Dispute Settlement Body 28 September 2006

DSB sets up compliance panel to review US implementation of “Cotton” rulings

At its meeting on 28 September 2006, the Dispute Settlement Body established a compliance panel under DSU Article 21.5 at the second-time request by Brazil to review US' implementation of the DSB rulings in the “Cotton” case. At the same meeting, China blocked the first-time requests by the EC, US and Canada for panels to examine China's measures on imports of auto parts; and the US blocked Thailand's first-time request for a panel to examine US measures on shrimp from Thailand.

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This summary has been prepared by the WTO Secretariat’s Information and Media Relations Division to help public understanding about developments in WTO disputes. It is not a legal interpretation of the issues, and it is not intended as a complete account of the issues. These can be found in the reports themselves and in the minutes of the Dispute Settlement Body’s meetings.

DS267: United States — Subsidies on Upland Cotton   back to top

At the second-time request by Brazil (WT/DS267/30), the DSB established a compliance review panel under DSU Article 21.5 to examine whether the measures implemented by the US were in conformity with the rulings of the DSB. Brazil stated that the US had adopted no implementation measures at all, and that the measures it had implemented fell far short of compliance.

The US said that contrary to Brazil 's claim, the US had fully implemented the DSB's rulings by repealing the Step 2 programme, under which hundreds of millions of dollars were paid to domestic users and exporters of US cotton, and had also ceased operating two of its export credit programmes, namely the GSM-103 and SCGP programmes. The sole remaining guarantee programme, the GSM-102, had been substantially modified to remove its export subsidy elements. Given all these changes, there was no basis for Brazil 's request. The US said that it was confident that its measures would be upheld by the compliance panel.

The following Members reserved their third-party rights: Argentina, Australia, Canada, China, India, Japan, New Zealand and the EC.


DS339, DS340, DS342: China —  Measures Affecting Imports of Automobile Parts back to top

China opposed the first-time requests by the EC, US and Canada for the establishment of panels (WT/DS339/8, WT/DS340/8, and WT/DS342/8) . The EC, US and Canada stated that, although China had committed itself in its Accession Protocol to impose a duty of 10 percent on most automobile parts, it had, however, reneged on this commitment by imposing a duty of 25 percent. The complainants claimed that China imposed a charge on imported auto parts that was equal to the higher tariff on completed motor vehicles. This charge was imposed whenever a complete vehicle did not contain an arbitrarily-set minimum quantity or value of Chinese auto parts, thus discouraging auto manufacturers in China from using parts imported from abroad. The complainants also claimed that China imposed additional administrative obligations on manufacturers which produced vehicles that did not meet local content requirements. According to the complainants, these measures breached a number of WTO provisions, including Articles II and III of the GATT 1994, Article 2 of the TRIMS Agreement and several provisions of China 's Protocol of Accession. They said that consultations had failed to resolve the dispute leaving them with no option other than to request the establishment of panels. The US requested a single panel to adjudicate on the claims raised by the three Members.

China expressed regret over the decision by the EC, US and Canada to request a panel. China said that, since its accession, it had progressively reduced its tariffs on automobiles and auto parts from 80 per cent and 30 percent, respectively in 2001 to 25 percent and 10 percent. China said that, contrary to the claims of the complainants, it was convinced that its measures were in conformity with its WTO obligations and was confident that a panel would come to the same conclusion. The objective of the Chinese measures was not to discriminate against imported auto parts, but to prevent tariff evasion and circumvention by auto companies. For the foregoing reasons, China could not agree to the establishment of a panel at the present DSB meeting.


DS343: United States — Measures Relating to Shrimp from Thailand   back to top

The US blocked the first-time request by Thailand for a panel (WT/DS343/7). Thailand said that apart from requiring the payment of cash deposits of anti-dumping duties at the time of importation of the merchandise, the US also required importers of shrimps from Thailand to post a continuous bond which was calculated as the amount of the applicable antidumping duty margin multiplied by the value of shrimp imports by the importer in the preceding year. These requirements were excessive and burdensome. According to Thailand, the claim by the US that the continuous bond requirement was necessary to secure payment of antidumping duties appeared not to be supported by the facts. The US had imposed the requirement on only one antidumping order, namely the import of shrimps from Thailand and certain other countries. Thailand claimed that the true objective of the measure was to increase the burden and effect of its antidumping measures beyond what was contemplated or permitted under Article VI of the GATT 1994 and the Antidumping Agreement. Thailand stated that the bond requirement also breached other WTO provisions, including Articles I, II and XI of the GATT 1994 and could not be justified under Article XX (d) of the GATT 1994; and that the use of the zeroing methodology in the establishment of antidumping margins was contrary to the Antidumping Agreement as affirmed by the Appellate Body in previous cases.

The US expressed regret over Thailand 's decision to request a panel, especially considering the decision by the US Department of Commerce to abandon the use of zeroing in average-to-average comparisons in antidumping investigations. The US stated that Members have the right to ensure that importers paid duties owed. The US believed that the panel request was premature and was therefore unable to accept the establishment of a panel at the present DSB meeting.


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Implementation by the EC of the DSB's recommendations and rulings in the case “EC — Regime for the Importation, Sale and Distribution of Bananas” (DS27) and related subsequent WTO proceedings.  

Honduras, Nicaragua and Panama expressed concern about the failure of the EC to bring its banana regime into conformity with its WTO obligations. They said that contrary to the assertion of the EC that available data showed increases in MFN and ACP volumes, the market share of Latin American countries in the EC was on a downward trend. Not only had supply volumes contracted, MFN prices had also declined by about 20 percent. The recent announcement of sharp increases in banana subsidy payments to EC producers would further distort the market. These new developments had conclusively established that MFN access was not being maintained by the EC. The new banana regime was discriminatory, as it had allowed ACP suppliers to gain market share at the expense of Latin American countries. The conclusion of economic partnership agreements between the EC and ACP states would further hasten the decline of the banana industry in Latin America, unless prompt measures were adopted to address this situation. In such circumstances, dispute settlement would be punitive not remedial for Latin American countries, undermining the objective of prompt compliance and the need for maximum attention to be given to the trading interests of developing countries.

The EC said that it had taken careful note of the statements by Honduras, Nicaragua and Panama and remained convinced that the matter raised by them was not an implementation issue within the meaning of Article 21.5 of the DSU. The EC was aware of the importance of the banana industry to Latin American countries, as well as for ACP countries and had always taken these interests into consideration. The EC said that it was open to addressing the concerns of Latin American suppliers in the appropriate fora and was in regular contact with interested WTO Members to discuss a range of issues, including the rebinding of the MFN tariff. The EC said that, contrary to the statements made by Honduras, Nicaragua and Panama, the current data on overall MFN imports showed an increase in imports from both MFN and ACP suppliers as compared to 2005. This contradicted the claim that MFN access was not being maintained. The EC reiterated its commitment to maintain access to the EC market by all banana-supplying countries, including Latin American countries.

The US expressed concern about the new banana regime and said that the US was holding informal discussions with interested Members to determine the most appropriate way of addressing these concerns. The US urged the EC to work with the interested Members in order to find a mutually satisfactory solution as expeditiously as possible.


DS217, DS234: United States — Continued Dumping and Subsidy Offset Act of 2000: Implementation of the Recommendations Adopted by the DSB   back to top

Brazil, Canada, China, Hong Kong (China), India, Indonesia, Japan, Mexico, Thailand and the EC said that since the repeal of the CDSOA would become effective only in October 2007 and would not produce any effects before Fiscal Year 2010 starting on 1 October 2009, the US could not assert that it had fully implemented the DSB's recommendations and rulings in this case. It should have therefore submitted a status report as mandated by the DSU. They noted that the transitional clause would allow duties collected before October 2007 to be disbursed in contravention of WTO rules. In fact, the amount slated to be distributed this year would exceed last year's amount. The continued insistence by the US that no further action was required on its part raised serious questions about its commitment to the dispute settlement system and particularly the obligation of Members to promptly implement the DSB's recommendations and rulings. They urged the US authorities to bring their measures into full compliance with the DSB's recommendations and rulings and in the interim provide status reports to the DSB. Mexico said that to induce US compliance with the DSB's recommendations and rulings, Mexico had decided to suspend equivalent concessions to the US in the amount authorised by the arbitrator.

The US said that given the repeal of the Deficit Reduction Act, the US had taken all necessary actions to implement the DSB's recommendations and rulings. The US disagreed with the view that it had not fully implemented. Given that the CDSOA did not apply to Canadian exports, the US could not comprehend Canada 's position in this matter. The US also said that it was not aware of the decision by Mexico to suspend concessions and would later review this decision.


Surveillance of implementation of recommendations adopted by the DSB  back to top

The United States presented the following status reports:

DS176:   US — Section 211 Omnibus Appropriations Act of 1998
The US said that several legislative proposals relating to Section 211 had been introduced in the current Congress and that the US Administration was committed to working with the Congress to implement the DSB's recommendations and rulings. The EC said that the continued non-implementation by the US of the DSB's recommendations and rulings was seriously undermining the authority of the TRIPS Agreement and the credibility of US commitment to its WTO obligations and duty to promptly comply with the DSB's recommendations and rulings. The US was compromising the interests of its industry at large in order to preserve legislation that benefited the interests of a few companies. The EC was extremely disappointed and concerned by the recent decision of the US Administration not to grant the specific licence that would have allowed the renewal of the registration of the Havana Club mark. The renewal would not have given away or granted any rights, but would have preserved the status quo and allowed the US courts to determine in pending proceedings who was the legitimate owner of the mark. The explanation by the US that this decision was made on foreign policy grounds was disturbing, as disagreements as to ownership of intellectual property rights had to be decided by legitimate courts or tribunals on the basis of law free from any political considerations. The EC urged the US to comply with its TRIPS obligations and to accept multilateral disciplines and the rule of law. Cuba said that the continued non-implementation of the DSB's recommendations and rulings by the US undermined the credibility of the dispute settlement system as a central element in guaranteeing security and predictability to the multilateral trading system. Cuba criticised the US for not granting the specific licence that would have allowed the renewal of the registration of the Havana Club mark. The main beneficiary of this decision was Bacardi, which had started marketing rum produced in Puerto Rico under the Havana Club brand. According to Cuba, this was fraudulent and deceived consumers as to the true origin of the product. Cuba urged the US to promptly bring its measures into conformity with its TRIPS obligations by repealing Section 211. Argentina, Brazil, China, India and Venezuela commented on the systemic importance of this case and urged the US to promptly bring its measures into conformity with the DSB's recommendations and rulings.

DS184:   US — Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan
 The US said that the US Administration was supporting specific legislative amendments that would implement the DSB's recommendations and rulings with respect to the US antidumping statute. The US recalled that the DSB's recommendations and rulings relating to antidumping margins had already been addressed by the US in November 2002 and said that the US Administration would continue to work with Congress to enact the appropriate legislation. Japan said that his delegation had taken note of the latest status report of the US, and that while Japan was encouraged by the assurances that the Administration was working with Congress to pass the amending bill (H.R. 2473), there had not been any demonstrable progress since the bill's introduction in Congress in May 2005. He urged the US to redouble its efforts to implement the DSB's recommendations and rulings as soon as possible, as its continued non-implementation undermined the credibility of the dispute settlement system.

DS160:   US — Section 110(5) of the US Copyright Act
The US said that the US Administration was working closely with Congress and conferring with the EC with a view to reaching a mutually satisfactory solution to this dispute. The EC expressed regret at the lack of substantive progress in this case. The EC recalled that the Panel Report had been adopted by the DSB more than five years ago and that the inaction by the US was hurting the interests of music creators. The US was failing to comply at home with the very rules that it was seeking to enforce abroad; this situation of double standards resulted in damage that went beyond the boundaries of this specific dispute, according to the EC. It urged the US to abide by its TRIPS commitments and bring its measures into conformity with the DSB's recommendations and rulings as soon as possible. The EC further requested the US to provide detailed information on the initiatives being pursued by Congress and the Administration to implement the DSB's recommendations and rulings. The EC recalled that it had reserved its right to reactivate its arbitration request at anytime, should there not be any substantive progress towards resolving this long-running dispute.


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Next meeting 

The next meeting of the DSB is scheduled to take place on 26 October 2006.

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