DISPUTE SETTLEMENT

DS: United States — Anti-dumping and countervailing duties on ripe olives from Spain

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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Summary of the dispute to date

The summary below was up-to-date at

Consultations

Complaint by the European Union

On 29 January 2019, the European Union requested consultations with the United States concerning the imposition of countervailing and anti-dumping duties on ripe olives from Spain, as well as the legislation that was the basis for the imposition of those duties.

The European Union claimed that the challenged measures appear to be inconsistent with:

  • Articles 1.1(a), 1.1(b), 1.2, 2.1, 2.2, 2.4, 10, 12.1, 12.5, 12.8, 14, 15.1, 15.2, 15.5, 19.1, 19.3, 19.4 and 32.1 of the SCM Agreement;
      
  • Articles 3.1, 3.2 and 3.5 of the Anti-Dumping Agreement; and
      
  • Articles VI:1, VI:2 and VI:3 of the GATT 1994.

On 11 February 2019, Australia requested to join the consultations.

 

Panel and Appellate Body proceedings

On 16 May 2019, the European Union requested the establishment of a panel. At its meeting on 28 May 2019, the DSB deferred the establishment of a panel.

At its meeting on 24 June 2019, the DSB established a panel. Australia, Brazil, Canada, China, India, Japan, Mexico, the Russian Federation, Saudi Arabia, Switzerland and Turkey reserved their third-party rights.

On 8 October 2019, the European Union requested the Director-General to compose the panel. On 18 October 2019, the Director-General composed the panel.

On 15 April 2020, the Chair of the panel informed the DSB that, due to a delay in the beginning of the panel’s work resulting from the lack of available experienced lawyers in the Secretariat and delays caused by the global COVID-19 pandemic, the panel did not expect to issue its final report to the parties before the end of 2020. The Chair apprised the DSB that the report would be available to the public once it was circulated to the Members in all three official languages, and that the date of circulation depends on completion of translation. On 21 December 2020, the Chair of the panel informed the DSB that in light of further delays in the proceedings caused by the global COVID-19 pandemic, the panel expected to issue its final report to the parties by the end of June 2021. On 9 June 2021, the Chair of the panel informed the DSB that in light of further delays in the proceedings caused by the global COVID-19 pandemic, the panel expected to issue its final report to the parties by the end of August 2021. On 17 September 2021, the Chair of the panel informed the DSB that the panel had received joint requests from the parties to postpone the issuance of the final report. Cognisant of the aim of the dispute settlement mechanism to secure a positive solution to a dispute, and of the requirement that Members engage in the dispute settlement procedures in good faith in an effort to resolve the dispute, the panel agreed to the parties' requests, and postponed the issuance of the final report to the parties until 3 November 2021.

On 19 November 2021, the panel report was circulated to Members.

Factual background

This dispute concerns a challenge to the United States' application in 2018 of countervailing and anti-dumping duties on ripe olives from Spain, as well as certain administrative acts and legislation on which these duties were based. The countervailing duty investigation addressed subsidies provided to raw olive growers under the European Union's Common Agricultural Policy. The European Union challenged various aspects of that investigation, as well as Section 771B of the Tariff Act of 1930, the provision of US law governing the attribution of subsidies in countervailing duty investigations involving agricultural products processed from a raw agricultural input. Finally, the European Union also challenged the United States' International Trade Commission's (USITC) injury determination regarding dumped and subsidized ripe olives from Spain.

The Panel's findings

With respect to the European Union's claims regarding the USDOC's de jure specificity determination in the countervailing duty investigation, the Panel found the following:

  1. the USDOC acted inconsistently with Articles 2.1, 2.1(a), and 2.4 of the SCM Agreement because:
    1. the USDOC did not properly examine and account for the rules governing the allocation and valuation of BPS entitlements with respect to new farmers, farmers holding entitlements transferred under the SPS programme, and farmers no longer growing olives;
    2. the USDOC relied upon erroneous factual findings with respect to function and role of the so called “regional rate” to support its determination of de jure specificity; and
    3. the USDOC did not properly examine and account for the rules governing the allocation and valuation of SPS entitlements with respect to farmers with SPS entitlements obtained via transfer, and farmers holding COMOF programme‑based entitlements no longer producing olives.
  2. For the reasons set out in (a)(i)-(iii), the USDOC's determination of de jure specificity was not based on a reasoned and adequate explanation of why access to the BPS and SPS subsidies was explicitly limited to olive growers, within the meaning of Articles 2.1 and 2.1(a) of the SCM Agreement, and was not clearly substantiated on the basis of positive evidence, as required by Article 2.4 of the SCM Agreement;
  3. the USDOC acted inconsistently with Article 2.4 of the SCM Agreement to the extent that the USDOC's determinations of de jure specificity with respect to the SPS and BPS/GP subsidies relied upon an erroneous factual finding concerning the calculation of assistance under the COMOF programme;
  4. the European Union has not demonstrated that the USDOC acted inconsistently with Articles 2.1 and 2.1(a) of the SCM Agreement merely because the USDOC based its findings of de jure specificity in the ripe olives countervailing duty investigation on the rules in the relevant subsidy programmes governing the calculation of the amounts of subsidies available to eligible enterprises;
  5. the European Union has not demonstrated that the USDOC acted inconsistently with Article 2.1(a) of the SCM Agreement because the USDOC's determination of de jure specificity was dependent upon how certain alleged features of past subsidy programmes no longer in force were relied upon and integrated into the BPS programme;
  6. the European Union has not demonstrated that, as a matter of fact, the USDOC found that the BPS/GP and SPS subsidies were de jure specific to olive growers as a result of being coupled or tied to olive production;
  7. the European Union has not demonstrated that the USDOC acted inconsistently with Articles 2.1, 2.1(a), and 2.4 of the SCM Agreement because, contrary to the European Union's assertions:
    1. the USDOC's rejection of the arguments concerning the application of the convergence factor under the BPS programme was supported by record evidence, and to this extent, reasonably and adequately explained and based on clearly substantiated positive evidence;
    2. the totality of the USDOC's discussion of the rules governing the calculation of SPS payments reveals that the USDOC correctly understood that SPS payments were made to farmers and that Spain did not implement the SPS programme on a regional basis; and
    3. the lack of a formal specificity finding under US law does not undermine the USDOC's determinations of de jure specificity with respect to the SPS, BPS, and GP programmes, given the absence of any suggestion on the part of the European Union that the COMOF programme subsidies were not de jure specific, and in the light of the fact that the USDOC made sufficient factual findings to satisfy itself that those subsidies would be de jure specific under its domestic legislation, had it been required to make such a determination.

With respect to the European Union's claims in relation to Section 771B of the 1930 Tariff Act and its application in the ripe olives countervailing duty investigation, the Panel found the following:

  1. Section 771B of the Tariff Act of 1930 is as such inconsistent with Article VI:3 of the GATT 1994 and Article 10 of the SCM Agreement because it requires the USDOC to presume that the entire benefit of a subsidy provided in respect of a raw agricultural input product passes through to the downstream processed agricultural product, based on a consideration of only two factual circumstances, without leaving open the possibility of taking into account any other factors that may be relevant to the determination of whether there is any pass-through and, if so, its degree;
  2. the USDOC acted inconsistently with Article VI:3 of the GATT 1994 and Article 10 of the SCM Agreement regarding its application of Section 771B of the Tariff Act of 1930 in the Spanish ripe olives countervailing duty investigation because it failed to establish the existence and extent of indirect subsidization taking into account all relevant facts and circumstances; and

With respect to the European Union's claims regarding the USITC's injury determination, the Panel found the following:

  1. the European Union did not demonstrate that the USITC acted inconsistently with Articles 15.1 and 15.2 of the SCM Agreement, and Articles 3.1 and 3.2 of the Anti-Dumping Agreement, by failing to undertake an analysis of the volume of ripe olives from Spain based on an objective examination of positive evidence;
  2. the European Union did not demonstrate that the USITC acted inconsistently with Articles 15.1 and 15.2 of the SCM Agreement, and Articles 3.1 and 3.2 of the Anti-Dumping Agreement, by failing to consider a “volume effect” within the meaning of Article 15.2 of the SCM Agreement and Article 3.2 of the Anti-Dumping Agreement;
  3. the European Union did not demonstrate that the USITC acted inconsistently with Articles 15.1 and 15.2 of the SCM Agreement, and Articles 3.1 and 3.2 of the Anti-Dumping Agreement, by failing to undertake an analysis of the price effects of ripe olives from Spain that was based on an objective examination of positive evidence;
  4. For the reasons set out at paragraphs (a)-(c), the European Union did not demonstrate that the USITC acted inconsistently with Articles 15.4 and 15.5 of the SCM Agreement, and Articles 3.4 and 3.5 of the Anti-Dumping Agreement, as a consequence of alleged violations concerning the USITC's volume analysis and price effects analysis;
  5. the European Union did not demonstrate that the USITC acted inconsistently with Articles 15.1 and 15.4 of the SCM Agreement, and Articles 3.1 and 3.4 of the Anti-Dumping Agreement, by failing to undertake an analysis of the consequent impact of ripe olives from Spain on the domestic industry that was based on an objective examination of positive evidence;
  6. For the reasons set out at paragraph (e), the European Union did not demonstrate that the USITC acted inconsistently with Article 15.5 of the SCM Agreement, and Article 3.5 of the Anti-Dumping Agreement, as a consequence of alleged violations concerning the USITC's impact analysis; and
  7. the European Union did not demonstrate that the USITC acted inconsistently with Articles 15.1 and 15.5 of the SCM Agreement, and Articles 3.1 and 3.5 of the Anti-Dumping Agreement, by failing to undertake a causation analysis that was based on an objective examination of positive evidence.

With respect to the European Union's claims concerning mandatory respondent, Aceitunas Guadalquivir's final subsidy margin and countervailing duty rate calculation, the Panel found the following:

  1. the USDOC acted inconsistently with Article VI:3 of the GATT 1994 because, by relying on the volume of Aceitunas Guadalquivir's raw olive purchases reported in its response to the initial 4 August 2017 questionnaire to determine Aceitunas Guadalquivir's final subsidy margin and countervailing duty rate, the USDOC did not ensure, and take the necessary steps to ascertain as accurately as possible the amount of subsidization bestowed on the investigated products;
  2. the USDOC acted inconsistently with Article VI:3 of the GATT 1994 because the USDOC relied upon the margin of subsidization incorrectly determined for Aceitunas Guadalquivir in its determination of the “all-others” rate of countervailing duties imposed on exporters of ripe olives that were not individually investigated;
  3. the USDOC acted inconsistently with Article 12.1 of the SCM Agreement because the USDOC failed to notify the respondents that the USDOC required information regarding the volume of purchases of raw olives processed into ripe olives; and
  4. the USDOC acted inconsistently with Article 12.8 of the SCM Agreement because the USDOC failed to inform interested parties before the final determination that the volume of purchases of raw olives processed into ripe olives was an “essential fact under consideration”.

Having found that the United States had acted in several instances inconsistently with its obligations under GATT 1994 and the SCM Agreement, the Panel did not consider it necessary to achieve a positive resolution of the dispute, to make findings with respect to the merits of the entirety of the European Union's claims against the challenged measures.

The Panel's recommendation and suggestion

The Panel recommended that the United States bring its measures into conformity with its obligations under the GATT 1994, the Anti-Dumping Agreement and the SCM Agreement.

At its meeting on 20 December 2021, the DSB adopted the panel report.

 

Reasonable period of time

On 19 January 2022, the United States informed the DSB that it intended to implement the recommendations and rulings of the DSB in a manner consistent with its WTO obligations and that it would need a reasonable period of time to do so. On 17 March 2022, the European Union and the United States informed the DSB that in light of ongoing discussions between them, in order to allow sufficient time for the parties to discuss a mutually agreed period, they had agreed on a common understanding regarding the deadlines relative to the arbitration procedure provided in Article 21.3(c) of the DSU.

 

 

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