Antidumping

WTO Panel report on UNITED STATES – ANTI-DUMPING AND COUNTERVAILING DUTIES ON CERTAIN PRODUCTS AND THE USE OF FACTS AVAILABLE should be appealed by the United States

· January 29, 2021 · dispute settlement · , , , , · No Comments

On January 21, 2021, the WTO panel that had been composed back on 5 December 2018 issued its report in UNITED STATES – ANTI-DUMPING AND COUNTERVAILING DUTIES ON CERTAIN PRODUCTS AND THE USE OF FACTS AVAILABLE, WT/DS539/R. Korea had requested consultations on a series of antidumping and countervailing investigations and reviews on February 14, 2018 and a panel had been established on May 28, 2018. See WT/DS539/R at para. 1.1, 1.3 and 1.5.

Korea mounted a broad attack on the U.S. Department of Commerce’s use of facts available in a number of antidumping and countervailing duty proceedings largely pertaining to the same major Korean company with a long record of participation in various U.S. trade remedy cases.

For investigating authorities working under a statutory timeline and time limits existing within the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (“ADA”) and the Agreement on Subsidies and Countervailing Measures (“ASCM”), it is important that parties provide complete information in a timely manner. While WTO obligations require administering authorities to flag deficiencies and provide an opportunity to respondents to correct such deficiencies, administering authorities need the ability to cut off submissions and move to decision at a reasonably early period to permit all work to be done in verifying information (investigations), providing other parties a chance to comment and challenge information provided.

Where a party fails to provide information requested, the administering authority is authorized to use facts available. As stated in Article 6.8 of the ADA and Article 12.7 of the ASCM, “In cases in which any interested party refuses access to, or otherwise does not provide, necessary information within a reasonable period or significantly impedes the investigation, preliminary and final determinations, affirmative or negative, may be made on the basis of the facts available.” Art. 6.8 of the ADA then adds, “The provisions of Annex II shall be observed in the application of this paragraph.” Similar language is not in Art. 12.7 of the ASCM (changes to the ADA during the Uruguay Round of negotiations were typically adopted in the ASCM as they related to trade remedy proceedings, although changes made at the end of the negotiations to the ADA were not brought into the ASCM due to timing limitations).

Annex II of the ADA consists of seven paragraphs and is copied below.

“Annex II: Best Information Available in Terms of Paragraph 8 of Article 6

“1.   As soon as possible after the initiation of the investigation, the investigating authorities should specify in detail the information required from any interested party, and the manner in which that information should be structured by the interested party in its response. The authorities should also ensure that the party is aware that if information is not supplied within a reasonable time, the authorities will be free to make determinations on the basis of the facts available, including those contained in the application for the initiation of the investigation by the domestic industry.

“2.   The authorities may also request that an interested party provide its response in a particular medium (e.g. computer tape) or computer language. Where such a request is made, the authorities should consider the reasonable ability of the interested party to respond in the preferred medium or computer language, and should not request the party to use for its response a computer system other than that used by the party. The authority should not maintain a request for a computerized response if the interested party does not maintain computerized accounts and if presenting the response as requested would result in an unreasonable extra burden on the interested party, e.g. it would entail unreasonable additional cost and trouble. The authorities should not maintain a request for a response in a particular medium or computer language if the interested party does not maintain its computerized accounts in such medium or computer language and if presenting the response as requested would result in an unreasonable extra burden on the interested party, e.g. it would entail unreasonable additional cost and trouble.

“3.   All information which is verifiable, which is appropriately submitted so that it can be used in the investigation without undue difficulties, which is supplied in a timely fashion, and, where applicable, which is supplied in a medium or computer language requested by the authorities, should be taken into account when determinations are made. If a party does not respond in the preferred medium or computer language but the authorities find that the circumstances set out in paragraph 2 have been satisfied, the failure to respond in the preferred medium or computer language should not be considered to significantly impede the investigation.

“4.   Where the authorities do not have the ability to process information if provided in a particular medium (e.g. computer tape), the information should be supplied in the form of written material or any other form acceptable to the authorities.

“5.   Even though the information provided may not be ideal in all respects, this should not justify the authorities from disregarding it, provided the interested party has acted to the best of its ability.

“6.   If evidence or information is not accepted, the supplying party should be informed forthwith of the reasons therefor, and should have an opportunity to provide further explanations within a reasonable period, due account being taken of the time-limits of the investigation. If the explanations are considered by the authorities as not being satisfactory, the reasons for the rejection of such evidence or information should be given in any published determinations.

“7.   If the authorities have to base their findings, including those with respect to normal value, on information from a secondary source, including the information supplied in the application for the initiation of the investigation, they should do so with special circumspection. In such cases, the authorities should, where practicable, check the information from other independent sources at their disposal, such as published price lists, official import statistics and customs returns, and from the information obtained from other interested parties during the investigation. It is clear, however, that if an interested party does not cooperate and thus relevant information is being withheld from the authorities, this situation could lead to a result which is less favourable to the party than if the party did cooperate.” (emphasis added).

Antidumping and countervailing duty proceedings in the United States are very transparent with full access to information on the record available to parties under administrative protective order and with many opportunities to submit comments, raise questions, seek clarification or respond to additional inquiries flowing from earlier responses. It is quite common for Commerce to receive requests for more time to respond to the initial questionnaire and to any supplemental requests flowing from developments. Responding parties can determine whether or not to submit all information, partial information or no information. Questionnaire responses are often incomplete or adopt interpretations of what has been requested to provide less than complete information. In antidumping investigations, it is not uncommon for respondent data bases to change during the course of the investigation, sometimes markedly. Briefing after the preliminary determination permits challenges to the preliminary determination by all parties, including challenges to use of facts available. While there are always legal issues that are briefed, facts available issues are fact-based issues flowing from whether parties cooperated, withheld information, failed to supply requested information, etc., and if so, what alternative information is available that can be used.

The ADA provides special provisions on dispute settlement in Article 17.6. The approach on review of facts is laid out in Article 17.6(i) of the ADA (there is no counterpart in the ASCM for the reason that Art. 17.6 of the ADA was added at the end of the Uruguay Round without chance to consider adopting a parallel provision in the ASCM). Art. 17.6(i) states:

“17.6  In examining the matter referred to in paragraph 5:

“(i)   in its assessment of the facts of the matter, the panel shall determine whether the authorities’ establishment of the facts was proper and whether their evaluation of those facts was unbiased and objective. If the establishment of the facts was proper and the evaluation was unbiased and objective, even though the panel might have reached a different conclusion, the evaluation shall not be overturned;”

Article 17.6 was added to the ADA at the end of the Uruguay Round at the insistence of the United States which was interested in seeing that very complicated and detailed administrative proceedings were not second guessed by panels or the Appellate Body which would not have been involved in the proceeding or have access to all materials. Art. 17.6(i) deals with providing deference to administering authorities on facts. Art. 17.6(ii) does the same for legal interpretations for provisions subject to more than one meaning.

The panel report, following other panel and Appellate Body reports that have been problematic from the U.S. perspective, doesn’t view Art. 17.6(i) as being deferential to an investigating authority as long as the authority hasn’t conducted the investigation in a biased or non-objective manner or somehow established facts improperly. See WT/DS539/R at para. 7.23 – 7.36 (after a review of the meaning of ADA Art. 6.8 and Annex II, the panel sums its view of the panel’s task to be the following: “In sum, we consider that the terms of Article 6.8, interpreted in light of their context and object and purpose, require investigating authorities to select – in an unbiased and objective manner – those facts available that constitute reasonable replacements for the missing “necessary” information in the specific facts and circumstances of a given case. In doing so, investigating authorities must take into account all facts that are properly available to them. In selecting the replacement facts, Article 6.8 does not require investigating authorities to select those facts that are most ‘favourable’ to the non-cooperating party. Investigating authorities may take into account the procedural circumstances in which information is missing, but Article 6.8 does not condone the selection of replacement facts for the purpose of punishing interested parties.”).

In reading the panel report, the Commerce Department is not given deference for its decisions of what facts available should be used. Thus, that violations were found for how Commerce determined facts available in each of the six proceedings reflect the panel reaching a different conclusion than Commerce. But while the panel may have reached a different result than Commerce, that by itself does not constitute a basis under Art. 17.6(i) to find a violation.

Conclusion

The constant limiting by panel and Appellate Body reports of the ability to utilize trade remedy agreements is, of course, the main substantive concern that the United States has with the operation of the WTO’s Dispute Settlement system, although there are examples of the same problem in other areas covered by panel or AB reports as well. Last week’s panel report on Korea’s challenge to U.S. antidumping and countervailing duty proceedings on the use of facts available continues to undermine the legitimacy of WTO dispute settlement.

Accordingly, the Biden Administration should file an appeal from last week’s panel decision and ensure that any eventual resolution of the Appellate Body impasse includes a restoration of rights that have narrowed or eliminated under the trade remedy or trade defense agreements (ADA, ASCM and safeguard).

USTR’s Report on the WTO Appellate Body — An Impressive Critique of the Appellate Body’s Deviation from Its Proper Role

· February 14, 2020 · Uncategorized · , , , , , , · No Comments

On February 11, 2020 the U.S. Trade Representative released a Report on the Appellate Body of the World Trade Organization . https://ustr.gov/sites/default/files/Report_on_the_Appellate_Body_of_the_World_Trade_Organization.pdf. The Report is a total of 174 pages, the report itself being 122 pages along with four appendices. The Report does not lay down what it views as the required solutions to the widespread problems that the United States has with the Appellate Body’s actions over the first twenty-five years of the WTO. But the report lays out the U.S. concerns in great detail, why the concerns reflect violations of the limited role of the Appellate Body within the WTO’s dispute settlement system and how WTO Members are harmed by the actions of the Appellate Body over time. The report goes over the issues that the U.S. has reviewed extensively at the Dispute Settlement Body and the General Council over the last two years and adds several additional concerns.

On the critical issue of Appellate Body overreach, the Report lays out examples of specific major problems for the United States in terms of the Appellate Body creating obligations or limiting rights under the WTO Agreements but identifies a number of other examples as well. It is fair to opine that the overreach issues flagged in the report constitute an absolute minimum of issues that need to be corrected for there to be an adequate restoration of rights and obligations in the view of the United States.

The appendices review concerns expressed over the last twenty years by members of Congress, various U.S. Trade Representatives and their Deputies on the continuing problem of WTO Appellate Body overreach vis-a-vis U.S. laws, regulations and practices, and actions by Congress calling for the U.S. Administration to address problems of WTO Appellate Body overreach.

In short, the Report is an extraordinary document that lays out in a comprehensive and coherent manner the U.S. view on why the WTO dispute settlement system has deviated far from its intended path. The full report is included below.

USTR-report-on-the-AB-of-the-WTO

The Report’s release at the time that the WTO Members seek a road forward on the dispute settlement system and how to restore an appellate body level of review gives all WTO Members notice that the U.S. is serious in insisting on Members coming to grips with how and why the Appellate Body has strayed so far from the limited mandate of the Dispute Settlement Understanding. Without a coming together of the Membership on the causes, one can expect that the United States will continue to block the start of selecting Appellate Body members.

Because certain major WTO Members seem unconcerned with (or are even supportive of) the violations that characterize a large number of Appellate Body decisions (at least on particular issues), it is not clear that meaningful movement and discussion will occur in the coming months in the lead up to the 12th Ministerial Conference in Kazakhstan in early June of this year. If not, resolution of the current impasse on the WTO Appellate Body is likely to drag on indefinitely.

Excerpts from the Executive Summary

The Executive Summary provides a concise review of the U.S. concerns. Excerpts are provided below (Report at 1-3):

“The United States and other free-market nations established the World Trade Organization (“WTO”) in 1995 as a forum for negotiating and implementing trade agreements. The dispute settlement mechanism of the WTO was designed to help Members resolve trade disputes arising under those agreements, without adding to or diminishing the rights and obligations to which Members had agreed. When the WTO dispute settlement system functions according to the agreed rules, it provides a vital tool to enforce Members’ WTO rights and obligations. For more than 20 years, however, the United States and other WTO Members have expressed serious concerns with the Appellate Body’s disregard for those rules.

“As detailed in this Report, the Appellate Body has repeatedly failed to apply the rules of the WTO agreements in a manner that adheres to the text of those agreements, as negotiated and agreed by WTO Members. The Appellate Body has strayed far from the limited role that WTO Members assigned to it, ignoring the text of the WTO agreements. Through this persistent overreaching, the Appellate Body has increased its own power and seized from sovereign nations and other WTO Members authority that it was not provided. For example:

“ The Appellate Body consistently ignores the mandatory deadline for deciding appeals;
“ The Appellate Body allows individuals who have ceased to serve on the Appellate Body to continue deciding appeals as if their term had been extended by WTO Members in the Dispute Settlement Body;
“ The Appellate Body has made findings on issues of fact, including issues of fact relating to WTO Members’ domestic law, although Members authorized it to address only legal issues;
“ The Appellate Body has issued advisory opinions and otherwise opined on issues not necessary to assist the WTO Dispute Settlement Body in resolving the dispute before it;
“ The Appellate Body has insisted that dispute settlement panels treat prior Appellate Body interpretations as binding precedent;
“ The Appellate Body has asserted that it may ignore WTO rules that explicitly mandate it recommend a WTO Member to bring a WTO-inconsistent measure into compliance with WTO rules; and
“ The Appellate Body has overstepped its authority and opined on matters within the authority of WTO Members acting through the Ministerial Conference, General Council, and Dispute Settlement Body.

“The Appellate Body’s persistent overreaching has also taken away rights and imposed new obligations through erroneous interpretations of WTO agreements. The Appellate Body has attempted to fill in “gaps” in those agreements, reading into them rights or obligations to which the United States and other WTO Members never agreed. These errors have favored non-market economies at the expense of market economies, rendered trade remedy laws ineffective, and infringed on Members’ legitimate policy space. For example:

“ The Appellate Body’s erroneous interpretation of the term “public body” threatens the ability of Members to counteract trade-distorting subsidies provided through SOEs, undermining the interests of all market-oriented actors;
“ The Appellate Body has intruded on Members’ legitimate policy space by essentially converting a non-discrimination obligation for regulations into a ‘detrimental impact’ test;
“ The Appellate Body has prevented WTO Members from fully addressing injurious dumping by prohibiting a common-sense method of calculating the extent of dumping that is injuring a domestic industry (“zeroing”);
“ The Appellate Body’s stringent and unrealistic test for using out-of-country benchmarks to measure subsidies has weakened the effectiveness of trade remedy laws in addressing distortions caused by state-owned enterprises in non-market economies;
“ The Appellate Body’s creation of an “unforeseen developments” test and severe causation analysis prevents the effective use of safeguards by WTO Members to protect their industries from import surges; and
“ The Appellate Body has limited WTO Members’ ability to impose countervailing duties and antidumping duties calculated using a non-market economy methodology to address simultaneous dumping and trade-distorting subsidization by non-market economies like China.

“For many years, successive Administrations and the U.S. Congress have voiced significant concerns about the Appellate Body’s disregard for the rules agreed to by WTO Members. As set forth in the Appendices to this Report, in multiple Congressional Sessions, up to and including the current Session, Senators and Representatives of both parties have voiced urgent concerns and the need for reform in numerous resolutions, reports, and statements.1

“1 See Statements by Members of the United States Congress Expressing Concerns with Appellate Body Overreaching (Appendix A1); Congressional Legislation and Reports Expressing Concern with Appellate Body
Overreaching (Appendix A2); Statements by U.S. Trade Representatives or Their Deputies on Appellate Body Overreach (Appendix B1); and Statements by the United States to the WTO Dispute Settlement Body Expressing Concerns with the Appellate Body’s Failure to Follow WTO Rules and Erroneous Interpretations of the WTO Agreements (Appendix B2).

“Unfortunately, U.S. efforts were ignored, and the problem has worsened as too many WTO Members remain unwilling to do anything to rein in this conduct. The proper functioning of the WTO Appellate Body has a disproportionate impact on the United States because more than one quarter of all disputes at the WTO have been challenges to U.S. laws or other measures. Specifically, 155 disputes have been filed against the United States, and no other Member has faced even a hundred disputes. According to some analyses, up to approximately 90 percent of the disputes pursued against the U.S. have led to a report finding that the U.S. law or other measure was inconsistent with WTO agreements. This means that, on average, over the past 25 years, the WTO has found a U.S. law or measure WTO-inconsistent between five and six times per year, every year.

“But these failings have dire consequences for U.S. interests in the WTO, and for all WTO Members, as well. The negotiating function of the WTO has atrophied as the Appellate Body has facilitated efforts by some Members to obtain through litigation what they have not achieved through negotiation; the effectiveness of WTO tools designed to address distortions by nonmarket economies has been greatly diminished; and the WTO dispute settlement system continues to lose the credibility necessary to maintain public support for the system.

“In short, the Appellate Body’s failure to follow the agreed rules has undermined not only WTO dispute settlement, but the effectiveness and functioning of the WTO more generally. Furthermore, by encouraging behavior that distorts markets, the Appellate Body has helped to make the global economy less efficient. Lasting and effective reform of the WTO dispute settlement system requires all WTO Members to come to terms with the failings of the Appellate Body.”

Additional Comments

The Executive Summary lists seven ways in which the Appellate Body has deviated from the limited role assigned to the Appellate Body within the Dispute Settlement Understanding. The last two listed have not been the focus of much of the U.S. commentary over the last several years but reflect additional concerns with the Appellate Body’s conduct. The first issue goes to decisions where the Appellate Body has ignored the clear Dispute Settlement Understanding requirement to recommend a party bring its actions into conformity with its WTO obligations where during the pendency of a dispute the Member alleged to be acting inconsistent with WTO obligations withdraws the measure in question. Report at 64-68. The second deals with situations where the Appellate Body has articulated how WTO bodies should carry out their functions even though the functioning of various WTO bodies is not an area properly before the Appellate Body. Report at 69-74. A third additional issue that is not listed in the Executive Summary but is in the full report (Report at 74-80) is “The Appellate Body Has Departed from WTO Rules by Deeming Decisions Not Made under Article IX:2 to Be Authoritative Interpretations of Covered Agreements”.

A major part of the Report is a review of selected Appellate Body decisions which have incorrectly interpreted various WTO Agreements and have thus either created obligations or reduced rights of the United States (and other Members). See pages 81 – 119. The opening paragraphs of this part of the Report summarize the concerns (page 81):

“In addition to failing to follow the rules that WTO Members have adopted, the Appellate Body has erroneously interpreted and applied numerous important WTO agreements. The Appellate Body has overreached on substantive issues, engaged in impermissible gap-filling, and read into
the WTO agreements rights or obligations that are not there.

“The texts of the covered agreements result from extensive negotiations among sovereign nations and autonomous customs territories, and reflect differing negotiating objectives and positions. It is often possible to reach agreement on only one particular obligation or discipline while being unable to reach agreement on any obligation or discipline even in a related area. As such, ‘gaps’ in the text of a covered agreement may simply reflect a situation where there was a limit upon what negotiators could agree. WTO Members have not agreed to delegate to WTO adjudicative bodies the task of filling in gaps in the covered agreements, and it is critical for WTO
adjudicators to respect these limits.

“Despite this, the Appellate Body has expanded its own power and attempted to substitute for negotiators to re-write, reduce or supplement the agreed text. Among other interpretive errors, the Appellate Body has engaged in impermissible gap-filling and read into the text of the covered agreements obligations or rights that are not present in the text. This conduct is inconsistent with the Appellate Body’s role and adds to or diminishes Members’ rights and obligations, contrary to Articles 3.2 and 19.2 of the DSU.”

Five examples are reviewed at length, including four that address issues from trade remedy agreements (Subsidies and Countervailing Measures; Anti-Dumping; Safeguards) and one that involves the Technical Barriers to Trade Agreement. Moreover, four additional decisions are referenced in footnote 195:

“195 For example, this Report does not discuss the dispute US – Continued Dumping and Subsidy Offset Act Of 2000, in which the Appellate Body’s interpretation of the Subsidies Agreement in effect created a new category of prohibited subsidies that was neither negotiated nor agreed to by WTO Members; or other examples, such as US – Gambling, US – Cotton, US – FSC.”

The problem of the Appellate Body (or panels) creating obligations or diminishing rights not contained in the various agreements of the WTO is not limited to these nine cases where the U.S. has raised serious concerns but has included concerns raised by many trading partners. In a paper prepared for the Asia Society Policy Institute in early 2018, I reviewed excerpts from various Dispute Settlement Body meetings where various WTO Members raised concerns about creating obligations or diminishing rights. The paper is enclosed below.

Final-Asia-Society-Paper-re-dispute-settlement

Conclusion

The fundamental questions facing the WTO membership on the dispute settlement system are whether Members will agree to conform the dispute settlement system to the limited role envisioned at its creation in 1995 and restore balance to the Agreements that were negotiated. The United States has laid out its case that a limited role for the Appellate Body was all that was intended and all that the U.S. supports. Many Members have seen the deviation from the Dispute Settlement Understanding but have looked the other way or even encouraged the expansion of the deviation for a variety of reasons, not least of which is achieving through disputes what wasn’t achieved through negotiations. Without a resolution acceptable to the United States, the WTO dispute settlement system will struggle to regain its full measure of legitimacy and there will be no restoration of an Appellate Body.