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DISPUTE SETTLEMENT: DISPUTE DS184

United States — Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan

This summary has been prepared by the Secretariat under its own responsibility. The summary is for general information only and is not intended to affect the rights and obligations of Members.

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See also: One-page summary of key findings of this dispute

Appellate Body and Panel Reports Adopted

Complaint by Japan.

On 18 November 1999, Japan requested consultations with the US in respect of the preliminary and final determinations of the US Department of Commerce and the US International Trade Commission on the anti-dumping investigation of Certain Hot Rolled Steel Products from Japan issued on 25 and 30 November 1998, 12 February 1999, 28 April 1999 and 23 June 1999. Japan considered that these determinations are erroneous and based on deficient procedures under the US Tariff Act of 1930 and related regulations. The Japanese complaint also concerned certain provisions of the Tariff Act of 1930 and related regulations. Japan claimed violations of Articles VI and X of the GATT 1994 and Articles 2, 3, 6 (including Annex II), 9 and 10 of the Anti-Dumping Agreement.

On 11 February 2000, Japan requested the establishment of a panel. At its meeting on 24 February 2000, the DSB deferred the establishment of a panel. Further to a second request to establish a panel by Japan, the DSB established a panel at its meeting on 20 March 2000. Brazil, Canada, Chile, the EC and Korea reserved their third-party rights. On 9 May 2000, Japan requested the Director-General to determine the composition of the Panel. On 24 May 2000, the Panel was composed. The Panel circulated its report on 28 February 2001. The Panel concluded as follows:

• The US acted inconsistently with Articles 6.8 and Annex II of the AD Agreement in its application of “facts available” to Kawasaki Steel Corporation (KSC), Nippon Steel Corporation (NSC) and NKK Corporation;
   
• Section 735(c)(5)(A) of the Tariff Act of 1930, as amended, which mandates that USDOC exclude only margins based entirely on facts available in determining an all others rate, is inconsistent with Article 9.4 of the AD Agreement, and that therefore the US has acted inconsistently with its obligations under Article 18.4 of the AD Agreement and Article XVI:4 of the Marrakesh Agreement by failing to bring that provision into conformity with its obligations under the AD Agreement; and
   
• The US acted inconsistently with Article 2.1 of the AD Agreement in excluding certain home-market sales to affiliated parties from the calculation of normal value on the basis of the “arm’s length” test. In addition, in light of the findings above, the panel concluded that the replacement of those sales with sales to unaffiliated downstream purchasers was inconsistent with Article 2.1 of the AD Agreement.
   
• With respect to those of Japan’s claims not addressed above the panel concluded: (1) that the claim was not within its terms of reference (“general practice” concerning adverse facts available; “general practice” of excluding certain home-market sales from the calculation of normal value), or (2) that, in light of considerations of judicial economy, it is neither necessary nor appropriate to make findings.

On 25 April 2001, the US notified its decision to appeal to the Appellate Body certain issues of law covered in the Panel Report and certain legal interpretations developed by the Panel. The Appellate Body circulated its Report on 24 July 2001. In this regard, the Appellate Body upheld the Panel’s findings except for the following:

• It reversed the Panel’s finding regarding the inconsistency with Article 2.1 of the Anti-dumping Agreement of the US’s methodology for calculating the normal value as regards the using of certain downstream sales made by an investigated exporters’ affiliates to dependent purchasers;
   
• It found that there was insufficient factual record to allow completion of the analysis of Japan’s claim under Article 2.4 of the Anti-dumping Agreement that the US did not make a fair comparison in its use of downstream sales when calculating normal value;
   
• It reversed the Panel’s finding that the US did not act inconsistently with the Anti-dumping Agreement in its application of the captive production provision in its determination of injury sustained by the US hot-rolled steel industry;
   
• It reversed the Panel’s finding that the USITC demonstrated the existence of a causal relationship, under Article 3.5 of the said agreement, between dumped imports and material injury to that industry; but found that there was insufficient factual record to allow completion of the analysis of Japan’s claim on causation;

The DSB adopted the Appellate Body Report and the Panel Report, as modified by the Appellate Body Report, on 23 August 2001.

Implementation Status of Adopted Reports

On 20 November 2001, Japan requested that the reasonable period of time for implementation of the DSB’s recommendations be determined by binding arbitration under Article 21.3(c) of the DSU. Pending the appointment of the arbitrator, Japan and the US agreed to extend the time-period under that provision. They agreed that the award of the arbitrator is to be made no later than 19 February 2002. On 19 February 2002, the arbitrator circulated his award. The arbitrator concluded that the reasonable period of time for implementation by the United States of the DSB’s recommendations was 15 months from 23 August 2001. Accordingly, this period will expire on 23 November 2002.

At the DSB meeting on 1 October 2002, the US presented its status report regarding the implementation of the recommendations and rulings of the DSB. The US stated that the US Administration had started taking steps to comply with the recommendations and rulings of the DSB. To that end, the US Department of Commerce had published a proposed change to its “arm’s length” test with a view to complying with the recommendations and rulings of the DSB. The US would apply this test to the hot-steel products which were the subject matter of the dispute. The US confirmed that this test would be applied in future anti-dumping proceedings initiated by the US. Regarding the statutory aspects of this dispute, the US stated that the Administration was consulting with Congress with a view to determining which measures might be required to achieve a solution to the dispute.

Japan expressed its concerns that the US might not be able to fulfil its obligations by the expiry of the reasonable period of time. It stated that while the status report submitted by the US indicated that the DOC and Congress were taking steps to comply with the recommendations and rulings of the DSB, the report did not disclose anything in relation to the International Trade Commission, whose application of the relevant US law was found to be inconsistent with the US obligations under the WTO. Japan urged the US to bring its measures into compliance with the recommendations and rulings of the DSB and stated that Japan would monitor all aspects of US implementation of the DSB recommendations and rulings. The EC urged the US to implement promptly the recommendations and rulings of the DSB.

At the DSB meeting on 11 November 2002, the US submitted a status report stating that the US Department of Commerce had published a proposed change to its “arm’s length” test with a view to complying with the recommendations and rulings of the DSB. He said that the US would apply this test to the hot-steel products which were the subject matter of this dispute. The US confirmed that this test would be applied in future anti-dumping proceedings initiated by the US. Regarding the statutory aspects of this dispute, he said that the Administration was working with Congress with a view to finding a solution to this dispute. Japan stated that the reasonable period of time for the implementation of the recommendations and rulings of the DSB would expire on 23 November 2002 and Japan was concerned that the United States might not be able to fulfil its obligations by that time. He said that while the status report submitted by the US indicated that the Department of Commerce and Congress were taking steps to comply with the recommendations and rulings of the DSB, it did not disclose anything in relation to the International Trade Commission, whose application of the relevant US law was found to be inconsistent with the obligations of the United States under the WTO Agreement. He urged the US to bring its measures into compliance with the recommendations and rulings of the DSB, and said that Japan would be entitled after the expiration of the reasonable period of time to request authorization to suspend concessions or other obligations pursuant to Article 22.2 of the DSU.

On 22 November 2002, the US requested the DSB to modify the reasonable period of time. The US proposed that the reasonable period of time be modified so as to expire on 31 December 2003, or on the date on which the first session of the next US Congress adjourns, whichever was earlier. The US believed that such an extension of time would promote a principal aim of the dispute settlement system, which is to provide mutually satisfactory solutions to disputes.

At the DSB meeting of 28 November 2002, the US stated that the DOC had issued a new final determination in the hot-rolled steel anti-dumping duty investigation, which implemented the recommendations and rulings of the DSB with respect to the calculation of anti-dumping margins in that investigation. Regarding the recommendations and rulings of the DSB with respect to the US anti-dumping statute, the US stated that the US Administration was continuing to consult and to work with the US Congress with a view to resolving this dispute in a mutually satisfactory manner. To that end, the US was consulting with Japan and had sought its agreement to extend the reasonable period of time in this case to 31 December 2003 or the end of the first session of the next Congress, whichever is earlier. Japan expressed disappointment about the failure of the US to implement the recommendations and rulings of the DSB within the reasonable period of time, and said that the lack of implementation compromised the credibility of the dispute settlement mechanism. Japan further stated that whilst it would probably agree to an extension of the reasonable period of time, it expected the US to bring its measures into compliance as soon as practicable. Japan also reserved its right to take appropriate action in the event of non-compliance again by the US.

At its meeting on 5 December 2002, the DSB agreed to the request by the US for an extension of the reasonable period of time for the implementation of the recommendations and rulings of the DSB in this dispute. At the DSB meeting on 27 January 2003, the US submitted a status report where it recalled his earlier statement concerning the issuance of a new final determination in the hot-rolled steel antidumping duty investigation by the Department of Commerce which, according to the US, implemented the recommendations and rulings of the DSB with respect to the calculation of anti-dumping margins in that investigation. Regarding the recommendations and rulings of the DSB with respect to the US anti-dumping statute, the US said that its Administration would work with the new Congress with a view to finding a satisfactory solution to the dispute. Japan expressed disappointment about the failure of the US to implement the recommendations and rulings of the DSB within the reasonable period of time, and said that the lack of implementation compromised the credibility of the dispute settlement mechanism. Japan urged the US Administration to intensify its efforts and work with the new Congress to implement as promptly as possible the recommendations and rulings of the DSB.

At its meeting on 2 October 2003, the US presented its status report and stated that with respect to the DSB’s recommendations and rulings on the US anti-dumping statute, the US administration would continue to consult and to work with Congress with a view to resolving this matter. In this regard, the US stated that the US administration was supporting the passage of specific amendments to the US anti-dumping duty law that would implement these recommendations and rulings. Japan noted that the US status report and its statement did not contain a concrete explanation of its plan for implementation. Japan urged the United States to implement the DSB’s recommendations before the end of the first session of the 108^th Congress and to consult with Japan in an urgent and detailed manner on how and when it intended to implement the recommendations.

At the DSB meeting on 7 November 2003, the US stated that with respect to the DSB’s recommendations and rulings on the US anti-dumping statute, the US administration was supporting the passage of specific amendments to the US anti-dumping duty law in order to bring it into conformity with the DSB’s recommendations and rulings. Japan said that the extended reasonable period of time for the implementation of the DSB’s recommendations and rulings agreed to by the parties was about to expire, yet the necessary statutory changes had not been introduced in the US Congress which was about to go on recess very soon. Japan also suggested that it would be helpful if the US consulted Japan on how it intended to implement the recommendations. On 21 November, 2003, the US notified the Chairman of the DSB that it proposed that the reasonable period of time for implementation of the recommendations and rulings of the DSB be modified so as to expire on 31 July 2004, and that it was consulting with Japan regarding this proposal. At its meeting on 10 December 2003, the DSB agreed to the request by the US for an extension of the reasonable period of time for the implementation of the recommendations and rulings of the DSB. On 30 July 2004, the US notified the Chairman of the DSB that it proposed that the reasonable period of time for implementation of the recommendations and rulings of the DSB be modified so as to expire on 31 July 2005, and that it had consulted with Japan regarding this proposal. At its meeting on 31 August 2004, the DSB agreed to the request by the US for an extension of the reasonable period of time for the implementation of the recommendations and rulings of the DSB.

On 7 July 2005, the parties to the dispute informed the DSB of an Understanding that Japan retains its right to be granted DSB authorization to suspend concessions or other obligations pursuant to Article 22.6 of the DSU at any future date and the United States will not seek to block Japan’s request for DSB authorization on the grounds that such DSB action would not be within the time period set out in the first sentence of Article 22.6 of the DSU.

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