# WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/crs%3ARL32014 ## Record - **Collection:** Congressional research report - **Document type:** CRS Report - **Published:** April 23, 2012 - **Citation:** RL32014 ## Text WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases (name redacted) Legislative Attorney April 23, 2012 Congressional Research Service 7-.... www.crs.gov RL32014 CRS Report for Congress Prepared for Members and Committees of Congress WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases Summary Although the United States has complied with adverse rulings in many past World Trade Organization (WTO) disputes, there are currently 14 cases in which rulings have not yet been implemented or the United States has acted and the dispute has not been fully resolved. Under WTO dispute settlement rules, a WTO Member will generally be given a reasonable period of time to comply. While the Member is expected to remove the offending measure by the end of this period, compensation and temporary retaliation are available if the Member has not acted or not taken adequate remedial action by this time. Either disputing party may request a compliance panel if there is disagreement over whether a Member has complied in a case. Nine unresolved cases involve trade remedies, including a long-standing dispute with Japan over a provision of U.S. antidumping (AD) law and another with various WTO Members over the Continued Dumping and Subsidy Offset Act of 2000. The Offset Act was repealed as of October 2005, but remains the target of sanctions by the European Union (EU) and Japan due to continued payments to U.S. firms authorized under the repealer (P.L. 109-171). Six of these cases involve “zeroing,” a practice under which the Department of Commerce (DOC), in calculating dumping margins in AD proceedings, disregards non-dumped sales. The practice was challenged by the EU (DS294/DS350), Japan (DS322), and Mexico (DS344), resulting in broad prohibitions on its use. The United States administratively resolved one aspect of DS294 by abandoning zeroing in original AD investigations, but has yet to comply fully either in this case or in DS350, 322, or 344, leading the EU (in DS294) and Japan to request the WTO to authorize sanctions. Under memoranda signed by the United States with each complainant on February 6, 2012, however, U.S.-requested arbitration of the two sanctions proposals has been suspended while the United States makes new dumping determinations in challenged AD proceedings using a methodology finalized in March 2012 that eliminates zeroing in later stages of AD cases. The sanctions arbitrations will be terminated once implementation of the new determinations is complete. A compliance panel report in Mexico’s zeroing dispute has not yet been publicly circulated. The United States was expected to comply by March 17, 2012, in Brazil’s zeroing challenge (DS382), but it is unclear if recent U.S. action will resolve the dispute. A July 2, 2012, deadline is in place in the dispute with Vietnam (DS404). The United States is expected to comply by April 25, 2012, in China’s challenge to U.S. countervailing duties imposed on Chinese goods (DS379). Panel and Appellate Body reports were adopted in the EU’s successful challenge of U.S. aircraft subsidies on March 23, 2012 (DS353) (“Boeing” case), and the United States is expected to comply by September 23, 2012. In Brazil’s dispute over U.S. cotton subsidies (DS267), Congress repealed a WTO-inconsistent cotton program in 2006 (P.L. 109-171), but other programs were also successfully challenged and the United States was found not to have fully complied. The United States later made statutory and administrative changes to the export credit guarantee program faulted in the case. While the WTO has authorized Brazil to retaliate, the United States and Brazil signed an agreement in June 2010 aimed at permanently resolving the dispute. It includes Brazil’s pledge not to impose sanctions during the life of the agreement and foresees possible legislative resolution of the dispute in the 2012 farm bill. The United States and Antigua have been consulting on outstanding issues in Antigua’s challenge of U.S. online gambling restrictions (DS285); compensation agreements between the United States and various WTO Members in exchange for U.S. withdrawal of its WTO gambling commitments, an action taken to resolve the case, will not enter into effect until issues with Antigua are settled. Also unsettled are long-pending disputes with the European Union (EU) over a music copyright law (DS160) and a statutory trademark provision affecting property confiscated by Cuba (DS176). Congressional Research Service WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases Contents WTO Dispute Settlement Procedures .............................................................................................. 1 Uruguay Round Agreements Act (URAA): Statutory Requirements for Implementing WTO Decisions ............................................................................................................................ 4 Section 102: Domestic Legal Effect of WTO Decisions ........................................................... 4 Federal Law......................................................................................................................... 4 State Law............................................................................................................................. 5 Preclusion of Private Remedies........................................................................................... 6 Domestic Implementation of WTO Decisions Involving Administrative Action...................... 7 Section 123: Regulatory Action Generally.......................................................................... 7 Section 129: Agency Determinations in Trade Remedy Proceedings ................................. 8 Judicial Responses................................................................................................................... 12 Pending WTO Disputes: An Overview.......................................................................................... 14 A Thumbnail Sketch of Pending Cases ................................................................................... 14 A Major Focus: Use of “Zeroing” in Antidumping Proceedings............................................. 15 Pending Disputes: Trade Remedies ............................................................................................... 23 Antidumping Measures on Hot-Rolled Steel Products from Japan (DS184) .......................... 23 Recent Developments........................................................................................................ 26 Continued Dumping and Subsidy Offset Act (DS217/DS234) ............................................... 26 Recent Developments........................................................................................................ 30 Laws, Regulations, and Methodology for Calculating Dumping Margins (“Zeroing”) (DS294) ................................................................................................................................ 30 Recent Developments........................................................................................................ 40 Measures Relating to Zeroing and Sunset Reviews (DS322).................................................. 42 Recent Developments........................................................................................................ 48 Final Anti-Dumping Measures on Stainless Steel from Mexico (DS344)............................... 49 Recent Developments........................................................................................................ 51 Continued Existence and Application of Zeroing Methodology (DS350) .............................. 51 Recent Developments........................................................................................................ 53 Definitive Anti-Dumping and Countervailing Duties on Certain Products from China (DS379) ................................................................................................................................ 54 Related U.S. Litigation: GPX Int’l Tire Corp. v. United States......................................... 62 Recent Developments........................................................................................................ 64 Anti-Dumping Administrative Reviews and Other Measures Related to Imports of Certain Orange Juice from Brazil (DS382) .......................................................................... 65 Anti-Dumping Measures on Certain Shrimp from Vietnam (DS404) ..................................... 66 Pending Disputes: Subsidies.......................................................................................................... 67 Subsidies on Upland Cotton (DS267) ..................................................................................... 67 Recent Developments........................................................................................................ 80 Measures Affecting Trade in Large Civil Aircraft (Second Complaint) (“Boeing” Case) (DS353) ...................................................................................................................... 83 Pending Disputes: Trade in Services ............................................................................................. 91 Measures Affecting Cross-Border Supply of Gambling and Betting Services (DS285) ......... 91 Recent Developments........................................................................................................ 98 Pending Disputes: Trade-Related Intellectual Property Rights.................................................... 100 Section 110(5)(B) of the Copyright Act (Music Copyrights) (DS160) ................................. 100 Congressional Research Service WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases Recent Developments...................................................................................................... 101 Section 211 of the Omnibus Appropriations Act of 1998 (Trademark Exclusion Involving Property Confiscated by Cuba) (DS176) ........................................................... 102 Recent Developments...................................................................................................... 102 Contacts Author Contact Information......................................................................................................... 103 Congressional Research Service WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases T his report provides a summary of the status of U.S. compliance efforts in pending World Trade Organization (WTO) disputes that have resulted in adverse rulings against the United States. The report focuses on cases in which panel and Appellate Body reports have been adopted by the WTO Dispute Settlement Body, an action sending the disputes into the compliance phase of the WTO dispute process. Although the United States has complied with adverse rulings in many past WTO disputes,1 there are 14 pending cases in which the United States is facing compliance deadlines in 2012; deadlines have expired but the United States has not yet fully implemented the WTO decisions involved; or the United States has taken action, including the enactment of legislation, but the prevailing parties in the dispute continue to question whether the United States has fully complied and, as in one case, continue to impose WTO-authorized trade sanctions. Compliance in these cases may implicate either legislative or administrative action by the United States, or both. The report begins with an overview of WTO dispute settlement procedures, focusing on the compliance phase of the process, followed by a discussion of U.S. laws relating to WTO dispute resolution proceedings. The report then lists pending WTO disputes in the compliance phase categorized by subject matter: trade remedies, subsidies, trade in services, and trade-related intellectual property rights. Disputes are listed in chronological order based on the date on which the panel and any Appellate Body in the case were adopted by the WTO Dispute Settlement Body. Each entry contains a discussion of major issues and U.S. compliance history. Longstanding cases also include a section titled “Recent Developments” discussing the latest activity in the dispute. WTO Dispute Settlement Procedures WTO disputes are conducted under the terms of the WTO Understanding on the Rules and Procedures Governing the Settlement of Disputes (Dispute Settlement Understanding or DSU).2 The DSU, which entered into force with the establishment of the World Trade Organization on January 1, 1995, carries forward and expands upon dispute settlement practices developed under the General Agreement on Tariffs and Trade (GATT). The DSU is administered by the WTO Dispute Settlement Body (DSB), which is composed of all WTO Members. Where individual WTO agreements contain special or additional dispute settlement rules that differ from those in the DSU (e.g., expedited timelines for subsidy disputes in the Agreement on Subsidies and Countervailing Measures), the former will prevail. A list of these agreements and rules is contained in Appendix 2 of the DSU. The Office of the United States Trade Representative (USTR) represents the United States in the WTO and in WTO disputes. 1 The case histories in this report are primarily based on WTO documents, available at http://www.wto.org, or the WTO dispute settlement website indicated below. This report does not address cases in which the United States has implemented adverse reports to the satisfaction of the complaining party and the dispute has been fully settled, nor does it discuss the compliance history of other WTO Members that have been found to be in violation of their WTO obligations. For further information on WTO disputes, see Office of the U.S. Trade Representative, “WTO Dispute Settlement,” at http://www.ustr.gov/trade-topics/enforcement/dispute-settlement-proceedings/wto-dispute-settlement; the annual Trade Policy Agenda and Annual Report of the President of the United States on the Trade Agreements Program, at http://www.ustr.gov/sites/default/files/uploads/reports/2009/asset_upload_file86_15410.pdf; and WTO, Update of WTO Dispute Settlement Cases (updated regularly), at http://www.wto.org/english/tratop_e/dispu_e/ dispu_e.htm. 2 For further information on WTO dispute settlement procedures, see “Dispute settlement,” at http://www.wto.org/ english/tratop_e/dispu_e/dispu_e.htm, and CRS Report RS20088, Dispute Settlement in the World Trade Organization (WTO): An Overview, by (name redacted). Congressional Research Service 1 WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases WTO dispute settlement may be characterized as a three-stage process: (1) consultations; (2) panel and, if requested, Appellate Body (AB) proceedings; and (3) implementation. Within this framework, the DSB establishes panels; adopts panel and appellate reports; authorizes countermeasures when requested; and monitors the implementation of dispute settlement results. The establishment of panels, adoption of panel and AB reports, and authorization of countermeasures are decisions that are subject to a “reverse consensus” rule under which the DSB agrees to these actions unless all DSB Members object. In effect, these decisions are virtually automatic. Article 23 of the DSU requires a complaining Member to act in accordance with the DSU when it initiates a dispute, including making any internal determination that another Member has violated a WTO obligation consistent with the WTO decision in the case and following DSU procedures to set a deadline by which the defending Member must comply, determining the level of sanctions for non-compliance, and obtaining authorization from the DSB to impose any such sanctions. After the DSB adopts an adverse panel and any Appellate Body report, the defending Member must inform the DSB of its compliance plans. If it is impracticable for the Member to comply immediately, the Member will be allowed a “reasonable period of time” to do so. If the Member proposes a compliance period and it is not approved by the DSB, the disputing parties may negotiate a deadline themselves. If this fails, the length of the period will be arbitrated. A WTO Member found to have violated WTO obligations is expected to comply by withdrawing the offending measure by the end of the established compliance period, with compensation and temporary retaliation available to the prevailing party as alternative remedies. Full compliance is the preferred outcome, however, so as to ensure that negotiated rights and obligations are preserved and maintained. Article 22 of the DSU provides that if the prevailing Member in a dispute believes that the defending Member has not implemented the WTO rulings and recommendations by the end of the established compliance period, it may request the other Member to negotiate a compensation agreement or it may ask the DSB for authorization to suspend WTO concessions, usually to impose higher tariffs on selected imports from the defending country. The Member may choose the latter option without first requesting compensation. In some cases, the prevailing party may agree to extend the original compliance deadline instead of immediately seeking a remedy. If a prevailing Member does choose to suspend concessions, it is expected to do so in the same sector in which the WTO violation was found, but if the Member finds that this is not “practicable or effective,” it may seek to suspend concessions in other sectors in the same agreement. If, however, the Member finds that this alternative would also be impracticable or ineffective and that “the circumstances are serious enough,” it may seek to suspend obligations under another WTO agreement, referred to as “cross-retaliation.” A prevailing Member may seek to crossretaliate if, for example, in a dispute involving trade in goods, the Member does not import a sufficient amount of goods from the defending Member to remedy the trade injury involved or the Member believes that placing tariff surcharges on goods imported from the defending Member would be unreasonably costly for the prevailing Member’s economy. Under the DSU, the DSB is to authorize the retaliation request under the reverse consensus rule within 30 days after the compliance period expires. If the defending Member objects to the request, however, the proposed retaliation will be arbitrated and the 30-day deadline for approving the retaliation request effectively extended. The objection may relate to the level of nullification or impairment of benefits involved or whether DSU cross-retaliation rules have been followed. The arbitration, which may be carried out by the original panel if members are Congressional Research Service 2 WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases available, or by an arbitrator appointed by the WTO Director General, is ordinarily to be completed within 60 days after the compliance period expires. The DSB then meets to authorize the retaliation request, subject to any modification by the arbitrator. In addition, Article 21.5 of the DSU provides for further dispute settlement proceedings in the event the disputing parties disagree as to whether the defending Member has implemented the WTO rulings and recommendations in a particular case. Once a compliance panel is convened, it is expected to issue its report within 90 days; the report may then be appealed. In practice, compliance panels may require a considerably longer period of time to complete their work where a complicated case is involved. For example, in the European Union’s challenge to the U.S. use of “zeroing” in antidumping proceedings (DS294), the EU made its compliance panel request in September 2007, panelists were appointed in November 2007, and the panel report was not publicly circulated until December 2008. Because the DSU fails to incorporate Article 21.5 proceedings into the 30-day period for approving countermeasures and the time frame for any subsequent arbitration, a procedural problem, referred to as “sequencing,” has resulted. Disputing Members have often filled the gap by entering into ad hoc bilateral procedural agreements setting out timelines for any requested compliance-related proceedings and reserving Members’ rights in the unfolding of these proceedings.3 Such agreements have been entered into in many of the cases discussed below. The DSU provides that any suspension of concessions or other obligations is temporary and may only be applied by the prevailing Member until the WTO-inconsistent measure is removed, the defending Member provides a solution to any trade injury at issue, or a mutually satisfactory resolution of the dispute is reached.4 Moreover, if a prevailing Member is ultimately authorized to impose countermeasures, the Member is not required to implement them. As evident from some of the cases discussed in this report, WTO Members may manage disputes in a variety of ways at the compliance phase, short of imposing sanctions. 3 See Sylvia A. Rhodes, The Article 21.5/22 Problem: Clarification Through Bilateral Agreements?, 3 J. INT’L ECON. L. 553 (2000). 4 The DSU does not expressly set out a procedure for obtaining the removal of countermeasures, though Members may obtain a ruling on whether continued imposition is warranted either through a compliance panel or a new dispute settlement proceeding. The issue of removing such measures arose in connection with the continued levying of increased tariffs on imports from the European Union (EC) by the United States and Canada in response to the EC’s failure to comply with WTO decisions faulting European Union import restrictions on beef produced with growth hormones. The EC initiated WTO dispute settlement proceedings against the United States and Canada in 2004. The Appellate Body, reversing the panel on various points, recommended that the disputing parties request an Article 21.5 compliance panel proceeding in order to resolve their differences as to whether the EC is in compliance in the underlying beef hormone cases (DS26/DS48) and whether the U.S. and Canadian countermeasures thus have a legal basis. Appellate Body Report, United States—Continued Suspension of Obligations in the EC-Hormones Dispute, WT/DS320/AB/R (October 16, 2008); Appellate Body Report, Canada—Continued Suspension of Obligations in the EC-Hormones Dispute, WT/DS321/AB/R (October 16, 2008). The EC requested consultations under Article 21.5 in December 2008, but the proceeding involving the United States has since been suspended as part of a bilateral agreement intended to resolve the beef hormone dispute. Press Release, Office of the USTR, USTR Announces Agreement with European Union in Beef Hormones Dispute (updated June 22, 2009), at http://www.ustr.gov/about-us/ press-office/press-releases/2009/may/ustr-announces-agreement-european-union-beef-hormones-; European Commission, Memorandum on Beef Hormones dispute signed with the United States (May 14, 2009), at http://ec.europa.eu/trade/issues/respectrules/dispute/memo140509_en.htm. Congressional Research Service 3 WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases Uruguay Round Agreements Act (URAA): Statutory Requirements for Implementing WTO Decisions The legal effect of Uruguay Round agreements and WTO dispute settlement results in the United States is comprehensively dealt with in the Uruguay Round Agreements Act (URAA), P.L. 103465, which addresses the relationship of WTO agreements to federal and state law and prohibits private remedies based on alleged violations of WTO agreements.5 The statute also requires the United States Trade Representative (USTR) to keep Congress informed of disputes challenging U.S. laws once a dispute panel is established, any U.S. appeal is filed, and a panel or Appellate Body report is circulated to WTO Members.6 In addition, the URAA places requirements on regulatory action taken to implement WTO decisions and contains provisions specific to the implementation of panel and appellate reports that fault U.S. actions in trade remedy proceedings. Section 102: Domestic Legal Effect of WTO Decisions Section 102 of the URAA and its legislative history establish that domestic law supersedes any inconsistent provisions of the Uruguay Round agreements and that congressional or administrative action, as the case may be, is required to implement adverse decisions in WTO dispute settlement proceedings. Federal Law Section 102(a)(1), 19 U.S.C. Section 3512(a)(1), provides that “[n]o provision of any of the Uruguay Round Agreements, nor the application of any such provision to any person or circumstance, that is inconsistent with any law of the United States shall have effect.” The URAA further provides, at Section 102(a)(2), 19 U.S.C. Section 3512(a)(2), that nothing in the statute “shall be construed ... to amend or modify any law of the United States ... or ... to limit any authority conferred under any law of the United States ... unless specifically provided for in this act.” As explained in Statement of Administrative Action (SAA) accompanying the Uruguay Round agreements when they were submitted to Congress in 1994, “[i]f there is a conflict between U.S. law and any of the Uruguay Round agreements, section 102(a) of the implementing bill makes clear that U.S. law will take precedence.”7 Moreover, Section 102 is further intended to clarify that all changes to U.S. law “known to be necessary or appropriate” to implement the WTO 5 For background discussions regarding the effect of treaties and international agreements in domestic law, see CRS Report RL32528, International Law and Agreements: Their Effect Upon U.S. Law, by (name redacted); Ronald A. Brand, Direct Effect of International Economic Law in the United States and the European Union, 17 NW. J. INT’L L. & BUS. 556 (1996-97); and John H. Jackson, Status of Treaties in Domestic Legal Systems: A Policy Analysis, 86 AM. J. INT’L L. 310 (1992). 6 Uruguay Round Agreements Act (URAA), P.L. 103-465, §123(d)-(f), 19 U.S.C. §3533(d)-(f). 7 Uruguay Round Agreements, Statement of Administrative Action, H.Doc. 103-316(I) at 659 (1994)[hereinafter cited as Uruguay Round SAA]. The SAA, which was expressly approved in the URAA, is “regarded as an authoritative expression by the United States concerning the interpretation and application of the Uruguay Round Agreements and ... [the URAA] in any judicial proceeding in which a question arises concerning such interpretation or application.” URAA, §102(d), 19 U.S.C. §3512(d). Congressional Research Service 4 WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases agreements are incorporated in the URAA and that any unforeseen conflicts between U.S. law and the WTO agreements “can be enacted in subsequent legislation”8 Congress has traditionally treated potential conflicts with prior GATT agreements and free trade agreements in this way, treatment that it also deems to be “consistent with the Congressional view that necessary changes in Federal statutes should be specifically enacted, not preempted by international agreements.”9 This approach carries over into the implementation of WTO dispute settlement results, a situation explained as follows in URAA legislative history: Since the Uruguay Round agreements as approved by the Congress, or any subsequent amendments to those agreements, are non-self-executing, any dispute settlement findings that a U.S. statute is inconsistent with an agreement also cannot be implemented except by legislation approved by the Congress unless consistent implementation is permissible under the terms of the statute.10 State Law Where a state law is at issue in a WTO dispute, the URAA provides for federal-state cooperation in the proceeding and limits any domestic legal challenges to the law to the United States.11 The act’s general preclusion of private remedies (discussed below) further centralizes the response to adverse WTO decisions involving state law in the federal government.12 Section 102(b) provides as follows: No State law, or the application of such a State law, may be declared invalid as to any person or circumstance on the ground that the provision or its application is inconsistent with any of the Uruguay Round Agreements, except in an action brought by the United States for the purposes of declaring such law or application invalid.13 8 H.Rept. 103-826(I), at 25; see also S.Rept. 103-412, at 13. H.Rept. 103-826(I), at 25; see also S.Rept. 103-412, at 13. 10 H.Rept. 103-826(I), at 25; see also S.Rept. 103-412, at 13, and the Uruguay Round SAA, supra note 7, at 1032-33. The latter states as follows: “Reports issued by panels or the Appellate Body under the DSU have no binding effect under the law of the United States and do not represent an expression of U.S. foreign or trade policy. They are no different in this respect than those issued by GATT panels since 1947. If a report recommends that the United States change federal law to bring it into conformity with a Uruguay Round agreement, it is for the Congress to decide whether any such change will be made.” 11 A challenge by Brazil to Florida’s equalizing excise tax on processed orange and grapefruit products (WT/DS250) was resolved in 2004 without panelists having been appointed after Florida amended its statute. Notification of Mutually Agreed Solution, United States—Equalizing Excise Tax Imposed by Florida on Processed Orange and Grapefruit Products, WT/DS250/3 (June 2, 2004); U.S. Brazil Settle Long-standing Dispute Over Florida Tax to Promote Citrus Products, 21 Int’l Trade Rep. (Bloomberg BNA) 945 (2004). In the challenge by Antigua and Barbuda to both federal and state laws affecting the cross-border supply of gambling and betting services (DS285), the United States prevailed on the issue of whether the state measures infringed market access obligations under the General Agreement on Trade in Services (GATS). The WTO Appellate Body found that the panel had erred in considering whether the eight laws at issue violated the Agreement because the complainant had not presented sufficient evidence and legal arguments to establish a prima facie case. United States—Measures Affecting the Cross-Border Supply of Gambling and Betting Services, WT/DS285. See infra text accompanying notes 387-436 for further discussion of this case. 12 For further discussion, see Uruguay Round SAA, supra note 7, at 676. 13 URAA, §102(b)(2)(A), 19 U.S.C. §3512(b)(2)(A). The term “State law” is defined to include “any law of a political subdivision of a State, as well as any State law that regulates or taxes the business of insurance.” URAA, §102(b)(3), (continued...) 9 Congressional Research Service 5 WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases According to legislative history, the provision “makes clear that the Uruguay Round agreements do not automatically preempt State laws that do not conform to their provisions, even if a WTO dispute settlement panel or the Appellate Body were to determine that a particular State measure was inconsistent with one or more of the Uruguay Round agreements.”14 The statute also contains certain restrictions in any such legal action brought by the United States, including that the report of the WTO dispute settlement panel or the Appellate Body may not be considered binding or otherwise accorded deference.15 Any such suit by the United States is expected to be a rarity.16 Preclusion of Private Remedies Private remedies are prohibited under Section 102(c)(1) of the URAA, 19 U.S.C. Section 3512(c)(1), which provides that “[n]o person other than the United States ... shall have a cause of action or defense under any of the Uruguay Round Agreements or by virtue of congressional approval of such an agreements” or “may challenge, in any action brought under any provision of law, any action or inaction by any department, agency, or other instrumentality of the United States, any State, or any political subdivision of a State, on the ground that such action or inaction is inconsistent with such agreement.” Congress has additionally stated in Section 102(c)(2) of the URAA, 19 U.S.C. Section 3512(c)(2), that it intends, through the prohibition on private remedies: to occupy the field with respect to any cause of action or defense under or in connection with any of the Uruguay Round Agreements, including by precluding any person other than the United States from bringing any action against any State or political subdivision thereof or raising any defense to the application of State law under or in connection with any of the Uruguay Round Agreements— (A) on the basis of a judgment obtained by the United States in an action brought under any such agreement; or (B) on any other basis. (...continued) 19 U.S.C. §3512(b)(3). The term is intended to encompass “any provision of a state constitution, regulation, practice or other state measure.” Uruguay Round SAA, supra note 7, at 674. 14 S.Rept. 103-412, at 15; see also H.Rept. 103-826(I), at 25, and Uruguay Round SAA, supra note 7, at 670. 15 URAA, §102(b)(2)(B), 19 U.S.C. §3512(b)(2)(B). In addition, the United States will have the burden of proving that the State law or its application is inconsistent with the WTO agreement in question; any State whose interests may be impaired or impeded by the suit will have the unconditional right to intervene as a party, and the United States will be entitled to amend its complaint to include a claim or cross-claim concerning the law of a State that does intervene; and any State law that is declared invalid will not be considered to have been invalid in its application during any period before the court’s judgment becomes final and all timely appeals are exhausted. The statute also requires the United States Trade Representative to notify Congress before bringing any such suit. URAA, §102(b)(2)(C), 19 U.S.C. §3512(b)(2)(C). 16 Uruguay Round SAA, supra note 7, at 674; H.Rept. 103-826(I), at 26; S.Rept. 103-412, at 15. The SAA states, inter alia, that the Attorney General “will be particularly careful in considering recourse to this authority where the state measure involved is aimed at the protection of human, animal, or plant health or of the environment or the state measure is a state tax of a type that has been held to be consistent with the requirements of the U.S. Constitution. In such a case, the Attorney General would entertain use of this statutory authority only if consultations between the President and the Governor of the State concerned failed to yield an appropriate alternative.” Uruguay Round SAA, supra note 7, at 674. Congressional Research Service 6 WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases The House Ways and Means Committee report on the URAA discusses the rationale and implications of Section 102(c) as follows: For example, a private party cannot bring an action to require, preclude, or modify government exercise of discretionary or general “public interest” authorities under other provisions of law. These prohibitions are based on the premise that it is the responsibility of the Federal Government, and not private citizens, to ensure that Federal or State laws are consistent with U.S. obligations under international agreements such as the Uruguay Round agreements.17 The SAA notes, however, that Section 102(c) “does not preclude any agency of government from considering, or entertaining argument on, whether its action or proposed action is consistent with the Uruguay Round agreements, although any change in agency action would have to be authorized by domestic law.”18 Domestic Implementation of WTO Decisions Involving Administrative Action In addition to the URAA provisions that limit the direct effect of WTO rules and decisions in U.S. law, the URAA also places requirements on agencies in their implementation of WTO panel and Appellate Body reports. These provisions apply to regulatory action in general and to new agency determinations in response to WTO decisions involving trade remedy proceedings. Section 123: Regulatory Action Generally Section 123(g) of the URAA, 19 U.S.C. Section 3533(g), provides that in any WTO case in which a departmental or agency regulation or practice has been found to be inconsistent with a WTO agreement, the regulation or practice may not be rescinded or modified in implementation of the decision “unless and until” the United States Trade Representative and relevant agencies meet congressional consultation and private sector advice requirements, the proposal has been published in the Federal Register with a request for public comment, and the final rule or other modification has been published in the Federal Register.19 Section 123(g) does not apply to any regulation or practice of the U.S. International Trade Commission. The statute requires the USTR to consult with “the appropriate congressional committees” regarding the proposed contents of the final rule or other modification. These committees include the House Ways and Means Committee, the Senate Finance Committee, and any other 17 H.Rept. 103-826(I), at 26. Uruguay Round SAA, supra note 7, at 676. 19 The provision first came into play in 1996 when the United States took regulatory action to comply with the adverse WTO decision in United States—Standards for Reformulated and Conventional Gasoline, WT/DS2, WT/DS4. See World Trade Organization (WTO) Decision on Gasoline Rule (Reformulated and Conventional Gasoline), 61 Federal Register 33703 (1996). The U.S. Court of Appeals for the District of Columbia Circuit upheld the final rule issued by EPA to resolve the dispute, finding, inter alia, that the agency was not statutorily precluded from considering factors other than air quality in issuing rules under the antidumping provision of the Clean Air Act and could thus consider the effect of the proposed rule on U.S. treaty obligations. George E. Warren Corp. v. U.S. Environmental Protection Agency, 159 F.3d 616 (D.C.Cir. 1998). 18 Congressional Research Service 7 WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases congressional committees that have jurisdiction over matter at hand.20 In addition, the final rule or other modification may not take effect until 60 days after the USTR has begun committee consultations, unless the President determines that an earlier effective date is in the national interest. The House Ways and Means Committee and the Senate Finance Committee may vote to indicate the disagreement of the committee with the proposed action during the 60-day period. Any such vote is not binding on the agency or department involved.21 Section 129: Agency Determinations in Trade Remedy Proceedings Section 129 of the URAA, 19 U.S.C. Section 3538, sets forth authorities and procedures under which the Department of Commerce (DOC) and the U.S. International Trade Commission (ITC) may issue new subsidy, dumping and injury determinations, referred to as Section 129 Determinations, in implementation of adverse WTO decisions involving U.S. safeguards, antidumping, and countervailing duty proceedings. Section 129 does not authorize the Commerce Department or the ITC to issue new determinations on their own motion, but instead grants the USTR the discretion to direct the agency to do so in a given case. In antidumping and countervailing duty investigations, which are carried out under authorities in Title VII of the Tariff Act of 1930, 19 U.S.C. Sections 1671-1677n, the Commerce Department determines the existence and level of dumping or subsidization, as the case may be, and the ITC determines whether the dumped or subsidized imports cause material injury, or a threat of material injury, to a domestic industry. Under U.S. safeguards law, set forth in Title II of the Trade Act of 1974, 19 U.S.C. Sections 2251-2254, the ITC conducts investigations to determine if increased imports, whether or not they are fairly traded, are a substantial cause of serious injury to a domestic industry. If the ITC makes an affirmative injury determination, it recommends remedial measures (e.g., a tariff surcharge or import quota) to the President, who ultimately determines whether or not to take action. Implemented Section 129 Determinations in antidumping and countervailing duty cases are reviewable in the U.S. Court of International Trade and by binational panels established under Chapter 19 of the North American Free Trade Agreement (NAFTA).22 Chapter 19 panels are 20 URAA, §121(3), 19 U.S.C. §3531(3). Two 110th Congress bills would have placed restrictions on the use of Section 123 authorities. S. 364 (Rockefeller) would have amended Section 123 to provide that any regulatory modification or final rule proposed under the Section could only enter into force if approved by joint resolution enacted into public law. The bill would also have rescinded certain Section 123 regulatory modifications that had already taken effect. S. 1919 (Baucus) would have established a WTO Dispute Settlement Review Commission to evaluate WTO decisions under statutory criteria and prohibited a domestic regulatory modification under Section 123 from taking effect unless and until Congress received the Commission’s report on the WTO decision involved. No action was taken on either of these bills. See also infra note 133. 22 URAA, §129(e), adding Tariff Act of 1930, §516A(a)(2)(B)(vii), 19 U.S.C. §1516a(a)(2)(B)(vii)), and amending Tariff Act of 1930, §516A(g)(8)(A)(i), 19 U.S.C. §1516a(g)(8)(A)(i). The Uruguay Round SAA states the following regarding the legal implications of possible parallel judicial proceedings regarding the same agency determinations: Since implemented determinations under section 129 may be appealed, it is possible that Commerce or the ITC maybe in the position of simultaneously defending determinations in which the agency reached different conclusions. In such situations, the Administration expects that courts and binational panels will be sensitive to the fact that under the applicable standard of review, as set forth in statute and case law, multiple permissible interpretations of the law and the facts may be legally permissible in any particular case, and the issuance of a different determination under (continued...) 21 Congressional Research Service 8 WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases available to review final agency determinations in antidumping and countervailing duty investigations involving NAFTA countries in lieu of judicial review in the country in which the determination is made. U.S. International Trade Commission If an interim WTO panel report or a WTO Appellate Body report concludes that an action by the ITC in connection with a trade remedy proceeding is inconsistent with U.S. obligations under the WTO Antidumping Agreement, the Agreement on Subsidies and Countervailing Measures, or the Agreement on Safeguards, the USTR may request the ITC to issue an advisory report on whether U.S. antidumping, countervailing duty, or safeguards law, as appropriate, allows the ITC to take steps with respect to the proceeding at issue that would render its action “not inconsistent with” the panel or AB findings.23 The ITC is to report to the USTR within 30 calendar days of the USTR’s request where an interim report is involved, and within 21 calendar days in case of an AB report.24 These deadlines are aimed at ensuring that the USTR will receive the requested advice in time to decide whether to appeal a panel’s interim report or to implement an adverse report, and to estimate the period of time that may be needed to implementing the WTO decision.25 If a majority of the ITC Commissioners have found that action may be taken under existing law, the USTR must consult with the House Ways and Means Committee and the Senate Finance Committee and may request the ITC in writing to issue a new determination in the underlying proceeding that would render the ITC action “not inconsistent with” the WTO findings.26 The new determination must be issued within 120 days of the USTR’s request.27 The 120-day limit is intended to allow the USTR to propose a reasonable period of time for implementation to the WTO Dispute Settlement Body once the DSB adopts a WTO panel and any Appellate Body report in a case.28 In the event the ITC issues a new negative injury or threat of injury determination, the imports subject to antidumping or countervailing duty order at issue, or a least a portion of them, would no longer be considered to have caused a harmful effect, even though they may in fact be dumped or subsidized. The Tariff Act requires that the imposition of antidumping or countervailing duties on dumped or subsidized imports be supported by an affirmative injury determination and thus, absent such a determination, the antidumping or countervailing duty order would need to be revoked in whole or in part. Section 129(a)(6) authorizes the USTR to direct the Commerce (...continued) section 129 does not signify that the initial determination was unlawful. Uruguay Round SAA, supra note 7, at 1027. 23 URAA, §129(a)(1), 19 U.S.C. §3538(a)(1). 24 URAA, §129(a)(2), 19 U.S.C. §3538(a)(2). 25 Uruguay Round SAA, supra note 7, at 1023. 26 URAA, §129(a)(3),(4), 19 U.S.C. §3538(a)(3),(4). 27 ITC authority to issue a new determination is granted “notwithstanding any provision of Tariff Act of 1930 ... or title II of the Trade Act of 1974.” The Uruguay Round SAA explains that “[m]any of the ITC’s proceedings are timelimited by statute, and the ITC cannot revisit its actions in those proceedings in the absence of the authority provided by subsection (a)(4) or a remand.” Uruguay Round SAA, supra note 7, at 1024. 28 Id. Congressional Research Service 9 WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases Department to take this action.29 The USTR must consult with the House Ways and Means and Senate Finance Committees before the ITC’s new determination is implemented.30 Where a safeguard proceeding is involved, Section 129 authorizes the President, after receiving a new ITC determination, to reduce, modify, or terminate the safeguard notwithstanding other statutory requirements governing changes in existing safeguard measures.31 The President must consult with the House Ways and Means Committee and Senate Finance Committee before acting under this authority. The USTR is required to publish a notice of the implementation of any ITC determination in the Federal Register.32 Department of Commerce Section 129 also sets out a procedure for new Department of Commerce determinations in antidumping and countervailing duty proceedings, though without the requirement for an initial agency advisory report regarding the scope of the agency’s statutory discretion. Instead, promptly after the issuance of a WTO panel or Appellate Body report finding that a DOC determination in an antidumping or countervailing duty proceeds is inconsistent with U.S. obligations under the WTO Antidumping Agreement or the Agreement on Subsidies and Countervailing Measures, the USTR is to consult with the Commerce Department and the House Ways and Means and Senate Finance Committees, and may request the department, in writing, to issue a determination in connection with the underlying antidumping or countervailing duty proceeding that would render its action “not inconsistent with” the panel or appellate findings.33 The Commerce Department must issue its Section 129 Determination within 180 days of the request.34 A new determination may, for example, reduce the dumping margin or net subsidy and thus result in a reduction of existing duties. After consulting with DOC and the above-named congressional committees, USTR may direct DOC to implement its determination in whole or in part.35 Prospective Implementation of Section 129 Determinations Section 129(c)(1) of the URAA provides that Section 129 Determinations, whether issued by the ITC or the Commerce Department, apply prospectively, that is, the full or partial revocation of the antidumping or countervailing duty order or the implementation of the DOC determination, as the case may be, applies to unliquidated entries of the subject merchandise that are entered, or 29 URAA, §129(a)(6), 19 U.S.C. §3538(a)(6). URAA, §129(a)(5),(6), 19 U.S.C. §3538(a)(5),(6). 31 URAA, §129(a)(7), 19 U.S.C. §2254(b)(3). 32 URAA, §129(c)(2)(B), 19 U.S.C. §3538(c)(2)(B). 33 URAA, §129(b)(1),(2), 19 U.S.C. §3538(b)(1),(2). Senate legislative history indicates that USTR is expected to “consult closely with Commerce in order to ensure that it benefits from Commerce’s expertise with respect to both the panel or Appellate Body reports and the appropriate implementing action (if any), including the implications of any such action on the administration of the antidumping or countervailing duty law.” S.Rept. 103-412, at 27. The Senate Finance Committee has further stated that it “expects to be consulted closely by the Administration throughout this process, and to be informed and provided an explanation should USTR decide to implement an adverse panel or Appellate Body decision notwithstanding a contrary recommendation by Commerce.” Id. If USTR directs Commerce to implement the new determination, “Commerce may do so even if litigation is pending with respect to the initial agency determination.” H.Rept. 103-826(I), at 39. 34 URAA, §129(b)(2), 19 U.S.C. §3538(b)(2). 35 URAA, §129(b)(3),(4), 19 U.S.C. §3538(b)(3),(4). 30 Congressional Research Service 10 WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases withdrawn from warehouse for consumption, on or after the date on which the USTR directs the Commerce Department to revoke the order or implement the determination.36 Unliquidated entries are those for which the U.S. Customs and Border Protection (CBP) has not ascertained a final rate and amount of duty.37 Notices of the implementation of Section 129 Determinations must be published in the Federal Register. The Uruguay Round SAA explains the operation of Section 129(c)(1) as follows: Consistent with the principle that GATT panel recommendations apply only prospectively, subsection 129(c)(1) provides that where determinations by the ITC or Commerce are implemented under subsections (a) or (b), such determinations have prospective effect only. That is, they apply to unliquidated entries of merchandise entered, or withdrawn from warehouse, for consumption on or after the date on which the Trade Representative directs implementation. Thus, relief available under subsection 129(c)(1) is distinguishable from relief available in an action brought before a court or a NAFTA binational panel, where, depending on the circumstances of the case, retroactive relief may be available. Under 129(c)(1), if implementation of a WTO report should result in the revocation of an antidumping or countervailing duty order, entries made prior to the date of Trade Representative’s direction would remain subject to potential duty liability.38 Canada unsuccessfully challenged Section 129(c)(1) in a WTO dispute settlement proceeding in 2001 on the ground that the provision violated the WTO Dispute Settlement Understanding and various WTO antidumping and countervailing duty obligations. Under the retrospective U.S. antidumping and countervailing duty system, DOC ordinarily makes a final assessment of the duties owed on dumped or subsidized goods in an administrative review conducted after the goods are imported. The review covers goods that enter the United States during a specified prior 12-month period. Until this final duty assessment is made for particular goods, importers must deposit estimated duties with CBP on entry.39 Canada argued that, where a DOC or ITC determination in an antidumping or countervailing duty proceeding is found to violate a WTO obligation, Section 129(c)(1) effectively prohibits the United States from fully complying with the WTO decision by preventing it from refunding estimated duties deposited with CBP before the date that the Section 129 Determination is implemented. In other words, because the duty deposits supported by the challenged determination would no longer have a WTO-consistent basis, Canada argued that they must be returned.40 In response to Canada’s claim, the United States maintained that Section 129(c)(1) addresses only the treatment of imports entered after the implementation date and does not govern the treatment of prior entries for which final duties have not yet been calculated. The United States further argued that the statute does not mandate any particular treatment of these prior unliquidated entries and that the United States has other legal options for dealing with them, including 36 URAA, §129(c)(1), 19 U.S.C. §3538(c)(1). This provision has been held to be unambiguous in its prospective effect. E.g., Corus Staal BV, v. United States, 593 F.Supp.2d 1373, 1382-83 (Ct. Int’l Trade 2008). 37 U.S. Customs and Border Protection, Importing into the United States; A Guide for Commercial Importers 105-106 (2002 ed.), at http://www.cbp.gov/nafta/cgov/pdf/iius.pdf. 38 Uruguay Round SAA, supra note 7, at 1026. See also H.Rept. 103-826(I), at 39; S.Rept. 103-412, at 27. 39 Trade Act of 1974, §751(a), 19 U.S.C. §1675(a), 19 C.F.R, §351.212(a), 351.213. The rate determined in the administrative review is also the rate at which estimated duties on imports entered during the succeeding year are assessed and will apply until any subsequent administrative review produces a new rate. 40 Request for the Establishment of a Panel by Canada, United States—Section 129(c)(1) of the Uruguay Round Agreements Act, WT/DS221/4 (July 13, 2001). Congressional Research Service 11 WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases establishing a new dumping or subsidy margin by using a WTO-consistent methodology in an administrative review of the entries or, in the event the duty order or orders were revoked as a result of the WTO proceeding, revising the duty rate in response to a domestic court decision involving the earlier entries.41 In a report issued in July 2002, the WTO panel concluded that Canada failed to establish that the statute either required WTO-inconsistent action on the part of the United States or precluded the United States from taking action in accordance with its WTO obligations.42 Canada did not appeal, and the panel report was adopted by the DSB in August 2002. Judicial Responses Although private rights of action based on Uruguay Round agreements are precluded under Section 102(c) of the Uruguay Round Agreements Act, WTO panel findings have at times been brought to the attention of federal courts, most often in challenges to agency determinations in antidumping and countervailing duty proceedings initiated under judicial review provisions contained in Section 516A of the Tariff Act of 1930, 19 U.S.C. Section 1516a. Section 129 determinations issued by the ITC and the Commerce Department to comply with WTO decisions are also reviewable under this statute. These cases are heard in the U.S. Court of International Trade (USCIT), which has exclusive jurisdiction over civil actions brought under Section 516A.43 The USCIT’s decisions may be appealed to the U.S. Court of Appeals for the Federal Circuit, whose decisions are reviewable by the U.S. Supreme Court. Federal courts must hold a final agency determination in an antidumping or countervailing duty proceeding or a Section 129 Determination unlawful if it is found to be “unsupported by substantial evidence on the record, or otherwise not in accordance with law.”44 To determine whether an agency legal interpretation applied in an agency determination is in accordance with law, the court employs the two-step analysis set out by the U.S. Supreme Court in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984).45 First, the court, using tools of statutory construction, determines whether Congress has clearly spoken to the issue at hand. Second, if the underlying statute is silent or ambiguous, the court decides whether the agency’s construction of the statute is permissible and will defer to an agency’s interpretation of a statute provided it is reasonable. It has also been argued that, in considering whether an agency construction is reasonable for purposes of the second prong of the Chevron test, the court should apply the canon of construction articulated by the Supreme Court in 1804 in Murray v. Schooner Charming Betsy, 6 U.S. (2 Cranch) 64, 118 (1804). This canon holds that where a statute does not 41 Second Written Submission of the United States, United States—Section 129(c)(1) of the Uruguay Round Agreements Act (WT/DS221), paras. 17-20 (March 8, 2002), at http://www.ustr.gov/webfm_send/688. 42 Panel Report, United States—Section 129(c)(1) of the Uruguay Round Agreements Act, WT/DS221/R (July 15, 2002). 43 28 U.S.C. §1581(c)(enacted in Customs Courts Act of 1980, P.L. 96-417, §201). 44 Tariff Act of 1930, §516A(b)(1)(B)(i), 19 U.S.C. §1516a(b)(1)(B)(i). 45 See United States v. Eurodif S.A., 129 S.Ct. 878, 886-87 (2009); United States v. Mead Corp., 533 U.S. 218, 226-27 (2001). See also Wheatland Tube Co. v. United States, 495 F.3d 1355 (Fed. Cir. 2007); Pesquera Mares Australes Ltda. v. United States, 266 F.3d 1372, 1379-82 (Fed. Cir. 2001); Koyo Seiko Co. v. United States, 36 F.3d 1565, 1570 (Fed. Cir. 1994), Corus Staal BV v. United States, 593 F.Supp.2d 1373, 1381-82 (Ct. Int’l Trade 2008); Windmill Int’l PTE v. United States, 193 F.Supp.2d 1303, 1305-306 (Ct. Int’l Trade 2002); Cultivos Miramonte S.A. v. United States, 980 F.Supp. 1268, 1271-72 (Ct. Int’l Trade 1997). Congressional Research Service 12 WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases require a specific interpretation, that is, it permits more than one interpretation, it should be interpreted consistently with U.S. international obligations.46 In the current context, the international obligation would be that contained in a WTO agreement, either by itself or as interpreted in one or more WTO decisions.47 Plaintiffs thus argue, on the basis of the Charming Betsy canon, that an agency interpretation that violates a WTO obligation is unreasonable under Chevron step two. Because the underlying cause of action in domestic legal challenges to the agency actions described above is based in the Tariff Act and not on a provision of a WTO agreement, courts have not viewed Section 102(c) of the URAA as preventing them from hearing a WTO-based argument in these challenges.48 When faced with such arguments, courts may deem WTO decisions to be “persuasive”49 or a source of useful reasoning, “if sound” to inform a court’s decision,50 but state that WTO decisions are not binding on the United States, U.S. agencies, or the judiciary.51 Most recently, courts have made clear that, given the statutory scheme established in the URAA for regulatory implementation of adverse WTO decisions, questions as to whether the United States should comply with an adverse WTO decision, and what the extent of U.S. compliance should be, are matters falling within the province of the executive branch.52 As a result, in ruling on whether an agency’s interpretation of a statute is reasonable, courts have 46 See, e.g, Corus Staal BV v. U.S. Dep’t of Commerce, 259 F.Supp.2d 1253, 1262 (Ct. Int’l Trade 2003) and generally Jane A. Restani & Ira Bloom, Interpreting International Trade Statutes: Is The Charming Betsy Sinking? 24 FORDHAM INT’L L. J. 1533 (2001). The Charming Betsy canon stems from the following Supreme Court language: “It has also been observed, that an act of congress ought never to be construed to violate the law of nations, if any other possible construction remains, and consequently, can never be construed to violate neutral rights, or to affect neutral commerce, further than is warranted by the law of nations as understood in this country.” Murray v. Schooner Charming Betsy, 6 U.S. (2 Cranch) 64, 118 (1804). 47 See, e.g, Corus Staal BV v. Dept. of Commerce, 395 F.3d 1343, 1347 (Fed. Cir. 2005), cert denied, 126 S.Ct. 1023 (2006); Timken Co. v. United States, 354 F.3d 1334, 1343-44 (Fed. Cir. 2004); Corus Staal BV v. United States, 593 F.Supp.2d 1373, 1383-84 (Ct. Int’l Trade 2008). 48 E.g., SNR Roulements v. United States, 341 F.Supp.2d 1334, 1341 (Ct. Int’l Trade 2004); Timken v. United States, 240 F.Supp. 2d 1228, 1238 (Ct. Int’l Trade 2002); Gov’t of Uzbekistan v. United States, 2001 WL 1012780, at *3 (Ct. Int’l Trade August 30, 2001). 49 Koyo Seiko Co. v. United States, 442 F.Supp.2d 1360, 1363 (Ct. Intl Trade 2006), citing, inter alia, NSK Ltd. v. United States, 358 F.Supp.2d 1276, 1288 (Ct. Int’l Trade 2005). Note also that in Cummings Inc. v. United States, the Court of Appeals for the Federal Circuit held that a classification opinion of the World Customs Organization “is not binding and is entitled, at most, to ‘respectful consideration’” by a U.S. court. 454 F.3d 1361, 1366 (Fed. Cir. 2006). 50 Hyundai Electronics Co. v. United States, 53 F.Supp.2d 1334, 1343 (Ct. Int’l Trade 1999); see also, e.g., Allegheny Ludlum Corp. v. United States, 367 F.3d 1339, 1348 (Fed. Cir. 2004). 51 Corus Staal BV v. Dept. of Commerce, 395 F.3d 1343, 1348-49 (Fed. Cir. 2005), cert denied, 126 S.Ct. 1023 (2006). See also Corus Staal BV v. United States, 502 F.3d 1370, 1375 (Fed. Cir. 2007), and Koyo Seiko Co. v. United States, 442 F.Supp.2d 1360, 1363 (Ct. Int’l Trade 2006). For discussions of federal cases addressing the domestic effect of WTO decisions, see, e.g., Robin Miller, Effect of World Trade Organization (WTO) Decisions Upon United States, 17 A.L.R.FED.2D 1 (2007) and Patrick C. Reed, Relationship of WTO Obligations to U.S. International Trade Law: Internationalist Vision Meets Domestic Reality, 38 GEO. J. INT’L L. 209 (2006). 52 Koyo Seiko Co. v. United States, 551 F.3d 1286, 1291 (Fed. Cir. 2008)(“The determination whether, when, and how to comply with the WTO’s decision on ‘zeroing’, involves delicate and subtle political judgments that are within the authority of the Executive and not the Judicial Branch.”); Corus Staal BV v. Dept. of Commerce, 395 F.3d 1343, 1347 (Fed. Cir. 2005), cert denied, 126 S.Ct. 1023 (2006); SKF USA v. United States, 611 F.Supp.2d 1351, 1359-60 (Ct. Intl Trade 2009); Corus Staal BV v. United States, 593 F.Supp.2d 1373, 1383-85 (Ct. Int’l Trade 2008). See also Koyo Seiko Co. v. United States, 442 F.Supp. 1360, 1363 (Ct. Int’l Trade 2006). In this case, the court refused to permit the plaintiff to amend its complaint to challenge the Commerce Department’s “zeroing” methodology on the ground that the WTO had since adopted an Appellate Body decision faulting the U.S. practice, stating that such an amendment would be futile “given that it is not controlling precedent and is immaterial to the court’s examination of the administrative decisions issued by the Department.” Congressional Research Service 13 WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases rejected Charming Betsy arguments and declined to base their decision making on a WTO decision adverse to the United States where the executive branch has not taken the necessary domestic action to comply.53 Pending WTO Disputes: An Overview A Thumbnail Sketch of Pending Cases There are currently 14 pending WTO cases in which the United States is the defending (or in the language of the WTO Dispute Settlement Understanding, “responding”) party. As noted earlier, this report treats a WTO case as pending if the United States has not fully implemented adopted WTO panel and Appellate Body reports or the United States has taken action, including the enactment of legislation, but the prevailing parties in the dispute continue to question whether the United States has fully complied. In one such case, complaining Members are continuing to impose WTO-authorized trade sanctions. Of the 14 cases, nine involve U.S. trade remedies, with the remainder involving subsidies, trade in services, or trade-related intellectual property rights. Six of the nine pending trade remedy cases focus on the U.S. practice of “zeroing” in antidumping proceedings, discussed in greater detail below. The remaining three are a longstanding dispute with Japan over a portion of U.S. antidumping law governing the calculation of dumping rates for producers and exporters who are not individually investigated by the Commerce Department in an antidumping proceeding; a dispute involving the Continued Dumping and Subsidy Offset Act, a statute that required the distribution of collected antidumping and countervailing duties to petitioners and interested parties in the underlying trade remedy proceedings; and the application of U.S. antidumping and countervailing duty law to products of China. The United States took administrative action to resolve its antidumping dispute with Japan, but has yet to amend a statutory provision at issue in the case. While Congress repealed the CDSOA as of October 1, 2005, and Congress placed additional restrictions on available funds in 2010, the 2005 repeal legislation mandates the distribution to U.S. firms of duties collected on goods entered through September 30, 2007. The European Union and Japan, two complainants who have objected to the post-repeal disbursements, are continuing to retaliate with tariff surcharges on U.S. goods, albeit in decreasing amounts. The United States and China have agreed to a deadline of April 25, 2012, in their countervailing duty dispute.54 53 E.g., Corus Staal BV v. Dept. of Commerce, 395 F.3d 1343, 1349 (Fed. Cir. 2005), cert denied, 126 S.Ct. 1023 (2006) and SNR Roulements v. United States, 341 F.Supp.2d 1334, 1343-44 (Ct. Int’l Trade 2004). See also Mary Jane Alves, Reflections on the Current State of Play: Have U.S. Courts Finally Decided to Stop Using International Agreements and Reports of International Trade Panels in Adjudicating International Trade Cases? 17 TUL. J. INT’L & COMP. L. 299 (2009). Jeffry L. Dunoff, Less Than Zero: The Effects of Giving Domestic Effect to WTO Law, 6 LOY. U. CHI. INT’L L. REV. 279 (2008); and John D. Greenwald, After Corus Staal—Is There Any Role, and Should There Be— for WTO Jurisprudence in the Review of U.S. Trade Measures by U.S. Courts? 39 GEO. J. INT’L L. 199 (2007). 54 In another recent case brought by China against the United States, a panel report adverse to the United States was issued in September 2010, but because the challenged measure had expired before the panel concluded its work, the United States was not required to take any action. The panel in the case, United States—Certain Measures Affecting Imports of Poultry from China, found that a U.S. appropriations restriction set to expire on September 30, 2009, which prohibited the use of appropriated funds “to establish or implement a rule allowing poultry products to be imported into the United States from the People’s Republic of China,” violated U.S. obligations under the WTO Agreement on (continued...) Congressional Research Service 14 WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases As the result of a compliance panel proceeding, the United States was found not to have fully complied in Brazil’s challenge to U.S. cotton subsidies and continues to face the possibility of retaliation by Brazil against U.S. goods and possibly U.S. services or intellectual property interests. While Congress repealed or made statutory changes to U.S. export credit guarantee programs that were found by the WTO to be prohibited subsidies and the executive branch made administrative changes to one of these programs under revised statutory authority, Congress also reauthorized payments under two domestic support programs that Brazil successfully challenged as actionable subsidies. Payments under these programs were found to cause serious prejudice to Brazil in the form of significant price suppression in the world upland cotton market. Brazil is currently authorized to impose sanctions to remedy both prohibited and actionable subsidy measures at issue in the case. The United States and Brazil have temporarily resolved their dispute, however, forestalling any application of sanctions by Brazil. Antigua’s challenge to federal laws governing the remote supply of gambling services, while only partially successful, left certain issues unresolved and resulted in the United States withdrawing its market access commitments for gambling services under the General Agreement on Trade in Services (GATS). Antigua sought authorized retaliation in the WTO dispute as well as compensation under the GATS for the negative effects of the U.S. withdrawal of GATS commitments. Outstanding issues still remain subject to discussion by the two parties. Two long-standing disputes involve intellectual property rights, each of these brought by the European Union (EU).55 The first involves Section 110(5)(B) of the Copyright Act, a statute affecting music licensing; the second, Section 211 of the Omnibus Appropriations Act of 1998, a statute addressing trademarks that involve property confiscated by Cuba. The United States made a payment of $3 million to the EU in partial resolution of the music licensing case, but has not yet fully complied. While bills have been introduced in past and current Congresses aimed at resolving the trademark dispute, none has been enacted. A Major Focus: Use of “Zeroing” in Antidumping Proceedings Twenty-one WTO complaints against the United States have challenged the use of “zeroing,” a practice used by the Department of Commerce (DOC) in antidumping proceedings to calculate dumping margins, that is, the amount by which the home market or “normal” value of a good exceeds its export price. Under this practice, DOC, in calculating dumping margins for an imported product, disregards non-dumped sales and thus, complainants argue, inflates the dumping margin or establishes a dumping margin where one might not otherwise exist. Of the 21 cases, six are currently in the compliance phase. Two of these cases were brought by the (...continued) Sanitary and Phytosanitary Measures, the GATT most-favored nation article, and the GATT prohibition on quantitative restrictions. Panel Report, United States—Certain Measures Affecting Imports of Poultry from China, WT/DS392/R (September 29, 2010). The challenged provision was Section 727 of the Omnibus Appropriations Act, 2009, P.L. 1118, Div. A, 123 Stat. 557. There was no appeal in the case and the panel report was adopted on October 25, 2010. 55 As of December 1, 2009, “European Union” replaced “European Communities” as the official name of this WTO Member. The terms European Communities and EC still appear in older WTO materials, including panel and Appellate Body reports, bilateral procedural agreements in particular disputes, and communications to the WTO Dispute Settlement Body. Except for references to any such older WTO documents, this report uses the name “European Union” or the acronym “EU” in the text of the report regardless of the time period being discussed. For further information, see European Union or Communities?, at http://www.wto.org/english/thewto_e/countries_e/ european_union_or_communities_popup.htm. Congressional Research Service 15 WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases European Union (DS294 and DS350), with one each brought by Japan (DS322), Mexico (DS344), Brazil (DS382), and Vietnam (DS404). The decisions in these cases have resulted in a broad WTO prohibition on the use of zeroing in U.S. antidumping proceedings, a multi-phased process consisting of original investigations, annual administrative reviews, five-year “sunset” reviews, and, in some cases, “changed circumstances” and “new shipper” reviews. In response to the first EU challenge (DS294), the Commerce Department in early 2007 discontinued the use of zeroing in the price comparison employed most frequently in original antidumping investigations and recalculated dumping margins in the investigations cited by the EU, issuing new determinations under Section 129 of the Uruguay Round Agreements Act (URAA). The United States has yet to fully comply with the WTO decisions in this case, the cases initiated by Japan (DS322) and Mexico (DS344), and the second EU challenge (DS350), to the extent that the WTO decisions involve the use of zeroing in other phases of U.S. antidumping proceedings. Both the EU (in DS294) and Japan requested authorization from the WTO to impose trade sanctions against the United States for non-compliance with the WTO decisions involved; the United States objected to the proposals and, thus, under WTO dispute settlement rules, the requests were automatically sent to arbitration. In 2010, the EU and Japan agreed to suspend the arbitrations on the understanding that the United States would address outstanding issues by early September 2011. In response, the Department of Commerce issued a Federal Register notice in December 2010 in which it proposed as a general rule to calculate dumping margins and duty assessment rates with an offset for non-dumped sales, that is, without zeroing, in administrative, expedited administrative, and new shipper reviews and, by implication, to eliminate zeroing in sunset reviews as well. The dates for resuming the sanctions arbitrations were extended several times, ultimately to February 6, 2012, for both the EC and Japan. Under separate memoranda signed by the United States with the EU and Japan on that date, the suspensions will continue while the United States finalizes the December 2010 zeroing proposal and issues Section 129 determinations using the new methodology in eight AD proceedings challenged by the EU, one proceeding challenged by Japan, and possibly a second proceeding challenged by Japan if U.S. courts do not uphold the revocation of the antidumping order at issue. The sanctions arbitrations are to be terminated once the Section 129 proceedings are completed, that is, on the date the USTR directs DOC to implement the new determinations. DOC is expected to issue the Section 129 determinations within four months of February 6, 2012, and the USTR is expected to direct DOC to implement these determinations within seven days after they are issued. Implementation will be on a prospective basis; that is, the new cash deposit rates resulting from the recalculated dumping margins will apply to unliquidated entries (i.e., entries for which final duties have not been assessed) that enter on or after the date that the determinations are implemented. In September 2010, Mexico requested a compliance panel in DS344, alleging the failure of the United States to comply with the WTO decision as it involves antidumping administrative reviews in general and reviews of the original antidumping order challenged in the case. The panel has not yet publicly circulated its report. The United States was expected to comply by March 17, 2012, in Brazil’s zeroing challenge (DS382), but it is unclear if recent actions taken by the United States will resolve the dispute. A deadline of July 2, 2012, is set in the dispute with Vietnam (DS404). Congressional Research Service 16 WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases New complaints involving zeroing were filed in 2011 by Korea (DS420), China (DS422), and the EU (DS424), and by Vietnam in February 2012 (DS429).56 A panel was established in Korea’s challenge on February 22, 2012, following the entry into a bilateral procedural agreement by Korea and the United States; among other things, the agreement aims at expediting the panel proceeding and excludes from the panel’s consideration U.S. compliance efforts in other WTO zeroing cases that may address issues also raised in Korea’s panel request.57 A panel was established in China’s challenge in October 2011 after the United States and China entered into a bilateral procedural agreement under which the parties agreed to expedite the panel process, China pledged to provide the necessary evidence and arguments to support its allegations, and the United States agreed not to contest China’s claim that the measures identified in the agreed-upon panel request are inconsistent with the relevant section of the WTO Antidumping Agreement, an approach the United States has taken in recent cases in which the use of zeroing in initial investigations was challenged.58 The panel was appointed on December 21, 2011.59 The complaint by the EU remains in consultations,60 as does the complaint by Vietnam, which involves a variety of antidumping issues.61 Finally, 11 other WTO complaints have cited the U.S. use of zeroing; some of these disputes were resolved through the panel process, while others remain in consultations or have been otherwise settled.62 To date, more than 25 WTO panel and Appellate Body reports have been rendered on this issue. 56 Request for Consultations by the Republic of Korea, United States—Anti-Dumping Measures on Corrosion-Resistant Carbon Steel Flat Products from Korea, WT/DS420/1 (February 3, 2011); Request for Consultations by China, United States—Anti-Dumping Measures on Certain Frozen Warmwater Shrimp from China, WT/DS422/1 (March 2, 2011)(caption since revised); Request for Consultations by the European Union, United States—Anti-Dumping Measures on Imports of Stainless Steel Sheet and Strip in Coils from Italy, WT/DS424/1 (April 6, 2011); Request for Consultations by Viet Nam, United States—Anti-Dumping Measures on Certain Shrimp from Viet Nam, WT/DS429/1 (February 27, 2012). 57 WTO News Item, Panel set up in steel case, reports adopted on raw materials, footwear and plastic (February 22, 2012), at http://www.wto.org/english/news_e/news12_e/dsb_14feb12_e.htm; Agreement on Procedures between Korea and the United States, United States—Anti-Dumping Measures on Corrosion-Resistant Carbon Steel Flat Products from Korea, WT/DS420/6 (February 15, 2012). 58 Request for the Establishment of a Panel by China, United States—Anti-Dumping Measures on Certain Shrimp and Diamond Sawblades from China, WT/DS422/3 (October 14, 2011); Agreement on Procedures between China and the United States, United States—Anti-Dumping Measures on Certain Shrimp and Diamond Sawblades from China, WT/DS422/4 (October 14, 2011). Regarding past U.S. practice not to contest certain zeroing complaints, see infra notes 62-63 and accompanying text. 59 Note by the Secretariat, Constitution of the Panel Established at the Request of China, United States—Anti-Dumping Measures on Certain Shrimp and Diamond Sawblades from China, WT/DS422/5 (January 6, 2012). 60 The antidumping order in the EU’s challenge has since been revoked, 76 Federal Register 49450 (August 10, 2011), an action that the EU has stated “could ... resolve” the dispute. Press release, European Commission, DirectorateGeneral for Trade, EU welcomes US decision to lift duties on stainless steel sheet and strip (August 10, 2011), at http://trade.ec.europa.eu/doclib/press/index.cfm?id=731. 61 See the USTR’s notice and request for comments regarding this case, at WTO Dispute Settlement Proceeding Regarding United Stares; Anti-Dumping Measures on Certain Shrimp from Viet Nam, 77 Federal Register 19745 (April 2, 2012). 62 The 11 cases, in reverse chronological order by DS number, are as follows: United States—Use of Zeroing in Anti-Dumping Measures Involving Products from Korea, WT/DS 402 (adverse panel report adopted February 24, 2011; dispute resolved with implementation in October and November 2011 of three Section 129 Determinations in which dumping margins were recalculated without use of zeroing; as a result two challenged AD orders were revoked in full and one in part); United States—Antidumping Measures on Polyethylene Retail Carrier Bags from Thailand, WT/DS383 (adverse panel (continued...) Congressional Research Service 17 WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases The conduct of antidumping investigations and the imposition of antidumping duties are subject to obligations in the WTO Agreement on Antidumping and Article VI of the General Agreement on Tariffs and Trade 1994 (GATT 1994), which permits the imposition of an antidumping duty on an imported product “not greater in amount than the margin of dumping in respect of such product.” While neither of these agreements expressly address the use of zeroing in antidumping investigations or in the various reviews and duty assessments carried out in antidumping proceedings, WTO panels and the Appellate Body have found that the use of zeroing in original investigations, as applied in two types of price comparisons, is inconsistent with obligations in Article 2.4.2 of the WTO Antidumping Agreement, a provision requiring WTO Members to determine dumping margins by comparing normal and export values of “all comparable export transactions.”63 In addition, WTO panels and the Appellate Body have concluded that the use of zeroing in administrative and new shipper reviews violates GATT and Antidumping Agreement prohibitions on imposing antidumping duties that exceed the dumping margin for the goods under investigation. Further, reliance on zeroing-based dumping margins in mandatory five-year sunset (...continued) report adopted February 18, 2010; dispute resolved with July 2010 implementation of Section 129 Determination in which dumping margins were recalculated without use of zeroing; AD order partially revoked as a result); United States—Measures Related to Shrimp from Thailand, WT/DS343 (adverse panel and AB reports adopted August 1, 2008; dispute resolved with January 2009 implementation of Section 129 Determination in which dumping margins were recalculated without use of zeroing); United States—Anti-dumping Measure on Shrimp from Ecuador, WT/DS335 (adverse panel report adopted February 20, 2007; dispute resolved with August 2007 revocation of the AD order at issue); United States—Anti-dumping Determinations Regarding Stainless Steel from Mexico, WT/DS325 (consultations only; see WT/DS344, discussed in text, for further action); United States—Provisional Anti-Dumping Measures on Shrimp from Thailand, WT/DS324 (consultations only; see WT/DS343, supra, for further action); United States—Anti-dumping Measures on Cement from Mexico, WT/DS281 (panel established but work suspended; dispute settled with 2006 bilateral Trade in Cement Agreement); United States—Final Dumping Determination on Softwood Lumber from Canada, WT/DS264 (adverse panel and AB reports in original dispute adopted August 31, 2004; adverse AB report and reversed panel report in compliance panel proceeding adopted September 1, 2006; dispute settled with 2006 bilateral Softwood Lumber Agreement); United States—Provisional Anti-Dumping Measures on Import of Certain Softwood Lumber from Canada, WT/DS247 (consultations only; dispute settled with 2006 bilateral Softwood Lumber Agreement); United States—Sunset Review of Anti-Dumping Duties on Corrosion-Resistant Carbon Steel Flat Products from Japan, WT/DS244 (Appellate Body reversed panel finding that United States did not violate WTO Antidumping Agreement in relying on zeroing-based dumping margin in challenged sunset review, but found that it had insufficient factual basis to complete analysis of Japan’s claim; reports adopted January 9, 2004); United States—Anti-dumping Duties on Silicon Metal from Brazil, WT/DS239 (consultations only). 63 Article 2.4.2 states, in pertinent part, as follows: “Subject to the provisions governing fair comparison in paragraph 4, the existence of margins of dumping during the investigation phase shall normally be established on the basis of a comparison of a weighted average normal value with a weighted average of prices of all comparable export transactions or by a comparison of normal value and export prices on a transaction-to-transaction basis.” The first WTO decision in which the U.S. practice of zeroing was ruled to be inconsistent with this provision of the WTO Antidumping Agreement was United States—Final Dumping Determination on Softwood Lumber from Canada (Softwood Lumber), WT/DS264, a case involving the application of zeroing in an average-to-average price comparison in an original antidumping investigation. As summarized in a January 2010 panel report, the WTO Appellate Body found in Softwood Lumber “that the terms ‘margins of dumping’ and ‘all comparable export transactions’ in Article 2.4.2 must be interpreted in an ‘integrated manner’, such that where ‘an investigating authority has chosen to undertake multiple comparisons [of product sales], the investigating authority necessarily has to take into account the results of all those comparisons in order to establish margins of dumping for the product as a whole under Article 2.4.2’.” Panel Report, United States—Anti-Dumping Measures on Polyethylene Retail Carrier Bags from Thailand, para. 7.20, WT/DS383/R (January 22, 2010). Congressional Research Service 18 WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases reviews of antidumping duty orders has been found to violate Article 11.3 of the WTO Antidumping Agreement on the ground that such reliance taints the fundamental determination made in sunset reviews, namely, whether revocation of the antidumping order is likely to lead to the recurrence or continuation of dumping and injury. As a result of these cases, the use of zeroing has been found to be broadly prohibited in the calculation of dumping margins in U.S. antidumping proceedings, both as a general practice and as applied in particular proceedings. Moreover, findings in related compliance panel proceedings that a WTO decision faulting the use of zeroing in an original antidumping investigation continues to apply with respect to subsequent annual administrative reviews are particularly important for the U.S. “retrospective” antidumping duty system of which administrative reviews are a key component. It has also been found in these cases that, where goods have entered the United States before the end of the compliance period established in a WTO dispute but final duties have not been collected, zeroing-based duties may not be applied to such goods once the compliance period has ended. In addition, the Appellate Body has found that an additional claim may be made in an initial WTO complaint against zeroing, namely, the “continued use” of the practice in subsequent domestic proceedings relating to a particular antidumping duty order. As mentioned earlier, the United States has responded to these decisions by prospectively eliminating the use of zeroing in original investigations under a regulatory modification issued by the Commerce Department under Section 123(g) of the Uruguay Round Agreements Act and finalizing its December 2010 regulatory modification on the use of zeroing in subsequent phases of antidumping proceedings. Where the use of zeroing in an individual original antidumping investigation has been challenged, the United States has resolved the case by the issuance of a Section 129 Determination in which the dumping margin in question has been recalculated without the use of zeroing.64 The United States has not contested recent complaints of this type before the panel. It is not clear that prospective modification of U.S. zeroing practice—that is, its application to new proceedings only—and the issuance of case-by-case recalculations under Section 129 will be sufficient to satisfy the concerns of all WTO complainants.65 The EU, however, appears to have dropped any demands that it had for the refund of zeroing-based duties paid after the expiration of the compliance periods in its zeroing cases, given that the memorandum that the EU signed with the United States in February 2012 aimed at resolving its zeroing disputes with the United States 64 An example is United States—Antidumping Measures on Polyethylene Retail Carrier Bags from Thailand (WT/DS383). On January 22, 2010, the WTO dispute panel issued a report finding that the United States was in violation of its obligations under the WTO Antidumping Agreement. Panel Report, United States—Antidumping Measures on Polyethylene Retail Carrier Bags from Thailand, WT/DS383/R (January 22, 2010). The United States did not contest Thailand’s claim in the case. See id. para. 3.3. The panel report was adopted on February 18, 2010, and the two parties agreed to a compliance deadline of August 18, 2010. Agreement on Procedures between Thailand and the United States, United States—Antidumping Measures on Polyethylene Retail Carrier Bags from Thailand, WT/DS383/4 (January 12, 2010); Agreement under Article 21.3(b) of the DSU, United States—Antidumping Measures on Polyethylene Retail Carrier Bags from Thailand, WT/DS383/6 (April 6, 2010). The Section 129 Determination was issued on June 29, 2010, and implemented effective July 28, 2010. Notice of Implementation of Determination Under Section 129 of the Uruguay Round Agreements Act and Partial Revocation of the Antidumping Duty Order on Polyethylene Retail Carrier Bags from Thailand, 75 Federal Register 48940 (August 12, 2010). Thailand expressed appreciation for the “timely” U.S. determination at the August 31, 2010, meeting of the WTO Dispute Settlement Body. Dispute Settlement Body, Minutes of Meeting, August 31, 2010, at 11-12, WT/DSB/M/286 (October 22, 2010). 65 See, e.g., Brazil Mulling Whether to Move Forward with Zeroing Case Against U.S., INSIDE U.S. TRADE, March 30, 2012, at 19; U.S. Still Examining Whether It Will Adjust Past Reviews in Zeroing Cases, INSIDE U.S. TRADE, January 7, 2011, at 3. Congressional Research Service 19 WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases provides that the new WTO-compliant dumping margins to be calculated by the United States will be applied only to future entries of merchandise.66 The United States has been critical of the Appellate Body’s broad prohibition on the use of zeroing at meetings of the WTO Dispute Settlement Body and in related documents circulated to Members. In addition, the United States submitted proposals in June 2007 to the WTO Negotiating Group of Rules, which has been negotiating revisions to antidumping and subsidy rules in the Doha Round, asking that negotiators evaluate the reasoning of the WTO panels that have examined the issue of zeroing and stating that “the proper resolution of this issue requires clear text providing that margins of dumping may be determined without offsets for non-dumped transactions, consistent with the long-held concept of dumping.”67 The United States also proposed revised language for the Antidumping Agreement to this effect.68 While the draft negotiating text issued by the Chairman of the Doha Negotiating Group in November 2007 contained proposed language reflecting U.S. concerns,69 the draft text issued in December 2008 does not contain such language and instead notes that, with regard to zeroing, “[d]elegations remain profoundly divided on this issue,” with positions ranging from “insistence on a total prohibition of zeroing irrespective of the comparison methodology used and in respect of all proceedings to a demand that zeroing be specifically authorized in all contexts.”70 Notwithstanding these uncertainties, including the continued inability of WTO Members to complete the Doha Round, the United States stated at a February 2012 meeting of the WTO Dispute Settlement Body that “it will continue to press in ongoing WTO negotiations for affirmation that ‘zeroing’ is consistent with WTO rules.”71 Domestic Legal Basis for Zeroing Although the Tariff Act of 1930, at Section 735(A), 19 U.S.C. Section 1677(35), defines the terms “dumping margin” and “weighted average dumping margin,” it does not expressly address the practice of zeroing. Using the Chevron standard of judicial review, U.S. courts have held that the statute does not unambiguously require zeroing, but that the Commerce Department’s interpretation of the statute as allowing the practice is a permissible one.72 Courts have also 66 See, e.g., Dispute Settlement Body, Minutes of Meeting, January 25, 2011, at 9, WT/DSB/M/291 (March 8, 2011); Dispute Settlement Body, Minutes of Meeting, February 24, 2011, at 8-9, WT/DSB/M/293 (May 2, 2011). 67 Communication from the United States, Offsets for Non-Dumped Comparisons, TN/RL/W/208 (June 5, 2007). 68 Proposal from the United States, Proposal on Offsets for Non-Dumped Comparisons, TN/RL/GEN/147 (June 27, 2007). 69 WTO, Negotiating Group on Rules, Draft Consolidated Chair Texts of the AD and SCM Agreements, at 6, 20, TN/RL/W/213 (November 30, 2007). 70 WTO, Negotiating Group on Rules, New Draft Consolidated Chair Texts of the AD and SCM Agreements, at 6, TN/RL/W/236 (December 19, 2008). See also 16 Members Propose Complete Ban of All ‘Zeroing’ in WTO Rules Talks, 25 Int’l Trade Rep. (Bloomberg BNA) 149 (January 31, 2008); China, Other WTO Members Add Support to Proposal on Elimination of Zeroing, 25 Int’l Trade Rep. (Bloomberg BNA) 185 (February 7, 2008). See also U.S. Continues Fight to Preserve Zeroing in Doha Despite New Proposal, INSIDE U.S. TRADE, January 7, 2011, at 8; Office of the U.S. Trade Representative, 2011 TRADE POLICY AGENDA AND 2010 ANNUAL REPORT, at 10 (March 2011), at http://www.ustr.gov/webfm_send/2597; Commerce Signals Link Between Doha Talks and Zeroing Compliance, INSIDE U.S. TRADE, March 11, 2011, at 17. 71 Statement by the United States at the February 22, 2012, DSB Meeting, para. E., at http://geneva.usmission.gov/ 2012/02/23/statement-by-the-united-states-at-the-february-22-2012-dsb-meeting/. 72 SKF USA Inc. v. United States, 491 F. Supp. 1354, 1364-66 (Ct. Int’l Trade 2007), aff’d, 537 F.3d 1373 (Fed. Cir. 2008); Corus Staal BV v. Department of Commerce, 395 F.3d 1343, 1347 (Fed. Cir. 2005), cert denied, 126 S.Ct. 1023 (2006); Timken Co. v. United States, 354 F.3d 1334, 1341-42 (Fed. Cir.), cert denied sub nom. Koyo Seiko Co. v. (continued...) Congressional Research Service 20 WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases refused to implement adverse WTO decisions on zeroing, leaving determinations as to “whether, when, and how” to comply with such rulings to the executive branch.73 Further, the U.S. Court of International Trade (USCIT) ruled in July 2009 that the Commerce Department’s determination under Section 123 of the Uruguay Round Agreements Act to eliminate the use of zeroing in average-to-average comparisons in original antidumping investigations and to offset sales made at less than fair value with fair value sales, an action taken in response to the WTO decision in DS294, was based on a reasonable interpretation of U.S. antidumping law for purposes of Chevron and was thus in accordance with law.74 As discussed earlier, Section 123 sets out statutory requirements for U.S. regulatory modifications taken to implement WTO decisions. Thus, in its Chevron analysis, the court also considered that the department was undertaking this interpretation in the context of statutory authorities and requirements with an international dimension, stating that the “deference accorded to Commerce’s interpretation [under Chevron] is at its highest when that agency acts under the authority of a Congressional mandate to harmonize U.S. practices with international obligations, particularly when it allows the Executive Branch to speak on behalf of the U.S. to the international community on matters of trade and commerce.”75 The court further held that, because the Section 123 action was in accordance with law, the department’s use of this new approach in a Section 129 Determination taken to comply with the WTO decision was “not unlawful.”76 In October 2010, the U.S. Court of Appeals for the Federal Circuit (CAFC), in a decision focused on the Section 129 claim, found that the department’s Section 129 Determination “reflects Commerce’s reasonable interpretation of an ambiguous statute” and affirmed the USCIT decision.77 In March 2011, however, the CAFC ruled in Dongbu Steel Co. v. United States that DOC’s use of zeroing in administrative reviews while abandoning it in initial investigations was an arbitrary interpretation of the statute for purposes of Chevron step two, vacating and remanding the contrary USCIT judgment and remanding to DOC for further proceedings to enable DOC to explain its reasoning.78 The court found, in part, that the government’s decision to implement an adverse WTO decision “standing alone does not provide sufficient justification for the inconsistent statutory interpretations.”79 The court stated in summary: our prior case law does not address the situation at hand where Commerce has decided to interpret 19 U.S.C. §1677(35) differently based on the nature of the antidumping proceeding at issue. Applying Chevron step two to this ambiguous statute, we conclude that the agency has not provided a reasonable explanation for why the statute supports such inconsistent interpretations.... We accordingly vacate the decision of the Court of International Trade and remand for further proceedings to give Commerce the opportunity to explain its reasoning. It may be that Commerce cannot justify using opposite interpretations of 19 U.S.C. §1677(35) (...continued) United States, 543 U.S. 976 (2004). 73 Koyo Seiko Co. v. United States, 551 F.3d 1286, 1290-91 (Fed. Cir. 2008). 74 U.S. Steel Corp. v. United States, 637 F.Supp.2d 1199, 1209-16 (Ct. Int’l Trade 2009). 75 Id. at 1212. 76 Id. at 1216. 77 United States Steel Corp. v. United States, 621 F.3d 1351, 1360-63 (Fed. Cir. 2010). 78 Dongbu Steel Co. v. United States, 635 F.3d 1363, 1369-73 (Fed. Cir. 2011). 79 Id. at 1372. Congressional Research Service 21 WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases in investigations and in administrative reviews. Under such circumstances, Commerce is of course free to choose a single consistent interpretation of the statutory language.80 In a subsequent case, JTEKT Corp. v. United States, DOC explained to the CAFC that the reason for continuing to use zeroing in administrative reviews was that investigations and administrative reviews are “different proceedings with different purposes,” with the dumping margin calculation in the former used to determine if an antidumping order will be imposed and the dumping margin calculation in the latter used to determine the amount of the duty assessment on entries subject to the order.81 In response, the court ruled in June 2011 that DOC had “failed to address the relevant question—why is it a reasonable interpretation of the statute to zero in administrative reviews, but not in investigations?”—and again vacated and remanded.82 The U.S. Court of International Trade remanded the case to the Commerce Department on December 15, 2011, ordering the department to issue a redetermination in which it reconsiders its decision in the administrative review at issue; to modify its decision or explain how the language of 19 U.S.C. §1677(35) may be construed differently as to the use of zeroing whether an original investigation or an administrative review is involved; and, if the department modifies its decision and decides not to apply zeroing or to make some other change, to redetermine the dumping margin for the exporter involved.83 The court stated that to be adequate under the CAFC standard articulated in Dongbu and JTEKT, discussed above, “any such explanation must identify a ‘basis in the statute for reading 19 U.S.C. §1677(35) differently in administrative reviews than in investigations’ … and must explain why the differences between antidumping investigations and antidumping administrative reviews, ‘make it reasonable to continue zeroing in one phase, but not the other.’”84 In Union Steel v. United States, a February 2012 decision of the USCIT, the court accepted the department’s more expansive explanation and upheld the continued use of zeroing in administrative reviews.85 The department provided three reasons for its different approaches: (1) zeroing has been was the department’s “preferred method” and has been consistently upheld by the courts; (2) the difference in procedures was the result of the department’s decision to comply with WTO decisions; and (3) there exist inherent differences in the nature and purpose of investigations and reviews.86 Regarding the third rationale, the department contrasted the fact that investigations focus on “overall pricing behavior of an exporter in order to establish an antidumping duty order” while reviews are used to set final rates to be used to assess antidumping duties.87 The court stated that, in reviews, “it is reasonable for the agency to look for more accuracy, which it achieves in some measure through monthly averaging, and also for the agency to look for the full measure of duties resulting therefrom, which it better achieves through 80 Id. at 1373. JTEKT Corp. v. United States, 642 F.3d 1378, 1384-85 (Fed. Cir. 2011). 82 Id. at 1384-85. 83 JTEKT Corp. v. United States, No. 08-00324, slip. op at 7-8 (Ct. Int’l Trade December 15, 2011), at http://www.cit.uscourts.gov/slip_op/Slip_op11/11-158.pdf. 84 Id., slip op. at 6 (emphasis added by the court). 85 Union Steel and Dongbu Steel Co., Ltd v. United States, No. 11-00083 (Ct. Int’l Trade February 27, 2012), at http://www.cit.uscourts.gov/SlipOpinions/Slip_op12/12-24.pdf. 86 Id., slip op. at 18-22. 87 Id. at 20-21. 81 Congressional Research Service 22 WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases zeroing.”88 The court thus concluded that’s “when it comes to reviews, which are intended to more accurately reflect commercial reality, Commerce is permitted to unmask dumping behavior in a way that is not necessary at the investigation stage.”89 Considering these reasons in the context of a statute that is silent on the matter of zeroing, the court held that Commerce did not abuse its discretion in changing only its investigation methodology and acted reasonably in applying the antidumping statute to conform to the different purposes of the two.90 Pending Disputes: Trade Remedies Antidumping Measures on Hot-Rolled Steel Products from Japan (DS184) In November 1999, Japan challenged determinations made by the Department of Commerce (DOC) and the U.S. International Trade Commission (ITC) in an antidumping investigation of hot-rolled steel products from Japan initiated in 1998. Under Section 703 of the Tariff Act of 1930, 19 U.S.C. Section 1673, antidumping duties will be imposed if DOC determines that dumping exists, that is, that a product is sold, or likely to be sold, in the United States at less than its fair value, and ITC determines that the dumped imports cause, or threaten to cause, material injury to a domestic industry. At issue in the WTO case were the manner in which DOC calculated the dumping margins in these cases, that is, the amount by which the fair market or “normal” value of the product under investigation exceeded the export price, and elements of the affirmative material injury determination made by the ITC. DOC calculates dumping margins for individual exporters, as well as an “all others” rate for firms that are not investigated individually. Under Section 735(c)(5)(A) of the Tariff Act of 1930, 19 U.S.C. Section 1673d(c)(5)(A), the “all others” rate is to be based on rates determined for individually investigated producers, excluding any zero and de minimis margins (i.e., margins of less than 2%) and any margins determined “entirely” under “facts available.” The department uses “facts available” whenever necessary information is not on the public record or any person involved in the investigation withholds requested information, fails to provide information in a timely manner, significantly impedes an investigation, or provides information that cannot be properly verified.91 When the department decides to use “facts available,” it needs to determine what is the most appropriate information on which to base the dumping margin and whether a party has failed to cooperate in such a manner that an adverse inference against it is warranted.92 Also at issue was the test used by the United States to determine if sales were “in the ordinary course of trade” and therefore included in the calculation of normal value. The Antidumping Agreement requires that sales not made “in the ordinary course of trade” are to be excluded from this calculation, but the agreement neither defines this concept nor establishes a general test for determining whether sales fall within this category. In the case at hand, the “arm’s length” pricing 88 Id. at 21. Id. at 22. 90 Id. at 22. 91 Tariff Act of 1930, §776(a), 19 U.S.C. §1677e(a). 92 Tariff Act of 1930, §776(b), 19 U.S.C. §1677e(b). 89 Congressional Research Service 23 WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases test used by the United States to determine whether sales made by exporters and producers to affiliated customers were “in the ordinary course of trade” was argued to unfairly exclude certain low-priced sales and therefore to increase normal value and consequently inflate the dumping margin for the goods under investigation. In 2001, the WTO panel, as upheld by the Appellate Body, found that the United States was in violation of the WTO Antidumping Agreement because (1) U.S. law requires, in effect, that any dumping margins based in part on “facts available” be used in calculating the “all others” rate; (2) the Commerce Department improperly applied “facts available” in calculating dumping margins for producers who were individually investigated; and (3) the department improperly determined the normal value of the goods under investigation due to the manner in which it determined whether sales were “in the ordinary course of trade.” 93 While the panel had focused on the “arm’s length” test, the Appellate Body looked at the combined operation of two tests used by the department in determining whether goods were “in the ordinary course of trade”—the “arm’s length” test and the related and even more limited “aberrationally high” test—finding a “lack of even-handedness” that disadvantaged exporters. 94 As stated by the Appellate Body, the “combined application of these two tests operated systematically to raise normal value, through the automatic exclusion of marginally low-priced sales, coupled with the automatic inclusion of all high-priced sales, except those proved, upon request, to be aberrationally high priced.”95 The Appellate Body reversed the panel on a related point, finding that the United States was not in violation of its WTO obligations regarding the calculation of normal value when it replaced home market sales to affiliates that were excluded under the “arm’s length” test with downstream home market sales by the affiliates to independent purchasers.96 The Appellate Body also ruled against the United States with respect to the ITC’s injury determination, reversing two panel findings favorable to the United States. First, in contrast to the panel, the AB found that ITC had not applied a provision of the antidumping statute addressing “captive production” consistently with the Antidumping Agreement. “Captive production” refers to the situation in which a domestic producer does not sell the domestic counterpart of the product under investigation to unrelated parties (the “merchant market”) but instead processes it into a higher-value good downstream. Second, the AB determined that the ITC had not found a causal link between the dumped imports and material injury to the domestic industry involved. The AB also found, however, that there was an insufficient factual record to allow completion of the required causation analysis.97 The original compliance period in the case, which had been determined by arbitration, expired November 23, 2002. It was later extended until December 31, 2003, or the end of the 108th Congress, first session, whichever was earlier, in order to facilitate full compliance.98 93 Panel Report, United States—Anti-dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/R (February 28, 2001)[hereinafter Hot-Rolled Steel Panel Report]; Appellate Body Report, United States— Anti-dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/AB/R (July 24, 2001)[hereinafter Hot-Rolled Steel AB Report]. 94 Hot-Rolled Steel AB Report, supra note 93, paras. 150-153. 95 Id. para. 154. 96 Id. paras.159-180. 97 Id. paras. 235-236. 98 See Status Report by the United States, Addendum, United States—Anti-dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/15/Add.3 (December 9, 2002). Congressional Research Service 24 WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases Administrative Compliance Addressing the normal value finding, the Commerce Department modified its “arm’s length” test by establishing a price band covering a range of prices both below and above those charged by producers or exporters to non-affiliated companies and treating sales to affiliates within the band as being “in the ordinary course of trade” for purposes of determining normal value.99 It stated that the new methodology would be used to implement the WTO findings regarding the Japan hot-rolled steel AD proceeding, and applied in all investigations and reviews initiated on or after November 23, 2002.100 The department announced a new dumping determination in the AD proceeding at issue in December 2002, stating that in implementation of the WTO rulings and recommendations, it had recalculated dumping margins for three affected Japanese producers using the new methodology; addressed issues related to the use of adverse facts available; and recalculated the all-others rate based on the new rates for the respondent companies.101 The recalculations resulted in reduced dumping margins for the three companies as well for all other exporters. Although ITC findings were also faulted in the case, no action was taken by the ITC in response to the WTO decision.102 Legislative Compliance The WTO panel, as affirmed on appeal, also concluded that Section 735(c)(5)(A) of the Tariff Act of 1930 is inconsistent with Article 9.4 of the WTO Antidumping Agreement because it requires DOC to consider dumping margins based in part on facts available in determining the all-others rate, whereas Article 9.4 was found to require the exclusion of dumping margins based either in whole or in part on such facts.103 Absent legislative compliance by the United States, the December 2003 deadline referred to earlier was extended twice, most recently to July 31, 2005.104 The deadline lapsed without U.S. action. In an understanding between the disputing parties reached earlier in July 2005, Japan stated that it would not request authorization to retaliate at the time but might choose to do so in the future.105 99 Antidumping Proceedings: Affiliated Party Sales in the Ordinary Course of Trade, 67 Federal Register 69186 (November 15, 2002). See also Antidumping Proceedings: Affiliated Party Sales in the Ordinary Course of Trade, 67 Federal Register 53339 (August 15, 2002)(request for public comment). 100 Id. 101 Notice of Determination Under Section 129 of the Uruguay Round Agreements Act: Antidumping Measures on Certain Hot-Rolled Flat-Rolled Carbon-Quality Steel Products from Japan, 67 Federal Register 71936 (December 3, 2002). 102 The United States and Japan had reportedly been in disagreement regarding implementation of the ruling as it relates to the ITC’s application of the statutory captive production provision. See Japan Threatens Retaliation Against U.S. For Hot-Rolled Steel Antidumping Duties, 19 Int’l Trade Rep. (Bloomberg BNA) 1965 (2002); U.S. Response Leaves WTO Ruling on Hot-Rolled Injury Claims Untouched, INSIDE U.S. TRADE, November 15, 2002, at 3; U.S. Gets Extra Year to Comply with WTO Hot-rolled Steel Decision, INSIDE U.S. TRADE, December 6, 2002, at 13. 103 Emphasis added. See Hot-Rolled Steel Panel Report, supra note 93, paras. 7.83-7.90, 8.1(b); Hot-Rolled Steel AB Report, supra note 93, paras. 111-130. 104 See Dispute Settlement Body, Minutes of Meeting, August 31, 2004, at 6-7, WT/DSB/M/175 (September 24, 2004). 105 Understanding between Japan and the United States, United States—Anti-dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/19 (July 28, 2005). The United States agreed not to block any retaliation request on the ground that the 30-day period for requesting authorization to suspend concessions in Article 22.6 of WTO Dispute Settlement Understanding has expired, but reserved the right to have any retaliation request referred to arbitration. Congressional Research Service 25 WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases Recent Developments No legislation has been introduced to amend Section 735(c)(5) of the Tariff Act since the 109th Congress. H.R. 2473 (Shaw), 109th Congress, 1st Sess., would have amended Section 735(c)(5) to remove the word “entirely” each time it appears in the provision, thus enabling the Department of Commerce to exclude dumping margins based in whole or in part on facts available in determining the “all others” rate, as called for by the WTO decision. Although the text of H.R. 2473 was listed for possible inclusion in 109th Congress miscellaneous tariff legislation,106 the bill was not made part of the tariff legislation nor was it acted upon as stand-alone legislation. Japan continues to seek legislative action,107 as the United States continues to state its support for legislative amendments that would achieve full compliance in the case.108 The United States has also submitted a proposal to the Doha Round Negotiating Group on Rules that Article 9.4 of the Antidumping Agreement be clarified to allow the invalidated practice.109 No revisions or clarifications of Article 9.4, however, were included in the draft texts of proposed revisions to the Antidumping Agreement circulated by the Chair of the Negotiating Group in November 2007 and December 2008.110 Continued Dumping and Subsidy Offset Act (DS217/DS234) The Continued Dumping and Subsidy Offset Act (CDSOA) of 2000, also known as the Byrd Amendment, required that duties collected under an existing antidumping or countervailing duty order be distributed annually to petitioners and interested parties in the underlying antidumping or countervailing duty proceeding.111 Payments were available for “qualifying expenditures” in specified categories (e.g., manufacturing facilities or equipment) incurred by the petitioners and interested parties after the applicable antidumping or countervailing duty order was issued. To be eligible, petitioners and interested parties, referred to in the statute as “affected domestic producers,” must also have remained in operation. Although the statute was held WTOinconsistent in January 2003 and repealed, effective October 2005, by P.L. 109-171, it remains 106 Comments submitted to the Trade Subcommittee of the House Ways and Means Committee on the possible inclusion of this legislation in a future bill are available at http://waysandmeans.house.gov/hearings.asp?formmode= comment&hearing=440. 107 E.g., Dispute Settlement Body, Minutes of Meeting, October 25, 2011, at 5-6, WT/DSB/M/305 (December 22, 2011). 108 Status Report by the United States, Addendum, United States—Anti-dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/15/Add.112 (March 13, 2012). 109 U.S. Seeks to Reverse WTO Ruling on ‘Facts Available’ Dumping Rates, 21 Int’l Trade Rep. (Bloomberg BNA) 1540 (2004); Negotiating Group on Rules, All-Others Rate (Article 9.4 ADA); Communication from the United States, TN/RL/GEN/16 (September 15, 2004), as corrected. See also Negotiating Group on Rules, Identification of Certain Major Issues Under the Anti-Dumping and Subsidies Agreements; Submission by the United States, TN/RL/W/72, at 2-3 (March 19, 2003). 110 See WTO, Negotiating Group on Rules, New Draft Consolidated Chair Texts of the AD and SCM Agreements, at 20, TN/RL/W/236 (December 19, 2008) and WTO, Negotiating Group on Rules, Draft Consolidated Chair Texts of the AD and SCM Agreements, at 21, TN/RL/W/213 (November 30, 2007). 111 P.L. 106-387, 114 Stat. 1549A-72, codified at 19 U.S.C. §1675c (2000). Regulations are set out at 19 C.F.R. §§159.61-64. For a more detailed examination of the statute and additional discussion of the WTO proceeding, see CRS Report RL33045, The Continued Dumping and Subsidy Offset Act (“Byrd Amendment”), by (name redacted) and (name redacted). See also U.S. Government Accountability Office, International Trade: Issues and Effects of Implementing the Continued Dumping and Subsidy Offset Act (September 2005)(GAO-05-979). Congressional Research Service 26 WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases the target of authorized sanctions by complainants European Union and Japan due to continued payments to U.S. firms under the CDSOA program. Original WTO Complaints Eleven WTO members challenged CDSOA shortly after its enactment in October 2000 as violative of the WTO Antidumping Agreement, the WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement), and other WTO obligations. The complainants based their argument in part on the prohibitions in Article 18.1 of the Antidumping Agreement and Article 32.1 of the SCM Agreement against Members’ taking any “specific action against” dumping and subsidization, respectively, except for action taken in accordance with the GATT 1994 as interpreted by the Antidumping Agreement or the SCM Agreement.112 Two complaints were filed: DS217, filed jointly by Australia, Brazil, Chile, the European Union (EU), India, Indonesia, Japan, Korea and Thailand; and DS234, filed jointly by Canada and Mexico. Considering both complaints at the same time, the WTO panel found that the CDSOA did create an impermissible “specific action against” dumping and subsidization and that it provided a financial incentive for domestic producers to file or support antidumping and countervailing duty petitions, thereby undermining the industry support requirements in the Antidumping and SCM Agreements. At the same time, the panel rejected other arguments made by the complainants, including Mexico’s claim that the act constituted a subsidy in and of itself.113 The Appellate Body upheld the panel’s finding that the statute created a “specific action against” dumping and subsidization not allowed under WTO agreements, but reversed the panel on its conclusion regarding industry support requirements.114 The reports were adopted January 27, 2003, and the compliance period was subsequently determined by arbitration to expire December 27, 2003.115 Complainants’ Retaliation Requests and Subsequent Arbitration Because the United States did not comply by the December 2003 deadline, eight complaining Members—Brazil, Chile, EU, India, Japan, Korea, Canada, and Mexico—asked the WTO in January 2004 for authorization to impose retaliatory measures.116 The United States objected to the requests, sending them to arbitration.117 The remaining three complainants—Australia, Indonesia, and Thailand—agreed to give the United States until December 27, 2004, to comply.118 112 Article 18.1 of the Antidumping Agreement had [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/crs%3ARL32014. Public record. Not legal advice.