World Trade Organization (WTO) Decisions and Their Effect in U.S. Law
Released: 2012-11-26T00:00:00

Uruguay Round Agreements Act (URAA)

The Uruguay Round of Multilateral Trade Negotiations, initiated in 1986 under the auspices of the General Agreement on Tariffs and Trade (GATT), concluded in 1994 with the signing of the Marrakesh Agreement Establishing the World Trade Organization (WTO Agreement). The WTO Agreement, which entered into force January 1, 1995, requires any country that wishes to be a WTO Member to accept all of the multilateral trade agreements negotiated during the Round. The Uruguay Round package of agreements not only carries forward long-standing GATT obligations (such as according goods of other parties nondiscriminatory treatment, not placing tariffs on goods that exceed negotiated or "bound" rates, generally refraining from imposing quantitative restrictions such as quotas and embargoes on imports and exports, and avoiding injurious subsidies), but also expands on these obligations in new agreements.

The Uruguay Round package also includes the Understanding on Rules and Procedures Governing the Settlement of Disputes (Dispute Settlement Understanding or DSU), which applies to disputes between WTO Members arising under virtually all WTO agreements. Dispute settlement is administered by the WTO Dispute Settlement Body (DSB), an entity consisting of all WTO Members. The dispute settlement process consists of consultations, panels and possible appeals, and adoption by the DSB of the resulting panel and appellate reports. If the defending Member is found to have violated a WTO obligation, it must implement the decision within an established "reasonable period of time." If the Member has not complied within the established time period, the prevailing Member may seek compensation from the non-complying Member or obtain authorization from the DSB to impose retaliatory measures, such as increased tariffs on selected products exported from the non-complying Member's territory.

Congress approved and implemented the WTO Agreement and the other agreements negotiated in the Uruguay Round in the Uruguay Round Agreement Act (URAA). In enacting the URAA, Congress comprehensively dealt with the legal effect in the United States of both the Uruguay Round agreements and WTO decisions adverse to the United States resulting from dispute settlement proceedings under the new DSU. The URAA addresses the relationship of WTO agreements to federal and state law and prohibits private remedies based on alleged violations of WTO agreements. It also requires the United States Trade Representative (USTR) to keep Congress informed of disputes challenging U.S. laws once a dispute panel is established, any U.S. appeal is filed, and a panel or Appellate Body report is circulated to WTO Members. In addition, the URAA places requirements on agencies taking domestic regulatory action to implement WTO decisions, including provisions specific to successfully challenged agency determinations in U.S. trade remedy proceedings.

Domestic Legal Effect of WTO Decisions Under the URAA

As is the case with previous trade agreements, including the North American Free Trade Agreement (NAFTA) and the GATT Tokyo Round agreements, Congress considers the Uruguay Round agreements to be non-self-executing; that is, their legal effect in the United States is based on their implementing legislation (i.e., the Uruguay Round Agreements Act (URAA)). To this end, the URAA approves the agreements and contains provisions "necessary or appropriate" to implement them, including provisions setting out new and revised authorities as well as any needed repeals. In addition, Section 102 of the URAA, as well as its legislative history, indicates that domestic law supersedes any inconsistent provisions of WTO agreements approved and implemented in the URAA and that WTO decisions involving U.S. laws or regulatory actions that are successfully challenged in the WTO do not have direct or automatic legal effect in the United States. Instead, specific congressional or administrative action, as the case may be, is required to implement these WTO decisions.

Federal Law

Section 102(a)(1) of the URAA states that "[n]o provision of any of the Uruguay Round Agreements, nor the application of any such provision to any person or circumstance, that is inconsistent with any law of the United States shall have effect." Section 102(a)(2) further provides that nothing in the statute "shall be construed ... to amend or modify any law of the United States ... or ... to limit any authority conferred under any law of the United States ... unless specifically provided for in this act."

The Statement of Administrative Action (SAA) that accompanied the WTO agreements when submitted to Congress by the President in 1994 explains that "[i]f there is a conflict between U.S. law and any of the Uruguay Round agreements, Section 102(a) of the implementing bill makes clear that U.S. law will take precedence." Moreover, Section 102 is intended to clarify that all changes to U.S. law "known to be necessary or appropriate" to implement the WTO agreements are incorporated in the URAA and that statutory changes needed "to remedy an unforeseen conflict" between U.S. law and WTO agreements "can be enacted in subsequent legislation." This approach, which Congress has taken in addressing potential conflicts between domestic law and prior GATT and free trade agreements, is considered to be "consistent with the Congressional view that necessary changes in Federal statutes should be specifically enacted, not preempted by international agreements."

The implementation of WTO dispute settlement results is to be similarly treated. URAA legislative history states that "[s]ince the Uruguay Round agreements as approved by the Congress, or any subsequent amendments to those agreements, are non-self-executing, any dispute settlement findings that a U.S. statute is inconsistent with an agreement also cannot be implemented except by legislation approved by the Congress unless consistent implementation is permissible under the terms of the statute." In the event a statute permits implementation consistent with the WTO decision, Congress has specified procedures for agencies to follow in taking administrative action to comply. These requirements are discussed below.

State Law

Where state law is at issue in a WTO dispute, Section 102(b) of the URAA provides for federal-state cooperation in the WTO proceeding; requires the USTR to work with the state to "develop a mutually agreeable response" to an adverse WTO ruling; and allows the United States alone to bring domestic legal challenges to the state law. The URAA's general preclusion of private remedies (discussed below) further centralizes the response to adverse WTO decisions involving state law in the federal government.

Section 102(b) states that "[n]o State law, or the application of a such a State law, may be declared invalid as to any person or circumstance on the ground that the provision or its application is inconsistent with any of the Uruguay Round Agreements, except in an action brought by the United States for the purposes of declaring such law or application invalid." According to legislative history, the provision "makes clear that the Uruguay Round agreements do not automatically preempt State laws that do not conform to their provisions, even if a WTO dispute settlement panel or the Appellate Body were to determine that a particular State measure was inconsistent with one or more of the Uruguay Round agreements." The statute also contains restrictions on any such U.S. legal action, including that the report of the WTO dispute settlement panel or the Appellate Body may not be considered binding on the court or otherwise accorded deference. Any such suit by the United States is expected to be a rarity.

Preclusion of Private Remedies

Private remedies are prohibited under Section 102(c)(1) of the URAA, which provides that "[n]o person other than the United States ... shall have a cause of action or defense under any of the Uruguay Round Agreements or by virtue of congressional approval of such an agreement" or "may challenge, in any action brought under any provision of law, any action or inaction by any department, agency, or other instrumentality of the United States, any State, or any political subdivision of a State, on the ground that such action or inaction is inconsistent with such agreement." Congress has additionally stated in the statute that it intends, through the prohibition on private remedies:

to occupy the field with respect to any cause of action or defense under or in connection with any of the Uruguay Round Agreements, including by precluding any person other than the United States from bringing any action against any State or political subdivision thereof or raising any defense to the application of State law under or in connection with any of the Uruguay Round Agreements—(A) on the basis of a judgment obtained by the United States in an action brought under any such agreement; or (B) on any other basis.

The House Ways and Means Committee report on the URAA explains that because of this provision a private party, for example, "cannot bring an action to require, preclude, or modify government exercise of discretionary or general 'public interest' authorities under the other provisions of law." The joint Senate committee report on the act adds that this provision would preclude any action by a private party against a state "under or in connection with any Uruguay Round agreement, including … [one] based on Congress' authority under the Commerce Clause of the U.S. Constitution." Overall, the House Ways and Means Committee report states, the prohibitions on private rights of action "are based on the premise that it is the responsibility of the Federal Government, and not private citizens, to ensure that Federal or State laws are consistent with U.S. obligations under international agreements such as the Uruguay Round agreements."

The SAA notes, however, that Section 102(c) "does not preclude any agency of government from considering, or entertaining argument on, whether its action or proposed action is consistent with the Uruguay Round agreements, although any change in agency action would have to be authorized by domestic law."

Domestic Administrative Implementation of WTO Decisions Under the URAA

The Uruguay Round Agreements Act sets out procedures that agencies must follow in implementing WTO decisions that are adverse to the United States when existing statutes may allow them to do so. Section 123 of the URAA addresses regulatory modifications in general, while Section 129 addresses the issuing of new determinations in certain domestic trade remedy proceedings. In some cases, implementation of a WTO decision may involve the exercise of authorities under both provisions.

Domestic Regulations and Administrative Practices (URAA, §123(g))

Section 123(g) of the URAA provides that in any case in which a report of a WTO panel or the Appellate Body finds that an administrative regulation or practice is inconsistent with a WTO agreement, the regulation or practice may not be "amended, rescinded or otherwise modified in implementation of such report unless and until" the USTR and relevant agencies consult with Congress; seek private sector advice; publish the proposed change in the Federal Register with a request for public comment; and the final rule or other modification is published in the Federal Register . Section 123(g) mandates a 60-day consultation period with Congress and provides that the Senate Finance and House Ways and Means Committees may vote to indicate their agreement or disagreement with the proposed action during this period. Section 123(g) does not apply to regulations or practices of the U.S. International Trade Commission.

Determinations in Trade Remedy Proceedings (URAA, §129)

Section 129 of the URAA sets forth authorities and procedures to be used by the United States Trade Representative, the U.S. International Trade Commission (USITC), and the Department of Commerce (Commerce Department, or DOC) in implementing adverse WTO panel and Appellate Body (AB) reports involving agency determinations in U.S. safeguards, antidumping, and countervailing duty proceedings. The conduct of these proceedings is subject to rights and obligations in, respectively, the WTO Agreement on Safeguards, the Agreement on Antidumping, and the Agreement on Subsidies and Countervailing Measures.

In safeguards proceedings (as authorized in Title II of the Trade Act of 1974) the USITC conducts an investigation to determine whether or not increased imports of a particular product are a substantial cause of serious injury (or threat of serious injury) to a domestic industry producing a product that is like, or directly competitive with, the imported good. The proceedings may be initiated on the basis of a domestic industry petition, executive or legislative branch request, or its own motion. If injury is found, the President may temporarily restrict imports or take other measures to remedy the harm to U.S. firms.

Antidumping and countervailing duty investigations, which are authorized in Title VII of the Tariff Act of 1930, may be initiated by petition or on the motion of the Department of Commerce, and involve determinations by both the Commerce Department and the USITC. DOC determines whether the product under investigation is dumped, that is, sold in the United States at less than fair value, or subsidized by a foreign government. The USITC determines whether the dumped or subsidized imports cause material injury or threat of material injury to a domestic industry. If dumping and injury are found, antidumping duties will be imposed on imports of the product under investigation in the amount of the dumping margin. If subsidization and injury are found, countervailing duties will be imposed on the imported good in the amount of the net subsidy conferred.

In the event of an adverse WTO decision involving one of the above-described DOC or USITC determinations, Section 129 requires that, upon USTR request, the affected agency must first determine if it may take action to comply with the WTO decision under existing law. If it finds that it may do so, the USTR may request the agency involved to issue a determination—referred to by the Commerce Department as a "Section 129 Determination" and the USITC as a "Section 129 Consistency Determination"—that would render the agency's action "not inconsistent with the findings" of the WTO panel or Appellate Body. The statute also requires consultation with Congress at various stages of the implementation process.

Where an antidumping or countervailing duty order is no longer supported by an affirmative injury determination—that is, where the USITC no longer finds material injury or threat from the dumped or subsidized imports—the USTR may direct DOC to revoke the order in whole or in part. Where a new DOC determination is issued, the USTR may direct DOC to implement the new determination in whole or in part. Depending on the new DOC finding, DOC may raise or lower the amount of duties to be collected on the subject imports under the order or, where dumping or subsidization is no longer found or is found to occur at a statutory de minimis level, DOC may revoke the order.

Section 129 determinations have prospective application, that is, they apply to unliquidated goods (i.e., goods for which final duties have not been assessed) that enter the United States for consumption on or after specified dates. These are as follows: (1) where a USITC material injury determination no longer supports an antidumping or countervailing duty order, the date that the USTR directs the Commerce Department to revoke the order, and (2) where a new DOC dumping or subsidy determination is made, the date on which the USTR directs the Commerce Department to implement the determination.

Section 129 determinations that are implemented are reviewable in the U.S. Court of International Trade or before binational panels established under Chapter Nineteen of the North American Free Trade Agreement (NAFTA). As noted in the Uruguay Round Statement of Administrative Action, "Section 129 determinations that are not implemented will not be subject to judicial or binational panel review, because such determinations will not have any effect under domestic law."

Judicial Responses

Although private rights of action based on Uruguay Round agreements are precluded under Section 102(c) of the URAA, WTO panel findings have at times been brought to the attention of federal courts, most often in challenges to agency determinations in antidumping and countervailing duty proceedings brought under judicial review provisions contained in Section 516A of the Tariff Act of 1930. Section 129 determinations issued by the USITC and the Commerce Department to comply with WTO decisions are also reviewable under this statute. These cases are heard in the U.S. Court of International Trade (USCIT), which has exclusive jurisdiction over civil actions brought under Section 516A. The USCIT's decisions may be appealed to the U.S. Court of Appeals for the Federal Circuit, whose decisions are reviewable by the U.S. Supreme Court.

Federal courts must hold a final agency determination in an antidumping or countervailing duty proceeding or a Section 129 Determination unlawful if it is found to be "unsupported by substantial evidence on the record, or otherwise not in accordance with law." To determine whether an agency determination is in accordance with law, the court employs the two-step analysis for review of agency implementation of a statutory provision set out by the U.S. Supreme Court in Chevron, U.S.A., Inc. v. Natural Resources Defense Council . First, the court, using tools of statutory construction, determines whether Congress has clearly spoken to the issue at hand. Second, if the underlying statute is silent or ambiguous, the court decides whether the agency's construction of the statute is permissible and will defer to an agency's interpretation of a statute provided it is reasonable. It has also been argued that, in considering whether an agency construction is reasonable, the court should apply the canon of construction articulated by the Supreme Court in 1804 in Murray v. Schooner Charming Betsy . This canon guides that where a statute does not require a specific interpretation (that is, it permits more than one interpretation), it should be interpreted consistently with U.S. international obligations —in this context, a provision of a WTO agreement either by itself or as interpreted in one or more WTO decisions. When read with C hevron , the Charming Betsy argument would come into play only where a statute is unclear as to the matter at hand; where the statute is unambiguous, the statutory language prevails and the question of international obligation would no longer be pertinent.

Because the underlying cause of action in domestic legal challenges to the agency actions described above is based in the Tariff Act and not on a provision of a WTO agreement, courts have not viewed Section 102(c) of the URAA as preventing them from hearing a WTO-based argument in these challenges. When faced with such arguments, some federal courts have deemed WTO decisions to be "persuasive" or a source of useful reasoning to inform a court's decision, but have stated that WTO decisions are not binding on the United States, U.S. agencies, or the judiciary. More commonly, however, federal courts have made clear that, given the statutory scheme established in the URAA for implementing adverse WTO decisions, questions as to whether the United States should comply with an adverse WTO decision and what the extent of U.S. compliance should be are matters falling within the province of the executive branch. As a result, in ruling on whether an agency action is reasonable, courts have declined to base their decision making on a WTO decision adverse to the United States where the executive branch has not taken the necessary domestic action to comply.

The issue of the interaction of Chevron and Charming Betsy appears to have arisen most frequently in court cases challenging Commerce Department antidumping determinations in which dumping margins were calculated with the use of "zeroing," a practice under which the department considers only sales below fair market value—generally the price in the exporting country—and assigns a zero value to sales at or above this price. The U.S. practice, which is alleged to improperly create or inflate dumping margins, has been successfully challenged in numerous WTO dispute settlement proceedings as violative of the WTO Antidumping Agreement. At the same time, U.S. courts, using the Chevron standard of review, have regularly held that, although the U.S. antidumping statute does not unambiguously require zeroing, the Commerce Department's interpretation of the statute as allowing the practice is a permissible one. To respond to these adverse WTO decisions, the Commerce Department used Section 123(g) authority to prospectively abandon the practice in original antidumping investigations in early 2007 and has recently proposed modifications in the use of zeroing in subsequent phases of U.S. antidumping proceedings. In addition, where a specific antidumping order has been challenged in a WTO proceeding, the Commerce Department has utilized Section 129(c) authority to issue a new antidumping determination in which the dumping margin was calculated without the use of zeroing and, as a result, has either amended or, in some cases, revoked the antidumping order involved.

Recent Legislation

Legislation introduced in recent Congresses generally reflected congressional concerns that the WTO Appellate Body had interpreted WTO agreements in an overly broad manner to the detriment of the United States and that the executive branch had in some cases too readily used existing statutory authorities to comply with these decisions, particularly where U.S. trade remedies were involved. Legislation focused particularly on the various WTO disputes in which the U.S. use of zeroing in antidumping proceedings was successfully challenged and the U.S. response to one of the first WTO decisions on this issue, discussed earlier in this report.