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WTO ANALYTICAL INDEX: SUBSIDIES AND COUNTERVAILING MEASURES Agreement on Subsidies and Countervailing Measures |
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> General Issues |
Article 11: Initiation and Subsequent Investigation 11.1 Except as provided in paragraph 6, an investigation to determine the existence, degree and effect of any alleged subsidy shall be initiated upon a written application by or on behalf of the domestic industry.
11.2 An application under paragraph 1 shall include sufficient evidence of the existence of (a) a subsidy and, if possible, its amount, (b) injury within the meaning of Article VI of GATT 1994 as interpreted by this Agreement, and (c) a causal link between the subsidized imports and the alleged injury. Simple assertion, unsubstantiated by relevant evidence, cannot be considered sufficient to meet the requirements of this paragraph. The application shall contain such information as is reasonably available to the applicant on the following:
(i) the identity of the applicant and a description of the volume and value of the domestic production of the like product by the applicant. Where a written application is made on behalf of the domestic industry, the application shall identify the industry on behalf of which the application is made by a list of all known domestic producers of the like product (or associations of domestic producers of the like product) and, to the extent possible, a description of the volume and value of domestic production of the like product accounted for by such producers;
(ii) a complete description of the allegedly subsidized product, the names of the country or countries of origin or export in question, the identity of each known exporter or foreign producer and a list of known persons importing the product in question;
(iii) evidence with regard to the existence, amount and nature of the subsidy in question;
(iv) evidence that alleged injury to a domestic industry is caused by subsidized imports through the effects of the subsidies; this evidence includes information on the evolution of the volume of the allegedly subsidized imports, the effect of these imports on prices of the like product in the domestic market and the consequent impact of the imports on the domestic industry, as demonstrated by relevant factors and indices having a bearing on the state of the domestic industry, such as those listed in paragraphs 2 and 4 of Article 15.
11.3 The authorities shall review the accuracy and adequacy of the evidence provided in the application to determine whether the evidence is sufficient to justify the initiation of an investigation.
11.4 An investigation shall not be initiated pursuant to paragraph 1 unless the authorities have determined, on the basis of an examination of the degree of support for, or opposition to, the application expressed(38) by domestic producers of the like product, that the application has been made by or on behalf of the domestic industry.(39) The application shall be considered to have been made "by or on behalf of the domestic industry" if it is supported by those domestic producers whose collective output constitutes more than 50 per cent of the total production of the like product produced by that portion of the domestic industry expressing either support for or opposition to the application. However, no investigation shall be initiated when domestic producers expressly supporting the application account for less than 25 per cent of total production of the like product produced by the domestic industry.
(footnote original) 38 In the case of fragmented industries involving an exceptionally large number of producers, authorities may determine support and opposition by using statistically valid sampling techniques.
(footnote original) 39 Members are aware that in the territory of certain Members employees of domestic producers of the like product or representatives of those employees may make or support an application for an investigation under paragraph 1.
11.5 The authorities shall avoid, unless a decision has been made to initiate an investigation, any publicizing of the application for the initiation of an investigation.
11.6 If, in special circumstances, the authorities concerned decide to initiate an investigation without having received a written application by or on behalf of a domestic industry for the initiation of such investigation, they shall proceed only if they have sufficient evidence of the existence of a subsidy, injury and causal link, as described in paragraph 2, to justify the initiation of an investigation.
11.7 The evidence of both subsidy and injury shall be considered simultaneously (a) in the decision whether or not to initiate an investigation and (b) thereafter, during the course of the investigation, starting on a date not later than the earliest date on which in accordance with the provisions of this Agreement provisional measures may be applied.
11.8 In cases where products are not imported directly from the country of origin but are exported to the importing Member from an intermediate country, the provisions of this Agreement shall be fully applicable and the transaction or transactions shall, for the purposes of this Agreement, be regarded as having taken place between the country of origin and the importing Member.
11.9 An application under paragraph 1 shall be rejected and an investigation shall be terminated promptly as soon as the authorities concerned are satisfied that there is not sufficient evidence of either subsidization or of injury to justify proceeding with the case. There shall be immediate termination in cases where the amount of a subsidy is de minimis, or where the volume of subsidized imports, actual or potential, or the injury, is negligible. For the purpose of this paragraph, the amount of the subsidy shall be considered to be de minimis if the subsidy is less than 1 per cent ad valorem.
11.10 An investigation shall not hinder the procedures of customs clearance.
11.11 Investigations shall, except in special circumstances, be concluded within one year, and in no case more than 18 months, after their initiation. 230. In US - Carbon Steel, the Panel noted that Article 11.9 sets out certain grounds for termination of countervailing duty proceedings. The Panel considered three bases for termination: (i) insufficient evidence of either subsidization or of injury; (ii) negligible volume of subsidised imports; and (iii) negligible injury. The Panel stated that these bases were grounded in the notion of, and sought to limit countervailing duty proceedings to cases of, injurious subsidization: "We note that Article 11.9 sets out certain other grounds for termination of CVD proceedings as well: (i) insufficient evidence of either subsidization or of injury; (ii) negligible volume of subsidised imports; and (iii) negligible injury. It would seem clear to us that all three bases for termination are fundamentally grounded in the notion of, and seek to limit CVD proceedings to cases of, injurious subsidization. We consider that all grounds for termination of CVD proceedings - including de minimis subsidization - link expressly with the purpose of CVDs and with the object and purpose of the SCM Agreement as set out in Article VI of the GATT 1994. The recurrent theme, in our view, is that CVD proceedings serve to counter injurious subsidization and therefore may not continue if injurious subsidization does not (or is not likely to) exist. The nature of the other bases set out in Article 11.9 for termination of CVD proceedings supports our view that the rationale for the de minimis standard is that relating to non-injurious subsidization."(331) (b) Non-application of "de minimis" standard to sunset reviews 231. The Appellate Body on US - Carbon Steel reversed the Panel's finding that concluded that the 1 per cent de minimis standard contained in Article 11.9 of the SCM Agreement (which applies to countervailing duty investigations) could be "implied" in Article 21.3 of the SCM Agreement on sunset reviews of countervailing duty determinations. In doing so, the Appellate Body observed that all the subdivisions of Article 11 relate to the authorities' initiation and conduct of a countervailing duty investigation, and in particular reflect rules that are of a "mainly procedural and evidentiary nature."(332) The Appellate Body considered: "Although the terms of Article 11.9 are detailed as regards the obligations imposed on authorities thereunder, none of the words in Article 11.9 suggests that the de minimis standard that it contains is applicable beyond the investigation phase of a countervailing duty proceeding. In particular, Article 11.9 does not refer to Article 21.3, nor to reviews that may follow the imposition of a countervailing duty."(333) 232. The Appellate Body on US - Carbon Steel criticized on several grounds the Panel's approach to the de minimis standard in Article 21.3 and observed that it "centred" on the premise that the Article 11.9 de minimis standard represents a threshold below which subsidization is always non-injurious. While the Appellate Body recognized that it would be "unlikely" that very low levels of subsidization could be shown to cause "material" injury, it considered that the SCM Agreement does not per se preclude such a possibility.(334) In this regard, the Appellate Body noted: "[T]here is nothing in Article 11.9 to suggest that its de minimis standard was intended to create a special category of 'non-injurious' subsidization, or that it reflects a concept that subsidization at less than a de minimis threshold can never cause injury. For us, the de minimis standard in Article 11.9 does no more than lay down an agreed rule that if de minimis subsidization is found to exist in an original investigation, authorities are obliged to terminate their investigation, with the result that no countervailing duty can be imposed in such cases."(335) 233. The Appellate Body on US - Carbon Steel then examined Article 11.9 and other paragraphs of Article 11 and found that most of these provisions set forth rules of "a mainly procedural and evidentiary nature" and that "none of the words in Article 11.9 suggests that the de minimis standard that it contains is applicable beyond the investigation phase of a countervailing duty proceeding. In particular, Article 11.9 does not refer to Article 21.3, nor to reviews that may follow the imposition of a countervailing duty."(336) 234. The Appellate Body on US - Carbon Steel noted in particular the absence of textual cross-referencing between Article 21.3 and Article 11.9 and observed that: "[T[he technique of cross-referencing is frequently used in the SCM Agreement... In the light of the many express cross-references made in the SCM Agreement, we attach significance to the absence of any textual link between Article 21.3 reviews and the de minimis standard set forth in Article 11.9. We consider this to be noteworthy, having regard to the fact that both the adoption of a de minimis standard for investigations, and the introduction of a "sunset" provision, were regarded as important additions to the Tokyo Round Subsidies Code for improving GATT disciplines on subsidies and countervailing duties."(337) 235. The Appellate Body on US - Carbon Steel drew attention to the reference to Article 12 in Article 21.4 and noted the lack of reference to Article 11, "as an indication that the drafters intended that the obligations in Article 12, but not those in Article 11, would apply to reviews carried out under Article 21.3."(338) The Appellate Body found that although "Part V of the Agreement is aimed at striking a balance between the right to impose countervailing duties to offset subsidization that is causing injury, and the obligations that Members must respect in order to do so. While we agree that Part V strikes such a balance, this alone does not assist us in the task of determining whether the 1 percent de minimis standard in Article 11.9 is intended to be applied in reviews carried out pursuant to Article 21.3."(339) 236. The Appellate Body on US - Carbon Steel further considered that the Panel's decision to "imply" the de minimis standard in Article 21.3 was based on the fact that the Article 11.9 de minimis standard draws a threshold below which subsidization is non-injurious. The Appellate Body considered the Panel's approach to be wrong and indicated, inter alia, that the Panel had not explained why it thought it appropriate to rely on a 1987 Note prepared by the Secretariat for the Uruguay Round Negotiating Group on Subsidies and Countervailing Measures.(340) "We observe, first, that in taking this approach, the Panel did not explain why it thought that it was appropriate to rely on the 1987 Note, but simply stated that "it is useful to consider the rationale for the application of a de minimis standard to investigations, as reflected in a Note by the Secretariat prepared in April 1987".(341) 76 In any event, it seems to us that the 1987 Note does not support the Panel's conclusion that the "rationale" for the de minimis standard in Article 11.9 is that a de minimis subsidy is considered to be non-injurious. As the Panel itself recognized, the 1987 Note sets forth two rationales for de minimis standards, but does not suggest which of them is more compelling or preferable. Nor was any evidence adduced before the Panel suggesting that the negotiators of the SCM Agreement considered these or other rationales and expressed a preference for any of them. The Panel chose to base its interpretation of Article 11.9 on only one of these rationales. Even if it were appropriate to rely on the 1987 Note in interpreting the SCM Agreement in accordance with the rules of interpretation set forth in the Vienna Convention, selective reliance on such a document does not provide a proper basis for the conclusion reached by the Panel in this regard."(342) 237. Moreover, the Appellate Body in US - Carbon Steel considered that "Article 15 of the SCM Agreement, which deals with injury and how it is to be determined, refers, in its paragraph 3, to the de minimis standard in Article 11.9 only for the purpose of cumulation of imports. Moreover, footnote 45 to Article 15 indicates that, in the SCM Agreement, the term "injury" is, "unless otherwise specified", [to] be taken to mean material injury to a domestic industry, threat of material injury to a domestic industry or material retardation of the establishment of such an industry and shall be interpreted in accordance with the provisions of [Article 15]":(343) "In defining the concept of injury, footnote 45 does not make any reference to the amount of subsidy involved. The Appellate Body also highlighted that "Article 1 of the SCM Agreement sets out a definition of "subsidy" that applies to the whole of that Agreement. This definition includes all such subsidies, regardless of their amount. None of the provisions in the SCM Agreement that uses the term "subsidization" confines the meaning of "subsidization" to subsidization at a rate equal to or in excess of 1 percent ad valorem, or to any other de minimis threshold.(344) It is also worth noting that, under Part II of the SCM Agreement, prohibited subsidies are prohibited regardless of the amount of the subsidy.
[I]n our view, the terms "subsidization" and "injury" each have an independent meaning in the SCM Agreement which is not derived by reference to the other. It is unlikely that very low levels of subsidization could be demonstrated to cause "material" injury. Yet such a possibility is not, per se, precluded by the Agreement itself, as injury is not defined in the SCM Agreement in relation to any specific level of subsidization."(345) 238. The Appellate Body on US - Carbon Steel then considered that the negotiating history and confirmed its view on the meaning of Article 21.3: "[R]ecourse to the negotiating history of the SCM Agreement tends to confirm our view as to the meaning of Article 21.3. We note that the two issues, namely the application of a specific de minimis standard in investigations, and the introduction of a time-bound limitation on the maintenance of countervailing duties, were considered to be highly important and were the subject of protracted negotiations. .... The final texts of Article 11.9 and of Article 21.3 were the result of a carefully negotiated compromise that drew from a number of different proposals, reflecting divergent interests and views. We further note in this respect that none of the participants in this appeal pointed to any document indicating that the inclusion of a de minimis threshold was ever considered in the negotiations on sunset review provisions leading to the text of Article 21.3."(346)
XIII. Article 12 back to top Article 12: Evidence 12.1 Interested Members and all interested parties in a countervailing duty investigation shall be given notice of the information which the authorities require and ample opportunity to present in writing all evidence which they consider relevant in respect of the investigation in question.
12.1.1 Exporters, foreign producers or interested Members receiving questionnaires used in a countervailing duty investigation shall be given at least 30 days for reply.(40) Due consideration should be given to any request for an extension of the 30-day period and, upon cause shown, such an extension should be granted whenever practicable.
(footnote original) 40 As a general rule, the time-limit for exporters shall be counted from the date of receipt of the questionnaire, which for this purpose shall be deemed to have been received one week from the date on which it was sent to the respondent or transmitted to the appropriate diplomatic representatives of the exporting Member or, in the case of a separate customs territory Member of the WTO, an official representative of the exporting territory.
12.1.2 Subject to the requirement to protect confidential information, evidence presented in writing by one interested Member or interested party shall be made available promptly to other interested Members or interested parties participating in the investigation.
12.1.3 As soon as an investigation has been initiated, the authorities shall provide the full text of the written application received under paragraph 1 of Article 11 to the known exporters(41) and to the authorities of the exporting Member and shall make it available, upon request, to other interested parties involved. Due regard shall be paid to the protection of confidential information, as provided for in paragraph 4.
(footnote original) 41 It being understood that where the number of exporters involved is particularly high, the full text of the application should instead be provided only to the authorities of the exporting Member or to the relevant trade association who then should forward copies to the exporters concerned.
12.2. Interested Members and interested parties also shall have the right, upon justification, to present information orally. Where such information is provided orally, the interested Members and interested parties subsequently shall be required to reduce such submissions to writing. Any decision of the investigating authorities can only be based on such information and arguments as were on the written record of this authority and which were available to interested Members and interested parties participating in the investigation, due account having been given to the need to protect confidential information.
12.3 The authorities shall whenever practicable provide timely opportunities for all interested Members and interested parties to see all information that is relevant to the presentation of their cases, that is not confidential as defined in paragraph 4, and that is used by the authorities in a countervailing duty investigation, and to prepare presentations on the basis of this information.
12.4 Any information which is by nature confidential (for example, because its disclosure would be of significant competitive advantage to a competitor or because its disclosure would have a significantly adverse effect upon a person supplying the information or upon a person from whom the supplier acquired the information), or which is provided on a confidential basis by parties to an investigation shall, upon good cause shown, be treated as such by the authorities. Such information shall not be disclosed without specific permission of the party submitting it.(42)
(footnote original) 42 Members are aware that in the territory of certain Members disclosure pursuant to a narrowly-drawn protective order may be required.
12.4.1 The authorities shall require interested Members or interested parties providing confidential information to furnish non-confidential summaries thereof. These summaries shall be in sufficient detail to permit a reasonable understanding of the substance of the information submitted in confidence. In exceptional circumstances, such Members or parties may indicate that such information is not susceptible of summary. In such exceptional circumstances, a statement of the reasons why summarization is not possible must be provided.
12.4.2 If the authorities find that a request for confidentiality is not warranted and if the supplier of the information is either unwilling to make the information public or to authorize its disclosure in generalized or summary form, the authorities may disregard such information unless it can be demonstrated to their satisfaction from appropriate sources that the information is correct.(43)
(footnote original) 43 Members agree that requests for confidentiality should not be arbitrarily rejected. Members further agree that the investigating authority may request the waiving of confidentiality only regarding information relevant to the proceedings.
12.5 Except in circumstances provided for in paragraph 7, the authorities shall during the course of an investigation satisfy themselves as to the accuracy of the information supplied by interested Members or interested parties upon which their findings are based.
12.6 The investigating authorities may carry out investigations in the territory of other Members as required, provided that they have notified in good time the Member in question and unless that Member objects to the investigation. Further, the investigating authorities may carry out investigations on the premises of a firm and may examine the records of a firm if (a) the firm so agrees and (b) the Member in question is notified and does not object. The procedures set forth in Annex VI shall apply to investigations on the premises of a firm. Subject to the requirement to protect confidential information, the authorities shall make the results of any such investigations available, or shall provide disclosure thereof pursuant to paragraph 8, to the firms to which they pertain and may make such results available to the applicants.
12.7 In cases in which any interested Member or interested party refuses access to, or otherwise does not provide, necessary information within a reasonable period or significantly impedes the investigation, preliminary and final determinations, affirmative or negative, may be made on the basis of the facts available.
12.8 The authorities shall, before a final determination is made, inform all interested Members and interested parties of the essential facts under consideration which form the basis for the decision whether to apply definitive measures. Such disclosure should take place in sufficient time for the parties to defend their interests.
12.9 For the purposes of this Agreement, "interested parties" shall include:
(i) an exporter or foreign producer or the importer of a product subject to investigation, or a trade or business association a majority of the members of which are producers, exporters or importers of such product; and
(ii) a producer of the like product in the importing Member or a trade and business association a majority of the members of which produce the like product in the territory of the importing Member.
This list shall not preclude Members from allowing domestic or foreign parties other than those mentioned above to be included as interested parties.
12.10 The authorities shall provide opportunities for industrial users of the product under investigation, and for representative consumer organizations in cases where the product is commonly sold at the retail level, to provide information which is relevant to the investigation regarding subsidization, injury and causality.
12.11 The authorities shall take due account of any difficulties experienced by interested parties, in particular small companies, in supplying information requested, and shall provide any assistance practicable.
12.12 The procedures set out above are not intended to prevent the authorities of a Member from proceeding expeditiously with regard to initiating an investigation, reaching preliminary or final determinations, whether affirmative or negative, or from applying provisional or final measures, in accordance with relevant provisions of this Agreement. No jurisprudence or decision of a competent WTO body.
XIV. Article 13 back to top Article 13: Consultations 13.1 As soon as possible after an application under Article 11 is accepted, and in any event before the initiation of any investigation, Members the products of which may be subject to such investigation shall be invited for consultations with the aim of clarifying the situation as to the matters referred to in paragraph 2 of Article 11 and arriving at a mutually agreed solution.
13.2 Furthermore, throughout the period of investigation, Members the products of which are the subject of the investigation shall be afforded a reasonable opportunity to continue consultations, with a view to clarifying the factual situation and to arriving at a mutually agreed solution.(44)
(footnote original) 44 It is particularly important, in accordance with the provisions of this paragraph, that no affirmative determination whether preliminary or final be made without reasonable opportunity for consultations having been given. Such consultations may establish the basis for proceeding under the provisions of Part II, III or X.
13.3 Without prejudice to the obligation to afford reasonable opportunity for consultation, these provisions regarding consultations are not intended to prevent the authorities of a Member from proceeding expeditiously with regard to initiating the investigation, reaching preliminary or final determinations, whether affirmative or negative, or from applying provisional or final measures, in accordance with the provisions of this Agreement.
13.4 The Member which intends to initiate any investigation or is conducting such an investigation shall permit, upon request, the Member or Members the products of which are subject to such investigation access to non-confidential evidence, including the non-confidential summary of confidential data being used for initiating or conducting the investigation. No jurisprudence or decision of a competent WTO body.
XV. Article 14 back to top Article 14: Calculation of the Amount of a Subsidy in Terms of the Benefit to the Recipient For the purpose of Part V, any method used by the investigating authority to calculate the benefit to the recipient conferred pursuant to paragraph 1 of Article 1 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. Furthermore, any such method shall be consistent with the following guidelines:
(a) government provision of equity capital shall not be considered as conferring a benefit, unless the investment decision can be regarded as inconsistent with the usual investment practice (including for the provision of risk capital) of private investors in the territory of that Member;
(b) a loan by a government shall not be considered as conferring a benefit, unless there is a difference between the amount that the firm receiving the loan pays on the government loan and the amount the firm would pay on a comparable commercial loan which the firm could actually obtain on the market. In this case the benefit shall be the difference between these two amounts;
(c) a loan guarantee by a government shall not be considered as conferring a benefit, unless there is a difference between the amount that the firm receiving the guarantee pays on a loan guaranteed by the government and the amount that the firm would pay on a comparable commercial loan absent the government guarantee. In this case the benefit shall be the difference between these two amounts adjusted for any differences in fees;
(d) the provision of goods or services or purchase of goods by a government shall not be considered as conferring a benefit unless the provision is made for less than adequate remuneration, or the purchase is made for more than adequate remuneration. The adequacy of remuneration shall be determined in relation to prevailing market conditions for the good or service in question in the country of provision or purchase (including price, quality, availability, marketability, transportation and other conditions of purchase or sale). (a) "calculate the benefit to the recipient conferred pursuant to paragraph 1 of Article 1" 239. The Panel on US - Lead and Bismuth II rejected the argument that "benefit" should be determined by reference to the market practice prevailing at the time that each of the four types of "financial contribution" [under Article 1.1] ... is bestowed."(347) Instead, the Panel stated that "[n]othing in the text of Article 14 restricts the analysis envisaged in sub-paragraphs (a)-(d) ... to the time at which the relevant 'financial contribution' was bestowed. ... Article 14 does not ... guide Members as to when th[e] calculation of 'benefit' should take place."(348) 240. As regards the concept of a benefit in Article 1.1 see paragraphs 45-71 above). 241. In Canada - Aircraft Credits and Guarantees, the Panel noted the relevance of Article 14(c) of the SCM Agreement for the purpose of establishing the existence of a "benefit" in the framework of equity guarantees. It noted that a "benefit" could arise if there was a difference between the cost of equity with and without an equity guarantee programme, to the extent that such difference was not covered by the fees charged by the programme for providing the equity guarantee. If it is established that the programme's fees were not market-based, the Panel said, such a cost difference would not be covered by the programme's fees: "[A]lthough Article 14(c) is expressly concerned with 'benefit' in the context of loan guarantees, there are perhaps sufficient similarities between the operation of loan guarantees and equity guarantees for it to be appropriate to rely on Article 14(c) for the purpose of establishing the existence of 'benefit' in the context of equity guarantees in certain circumstances. Thus, a 'benefit' could arise if there is a difference between the cost of equity with and without an IQ equity guarantee, to the extent that such difference is not covered by the fees charged by IQ for providing the equity guarantee. In our opinion, it is safe to assume that such cost difference would not be covered by IQ's fees if it is established that IQ's fees are not market-based."(349) 242. Regarding the loan guarantee programmes under consideration, the Panel on Canada - Aircraft Credits and Guarantees also referred to the findings of the Panel and Appellate Body in Canada - Aircraft(350) and considered that Article 14(c) of the SCM Agreement provided "contextual guidance for interpreting the term "benefit" in the context of loan guarantees." On this basis, the Panel stated that there would be a "benefit" when the cost-saving for the company's customer for securing a loan with a loan guarantee programme is not offset by the programme's fees. For example, if it was established that the programme's fees was not market-based.(351) The Panel stated: "In our view, and taking into account the contextual guidance afforded by Article 14(c), we consider that an IQ loan guarantee will confer a "benefit" when "there is a difference between the amount that the firm receiving the guarantee pays on a loan guaranteed by [IQ] and the amount that the firm would pay on a comparable commercial loan absent the [IQ] guarantee. In this case the benefit shall be the difference between these two amounts adjusted for any differences in fees."(352) 243. In US - Softwood Lumber III, the Panel noted that "Article 14(d) is the relevant provision in the SCM Agreement for measuring the amount of benefit to the recipient by determining whether the government has provided a good or service, within the meaning of Article 1.1(a)(1)(iii) SCM Agreement, for less than adequate remuneration."(353) 244. Regarding Article 14(d) and the notion of benefit, the Panel on US - Softwood Lumber III further clarified that the prevailing market conditions for the good or service in question in the country of provision or purchase are determinant: "Article 14(d) SCM Agreement thus provides that the provision of goods by a government shall not be considered as conferring a benefit unless the provision is made for less than adequate remuneration. The adequacy of the remuneration charged by the government shall be determined 'in relation to the prevailing market conditions for the good or service in question in the country of provision or purchase (including price, quality, availability, marketability, transportation and other conditions of purchase or sale)'. We find that the text of Article 14(d) SCM Agreement is very clear: the adequacy of remuneration is to be determined in relation to prevailing market conditions for the good or service in question in the country of provision or purchase."(354) (emphasis original) 245. The Panel on US - Softwood Lumber III further clarified the notion of prevailing market conditions in the country of provision of the goods under consideration in light of the language of Article 14(d). The Panel considered that the prevailing market conditions of Article 14(d) do not refer to a "theoretical market free of government interference." Rather, Article 14(d) provides that the "prevailing" market conditions in the country of provision of the goods are to form the basis for the comparison. For the Panel, the "ordinary meaning" of the term "prevailing" market conditions is the market conditions as "as they exist" or "which are predominant". (emphasis original) "[T]there is no basis in the text of the SCM Agreement to conclude that the market conditions in the country of provision could mean anything else than the conditions prevailing in the market of that country, and not those prevailing in some other country. Article 14(d) SCM Agreement does not just refer to 'market conditions' in general, but explicitly to those prevailing 'in the country of provision' of the good. ... the fact that a good may also be bought on a market outside the country of provision, does not, in our view, imply that the prices for those goods in that other country become part of the market conditions 'in the country of provision'. .... In light of the clear language of Article 14(d) SCM Agreement, the 'availability' of the good, the 'conditions of purchase or sale', the 'price', are various aspects of the market conditions existing in the country of provision, and refer to the price for the good in that country, its availability in that country, the conditions of sale as they are prevailing in that country. In our view, the bracketed language in Article 14(d) SCM Agreement specifies what the market conditions referred to in the preceding sentence are, and, as is the case for the 'market conditions', they also all relate to the country of provision, and not some other country.
... The fact that in the different context of criteria for a similar measure to constitute a prohibited export subsidy there is an explicit requirement to look at commercially available world market prices, cannot mean that any reference to the 'market' in the SCM Agreement necessarily refers to the world market, or some portion thereof, particularly when the language in the provision clearly states otherwise. We note that the prices of imported goods in the market of provision can indeed form part of the prevailing market conditions in the sense of Article 14(d) SCM Agreement. But this is not the same as the price for those goods prevailing in the country of export. Nor does this imply that import prices necessarily can be the exclusive basis to determine prevailing market conditions.
In our view, however, the 'prevailing market conditions' of Article 14(d) SCM Agreement do not refer to a theoretical market free of government interference as the US seems to be suggesting. Article 14(d) SCM Agreement provides that the "prevailing" market conditions in the country of provision of the goods are to form the basis for the comparison. The ordinary meaning of the term "prevailing" market conditions is the market conditions 'as they exist' or 'which are predominant'. Considering that the only qualifier used to the "market conditions" in question is that they be 'prevailing', we are of the view that the text of Article 14(d) SCM Agreement does not in any way require the 'market' conditions to be those of a hypothetical undistorted or perfectly competitive market."(355) 246. The Panel concluded that the text of Article 14(d) does not require the "market" conditions to be those of a "hypothetical undistorted or perfectly competitive market": "[T]he chapeau of Article 14 SCM Agreement clearly states that Article 14 SCM Agreement establishes guidelines for the calculation of "benefit" to the recipient.(356) ... in order to calculate the benefit to the recipient, an authority is to compare the price the recipient paid the government with the prices prevailing in other market transactions. We do not consider that the goal of the examination of the benefit enjoyed by the recipient is to determine what the market price would have been absent the government's financial contribution ... or to measure the trade distorting potential of the government's financial contribution. The text of Article 14 SCM Agreement does not require a general "but for" test to the prevailing market conditions. We are thus of the view that Article 14(d) SCM Agreement does not require that the authority construct a market price that could have existed but for the government's involvement, nor does it allow the authority to decline to use in-country prices because they may be affected by the government's financial contribution.
We consider that if the drafters of the SCM Agreement had wanted to exclude the use of market prices in case of price suppression due to the government's involvement, they would have explicitly provided so, but they have not. The opposite is the case. As we found above, when it comes to the market conditions, the only qualifier in the text of the Agreement is "prevailing". Thus, the market conditions are those that are actually existing in the country and are those faced by the recipient of the financial contribution. The reference prices are those that the producer would have had to pay if it had to buy the goods now provided by the government from a different and independent seller. ."(357) 247. The Panel on US - Softwood Lumber III clarified that the plain meaning of the text needed to be taken into account even in exceptional circumstances: "[E]ven if in certain exceptional circumstances it may prove difficult in practice to apply Article 14(d) SCM Agreement, that would not justify reading words into the text of the Agreement that are not there or ignoring the plain meaning of the text. In our view, the text of Article 14 SCM Agreement leaves no choice to the investigating authority but to use as a benchmark the market, for the good (or service) in question, as it exists in the country of provision."(358) 248. The Panel on US - Softwood Lumber III noted moreover that with regard to domestic markets, each WTO Member has a different market with different qualitative requirements: "[T]he domestic markets of the member countries of the WTO are not identical - nor are they expected to be - and that there is nothing in the WTO or SCM Agreement indicating that, in order to qualify as such, markets must meet specific qualitative requirements ... A contrary conclusion would lead to a result in which the importing country would have a very broad scope to choose another market, including its own, in order to determine benefit. Such a result would clearly distort the letter and purpose of Article 14(d) and vitiate its intended application."(359) 249. On this basis, the Panel found that the Member that had included its own data in the examination of the claimant's stumpage prices had acted inconsistently with Article 14 and 14(d) of the SCM Agreement.(360) (b) Relationship with other Articles 250. With respect to the relationship with Article 1.1 and Article 1.1(b), see paragraphs 80 and 72 above respectively.
XVI. Article 15 back to top Article 15: Determination of Injury(45) (footnote original) 45 Under this Agreement the term "injury" shall, unless otherwise specified, be taken to mean material injury to a domestic industry, threat of material injury to a domestic industry or material retardation of the establishment of such an industry and shall be interpreted in accordance with the provisions of this Article.
15.1 A determination of injury for purposes of Article VI of GATT 1994 shall be based on positive evidence and involve an objective examination of both (a) the volume of the subsidized imports and the effect of the subsidized imports on prices in the domestic market for like products(46) and (b) the consequent impact of these imports on the domestic producers of such products.
(footnote original) 46 Throughout this Agreement the term "like product" ("produit similaire") shall be interpreted to mean a product which is identical, i.e. alike in all respects to the product under consideration, or in the absence of such a product, another product which, although not alike in all respects, has characteristics closely resembling those of the product under consideration.
15.2 With regard to the volume of the subsidized imports, the investigating authorities shall consider whether there has been a significant increase in subsidized imports, either in absolute terms or relative to production or consumption in the importing Member. With regard to the effect of the subsidized imports on prices, the investigating authorities shall consider whether there has been a significant price undercutting by the subsidized imports as compared with the price of a like product of the importing Member, or whether the effect of such imports is otherwise to depress prices to a significant degree or to prevent price increases, which otherwise would have occurred, to a significant degree. No one or several of these factors can necessarily give decisive guidance.
15.3 Where imports of a product from more than one country are simultaneously subject to countervailing duty investigations, the investigating authorities may cumulatively assess the effects of such imports only if they determine that (a) the amount of subsidization established in relation to the imports from each country is more than de minimis as defined in paragraph 9 of Article 11 and the volume of imports from each country is not negligible and (b) a cumulative assessment of the effects of the imports is appropriate in light of the conditions of competition between the imported products and the conditions of competition between the imported products and the like domestic product.
15.4 The examination of the impact of the subsidized imports on the domestic industry shall include an evaluation of all relevant economic factors and indices having a bearing on the state of the industry, including actual and potential decline in output, sales, market share, profits, productivity, return on investments, or utilization of capacity; factors affecting domestic prices; actual and potential negative effects on cash flow, inventories, employment, wages, growth, ability to raise capital or investments and, in the case of agriculture, whether there has been an increased burden on government support programmes. This list is not exhaustive, nor can one or several of these factors necessarily give decisive guidance.
15.5 It must be demonstrated that the subsidized imports are, through the effects(47) of subsidies, causing injury within the meaning of this Agreement. The demonstration of a causal relationship between the subsidized imports and the injury to the domestic industry shall be based on an examination of all relevant evidence before the authorities. The authorities shall also examine any known factors other than the subsidized imports which at the same time are injuring the domestic industry, and the injuries caused by these other factors must not be attributed to the subsidized imports. Factors which may be relevant in this respect include, inter alia, the volumes and prices of non-subsidized imports of the product in question, contraction in demand or changes in the patterns of consumption, trade restrictive practices of and competition between the foreign and domestic producers, developments in technology and the export performance and productivity of the domestic industry.
(footnote original) 47 As set forth in paragraphs 2 and 4.
15.6 The effect of the subsidized imports shall be assessed in relation to the domestic production of the like product when available data permit the separate identification of that production on the basis of such criteria as the production process, producers' sales and profits. If such separate identification of that production is not possible, the effects of the subsidized imports shall be assessed by the examination of the production of the narrowest group or range of products, which includes the like product, for which the necessary information can be provided.
15.7 A determination of a threat of material injury shall be based on facts and not merely on allegation, conjecture or remote possibility. The change in circumstances which would create a situation in which the subsidy would cause injury must be clearly foreseen and imminent. In making a determination regarding the existence of a threat of material injury, the investigating authorities should consider, inter alia, such factors as:
(i) nature of the subsidy or subsidies in question and the trade effects likely to arise therefrom;
(ii) a significant rate of increase of subsidized imports into the domestic market indicating the likelihood of substantially increased importation;
(iii) sufficient freely disposable, or an imminent, substantial increase in, capacity of the exporter indicating the likelihood of substantially increased subsidized exports to the importing Member's market, taking into account the availability of other export markets to absorb any additional exports;
(iv) whether imports are entering at prices that will have a significant depressing or suppressing effect on domestic prices, and would likely increase demand for further imports; and
(v) inventories of the product being investigated.
No one of these factors by itself can necessarily give decisive guidance but the totality of the factors considered must lead to the conclusion that further subsidized exports are imminent and that, unless protective action is taken, material injury would occur.
15.8 With respect to cases where injury is threatened by subsidized imports, the application of countervailing measures shall be considered and decided with special care. (a) "characteristics closely resembling" 251. In its "like product" analysis under footnote 46, the Panel on Indonesia - Autos emphasized the physical characteristics of the compared products and held that in its analysis, the Panel would also be guided by the "like product" analysis contained in the Appellate Body Report in Korea - Alcoholic Beverages": "In our view, the analysis as to which cars have 'characteristics closely resembling' those of the Timor logically must include as an important element the physical characteristics of the cars in question. This is especially the case because many of the other possible criteria identified by the parties are closely related to the physical characteristics of the cars in question. Thus, factors such as brand loyalty, brand image/reputation, status and resale value reflect, at least in part, an assessment by purchasers of the physical characteristics of the cars being purchased. Although it is possible that products that are physically very different can be put to the same uses, differences in uses generally arise out of, and assist in assessing the importance of, different physical characteristics of products. Similarly, the extent to which products are substitutable may also be determined in substantial part by their physical characteristics. Price differences also may (but will not necessarily) reflect physical differences in products. An analysis of tariff classification principles may be useful because it provides guidance as to which physical distinctions between products were considered significant by Customs experts. However, we do not see that the SCM Agreement precludes us from looking at criteria other than physical characteristics, where relevant to the like product analysis. The term 'characteristics closely resembling' in its ordinary meaning includes but is not limited to physical characteristics, and we see nothing in the context or object and purpose of the SCM Agreement that would dictate a different conclusion.
Although we are required in this dispute to interpret the term 'like product' in conformity with the specific definition provided in the SCM Agreement, we believe that useful guidance can nevertheless be derived from prior analysis of 'like product' issues under other provisions of the WTO Agreement. Thus, we note the statement of the Appellate Body in Alcoholic Beverages (1996) that, in this context as in any other, the issue of 'like product' must be considered on a case-by-case basis, that in applying relevant criteria panels can only use their best judgment regarding whether in fact products are like, and that this will always involve an unavoidable element of individual, discretionary judgement."(361) 252. Further in its "like products" analysis under footnote 46, the Panel on Indonesia - Autos rejected the argument that it "must consider all passenger cars to be 'like' because any effort to differentiate between passenger cars with a multitude of differing characteristics would inevitably result in arbitrary divisions":(362) "We are aware that there are innumerable differences among passenger cars and that the identification of appropriate deciding lines between them may not be a simple task. However, this does not in our view justify limping all such products together where the differences among the products are so dramatic. ... We must endeavour to find some reasonable way to assess the relative importance of the various differences in the minds of consumers and to devise some sensible means to categorize passenger cars."(363) 253. The Panel on Indonesia - Autos decided that "[o]ne reasonable way ... to approach the 'like product' issue is to look at the manner in which the automotive industry itself has analysed market segmentation."(364) The Panel opted for an analysis which "considered the physical characteristics of the cars in question when designing its segmentation"; it considered that "an approach, which segments the market based on a combination of size and price/market position, [is] a sensible one which is consistent with the criteria relevant to 'like product' analysis under the SCM Agreement."(365) 254. In Indonesia - Autos, Indonesia argued that the low price of its Timor car placed it in a "special market niche" and rendered it unlike other, more expensive, car models. The Panel noted that the complainants in the case before it were claiming that the Indonesian Timor was being sold at undercutting prices as a result of subsidization and rejected the argument by Indonesia: "We do not preclude that price might be a relevant consideration in performing 'like product' analysis, particularly where differences in price represent one way to assess the relative importance of differing physical characteristics to consumers. In this case, however, the complainants allege that the Timor is being sold at undercutting prices as a result of subsidization. If we were to conclude that the low price of the Timor in the Indonesian market were to render the Timor 'unlike' other models which are similar in physical characteristics to the Timor but priced higher, the result would be that, in cases where the subsidization and resulting price undercutting were sufficiently high, price undercutting claims under Article 6 could never prevail. Thus, we do not consider that the Timor's lower price is a basis to conclude that it is unlike the models alleged by the complainants to be 'like' the Timor."(366) 255. Considering whether "the difference between a product assembled and unassembled is sufficiently important that the unassembled product does not 'closely resemble' the assembled product"(367), the Panel on Indonesia - Autos stated: "We do not consider that an unassembled product ipso facto is not a like product to that product assembled. Recalling the view of the Appellate Body that tariff classification may be a useful tool in like product analysis [footnote omitted], we note that, under the General Rules for the Interpretation of the Harmonized System:
Any reference in a heading to an Article shall be taken to include a reference to that Article complete or unfinished, provided that, as presented, the incomplete or unassembled Article has the essential character of the complete or unfinished article.
We think that a comparable approach to the relation between assembled and unassembled products makes good sense in the context of this dispute."(368) 2. Relationship with other Articles 256. When reversing the Panel's findings that the de minimis standard contained in Article 11.9 was applicable to sunset review investigations, the Appellate Body in US - Carbon Steel, considered Article 15 and its footnote 45 as support for its views. In this regard, see paragraph 237 above.
XVII. Article 16 back to top Article 16: Definition of Domestic Industry 16.1 For the purposes of this Agreement, the term "domestic industry" shall, except as provided in paragraph 2, be interpreted as referring to the domestic producers as a whole of the like products or to those of them whose collective output of the products constitutes a major proportion of the total domestic production of those products, except that when producers are related(48) to the exporters or importers or are themselves importers of the allegedly subsidized product or a like product from other countries, the term "domestic industry" may be interpreted as referring to the rest of the producers.
(footnote original) 48 For the purpose of this paragraph, producers shall be deemed to be related to exporters or importers only if (a) one of them directly or indirectly controls the other; or (b) both of them are directly or indirectly controlled by a third person; or (c) together they directly or indirectly control a third person, provided that there are grounds for believing or suspecting that the effect of the relationship is such as to cause the producer concerned to behave differently from non-related producers. For the purpose of this paragraph, one shall be deemed to control another when the former is legally or operationally in a position to exercise restraint or direction over the latter.
16.2. In exceptional circumstances, the territory of a Member may, for the production in question, be divided into two or more competitive markets and the producers within each market may be regarded as a separate industry if (a) the producers within such market sell all or almost all of their production of the product in question in that market, and (b) the demand in that market is not to any substantial degree supplied by producers of the product in question located elsewhere in the territory. In such circumstances, injury may be found to exist even where a major portion of the total domestic industry is not injured, provided there is a concentration of subsidized imports into such an isolated market and provided further that the subsidized imports are causing injury to the producers of all or almost all of the production within such market.
16.3 When the domestic industry has been interpreted as referring to the producers in a certain area, i.e. a market as defined in paragraph 2, countervailing duties shall be levied only on the products in question consigned for final consumption to that area. When the constitutional law of the importing Member does not permit the levying of countervailing duties on such a basis, the importing Member may levy the countervailing duties without limitation only if (a) the exporters shall have been given an opportunity to cease exporting at subsidized prices to the area concerned or otherwise give assurances pursuant to Article 18, and adequate assurances in this regard have not been promptly given, and (b) such duties cannot be levied only on products of specific producers which supply the area in question.
16.4 Where two or more countries have reached under the provisions of paragraph 8(a) of Article XXIV of GATT 1994 such a level of integration that they have the characteristics of a single, unified market, the industry in the entire area of integration shall be taken to be the domestic industry referred to in paragraphs 1 and 2.
16.5 The provisions of paragraph 6 of Article 15 shall be applicable to this Article. No jurisprudence or decision of a competent WTO body.
XVIII. Article 17 back to top Article 17: Provisional Measures 17.1 Provisional measures may be applied only if:
(a) an investigation has been initiated in accordance with the provisions of Article 11, a public notice has been given to that effect and interested Members and interested parties have been given adequate opportunities to submit information and make comments;
(b) a preliminary affirmative determination has been made that a subsidy exists and that there is injury to a domestic industry caused by subsidized imports; and
(c) the authorities concerned judge such measures necessary to prevent injury being caused during the investigation.
17.2 Provisional measures may take the form of provisional countervailing duties guaranteed by cash deposits or bonds equal to the amount of the provisionally calculated amount of subsidization.
17.3 Provisional measures shall not be applied sooner than 60 days from the date of initiation of the investigation.
17.4 The application of provisional measures shall be limited to as short a period as possible, not exceeding four months.
17.5 The relevant provisions of Article 19 shall be followed in the application of provisional measures. 257. In US - Softwood Lumber III, the Panel found that the provisional measures were in violation of Article 17.3 (and 17.4) of the SCM Agreement because they were imposed less than 60 days after the date of initiation of the investigation and because they applied to imports for a period of more than four months. The Panel found that "Article 17.3 and 17.4 of the SCM Agreement are unambiguous, clearly specifying that provisional measures shall not be applied sooner than 60 days after initiation and their application shall be limited to maximum 4 months."(369) (b) Relationship with other Articles 258. Furthermore, the Panel on US - Softwood III considered that regarding "the starting-point for the application of provisional and final measures, Article 20 of the SCM Agreement establishes two exceptions to the general rule of non-retroactivity of final countervailing duties and no exceptions to the general rule of non-retroactivity of provisional measures. Nothing in Article 20 SCM Agreement provides an exception to the rules relating to the minimum period between initiation and application of provisional measures or the maximum period of application of such measures as provided for in Article 17.3 and 17.4 SCM Agreement."(370) 259. In US - Softwood Lumber III, the Panel considered that the text of Article 17.3 (and Article 17.4) is unambiguous. See paragraph 257 above. 260. The Panel on US - Softwood Lumber III, rejected the argument that the period of application referred to in Article 17.4 is the period during which cash deposits or bonds are taken, rather than the period during which the affected imports enter for consumption. For the Panel, this interpretation would allow for significantly more than four months worth of entries to be covered by a provisional measure. The Panel considered that such an interpretation would effectively nullify the disciplines of Article 17, particularly in light of the obligation contained in Article 20.1: "We consider that the US argument that the period of application in Article 17.4 SCM Agreement refers to the period during which cash deposits or bonds are taken rather than the period during which the affected imports enter for consumption would have the effect of nullifying the provision, particularly in light of Article 20.1 SCM Agreement. We cannot accept such an interpretation which would reduce a provision of the treaty to redundancy or inutility.(371) The US interpretation would allow significantly more than 4 months worth of entries to be covered by a provisional measure. For example, under this interpretation, a decision under Article 17.1 SCM Agreement could be taken after 60 days, following which the importing country would wait say 3 months before "applying" the provisional measures for 4 months, including retroactively to imports entering after the date of the decision. In our view this would render meaningless the disciplines imposed by Article 17 SCM Agreement."(372) (c) Relationship with other Articles 261. In US - Softwood Lumber III, the Panel considered that Article 20 does not provide an exception on the maximum period of application of provisional measures in Article 17.4. See paragraph 260 above.
XIX. Article 18 back to top Article 18: Undertakings 18.1 Proceedings may(49) be suspended or terminated without the imposition of provisional measures or countervailing duties upon receipt of satisfactory voluntary undertakings under which:
(footnote original) 49 The word "may" shall not be interpreted to allow the simultaneous continuation of proceedings with the implementation of undertakings, except as provided in paragraph 4.
(a) the government of the exporting Member agrees to eliminate or limit the subsidy or take other measures concerning its effects; or
(b) the exporter agrees to revise its prices so that the investigating authorities are satisfied that the injurious effect of the subsidy is eliminated. Price increases under such undertakings shall not be higher than necessary to eliminate the amount of the subsidy. It is desirable that the price increases be less than the amount of the subsidy if such increases would be adequate to remove the injury to the domestic industry.
18.2 Undertakings shall not be sought or accepted unless the authorities of the importing Member have made a preliminary affirmative determination of subsidization and injury caused by such subsidization and, in case of undertakings from exporters, have obtained the consent of the exporting Member.
18.3 Undertakings offered need not be accepted if the authorities of the importing Member consider their acceptance impractical, for example if the number of actual or potential exporters is too great, or for other reasons, including reasons of general policy. Should the case arise and where practicable, the authorities shall provide to the exporter the reasons which have led them to consider acceptance of an undertaking as inappropriate, and shall, to the extent possible, give the exporter an opportunity to make comments thereon.
18.4 If an undertaking is accepted, the investigation of subsidization and injury shall nevertheless be completed if the exporting Member so desires or the importing Member so decides. In such a case, if a negative determination of subsidization or injury is made, the undertaking shall automatically lapse, except in cases where such a determination is due in large part to the existence of an undertaking. In such cases, the authorities concerned may require that an undertaking be maintained for a reasonable period consistent with the provisions of this Agreement. In the event that an affirmative determination of subsidization and injury is made, the undertaking shall continue consistent with its terms and the provisions of this Agreement.
18.5 Price undertakings may be suggested by the authorities of the importing Member, but no exporter shall be forced to enter into such undertakings. The fact that governments or exporters do not offer such undertakings, or do not accept an invitation to do so, shall in no way prejudice the consideration of the case. However, the authorities are free to determine that a threat of injury is more likely to be realized if the subsidized imports continue.
18.6 Authorities of an importing Member may require any government or exporter from whom an undertaking has been accepted to provide periodically information relevant to the fulfilment of such an undertaking, and to permit verification of pertinent data. In case of violation of an undertaking, the authorities of the importing Member may take, under this Agreement in conformity with its provisions, expeditious actions which may constitute immediate application of provisional measures using the best information available. In such cases, definitive duties may be levied in accordance with this Agreement on products entered for consumption not more than 90 days before the application of such provisional measures, except that any such retroactive assessment shall not apply to imports entered before the violation of the undertaking. No jurisprudence or decision of a competent WTO body.
XX. Article 19 back to top Article 19: Imposition and Collection of Countervailing Duties 19.1 If, after reasonable efforts have been made to complete consultations, a Member makes a final determination of the existence and amount of the subsidy and that, through the effects of the subsidy, the subsidized imports are causing injury, it may impose a countervailing duty in accordance with the provisions of this Article unless the subsidy or subsidies are withdrawn.
19.2 The decision whether or not to impose a countervailing duty in cases where all requirements for the imposition have been fulfilled, and the decision whether the amount of the countervailing duty to be imposed shall be the full amount of the subsidy or less, are decisions to be made by the authorities of the importing Member. It is desirable that the imposition should be permissive in the territory of all Members, that the duty should be less than the total amount of the subsidy if such lesser duty would be adequate to remove the injury to the domestic industry, and that procedures should be established which would allow the authorities concerned to take due account of representations made by domestic interested parties(50) whose interests might be adversely affected by the imposition of a countervailing duty.
(footnote original) 50 For the purpose of this paragraph, the term "domestic interested parties" shall include consumers and industrial users of the imported product subject to investigation.
19.3 When a countervailing duty is imposed in respect of any product, such countervailing duty shall be levied, in the appropriate amounts in each case, on a non-discriminatory basis on imports of such product from all sources found to be subsidized and causing injury, except as to imports from those sources which have renounced any subsidies in question or from which undertakings under the terms of this Agreement have been accepted. Any exporter whose exports are subject to a definitive countervailing duty but who was not actually investigated for reasons other than a refusal to cooperate, shall be entitled to an expedited review in order that the investigating authorities promptly establish an individual countervailing duty rate for that exporter.
19.4 No countervailing duty shall be levied(51) 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.
(footnote original) 51 As used in this Agreement "levy" shall mean the definitive or final legal assessment or collection of a duty or tax. (a) Relationship with other Articles 262. The Panel on Australia - Automotive Leather II (Article 21.5 - US) relied, inter alia, on Article 19.1 in its finding that the phrase "withdraw the subsidy" under Article 4.7 referred to retroactive remedies (repayment). See paragraph 158 above. 263. For the relationship with Article 19.4, see paragraphs 267-268 below. 264. In US - Softwood Lumber III, the Panel recalled the relevant part of Article19.3 concerning the rights of any investigated exporter to an expedited review (unless he is being investigated for refusing to cooperate): "[T]he relevant part of Article 19.3 SCM Agreement, namely that any exporter whose exports were not actually investigated for reasons other than a refusal to cooperate is 'entitled' to an expedited review to establish an individual countervailing duty rate must be conducted, upon request, for any exporter of the type referred to in Article 19.3 SCM Agreement."(373) 265. The Panel on US - Softwood Lumber III found the relevant Member's regulations to be silent on the issue of whether the regulations under consideration prohibit the investigating authorities from conducting such reviews in aggregate cases and stated that the fact that no regulation exists regarding the case of aggregate investigations "does not imply" that the Member is "required by law to deny any requests for expedited review where an aggregate countervailing duty rate has been applied." Therefore, the Panel concluded that the laws and regulations that had been examined in the case did not mandate a violation of the requirement in Article 19.3 to conduct an expedited review. For this reason, the Panel also found that the Member is not required by law to violate Article 19.4 by levying countervailing duties in excess of the amount of the subsidy found: "We consider that the fact that no regulation exists regarding the apparently rare case of aggregate investigations does not imply that the USDOC is required by law to deny any requests for expedited review where an aggregate countervailing duty rate has been applied. In other words, the USDOC Regulations are simply silent on the issue.
We thus agree with the US that the fact that the USDOC has not elected to codify specific rules for handling what could potentially be an extremely large number of expedited reviews in an aggregate case does not in any way diminish the Department's statutory authority to conduct such reviews. We therefore find that the fact that 19 C.F.R. § 351.214(k)(1) does not specifically address the possibility of expedited reviews in aggregate cases does not prohibit such reviews ... We consider that the fact that no regulation exists regarding the apparently rare case of aggregate investigations, does not imply that exporters are denied by law the right to an expedited review where an aggregate countervailing duty rate was applied. The US laws and regulations cited by Canada thus do not mandate a violation of the requirement under Article 19.3 SCM Agreement to conduct an expedited review in order that the authority promptly establish an individual countervailing duty rate for any exporter whose exports are subject to a definitive countervailing duty but who was not actually investigated for reasons other than a refusal to cooperate. For this reason also, we do not find that the USDOC is required by law to violate Article 19.4 SCM Agreement in the softwood lumber case by inevitably levying countervailing duties in excess of the amount of the subsidy found.
In sum, we find that the above-cited US laws and regulations concerning expedited reviews do not mandate a violation of Article 19.3 SCM Agreement, or thereby, of Article 19.4 SCM Agreement, and thus reject Canada's claims in this respect. "(374) 266. Finally, the Panel on US - Softwood Lumber III noting that no final determination had been made and that no reviews of such a determination had been requested at the time of the preliminary determination under review by the Panel, and given the Panel's findings that the Member's laws and regulations did not preclude the Member from acting consistently with Article 19.3 and Article 21, considered that with respect to expedited and administrative reviews "it is not appropriate to rule on a potential denial of a request for review if no such request has even been made. The WTO dispute settlement system allows a Member to challenge a law as such or its actual application in a particular case, but not its possible future application."(375) 267. Referring to the ordinary meaning of Article 19.4, the Panel on US - Lead and Bismuth II stated that "no countervailing duty may be imposed on an imported product if no (countervailable) subsidy is found to exist with respect to that imported product, since in such cases the amount of subsidy found to exist with respect to the imported product would be zero. Thus, like Article 19.1, Article 19.4 ... establishes a clear nexus between the imposition of a countervailing duty, and the existence of a (countervailable) subsidy."(376) 268. The Panel on US - Lead and Bismuth II concluded that "consistent with the fundamental premise underlying Articles 19.1, 19.4, and 21.1 of the SCM Agreement, and Article VI:3 of the GATT 1994, and consistent with the object and purpose of countervailing duties envisaged by Part V of the SCM Agreement, we consider that a countervailing duty may only be imposed on an imported product if it is demonstrated that a (countervailable) subsidy was bestowed directly or indirectly on the manufacture, production or export of that merchandise."(377) (b) Relationship with other Articles 269. With respect to the relationship with Article 19.1, see paragraphs 263 above. 270. With respect to the relationship with Article 19.3, see paragraphs 265-266 above 271. With respect to the relationship with Article 21.1, see paragraph 268 above.
XXI. Article 20 back to top Article 20: Retroactivity 20.1 Provisional measures and countervailing duties shall only be applied to products which enter for consumption after the time when the decision under paragraph 1 of Article7 17 and paragraph 1 of Article 19, respectively, enters into force, subject to the exceptions set out in this Article.
20.2 Where a final determination of injury (but not of a threat thereof or of a material retardation of the establishment of an industry) is made or, in the case of a final determination of a threat of injury, where the effect of the subsidized imports would, in the absence of the provisional measures, have led to a determination of injury, countervailing duties may be levied retroactively for the period for which provisional measures, if any, have been applied.
20.3 If the definitive countervailing duty is higher than the amount guaranteed by the cash deposit or bond, the difference shall not be collected. If the definitive duty is less than the amount guaranteed by the cash deposit or bond, the excess amount shall be reimbursed or the bond released in an expeditious manner.
20.4 Except as provided in paragraph 2, where a determination of threat of injury or material retardation is made (but no injury has yet occurred) a definitive countervailing duty may be imposed only from the date of the determination of threat of injury or material retardation, and any cash deposit made during the period of the application of provisional measures shall be refunded and any bonds released in an expeditious manner.
20.5 Where a final determination is negative, any cash deposit made during the period of the application of provisional measures shall be refunded and any bonds released in an expeditious manner.
20.6 In critical circumstances where for the subsidized product in question the authorities find that injury which is difficult to repair is caused by massive imports in a relatively short period of a product benefiting from subsidies paid or bestowed inconsistently with the provisions of GATT 1994 and of this Agreement and where it is deemed necessary, in order to preclude the recurrence of such injury, to assess countervailing duties retroactively on those imports, the definitive countervailing duties may be assessed on imports which were entered for consumption not more than 90 days prior to the date of application of provisional measures. 1. Retroactive application of countervailing duties 272. The Panel on US - Softwood Lumber III noted that Article 20 only provides for the exceptional retroactive application of definitive duties but not of provisional duties: "As its text indicates, Article 20.1 SCM Agreement provides that provisional measures and countervailing duties shall only be applied to products entering the country following the imposition of such measures, 'subject to the exceptions set out in this Article'. While Article 20.2 and Article 20.6 SCM Agreement provide for explicit exceptions in the case of the definitive countervailing duties, we find no similar exceptions relating to provisional measures. Article 20.2 SCM Agreement sets forth the circumstances in which definitive countervailing duties may be applied retroactively for the period during which provisional measures were applied. Similarly, in critical circumstances, Article 20.6 SCM Agreement allows for the definitive duties to be assessed on imports which entered the country from 90 days prior to the date of application of the provisional measures. ... ... In respect of the starting-point for the application of provisional and final measures, Article 20 SCM Agreement thus establishes two exceptions to the general rule of non-retroactivity of final countervailing duties and no exceptions to the general rule of non-retroactivity of provisional measures. Nothing in Article 20 SCM Agreement provides an exception to the rules relating to the minimum period between initiation and application of provisional measures or the maximum period of application of such measures as provided for in Article 17.3 and 17.4 SCM Agreement."(378) 273. On the basis of the "clear language in the SCM Agreement", the Panel on US - Softwood Lumber III found that "the general rule of non-retroactivity applies to provisional measures, without exceptions", and concluded that the retroactive application of the provisional measure imposed by the Member was inconsistent with Article 20.6 of the SCM Agreement.(379) The Panel agreed "that a Member is allowed to take measures which are necessary to preserve the right to later apply definitive duties retroactively. In our view, an effective interpretation of the right to apply definitive duties retroactively requires that a Member be allowed to take such steps as are necessary to preserve the possibility of exercising that right" The Panel considered that "what kind of measures may thus be taken by the Member concerned will have to be determined on a case-by-case basis."(380) 274. However, the Panel on US - Softwood Lumber III rejected the argument that suspension of liquidation and the posting of a cash deposit or bond are necessary for the Member's authorities to colle |
