then, however, the USDOC states that it received allegations that
the privatization was affected by "market distortions"; concludes that such a privatization would not
warrant a finding that the privatization extinguished pre- privatization, non-recurring subsidies; and
dismisses the issue, explaining that it would not address this issue because it did not address the arm's
length/FMV issue. Given all of this, what is the determination on the privatization? (United States)

Answer: USDOC did not make any company-specific determinations on privatizations in the UK
Section 129 determination. Rather, USDOC determined that, assuming arguendo that the
privatization of British Steel plc was at arm's-leng th and for fair market value (so that all pre-
privatization subsidies were eliminated) , there rema ined a sufficient basis for an affirmative subsidy
likelihood determination, i.e., the finding in the or iginal sunset review that other subsidies, not
affected by privatization, continued during the life of the order.

Question 39: Given the Appellate Body's recommendations and rulings, how did the USDOC remove
the so-called "taint" in this case? Does the Unite d States consider that its removal of the "taint"
consists of "assuming arguendo"? (United States)

Answer: USDOC assumed that the privatization of British Steel plc was at arm's length and for fair
market value and thereby rendered the revised UK sunset review consistent with the DSB
recommendations and rulings. As noted above, USDOC found that there remained a sufficient basis
for an affirmative subsidy likelih ood determination absent the benef it associated with allocable, pre-
privatization subsidies conferred upon British Steel plc. Because the revised determination was not
based on a privatization analysis of any kind, the revised determination was no longer "tainted".

Question 40: The United States argues in its submissions that the USDOC assumed in its Section 129
determination that British Steel plc was privatized at arm's length and for FMV. The Panel
understands that the only subsidy programme s benefiting British Steel prior to its privatization were
non-recurring. Is that correct? If this is the case, if the privatization did in fact extinguish the benefit
of those non-recurring subsidies, what is the basis for maintaining the CVD order vis-à-vis British
Steel plc? (United States)

590 Appellate Body Report, para. 149 (emphasis added).

Answer: As explained above, consistent with Article 21.3 of the SCM Agreement, USDOC's subsidy
likelihood determination is made on an order-wide basis. Thus, a sunset review does not result in
maintenance of an order vis-a-vis one company or another. Rather, the order is simply continued, and
those companies subject to the order remain subject to the order. As the United States has noted, if
British Steel wishes to have the order revoked vis-a-vis itself, rather than on an order-wide basis, then
British Steel may request an assessment review to begin that process.

Question 41: Which subsidy programmes is the United States currently countervailing? Which
recurring programmes form the basis of the USDOC' s affirmative determination of likelihood of
continuation or recurrence of subsidisation in the UK Section 129 determination? (European
Communities/United States)

Answer: The current deposit rate for Glynwed is .73 per cent ad valorem. For all other exporters, the
deposit rate is 12 per cent ad valorem. These depos it rates are based on the results of the original
investigation, not on the results of the sunset re view or the revised sunset review. The original
investigation resulted in affirmative findings with respect to the following programs: Equity Infusions
into British Steel, Cancelled NLF Debt, Regiona l Development Grants, the European Regional
Development Fund, ECSC Article 54 Loans/Interest Rebates, and Transportation Assistance.
591 There
have been no assessment reviews c onducted with respect to the UK countervailing duty order, and,
thus, there has been no opportunity to revise the deposit rates.

 Regarding USDOC's revised likelihood dete rmination in the UK case, USDOC based the
affirmative result on its finding in the underlying sun set review that Glynwed is likely to continue to
benefit from countervailable subsidies.592

Question 42: What evidence did the European Communities/UK Government/Corus provide
regarding recurring subsidisation? When did they prov ide it? In the Section 129 determination? In
the sunset review? Please distinguish between evidence on general programmes and those specific to
either British Steel or Glynwed, if applicable. In the Section 129 determination, did they provide any
evidence on the same programmes additional to that evi dence already provided in the sunset review?
Did the evidence regarding non applicable/no longer available subsidy programs submitted during
the sunset review concern the countervailed subsidy programs benefitin g Glynwed? (European
Communities/United States)

Answer: The European Communities/the Government of the UK/Corus offered arguments
concerning a number of programs in the original suns et review, including programs that benefit or are
likely to benefit Glynwed. USDOC rejected those arguments. In the Section 129 proceeding, the EC
sought to re-introduce arguments re garding programs that benefit or are likely to benefit Glynwed.
However, because the purpose of the Section 129 pr oceeding was to bring the United States into
compliance with the DSB recommendations and rulings , which were limited to privatization, those
arguments (and the underlying information) were inapposite.

Question 44: At page 19 of the original sunset review Issues and Decision Memorandum (Exhibit
EC-6), the USDOC provides a company-specific ra te for Glynwed (0.73 percent) and an all others
rate (12.00 percent). Does this mean that the US DOC would have a sufficient basis to recalculate the
countervailing duty in a sunset review? If not, what is the source for this rate? (United States)

591 Issues and Decision Memorandum in Cut-to-Length Carbon Steel Plate from the United Kingdom:
Final Results of Expedited Revi ew of Countervailing Duty Order , 65 Fed. Reg. 18309 (April 7, 2000) (Exhibit
EC-6).
592 Issues and Decision Memorandum in Cut-to-Length Carbon Steel Plate from the United Kingdom:
Final Results of Expedited Revi ew of Countervailing Duty Order , 65 Fed. Reg. 18309 (April 7, 2000) (Exhibit
EC-6), p. 13-14.

Answer: Those are the rates from the original inves tigation. They were not calculated, or
recalculated, in the sunset review.

Question 45: What is the cash deposit rate(s) for the relev ant products in this case? Is the legal
basis for this cash deposit rate(s) the original inves tigation, the original sunset review, or the revised
sunset review provided in the Section 129 determination? (European Communities/United States)

Answer: In addition to the deposit rates for the UK case (see answer to Question # 41), the deposit
rate in the Spanish case is 36.86 per cent country-wid e, and the deposit rate in the French case is
15.13 per cent (Usinor and country-wide). In both cases, these deposit rates were determined in the
investigation (which, in the French case, included recalculation as a result of domestic litigation); no
party has requested an assessment review in either of these cases.

Question 46: The Panel notes that sunset reviews in th e United States are conducted on an order-
wide basis. Please explain why the UK Section 129 determination provides a company-specific rate
for Glynwed. (United States)

Answer: USDOC did not assign Glynwed a new company-specific rate in the UK Section 129
determination. The reference to the rate relates ba ck to the rate that USDOC assigned to Glynwed in
the original investigation (there were no admini strative reviews) and reported to the Commission in
the initial sunset determination. As discussed a bove, in the initial sunset determination, USDOC
reported company-specific rates only because the US statute requires USDOC to report likely-to-
prevail rates to the ITC.

Question 47: Would a decrease in the volume of subsid ized imports pursuant to a likelihood-of-
subsidisation determination have an impact on the likelihood-of-injury analysis? (United States)

Answer: The volume of subsidized imports would not be affected by a Section 129 determination
finding likelihood-of-subsidization on an order-wide basis. The Appellate Body has clarified that
Members are not obligated to make company-specific determinations in sunset reviews of
antidumping orders; by analogy, Members are not oblig ated to make such determinations in sunset
reviews of countervailing duty orders.
593 Thus, where, as in the case of the UK Section 129
determination, there is a finding that order-wide s ubsidization is likely to continue or recur, there
would be no change in the volume of imports covered by the order. If, on the other hand, a Section
129 determination by USDOC resulted in an order-wid e finding of no likely subsidization, the USTR
could direct USDOC to "implement" by revoking the order altogether.

Question 48: Can the United States confirm that the USDOC did not need to revisit the privatization
analysis in the UK (and Spain) case(s) because it relied on other grounds for its likelihood-of-
subsidization determination? (United States)

Answer: Yes.

Question 49: Given the text of Article 21.1 SCM, which provides that "a countervailing duty shall
remain in force only as long as and to the extent necessary to counteract subsidisation which is
causing injury", could one assume that a change in circumstances, especially one affecting the level
of subsidised imports, would require an authority to revaluate injury? What is the relationship
between the obligations in Article 21.1 SCM and Article 21.3 SCM? (European Communities/United
States)

593 Appellate Body Report, United States – Sunset Review of Anti-Dumping Duties on Corrosion-
Resistant Carbon Steel Flat Products from Japan, WT/DS244/AB/R, adopted 9 January 2004, para. 150.

Answer: As this Panel has noted, Article 21.1 establishes a "general rule," and Article 21.3 "seems to
provide a specific application" of that general rule.
594 The United States provides for change-in-
circumstance reviews pursuant to Article 21.2.

Question 50: In its First written submission, the United States argues that "USDOC assumed that the
privatization[] in ... Spain [was] at arm's-length and for fair market value"
595 Can the United States
identify in the text of the Spain Section 129 determ ination the facts and circumstances on the basis of
which the USDOC "assumed" that the privatization of Aceralia was at arm's length and for
FMV? (United States)

Answer: As was the case with the UK review, it was unnecessary for USDOC to conduct a
privatization analysis because there were other, non-privatization grounds for continuing the order.
See the US answer to Question 39.

Question 51: Which subsidy programmes is the United States currently countervailing? Which
recurring programmes form the basis of the USDOC' s affirmative determination of likelihood of
continuation or recurrence of subsidisation in the Spain Section 129 determination? (European
Communities/United States)

Answer: In the original affirmative countervailing dut y determination, the following programs were
found to confer countervailable subsidies: (1) Law 60/70 – Long-term Loans from the Bank of
Industrial Credit and Equity Infusion; (2) Roya l Decree 878/81 – BCI Exceptional Credits, Grants,
and Equity Infusion; (3) 1984 Council of Minister s Meeting – Equity Infusions, Loan Guarantees,
Share "Issue Premium," and Grant; (4) 1987 Government Delegated Commission on Economic
Affairs – Deferral of Social Security and Other Tax Obligations, Grants, and Fund for Employment
Promotion and Early Retirement; (5) Contributions Made to INI Special Finance Accounts; and (6)
ECSC Article 54 Loans and Loan Guarantees. Ther e have been no assessment reviews to take into
account changes to these programs and/or changes to the subsidy rates as sociated with these
programs.

 In the Spanish sunset review (and in the revi sed Spanish sunset review), USDOC's affirmative
likelihood determination was based in part on a dete rmination that there are countervailable recurring,
non-allocable subsidies provided by programs that continue to exist such as the 1987 Government
Delegated Commission on Economic Affairs: F und For Employment Promotion and Early
Retirement.

Question 52: What evidence did the European Communities/Government of Spain provide regarding
recurring subsidisation? When did they provide it? In the Section 129 determinations? In the sunset
reviews? Please distinguish between evidence on general programmes and those specific to Aceralia.
In the Section 129 determination, did they provid e any evidence on the same programmes additional
to that evidence already provided in the sunset review? (European Communities/United States)

Answer: The European Communities and the Government of Spain offered arguments concerning a
number of programs in the original sunset review. USDOC rejected these arguments in the original
review.
596 In the Section 129 proceeding, the EC and th e Government of Spain sought to re-introduce
their earlier arguments regarding recurring subsidies. However, because the purpose of the Section
129 proceeding was to bring the United States into compliance with the DSB recommendations and

594 Panel Report, paras. 7.107-7.108.
596 Issues and Decision Memorandum in Cut-to-Length Carbon Steel Plate from Spain (Exhibit EC-7).

rulings, which were limited to privatization, th e arguments (and underlying information) on recurring
subsidy programs were inapposite.

Question 53: What is the cash deposit rate(s) for the relev ant products in this case? Is the legal
basis for this cash deposit rate(s) the original inves tigation, the original sunset review, or the revised
sunset review provided in the Section 129 determination? (European Communities/United States)

Answer: See response to Question 45.