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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
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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
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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
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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
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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
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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
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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 467–468 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
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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 473–475 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
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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 366–373
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 22 ‘mutatis
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.
159–165.
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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