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WTO ANALYTICAL INDEX: SUBSIDIES AND COUNTERVAILING MEASURES

Agreement on Subsidies and Countervailing Measures

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> Declaration on Dispute Settlement Pursuant to the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade or Part V of the Agreement on Subsidies and Countervailing Measures

 

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XII. Article 11    back to top

A. Text of Article 11

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.


B. Interpretation and Application of Article 11

1. Article 11.2

(a) “caused by subsidized imports”

361.     In Japan — DRAMs (Korea), the Appellate Body upheld the Panel’s finding that it suffices for an investigating authority to find that subsidized imports are causing injury, without any additional requirement to trace the volume effects, the price effects, or the consequent impact of the subsidized imports back the subsidies. The Appellate Body, like the Panel, found contextual support for this conclusion in Article 11.2:

Article 11.2 of the SCM Agreement provides contextual support for our reading of the first sentence of Article 15.5. Article 11.2 sets forth guidance as to what may constitute “sufficient evidence” for purposes of an application for the initiation of a countervailing duty investigation and further describes the type of evidence that should be included in the application. Article 11.2 provides, in relevant part, that: …

 

We agree with the Panel that Article 11.2 thus indicates that information relating to the volume effects, the price effects, and the consequent impact of the subsidized imports on the domestic industry serves as evidence to demonstrate that injury is caused by the “subsidized imports through the effects of subsidies”.475 By its terms, Article 11.2 does not require an applicant to provide specific evidence regarding the effects that the subsidies may have on import volumes and prices so as to cause injury.

 

… If a demonstration of an additional causal link between the effect of the subsidy and injury is to be established as a prerequisite for an injury determination, as Korea contends, there is no reason why Article 11.2 would not have prescribed submission of evidence for that purpose.”(597)

2. Article 11.4

(a) “by or on behalf of the domestic industry”

(i) Requirement to make a determination

362.     In US — Offset Act (Byrd Amendment), the Appellate Body said that Article 11.4 of the SCM Agreement requires investigating authorities to “determine” whether an application for the initiation of an investigation has been “made by or on behalf of the domestic industry”. If a sufficient number of domestic producers have “expressed support” and the thresholds set out in Article 11.4 of the SCM Agreement have therefore been met, the “application shall be considered to have made been by or on behalf of the domestic industry”. In such circumstances, an investigation may be initiated. By contrast, there is no requirement that an investigating authority examine the motives of domestic producers that elect to support an investigation. Thus, an “examination” of the “degree” of support, and not the “nature” of support, is required. In other words, it is the “quantity”, rather than the “quality”, of support that is the issue.(598) The Appellate Body ruled:

“A textual examination of Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement reveals that those provisions contain no requirement that an investigating authority examine the motives of domestic producers that elect to support an investigation.(599) Nor do they contain any explicit requirement that support be based on certain motives, rather than on others. The use of the terms ‘expressing support’ and ‘expressly supporting’ clarify that Articles 5.4 and 11.4 require only that authorities ‘determine’ that support has been ‘expressed’ by a sufficient number of domestic producers. Thus, in our view, an ‘examination’ of the ‘degree’ of support, and not the ‘nature’ of support is required. In other words, it is the ‘quantity’, rather than the ‘quality’, of support that is the issue.”(600)

(ii) exclusive reliance on information in the application

363.     The Panel in Mexico — Olive Oil addressed the European Communities’ argument that investigating authorities are precluded from basing their standing determinations pursuant to Article 11.4 solely on the information provided in the application. The Panel rejected this argument in the following terms:

“[W]e see no language in Article 11.4, or in the SCM Agreement generally, prohibiting an investigating authority from basing its determination that an application has been made “by or on behalf of the domestic industry” solely on evidence provided by the applicant. In fact, there is no reference at all in Article 11.4, or elsewhere in the SCM Agreement, to particular sources of information that must or must not be used as the basis for this determination. The only stipulations concerning the quality of the evidence provided in an application are the general requirements in Articles 11.2 and 11.3 of the SCM Agreement (neither of which the European Communities has cited in its claims), that “simple assertions, unsubstantiated by relevant evidence, cannot be considered sufficient” for purposes of an application, and that the authority must “review the accuracy and adequacy of the evidence provided in the application”. The focus of these provisions is on the quality and credibility of the evidence, rather than on its exact source.”(601)

(b) Relationship with Article 5.4 of the Anti-Dumping Agreement

364.     In US — Offset Act (Byrd Amendment), the Appellate Body noted that Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement are “identical” provisions, and analysed them together. See paragraph 362 above.

3. Article 11.6

(a) Non-application of self-initiation standard to sunset reviews under Article 21.3

365.     The Appellate Body in US — Carbon Steel confirmed the Panel’s finding in relation to the self-initiation of sunset reviews that “nothing in the text of Article 11.6 provides for its evidentiary standards to be implied in Article 21.3” in relation.(602) The Appellate Body in US — Carbon Steel commented:

“Before leaving our analysis of the text of Article 21.3 of the SCM Agreement, we, lastly note that the provision contains no explicit cross-reference to evidentiary rules relating to initiation, such as those contained in Article 11.6. We believe the absence of any such cross-reference to be of some consequence given that, as we have seen, the drafters of the SCM Agreement have made active use of cross-references, inter alia, to apply obligations relating to investigations to review proceedings. In our view, the omission of any express cross-reference thus serves as a further indication that the negotiators of the SCM Agreement did not intend the evidentiary standards applicable to the self-initiation of investigations under Article 11 to apply to the self-initiation of reviews under Article 21.3.”(603)

4. Article 11.9

(a) Non-application of “de minimis” standard to sunset reviews under Article 21.3

366.     The Appellate Body in US — Carbon Steel reversed the Panel’s finding 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 paragraphs of Article 11 relate to the authorities’ initiation and conduct of a countervailing duty investigation, and in particular reflect rules that are “mainly procedural and evidentiary nature.”(604) 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.”(605)

367.     The Appellate Body in 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.(606) 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.”(607)

368.     The Appellate Body in 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.”(608)

369.     The Appellate Body in 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.”(609)

370.     The Appellate Body in 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.”(610)

371.     The Appellate Body in 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.(611)

“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”.(612) 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.”(613)

372.     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]:(614)

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.(615) 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.”(616)

373.     The Appellate Body in US — Carbon Steel then considered the negotiating history of the SCM Agreement 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.”(617)

(b) Exclusion of exporters from subsequent administrative and changed circumstances reviews

374.     The Appellate Body in Mexico — Anti-Dumping Measures on Rice, having found that the investigating authority must exclude from the anti-dumping measure any exporter found to have a zero or de minimis dumping margin further agreed with the Panel that as a consequence:

“[S]uch exporters cannot be subject to administrative and changed circumstances reviews, because such reviews examine, respectively, the ‘duty paid(618) and ‘the need for the continued imposition of the duty.’(619) Were an investigating authority to undertake a review of exporters that were excluded from the anti-dumping measure by virtue of their de minimis margins, those exporters effectively would be made subject to the anti-dumping measure, inconsistent with Article 5.8. The same may be said with respect to Article 11.9 of the SCM Agreement.”(620)

375.     Applying this reasoning, the Appellate Body in Mexico — Anti-Dumping Measures on Rice concluded that by requiring the investigating authority to conduct a review for exporters with zero margins and de minimis margins, Article 68 of Mexico’s Foreign Trade Act was inconsistent with Article 5.8 of the Anti-Dumping Agreement and SCM Agreement Article 11.9.(621)

5. Article 11.11

(a) “in no case more than 18 months”

376.     The Panel in Mexico — Olive Oil, found that the requirement set out in Article 11.1 is “clear and unequivocal”.(622) The Panel saw “no basis in this provision (nor authority in any other part of the SCM Agreement) to prolong an investigation beyond 18 months for any reason, including requests from interested parties”.(623) Since Mexico’s investigation exceeded 18 months, the Panel concluded that Mexico had acted inconsistently with Article 11.1.

 

XIII. Article 12     back to top

A. Text of Article 12

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.


B. Interpretation and Application of Article 12

1. General

377.     The Panel in Mexico — Olive Oil noted that certain provisions of the SCM Agreement leave considerable discretion to Members to define their own procedures:

“We also note that other provisions in the SCM Agreement leave considerable discretion to Members to define their own procedures; e.g. Articles 12, 14 and 23. This leads us to believe that, in general, unless a specific procedure is set forth in the Agreement the precise procedures for how investigating authorities will implement those obligations are left to the Members to decide.”(624)

2. Article 12.1

(a) “information which the authorities require”

378.     In US — Anti-Dumping and Countervailing Duties (China), the Panel rejected a claim under Article 12.1 because it was not convinced that the investigating authority “required” the information at issue.(625) The Panel further stated that:

“While it is certainly desirable that investigating authorities adopt clear positions on certain legal issues that have the potential to arise in the investigations they conduct, we are not convinced that Article 12.1 of the SCM Agreement requires them to do so with respect to any and all such issues.”(626)

379.     In US — Anti-Dumping and Countervailing Duties (China), the Panel also provided the following observations on Article 12.1:

Article 12, entitled “Evidence”, contains a series of evidentiary rules, including as to the requesting, receipt and handling of evidence by investigating authorities, the particular subject of Article 12.1 of the SCM Agreement. In this regard, the chapeau of Article 12.1 establishes two overarching requirements: that interested Members and parties be given (i) “notice” of the information required of them by the authorities; and (ii) “ample opportunity to present in writing all evidence which they consider relevant”. Neither of these requirements is circumscribed in any way, in terms of form or time period. In particular, the notice requirement places no limits on how, precisely, an investigating authority must request the information it requires, and thus seems to envisage different possible types of information requests. The ample opportunity requirement also contains no specific limits, and indeed extends beyond responses to requests from investigating authorities, to encompass the provision of information by an interested Member or party at its own initiative. Where an information request from an investigating authority is concerned, in our view the word “ample” must be understood to mean “ample” in the light of the specific nature and scope of that request, something that by its very nature can only be determined on a case-by-case basis.”(627)

(b) Article 12.1.1: 30-day deadline for questionnaire replies

380.     In Mexico — Anti-Dumping Measures on Rice, the Appellate Body addressed the scope of the obligation in Article 6.1.1 of the Anti-Dumping Agreement and 12.1.1 of the SCM Agreement:

“[T]he due process rights in Article 6 of the Anti-Dumping Agreement — which include the right to 30 days for reply to a questionnaire — ’cannot extend indefinitely’ but, instead, are limited by the investigating authority’s need ‘to “control the conduct” of its inquiry and to “carry out the multiple steps” required to reach a timely completion’ of the proceeding. As such, the time-limits for completing an investigation serve to circumscribe the obligation in Article 6.1.1 to provide all interested parties 30 days to reply to a questionnaire.”(628)

381.     In US — Anti-Dumping and Countervailing Duties (China), the Panel concluded that the term “questionnaires” in Article 12.1.1 refers to the initial comprehensive questionnaire (or set of questionnaires) issued by an investigating authority at or following the initiation of a countervailing duty investigation, and that the 30-day deadline to respond to questionnaires stipulated in Article 12.1.1 does not apply to responses to supplemental questionnaires.(629)

3. Article 12.4.1

(a) summaries shall be in sufficient detail to permit a reasonable understanding of substance of confidential information

382.     The Panel in Mexico — Olive Oil applied Article 12.4.1 in the context of an investigation where, instead of providing non-confidential summaries of the confidential information in its submissions, a party prepared public versions thereof by simply redacting the confidential information. The Panel found:

“Where confidentiality is claimed with respect to a specific document, we consider that the provision of a public version of that document, from which confidential information has simply been removed, may not necessarily satisfy the requirements of Article 12.4.1. This is because what is required to be summarized pursuant to Article 12.4.1 is the confidential information. The remaining non-confidential parts of the document may not, by themselves, be sufficient to convey a “reasonable understanding” of the substance of the confidential information that has been removed so as to constitute an adequate summarization of that information.

 

There may be circumstances in which the information remaining in the public version of a document may be sufficient, in itself, to provide the required summary of the confidential information. In such circumstances, no additional summary would be required. Such circumstances are likely to be limited, however, given that what the SCM Agreement requires is that the summary conveys a reasonable understanding of the substance of the confidential information.”(630)

383.     The Panel in Mexico — Olive Oil also addressed Mexico’s argument that non-confidential summaries need not be provided if representatives of interested parties were provided access to the totality of the confidential information. The Panel found no textual support for Mexico’s argument in Article 12.4.1 of the SCM Agreement. The Panel therefore rejected Mexico’s argument, invoking the reasoning applied by a panel in the context of Article 6.5 of the Anti-Dumping Agreement.(631)

(b) statement of the reasons why summarization is not possible

384.     The Panel in Mexico — Olive Oil found that, although the obligation to provide a statement of reasons is imposed on the interested party claiming confidentiality, Article 12.4.1 also imposes an obligation on the investigating authority to require that such a statement be provided. The Panel noted that this is consistent with the findings of various panels that have considered the equivalent provision in the Anti-Dumping Agreement (Article 6.5.1).(632)

385.     The Panel in Mexico — Olive Oil also noted that a statement of reasons may only substitute for a non-confidential summary in “exceptional” circumstances. According to the Panel:

“The use of the word ‘exceptional’ signifies that the drafters considered that confidential information should usually be capable of being summarized. In fact, summarization of confidential information is expected to be the norm, as it is only in ‘exceptional circumstances’ that summarization of the confidential information will not be possible.”(633)

386.     Regarding the obligations of an investigating authority in assessing an assertion that summarization is not possible, the Panel in Mexico — Olive Oil found that:

“[W]hile Article 12.4.1 does not set out any specific mechanism by which an investigating authority shall evaluate an assertion that summarization is not possible, the text of Article 12.4.1 nonetheless provides a clear indication of the basis of this evaluation: the investigating authority should examine the reasons given for not summarizing the confidential information and determine whether, indeed, these reasons constitute “exceptional” circumstances. By considering the extent to which an interested Member or party has shown exceptional circumstances, an investigating authority can determine whether the interested Member or party has substantiated that summarization is not possible.”(634)

4. Article 12.6

(a) Verification Meetings

387.     The Panel in US — Countervailing Duty Investigation on DRAMs considered the scope of application of Article 12.6, which gives Members the right to object to any verification meeting taking place within the territory of that Member. In particular, the Panel considered whether a Korean objection to the format of the verification (not to the verification itself) meant that the USDOC was precluded by Article 12.6 from carrying out the verification. According to the Panel, Article 12.6 establishes two conditions for investigating authorities to carry out investigations in the territory of other Members: “(1) the intention to carry out the investigations is notified in good time to the Member in question; and (2) that Member does not object to the investigation.”(635) Thus, Korea’s claim related to the second condition. On this issue the Panel agreed with the United States and concluded that:

“In our view, Article 12.6 establishes two conditions for investigating authorities to carry out investigations in the territory of other Members: (1) the intention to carry out the investigations is notified in good time to the Member in question; and (2) that Member does not object to the investigation.(636) As far as the first condition is concerned, Korea does not question the fact that the US notified Korea of its intention to carry out an investigation in the territory of Korea. The issue at hand has to do with the second condition, i.e. whether Korea objected to the investigation — or whether Korea had the right to object to the format of the investigation, not to the investigation in itself.

 

… Korea could have prevented the investigation in its territory from taking place, but it chose not to do so. In its letter of response to the US, Korea does not object to the meetings, nor to the discretion of the DOC to meet “with whomever it wants.”(637) Since Korea did not object to the DOC’s on-site investigation, the DOC’s decision to proceed with that investigation is not inconsistent with Article 12.6 of the SCM Agreement.”(638)

5. Article 12.7

388.     The Panel in EC — Countervailing Measures on DRAM Chips noted that Article 12.7 identifies the circumstances in which investigating authorities may overcome a lack of information, in the response of the interested parties, by using “facts” which are otherwise “available” to the investigating authority:

Article 12.7 thus allows an authority to make determinations on the basis of the facts available in case certain necessary information is not provided within a reasonable period, or if access to such information is refused, or in case an interested party or interested Member significantly impedes the investigation. Article 12.7 thus enables an authority to continue with the investigation and make determinations based on the facts that are available in case the information necessary to make such determinations is not provided by the interested parties, or, for example, verification of the accuracy of the information submitted is not allowed by an interested party, thereby significantly impeding the investigation. In other words, Article 12.7 identifies the circumstances in which investigating authorities may overcome a lack of information, in the response of the interested parties, by using “facts” which are otherwise “available” to the investigating authority.”(639),(640)

389.     The Panel in EC — Countervailing Measures on DRAM Chips discussed the use by an investigating authority of information from secondary sources, such as press reports for the purposes of making a subsidy determination in the context of Article 12.7 of the SCM Agreement. The Panel concluded that “[t]he weighing of the information and the evidence before it, is part of the discretionary authority of the investigating authority… There is no rule in the SCM Agreement that stops the investigating authority from taking into account information from all sources, including press reports.”(641)

390.     In Mexico — Anti-Dumping Measures on Rice, the Appellate Body provided guidance on a number of points relating to the interpretation of Article 12.7:

“We turn now to Article 12.7 of the SCM Agreement. The Panel based its finding of inconsistency with that provision on the reasoning it had developed with respect to the obligations in Article 6.8 of the Anti-Dumping Agreement and paragraphs 1, 3, 5, and 7 of Annex II thereto. We observe, however, that there are important textual differences between the relevant provisions of the Anti-Dumping Agreement and the SCM Agreement — namely, the absence in the SCM Agreement of an equivalent to Annex II to the Anti-Dumping Agreement.

 

Article 12.7 of the SCM Agreement provides: …

 

Like Article 6.8 of the Anti-Dumping Agreement, Article 12.7 of the SCM Agreement permits an investigating authority, under certain circumstances, to fill in gaps in the information necessary to arrive at a conclusion as to subsidization (or dumping) and injury. As in the Anti-Dumping Agreement, Article 12.7 prescribes the information that may be used for such purposes as the “facts available”. Unlike the Anti-Dumping Agreement, the SCM Agreement does not expressly set out in an annex the conditions for determining precisely which “facts” might be “available” for an agency to use when a respondent fails to provide necessary information. This does not mean, however, that no such conditions exist in the SCM Agreement.

 

Turning to the context of Article 12.7, we are of the view that, like Article 6 of the Anti-Dumping Agreement, Article 12 of the SCM Agreement as a whole “set[s] out evidentiary rules that apply throughout the course of the … investigation, and provide[s] also for due process rights that are enjoyed by ‘interested parties’ throughout … an investigation”.(642) In this respect, Article 12.1 provides:

 

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.

 

This due process obligation — that an interested party be permitted to present all the evidence it considers relevant — concomitantly requires the investigating authority, where appropriate, to take into account the information submitted by an interested party.(643)

 

Moreover, we note that Article 12.7 is intended to ensure that the failure of an interested party to provide necessary information does not hinder an agency’s investigation. Thus, the provision permits the use of facts on record solely for the purpose of replacing information that may be missing, in order to arrive at an accurate subsidization or injury determination.

 

In view of the above, we understand that recourse to facts available does not permit an investigating authority to use any information in whatever way it chooses. First, such recourse is not a licence to rely on only part of the evidence provided. To the extent possible, an investigating authority using the “facts available” in a countervailing duty investigation must take into account all the substantiated facts provided by an interested party, even if those facts may not constitute the complete information requested of that party. Secondly, the “facts available” to the agency are generally limited to those that may reasonably replace the information that an interested party failed to provide. In certain circumstances, this may include information from secondary sources.

 

This understanding of the limitations on an investigating authority’s use of “facts available” in countervailing duty investigations is further supported by the similar, limited recourse to “facts available” permitted under Annex II to the Anti-Dumping Agreement. Indeed, in our view, it would be anomalous if Article 12.7 of the SCM Agreement were to permit the use of “facts available” in countervailing duty investigations in a manner markedly different from that in anti-dumping investigations.”(644)

391.     In Japan — DRAMs (Korea), the Panel and the Appellate Body rejected Korea’s argument that the investigating authority acted inconsistently with Article 12.7 by designating certain entities as “interested parties,” and then having recourse to facts available when those entities failed to provide requested information. See Article 12.9 below.

392.     In US — Anti-Dumping and Countervailing Duties (China), the Panel found that the United States acted inconsistently with Article 12.7 because the investigating authority never requested the information at issue from the investigated producers. The Panel stated that:

“[P]ursuant to the plain language of Article 12.7 of the SCM Agreement, recourse to facts available is permissible only under the limited circumstances where an interested Member or interested party: (i) refuses access to necessary information within a reasonable period; (ii) otherwise fails to provide such information within a reasonable period; or (iii) significantly impedes the investigation. Both parties agree with our reading of Article 12.7 of the SCM Agreement. Our interpretation is also consistent with that of prior panels and Appellate Body that have considered this provision.(645)

 

 

We have determined above that Article 12.7 of the SCM Agreement limits the circumstances under which an investigating authority may resort to facts available to those where an interested party “refuses access to, or otherwise does not provide, necessary information within a reasonable period or significantly impedes the investigation”. The SCM Agreement contemplates no other possibilities; for instance, where an investigating authority, until a very late stage of the investigation, learns the need for information which it did not request during the course of the investigation and that is necessary to its final subsidization or injury determinations. As the USDOC’s reliance on facts available in the present instance does not fall within the situations contemplated in Article 12.7, we find that the USDOC’s use of facts available in the CWP and LWR investigations was inconsistent with Article 12.7 of the SCM Agreement.”(646)

6. Article 12.8

393.     The Panel in Mexico — Olive Oil noted that, consistent with the wording of Article 12.8, the “essential facts” are “the particular facts that ‘form the basis for the decision whether to apply definitive measures’.” According to the Panel, “these are the specific facts that underlie the investigating authority’s final findings and conclusions in respect of the three essential elements — subsidization, injury and causation — that must be present for application of definitive measures.”(647)

394.     In Mexico — Olive Oil, the Panel addressed an argument by the European Communities that Mexico violated Article 12.8 because it failed to inform interested parties that the document containing the investigating authority’s determination contained the “essential facts”. In other words, the European Communities argued that interested parties had no opportunity to present their views in respect of that determination in the guise of a document disclosing the “essential facts” pursuant to Article 12.8. The Panel rejected the European Communities’ argument, since the relevant determination had indicated that the facts stated therein were the basis for the determinations of subsidization, injury and causation.(648)

395.     In US — Anti-Dumping and Countervailing Duties (China), the Panel described Article 12.8 and concluded that this provision was not germane to China’s claim in that case:

Article 12.8 pertains to the disclosure that an investigating authority must make prior to the issuance of its final determination, in which it must set out the essential facts on which that determination is based. While China’s treatment of its Article 12.8 claim in its submissions is too succinct to achieve any certainty in this respect, it seems that China’s argument is not that the USDOC failed to disclose the evidence on which its determinations were based, but rather that it failed to indicate what evidence the USDOC would have accepted — if any — to establish the existence of a double remedy. Again, China seems to seek a finding that pertains to the legal framework that the USDOC would apply to the issue of double remedies, but does not explain how the terms of Article 12.8 of the SCM Agreement can accommodate such a claim.”(649)

7. Article 12.9

(a) “interested party”

396.     In Japan — DRAMs (Korea), Korea argued that an entity could only be treated as an “interested party” within the meaning of Article 12.9 if that entity had an interest in the outcome of the relevant countervailing duty investigation. The Panel rejected Korea’s argument:

“We agree that an interested party must by definition have an “interest” or “involvement” in something in order to be an “interested party”. However, we do not believe that “something” must, by definition, be the outcome of the investigation. We consider that a party may be an interested party when it was engaged, or involved, in the matter under investigation to such an extent that it has an interest in that matter. It is entirely plausible, therefore, that the “something” might instead be the alleged subsidies at issue in a countervailing duty investigation, in the sense that a party was involved in the provision of such subsidies.

 

… We do not think that Articles 12.9(i) and (ii) are an exclusive list of parties who can be taken to be “interested parties”. In our view, the fact that sub-paragraphs (i) and (ii) identify the most obvious instances where parties will be “interested” does not mean that other forms of interest should be excluded from the category of “interested parties”. One cannot derive from a selection (in subparagraphs (i) and (ii)) of the most obvious examples of “interested party” that less obvious examples should not also be treated as “interested parties”. We are therefore unable to accept Korea’s argument that Article 12.9(i) and (ii) give rise to the necessary implication that “interested parties” must by definition have an interest in the outcome of an investigation.”(650)

397.     The Panel’s finding was upheld by the Appellate Body in Japan — DRAMs (Korea):

“We observe that Article 12.9 of the SCM Agreement does not, by its explicit terms, require that an investigating authority must establish that a party has “an interest in the outcome of [a] proceeding”. Nor do we see any provision of the SCM Agreement that defines the nature of the interest required for an entity to be included as an interested party.

 

Korea argues that the parties listed in subparagraphs (i) and (ii) of Article 12.9, which are required to be included by an investigating authority as interested parties — that is, exporters, importers, foreign producers, domestic producers, and their associations — all have a clear and direct interest in the outcome of a countervailing duty investigation. For Korea, the types of entities included in the list provide a “strong indication” that an entity cannot be an interested party if it does not have such an interest. We agree that the entities specified in subparagraphs (i) and (ii) — which are all involved in the production, export, or import of the product under investigation, or in the production of the like product in the importing country — are likely to “have an interest in the outcome of the proceeding”, but we find nothing in Article 12.9 to suggest that interested parties are restricted to entities of this kind under the residual clause of Article 12.9. Although the term “interested party” by definition suggests that the party must have an interest related to the investigation, the mere fact that the lists in subparagraphs (i) and (ii) comprise entities that may be directly interested in the outcome of the investigation does not imply that parties that may have other forms of interest pertinent to the investigation are excluded.”(651)

(b) “allowing domestic or foreign parties other than those mentioned above to be included as interested parties”

398.     In Japan — DRAMs (Korea), Korea argued that the use of the word “allowing” in the second sentence of Article 12.9 implies that there must be a request from a party before it can be included as an “interested party”. The Panel rejected Korea’s argument thus:

“The term “allowing” in the second sentence of Article 12.9 could be understood as referring to a Member allowing, through national legislation or implementing regulations, certain parties to participate in investigations as interested parties. The term “allowing” could equally be understood as referring to an investigating authority allowing such entities to be included as interested parties following a request or suggestion to that effect from an applicant. In addition, as Japan noted in response to the same question from the Panel, there are a variety of provisions in the SCM Agreement which include the phrase “upon request,” and given that the drafters of the SCM Agreement explicitly used the phrase “upon request” where a request is required or contemplated, the lack of the use of this phrase in Article 12.9 supports the interpretation that the inclusion of a party as an interested party is not predicated on a request.”(652)

399.     The Panel’s reasoning in Japan — DRAMs (Korea) was upheld by the Appellate Body:

“We agree with the Panel’s interpretation of the term “allowing” in Article 12.9. While a response to a request is certainly one way by which an investigating authority may allow an entity to be recognized as an interested party, we do not believe this is the only way for a party to be included. In our view, the term “allowing” in the residual clause connotes the power or authority given to a Member to include other parties as interested parties, rather than a restriction on such power of inclusion to those parties that make a request.”(653)

(c) Relationship with Article 12.7 of the SCM Agreement

400.     In Japan — DRAMs (Korea), Korea argued that an entity could only be treated as an “interested party” within the meaning of Article 12.9 if that entity had an interest in the outcome of the relevant countervailing duty investigation. In interpreting that provision, and rejecting Korea’s argument, the Panel referred to Members’ rights under Article 12.7:

“Moreover, we believe that prior Appellate Body and panel reports relating to Article 12.7, the provision of the SCM Agreement governing the use of facts available, undermine rather than support Korea’s contention that only parties with an interest in the outcome of the investigation may be included as “interested parties”. In Mexico — Anti-Dumping Measures on Rice, the Appellate Body explained that Article 12.7 “is intended to ensure that the failure of an interested party to provide necessary information does not hinder an agency’s investigation.” In EC — Countervailing Measures on DRAM Chips, the panel observed that “Article 12.7 of the SCM Agreement is an essential part of the limited investigative powers of an investigating authority in obtaining the necessary information to make proper determinations.” Thus, previous Appellate Body and panel reports have underscored the important role that Article 12.7 serves in ensuring that investigating authorities are able to obtain the information necessary to make proper determinations. Requiring an investigating authority to establish that a party has an interest in the outcome of an investigation as a precondition for treating that party as an “interested party” could preclude investigating authorities from making proper determinations. In our view, the scope of the right of investigating authorities to include parties as “interested parties” in investigations must be interpreted with a view to ensuring that investigating authorities are able to obtain the “necessary information” needed to arrive at a determination. Therefore, we do not believe that Article 12.7 gives rise to the necessary implication that an investigating authority must establish that a party has an interest in the outcome of an investigation in order to include that party as an “interested party” in the investigation.”(654)

 

XIV. Article 13     back to top

A. Text of Article 13

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.


B. Interpretation and Application of Article 13

401.     In Mexico — Olive Oil, the European Communities argued that Mexico had acted inconsistently with Article 13.1 because it did not hold consultations between the date it sent the invitation to consult and the date of initiation of the investigation. The Panel rejected the European Communities’ argument on the basis that Article 13.1 merely provides that the exporting Member “shall be invited for consultations”. The Panel stated that “the provision makes no explicit reference to consultations being held, referring instead to an invitation to consult”.(655) According to the Panel, “the ordinary meaning of the obligation on the importing Member that is considering initiating a countervailing duty investigation is to ask the Member, the products of which may be subject to that investigation (the exporting Member), to consultations. It then falls to the latter Member to decide whether or not to accept the invitation”.(656) The Panel continued:

“We do not see a requirement in the text of Article 13.1 that the Members involved must actually hold the referenced consultations. Indeed, if under Article 13.1, the Member considering whether to initiate an investigation were obligated to hold consultations with the exporting Member before it could initiate an investigation, the exporting Member could effectively block initiation simply by declining to consult… . We emphasize, however, that the invitation must be a bona fides one. That is, assuming that the exporting Member accepts the invitation, the Member considering whether to initiate an investigation cannot then refuse to participate in the consultations.”(657)

402.     In Mexico — Olive Oil, the Panel saw “no requirement that a sufficient interval must be allowed after issuance of the invitation and before initiation that consultations could be held. Rather, the requirement in that provision is that the invitation must be issued “in any event before” initiation, with no indication of any specific time interval.”(658)

 

XV. Article 14     back to top

A. Text of Article 14

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).


B. Interpretation and Application of Article 14

1. General

403.     In US — Softwood Lumber IV, the Appellate Body stated that:

“The chapeau of Article 14 requires that “any” method used by investigating authorities to calculate the benefit to the recipient shall be provided for in a WTO Member’s legislation or regulations … The reference to “any” method in the chapeau clearly implies that more than one method consistent with Article 14 is available to investigating authorities for purposes of calculating the benefit to the recipient.

 

… We agree with the Panel that the term “shall” in the last sentence of the chapeau of Article 14 suggests that calculating benefit consistently with the guidelines is mandatory. We also agree that the term “guidelines” suggests that Article 14 provides the “framework within which this calculation is to performed”, although the “precise detailed method of calculation is not determined”. Taken together, these terms establish mandatory parameters within which the benefit must be calculated, but they do not require using only one methodology for determining the adequacy of remuneration for the provision of goods by a government.”(659)

404.     In Japan — DRAMs (Korea) the Appellate Body made the following findings regarding the requirements of the chapeau of Article 14:

“The chapeau of Article 14 sets out three requirements. The first is that “any method used” by an investigating authority to calculate the amount of a subsidy in terms of benefit to the recipient shall be provided for in the national legislation or implementing regulations of the Member concerned. The second requirement is that the “application” of that method in each particular case shall be transparent and adequately explained. The third requirement is that “any such method” shall be consistent with the guidelines contained in paragraphs (a)-(d) of Article 14.

 

The chapeau of Article 14 provides a WTO Member with some latitude as to the method it chooses to calculate the amount of benefit. Paragraphs (a)-(d) of Article 14 contain general guidelines for the calculation of benefit that allow for the method provided for in the national legislation or regulations to be adapted to different factual situations… .

 

We observe that the first requirement of the chapeau of Article 14 is that the method used be provided for in a WTO Member’s national legislation or implementing regulations. Although the chapeau of Article 14 states that the calculation of benefit must be consistent with the guidelines in paragraphs (a)-(d) of that provision, it does not, in our view, contemplate that the method be set out in detail. The requirement of the chapeau would be met if the method used in a particular case can be derived from, or is discernable from, the national legislation or implementing regulations. We believe that this view strikes an appropriate balance between the flexibility that is needed for adapting the benefit calculation (consistent, however, with the guidelines of paragraphs (a)-(d) of Article 14) to the particular factual situation of an investigation, and the need to ensure that other Members and interested parties are made aware of the method that will be used by the Member concerned, under Article 14 of the SCM Agreement.”(660)

405.     The Panel in Mexico — Olive Oil noted that certain provisions of the SCM Agreement leave considerable discretion to Members to define their own procedures:

“We also note that other provisions in the SCM Agreement leave considerable discretion to Members to define their own procedures; e.g. Articles 12, 14 and 23. This leads us to believe that, in general, unless a specific procedure is set forth in the Agreement the precise procedures for how investigating authorities will implement those obligations are left to the Members to decide.”(661)

406. In Mexico — Olive Oil, the Panel observed that:

“By its own terms, Article 14 concerns the “method” to be used in a countervailing duty investigation to calculate the amount of benefit to a recipient, and sets forth three basic requirements in this regard. The first has to do with the legislative framework, the second has to do with the application of the law to particular cases, and the third has to do with the general guidelines for how to determine the benefit to the recipient from four basic forms of government financial contributions: equity infusions, loans, loan guarantees, and government provision of goods or services or government purchase of goods.”(662)

407.     In Mexico — Olive Oil, the European Communities claimed that Mexico failed to apply the method used to calculate the benefit conferred on the recipient to each particular case in a transparent way which was adequately explained, in violation of Article 14. The Panel rejected the EC claim, and found that the investigating authority provided a sufficiently adequate and transparent explanation of its method to calculate benefit in respect of the subsidy programmes at issue.(663)

2. Article 14(a): “usual investment practice … of private investors”

(a) General

408.     The Panel in EC — Countervailing Measures on DRAM Chips observed that:

Article 14(a) of the SCM Agreement does not provide a precise method for calculating benefit. It simply states that a benefit is conferred if 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.”(664)

409.     In EC and certain member States — Large Civil Aircraft, the Appellate Body provided the following guidance on the interpretation of Article 14(a):

Article 14(a) states that equity capital provided by a government shall not be considered to confer a benefit unless it is inconsistent with what is termed the “usual investment practice” of private investors in the territory of that Member. The two words “usual” and “practice” are in a sense reinforcing, with the former signifying “[c]ommonly or customarily observed or practised”(665) and the latter “usual or customary action or performance”.(666) Thus, we understand the term “usual practice” to describe common or customary conduct of private investors in respect of equity investment. We also observe that Article 14(a) focuses the inquiry on the “investment decision”. This reflects an ex ante approach to assessing the equity investment by comparing the decision, based on the costs and expected returns of the transaction, to the usual investment practice of private investors at the moment the decision to invest is undertaken.(667) The focus in Article 14(a) on the “investment decision” is thus critical, in our view, because it identifies what is to be compared to a market benchmark, and when that comparison is to be situated. With this understanding in mind, we turn to consider whether the Panel set out the proper standard under Article 1.1(b) of the SCM Agreement.

As we have previously noted, Article 14(a) of the SCM Agreement focuses the inquiry on the “investment decision”. This reflects an ex ante assessment of the equity investment, taking into account the costs and expected returns of the transaction as compared to the usual investment practice of private investors at the moment the decision to invest is undertaken. As we stated, the focus of Article 14(a) on the “investment decision” is a critical step in the analysis because it identifies what is to be compared to the market benchmark, and when that comparison is to be situated. Thus, in assessing the European Union’s claims on appeal, we first seek to identify the “investment decision” that the Panel was to compare against the market benchmark consisting of the usual investment practice.”(668)

(b) Relevance of distinction between inside investor vs. outside investor

410.     In Japan — DRAMs (Korea), the Panel addressed arguments on whether the amount of benefit conferred by the restructuring of insolvent companies should be established from the perspective of inside / existing investors, or outside / new investors. Ultimately, the Panel found that there was no need for it to rule on whether or not the inside / existing investor standard was an appropriate market benchmark, since the parties agreed that it was. The Panel was reversed by the Appellate Body. The Appellate Body made the following findings on the matter:

“We do not consider the distinction between inside and outside investors to be helpful in order to determine the appropriate benchmark for calculating the amount of benefit under Articles 1.1(b) and 14 of the SCM Agreement. The terms of a financial transaction must be assessed against the terms that would result from unconstrained exchange in the relevant market. The relevant market may be more or less developed; it may be made up of many or few participants. By way of example, there are now well-established markets in many economies for distressed debt, and a variety of financial instruments are traded on these markets. In some instances, the market may be more rudimentary. In other instances, it may be difficult to establish the relevant market and its results. But these informational constraints do not alter the basic framework from which the analysis should proceed. We also do not consider that there are different standards applicable to inside and to outside investors. There is but one standard — the market standard — according to which rational investors act.

 

Article 14 of the SCM Agreement, entitled “Calculation of the Amount of a Subsidy in Terms of the Benefit to the Recipient”, provides guidance as to how the relevant market shall be identified. Specifically, with respect to “government provision of equity capital”, Article 14(a) stipulates that such equity infusions “shall not be considered as conferring a benefit, unless the investment decision can be regarded as inconsistent with the usual investment practice of private investors in the territory of that Member”. In respect of loans, Article 14(b) provides that “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 the latter case, “the benefit shall be the difference between these two amounts.” Thus, under Article 14(a), the benchmark is “the usual investment practice of private investors”, and under Article 14(b), the benchmark is “the amount the firm would pay on a comparable commercial loan which the firm could actually obtain on the market.” Neither of these benchmarks makes a distinction between “outside” or “inside” investors. Rather, they suggest that the investigating authority calculate the amount of benefit conferred on the recipient by comparing the terms of the financial contribution to the terms that the relevant market — consisting of rational investors, be they inside or outside investors or both — would have offered. As the Appellate Body has previously said:

 

Article 14, which … is relevant context in interpreting Article 1.1(b), supports our view that the marketplace is an appropriate basis for comparison. The guidelines set forth in Article 14 relate to equity investments, loans, loan guarantees, the provision of goods or services by a government, and the purchase of goods by a government. A “benefit” arises under each of the guidelines if the recipient has received a “financial contribution” on terms more favourable than those available to the recipient in the market.

 

We therefore disagree with the Panel’s approach in this case, which consisted only of examining “whether or not the JIA applied [the inside investor] standard in an appropriate manner.” As we see it, the Panel should have identified the appropriate benchmark to apply for the purpose of assessing whether the JIA calculated the amount of benefit for the October 2001 and December 2002 Restructurings consistently with Articles 1.1(b) and 14 of the SCM Agreement. Instead, the Panel held that, since the parties had agreed that the inside investor standard constituted a valid benchmark, “there [was] no need for [the Panel] to make any findings on whether or not the inside investor perspective constituted [the] valid market benchmark” for purposes of its analysis.”(669)

3. Article 14(b): loans

411.     In US — Anti-Dumping and Countervailing Duties (China), the Appellate Body found that the Panel did not commit an error in the interpretation of Article 14(b) in finding that “inherent in Article 14(b), as in Article 14(d), is sufficient flexibility to permit the use of a proxy in place of observed rates in the country in question where no ‘commercial’ benchmark can be found”.(670)

“We start by considering the constituent elements of a benchmark loan under Article 14(b), that is “comparable”, “commercial”, and a “loan which the firm could actually obtain on the market”.

 

A benchmark loan under Article 14(b) must be a loan that is “comparable” to the investigated government loan. Comparable is defined as “able to be compared”, “worthy of comparison”, and “fit to be compared (to)”.(671) This, in our view, suggests that something can be considered “comparable”, when there are sufficient similarities between the things that are compared as to make that comparison worthy or meaningful. Thus, a benchmark loan under Article 14(b) should have as many elements as possible in common with the investigated loan to be comparable. The Panel noted that, ideally, an investigating authority should use as a benchmark a loan to the same borrower that has been established around the same time, has the same structure as, and similar maturity to, the government loan, is about the same size, and is denominated in the same currency. The Panel, however, also considered that, in practice, the existence of such an ideal benchmark loan would be extremely rare, and that a comparison should also be possible with other loans that present a lesser degree of similarity. We agree with both of these observations by the Panel.

A loan only confers a benefit when and to the extent that it has been granted on terms that are not otherwise available in the market place.(672) A key element in ensuring a meaningful comparison under Article 14(b) is that a benchmark loan be “commercial”. The comparison between an investigated loan and a commercial loan, therefore, reveals whether a benefit has been conferred, and its amount. We observe that the term “commercial” is defined as “interested in financial return rather than artistry; likely to make a profit; regarded as a mere matter of business”.(673) Thus the term “commercial” does not speak of the identity of the provider of the loan.

 

Although the Panel did not explicitly rule on the issue, it stated that one possible interpretation of “commercial” could be that any loan made by the government would ipso facto not be “commercial”. In our view, it would not be correct to conclude that any loan made by the government (or by private lenders in a market dominated by the government) would ipso facto not be “commercial”. We see nothing to suggest that the notion of “commercial” is per se incompatible with the supply of financial services by a government. Therefore, the mere fact that loans are supplied by a government is not in itself sufficient to establish that such loans are not “commercial” and thus incapable of being used as benchmarks under Article 14(b) of the SCM Agreement. An investigating authority would have to establish that the government presence or influence in the market causes distortions that render interest rates unusable as benchmarks.

 

Finally, a benchmark loan under Article 14(b) must be a “loan which the firm could actually obtain on the market”. The use of the conditional tense, “could”, suggests that a benchmark loan under Article 14(b) need not in every case be a loan that exists or that can in fact be obtained in the market. In this respect, we agree with the Panel that this refers “first and foremost” to the borrower’s risk profile, that is, whether the benchmark loan is one that could be obtained by the borrower receiving the investigated government loan. Thus, we consider that Article 14(b) does not preclude the possibility of using as benchmarks interest rates on commercial loans that are not actually available in the market where the firm is located, such as, for instance, loans in other markets or constructed proxies.”(674)

412.     In US — Anti-Dumping and Countervailing Duties (China), the Appellate Body upheld the Panel’s conclusion of the Appellate Body’s interpretation of benchmarks under Article 14(d) in US — Softwood Lumber IV was in some respects equally applicable to Article 14(b). The Appellate Body reasoned as follows:

“We observe that, under Article 14(b), the benchmark to measure benefit is “the amount the firm would pay on a comparable commercial loan which the firm could actually obtain on the market”, while, under Article 14(d), it is the “prevailing market conditions for the good or service in question in the country of provision or purchase”. In contrast to Article 14(d), which clearly connects the relevant “market” to “the country of provision or purchase”, Article 14(b) does not specify expressly any geographical or national scope for what is the relevant “market” within which a comparable commercial loan should be identified.(675) We, therefore, agree with China that the relevant question under Article 14(b) is not whether an investigating authority may resort to an “out-of-country” benchmark as opposed to an “in-country” benchmark. It is, rather, to what extent Article 14(b) requires strict and formalistic compliance with all of the conditions specified therein, even when doing so would frustrate the purpose of that provision and prevent any calculation of the benefit. Thus, the relevant question is whether there is enough flexibility in Article 14(b), as the Appellate Body found that there is in Article 14(d), to allow for the use of a benchmark other than one that is always, and in every respect, “a comparable commercial loan which the firm could actually obtain on the market”.

It seems to us that, notwithstanding the differences between Article 14(b) and (d), there may also be under Article 14(b) limited circumstances where an excessively formalistic interpretation of this provision could frustrate its purpose and prevent the calculation of the benefit. Reading Article 14(b) as always requiring a comparison with loans denominated in the same currency as the investigated loans, even in circumstances where all loans in the same currency are distorted by government intervention, would lead to a comparison with government distorted loans, thus frustrating the purpose of Article 14(b). If loans in a given market and in a given currency are distorted by government intervention, an investigating authority should be permitted, in certain circumstances also under Article 14(b), to use a benchmark other than “a comparable commercial loan which the firm could actually obtain on the market”. However, such a benchmark would have to approximate “a comparable commercial loan which the firm could actually obtain on the market”.

 

We observe that the Panel reasoned that the identification of an appropriate benchmark under Article 14(b) can be seen as a “series of concentric circles”, where the investigating authorities should first seek commercial loans to the same borrower that are identical or nearly identical to the investigated loan. As the Panel stated, it is not reasonable to assume that, when there is no actually obtainable commercial loan that is comparable in every respect, an investigating authority must conclude that there is no benchmark, and that, therefore, no benefit amount can be determined. In the absence of an identical or nearly identical loan, an investigating authority should seek, in turn, other similar commercial loans held by the same borrower, then similar commercial loans granted to another borrower with a similar credit risk profile to the investigated borrower. In this process, an investigating authority will need to make adjustments to reflect differences from investigated loans, such as date of origination, size, maturity, currency, structure, or borrower’s credit risk. Yet, there may be situations where the actual differences between any of the existing commercial loans and the investigated government loan are so significant that it is not realistically possible to address them through adjustments. In such situations, the Panel considered that an investigating authority should be allowed to use proxies as benchmarks.

 

We agree that selecting a benchmark under Article 14(b) involves a progressive search for a comparable commercial loan, starting with the commercial loan that is closest to the investigated loan (a loan to the same borrower that is nearly identical to the investigated loan in terms of timing, structure, maturity, size and currency) and moving to less similar commercial loans while adjusting them to ensure comparability with the investigated loan.

 

We see no inherent limitations in Article 14(b) that would prevent an investigating authority from using as benchmarks interest rates on loans denominated in currencies other than the currency of the investigated loan, or from using proxies instead of observed interest rates, in situations where the interest rates on loans in the currency of the investigated loan are distorted and thus cannot be used as benchmarks. In fact, to read Article 14(b) as imposing such limitations on the selection of a benchmark would potentially frustrate the purpose of that provision, as no suitable benchmarks could be identified in situations where the interest rates on loans in a given currency were distorted by government presence or influence in the market and no loan in that currency exists in other markets. We further note that, as already discussed above, the possibility of resorting to a proxy under Article 14(b) is consistent with the use of the conditional tense: “would pay” and “could actually obtain on the market”. In the absence of an actual comparable commercial loan that is available on the market, an investigating authority should be allowed to use a proxy for what “would” have been paid on a comparable commercial loan that “could” have been obtained on the market.

 

We also consider that the further away an investigating authority moves from the ideal benchmark of the identical or nearly identical loan, the more adjustments will be necessary to ensure that the benchmark loan approximates the “comparable commercial loan which the firm could actually obtain on the market” specified in Article 14(b). As discussed above, we consider this to be consistent with, and parallel to, the requirement affirmed by the Appellate Body in US — Softwood Lumber IV under Article 14(d), that, in situations where an investigating authority does not use the private prices in the market of the country of provision, it should nevertheless select a method for calculating the benefit that relates or refers to, or is connected with, the prevailing market conditions in the country of provision.(676)

 

In sum, we consider that, in spite of the different formulations used in Article 14(b) and (d), some of the reasoning of the Appellate Body in US — Softwood Lumber IV concerning the use of out-of-country benchmarks and proxies under Article 14(d) is equally applicable under Article 14(b). In particular, we are of the view that a certain degree of flexibility also applies under Article 14(b) in the selection of benchmarks, so that such selection can ensure a meaningful comparison for the determination of benefit. At the same time, when an investigating authority resorts to a benchmark loan in another currency or to a proxy, it must ensure that such benchmark is adjusted so that it approximates the “comparable commercial loan”. Moreover, in accordance with the chapeau of Article 14, any such method, as well as how it approximates the loan in another currency or the proxy to a “comparable commercial loan which the firm could actually obtain on the market”, must be transparent and adequately explained.”(677)

413.     In EC and certain member States — Large Civil Aircraft, the Appellate Body noted that the Panel characterized the LA/MSF measures as “unsecured loans” and that neither participant had challenged this characterization on appeal, and stated “[a]ccordingly, the most relevant “guideline” of Article 14 of the SCM Agreement is that provided in subparagraph (b)”.(678) The Appellate Body then proceeded to provide further guidance on the interpretation and application of Article 14(b).

“A panel relying on Article 14(b) would thus examine whether there is a difference between the amount that the recipient pays on the government loan and the amount the recipient would pay on a comparable commercial loan, which the recipient could have actually obtained on the market.(679) There is a benefit — and therefore a subsidy — where the amount that the recipient pays on the government loan is less than what the recipient would have paid on a comparable commercial loan that the recipient could have obtained on the market. There is no benefit — and therefore no subsidy — if what the recipient pays on the government loan is equal to or higher than what it would have paid on a comparable commercial loan. The amount the recipient would have paid on a commercial loan is a function of the size of the loan, the interest rate, the duration, and other relevant terms of the transaction. The participants agreed at the oral hearing that Article 14(b) of the SCM Agreement provides useful guidance for purposes of the assessment of whether the LA/MSF measures confer a benefit.

 

Article 14(b) of the SCM Agreement calls for a comparison of the “amount the firm receiving the loan pays on the government loan” with “the amount the firm would pay on a comparable commercial loan which the firm could actually obtain in the market”. As we have already discussed in general terms above, we read this as suggesting that the comparison is to be performed as though the loans were obtained at the same time. In other words, the comparable commercial loan is one that would have been available to the recipient firm at the time it received the government loan.

 

Because the assessment focuses on the moment in time when the lender and borrower commit to the transaction, it must look at how the loan is structured and how risk is factored in, rather than looking at how the loan actually performs over time.(680) Such ex ante analysis of financial transactions is commonly used and appropriate financial models have been developed for these purposes. The analysis from a financial perspective proceeds as follows. The investor commits resources to an investment in the expectation of a future stream of earnings that will provide a positive return on the investment made. In deciding whether to commit resources to a particular investment, the investor will consider alternative investment opportunities. The investor will make its decision to invest on the basis of information available at the time the decision is made about market conditions and projections about how those economic conditions are likely to develop (future demand and price for the product, future costs, etc.). The information available will be, in most cases, imperfect. The investor does not have perfect foresight and thus there is always some likelihood, in some instances a sizeable one, that the investor’s projections will deviate significantly from what actually transpires. Hence, determining whether the investment was commercially rational is to be ascertained based on the information that was available to the investor at the time the decision to invest was made.(681) The commercial rationality of an investment cannot be ascertained on the basis of how the investment in fact performed because such an analysis has nothing useful to say about the basis upon which the investment was made. The investment could have earned a rate of return that exceeded, or was less than, the going market rate, but it was not predetermined to do so.

 

We note, moreover, that from a practical perspective, a requirement to look at the actual performance of a loan would mean that such measures could not be challenged until performance is fully completed. In the case of long-term loans, this would mean that any challenge of such measures would have to be deferred for years. Requiring a WTO Member to wait so long to mount a challenge would limit the effectiveness of Part II and Part III of the SCM Agreement also in the light of the prospective nature of WTO remedies.(682)

 

Therefore, in our view, the assessment of benefit must examine the terms and conditions of a loan at the time it is made and compare them to the terms and conditions that would have been offered by the market at that time. The European Union and the United States agreed at the oral hearing with this approach.”(683)

4. Article 14(c): loan guarantees

414.     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.”(684)

415.     Regarding the loan guarantee programmes under consideration, the Panel in Canada — Aircraft Credits and Guarantees also referred to the findings of the Panel and the Appellate Body in Canada — Aircraft(685) 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 were not marketbased.(686) 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.”(687)

5. Article 14(d): provision of goods or services and purchases of goods

(a) “in relation to prevailing market conditions for the good or service in question in the country of provision”

416.     In US — Softwood Lumber IV, the Appellate Body concluded that, in certain circumstances, an investigating authority may use a benchmark, under Article 14(d) of the SCM Agreement, other than private prices in the country of provision for determining if goods have been provided by a government for less than adequate remuneration. Regarding the threshold issue of whether a benchmark other than private prices may be used, the Appellate Body found:

“Although Article 14(d) does not dictate that private prices are to be used as the exclusive benchmark in all situations, it does emphasize by its terms that prices of similar goods sold by private suppliers in the country of provision are the primary benchmark that investigating authorities must use when determining whether goods have been provided by a government for less than adequate remuneration. In this case, both participants and the third participants agree that the starting-point, when determining adequacy of remuneration, is the prices at which the same or similar goods are sold by private suppliers in arm’s length transactions in the country of provision. This approach reflects the fact that private prices in the market of provision will generally represent an appropriate measure of the “adequacy of remuneration” for the provision of goods. However, this may not always be the case. As will be explained below, investigating authorities may use a benchmark other than private prices in the country of provision under Article 14(d), if it is first established that private prices in that country are distorted because of the government’s predominant role in providing those goods.”(688)

417.     As for the issue of when investigating authorities may use a benchmark other than private prices, the Appellate Body reasoned:

“In analyzing this question, we have some difficulty with the Panel’s approach of treating a situation in which the government is the sole supplier of certain goods differently from a situation in which the government is the predominant supplier of those goods. In terms of market distortion and effect on prices, there may be little difference between situations where the government is the sole provider of certain goods and situations where the government has a predominant role in the market as a provider of those goods. Whenever the government is the predominant provider of certain goods, even if not the sole provider, it is likely that it can affect through its own pricing strategy the prices of private providers for those goods, inducing the latter to align their prices to the point where there may be little difference, if any, between the government price and the private prices. This would be so even if the government price does not represent adequate remuneration. The resulting comparison of prices carried out under the Panel’s approach to interpreting Article 14(d) would indicate a “benefit” that is artificially low, or even zero, such that the full extent of the subsidy would not be captured, as the Panel itself acknowledged. As a result, the subsidy disciplines in the SCM Agreement and the right of Members to countervail subsidies could be undermined or circumvented when the government is a predominant provider of certain goods.

 

It appears to us that the language found in Article 14(d) ensures that the provision’s purposes are not frustrated in such situations. Thus, while requiring investigating authorities to calculate benefit “in relation to” prevailing conditions in the market of the country of provision, Article 14(d) permits investigating authorities to use a benchmark other than private prices in that market. When private prices are distorted because the government’s participation in the market as a provider of the same or similar goods is so predominant that private suppliers will align their prices with those of the government-provided goods, it will not be possible to calculate benefit having regard exclusively to such prices.

 

We emphasize once again that the possibility under Article 14(d) for investigating authorities to consider a benchmark other than private prices in the country of provision is very limited. We agree with the United States that “[t]he fact that the government is a significant supplier of goods does not, in itself, establish that all prices for the goods are distorted”. Thus, an allegation that a government is a significant supplier would not, on its own, prove distortion and allow an investigating authority to choose a benchmark other than private prices in the country of provision. The determination of whether private prices are distorted because of the government’s predominant role in the market, as a provider of certain goods, must be made on a case-by-case basis, according to the particular facts underlying each countervailing duty investigation.”(689)

418.     The Appellate Body recalled that the USDOC had constructed an alternative benchmark based on prices of stumpage in bordering states of the northern United States, adjusted to take into account market conditions prevailing in Canada. Having reversed the Panel’s interpretation of Article 14(d) of the SCM Agreement, the Appellate Body concluded that there were insufficient factual findings by the Panel and undisputed facts in the Panel record to enable it to examine the WTO consistency of the benchmark used by USDOC.(690) The Appellate Body observed that:

“[W]hen choosing an alternative method for determining the adequacy of remuneration, it has to be kept in mind that prices in the market of a WTO Member would be expected to reflect prevailing market conditions in that Member; they are unlikely to reflect conditions prevailing in another Member. Therefore, it cannot be presumed that market conditions prevailing in one Member, for instance the United States, relate or refer to, or are connected with, market conditions prevailing in another Member, such as Canada for example. Indeed, it seems to us that it would be difficult, from a practical point of view, for investigating authorities to replicate reliably market conditions prevailing in one country on the basis of market conditions prevailing in another country. First, there are numerous factors to be taken into account in making adjustments to market conditions prevailing in one country so as to replicate those prevailing in another country; secondly, it would be difficult to ensure that all necessary adjustments are made to prices in one country in order to develop a benchmark that relates or refers to, or is connected with, prevailing market conditions in another country, so as to reflect price, quality, availability, marketability, transportation and other conditions of purchase or sale in that other country.

 

It is clear, in the abstract, that different factors can result in one country having a comparative advantage over another with respect to the production of certain goods. In any event, any comparative advantage would be reflected in the market conditions prevailing in the country of provision and, therefore, would have to be taken into account and reflected in the adjustments made to any method used for the determination of adequacy of remuneration, if it is to relate or refer to, or be connected with, prevailing market conditions in the market of provision. This is because countervailing measures may be used only for the purpose of offsetting a subsidy bestowed upon a product, provided that it causes injury to the domestic industry producing the like product. They must not be used to offset differences in comparative advantages between countries.”(691)

419.     In US — Anti-Dumping and Countervailing Duties (China), the Appellate Body upheld the Panel’s finding that China had not established that the investigating authority’s rejection of in-country private prices as benchmarks was inconsistent with Article 14(d).(692)

(b) Prior subsidization in the relevant market

420.     In Japan — DRAMs (Korea), the Panel determined that prior subsidization of the relevant sector did not necessarily negate the commercial (i.e. “market”) nature of subsequent transactions by commercial actors within that sector:

“We begin by acknowledging that there may be circumstances in which the market is distorted to such an extent that the pricing in that market may not be used for the purpose of establishing benefit. Thus, the Appellate Body found in US — Softwood Lumber IV that “in certain situations where government involvement in the market is substantial, the prices of private suppliers may be artificially suppressed because of the prices charged for the same goods by the government”. This is “because the government’s role in providing the financial contribution is so predominant that it effectively determines the price at which private suppliers sell the same or similar goods, so that the comparison contemplated by Article 14 would become circular”. Furthermore, several panels have recognised that private participation in restructuring programmes might be influenced by government / public participation in those programmes. Thus, the panel in EC — Countervailing Measures on DRAM Chips found that “the behaviour of (…) market players [could be] so distorted by the government’s intervention that they can no longer serve as the benchmark against which to measure the alleged government distortion”. Similarly, the panel in Korea — Commercial Vessels found (with express reference to the Appellate Body’s findings in US — Softwood Lumber IV) that “there could be circumstances in which a government influences the market to such an extent that it becomes distorted, so that private entities no longer operate pursuant to purely commercial principles”.

 

Japan has referred to the US — Softwood Lumber IV case in support of the JIA’s reliance on prior subsidization. However, none of the Appellate Body or panel findings referred to above concerned the role of prior subsidization in distorting markets. Instead, they were concerned with distortion caused by present, or contemporaneous, government involvement and intervention in markets. These cases therefore do not provide support for the JIA’s determination.

 

In our view, prior subsidization of an object does not necessarily mean that the market price for that object is distorted. A buyer may be said to have paid a market price even though the object only exists because of prior subsidies. Indeed, this is the basic premise of consistent WTO rulings to the effect that the payment of fair market value for privatized entities does not confer a benefit. In US — Countervailing Measures on Certain EC Products, the Appellate Body confirmed that “[p]rivatization at arm’s length and for fair market value may result in extinguishing the benefit.” Implicit in this finding is the notion that a privatization might take place “for fair market value”. The fact that a state-owned entity, which only exists because of prior subsidization, may be privatized, or sold, “for fair market value” undermines Japan’s argument that there can be no (fair) market price for an entity that existed, in the JIA’s view, only because of prior subsidization.”(693)

 

XVI. Article 15     back to top

A. Text of Article 15

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.


B. Interpretation and Application of Article 15

1. Article 15.1

(a) Interpretation and Application

421.     The Panel in US — Countervailing Duty Investigation on DRAMs noted the Appellate Body’s interpretations of the equivalent Anti-Dumping Agreement provision in previous cases, and said that, given the parties’ agreement, it would use these Appellate Body statements in determining in this case whether the ITC’s injury determination was consistent with SCM Agreement Articles 15.2, 15.4 and 15.5.(694) In this context it was guided by the Appellate Body in US — Hot-Rolled Steel, which in paragraph 193 characterized “positive evidence” as evidence which is of an “affirmative, objective and verifiable character, and … [is] credible.” and which described an “objective examination” as requiring that the domestic industry and the effects of imports be investigated in an unbiased manner, without favouring the interests of any interested party, or group of interested parties, in the investigation:

“The term “objective examination” aims at a different aspect of the investigating authorities’ determination. While the term “positive evidence” focuses on the facts underpinning and justifying the injury determination, the term “objective examination” is concerned with the investigative process itself. The word “examination” relates, in our view, to the way in which the evidence is gathered, inquired into and, subsequently, evaluated; that is, it relates to the conduct of the investigation generally. The word “objective”, which qualifies the word “examination”, indicates essentially that the “examination” process must conform to the dictates of the basic principles of good faith and fundamental fairness.(695) In short, an “objective examination” requires that the domestic industry, and the effects of dumped imports, be investigated in an unbiased manner, without favouring the interests of any interested party, or group of interested parties, in the investigation. The duty of the investigating authorities to conduct an “objective examination” recognizes that the determination will be influenced by the objectivity, or any lack thereof, of the investigative process.”(696)’(697)

422.     Examining the nature of Article 15.1 of the SCM Agreement, the Panel in EC — Countervailing Measures on DRAM Chips noted that it is an overarching provision informing the other obligations contained in Article 15 of the SCM Agreement:

Article 15.1 of the SCM Agreement is an overarching provision which informs the more detailed obligations set forth in the remainder of Article 15 of the SCM Agreement. This implies that we can only reach a conclusion that the authority acted in a manner that is consistent with the specific obligations of, inter alia, Articles 15.2, 15.4 and 15.5 of the SCM Agreement if it based its determination of injury on positive evidence and conducted an objective examination of the various injury elements as required by these more specific provisions.”(698)

(b) Selection of the period of investigation

423.     The Panel in Mexico — Olive Oil examined Article 15.1 in the context of claims regarding the investigating authority’s definition of the period of investigation. The Panel made the following statements regarding this matter:

“In our view, the selection by an investigating authority of the period of investigation is a critical element in the countervailing duty investigative process. It determines the data that will form the basis for the assessment of subsidization, injury and the causal relationship between subsidized imports and the injury to the domestic industry. Although the SCM Agreement does not set forth an express requirement regarding the selection of the period of investigation for the purpose of conducting an injury analysis, this does not mean that an investigating authority’s discretion in this respect is unlimited. In our view, the requirements in Article 15.1 to base a determination of injury on positive evidence and pursuant to an objective examination impose certain constraints on an investigating authority’s discretion in selecting the period of investigation necessary to ensure the comprehensiveness and reliability of the data used as the basis for an injury determination.”(699)

2. Footnote 46

(a) “characteristics closely resembling”

424.     In its “like product” analysis under footnote 46, the Panel in 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.”(700)

425.     Further in its “like products” analysis under footnote 46, the Panel in 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”:(701)

“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.”(702)

426.     The Panel in 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.”(703) 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.”(704)

427.     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.”(705)

428.     Considering whether “the difference between a product assembled and unassembled is sufficiently important that the unassembled product does not ‘closely resemble’ the assembled product,”(706) the Panel in 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, 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.”(707)

3. Article 15.2

(a) “Significant” increase in subsidized imports

429.     The Panel in US — Countervailing Duty Investigation on DRAMs explained that there are three ways in which an investigating authority may comply with the requirement to consider whether there has been a significant increase in subsidized imports:

“There are three ways in which an investigating authority may comply with the Article 15.2 requirement to “consider whether there has been a significant increase in subsidized imports.” First, the investigating authority may consider whether there has been a significant increase in the volume of subsidized imports in absolute terms. Second, the investigating authority may consider whether there has been a significant increase in the volume of subsidized imports relative to domestic production. Third, the investigating authority may consider whether there has been a significant increase in the volume of subsidized imports relative to domestic consumption. Article 15.2 provides that “[n]o one or several of these factors can necessarily give decisive guidance.”(708)

430.     In respect of the volume of subsidized imports relative to domestic consumption, the Panel in US — Countervailing Duty Investigation on DRAMs, having found that Korea failed to establish that “an increase in subject import market share of this magnitude could not properly be considered significant,”(709) explained that:

Article 15.2 does not require an investigating authority to demonstrate that all of the subject imports covered by the period of injury investigation are subsidized… . It is not necessary that the period of review for subsidization must mirror the period of review for injury.”(710)

431.     The Panel in EC — Countervailing Measures on DRAM Chips stated that: “the language of Article 15.2 confers considerable latitude on an investigating authority. Article 15.2 allows an investigating authority to consider a significant increase, either in absolute terms or relative to production or consumption.”(711)

(b) Treatment of imports from companies which merged

432.     The Panel in EC — Countervailing Measures on DRAM Chips considered whether under Article 15.2 of the SCM Agreement, imports from the companies which merged are subject to any special rules. The Panel found that “Article 15.2 of the SCM Agreement sets forth no specific rules concerning the treatment of imports from companies which merged in the course of the period of investigation, thereby forming the company found to have been subsidized”.(712)

(c) Price effect

433.     The Panel in US — Countervailing Duty Investigation on DRAMs explained that, under Article 15.2, “competent authorities may choose whether to examine the price effects of subsidized imports on the basis of price underselling, price depression, or price suppression”.(713) Because, in this case, the ITC considered both price underselling and price depression, the Panel examined these issues separately. In respect of price underselling, the Panel, rejecting Korea’s arguments, noted that the “plain meaning” of Article 15.2 requires competent authorities only “to examine the price effects of subsidized imports,” and not to examine the price effects of non-subsidized imports or pricing on a combined brand basis:

Article 15.2 of the SCM Agreement requires the competent authority to analyse “the effect of the subsidized imports on [domestic] prices.” In light of the plain meaning of this text, the competent authority is only required to examine the price effects of subsidized imports. It is not required to also examine the price effects of non-subsidized imports, or pricing on a combined brand basis. Such examinations would extend beyond the price effects of subsidized imports, and therefore are not required by Article 15.2. For this reason, Korea’s arguments regarding the price effects of non-subsidized imports, or pricing on a combined brand basis, provide no basis for finding that the ITC could not properly have found that “there is significant price underselling by subject imports.”(714)

434.     On this basis, the Panel in US — Countervailing Duty Investigation on DRAMs rejected Korea’s argument that price depression was due to the larger volume of non-subject imports, noting Korea’s own acknowledgement that:

“[T]here may be multiple causes of injury suffered by a domestic industry. Thus, the fact that non-subject imports may have had negative price effects does not preclude a finding that subject imports also had negative effects on prices. Even if Korea’s arguments regarding the role of non-subject imports were correct, therefore, Korea’s arguments do not necessarily mean that the ITC could not properly have found, nevertheless, that “the effect of [] subject imports [] depressed prices to a significant degree.”(715)

435.     Discussing the argument advanced by Korea concerning the illogical nature of EC’s conclusion that Hynix’s imports had an effect on domestic prices when it was losing market share, the Panel in EC — Countervailing Measures on DRAM Chips noted that: “Article 15.2 of the SCM Agreement requires an investigating authority to consider whether there has been any significant price undercutting by the subsidized imports. Article 15.2 does not require an investigating authority to establish what caused the price undercutting.”(716)

436.     The Panel in EC — Countervailing Measures on DRAM Chips considered that Article 15.2 of the SCM Agreement does not set forth any particular methodology for examining price undercutting, as long as the methodology chosen is reasonable and objective.(717) The Panel stated that “[i]t appears to us that every methodology has its strengths and weaknesses, but that, in the absence of any prescribed methodology in the SCM Agreement, as long as the methodology used is not unreasonable, the Panel cannot find against it.”(718)

437.     Discussing, in the context of Article 15.2, the requirement to examine factors that might be affecting domestic prices, the Panel in EC — Countervailing Measures on DRAM Chips concluded that: “Article 15.2 of the SCM Agreement does not, as such, require an investigating authority to establish a causal link between the subsidized imports and the domestic prices which would require it to examine all other factors affecting domestic prices at the same time”.(719)

(d) Period of data collection

438.     The Panel in EC — Countervailing Measures on DRAM Chips noted that Article 15.2 does not contain any express obligations on the period of data collection, and concluded:

“In our view, there simply is no basis for reading such a requirement into the text of Articles 15.1 or 15.2 of the SCM Agreement. While an argument could certainly be made that the data on which the injury analysis is based should be sufficiently recent in order for this data to be relevant and probative such as to constitute positive evidence of injury caused by subsidized imports, we do not consider that it was unreasonable or not objective of the EC to refuse to extend the period of investigation for injury purposes beyond the period used to establish subsidization in this case.”(720)

4. Article 15.4

(a) Consideration of all relevant economic factors

439.     The Panel in US — Countervailing Duty Investigation on DRAMs concluded that Korea’s evidence in respect of particular companies that may have had access to capital markets was insufficient to overturn the ITC’s determination, recalling that the last sentence of Article 15.4 makes it clear that no single economic factor necessarily gives decisive guidance:

“[W]e do not consider that the fact that two domestic producers may have had continued access to capital markets is sufficient to overturn the ITC’s determination, based on a multitude of factors, that the domestic industry was suffering material injury. This is especially so as the last sentence of Article 15.4 makes it clear that no single economic factor having a bearing on the state of the domestic industry necessarily gives decisive guidance, and Korea has not established why domestic producers’ access to capital should be considered decisive. Accordingly, we are not persuaded that an objective and impartial investigating authority could not properly have found material injury in these circumstances.”(721)

440.     The Panel in EC — Countervailing Measures on DRAM Chips noted that Article 15.4 requires an objective examination and evaluation of all relevant factors having a bearing on the state of the industry, based on positive evidence.(722)

441.     Concerning economic downturn/business cycle and export performance, neither of which is a factor expressly listed in Article 15.4, the Panel in EC — Countervailing Measures on DRAM Chips concluded that the relevance of an economic factor depends, inter alia, on the nature of the industry being investigated:

“Whether an economic factor is relevant depends, inter alia, on the nature of the industry being investigated. In our view, and different from the situation addressed earlier in which a factor expressly listed in Article 15.4 is not evaluated, it will be for the complaining party to demonstrate two things: (1) that a certain factor which was relevant in assessing the impact of the subsidized imports on the state of the domestic industry was not examined; and (2) that the question of evaluation was raised during the investigation.”(723)

(b) Relationship with Article 16

442.     Addressing Korea’s argument that the ITC defined the subject imports and domestic industry inconsistently, the Panel said that:

“Korea would have to challenge the ITC’s definition of the domestic industry, and its treatment of assembly/ casing as a domestic production operation, by filing a claim under Article 16 of the SCM Agreement. However, Korea has not done so. There is therefore no basis for us to consider that the ITC’s definition of the domestic industry is inconsistent with that provision.”(724)

5. Article 15.5

(a) “through the effects of subsidies” / footnote 47

443.     In Japan — DRAMs (Korea), the Panel considered whether an assessment of causation of injury should relate to injury caused by “subsidization”, or to injury caused by “subsidized imports”. Korea, the complainant in that case, argued that the term “through the effects of subsidies” in Article 15.5 read in conjunction with the accompanying footnote requires a demonstration that the volume and price effects of the subsidized imports (as set forth in Article 15.2) and the consequent impact on these imports on the domestic industry (as set forth in Article 15.4), are “the effects of subsidies”. Thus, Korea argued that it must be demonstrated that the subsidies have caused the increased volume and/or price effects of the subsidized imports (Article 15.2) that have in turn had an impact on the domestic industry. In other words, Korea contended that it must be demonstrated that the subsidies are causing injury through the effects of subsidized imports. The Panel rejected Korea’s argument on the basis that “the ordinary meaning of the first sentence of Article 15.5 and its accompanying footnote is to define the phrase “through the effects of subsidies” to mean the effects of subsidized imports (“[a]s set forth in Articles 15.2 and 15.4”).”(725) The Panel concluded that Article 15.5 could not be read in the manner proposed by Korea, “as paragraphs 2 and 4 of Article 15 drive the reader towards a consideration of the effects of the subsidized imports, and not the effect of the subsidy.”(726)

444.     The Panel’s interpretation was upheld by the Appellate Body in the following terms:

“It is clear from the architecture of Articles 15.2, 15.4, and 15.5 that, for determining whether the “subsidized imports are, through the effects of subsidies, causing injury” to the domestic industry, what is required is the examination of the effects of the subsidized imports as set forth in Articles 15.2 and 15.4. These paragraphs neither envisage nor require the two distinct types of examinations suggested by Korea, namely, an examination of the effects of the subsidized imports as per Articles 15.2 and 15.4; and, a second examination of the effects of the subsidies as distinguished from the effects of the subsidized imports on a case-by-case basis.

 

Korea’s argument that the effects of subsidies must be distinguished from the effects of the subsidized imports is based on the premise that the increase in the volume of subsidized imports or the price at which they are sold on the importing Member’s market may not have been caused by the subsidies received by the exporting company. To illustrate its point, Korea has suggested that the increased volumes of sales of the product may be due to better quality, design, innovation, or customer preference, rather than the subsidy.

 

We are not persuaded by these arguments of Korea. In our view, they would imply additional inquiry by an investigating authority into two matters: first, the use to which the subsidies were put by the exporting company; and, secondly, whether, absent the subsidies, the product would have been exported in the same volumes or at the same prices. Such additional examinations are not contemplated by Articles 15.2 and 15.4.

 

Furthermore, the “non-attribution” provisions contained in the third sentence of Article 15.5 already address adequately the concern that the injurious effects of any known factors other than subsidized imports are not attributed to the subsidized imports. This ensures that injuries that may have been caused by other known factors are not attributed to the subsidized imports. The third sentence of Article 15.5 does not envisage the kind of additional enquiry implied in Korea’s arguments.

 

We are therefore of the view that, if an investigating authority carries out the examination required under Articles 15.2, 15.4, and 15.5, such examination suffices to demonstrate that “subsidized imports are, through the effects of subsidies, causing injury” within the meaning of the SCM Agreement.”(727)

(b) Non-attribution of injury caused by other factors

445.     Noting that the non-attribution requirement had been addressed by the Appellate Body in several recent cases in the context of Article 3.5 of the Anti-Dumping Agreement, the Panel in US — Countervailing Duty Investigation on DRAMs considered that, while the requirement had not been considered in cases involving the SCM Agreement, the identical wording of the relevant provisions called for the same approach:(728)

“The non-attribution requirement in anti-dumping investigations has been addressed by the Appellate Body in several recent cases. Although it has not been specifically considered in a countervailing duty case, given that the relevant provisions in the two Agreements are identical, and in light of the ‘need for the consistent resolution of disputes arising from anti-dumping and countervailing duty measures,’ [set out in the Ministerial Declaration on Dispute Settlement Pursuant to the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 or Part V of the Agreement on Subsidies and Countervailing Measures] it is clear to us that the requirement is the same in the context of both anti-dumping and countervailing duty investigations.”(729)

446.     Therefore the Panel in US — Countervailing Duty Investigation on DRAMs, citing the Appellate Body’s statement on the non-attribution requirement in paragraphs 188–189 of EC — Pipe Fittings, determined whether the ITC complied with Article 15.5 by examining whether the ITC properly separated and distinguished the injurious effects of other known factors from those of the alleged subsidized imports:

“Neither party has suggested that we should not be guided by the Appellate Body’s interpretation of the non-attribution requirement set forth in Article 3.5 of the AD Agreement. We shall therefore determine whether the ITC’s Final Injury Determination complied with the requirements of Article 15.5 of the SCM Agreement by examining whether the ITC properly separated and distinguished the injurious effects of other known factors from those of the alleged subsidized imports. We note that the Appellate Body has clarified that the ITC was “free to choose the methodology it [would] use” to separate and distinguish the injurious effects of other factors from those of the alleged subsidized imports. We also note that Korea has acknowledged that the ITC was not required to quantify the injury caused by other factors in order to separate and distinguish it from the injurious effects of the alleged subsidized imports.”(730)

447.     In considering Korea’s claim that under SCM Agreement Article 15.5, an investigating authority must “separate” and “distinguish” the injurious effects of factors other than subsidized imports to ensure that they are not attributed to the subsidized imports, the Panel in EC — Countervailing Measures on DRAM Chips referred to the jurisprudence under the parallel obligation contained in Article 3.5 of the Anti-Dumping Agreement. In light of the identical wording and role of the non-attribution requirement in the SCM Agreement, the Panel opined that Article 15.5 contains a similar requirement to separate and distinguish the injury caused by factors other than subsidized imports:

“The second part of Korea’s claim is whether the EC’s causation analysis satisfies (1) the non-attribution requirement set forth in Article 15.5 the SCM Agreement and (2) the overarching principle set forth in Article 15.1, i.e., that a determination under Article 15 must be based on an objective evaluation of positive evidence. We recall that Article 15.5 of the SCM Agreement requires an investigating authority to ensure that injury caused by any known factors, other than the subsidized imports, which at the same time are injuring the domestic industry, must not be attributed to the subsidized imports. We note that a parallel obligation in the AD Agreement has been interpreted by panels and the Appellate Body to require an investigating authority to separate and distinguish the injury caused by such other known factors.281 In light of the identical wording and role of the non-attribution requirement in the SCM Agreement, we are of the view that Article 15.5 contains a similar requirement to separate and distinguish the injury caused by factors other than subsidized imports. We note that the parties are in agreement with respect to the legal standard that applies, but differ in view as to the question whether the EC complied with this standard in its DRAMs investigation.

 

In our view, an investigating authority must make a better effort to quantify the impact of other known factors, relative to subsidized imports, preferably using elementary economic constructs or models. At the very least, the non-attribution language of Article 15.5 requires from an investigating authority a satisfactory explanation of the nature and extent of the injurious effects of the other factors, as distinguished from the injurious effects of the subsidized imports.”(731)

448.     In respect of non-subject imports, on US — Countervailing Duty Investigation the ITC had performed a separate pricing analysis of the two groups of imports and demonstrated that alleged subsidized imports had injurious price effects independent of those of the larger volume of non-subject imports, the Panel concluded that “given that there is no obligation under Article 15.5 to quantify the amount of injury caused by alleged subsidized and non-subject imports respectively, the ITC has done all that it was required to do.”(732)

449.     The Panel in US — Countervailing Duty Investigation on DRAMs concluded that the ITC recognized the negative impact of slowing demand, but that it had failed to explain how it ensured that the injury caused by such decline in demand was not attributed to alleged subsidized imports. Therefore, the Panel found a violation of SCM Agreement Article 15.5:

“[I]n the absence of any meaningful explanation of the nature and extent of the injurious effects of the slowing in demand, it is not apparent from the face of the [final determination] whether, or how, the ITC separated and distinguished the injury caused by such slowing in the growth in demand from (a) the injury caused by the decline in demand inherent in the business cycle and, more importantly, (b) the injury caused by subject imports.”(733)

450.     The Panel in Mexico — Olive Oil also addressed the non-attribution requirement set forth in Article 15.5. After reviewing the rulings of prior panel and Appellate Body reports regarding Article 3.5 of the Anti-Dumping Agreement, the Panel explained the nature of the Article 15.5 non-attribution obligation in the following terms:

“We find that the obligation in the third sentence of Article 15.5 in the SCM Agreement can be synthesized into two basic components. First, Economía was required to consider other factors known to it either as a result of its own investigation or because they were raised by the interested parties. Second, Economía was required to analyze each of these factors separately and to explain the nature and extent of the injurious effects of these other factors, separating and distinguishing them from the injurious effects of the subsidized imports. If the facts of the case so warranted, Economía might also have needed to consider the collective impact of the “other known factors”.(734)

6. Article 15.8

451.     The Panel in US — Softwood Lumber VI examined the meaning of the requirement under Article 3.8 of the Anti-Dumping Agreement and Article 15.8 of the SCM Agreement to consider and decide the application of anti-dumping and countervailing duties in a threat of injury case with “special care”. Based on dictionary definitions of “special” and “care”, the Panel opined that “a degree of attention over and above that required of investigating authorities in all anti-dumping and countervailing duty injury cases is required in the context of cases involving threat of material injury.”(735)

452.     The Panel in US — Softwood Lumber VI further considered that, in spite of the fact that Article 3.8 and Article 15.8 provides that the application of a measure has to be considered with special care, the “special care” obligation applies “during the process of investigation and determination of threat of material injury, that is, in the establishment of whether the prerequisites for application of a measure exist, and not merely afterward when final decisions whether to apply a measure are taken”.(736) Faced with the question of what is entailed by this obligation to act with an enhanced degree of attention, so as to demonstrate compliance with the “special care” obligation, the Panel made the following finding:

“The Agreements require, as noted above, an objective evaluation based on positive evidence in making any injury determination, including one based on threat of material injury. Canada has not asserted any specific legal requirements with respect to special care — it has made no arguments as to what it considers might constitute the special care required by the Agreements in threat cases. It is not clear to us what the parameters of such ‘special care’ in the context of an objective evaluation based on positive evidence would be. In these circumstances, we consider it appropriate to consider alleged violations of Articles 3.8 and 15.8 only after consideration of the alleged violations of specific provisions. While we do not consider that a violation of the special care obligation could not be demonstrated in the absence of a violation of the more specific provision of the Agreements governing injury determinations, we believe such a demonstration would require additional or independent arguments concerning the asserted violation of the special care requirement beyond the arguments in support of the specific violations.”(737)

 

XVII. Article 16     back to top

A. Text of Article 16

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.


B. Interpretation and Application of Article 16

1. “producers”

453.     In Mexico — Olive Oil, the Panel had to rule on the European Communities’ claim that the definition of “domestic industry” in Article 16.1 of the SCM Agreement requires an enterprise or a group of enterprises to be producing actual output of the like product at the time of application and / or during the period of investigation, in order to be considered “producers” for the purpose of that provision. Turning to the dictionary definition of the term “producer”, the Panel found that “the central element in these definitions is their focus on the nature of the activity undertaken — the bringing into existence or making of something. There is no suggestion in any of these definitions that being a producer is something that changes from one moment to the next depending on whether or not there is actual production of output at that moment.”(738) The Panel agreed with the approach taken by the Panel and Appellate Body in US — Lamb which, according to the Mexico — Olive Oil Panel, “focus[ed] on the essential nature of the business activities of a given enterprise as determinative of whether that enterprise could be considered a producer of the like product and thus be included in the domestic industry for that product.”(739) The Panel considered that a temporal approach to this issue, whereby enterprises might be excluded as domestic “producers” of the like product solely on the basis that they lack actual output at particular, defined moments, and regardless of the essential nature of their business activities, is fundamentally incompatible with the substantive approach taken in US — Lamb.(740) After referring to various contextual arguments, the Panel stated:

“Most importantly, in our view, the European Communities’ interpretation could lead to the result that an industry may be so badly injured by subsidized imports as to be forced to cease production for some period, but would be disqualified from obtaining the very remedy aimed at addressing such injury. We believe that this outcome would be absurd and contrary to the intention of the drafters of the SCM Agreement.”(741)

454.     As a result, the Panel in Mexico — Olive Oil rejected the European Communities’ claim:

“Based on the ordinary meaning of Article 16.1 read in light of its context and object and purpose, we find that Article 16.1 does not require that an enterprise or group of enterprises seeking countervail remedies must actually produce output around the date of filing of an application or during the subsidy POI to be considered a “producer” or “producers” and therefore part of or the entire “domestic industry” within the meaning of that Article.”(742)

 

XVIII. Article 17     back to top

A. Text of Article 17

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.


B. Interpretation and Application of Article 17

455.     In US — Softwood Lumber III, the Panel found that the provisional measures were in violation of Article 17.3 (and 17.4) 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.”(743) The Panel also explained that:

“[T]he 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 Articles 17.3 and 17.4 SCM Agreement.”(744)

456.     The Panel in 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.(745) 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.”(746)

 

XIX. Article 18     back to top

A. Text of Article 18

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.


B. Interpretation and Application of Article 18

457.     The Panel in US — Offset Act (Byrd Amendment) considered the extent of the obligation under Article 8.3 of the Anti-Dumping Agreement and Article 18.3 of the SCM Agreement concerning price undertakings. According to the Panel, under Article 8:

AD Article 8 and SCM 18 provide that when offered, the investigating authority need not accept the undertaking if it considers it impractical or if for other reasons it does not want to accept the undertaking. The decision to accept an undertaking or not under the Agreements is one the investigating authority is to take, and it may reject an undertaking for various reasons, including reasons of general policy. The fact that domestic producers may or may not be influenced by the CDSOA to suggest to the authority not to accept the undertaking, does not affect the possibility for interested parties concerned to offer an undertaking or for that undertaking to be accepted, in light of the non-decisive role of the domestic industry in this process.

 

In addition we note that the text of AD Article 8.3 and SCM Article 18.3 does not require the authority to examine objectively any undertaking offered. Rather, it stresses that undertakings offered need not be accepted and that the reasons for rejecting an undertaking may be manifold and include reasons of general policy. In our view, the CDSOA cannot be found to impede the objective examination of the appropriateness of accepting an undertaking, in the absence of any such obligation under AD Article 8 and SCM 18.”(747)

458.     In EC — Fasteners (China), the Panel observed that “[u]nder Article 8 of the AD Agreement, undertakings to revise prices or cease exports at dumped prices can be accepted only from individual exporters, following at least a preliminary determination of dumping”.(748) The Panel then noted that:

“This is in contrast to the parallel provision of the SCM Agreement, Article 18, which specifically provides for the acceptance of undertakings from the government of the exporting Member to eliminate or limit the subsidy, or take other measures concerning its effects. In our view, this difference reflects the fact that subsidization is a matter of government action, while dumping is, in general, a consequence of pricing decisions by commercial enterprises.”(749)

 

XX. Article 19     back to top

A. Text of Article 19

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 nondiscriminatory 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.


B. Interpretation and Application of Article 19

1. General

459.     In US — Customs Bond Directive, the Panel examined a claim that an enhanced bond requirement (EBR) for certain shrimp, imposed pursuant to the Amended Customs Bond Directive (Amended CBD) was inconsistent with Article 9 of the Anti-Dumping Agreement and Article 19 of the SCM Agreement. The Appellate Body upheld the Panel’s finding that bonds provided under the Amended CBD are not anti-dumping duties or countervailing duties, fall outside the scope of Articles 9 of the Anti-Dumping Agreement and 19 of the SCM Agreement, and consequently are not inconsistent as such with Articles 9.1, 9.2, 9.3 and 9.3.1 of the Agreement nor with Articles 19.2, 19.3 and 19.4 of the SCM Agreement:(750)

“A bond under the Amended CBD secures the payment of a duty. A bond, by itself, is not a duty as it does not entail any transfer of money from the importer to the government. Therefore, the EBR imposed pursuant to the Amended CBD cannot be characterized as a “duty” within the meaning of Article 9 of the Anti-Dumping Agreement and Article 19 of the SCM Agreement.”(751)

460.     As the text of certain provisions in Article 19 of the SCM Agreement parallels the text of provisions in Article 9 of the Anti-Dumping Agreement, see also Article 9 of the Chapter on the Anti-Dumping Agreement.

2. Article 19.1

(a) “through the effects of the subsidy”

461.     In Japan — DRAMs (Korea), the Panel considered whether an assessment of causation of injury should relate to injury caused by the effects of “subsidization”, or to injury caused by the effects of “subsidized imports”. The Panel examined this issue in the context of claims under both Articles 15.5 and 19.1 of the SCM Agreement. After finding that Article 15.5 does not require that an investigating authority demonstrate that the volume and price effects of the subsidized imports and the consequent impact on these imports on the domestic industry, as set forth in Articles 15.2 and 15.4, are “the effects of subsidies”, the Panel saw no basis for interpreting the phrase “through the effects of the subsidy” in Article 19.1 differently from the phrase “through the effects of subsidies” in Article 15.5. Accordingly, the Panel also found that Article 19.1 does not require that an investigating authority demonstrate that the volume and price effects of the subsidized imports and the consequent impact on these imports on the domestic industry, as set forth in Articles 15.2 and 15.4, are “the effects of subsidies”.(752) The Panel’s approach was upheld by the Appellate Body.(753)

(b) Relationship with other Articles

(i) Article 4.7

462.     The Panel in 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 208 above.

(ii) Article 19.4

463.     For discussion of the relationship with Article 19.4, see paragraphs 467468 below.

3. Article 19.3

(a) Right to an expedited review

(i) General

464.     In US — Softwood Lumber III, the Panel recalled the relevant part of Article 19.3 concerning the rights of any investigated exporter to an expedited review (unless it 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.”(754)

(ii) Aggregated investigations

465.     The Panel in US — Softwood Lumber III found the US regulations at issue to be silent on the question whether US investigating authorities could conduct expedited reviews in aggregate investigations, and stated that the fact that no regulation existed regarding the case of aggregate investigations “does not imply” that the United States 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 that 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 United States was 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.”(755)

(b) “appropriate amounts” and possible double remedies

466.     In US — Anti-Dumping and Countervailing Duties (China), the Appellate Body found that the imposition of double remedies, that is, the offsetting of the same subsidization twice by the concurrent imposition of anti-dumping duties calculated on the basis of a non-market economy (NME) methodology and countervailing duties, is inconsistent with Article 19.3 of the SCM Agreement. The Appellate Body stated that:

“[A] proper understanding of the “appropriate amounts” of countervailing duties in Article 19.3 of the SCM Agreement cannot be achieved without due regard to relevant provisions of the Anti-Dumping Agreement and recognition of the way in which the two legal regimes that these agreements set out, and the remedies which they authorize Members to impose, operate. To us, the requirement that any amounts be “appropriate” means, at a minimum, that investigating authorities may not, in fixing the appropriate amount of countervailing duties, simply ignore that anti-dumping duties have been imposed to offset the same subsidization. Each agreement sets out strict conditions that must be satisfied before the authorized remedy may be applied. The purpose of each authorized remedy may be distinct, but the form and effect of both remedies are the same. Both the Anti-Dumping Agreement and the SCM Agreement contain provisions requiring that the amounts of anti-dumping and countervailing duties be “appropriate in each case”, as reflected in Articles 9.2 and 19.3 respectively.”(756)

4. Article 19.4

(a) General

467.     Referring to the ordinary meaning of Article 19.4, the Panel in 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.”(757)

468.     The Panel in 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.”(758)

(b) “found to exist” — continued existence of benefit at the time of imposition

469.     In Japan — DRAMs (Korea), the Panel found that countervailing duties may only be imposed to offset present subsidization. In that case, Japan’s investigating authority had found that a benefit was conferred by a subsidy provided in 2001, had allocated the benefit conferred by the 2001 subsidy over a period of five years only, and had imposed a countervailing duty in 2006 (i.e. after the relevant period of benefit allocation had expired). The Panel explained that the obligation to demonstrate present subsidization at the time of duty imposition was not inconsistent with the practice of investigating authorities establishing the existence of subsidization on the basis of past periods of investigation:

“The obligation to establish present subsidization does not mean that investigating authorities are prevented from establishing the existence of subsidization (and injury and causing) by reference to data taken from a past period of investigation. To the contrary, given the need for investigating authorities to issue questionnaires, collect reliable and verifiable data, process and verify that data, and safeguard the due process rights of interested parties, investigating authorities have no choice but to establish the existence of subsidization (and injury) on the basis of past periods of investigation. Thus, countervailing duties may be imposed on the basis of the investigating authority’s review of a past period of investigation. We are not suggesting that an investigating authority is somehow required to conduct a new investigation at the time of imposition, in order to confirm the continued existence of the subsidization found to exist during the period of investigation. That would defeat the very purpose of using periods of investigation in the first place.

 

However, the use of a past period of investigation does not negate the need for an investigating authority to be satisfied that there is present subsidization. Rather, the historical data from the period of investigation “is being used to draw conclusions about the current situation,” “[b]ecause the conditions to impose [a duty] are to be assessed with respect to the current situation”. In this sense, the situation during the period of investigation is used as a proxy for the situation pertaining “current [ly]”, at the time of imposition. In the case of nonrecurring subsidies, if the review of the period of investigation indicates that the subsidy will no longer exist at the time of imposition, the existence of subsidization during the period of investigation will not suffice to demonstrate “current” subsidization at the time of imposition.

 

In the present case, the JIA used a past period of investigation to establish the existence of subsidization. That period of investigation covered the year 2003. The JIA’s determination of subsidization in 2003 was made based on an allocation of the benefit conferred by certain of the non-recurring subsidies provided by the October 2001 restructuring from 2001 to 2005. If the JIA had imposed countervailing duties in 2004, or 2005, its determination in respect of the period of investigation would have established that there was “current[ly]” subsidization in either of those two years, as benefit from those subsidies was still being conferred in those years. This is because, in investigating the period of investigation, the JIA had allocated the benefit of 2001 subsidies over the period 2001 to 2005. Once the JIA sought to impose countervailing duties in 2006, however, its finding of subsidization in respect of those subsidies for the period of investigation no longer demonstrated that there was “current[ly]” subsidization. This is because one important element of the JIA’s determination in respect of the period of investigation was that certain of the 2001 subsidies needed to be allocated, and would no longer confer any benefit in 2006.”(759)

470.     The findings of the Panel were upheld by the Appellate Body. The Appellate Body made the following finding regarding Article 19.4:

“By its terms, Article 19.4 refers to a subsidy “found to exist”. We see no requirement in Article 19.4 for an investigating authority to conduct a new investigation or to “update” the determination at the time of imposition of a countervailing duty in order to confirm the continued existence of the subsidy. However, in the case of a nonrecurring subsidy, a countervailing duty cannot be imposed if the investigating authority has made a finding in the course of its investigation as to the duration of the subsidy and, according to that finding, the subsidy is no longer in existence at the time that the Member makes a final determination to impose a countervailing duty. This is because, in such a situation, the countervailing duty, if imposed, would be in excess of the amount of subsidy found to exist, contrary to the provisions of Article 19.4.”(760)

(c) Relationship with other Articles

471.     With respect to the relationship with Article 19.1, see paragraph 463 above.

472.     With respect to the relationship with Article 21.1, see paragraph 468 above.

 

XXI. Article 20     back to top

A. Text of Article 20

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 Article 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.


B. Interpretation and Application of Article 20

1. Retroactive application of countervailing duties

473.     The Panel in 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.”(761)

474.     On the basis of the “clear language in the SCM Agreement”, the Panel in 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.(762) 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.”(763)

475.     However, the Panel in 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 collect definitive duties retroactively, as is expressly permitted under Article 20.6 of the SCM Agreement. The Panel considered on the basis of an “effective treaty interpretation” that the express permission in Article 20.6 to apply definitive duties retroactively up to 90 days prior to the application of the provisional measures leads to the conclusion that Article 20.3 does not preclude the imposition of definitive duties on entries for which no cash deposit or bond was collected. The Panel held that:

Article 20.3 SCM Agreement states that if the amount guaranteed by the cash deposit is lower than the definitive countervailing duty, the difference shall not be collected. If the reverse is true, the excess amount shall be reimbursed and the bond released in an expeditious manner. Article 20.3 SCM Agreement thus concerns the wholly different issue of how to deal with a discrepancy between the provisional and the final rates of the countervailing duty. It does not address the retroactive imposition and collection of definitive duties for the period before the application of provisional measures. Article 20.6 SCM Agreement provides that definitive duties may in certain circumstances be assessed on imports which were entered for consumption from 90 days prior to the date of application of provisional measures.

 

The text thus clearly indicates that the Agreement allows for the retroactive application of definitive duties at a time when no provisional measures were in place and thus no provisional duties were collected. To accept the US argument that Article 20.3 SCM Agreement would preclude a Member from collecting definitive duties for the period prior to the date of application of provisional measures, would mean that a Member doing what Article 20.6 SCM Agreement expressly allows for, would be violating the Agreement nevertheless. We cannot accept an interpretation which leads to this contradictory result. We consider that the principle of effective treaty interpretation requires the treaty interpreter to ‘read all applicable provisions of a treaty in a way that gives meaning to all of them, harmoniously’”(764),(765)

2. Relationship between paragraphs 1, 2 and 6 of Article 20

476.     In this regard, see paragraphs 473475 above.

3. Relationship with other Articles

(a) Articles 17.3 and 17.4

477.     The Panel in US — Softwood Lumber III considered that “[n]othing 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 Articles 17.3 and 17.4 SCM Agreement”.(766) See also paragraph 455 above.

 

XXII. Article 21     back to top

A. Text of Article 21

Article 21: Duration and Review of Countervailing Duties and Undertakings

21.1     A countervailing duty shall remain in force only as long as and to the extent necessary to counteract subsidization which is causing injury.

 

21.2     The authorities shall review the need for the continued imposition of the duty, where warranted, on their own initiative or, provided that a reasonable period of time has elapsed since the imposition of the definitive countervailing duty, upon request by any interested party which submits positive information substantiating the need for a review. Interested parties shall have the right to request the authorities to examine whether the continued imposition of the duty is necessary to offset subsidization, whether the injury would be likely to continue or recur if the duty were removed or varied, or both. If, as a result of the review under this paragraph, the authorities determine that the countervailing duty is no longer warranted, it shall be terminated immediately.

 

21.3     Notwithstanding the provisions of paragraphs 1 and 2, any definitive countervailing duty shall be terminated on a date not later than five years from its imposition (or from the date of the most recent review under paragraph 2 if that review has covered both subsidization and injury, or under this paragraph), unless the authorities determine, in a review initiated before that date on their own initiative or upon a duly substantiated request made by or on behalf of the domestic industry within a reasonable period of time prior to that date, that the expiry of the duty would be likely to lead to continuation or recurrence of subsidization and injury.(52) The duty may remain in force pending the outcome of such a review.

 

(footnote original) 52 When the amount of the countervailing duty is assessed on a retrospective basis, a finding in the most recent assessment proceeding that no duty is to be levied shall not by itself require the authorities to terminate the definitive duty.

 

21.4     The provisions of Article 12 regarding evidence and procedure shall apply to any review carried out under this Article. Any such review shall be carried out expeditiously and shall normally be concluded within 12 months of the date of initiation of the review.

 

21.5     The provisions of this Article shall apply mutatis mutandis to undertakings accepted under Article 18.


B. Interpretation and Application of Article 21

1. Article 21.1

(a) Temporal application

478.     The Appellate Body found in US — Carbon Steel that Article 21.1 sets forth a “general rule that, after the imposition of a countervailing duty, the continued application of that duty is subject to certain disciplines”.(767)

479.     The Panel in Japan — DRAMs (Korea) found that Article 21.1 only applies once countervailing duties have been imposed. The Panel rejected Korea’s argument that Article 21.1 also governed duty imposition per se:

“At the outset, we reject Korea’s claim insofar as it is based on Article 21.1 of the SCM Agreement. In our view, this provision applies once countervailing duties have been imposed. It does not govern duty imposition per se. Consistent with the title of Article 21, which reads “Duration and Review of Countervailing Duties and Undertakings”, Article 21.1 concerns the duration of countervailing measures, ensuring that they “remain in force” only as long as, and to the extent, necessary. The focus, therefore, is on the amount of time that a duty may remain in force, rather than the circumstances under which that duty initially entered into force. We therefore agree with the Appellate Body’s analysis of this provision as imposing disciplines regarding the “continued application” of countervailing duties, which apply “after the imposition” thereof.”(768)

(b) Relationship with other Articles

480.     With respect to the relationship with Article 19.4, see paragraph 468 above.

2. Article 21.2

(a) General

481.     In Brazil — Desiccated Coconut, the Panel found that, by virtue of Article 32.3, the investigation at issue was not covered by the SCM Agreement or Article VI of the GATT 1994. However, the Panel opined that even measures to which the WTO Agreement is not “immediately applicable” will fall under the SCM Agreement through reviews pursuant to Article 21.2:

“We recognize that these provisions regarding review are not comparable in effect to the immediate application of the WTO Agreement to all countervailing measures. The effect of reviews regarding the continued need for imposition of countervailing measures will likely be prospective and, depending on the date of imposition of the measure and the circumstances subsequent to its imposition, the exporting country Member may or may not be entitled to an immediate review. Nevertheless, it is clear from this provision that measures to which the WTO Agreement is not immediately applicable will nevertheless be brought under WTO disciplines over time pursuant to reviews under Article 21.2 of the SCM Agreement.”(769)

(b) Types of review under Article 21.2

482.     The Panel in US — Softwood Lumber III noted that Article 21.2 provides for different kinds of reviews but is silent on administrative reviews:

Article 21.2 SCM Agreement deals with different kinds of review mechanisms, requiring the authority to provide for the right of interested parties to request the authorities to examine whether the continued imposition of the duty is necessary to offset subsidization, whether the injury would be likely to continue or recur if the duty were removed or varied, or both. Thus, the first type of review addresses the question of whether subsidization is present at all, while the second type of review, by its very terms, has to do primarily with injury questions, that is, the effect on the domestic industry of changing or removing entirely the countervailing duty. This second type of review thus does not have to do with finalizing the rate of countervailing duty during a particular period for which estimated duties have been collected, but rather with the underlying need and rationale, from the standpoint of the affected domestic industry, for maintaining a countervailing duty. In short, Article 21.2 SCM Agreement is silent on the question of ‘administrative reviews’.”(770)

(c) Reviews not yet requested

483.     In US — Softwood Lumber III, the Panel considered that it was not appropriate to rule on a potential denial of a request for a review, where such a request had not 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.”(771)

(d) “necessary to offset subsidization”

484.     The Appellate Body in US — Lead and Bismuth II agreed with the Panel that “while an investigating authority may presume, in the context of an administrative review under Article 21.1, that a ‘benefit’ continues to flow from an untied, non-recurring ‘financial contribution’, this presumption can never be ‘irrebuttable’.”(772)

485.     The Appellate Body in US — Lead and Bismuth II rejected the view that “in the context of an administrative review under Article 21.2, an investigating authority must always establish the existence of a ‘benefit’ during the period of review in the same way as an investigating authority must establish a ‘benefit’ in an original investigation”. The Appellate Body stated:

“We believe that it is important to distinguish between the original investigation leading to the imposition of countervailing duties and the administrative review. In an original investigation, the investigating authority must establish that all conditions set out in the SCM Agreement for the imposition of countervailing duties are fulfilled. In an administrative review, however, the investigating authority must address those issues which have been raised before it by the interested parties or, in the case of an investigation conducted on its own initiative, those issues which warranted the examination.”(773)

(e) Exhaustiveness of the conditions listed

486.     In Mexico — Anti-Dumping Measures on Rice, the Appellate Body held that the conditions to carry out duty assessment reviews and changed circumstances reviews listed in Articles 9.3.2 and 11.2 of the Anti-Dumping Agreement and Article 21.2 of the SCM Agreement are exhaustive, and do not include a requirement to condition a review on a showing of representative volume of exports:

“[T]he above provisions … require an investigating authority to undertake duty assessment reviews and changed circumstances reviews once the conditions set out in those provisions have been satisfied. In our view, these conditions are exhaustive; thus, if an agency seeks to impose additional conditions on a respondent’s right to a review, this would be inconsistent with those provisions”.(774)

487.     In Mexico — Anti-Dumping Measures on Rice, the Appellate Body also confirmed that the completion of judicial proceedings as a condition for carrying out duty assessment and changed circumstances reviews is not provided for in Articles 9.3.2 of the Anti-Dumping Agreement and 11.2 and Article 21.2 of the SCM Agreement.(775)

3. Article 21.3

(a) Self-initiation of sunset reviews

(i) General

488.     The Appellate Body in US — Carbon Steel agreed with the Panel that Article 21.3 of the SCM Agreement does not prohibit the automatic self-initiation of sunset reviews by investigating authorities:

“[O]ur review of the context of Article 21.3 of the SCM Agreement reveals no indication that the ability of authorities to self-initiate a sunset review under that provision is conditioned on compliance with the evidentiary standards set forth in Article 11 of the SCM Agreement relating to initiation of investigations. Nor do we consider that any other evidentiary standard is prescribed for the self-initiation of a sunset review under Article 21.3.

 

This is not to say that authorities may continue the countervailing duties after five years in the absence of evidence that the expiry of the duty would be likely to lead to continuation or recurrence of subsidization and injury. Article 21.3 prohibits the continuation of countervailing duties unless a review is undertaken and the prescribed determination, based on adequate evidence, is made.

 

For all of these reasons, we agree with the Panel that Article 21.3 of the SCM Agreement does not prohibit the automatic self-initiation of sunset reviews by investigating authorities.”(776),(777)

(ii) Evidentiary requirements for self-initiation of sunset reviews

489.     The Appellate Body in US — Carbon Steel observed that Article 21.3 explicitly contemplates the termination of countervailing orders within five years, unless the prescribed determination is made in a review. It further considered that Article 21.3 requires initiation of such a review by the authorities (“on their own initiative”) or based on “a duly substantiated request made by or on behalf of the domestic industry”. The Appellate Body remarked that the terms “duly substantiated” are applicable to the authorization to initiate a review upon request, and not a self-initiation situation. Finally, the Appellate Body noted that Article 21.3 does not contain cross-references to evidentiary rules relating to self-initiation of an investigation, and considered that this omission means that Article 11 evidentiary standards are not applicable to the self-initiation of sunset reviews under Article 21.3. The Appellate Body considered:

“[W]e wish to underline the thrust of Article 21.3 of the SCM Agreement. An automatic time-bound termination of countervailing duties that have been in place for five years from the original investigation or a subsequent comprehensive review is at the heart of this provision. Termination of a countervailing duty is the rule and its continuation is the exception. The continuation of a countervailing duty must therefore be based on a properly conducted review and a positive determination that the revocation of the countervailing duty would ‘be likely to lead to continuation or recurrence of subsidization and injury’. Where the level of subsidization at the time of the review is very low, there must be persuasive evidence that revocation of the duty would nevertheless lead to injury to the domestic industry. Mere reliance by the authorities on the injury determination made in the original investigation will not be sufficient. Rather, a fresh determination, based on credible evidence, will be necessary to establish that the continuation of the countervailing duty is warranted to remove the injury to the domestic industry.

Article 21.3 requires the termination of countervailing duties within five years unless the prescribed determination is made in a review. Article 21.3 contemplates initiation of this review in one of two alternative ways, as is made clear through the use of the word ‘or’. Either the authorities may make their determination ‘in a review initiated … on their own initiative’; or, alternatively, the authorities may make the determination ‘in a review initiated … upon a duly substantiated request made by or on behalf of the domestic industry …’. The words ‘duly substantiated’ qualify only the authorization to initiate a review upon request made by or on behalf of the domestic industry. No such language qualifies the first method for initiating a sunset review, namely self-initiation of a review by the authorities.

 

We believe the absence of any such cross-reference to be of some consequence given that, as we have seen, the drafters of the SCM Agreement have made active use of cross-references, inter alia, to apply obligations relating to investigations to review proceedings. In our view, the omission of any express cross-reference thus serves as a further indication that the negotiators of the SCM Agreement did not intend the evidentiary standards applicable to the self-initiation of investigations under Article 11 to apply to the self-initiation of reviews under Article 21.3.”(778)

490.     While recognizing that the lack of an explicit limitation is “not dispositive of whether any such limitation exists”, the Appellate Body in US — Carbon Steel also took into account the context of Article 21.3. In particular, the Appellate Body noted that Article 21.4 explicitly states that the detailed evidentiary and procedural rules contained in Article 12 regarding the conduct of an investigation apply to Article 21.3 reviews. As a result, it stated that this explicit cross-reference to Article 12 suggests that evidentiary rules regarding the initiation of an investigation contained in Article 11 “are not incorporated by reference into Article 21.3.” For the Appellate Body, the fact that the Article 11 rules governing these matters are not incorporated by reference into Article 21.3 suggests that they do not apply to sunset reviews:

Article 21.2 differs from Article 21.3 in that the former identifies certain circumstances in which the authorities are under an obligation to review (“shall review”) whether the continued imposition of the countervailing duty is necessary. In contrast, the principal obligation in Article 21.3 is not, per se, to conduct a review, but rather to terminate a countervailing duty unless a specific determination is made in a review. We note that Article 21.2 sets down an explicit evidentiary standard for requests by interested parties for a review under that provision. In order to trigger the authorities’ obligation to conduct a review, such requests must, inter alia, include “positive information substantiating the need for review”. Article 21.2 does not, on its face, apply this same standard to the initiation by authorities “on their own initiative” of a review carried out under that provision. Thus, Article 21.2 contemplates that, for reviews carried out pursuant to that provision, the self-initiation by the authorities of a review is not governed by the same standards that apply to initiation upon request by other parties.

 

As we have noted earlier, the fourth paragraph of Article 21 explicitly applies to Article 21.3 reviews the detailed rules set out in Article 12 of the SCM Agreement regarding evidence and procedure in the conduct of investigations. However, the rules on evidence and procedure contained in Article 12 do not relate to the initiation of such investigations. Rather, the rules relating to evidence needed to initiate an investigation are set out in Article 11, which is not referred to in Article 21.4. The fact that the rules in Article 11 governing such matters are not incorporated by reference into Article 21.3 suggests that they are not, ipso facto, applicable to sunset reviews.”(779)

491.     The Appellate Body in US — Carbon Steel concluded that there is no indication in the framework of Article 21.3 that the authorities’ ability to self-initiate a sunset review is conditional upon compliance with evidentiary standards in Article 11 and that no other evidentiary standard is required for the self-initiation of a sunset review under Article 21.3.

“[O]ur review of the context of Article 21.3 of the SCM Agreement reveals no indication that the ability of authorities to self-initiate a sunset review under that provision is conditioned on compliance with the evidentiary standards set forth in Article 11 of the SCM Agreement relating to initiation of investigations. Nor do we consider that any other evidentiary standard is prescribed for the self-initiation of a sunset review under Article 21.3.”(780)

(iii) De minimis standard

492.     As regards the application of the deminimis standards to sunset reviews, see paragraphs 366373 above.

(b) Determination of likelihood of continuation/ recurrence of subsidization

(i) General

493.     The Panel in US — Carbon Steel referred to Article 21.1 and 21.2 of the SCM Agreement and highlighted that Article 21.3 of the SCM Agreement effectuates one of the purposes of the SCM Agreement, i.e. to regulate the imposition of countervailing duty measures:

Article 21.3 reflects the application of the general rule set out in Article 21.1 — that a CVD shall remain in place only as long as necessary — in the specific instance where five years have elapsed since the imposition of a CVD. Article 21.2 reflects the same general rule in a different circumstance, when a reasonable period has elapsed since the imposition of the duty, and it is deemed necessary to review the need for the continued imposition of the duty. We also note that one of the principal objects of the SCM Agreement is to regulate the imposition of CVD measures. Article 21.3 effectuates that purpose by providing that after five years, a CVD should be terminated unless the investigating authorities determine that there is a likelihood of continuation or recurrence of subsidization and injury.”(781)

(ii) Sufficient factual basis for the nondetermination

494.     The Panel in US — Carbon Steel considered that any determination made by an investigating authority under the SCM Agreement must be properly substantiated even if there is no specific language in this regard in the Agreement itself. The Panel referred to the similarity with safeguards and anti-dumping investigations, and concluded that a determination of likelihood under Article 21.3 of the SCM Agreement must rest on a sufficient factual basis:

“In our opinion, although there is no specific language in the SCM Agreement to that effect, it goes without saying that any determination made by investigating authorities under the SCM Agreement must be properly substantiated in order for that determination to be legally justified. In this regard, the Appellate Body has stated in US — Lamb:

 

‘[C]ompetent authorities must have a sufficient factual basis to allow them to draw reasoned and adequate conclusions concerning the situation of the “domestic industry”’.(782)

 

We recognise that the Appellate Body’s statement refers to the basis of an injury determination in a safeguard investigation. Yet, as far as the adequacy of the factual basis for a determination is concerned, we see no reason to distinguish between injury determinations in a safeguard investigation and a determination of the likelihood of continuation or recurrence of subsidization in a CVD sunset review.

 

We also note the decision of the Panel in US — DRAMS in which the Panel stated:

 

‘Accordingly, we must assess the essential character of the necessity involved in cases of continued imposition of an anti-dumping duty. We note that the necessity of the measure is a function of certain objective conditions being in place, i.e. whether circumstances require continued imposition of the anti-dumping duty. That being so, such continued imposition must, in our view, be essentially dependent on, and therefore assignable to, a foundation of positive evidence that circumstances demand it. In other words, the need for the continued imposition of the duty must be demonstrable on the basis of the evidence adduced.’(783)

 

Although the decision of the Panel was made as part of a review under Article 11.2 of the AD Agreement we believe this excerpt provides helpful guidance for our case relative to the adequacy of the factual basis for a determination.

 

Based on the two foregoing decisions, we consider that a determination of likelihood under Article 21.3 must rest on a sufficient factual basis.

 

An investigating authority’s determination of the likelihood of continuation or recurrence of subsidization should rest on the evaluation of the evidence that it has gathered during the original investigation, the intervening reviews and finally the sunset review. In our view, a likelihood analysis based on this evidentiary framework would be consistent with the requirements of Article 21.3.”(784)

495.     In US — Carbon Steel, the Panel further considered that one of the components of the likelihood analysis was the assessment of the likely rate of subsidization:

“In our view, one of the components of the likelihood analysis in a sunset review under Article 21.3 is an assessment of the likely rate of subsidization. We do not consider, however, that an investigating authority must, in a sunset review, use the same calculation of the rate of subsidization as in an original investigation. What the investigating authority must do under Article 21.3 is to assess whether subsidization is likely to continue or recur should the CVD be revoked. This is, obviously, an inherently prospective analysis. Nonetheless, it must itself have an adequate basis in fact. The facts necessary to assess the likelihood of subsidization in the event of revocation may well be different from those which must be taken into account in an original investigation. Thus, in assessing the likelihood of subsidization in the event of revocation of the CVD, an investigating authority in a sunset review may well consider, inter alia, the original level of subsidization, any changes in the original subsidy programmes, any new subsidy programmes introduced after the imposition of the original CVD, any changes in government policy, and any changes in relevant socioeconomic and political circumstances.”(785)

(c) Relationship with other paragraphs of Article 21

(i) Articles 21.2 and 21.4

496.     In US — Carbon Steel, the Panel discussed the relationship between paragraphs 1, 2 and 3 of Article 21, see paragraph 493 above.

497.     The Appellate Body in US — Carbon Steel noted the difference between paragraphs 2 and 3 of Article 21 as follows:

Article 21.2 differs from Article 21.3 in that the former identifies certain circumstances in which the authorities are under an obligation to review (‘shall review’) whether the continued imposition of the countervailing duty is necessary. In contrast, the principal obligation in Article 21.3 is not, per se, to conduct a review, but rather to terminate a countervailing duty unless a specific determination is made in a review. We note that Article 21.2 sets down an explicit evidentiary standard for requests by interested parties for a review under that provision. In order to trigger the authorities’ obligation to conduct a review, such requests must, inter alia, include ‘positive information substantiating the need for review’. Article 21.2 does not, on its face, apply this same standard to the initiation by authorities ‘on their own initiative’ of a review carried out under that provision. Thus, Article 21.2 contemplates that, for reviews carried out pursuant to that provision, the self-initiation by the authorities of a review is not governed by the same standards that apply to initiation upon request by other parties.”(786)

498.     In US — Carbon Steel, the Appellate Body further noted the differing scope of Article 21.3 and 21.4:

“As we have noted earlier, the fourth paragraph of Article 21 explicitly applies to Article 21.3 reviews the detailed rules set out in Article 12 of the SCM Agreement regarding evidence and procedure in the conduct of investigations. However, the rules on evidence and procedure contained in Article 12 do not relate to the initiation of such investigations. Rather, the rules relating to evidence needed to initiate an investigation are set out in Article 11, which is not referred to in Article 21.4. The fact that the rules in Article 11 governing such matters are not incorporated by reference into Article 21.3 suggests that they are not, ipso facto, applicable to sunset reviews.”(787)

(d) Relationship with other Articles

(i) Article 11.6

499.     The Appellate Body in US — Carbon Steel confirmed the Panel’s finding in relation to the self-initiation of sunset reviews that “nothing in the text of Article 11.6 provides for its evidentiary standards to be implied in Article 21.3”.(788) The Appellate Body in US — Carbon Steel commented:

“Before leaving our analysis of the text of Article 21.3 of the SCM Agreement, we, lastly note that the provision contains no explicit cross-reference to evidentiary rules relating to initiation, such as those contained in Article 11.6. We believe the absence of any such cross-reference to be of some consequence given that, as we have seen, the drafters of the SCM Agreement have made active use of cross-references, inter alia, to apply obligations relating to investigations to review proceedings. In our view, the omission of any express cross-reference thus serves as a further indication that the negotiators of the SCM Agreement did not intend the evidentiary standards applicable to the self-initiation of investigations under Article 11 to apply to the self-initiation of reviews under Article 21.3.”(789)

(ii) Article 11.9

500.     The Appellate Body in US — Carbon Steel reversed the Panel’s finding that the de minimis standard of Article 11.9 is implied in Article 21.3 and the Panel’s finding of violations of the SCM Agreement.(790) The Appellate Body noted:

“[T]he text of Article 21.3 does not mention any de minimis standard to be applied in sunset reviews. Nor does it make any express reference to the de minimis standard set forth in Article 11.9 of the SCM Agreement.

 

[T]he lack of any indication, in the text of Article 21.3, that a de minimis standard must be applied in sunset reviews serves, at least at first blush, as an indication that no such requirement exists. However, as the Panel itself observed, the task of ascertaining the meaning of a treaty provision with respect to a specific requirement does not end once it has been determined that the text is silent on that requirement.(791) Such silence does not exclude the possibility that the requirement was intended to be included by implication.”(792)

501.     However, ultimately, the Appellate Body concluded:

“[A] finding on our part that the de minimis standard of Article 11.9 is implied in sunset reviews under Article 21.3 would upset the delicate balance of rights and obligations attained by the parties to the negotiations, as embodied in the final text of Article 21.3. Such a finding would be contrary to the requirement of Article 3.2, repeated in Article 19.2 of the DSU, that our findings and recommendations ‘cannot add to or diminish the rights and obligations provided in the covered agreements’.”(793)

(e) Relationship with other WTO Agreements

502.     In US — Carbon Steel, the Panel considered that it saw no reason to differentiate between injury determination in a safeguard investigation and a determination of a likelihood of continuation or recurrence of subsidization. See paragraph 494 above.

 

XXIII. Article 22     back to top

A. Text of Article 22

Article 22: Public Notice and Explanation of Determinations

22.1     When the authorities are satisfied that there is sufficient evidence to justify the initiation of an investigation pursuant to Article 11, the Member or Members the products of which are subject to such investigation and other interested parties known to the investigating authorities to have an interest therein shall be notified and a public notice shall be given.

 

22.2     A public notice of the initiation of an investigation shall contain, or otherwise make available through a separate report,(53) adequate information on the following:

 

(footnote original) 53 Where authorities provide information and explanations under the provisions of this Article in a separate report, they shall ensure that such report is readily available to the public.

 

(i)     the name of the exporting country or countries and the product involved;

 

(ii)     the date of initiation of the investigation;

 

(iii)     a description of the subsidy practice or practices to be investigated;

 

(iv)     a summary of the factors on which the allegation of injury is based;

 

(v)     the address to which representations by interested Members and interested parties should be directed; and

 

(vi)     the time-limits allowed to interested Members and interested parties for making their views known.

 

22.3     Public notice shall be given of any preliminary or final determination, whether affirmative or negative, of any decision to accept an undertaking pursuant to Article 18, of the termination of such an undertaking, and of the termination of a definitive countervailing duty. Each such notice shall set forth, or otherwise make available through a separate report, in sufficient detail the findings and conclusions reached on all issues of fact and law considered material by the investigating authorities. All such notices and reports shall be forwarded to the Member or Members the products of which are subject to such determination or undertaking and to other interested parties known to have an interest therein.

 

22.4     A public notice of the imposition of provisional measures shall set forth, or otherwise make available through a separate report, sufficiently detailed explanations for the preliminary determinations on the existence of a subsidy and injury and shall refer to the matters of fact and law which have led to arguments being accepted or rejected. Such a notice or report shall, due regard being paid to the requirement for the protection of confidential information, contain in particular:

 

(i)     the names of the suppliers or, when this is impracticable, the supplying countries involved;

 

(ii)     a description of the product which is sufficient for customs purposes;

 

(iii)     the amount of subsidy established and the basis on which the existence of a subsidy has been determined;

 

(iv)     considerations relevant to the injury determination as set out in Article 15;

 

(v)     the main reasons leading to the determination.

 

22.5     A public notice of conclusion or suspension of an investigation in the case of an affirmative determination providing for the imposition of a definitive duty or the acceptance of an undertaking shall contain, or otherwise make available through a separate report, all relevant information on the matters of fact and law and reasons which have led to the imposition of final measures or the acceptance of an undertaking, due regard being paid to the requirement for the protection of confidential information. In particular, the notice or report shall contain the information described in paragraph 4, as well as the reasons for the acceptance or rejection of relevant arguments or claims made by interested Members and by the exporters and importers.

 

22.6     A public notice of the termination or suspension of an investigation following the acceptance of an undertaking pursuant to Article 18 shall include, or otherwise make available through a separate report, the non-confidential part of this undertaking.

 

22.7     The provisions of this Article shall apply mutatis mutandis to the initiation and completion of reviews pursuant to Article 21 and to decisions under Article 20 to apply duties retroactively.


B. Interpretation and Application of Article 22

1. Article 22.1 and 22.7

503.     In US — Carbon Steel, the Appellate Body noted that Articles 22.1 and 22.7, imposing notification and public notice obligations upon Members in the context of investigations or reviews, do not contain any evidentiary requirements per se.

Article 22.1 imposes notification and public notice obligations upon Members that have decided, in accordance with all the requirements of Article 11, that the initiation of a countervailing duty investigation is justified. Article 22.1 does not itself establish any evidentiary rule, but only refers to a standard established in Article 11.9:

 

Article 22.7 applies the provisions of Article 22mutatis mutandis to the initiation and completion of reviews pursuant to Article 21’. To us, in the same way that Article 22.1 imposes notification and public notice requirements on investigating authorities that have decided, in accordance with the standards set out in Article 11, to initiate an investigation, Article 22.1 (by virtue of Article 22.7) also operates to impose notification and public notice requirements on investigating authorities that have decided, in accordance with Article 21, to initiate a review. Similarly, in the same way that Article 22.1 does not itself establish evidentiary standards applicable to the initiation of an investigation, it does not itself establish evidentiary standards applicable to the initiation of sunset reviews. Such standards, if they exist, must be found elsewhere.”(794)

2. Article 22.5

504.     The Panel in US — Softwood Lumber VI saw no point in finding violations of Article 12.2.2 of the Anti-Dumping Agreement or Article 22.5 of the SCM Agreement:

Article 22.5 of the SCM Agreement, and Article 22.4 referred to therein, are similar, and the minor textual differences are not relevant to this dispute.

 

As with its other overarching claims, Canada does not make specific arguments with respect to these claims. Rather, as Canada clarified in response to the Panel’s questions, Canada’s claims under these provisions are procedural, dealing with the content of the notices, and not with the substantive elements of the underlying USITC determination. Canada specified that the asserted requirement for a “reasoned and adequate explanations” of the USITC’s determination, which it alleges was not provided in this case, did not derive from Articles 12.2.2 and 22.5, but rather from the substantive obligations of Article 3 of the AD Agreement and Article 15 of the SCM Agreement. In our view, Canada’s claims under Articles 12.2.2 of the AD Agreement and 22.5 of the SCM Agreement are thus dependent on the disposition of the specific claims of violation.

 

In evaluating these claims, we note that our conclusions with respect to each of the alleged substantive violations asserted by Canada rest on our examination of the USITC’s published determination, which constitutes the notices provided by the United States under Article 12.2.2 of the AD Agreement and Article 22.5 of the SCM Agreement with respect to the injury determination in this case. No additional materials have been cited to us with respect to the determination for consideration in determining whether or not the USITC’s determination are consistent with the relevant provisions of the Agreements. Thus, if we find no violation with respect to a particular specific claim, such a conclusion must rest on the USITC’s published determination. In this circumstance, it is clear to us that no violation of Articles 12.2.2 and 22.5 could be found to exist in this case, where it is not disputed that the USITC determination accurately reflects the analysis and determination in the investigations. On the other hand, if we find a violation of a specific substantive requirement, the question of whether the notice of the determination is “sufficient” under Article 12.2.2 of the AD Agreement or Article 22.5 of the SCM Agreement is, in our view, immaterial.

 

As was pointed out by the Panel in EC — Bed Linen:

 

“A notice may adequately explain the determination that was made, but if the determination was substantively inconsistent with the relevant legal obligations, the adequacy of the notice is meaningless. Further, in our view, it is meaningless to consider whether the notice of a decision that is substantively inconsistent with the requirements of the AD Agreement is, as a separate matter, insufficient under Article 12.2. A finding that the notice of an inconsistent action is inadequate does not add anything to the finding of violation, the resolution of the dispute before us, or to the understanding of the obligations imposed by the AD Agreement”.(795)

 

We share the views of the EC — Bed Linen Panel in this respect, and adopt them as our own. In this regard, we note Canada’s statement that “as a practical matter, Canada recognizes that it would be unusual for an injury determination to either satisfy the obligations in Articles 3 and 15 but not Articles 12.2.2 and 22.5 or vice versa”. Canada has made no arguments to suggest that this is such an unusual case. Therefore, we will make no findings with respect to the alleged violations of Article 12.2.2 of the AD Agreement and Article 22.5 of the SCM Agreement.”(796)

505.     In US — Countervailing Duty Investigation on DRAMS, the Appellate Body concluded that “even assuming arguendo that Article 22.5 of the SCM Agreement could provide the basis for a panel’s exclusion of evidence,” there was no reason to exclude evidence that, although contained in the record of the investigation, had not been cited in the investigating authority’s decision. See Appellate Body Report, US — Countervailing Duty Investigation on DRAMS, paras. 159165.

3. Relationship with other Articles

506.     With respect to the relationship with Article 11, see paragraph 503 above.

 

XXIV. Article 23     back to top

A. Text of Article 23

Article 23: Judicial Review

Each Member whose national legislation contains provisions on countervailing duty measures shall maintain judicial, arbitral or administrative tribunals or procedures for the purpose, inter alia, of the prompt review of administrative actions relating to final determinations and reviews of determinations within the meaning of Article 21. Such tribunals or procedures shall be independent of the authorities responsible for the determination or review in question, and shall provide all interested parties who participated in the administrative proceeding and are directly and individually affected by the administrative actions with access to review.


B. Interpretation and Application of Article 23

507.     The Panel in Mexico — Olive Oil noted that certain provisions of the SCM Agreement leave considerable discretion to Members to define their own procedures:

“We also note that other provisions in the SCM Agreement leave considerable discretion to Members to define their own procedures; e.g. Articles 12, 14 and 23. This leads us to believe that, in general, unless a specific procedure is set forth in the Agreement the precise procedures for how investigating authorities will implement those obligations are left to the Members to decide.”(797)

 

Part VI : Institutions

 

XXV. Article 24     back to top

A. Text of Article 24

Article 24: Committee on Subsidies and Countervailing Measures and Subsidiary Bodies

24.1     There is hereby established a Committee on Subsidies and Countervailing Measures composed of representatives from each of the Members. The Committee shall elect its own Chairman and shall meet not less than twice a year and otherwise as envisaged by relevant provisions of this Agreement at the request of any Member. The Committee shall carry out responsibilities as assigned to it under this Agreement or by the Members and it shall afford Members the opportunity of consulting on any matter relating to the operation of the Agreement or the furtherance of its objectives. The WTO Secretariat shall act as the secretariat to the Committee.

 

24.2     The Committee may set up subsidiary bodies as appropriate.

 

24.3     The Committee shall establish a Permanent Group of Experts composed of five independent persons, highly qualified in the fields of subsidies and trade relations. The experts will be elected by the Committee and one of them will be replaced every year. The PGE may be requested to assist a panel, as provided for in paragraph 5 of Article 4. The Committee may also seek an advisory opinion on the existence and nature of any subsidy.

 

24.4     The PGE may be consulted by any Member and may give advisory opinions on the nature of any subsidy proposed to be introduced or currently maintained by that Member. Such advisory opinions will be confidential and may not be invoked in proceedings under Article 7.

 

24.5     In carrying out their functions, the Committee and any subsidiary bodies may consult with and seek information from any source they deem appropriate. However, before the Committee or a subsidiary body seeks such information from a source within the jurisdiction of a Member, it shall inform the Member involved.


B. Interpretation and Application of Article 24

1. Rules of procedure

508.     At its meeting of 22 May 1996, the Council for Trade in Goods approved the rules of procedure for the SCM Committee.(798)

2. Subsidiary bodies

(a) Permanent Group of Experts (PGE)

509.     A decision taken on 13 June 1995 by the SCM Committee provided that “[t]he initial five persons elected to the Permanent Group of Experts shall serve staggered terms of office of 1, 2, 3, 4, and 5 years”.(799) It further provided that “[t]he decisions as to which person shall serve which of these terms of office shall be decided by lot after the initial membership of the PGE has been established.”

510.     The initial slate of experts was elected on 6 March 1996.(800) Since then, the SCM Committee has elected experts as required, according to the relevant process.(801)

511.     In 1996, the Committee agreed on the Rules of Procedure for the Permanent Group of Experts.(802)

(b) Informal Group of Experts (IGE)

512.     By a decision of 13 June 1995, the Committee created an Informal Group of Experts(803) with the following terms of reference:(804)

“To examine matters which are not specified in Annex IV to the Agreement or which need further clarification for the purposes of paragraph 1(a) of Article 6”.

(c) Working Party on Subsidy Notifications

513.     By a decision of 22 February 1995, the Committee created a Working Party on Subsidy Notifications.(805) The Working Party’s work is generally reflected in Chair’s reports in the minutes of the SCM Committee meetings.

 

Part VII: Notification And Surveillance

 

XXVI. Article 25     back to top

A. Text of Article 25

Article 25: Notifications

25.1     Members agree that, without prejudice to the provisions of paragraph 1 of Article XVI of GATT 1994, their notifications of subsidies shall be submitted not later than 30 June of each year and shall conform to the provisions of paragraphs 2 through 6.

 

25.2     Members shall notify any subsidy as defined in paragraph 1 of Article 1, which is specific within the meaning of Article 2, granted or maintained within their territories.

 

25.3     The content of notifications should be sufficiently specific to enable other Members to evaluate the trade effects and to understand the operation of notified subsidy programmes. In this connection, and without prejudice to the contents and form of the questionnaire on subsidies,(54) Members shall ensure that their notifications contain the following information:

 

(footnote original) 54 The Committee shall establish a Working Party to review the contents and form of the questionnaire as contained in BISD 9S/193–194.

 

(i)     form of a subsidy (i.e. grant, loan, tax concession, etc.);

 

(ii)     subsidy per unit or, in cases where this is not possible, the total amount or the annual amount budgeted for that subsidy (indicating, if possible, the average subsidy per unit in the previous year);

 

(iii)     policy objective and/or purpose of a subsidy;

 

(iv)     duration of a subsidy and/or any other time-limits attached to it;

 

(v)     statistical data permitting an assessment of the trade effects of a subsidy.

 

25.4     Where specific points in paragraph 3 have not been addressed in a notification, an explanation shall be provided in the notification itself.

 

25.5     If subsidies are granted to specific products or sectors, the notifications should be organized by product or sector.

 

25.6     Members which consider that there are no measures in their territories requiring notification under paragraph 1 of Article XVI of GATT 1994 and this Agreement shall so inform the Secretariat in writing.

 

25.7     Members recognize that notification of a measure does not prejudge either its legal status under GATT 1994 and this Agreement, the effects under this Agreement, or the nature of the measure itself.

 

25.8     Any Member may, at any time, make a written request for information on the nature and extent of any subsidy granted or maintained by another Member (including any subsidy referred to in Part IV), or for an explanation of the reasons for which a specific measure has been considered as not subject to the requirement of notification.

 

25.9     Members so requested shall provide such information as quickly as possible and in a comprehensive manner, and shall be ready, upon request, to provide additional information to the requesting Member. In particular, they shall provide sufficient details to enable the other Member to assess their compliance with the terms of this Agreement. Any Member which considers that such information has not been provided may bring the matter to the attention of the Committee.

 

25.10     Any Member which considers that any measure of another Member having the effects of a subsidy has not been notified in accordance with the provisions of paragraph 1 of Article XVI of GATT 1994 and this Article may bring the matter to the attention of such other Member. If the alleged subsidy is not thereafter notified promptly, such Member may itself bring the alleged subsidy in question to the notice of the Committee.

 

25.11     Members shall report without delay to the Committee all preliminary or final actions taken with respect to countervailing duties. Such reports shall be available in the Secretariat for inspection by other Members. Members shall also submit, on a semi-annual basis, reports on any countervailing duty actions taken within the preceding six months. The semi-annual reports shall be submitted on an agreed standard form.

 

25.12     Each Member shall notify the Committee (a) which of its authorities are competent to initiate and conduct investigations referred to in Article 11 and (b) its domestic procedures governing the initiation and conduct of such investigations.


B. Interpretation and Application of Article 25

1. General

(a) Questionnaire format for subsidy notifications

514.     At its meeting of 28 October and 1 and 8 December 2003, the SCM Committee adopted a revised Questionnaire Format for Subsidy Notifications under Article 25 of the SCM Agreement and under Article XVI of the GATT 1994,(806) which consists of general rules relating to the notifications and information to be provided in the notifications.

(b) Periodicity of submission and review of subsidy notifications

515.     At its meeting on 8 May 2003, the Committee took note of the Chair’s statement concerning Members’ views that their resources would be best utilized by giving maximum priority to submitting new and full subsidy notifications every two years and by de-emphasizing the review of updating notifications in the intervening years.(807) This was a continuation of the situation described in the Chair’s statement of 31 May 2001, of which the Committee had previously taken note.(808)

(c) Written procedure

516.     In April 2005, the Committee adopted a procedure for the 2005 review of new and full subsidy notifications pursuant to Article 25.1.(809) This procedure provides that the review of new and full notifications will be held on the basis of a written procedure, i.e. on the basis of written questions and written answers provided before the meeting, so as to avoid the repetition of lengthy questions and answers in the meeting. It sets out timeframes for that purpose. The procedure has been followed in subsequent years.(810)

2. Article 25.7

517.     The Panel in Canada — Aircraft rejected the argument made by Brazil that assistance under the Canada-Quebec Subsidiary Agreements on Industrial Development (agreements pledging support by the Government of Canada to industrial projects in Quebec) could conceivably be provided in the form of non-repayable contributions.(811) In making this assertion, Brazil was relying on the notification by Canada of these subsidiary agreements to the SCM Committee, made pursuant to Article 25.2 of the SCM Agreement; the Panel held that the mere notification by Canada of the programme under these subsidiary agreements was an insufficient basis for a finding of a prima facie case that subsidiary agreement assistance was provided in the form of non-repayable contributions.(812)

518.     In Brazil — Aircraft, the Appellate Body referred to Article 25.7 and noted that “Article 25 aims to promote transparency by requiring Members to notify their subsidies, without prejudging the legal status of those subsidies”.(813)

3. Article 25.11

(a) “shall report … all preliminary or final actions”

519.     At its meeting of 13 June 1995, the SCM Committee adopted the requirements for the minimum information to be provided under Article 25.11 in the reports on all preliminary or final countervailing actions.(814)

520.     In 2009 the Committee revised the guidelines for the minimum information to be provided under Article 25.11.(815)

(b) “semi-annual reports”

521.     At its meeting of 13 June 1995, the SCM Committee issued guidelines for information to be provided in the semi-annual reports.(816)

522.     In 2009, the SCM Committee adopted a revised format for semi-annual reports made pursuant to Article 25.11.(817)

(c) “nil” notifications under Article 25.11 and 25.12

523.     In 2009, the SCM Committee adopted a format for so-called “nil” notifications, to be used when a Member has not established an authority competent to initiate and conduct an investigation within the meaning of Article 25.12 and thus has not, to date, taken any countervailing actions within the meaning of Article 25.11 of the Agreement and does not anticipate taking any countervailing actions for the foreseeable future.(818)

(d) Relationship with other Articles

(i) Article 27.4

524.     In the Brazil — Aircraft dispute, Brazil argued that when determining whether a developing country Member has increased the level of its export subsidies within the meaning of Article 27.4 of the SCM Agreement, the Panel or the Appellate Body should consider the Member’s budgetary appropriations rather than actual expenditures. In making this argument, Brazil was relying on Article 25 of the SCM Agreement, which provides that notifications shall contain the “subsidy per unit or, in cases where this is not possible, the total amount or the annual amount budgeted for that subsidy ….” The Appellate Body in Brazil — Aircraft considered Article 25 to be “considerably less useful as context in interpreting the phrase ‘the level of its export subsidies’ in Article 27.4.”(819) It noted that “Article 25 has a fundamentally different purpose from Article 27 of the SCM Agreement. Whereas Article 25 aims to promote transparency by requiring Members to notify their subsidies, without prejudging the legal status of those subsidies, Article 27 imposes positive obligations on developing country Members with respect to export subsidies.”(820)

 

XXVII. Article 26     back to top

A. Text of Article 26

Article 26: Surveillance

26.1     The Committee shall examine new and full notifications submitted under paragraph 1 of Article XVI of GATT 1994 and paragraph 1 of Article 25 of this Agreement at special sessions held every third year. Notifications submitted in the intervening years (updating notifications) shall be examined at each regular meeting of the Committee.

 

26.2     The Committee shall examine reports submitted under paragraph 11 of Article 25 at each regular meeting of the Committee.


B. Interpretation and Application of Article 26

525.     As regards the procedures adopted for review of new and full subsidy notifications, see paragraph 515 above.

 

Footnotes:

597. Appellate Body Report, Japan — DRAMs (Korea), paras. 269–271. back to text
598. Appellate Body Report, US — Offset Act (Byrd Amendment), paras. 281–282. back to text
599. (footnote original) We note that the parties’ submissions do not suggest otherwise. back to text
600. Appellate Body Report, US — Offset Act (Byrd Amendment), para. 283. back to text
601. Panel Report, Mexico — Olive Oil, para. 7.225. back to text
602. Panel Report, US — Carbon Steel, para. 8.19 back to text
603. Appellate Body Report, US — Carbon Steel, para. 105. back to text
604. Appellate Body Report, US — Carbon Steel, paras. 66–67. back to text
605. Appellate Body Report, US — Carbon Steel, para. 68. back to text
606. Appellate Body Report, US — Carbon Steel, paras. 77–82. back to text
607. Appellate Body Report, US — Carbon Steel, para. 83. back to text
608. Appellate Body Report, US — Carbon Steel, paras. 67–68. back to text
609. Appellate Body Report, US — Carbon Steel, para. 69. back to text
610. Appellate Body Report, US — Carbon Steel, para. 72. back to text
611. Appellate Body Report, US — Carbon Steel, para. 77. back to text
612. (footnote original) Panel Report on US — Carbon Steel, para. 8.60. It is, for example, unclear to us whether the Panel considered the Note to form part of the preparatory work of the treaty and intended to use it as a supplementary means of treaty interpretation within the meaning of Article 32 of the Vienna Convention. back to text
613. Appellate Body Report, US — Carbon Steel, paras. 77–78. back to text
614. Appellate Body Report, US — Carbon Steel, para. 78. back to text
615. (footnote original) The term “subsidization” is used in the following Articles of the SCM Agreement: 6.1(a); 8.3; 11.9; 12.10; 15.3; 17.2; 18.2; 18.4; 19.4; 21.1; 21.2; 21.3; as well as in Annex IV. back to text
616. Appellate Body Report, US — Carbon Steel, paras. 78, 80–81. back to text
617. Appellate Body Report, US — Carbon Steel, para. 90. back to text
618. (footnote original) Article 9.3.2 of the Anti-Dumping Agreement. back to text
619. (footnote original) Article 11.2 of the Anti-Dumping Agreement; Article 21.2 of the SCM Agreement. back to text
620. Appellate Body Report, Mexico — Anti-Dumping Measures on Rice, para. 305. back to text
621. Appellate Body Report, Mexico — Anti-Dumping Measures on Rice, para. 307. back to text
622. Panel Report, Mexico — Olive Oil, para. 7.121. back to text
623. Panel Report, Mexico — Olive Oil, para. 7.121. back to text
624. Panel Report, Mexico — Olive Oil, footnote 63. back to text
625. Panel Report, US — Anti-Dumping and Countervailing Duties (China), para. 14.146. back to text
626. Panel Report, US — Anti-Dumping and Countervailing Duties (China), para. 14.147. back to text
627. Panel Report, US — Anti-Dumping and Countervailing Duties (China), para. 15.23. back to text
628. Appellate Body Report, Mexico — Anti-Dumping Measures on Rice, para. 282. See also Appellate Body Report, US — Oil Country Tubular Goods Sunset Reviews, paras. 241 and 242, and Appellate Body Report, US — Hot-Rolled Steel, para. 73. back to text
629. Panel Report, US — Anti-Dumping and Countervailing Duties (China), para. 15.15–15.49. back to text
630. Panel Report, Mexico — Olive Oil, paras. 7.87 and 7.88. back to text
631. Panel Report, Mexico — Olive Oil, para. 7.94. back to text
632. Panel Report, Mexico — Olive Oil, para. 7.89. back to text
633. Panel Report, Mexico — Olive Oil, para. 7.90. back to text
634. Panel Report, Mexico — Olive Oil, para. 7.92. back to text
635. Panel Report, US — Countervailing Duty Investigation on DRAMs, para. 7.404. back to text
636. (footnote original) We note that the provisions in Annex VI of the SCM Agreement, which contains procedures for on the spot investigations pursuant to Article 12.6, were not referred to by either Korea or the US in this dispute. back to text
637. (footnote original) Nowhere in its letter of response to the US does Korea object to the investigation in itself. Rather, it only objects to the “arranging of secret meetings” or to the DOC “having secret meetings.” See Exhibit GOK-27-(b) and Exhibit US-112. As Korea asserts in paragraph 247 of its Second Written Submission, it was not objecting to the substance of the verification; Korea had a “procedural objection.” back to text
638. Panel Report, US — Countervailing Duty Investigation on DRAMs, para. 7.405. back to text
639. (footnote original) We note that the Appellate Body was also of this view, when examining Article 6.8 of the AD Agreement dealing with facts available in the context of anti-dumping investigations. (Appellate Body Report, US — Hot-Rolled Steel, para. 77) back to text
640. Panel Report, EC — Countervailing Measures on DRAM Chips, para. 7.245. back to text
641. Panel Report, EC — Countervailing Measures on DRAM Chips, para. 7.249. back to text
642. (footnote original) Appellate Body Report, EC — Tube or Pipe Fittings, para. 138 (quoting Appellate Body Report, EC — Bed Linen (Article 21.5 — India), para. 136). (emphasis added in EC — Tube or Pipe Fittings) back to text
643. (footnote original) We note that the Appellate Body has found that the obligation in Article 6.1 of the Anti-Dumping Agreement the counterpart to Article 12.1 of the SCM Agreement is not satisfied where the investigating authority “disregard[s]” information submitted by an interested party. (Appellate Body Report, US — Oil Country Tubular Goods Sunset Reviews, para. 246) back to text
644. Appellate Body Report, Mexico — Anti-Dumping Measures on Rice, paras. 290–295. back to text
645. (footnote original) Appellate Body Reports on Japan — DRAMs (Korea), para. 235 and Mexico — Anti-Dumping Measures on Rice, para. 291; Panel Reports on Japan — DRAMs (Korea), para. 7.383 and EC — Countervailing Measures on DRAM Chips, para. 7.245. back to text
646. Panel Report, US — Anti-Dumping and Countervailing Duties (China), paras. 16.9, 16.16. back to text
647. Panel Report, Mexico — Olive Oil, para. 7.110. back to text
648. Panel Report, Mexico — Olive Oil, para. 7.113. back to text
649. Panel Report, US — Anti-Dumping and Countervailing Duties (China), para. 14.148. back to text
650. Panel Report, Japan — DRAMs (Korea), paras. 7.387 and 7.388. back to text
651. Appellate Body Report, Japan — DRAMs (Korea), paras. 237 and 238. back to text
652. Panel Report, Japan — DRAMs (Korea), para. 7.390. back to text
653. Appellate Body Report, Japan — DRAMs (Korea), para. 240. back to text
654. Panel Report, Japan — DRAMs (Korea), para. 7.392. back to text
655. Panel Report, Mexico — Olive Oil, para. 7.34. back to text
656. Panel Report, Mexico — Olive Oil, para. 7.34. back to text
657. Panel Report, Mexico — Olive Oil, para. 7.35. back to text
658. Panel Report, Mexico — Olive Oil, para. 7.39. back to text
659. Appellate Body Report, US — Softwood Lumber IV, paras. 91–92. back to text
660. Appellate Body Report, Japan — DRAMs (Korea), paras. 190 — 192. back to text
661. Panel Report, Mexico — Olive Oil, footnote 63. back to text
662. Panel Report, Mexico — Olive Oil, para. 7.169. back to text
663. Panel Report, Mexico — Olive Oil, para. 7.156. back to text
664. Panel Report, EC — Countervailing Measures on DRAM Chips, para. 7.211. back to text
665. (footnote original) Shorter Oxford English Dictionary, 6th edn, W. R. Trumble, A. Stevenson (eds) (Oxford University Press, 2007), Vol. 2, p. 3485. back to text
666. (footnote original) Shorter Oxford English Dictionary, 6th edn, W. R. Trumble, A. Stevenson (eds) (Oxford University Press, 2007), Vol. 2, p. 2311. back to text
667. (footnote original) See Part VI.B of this Report, where we have similarly emphasized the importance of an ex ante perspective in assessing the conferral of a benefit through government loans. back to text
668. Appellate Body Report, EC and certain member States — Large Civil Aircraft, paras. 999, 1019. back to text
669. Appellate Body Report, Japan — DRAMs (Korea), paras. 172–174. back to text
670. Appellate Body Report, US — Anti-Dumping and Countervailing Duties (China), para. 490. back to text
671. (footnote original) Shorter Oxford English Dictionary, 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007), Vol. 1, p. 468. back to text
672. (footnote original) Appellate Body Report, Canada — Aircraft, paras. 155–158. back to text
673. (footnote original) Shorter Oxford English Dictionary, 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007), Vol. 1, p. 462. back to text
674. Appellate Body Report, US — Anti-Dumping and Countervailing Duties (China), paras. 475–480. back to text
675. (footnote original) We consider that Article 14(b) may well accommodate, in any given case, a conception of the relevant market as one defined on the basis of the particular product or service (a loan), as well as one defined on a geographic basis. In some cases, the product market may be a national market, such as when loans in a particular currency are available only within a particular country. It seems to us that the word “comparable”, and some of the factors that the Panel identified as indications of comparability — the timing, structure, maturity, and currency of loans — may equally well be factors relevant to the identification of the product market as well as the geographic market for the loan. back to text
676. (footnote original) Appellate Body Report, US — Softwood Lumber IV, para. 96. back to text
677. Appellate Body Report, US — Anti-Dumping and Countervailing Duties (China), paras. 482–489. back to text
678. Appellate Body Report, EC and certain member States — Large Civil Aircraft, para. 834. back to text
679. (footnote original) Article 14(b) of the SCM Agreement says that the comparison should be to a comparable commercial loan that the recipient “could actually obtain on the market.” This suggests that where the recipient could not have obtained a commercial loan, then the granting of a loan by the government would be deemed to confer a benefit irrespective of the terms of that loan. As the European Union underscored at the oral hearing, the United States did not argue before the Panel that Airbus would have been unable to obtain a commercial loan. Instead, the United States premised its case on Airbus having to pay less for the LA/MSF than it would have paid for a commercial loan. back to text
680. (footnote original) We recognize that, in US — Upland Cotton (Article 21.5 — Brazil), the Appellate Body said that an assessment of whether guarantees under an export credit guarantee programme constituted export subsidies, under item (j) of the Illustrative List of Export Subsidies in Annex I to the SCM Agreement, could “examine both retrospective data relating to a programme’s historical performance and projections of its future performance”. (Appellate Body Report, US — Upland Cotton (Article 21.5 — Brazil), para. 278) That particular dispute concerned item (j) of the Illustrative List of Export Subsidies pursuant to which export credit guarantees will be deemed to be subsidies if they are provided at premium rates which are “inadequate to cover the long-term operating costs and losses” of the programmes. back to text
681. (footnote original) Such an ex ante approach is wholly consistent with the manner in which financial methods have been developed to test projections through sensitivity analysis and scenario building. back to text
682. (footnote original) It may also affect the ability of Members to apply countervailing measures under Part V of the SCM Agreement. back to text
683. Appellate Body Report, EC and certain member States — Large Civil Aircraft, paras. 834–838. back to text
684. Panel Report, Canada — Aircraft Credits and Guarantees, para. 7.345. back to text
685. Appellate Body Report, Canada — Aircraft, para. 155, regarding the contextual relevance of Article 14 for the purpose of determining the existence of “benefit”. back to text
686. Panel Report, Canada — Aircraft Credits and Guarantees, para. 7.397. back to text
687. Panel Report, Canada — Aircraft Credits and Guarantees, para. 7.398. back to text
688. Appellate Body Report, US — Softwood Lumber IV, para. 90. back to text
689. Appellate Body Report, US — Softwood Lumber IV, paras. 100–103. back to text
690. Appellate Body Report, US — Softwood Lumber IV, para. 118. back to text
691. Appellate Body Report, US — Softwood Lumber IV, paras. 108 and 109. back to text
692. Appellate Body Report, US — Anti-Dumping and Countervailing Duties (China), paras. 425–458. back to text
693. Panel Report, Japan — DRAMs (Korea), paras. 7.295–7.297. back to text
694. Panel Report, US — Countervailing Duty Investigation on DRAMs, para. 7.218. back to text
695. (footnote original) This provision is yet another expression of the general principle of good faith in the Anti-Dumping Agreement. See, supra, para. 101. back to text
696. (footnote original) In this respect, we recall that panels are under a similar duty, under Article 11 of the DSU, to make an “objective assessment of the matter … including an objective assessment of the facts”. In our Report in EC Measures Concerning Meat and Meat Products (Hormones), we indicated that the obligation to make an “objective assessment” includes an obligation to act in “good faith”, respecting “fundamental fairness”. (Appellate Body Report, WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998, DSR 1998:I, 135, para. 133) back to text
697. Appellate Body Report, US — Hot-Rolled Steel, para. 193. back to text
698. Panel Report, EC — Countervailing Measures on DRAM Chips, para. 7.276. back to text
699. Panel Report, Mexico — Olive Oil, para. 7.267. back to text
700. Panel Report, Indonesia — Autos, paras. 14.173–14.174. back to text
701. Panel Report, Indonesia — Autos, para. 14.176. back to text
702. Panel Report, Indonesia — Autos, para. 14.176. back to text
703. Panel Report, Indonesia — Autos, para. 14.177. back to text
704. Panel Report, Indonesia — Autos, para. 14.178. back to text
705. Panel Report, Indonesia — Autos, para. 14.192. back to text
706. Panel Report, Indonesia — Autos, para. 14.196. back to text
707. Panel Report, Indonesia — Autos, para. 14.197. back to text
708. Panel Report, US — Countervailing Duty Investigation on DRAMs, para. 7.223. back to text
709. Panel Report, US — Countervailing Duty Investigation on DRAMs, para. 7.243. back to text
710. Panel Report, US — Countervailing Duty Investigation on DRAMs, para. 7.245. back to text
711. Panel Report, EC — Countervailing Measures on DRAM Chips, para. 7.307. back to text
712. Panel Report, EC — Countervailing Measures on DRAM Chips, para. 7.301. back to text
713. Panel Report, US — Countervailing Duty Investigation on DRAMs, para. 7.265. back to text
714. Panel Report, US — Countervailing Duty Investigation on DRAMs, para. 7.269. back to text
715. Panel Report, US — Countervailing Duty Investigation on DRAMs, para. 7.271. back to text
716. Panel Report, EC — Countervailing Measures on DRAM Chips, para. 7.328. back to text
717. Panel Report, EC — Countervailing Measures on DRAM Chips, para. 7.334. back to text
718. Panel Report, EC — Countervailing Measures on DRAM Chips, para. 7.336. back to text
719. Panel Report, EC — Countervailing Measures on DRAM Chips, para. 7.338. back to text
720. Panel Report, EC — Countervailing Measures on DRAM Chips, para. 7.341. back to text
721. Panel Report, US — Countervailing Duty Investigation on DRAMs, para. 7. 301. back to text
722. Panel Report, EC — Countervailing Measures on DRAM Chips, para. 7.356. back to text
723. Panel Report, EC — Countervailing Measures on DRAM Chips, para. 7.363. back to text
724. Panel Report, US — Countervailing Duty Investigation on DRAMs, para. 7. 385. back to text
725. Panel Report, Japan — DRAMs (Korea), para. 7.411. back to text
726. Panel Report, Japan — DRAMs (Korea), para. 7.411. back to text
727. Appellate Body Report, Japan — DRAMs (Korea), paras. 264–268. back to text
728. A similar approach was taken by the Panel in Mexico — Olive Oil (para. 7.298). back to text
729. Panel Report, US — Countervailing Duty Investigation on DRAMs, para. 7. 351. back to text
730. Panel Report, US — Countervailing Duty Investigation on DRAMs, para. 7.353. back to text
731. Panel Report, EC — Countervailing Measures on DRAM Chips, paras. 7.404–7.405 back to text
732. Panel Report, US — Countervailing Duty Investigation on DRAMs, para. 7. 360. back to text
733. Panel Report, US — Countervailing Duty Investigation on DRAMs, para. 7. 368. back to text
734. Panel Report, Mexico — Olive Oil, para. 7.305. back to text
735. Panel Report, US — Softwood Lumber VI, para. 7.33. back to text
736. Panel Report, US — Softwood Lumber VI, para. 7.33 back to text
737. Panel Report, US — Softwood Lumber VI, para. 7.34. back to text
738. Panel Report, Mexico — Olive Oil, para. 7.192. back to text
739. Panel Report, Mexico — Olive Oil, para. 7.196. back to text
740. Panel Report, Mexico — Olive Oil, para. 7.196. back to text
741. Panel Report, Mexico — Olive Oil, para. 7.203. back to text
742. Panel Report, Mexico — Olive Oil, para. 7.204. back to text
743. Panel Report US — Softwood Lumber III, para. 7.100. back to text
744. Panel Report US — Softwood Lumber III, para. 7.100. back to text
745. (footnote original) Appellate Body Report, United States — Standards for Reformulated and Conventional Gasoline, WT/DS/2/AB/R, adopted on 20 May 1996, p. 23. back to text
746. Panel Report US — Softwood Lumber III, para. 7.102. back to text
747. Panel Report, US — Offset Act (Byrd Amendment), paras. 7.80–7.81. back to text
748. Panel Report, EC — Fasteners (China), para. 7.103. back to text
749. Panel Report, EC — Fasteners (China), footnote 279. back to text
750. Appellate Body Report, US — Shrimp (Thailand)/US — Customs Bond Directive, para. 281. back to text
751. Appellate Body Report, US — Shrimp (Thailand)/US — Customs Bond Directive, para. 280. back to text
752. Panel Report, Japan — DRAMs (Korea), para. 7.424. back to text
753. Appellate Body Report, Japan — DRAMs (Korea), para. 277. back to text
754. Panel Report US — Softwood Lumber III, para. 7.136. back to text
755. Panel Report US — Softwood Lumber III, paras. 7.133 and 7.140–7.142. back to text
756. Appellate Body Report, US — Anti-Dumping and Countervailing Duties (China), para. 571. back to text
757. Panel Report, US — Lead and Bismuth II, para. 6.52. back to text
758. Panel Report, US — Lead and Bismuth II, para. 6.57. back to text
759. Panel Report, Japan — DRAMs (Korea), paras. 7.356–7.358. back to text
760. Appellate Body Report, Japan — DRAMs (Korea), para. 210. back to text
761. Panel Report US — Softwood Lumber III, paras. 7.93 and 7.100. back to text
762. Panel Report US — Softwood Lumber III, para. 7.94. back to text
763. Panel Report US — Softwood Lumber III, para. 7.95. back to text
764. (footnote original) Appellate Body Report, Korea — Definitive Safeguard Measure on Imports of Certain Dairy Products, WT/DS98/AB/R, adopted on 12 January 2000, para. 81. back to text
765. Panel Report US — Softwood Lumber III, paras. 7.96–7.97. back to text
766. Panel Report US — Softwood Lumber III, para. 7.100. back to text
767. Appellate Body Report, US — Carbon Steel, para. 70. back to text
768. Panel Report, Japan — DRAMs (Korea), para. 7.350. back to text
769. Panel Report, Brazil — Desiccated Coconut, para. 277. back to text
770. Panel Report US — Softwood Lumber III, para. 7.151. back to text
771. Panel Report US — Softwood Lumber III, para. 7.157. back to text
772. Appellate Body Report, US — Lead and Bismuth II, para. 62, referring to the Panel Report, US — Lead and Bismuth II, para. 6.71. back to text
773. Appellate Body Report, US — Lead and Bismuth II, para. 63. back to text
774. Appellate Body Report, Mexico — Anti-Dumping Measures on Rice, para. 315. back to text
775. Appellate Body Report, Mexico — Anti-Dumping Measures on Rice, para. 350. back to text
776. (footnote original) Panel Report on US — Carbon Steel, para. 8.49. back to text
777. Appellate Body Report, US — Carbon Steel, paras. 116–118. back to text
778. Appellate Body Report, US — Carbon Steel, paras. 88, 103 and 105. back to text
779. Appellate Body Report, US — Carbon Steel, paras. 108 and 109. back to text
780. Appellate Body Report, US — Carbon Steel, para. 116. back to text
781. Panel Report, US — Carbon Steel, para. 8.91. back to text
782. (footnote original) Appellate Body Report on US — Lamb, para. 131. back to text
783. (footnote original) Panel Report on US — DRAMS, para. 6.42. back to text
784. Panel Report, US — Carbon Steel, paras. 8.92–8.95. back to text
785. Panel Report, US — Carbon Steel, para. 8.96. back to text
786. Appellate Body Report, US — Carbon Steel, para. 108. back to text
787. Appellate Body Report, US — Carbon Steel, para. 109. back to text
788. Panel Report, US — Carbon Steel, para. 8.19 back to text
789. Appellate Body Report, US — Carbon Steel, para. 105. back to text
790. Appellate Body Report, US — Carbon Steel, paras. 92–97. back to text
791. (footnote original) Panel Report, paras. 8.27–8.30. back to text
792. Appellate Body Report, US — Carbon Steel, paras. 64–65. back to text
793. Appellate Body Report, US — Carbon Steel, para. 91. back to text
794. Appellate Body Report, US — Carbon Steel, paras. 111–112. back to text
795. (footnote original) Panel Report, European Communities — Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India (“EC — Bed Linen ”), WT/DS141/R, adopted 12 March 2001, as modified by the Appellate Body Report, WT/DS141/AB/R, at para. 6.259. back to text
796. Panel Report, US — Softwood Lumber VI, paras. 7.39–7.42. back to text
797. Panel Report, Mexico — Olive Oil, footnote 63. back to text
798. G/C/M/10, section 1(iv). The text of the adopted rules of procedure can be found in G/L/144. back to text
799. G/SCM/4, para. 1. back to text
800. G/SCM/M/8; G/SCM/9. back to text
801. G/SCM/4. back to text
802. G/SCM/W/365, G/SCM/W/365/Corr.1, and G/SCM/W/365/Rev.1. back to text
803. G/SCM/M/2, item O; G/SCM/5. back to text
804. For reports of the IGE, see documents G/SCM/W/415/Rev.2, G/SCM/M/16, item H, G/SCM/W/415/Rev.2/Suppl.1 and G/SCM/M/24 item E. back to text
805. G/SCM/M/1, item P; G/SCM/1. back to text
806. G/SCM/6/Rev.1. See G/SCM/48, para. 213. back to text
807. G/SCM/M/46, item R.4. back to text
808. G/SCM/M/30, paras. 6–7. back to text
809. G/SCM/117. back to text
810. See e.g., for 2010, G/L/906, para. 7. back to text
811. Panel Report, Canada — Aircraft, para. 9.256. back to text
812. Panel Report, Canada — Aircraft, para. 9.256. back to text
813. Appellate Body Report, Brazil — Aircraft, para. 149. back to text
814. G/SCM/3. back to text
815. G/SCM/3/Rev.1. back to text
816. G/SCM/2. back to text
817. G/SCM/2/Rev.1. The new notification formats were circulated in document G/SCM/W/549 dated 12 October 2009. back to text
818. G/SCM/129. back to text
819. Appellate Body Report, Brazil — Aircraft, para. 149. back to text
820. Appellate Body Report, Brazil — Aircraft, para. 149. back to text

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