|
XI. Article 11 back to top
A. Text of Article 11
Article 11: Initiation and Subsequent Investigation
11.1 Except as provided in
paragraph 6, an investigation to determine the existence, degree and effect of any
alleged subsidy shall be initiated upon a written application by or on
behalf of the domestic industry.
11.2 An application under
paragraph 1
shall include sufficient evidence of the existence of (a) a subsidy and,
if possible, its amount, (b) injury within the meaning of Article VI of
GATT 1994 as interpreted by this Agreement, and (c) a causal link
between the subsidized imports and the alleged injury. Simple assertion,
unsubstantiated by relevant evidence, cannot be considered sufficient to
meet the requirements of this paragraph. The application shall contain
such information as is reasonably available to the applicant on the
following:
(i) the identity of the
applicant and a description of the volume and value of the domestic
production of the like product by the applicant. Where a written
application is made on behalf of the domestic industry, the application
shall identify the industry on behalf of which the application is made
by a list of all known domestic producers of the like product (or
associations of domestic producers of the like product) and, to the
extent possible, a description of the volume and value of domestic
production of the like product accounted for by such producers;
(ii) a complete
description of the allegedly subsidized product, the names of the
country or countries of origin or export in question, the identity of
each known exporter or foreign producer and a list of known persons
importing the product in question;
(iii) evidence with regard
to the existence, amount and nature of the subsidy in question;
(iv) evidence that alleged
injury to a domestic industry is caused by subsidized imports through
the effects of the subsidies; this evidence includes information on the
evolution of the volume of the allegedly subsidized imports, the effect
of these imports on prices of the like product in the domestic market
and the consequent impact of the imports on the domestic industry, as
demonstrated by relevant factors and indices having a bearing on the
state of the domestic industry, such as those listed in paragraphs 2 and
4 of Article 15.
11.3 The authorities shall review the
accuracy and adequacy of the evidence provided in the application to
determine whether the evidence is sufficient to justify the initiation
of an investigation.
11.4 An investigation shall not be
initiated pursuant to paragraph 1 unless the authorities have
determined, on the basis of an examination of the degree of support for,
or opposition to, the application expressed(38) by domestic
producers of the like product, that the application has been made by or
on behalf of the domestic industry.(39) The application shall be
considered to have been made “by or on behalf of the domestic industry”
if it is supported by those domestic producers whose collective output
constitutes more than 50 per cent of the total production of the like
product produced by that portion of the domestic industry expressing
either support for or opposition to the application. However, no
investigation shall be initiated when domestic producers expressly
supporting the application account for less than 25 per cent of total
production of the like product produced by the domestic industry.
(footnote original) 38 In the case of
fragmented industries involving an exceptionally large number of
producers, authorities may determine support and opposition by using
statistically valid sampling techniques.
(footnote original) 39 Members are aware
that in the territory of certain Members employees of domestic producers
of the like product or representatives of those employees may make or
support an application for an investigation under paragraph
1.
11.5 The authorities shall avoid,
unless a decision has been made to initiate an investigation, any
publicizing of the application for the initiation of an investigation.
11.6 If, in special circumstances, the
authorities concerned decide to initiate an investigation without having
received a written application by or on behalf of a domestic industry
for the initiation of such investigation, they shall proceed only if
they have sufficient evidence of the existence of a subsidy, injury and
causal link, as described in paragraph 2, to justify the initiation of
an investigation.
11.7 The evidence of both subsidy and
injury shall be considered simultaneously (a) in the decision whether or
not to initiate an investigation and (b) thereafter, during the course
of the investigation, starting on a date not later than the earliest
date on which in accordance with the provisions of this Agreement
provisional measures may be applied.
11.8 In cases where products are not
imported directly from the country of origin but are exported to the
importing Member from an intermediate country, the provisions of this
Agreement shall be fully applicable and the transaction or transactions
shall, for the purposes of this Agreement, be regarded as having taken
place between the country of origin and the importing Member.
11.9 An application under
paragraph 1
shall be rejected and an investigation shall be terminated promptly as
soon as the authorities concerned are satisfied that there is not
sufficient evidence of either subsidization or of injury to justify
proceeding with the case. There shall be immediate termination in cases
where the amount of a subsidy is de minimis, or where the volume of
subsidized imports, actual or potential, or the injury, is negligible.
For the purpose of this paragraph, the amount of the subsidy shall be
considered to be de minimis if the subsidy is less than 1 per cent ad
valorem.
11.10 An investigation shall not hinder the
procedures of customs clearance.
11.11 Investigations shall, except in
special circumstances, be concluded within one year, and in no case more
than 18 months, after their initiation.
B. Interpretation and Application of Article 11
1. Article 11.4
(a) “by or on behalf of the domestic
industry”
(i) Requirement to make a determination
243. In US — Offset Act (Byrd
Amendment), the Appellate Body said that Article 11.4 of the
SCM
Agreement requires investigating authorities to “determine” whether
an application for the initiation of an investigation has been “made
by or on behalf of the domestic industry”. If a sufficient number of
domestic producers have “expressed support” and the thresholds set
out in Article 11.4 of the SCM Agreement have therefore been met, the
“application shall be considered to have been made by or on behalf of
the domestic industry”. In such circumstances, an investigation may be
initiated. By contrast, there is no requirement that an investigating
authority examine the motives of domestic producers that elect to
support an investigation. Thus, an “examination” of the “degree”
of support, and not the “nature” of support, is required. In other
words, it is the “quantity”, rather than the “quality”, of
support that is the issue.(343) The Appellate Body ruled:
“A textual examination of Article 5.4 of the
Anti-Dumping Agreement and Article 11.4 of the
SCM Agreement reveals
that those provisions contain no requirement that an investigating
authority examine the motives of domestic producers that elect to
support an investigation.(344) Nor do they contain any explicit
requirement that support be based on certain motives, rather than on
others. The use of the terms ‘expressing support’ and ‘expressly
supporting’ clarify that Articles 5.4 and
11.4 require only that
authorities ‘determine’ that support has been ‘expressed’ by a
sufficient number of domestic producers. Thus, in our view, an ‘examination’
of the ‘degree’ of support, and not the ‘nature’ of support is
required. In other words, it is the ‘quantity’, rather than the ‘quality’,
of support that is the issue.”(345)
244. In considering the “object
and purpose” that had been identified by the Panel on US — Offset
Act (Byrd Amendment), the Appellate Body rejected the Panel’s analysis
whereby it “appear[ed] to have found that the Offset Act defeat[ed]
this ‘object and purpose’ because it implie[d] a return to the
situation which existed before the introduction” of these provisions,
in which an application could be “presumed” to have been made by or
on behalf of the domestic industry. The Appellate Body, instead, said
that Article 11.4 of the SCM Agreement does not permit investigating
authorities to “presume” that industry support for an application
exists. Rather, a sufficient number of domestic producers must have “expressed
support” for an application. In this sense, the Appellate Body did not
agree with the Panel that the Offset Act had “defeated” the object
and purpose of Article 11.4 of the SCM
Agreement, even if it were to
have assumed that the Panel’s understanding of the object and purpose
was correct. In the same vein, the Appellate Body did not agree with the
Panel that the Offset Act renders the quantitative threshold tests
included in Article 11.4 of the SCM Agreement “irrelevant” and “completely
meaningless” by saying:
“[W]e do not agree with the Panel that the CDSOA
has ‘defeated’ the object and purpose of Article 5.4 and
11.4, even
if we were to assume that the Panel’s understanding of such object and
purpose was correct. For the same reason, we also do not agree with the
Panel that the CDSOA renders the quantitative threshold test included in
Articles 5.4 and 11.4 ‘irrelevant’(346) and ‘completely meaningless’.”(347),
(348)
(ii) “evidence of industry-wide concern
of injury”
245. In US — Offset Act (Byrd
Amendment), the Appellate Body said that while it agreed with the Panel
that support expressed by domestic producers may be evidence of an “industry-wide
concern of injury”, it did not agree that such support on its own may
be taken as evidence of such concern. The Appellate Body also noted that
Article 11.4 of the SCM Agreement contains “no requirement for
investigating authorities to examine the motives of producers that elect
to support (or to oppose) an application”.(349)
(iii) “the Act in effect mandates
domestic producers to support the application”
246. The Appellate Body on US —
Offset Act (Byrd Amendment) said that the Panel had no basis for stating
that the Act in effect mandates domestic producers to support the
application. That a measure provides an “incentive” to act in a
certain way, said the Appellate Body, does not mean that it “in effect
mandates” or “requires” a certain form of action.(350) It was on
this basis that the Appellate Body reversed the Panel’s finding that
the Offset Act was inconsistent with Article 11.4 of the
SCM
Agreement.(351)
(b) “good faith”
247. In US — Offset Act (Byrd
Amendment), the Appellate Body considered the Panel’s conclusion that
the United States did not act in “good faith” with respect to its
obligations under Article 11.4 of the SCM
Agreement. The Appellate Body
observed that Article 31(1) of the Vienna Convention on the Law of
Treaties directs a treaty interpreter to interpret a treaty in good
faith in accordance with the ordinary meaning to be given to the terms
of the treaty in their context and in the light of the treaty’s object
and purpose. Furthermore, under Article 26 of the Vienna Convention on
the Law of Treaties, performance of treaties is also governed by the
principle of good faith. The Appellate Body has recognized the relevance
of the principle of good faith in a number of cases, such as US —
Shrimp and US — Hot-Rolled Steel. In US — Offset Act (Byrd
Amendment), the Appellate Body said that the evidence in the Panel
record does not support the Panel’s statement that the United States
“may be regarded as not having acted in good faith”. Therefore, the
Appellate Body rejected the Panel’s conclusion to this effect.(352) The
Appellate Body said:
“Nothing, however, in the covered agreements
supports the conclusion that simply because a WTO Member is found to
have violated a substantive treaty provision, it has therefore not acted
in good faith. In our view, it would be necessary to prove more than
mere violation to support such a conclusion.”(353)
(c) Relationship with Article 5.4 of the
Anti-Dumping Agreement
248. In US — Offset Act (Byrd
Amendment), the Appellate Body, further to noting that both Article 5.4
of the Anti-Dumping Agreement and Article 11.4 of the
SCM Agreement are
“identical” provisions, went on and analysed them together. See
paragraph 243 above.
2. Article 11.9
(a) General
249. In US — Carbon Steel, the
Panel noted that Article 11.9 sets out certain grounds for termination
of countervailing duty proceedings. The Panel considered three bases for
termination: (i) insufficient evidence of either subsidization or of
injury; (ii) negligible volume of subsidized imports; and (iii)
negligible injury. The Panel stated that these bases were grounded in
the notion of, and sought to limit countervailing duty proceedings to
cases of, injurious subsidization:
“We note that Article 11.9 sets out certain
other grounds for termination of CVD proceedings as well: (i)
insufficient evidence of either subsidization or of injury; (ii)
negligible volume of subsidized imports; and (iii) negligible injury. It
would seem clear to us that all three bases for termination are
fundamentally grounded in the notion of, and seek to limit CVD
proceedings to cases of, injurious subsidization. We consider that all
grounds for termination of CVD proceedings — including de minimis
subsidization — link expressly with the purpose of CVDs and with the
object and purpose of the SCM Agreement as set out in Article VI of the
GATT 1994. The recurrent theme, in our view, is that CVD proceedings
serve to counter injurious subsidization and therefore may not continue
if injurious subsidization does not (or is not likely to) exist. The
nature of the other bases set out in Article 11.9 for termination of CVD
proceedings supports our view that the rationale for the de minimis
standard is that relating to non-injurious subsidization.”(354)
(b) Non-application of “de minimis”
standard to sunset reviews
250. The Appellate Body on US —
Carbon Steel reversed the Panel’s finding that concluded that the 1
per cent de minimis standard contained in Article 11.9 of the SCM
Agreement (which applies to countervailing duty investigations) could be
“implied” in Article 21.3 of the SCM Agreement on sunset reviews of
countervailing duty determinations. In doing so, the Appellate Body
observed that all the subdivisions of Article 11 relate to the
authorities’ initiation and conduct of a countervailing duty investigation, and in particular reflect rules that are of “a mainly
procedural and evidentiary nature”.(355) The Appellate Body considered:
“Although the terms of Article 11.9 are detailed
as regards the obligations imposed on authorities thereunder, none of
the words in Article 11.9 suggests that the de minimis standard that it
contains is applicable beyond the investigation phase of a
countervailing duty proceeding. In particular, Article 11.9 does not
refer to Article 21.3, nor to reviews that may follow the imposition of
a countervailing duty.”(356)
251. The Appellate Body on US —
Carbon Steel criticized on several grounds the Panel’s approach to the
de minimis standard in Article 21.3 and observed that it “centred”
on the premise that the Article 11.9 de minimis standard represents a
threshold below which subsidization is always non-injurious. While the
Appellate Body recognized that it would be “unlikely” that very low
levels of subsidization could be shown to cause “material” injury,
it considered that the SCM Agreement does not per se preclude such a
possibility.(357) In this regard, the Appellate Body noted:
“[T]here is nothing in Article 11.9 to suggest
that its de minimis standard was intended to create a special category
of ‘non-injurious’ subsidization, or that it reflects a concept that
subsidization at less than a de minimis threshold can never cause
injury. For us, the de minimis standard in Article 11.9 does no more
than lay down an agreed rule that if de minimis subsidization is found
to exist in an original investigation, authorities are obliged to
terminate their investigation, with the result that no countervailing
duty can be imposed in such cases.”(358)
252. The Appellate Body on US —
Carbon Steel then examined Article 11.9 and other paragraphs of
Article
11 and found that most of these provisions set forth rules of “a
mainly procedural and evidentiary nature” and that “none of the
words in Article 11.9 suggests that the de minimis standard that it
contains is applicable beyond the investigation phase of a
countervailing duty proceeding. In particular, Article 11.9 does not
refer to Article 21.3, nor to reviews that may follow the imposition of
a countervailing duty.”(359)
253. The Appellate Body on US —
Carbon Steel noted in particular the absence of textual
cross-referencing between Article 21.3 and
Article 11.9 and observed
that:
“[T]he technique of cross-referencing is
frequently used in the SCM Agreement … In the light of the many
express cross-references made in the SCM Agreement, we attach
significance to the absence of any textual link between Article 21.3
reviews and the de minimis standard set forth in Article
11.9. We
consider this to be noteworthy, having regard to the fact that both the
adoption of a de minimis standard for investigations, and the
introduction of a “sunset” provision, were regarded as important
additions to the Tokyo Round Subsidies Code for improving GATT
disciplines on subsidies and countervailing duties.”(360)
254. The Appellate Body on US —
Carbon Steel drew attention to the reference to Article 12 in
Article
21.4 and noted the lack of reference to Article
11, “as an indication
that the drafters intended that the obligations in Article
12, but not
those in Article 11, would apply to reviews carried out under
Article
21.3”.(361) The Appellate Body found that “Part V of the Agreement is
aimed at striking a balance between the right to impose countervailing
duties to offset subsidization that is causing injury, and the
obligations that Members must respect in order to do so. While we agree
that Part V strikes such a balance, this alone does not assist us in the
task of determining whether the 1 percent de minimis standard in
Article
11.9 is intended to be applied in reviews carried out pursuant to
Article 21.3.”(362)
255. The Appellate Body on US —
Carbon Steel further considered that the Panel’s decision to “imply”
the de minimis standard in Article 21.3 was based on the fact that the
Article 11.9 de minimis standard draws a threshold below which
subsidization is non-injurious. The Appellate Body considered the Panel’s
approach to be wrong and indicated, inter alia, that the Panel had not
explained why it thought it appropriate to rely on a 1987 Note prepared
by the Secretariat for the Uruguay Round Negotiating Group on Subsidies
and Countervailing Measures.(363)
“We observe, first, that in taking this
approach, the Panel did not explain why it thought that it was
appropriate to rely on the 1987 Note, but simply stated that “it is
useful to consider the rationale for the application of a de minimis
standard to investigations, as reflected in a Note by the Secretariat
prepared in April 1987”.(364) In any event, it seems to us that the 1987
Note does not support the Panel’s conclusion that the “rationale”
for the de minimis standard in Article 11.9 is that a de minimis subsidy
is considered to be non-injurious. As the Panel itself recognized, the
1987 Note sets forth two rationales for de minimis standards, but does
not suggest which of them is more compelling or preferable. Nor was any
evidence adduced before the Panel suggesting that the negotiators of the
SCM Agreement considered these or other rationales and expressed a
preference for any of them. The Panel chose to base its interpretation
of Article 11.9 on only one of these rationales. Even if it were
appropriate to rely on the 1987 Note in interpreting the SCM Agreement
in accordance with the rules of interpretation set forth in the Vienna
Convention, selective reliance on such a document does not provide a
proper basis for the conclusion reached by the Panel in this regard.”(365)
256. Moreover, the Appellate Body
in US — Carbon Steel considered that “Article 15 of the SCM
Agreement, which deals with injury and how it is to be determined,
refers, in its paragraph 3, to the de minimis standard in
Article 11.9
only for the purpose of cumulation of imports. Moreover, footnote 45 to
Article 15 indicates that, in the SCM Agreement, the term “injury”
is, “unless otherwise specified”, [to] be taken to mean material
injury to a domestic industry, threat of material injury to a domestic
industry or material retardation of the establishment of such an
industry and shall be interpreted in accordance with the provisions of [Article
15]”:(366)
“In defining the concept of injury, footnote 45
does not make any reference to the amount of subsidy involved. The
Appellate Body also highlighted that “Article 1 of the SCM Agreement
sets out a definition of “subsidy” that applies to the whole of that
Agreement. This definition includes all such subsidies, regardless of
their amount. None of the provisions in the SCM Agreement that uses the
term “subsidization” confines the meaning of “subsidization” to
subsidization at a rate equal to or in excess of 1 percent ad valorem,
or to any other de minimis threshold. (367) It is also worth noting that,
under Part II of the SCM Agreement, prohibited subsidies are prohibited
regardless of the amount of the subsidy.
[I]n our view, the terms “subsidization” and
“injury” each have an independent meaning in the SCM Agreement which
is not derived by reference to the other. It is unlikely that very low
levels of subsidization could be demonstrated to cause “material”
injury. Yet such a possibility is not, per se, precluded by the
Agreement itself, as injury is not defined in the SCM Agreement in
relation to any specific level of subsidization.”(368)
257. The Appellate Body on US —
Carbon Steel then considered the negotiating history of the SCM
Agreement and confirmed its view on the meaning of Article
21.3:
“[R]ecourse to the negotiating history of the
SCM Agreement tends to confirm our view as to the meaning of Article
21.3. We note that the two issues, namely the application of a specific
de minimis standard in investigations, and the introduction of a
time-bound limitation on the maintenance of countervailing duties, were
considered to be highly important and were the subject of protracted
negotiations. … The final texts of Article 11.9 and of
Article 21.3
were the result of a carefully negotiated compromise that drew from a
number of different proposals, reflecting divergent interests and views.
We further note in this respect that none of the participants in this
appeal pointed to any document indicating that the inclusion of a de
minimis threshold was ever considered in the negotiations on sunset
review provisions leading to the text of Article
21.3.”(369)
XII. Article 12 back to top
A. Text of Article 12
Article 12: Evidence
12.1 Interested Members and all
interested parties in a countervailing duty investigation shall be given
notice of the information which the authorities require and ample
opportunity to present in writing all evidence which they consider
relevant in respect of the investigation in question.
12.1.1 Exporters, foreign producers or interested
Members receiving questionnaires used in a countervailing duty
investigation shall be given at least 30 days for reply.(40) Due
consideration should be given to any request for an extension of the
30-day period and, upon cause shown, such an extension should be granted
whenever practicable.
(footnote original) 40 As a general rule, the
time-limit for exporters shall be counted from the date of receipt of
the questionnaire, which for this purpose shall be deemed to have been
received one week from the date on which it was sent to the respondent
or transmitted to the appropriate diplomatic representatives of the
exporting Member or, in the case of a separate customs territory Member
of the WTO, an official representative of the exporting territory.
12.1.2 Subject to the requirement to
protect confidential information, evidence presented in writing by one
interested Member or interested party shall be made available promptly
to other interested Members or interested parties participating in the
investigation.
12.1.3 As soon as an investigation has
been initiated, the authorities shall provide the full text of the
written application received under paragraph 1 of Article 11 to the
known exporters(41) and to the authorities of the exporting Member and
shall make it available, upon request, to other interested parties
involved. Due regard shall be paid to the protection of confidential
information, as provided for in paragraph 4.
(footnote original) 41 It being understood that
where the number of exporters involved is particularly high, the full
text of the application should instead be provided only to the
authorities of the exporting Member or to the relevant trade association
who then should forward copies to the exporters concerned.
12.2 Interested Members and interested
parties also shall have the right, upon justification, to present
information orally. Where such information is provided orally, the
interested Members and interested parties subsequently shall be required
to reduce such submissions to writing. Any decision of the investigating
authorities can only be based on such information and arguments as were
on the written record of this authority and which were available to
interested Members and interested parties participating in the
investigation, due account having been given to the need to protect
confidential information.
12.3 The authorities shall whenever
practicable provide timely opportunities for all interested Members and
interested parties to see all information that is relevant to the
presentation of their cases, that is not confidential as defined in
paragraph 4, and that is used by the authorities in a countervailing
duty investigation, and to prepare presentations on the basis of this
information.
12.4 Any information which is by
nature confidential (for example, because its disclosure would be of
significant competitive advantage to a competitor or because its
disclosure would have a significantly adverse effect upon a person
supplying the information or upon a person from whom the supplier
acquired the information), or which is provided on a confidential basis
by parties to an investigation shall, upon good cause shown, be treated
as such by the authorities. Such information shall not be disclosed
without specific permission of the party submitting it.(42)
(footnote original) 42 Members are aware that in
the territory of certain Members disclosure pursuant to a narrowly-drawn
protective order may be required.
12.4.1 The authorities shall require
interested Members or interested parties providing confidential
information to furnish non-confidential summaries thereof. These
summaries shall be in sufficient detail to permit a reasonable
understanding of the substance of the information submitted in
confidence. In exceptional circumstances, such Members or parties may
indicate that such information is not susceptible of summary. In such
exceptional circumstances, a statement of the reasons why summarization
is not possible must be provided.
12.4.2 If the authorities find that a
request for confidentiality is not warranted and if the supplier of the
information is either unwilling to make the information public or to
authorize its disclosure in generalized or summary form, the authorities
may disregard such information unless it can be demonstrated to their
satisfaction from appropriate sources that the information is correct.(43)
(footnote original) 43 Members agree that
requests for confidentiality should not be arbitrarily rejected. Members
further agree that the investigating authority may request the waiving
of confidentiality only regarding information relevant to the
proceedings.
12.5 Except in circumstances provided
for in paragraph 7, the authorities shall during the course of an
investigation satisfy themselves as to the accuracy of the information
supplied by interested Members or interested parties upon which their
findings are based.
12.6 The investigating authorities may
carry out investigations in the territory of other Members as required,
provided that they have notified in good time the Member in question and
unless that Member objects to the investigation. Further, the
investigating authorities may carry out investigations on the premises
of a firm and may examine the records of a firm if (a) the firm so
agrees and (b) the Member in question is notified and does not object.
The procedures set forth in Annex VI shall apply to investigations on
the premises of a firm. Subject to the requirement to protect
confidential information, the authorities shall make the results of any
such investigations available, or shall provide disclosure thereof
pursuant to paragraph 8, to the firms to which they pertain and may make
such results available to the applicants.
12.7 In cases in which any interested
Member or interested party refuses access to, or otherwise does not
provide, necessary information within a reasonable period or
significantly impedes the investigation, preliminary and final
determinations, affirmative or negative, may be made on the basis of the
facts available.
12.8 The authorities shall, before a
final determination is made, inform all interested Members and
interested parties of the essential facts under consideration which form
the basis for the decision whether to apply definitive measures. Such
disclosure should take place in sufficient time for the parties to
defend their interests.
12.9 For the purposes of this
Agreement, “interested parties” shall include:
(i) an exporter or foreign
producer or the importer of a product subject to investigation, or a
trade or business association a majority of the members of which are
producers, exporters or importers of such product; and
(ii) a producer of the
like product in the importing Member or a trade and business association
a majority of the members of which produce the like product in the
territory of the importing Member.
This list shall not preclude Members from allowing
domestic or foreign parties other than those mentioned above to be
included as interested parties.
12.10 The authorities shall provide
opportunities for industrial users of the product under investigation,
and for representative consumer organizations in cases where the product
is commonly sold at the retail level, to provide information which is
relevant to the investigation regarding subsidization, injury and
causality.
12.11 The authorities shall take due
account of any difficulties experienced by interested parties, in
particular small companies, in supplying information requested, and
shall provide any assistance practicable.
12.12 The procedures set out above are
not intended to prevent the authorities of a Member from proceeding
expeditiously with regard to initiating an investigation, reaching
preliminary or final determinations, whether affirmative or negative, or
from applying provisional or final measures, in accordance with relevant
provisions of this Agreement.
B. Interpretation and Application of Article 12
No jurisprudence or decision of a competent WTO
body.
XIII. Article 13 back to top
A. Text of Article 13
Article 13: Consultations
13.1 As soon as possible after an
application under Article 11 is accepted, and in any event before the
initiation of any investigation, Members the products of which may be
subject to such investigation shall be invited for consultations with
the aim of clarifying the situation as to the matters referred to in
paragraph 2 of Article 11 and arriving at a mutually agreed solution.
13.2 Furthermore, throughout the
period of investigation, Members the products of which are the subject
of the investigation shall be afforded a reasonable opportunity to
continue consultations, with a view to clarifying the factual situation
and to arriving at a mutually agreed solution.(44)
(footnote original) 44 It is particularly
important, in accordance with the provisions of this paragraph, that no
affirmative determination whether preliminary or final be made without
reasonable opportunity for consultations having been given. Such
consultations may establish the basis for proceeding under the
provisions of Part II, III or
X.
13.3 Without prejudice to the
obligation to afford reasonable opportunity for consultation, these
provisions regarding consultations are not intended to prevent the
authorities of a Member from proceeding expeditiously with regard to
initiating the investigation, reaching preliminary or final
determinations, whether affirmative or negative, or from applying
provisional or final measures, in accordance with the provisions of this
Agreement.
13.4 The Member which intends to
initiate any investigation or is conducting such an investigation shall
permit, upon request, the Member or Members the products of which are
subject to such investigation access to non-confidential evidence,
including the non-confidential summary of confidential data being used
for initiating or conducting the investigation.
B. Interpretation and Application of Article 13
No jurisprudence or decision of a competent WTO
body.
XIV. Article 14 back to top
A. Text of Article 14
Article 14: Calculation of the Amount of a
Subsidy in Terms of the Benefit to the Recipient
For the purpose of Part V, any method used by the investigating
authority to calculate the benefit to the recipient conferred pursuant
to paragraph 1 of Article 1 shall be provided for in the national
legislation or implementing regulations of the Member concerned and its
application to each particular case shall be transparent and adequately
explained. Furthermore, any such method shall be consistent with the
following guidelines:
(a) government provision
of equity capital shall not be considered as conferring a benefit,
unless the investment decision can be regarded as inconsistent with the
usual investment practice (including for the provision of risk capital)
of private investors in the territory of that Member;
(b) a loan by a government
shall not be considered as conferring a benefit, unless there is a
difference between the amount that the firm receiving the loan pays on
the government loan and the amount the firm would pay on a comparable
commercial loan which the firm could actually obtain on the market. In
this case the benefit shall be the difference between these two amounts;
(c) a loan guarantee by a
government shall not be considered as conferring a benefit, unless there
is a difference between the amount that the firm receiving the guarantee
pays on a loan guaranteed by the government and the amount that the firm
would pay on a comparable commercial loan absent the government
guarantee. In this case the benefit shall be the difference between
these two amounts adjusted for any differences in fees;
(d) the provision of goods
or services or purchase of goods by a government shall not be considered
as conferring a benefit unless the provision is made for less than
adequate remuneration, or the purchase is made for more than adequate
remuneration. The adequacy of remuneration shall be determined in
relation to prevailing market conditions for the good or service in
question in the country of provision or purchase (including price,
quality, availability, marketability, transportation and other
conditions of purchase or sale).
B. Interpretation and Application of Article 14
1. General
(a) “calculate the benefit to the recipient
conferred pursuant to paragraph 1 of Article 1”
(i) “benefit”
258. The Panel on US — Lead and
Bismuth II rejected the argument that “benefit” should be determined
by reference to the market practice prevailing at the time that each of
the four types of “financial contribution [under Article
1.1] … is
bestowed”.(370) Instead, the Panel stated that “[n]othing in the text
of Article 14 restricts the analysis envisaged in
sub-paragraphs (a)-(d)
… to the time at which the relevant ‘financial contribution’ was
bestowed…. Article 14 does not … guide Members as to when th[e]
calculation of ‘benefit’ should take place.”(371)
259. As regards the concept of a
benefit in Article 1.1, see
paragraphs 45-72 above.
2. Article 14(c)
260. In Canada — Aircraft
Credits and Guarantees, the Panel noted the relevance of Article 14(c)
of the SCM Agreement for the purpose of establishing the existence of a
“benefit” in the framework of equity guarantees. It noted that a “benefit”
could arise if there was a difference between the cost of equity with
and without an equity guarantee programme, to the extent that such
difference was not covered by the fees charged by the programme for
providing the equity guarantee. If it is established that the programme’s
fees were not market-based, the Panel said, such a cost difference would
not be covered by the programme’s fees:
“[A]lthough Article 14(c) is expressly concerned
with ‘benefit’ in the context of loan guarantees, there are perhaps
sufficient similarities between the operation of loan guarantees and
equity guarantees for it to be appropriate to rely on Article 14(c) for
the purpose of establishing the existence of ‘benefit’ in the
context of equity guarantees in certain circumstances. Thus, a ‘benefit’
could arise if there is a difference between the cost of equity with and
without an IQ equity guarantee, to the extent that such difference is
not covered by the fees charged by IQ for providing the equity
guarantee. In our opinion, it is safe to assume that such cost
difference would not be covered by IQ’s fees if it is established that
IQ’s fees are not market-based.” (372)
261. Regarding the loan guarantee
programmes under consideration, the Panel on Canada — Aircraft Credits
and Guarantees also referred to the findings of the Panel and the
Appellate Body in Canada — Aircraft(373) and considered that
Article
14(c) of the SCM Agreement provided “contextual guidance for
interpreting the term ‘benefit’ in the context of loan guarantees”.
On this basis, the Panel stated that there would be a “benefit” when
the cost-saving for the company’s customer for securing a loan with a
loan guarantee programme is not offset by the programme’s fees; for
example, if it was established that the programme’s fees were not
market-based.(374) The Panel stated:
“In our view, and taking into account the
contextual guidance afforded by Article 14(c), we consider that an IQ
loan guarantee will confer a “benefit” when “there is a difference
between the amount that the firm receiving the guarantee pays on a loan
guaranteed by [IQ] and the amount that the firm would pay on a
comparable commercial loan absent the [IQ] guarantee. In this case the
benefit shall be the difference between these two amounts adjusted for
any differences in fees.”(375)
3. Article 14(d)
(a) General
262. In US — Softwood Lumber
III, the Panel noted that “Article 14(d) is the relevant provision in
the SCM Agreement for measuring the amount of benefit to the recipient
by determining whether the government has provided a good or service,
within the meaning of Article 1.1(a)(1)(iii) SCM
Agreement, for less
than adequate remuneration.”(376)
263. Regarding Article 14(d) and
the notion of benefit, the Panel on US — Softwood Lumber III further
clarified that the prevailing market conditions for the good or service
in question in the country of provision or purchase are determinant:
“Article 14(d) SCM Agreement thus provides that
the provision of goods by a government shall not be considered as
conferring a benefit unless the provision is made for less than adequate
remuneration. The adequacy of the remuneration charged by the government
shall be determined ‘in relation to the prevailing market
conditions for the good or service in question in the country of
provision or purchase (including price, quality, availability,
marketability, transportation and other conditions of purchase or sale)’.
We find that the text of Article 14(d) SCM Agreement is very clear: the
adequacy of remuneration is to be determined in relation to prevailing
market conditions for the good or service in question in the country of
provision or purchase.”(377) (emphasis original)
264. The Panel on US — Softwood
Lumber III further clarified the notion of prevailing market conditions
in the country of provision of the goods under consideration in light of
the language of Article 14(d). The Panel considered that the prevailing
market conditions of Article 14(d) do not refer to a “theoretical
market free of government interference”. Rather, Article 14(d)
provides that the “prevailing” market conditions in the country of
provision of the goods are to form the basis for the comparison. For the
Panel, the “ordinary meaning” of the term “prevailing” market
conditions is the market conditions as “as they exist” or “which
are predominant”. (emphasis original)
“[T]here is no basis in the text of the SCM
Agreement to conclude that the market conditions in the country of
provision could mean anything else than the conditions prevailing in the
market of that country, and not those prevailing in some other country.
Article 14(d) SCM Agreement does not just refer to ‘market conditions’
in general, but explicitly to those prevailing ‘in the country of
provision’ of the good. … the fact that a good may also be bought on
a market outside the country of provision, does not, in our view, imply
that the prices for those goods in that other country become part of the
market conditions ‘in the country of provision’. … In light of the
clear language of Article 14(d) SCM Agreement, the ‘availability’ of
the good, the ‘conditions of purchase or sale’, the ‘price’, are
various aspects of the market conditions existing in the country of
provision, and refer to the price for the good in that country, its
availability in that country, the conditions of sale as they are
prevailing in that country. In our view, the bracketed language in
Article 14(d) SCM Agreement specifies what the market conditions
referred to in the preceding sentence are, and, as is the case for the
‘market conditions’, they also all relate to the country of
provision, and not some other country.
… The fact that in the different context of
criteria for a similar measure to constitute a prohibited export subsidy
there is an explicit requirement to look at commercially available world
market prices, cannot mean that any reference to the ‘market’ in the
SCM Agreement necessarily refers to the world market, or some portion
thereof, particularly when the language in the provision clearly states
otherwise. We note that the prices of imported goods in the market of
provision can indeed form part of the prevailing market conditions in
the sense of Article 14(d) SCM Agreement. But this is not the same as
the price for those goods prevailing in the country of export. Nor does
this imply that import prices necessarily can be the exclusive basis to
determine prevailing market conditions.
In our view, however, the ‘prevailing market
conditions’ of Article 14(d) SCM Agreement do not refer to a
theoretical market free of government interference as the US seems to be
suggesting. Article 14(d) SCM Agreement provides that the “prevailing”
market conditions in the country of provision of the goods are to form
the basis for the comparison. The ordinary meaning of the term “prevailing”
market conditions is the market conditions ‘as they exist’ or ‘which
are predominant’. Considering that the only qualifier used to the “market
conditions” in question is that they be ‘prevailing’, we are of
the view that the text of Article 14(d) SCM Agreement does not in any
way require the ‘market’ conditions to be those of a hypothetical
undistorted or perfectly competitive market.”(378)
265. The Panel concluded that the
text of Article 14(d) does not require the “market” conditions to be
those of a “hypothetical undistorted or perfectly competitive market”:
“[T]he chapeau of Article 14 SCM Agreement
clearly states that Article 14 SCM Agreement establishes guidelines for
the calculation of “benefit” to the recipient.(379) … in order to
calculate the benefit to the recipient, an authority is to compare the
price the recipient paid the government with the prices prevailing in
other market transactions. We do not consider that the goal of the
examination of the benefit enjoyed by the recipient is to determine what
the market price would have been absent the government’s financial
contribution … or to measure the trade distorting potential of the
government’s financial contribution. The text of Article 14 SCM
Agreement does not require a general “but for” test to the
prevailing market conditions. We are thus of the view that Article 14(d)
SCM Agreement does not require that the authority construct a market
price that could have existed but for the government’s involvement,
nor does it allow the authority to decline to use in-country prices
because they may be affected by the government’s financial
contribution.
We consider that if the drafters of the SCM
Agreement had wanted to exclude the use of market prices in case of
price suppression due to the government’s involvement, they would have
explicitly provided so, but they have not. The opposite is the case. As
we found above, when it comes to the market conditions, the only
qualifier in the text of the Agreement is “prevailing”. Thus, the
market conditions are those that are actually existing in the country
and are those faced by the recipient of the financial contribution. The
reference prices are those that the producer would have had to pay if it
had to buy the goods now provided by the government from a different and
independent seller.”(380)
266. The Panel on US — Softwood
Lumber III clarified that the plain meaning of the text needed to be
taken into account even in exceptional circumstances:
“[E]ven if in certain exceptional circumstances
it may prove difficult in practice to apply Article 14(d) SCM
Agreement,
that would not justify reading words into the text of the Agreement that
are not there or ignoring the plain meaning of the text. In our view,
the text of Article 14 SCM Agreement leaves no choice to the
investigating authority but to use as a benchmark the market, for the
good (or service) in question, as it exists in the country of provision.”(381)
267. The Panel on US — Softwood
Lumber III noted moreover that with regard to domestic markets, each WTO
Member has a different market with different qualitative requirements:
“[T]he domestic markets of the member countries
of the WTO are not identical — nor are they expected to be — and
there is nothing in the WTO or SCM Agreement indicating that, in order
to qualify as such, markets must meet specific qualitative requirements
… A contrary conclusion would lead to a result in which the importing
country would have a very broad scope to choose another market,
including its own, in order to determine benefit. Such a result would
clearly distort the letter and purpose of Article 14(d) and vitiate its
intended application.”(382)
268. On this basis, the Panel
found that the Member that had included its own data in the examination
of the claimant’s stumpage prices had acted inconsistently with
Article 14 and 14(d) of the SCM Agreement. (383)
(b) Relationship with other Articles
269. With respect to the
relationship with Article 1.1 and
Article 1.1(b), see respectively
paragraphs 79 and 73 above.
XV. Article 15 back to top
A. Text of Article 15
Article 15: Determination of Injury(45)
(footnote original)
45 Under this Agreement the
term “injury” shall, unless otherwise specified, be taken to mean
material injury to a domestic industry, threat of material injury to a
domestic industry or material retardation of the establishment of such
an industry and shall be interpreted in accordance with the provisions
of this Article.
15.1 A determination of injury
for purposes of Article VI of GATT 1994 shall be based on positive
evidence and involve an objective examination of both (a) the volume of
the subsidized imports and the effect of the subsidized imports on
prices in the domestic market for like products(46) and (b) the consequent
impact of these imports on the domestic producers of such products.
(footnote original) 46 Throughout this Agreement
the term “like product” (“produit similaire”) shall be
interpreted to mean a product which is identical, i.e. alike in all
respects to the product under consideration, or in the absence of such a
product, another product which, although not alike in all respects, has
characteristics closely resembling those of the product under
consideration.
15.2 With regard to the volume of the
subsidized imports, the investigating authorities shall consider whether
there has been a significant increase in subsidized imports, either in
absolute terms or relative to production or consumption in the importing
Member. With regard to the effect of the subsidized imports on prices,
the investigating authorities shall consider whether there has been a
significant price undercutting by the subsidized imports as compared
with the price of a like product of the importing Member, or whether the
effect of such imports is otherwise to depress prices to a significant
degree or to prevent price increases, which otherwise would have
occurred, to a significant degree. No one or several of these factors
can necessarily give decisive guidance.
15.3 Where imports of a product from
more than one country are simultaneously subject to countervailing duty
investigations, the investigating authorities may cumulatively assess
the effects of such imports only if they determine that (a) the amount
of subsidization established in relation to the imports from each
country is more than de minimis as defined in paragraph 9 of Article 11
and the volume of imports from each country is not negligible and (b) a
cumulative assessment of the effects of the imports is appropriate in
light of the conditions of competition between the imported products and
the conditions of competition between the imported products and the like
domestic product.
15.4 The examination of the impact of
the subsidized imports on the domestic industry shall include an
evaluation of all relevant economic factors and indices having a bearing
on the state of the industry, including actual and potential decline in
output, sales, market share, profits, productivity, return on
investments, or utilization of capacity; factors affecting domestic
prices; actual and potential negative effects on cash flow, inventories,
employment, wages, growth, ability to raise capital or investments and,
in the case of agriculture, whether there has been an increased burden
on government support programmes. This list is not exhaustive, nor can
one or several of these factors necessarily give decisive guidance.
15.5 It must be demonstrated that the
subsidized imports are, through the effects(47) of subsidies, causing
injury within the meaning of this Agreement. The demonstration of a
causal relationship between the subsidized imports and the injury to the
domestic industry shall be based on an examination of all relevant
evidence before the authorities. The authorities shall also examine any
known factors other than the subsidized imports which at the same time
are injuring the domestic industry, and the injuries caused by these
other factors must not be attributed to the subsidized imports. Factors
which may be relevant in this respect include, inter alia, the volumes
and prices of non-subsidized imports of the product in question,
contraction in demand or changes in the patterns of consumption, trade
restrictive practices of and competition between the foreign and
domestic producers, developments in technology and the export
performance and productivity of the domestic industry.
(footnote original) 47 As set forth in
paragraphs
2 and 4.
15.6 The effect of the subsidized
imports shall be assessed in relation to the domestic production of the
like product when available data permit the separate identification of
that production on the basis of such criteria as the production process,
producers’ sales and profits. If such separate identification of that
production is not possible, the effects of the subsidized imports shall
be assessed by the examination of the production of the narrowest group
or range of products, which includes the like product, for which the
necessary information can be provided.
15.7 A determination of a threat of
material injury shall be based on facts and not merely on allegation,
conjecture or remote possibility. The change in circumstances which
would create a situation in which the subsidy would cause injury must be
clearly foreseen and imminent. In making a determination regarding the
existence of a threat of material injury, the investigating authorities
should consider, inter alia, such factors as:
(i) nature of the subsidy
or subsidies in question and the trade effects likely to arise therefrom;
(ii) a significant rate of
increase of subsidized imports into the domestic market indicating the
likelihood of substantially increased importation;
(iii) sufficient freely disposable, or
an imminent, substantial increase in, capacity of the exporter
indicating the likelihood of substantially increased subsidized exports
to the importing Member’s market, taking into account the availability
of other export markets to absorb any additional exports;
(iv) whether imports are
entering at prices that will have a significant depressing or
suppressing effect on domestic prices, and would likely increase demand
for further imports; and
(v) inventories of the
product being investigated.
No one of these factors by itself can necessarily
give decisive guidance but the totality of the factors considered must
lead to the conclusion that further subsidized exports are imminent and
that, unless protective action is taken, material injury would occur.
15.8 With respect to cases where
injury is threatened by subsidized imports, the application of
countervailing measures shall be considered and decided with special
care.
B. Interpretation and Application of Article 15
1. Footnote 46
(a) “characteristics closely resembling”
270. In its “like product”
analysis under footnote 46, the Panel on Indonesia — Autos emphasized
the physical characteristics of the compared products and held that in
its analysis, the Panel would also be guided by the “like product”
analysis contained in the Appellate Body Report in Korea — Alcoholic
Beverages:
“In our view, the analysis as to which cars have
‘characteristics closely resembling’ those of the Timor logically
must include as an important element the physical characteristics of the
cars in question. This is especially the case because many of the other
possible criteria identified by the parties are closely related to the
physical characteristics of the cars in question. Thus, factors such as
brand loyalty, brand image/reputation, status and resale value reflect,
at least in part, an assessment by purchasers of the physical
characteristics of the cars being purchased. Although it is possible
that products that are physically very different can be put to the same
uses, differences in uses generally arise out of, and assist in
assessing the importance of, different physical characteristics of
products. Similarly, the extent to which products are substitutable may
also be determined in substantial part by their physical
characteristics. Price differences also may (but will not necessarily)
reflect physical differences in products. An analysis of tariff
classification principles may be useful because it provides guidance as
to which physical distinctions between products were considered
significant by Customs experts. However, we do not see that the SCM
Agreement precludes us from looking at criteria other than physical
characteristics, where relevant to the like product analysis. The term
‘characteristics closely resembling’ in its ordinary meaning
includes but is not limited to physical characteristics, and we see
nothing in the context or object and purpose of the SCM Agreement that
would dictate a different conclusion.
Although we are required in this dispute to
interpret the term ‘like product’ in conformity with the specific
definition provided in the SCM Agreement, we believe that useful
guidance can nevertheless be derived from prior analysis of ‘like
product’ issues under other provisions of the WTO Agreement. Thus, we
note the statement of the Appellate Body in Alcoholic Beverages (1996)
that, in this context as in any other, the issue of ‘like product’
must be considered on a case-by-case basis, that in applying relevant
criteria panels can only use their best judgment regarding whether in
fact products are like, and that this will always involve an unavoidable
element of individual, discretionary judgement.”(384)
271. Further in its “like
products” analysis under footnote 46, the Panel on Indonesia — Autos
rejected the argument that it “must consider all passenger cars to be
‘like’ because any effort to differentiate between passenger cars
with a multitude of differing characteristics would inevitably result in
arbitrary divisions”: (385)
“We are aware that there are innumerable
differences among passenger cars and that the identification of
appropriate deciding lines between them may not be a simple task.
However, this does not in our view justify lumping all such products
together where the differences among the products are so dramatic. … We
must endeavour to find some reasonable way to assess the relative
importance of the various differences in the minds of consumers and to
devise some sensible means to categorize passenger cars.”(386)
272. The Panel on Indonesia —
Autos decided that “One reasonable way … to approach the ‘like
product’ issue is to look at the manner in which the automotive
industry itself has analysed market segmentation.”(387) The Panel opted
for an analysis which “considered the physical characteristics of the
cars in question when designing its segmentation”; it considered that
“an approach, which segments the market based on a combination of size
and price/market position, [is] a sensible one which is consistent with
the criteria relevant to ‘like product’ analysis under the SCM
Agreement”. (388)
273. In Indonesia — Autos,
Indonesia argued that the low price of its Timor car placed it in a “special
market niche” and rendered it unlike other, more expensive, car
models. The Panel noted that the complainants in the case before it were
claiming that the Indonesian Timor was being sold at undercutting prices
as a result of subsidization and rejected the argument by Indonesia:
“We do not preclude that price might be a
relevant consideration in performing ‘like product’ analysis,
particularly where differences in price represent one way to assess the
relative importance of differing physical characteristics to consumers.
In this case, however, the complainants allege that the Timor is being
sold at undercutting prices as a result of subsidization. If we were to
conclude that the low price of the Timor in the Indonesian market were
to render the Timor ‘unlike’ other models which are similar in
physical characteristics to the Timor but priced higher, the result
would be that, in cases where the subsidization and resulting price
undercutting were sufficiently high, price undercutting claims under
Article 6 could never prevail. Thus, we do not consider that the Timor’s
lower price is a basis to conclude that it is unlike the models alleged
by the complainants to be ‘like’ the Timor.”(389)
274. Considering whether “the
difference between a product assembled and unassembled is sufficiently
important that the unassembled product does not ‘closely resemble’
the assembled product”,(390) the Panel on Indonesia — Autos stated:
“We do not consider that an unassembled product
ipso facto is not a like product to that product assembled. Recalling
the view of the Appellate Body that tariff classification may be a
useful tool in like product analysis [footnote omitted], we note that,
under the General Rules for the Interpretation of the Harmonized System:
Any reference in a heading to an Article shall be
taken to include a reference to that Article complete or unfinished,
provided that, as presented, the incomplete or unassembled Article has
the essential character of the complete or unfinished article.
We think that a comparable approach to the
relation between assembled and unassembled products makes good sense in
the context of this dispute.”(391)
2. Relationship with other Articles
275. When reversing the Panel’s
findings that the de minimis standard contained in Article 11.9 was
applicable to sunset review investigations, the Appellate Body in US —
Carbon Steel considered Article 15 and its
footnote 45 as support for
its views. In this regard, see paragraph 256 above.
XVI. Article 16 back to top
A. Text of Article 16
Article 16: Definition of Domestic Industry
16.1 For the purposes of this
Agreement, the term “domestic industry” shall, except as provided in
paragraph 2, be interpreted as referring to the domestic producers as a
whole of the like products or to those of them whose collective output
of the products constitutes a major proportion of the total domestic
production of those products, except that when producers are related(48)
to the exporters or importers or are themselves importers of the
allegedly subsidized product or a like product from other countries, the
term “domestic industry” may be interpreted as referring to the rest
of the producers.
(footnote original) 48 For the purpose of this
paragraph, producers shall be deemed to be related to exporters or
importers only if (a) one of them directly or indirectly controls the
other; or (b) both of them are directly or indirectly controlled by a
third person; or (c) together they directly or indirectly control a
third person, provided that there are grounds for believing or
suspecting that the effect of the relationship is such as to cause the
producer concerned to behave differently from non-related producers. For
the purpose of this paragraph, one shall be deemed to control another
when the former is legally or operationally in a position to exercise
restraint or direction over the latter.
16.2. In exceptional circumstances,
the territory of a Member may, for the production in question, be
divided into two or more competitive markets and the producers within
each market may be regarded as a separate industry if (a) the producers
within such market sell all or almost all of their production of the
product in question in that market, and (b) the demand in that market is
not to any substantial degree supplied by producers of the product in
question located elsewhere in the territory. In such circumstances,
injury may be found to exist even where a major portion of the total
domestic industry is not injured, provided there is a concentration of
subsidized imports into such an isolated market and provided further
that the subsidized imports are causing injury to the producers of all
or almost all of the production within such market.
16.3 When the domestic industry has
been interpreted as referring to the producers in a certain area, i.e. a
market as defined in paragraph 2, countervailing duties shall be levied
only on the products in question consigned for final consumption to that
area. When the constitutional law of the importing Member does not
permit the levying of countervailing duties on such a basis, the
importing Member may levy the countervailing duties without limitation
only if (a) the exporters shall have been given an opportunity to cease
exporting at subsidized prices to the area concerned or otherwise give
assurances pursuant to Article 18, and adequate assurances in this
regard have not been promptly given, and (b) such duties cannot be
levied only on products of specific producers which supply the area in
question.
16.4 Where two or more countries have
reached under the provisions of paragraph 8(a) of Article XXIV of GATT
1994 such a level of integration that they have the characteristics of a
single, unified market, the industry in the entire area of integration
shall be taken to be the domestic industry referred to in paragraphs 1
and 2.
16.5 The provisions of paragraph 6 of
Article 15 shall be applicable to this Article.
B. Interpretation and Application of Article 16
No jurisprudence or decision of a competent WTO
body.
XVII. Article 17 back to top
A. Text of Article 17
Article 17: Provisional Measures
17.1 Provisional measures may be
applied only if:
(a) an investigation has
been initiated in accordance with the provisions of Article
11, a public
notice has been given to that effect and interested Members and
interested parties have been given adequate opportunities to submit
information and make comments;
(b) a preliminary
affirmative determination has been made that a subsidy exists and that
there is injury to a domestic industry caused by subsidized imports; and
(c) the authorities
concerned judge such measures necessary to prevent injury being caused
during the investigation.
17.2 Provisional measures may take the
form of provisional countervailing duties guaranteed by cash deposits or
bonds equal to the amount of the provisionally calculated amount of
subsidization.
17.3 Provisional measures shall not be
applied sooner than 60 days from the date of initiation of the
investigation.
17.4 The application of provisional
measures shall be limited to as short a period as possible, not
exceeding four months.
17.5 The relevant provisions of
Article 19 shall be followed in the application of provisional measures.
B. Interpretation and Application of Article 17
1. Article 17.3
(a) General
276. In US — Softwood Lumber
III, the Panel found that the provisional measures were in violation of
Article 17.3 (and 17.4) of the SCM Agreement because they were imposed
less than 60 days after the date of initiation of the investigation and
because they applied to imports for a period of more than four months.
The Panel found that “Article 17.3 and 17.4 of the SCM Agreement are
unambiguous, clearly specifying that provisional measures shall not be
applied sooner than 60 days after initiation and their application shall
be limited to maximum 4 months.”(392)
(b) Relationship with other Articles
(i) Article 20
277. Furthermore, the Panel on US
— Softwood III considered that regarding “the starting-point for the
application of provisional and final measures, Article 20 of the SCM
Agreement establishes two exceptions to the general rule of
non-retroactivity of final countervailing duties and no exceptions to
the general rule of non-retroactivity of provisional measures. Nothing
in Article 20 SCM Agreement provides an exception to the rules relating
to the minimum period between initiation and application of provisional
measures or the maximum period of application of such measures as
provided for in Articles 17.3 and 17.4 SCM
Agreement.” (393)
2. Article 17.4
(a) General
278. In US — Softwood Lumber
III, the Panel considered that the text of Article 17.3 (and
Article 17.4) is unambiguous. See paragraph 276 above.
(b) Period of application
279. The Panel on US — Softwood
Lumber III rejected the argument that the period of application referred
to in Article 17.4 is the period during which cash deposits or bonds are
taken, rather than the period during which the affected imports enter
for consumption. For the Panel, this interpretation would allow for
significantly more than four months’ worth of entries to be covered by
a provisional measure. The Panel considered that such an interpretation
would effectively nullify the disciplines of Article
17, particularly in
light of the obligation contained in Article
20.1:
“We consider that the US argument that the
period of application in Article 17.4 SCM Agreement refers to the period
during which cash deposits or bonds are taken rather than the period
during which the affected imports enter for consumption would have the
effect of nullifying the provision, particularly in light of Article
20.1 SCM Agreement. We cannot accept such an interpretation which would
reduce a provision of the treaty to redundancy or inutility.(394) The US
interpretation would allow significantly more than 4 months worth of
entries to be covered by a provisional measure. For example, under this
interpretation, a decision under Article 17.1 SCM Agreement could be
taken after 60 days, following which the importing country would wait
say 3 months before ‘applying’ the provisional measures for 4
months, including retroactively to imports entering after the date of
the decision. In our view this would render meaningless the disciplines
imposed by Article 17 SCM Agreement.”(395)
(c) Relationship with other Articles
(i) Article 20.1
280. In US — Softwood Lumber
III, the Panel considered that Article 20 does not provide an exception
to the maximum period of application of provisional measures in Article
17.4. See paragraph 279 above.
XVIII. Article 18 back to top
A. Text of Article 18
Article 18: Undertakings
18.1 Proceedings may(49) be suspended or
terminated without the imposition of provisional measures or
countervailing duties upon receipt of satisfactory voluntary
undertakings under which:
(footnote original) 49 The word “may” shall
not be interpreted to allow the simultaneous continuation of proceedings
with the implementation of undertakings, except as provided in paragraph
4.
(a) the government of the
exporting Member agrees to eliminate or limit the subsidy or take other
measures concerning its effects; or
(b) the exporter agrees to
revise its prices so that the investigating authorities are satisfied
that the injurious effect of the subsidy is eliminated. Price increases
under such undertakings shall not be higher than necessary to eliminate
the amount of the subsidy. It is desirable that the price increases be
less than the amount of the subsidy if such increases would be adequate
to remove the injury to the domestic industry.
18.2 Undertakings shall not be sought
or accepted unless the authorities of the importing Member have made a
preliminary affirmative determination of subsidization and injury caused
by such subsidization and, in case of undertakings from exporters, have
obtained the consent of the exporting Member.
18.3 Undertakings offered need not be
accepted if the authorities of the importing Member consider their
acceptance impractical, for example if the number of actual or potential
exporters is too great, or for other reasons, including reasons of
general policy. Should the case arise and where practicable, the
authorities shall provide to the exporter the reasons which have led
them to consider acceptance of an undertaking as inappropriate, and
shall, to the extent possible, give the exporter an opportunity to make
comments thereon.
18.4 If an undertaking is accepted,
the investigation of subsidization and injury shall nevertheless be
completed if the exporting Member so desires or the importing Member so
decides. In such a case, if a negative determination of subsidization or
injury is made, the undertaking shall automatically lapse, except in
cases where such a determination is due in large part to the existence
of an undertaking. In such cases, the authorities concerned may require
that an undertaking be maintained for a reasonable period consistent
with the provisions of this Agreement. In the event that an affirmative
determination of subsidization and injury is made, the undertaking shall
continue consistent with its terms and the provisions of this Agreement.
18.5 Price undertakings may be
suggested by the authorities of the importing Member, but no exporter
shall be forced to enter into such undertakings. The fact that
governments or exporters do not offer such undertakings, or do not
accept an invitation to do so, shall in no way prejudice the
consideration of the case. However, the authorities are free to
determine that a threat of injury is more likely to be realized if the
subsidized imports continue.
18.6 Authorities of an importing
Member may require any government or exporter from whom an undertaking
has been accepted to provide periodically information relevant to the
fulfilment of such an undertaking, and to permit verification of
pertinent data. In case of violation of an undertaking, the authorities
of the importing Member may take, under this Agreement in conformity
with its provisions, expeditious actions which may constitute immediate
application of provisional measures using the best information
available. In such cases, definitive duties may be levied in accordance
with this Agreement on products entered for consumption not more than 90
days before the application of such provisional measures, except that
any such retroactive assessment shall not apply to imports entered
before the violation of the undertaking.
B. Interpretation and Application of Article 18
No jurisprudence or decision of a competent WTO
body.
XIX. Article 19 back to top
A. Text of Article 19
Article 19: Imposition and Collection of
Countervailing Duties
19.1 If, after reasonable efforts have
been made to complete consultations, a Member makes a final
determination of the existence and amount of the subsidy and that,
through the effects of the subsidy, the subsidized imports are causing
injury, it may impose a countervailing duty in accordance with the
provisions of this Article unless the subsidy or subsidies are
withdrawn.
19.2 The decision whether or not to
impose a countervailing duty in cases where all requirements for the
imposition have been fulfilled, and the decision whether the amount of
the countervailing duty to be imposed shall be the full amount of the
subsidy or less, are decisions to be made by the authorities of the
importing Member. It is desirable that the imposition should be
permissive in the territory of all Members, that the duty should be less
than the total amount of the subsidy if such lesser duty would be
adequate to remove the injury to the domestic industry, and that
procedures should be established which would allow the authorities
concerned to take due account of representations made by domestic
interested parties(50) whose interests might be adversely affected by the
imposition of a countervailing duty.
(footnote original) 50 For the purpose of this
paragraph, the term “domestic interested parties” shall include
consumers and industrial users of the imported product subject to
investigation.
19.3 When a countervailing duty is
imposed in respect of any product, such countervailing duty shall be
levied, in the appropriate amounts in each case, on a non-discriminatory
basis on imports of such product from all sources found to be subsidized
and causing injury, except as to imports from those sources which have
renounced any subsidies in question or from which undertakings under the
terms of this Agreement have been accepted. Any exporter whose exports
are subject to a definitive countervailing duty but who was not actually
investigated for reasons other than a refusal to cooperate, shall be
entitled to an expedited review in order that the investigating
authorities promptly establish an individual countervailing duty rate
for that exporter.
19.4 No countervailing duty shall be
levied(51) on any imported product in excess of the amount of the subsidy
found to exist, calculated in terms of subsidization per unit of the
subsidized and exported product.
(footnote original) 51 As used in this Agreement
“levy” shall mean the definitive or final legal assessment or
collection of a duty or tax.
B. Interpretation and Application of Article 19
1. Article 19.1
(a) Relationship with other Articles
(i) Article 4.7
281. The Panel on Australia —
Automotive Leather II (Article 21.5 — US) relied, inter alia, on
Article 19.1 in its finding that the phrase “withdraw the subsidy”
under Article 4.7 referred to retroactive remedies (repayment). See
paragraph 161 above.
(ii) Article 19.4
282. For the relationship with
Article 19.4, see paragraphs 286-287 below.
2. Article 19.3
283. In US — Softwood Lumber
III, the Panel recalled the relevant part of Article19.3 concerning the
rights of any investigated exporter to an expedited review (unless he is
being investigated for refusing to cooperate):
“[T]he relevant part of Article 19.3 SCM
Agreement, namely that any exporter whose exports were not actually
investigated for reasons other than a refusal to cooperate is ‘entitled’
to an expedited review to establish an individual countervailing duty
rate must be conducted, upon request, for any exporter of the type
referred to in Article 19.3 SCM Agreement.”(396)
284. The Panel on US — Softwood
Lumber III found the relevant Member’s regulations to be silent on the
issue of whether the regulations under consideration prohibit the
investigating authorities from conducting such reviews in aggregate
cases and stated that the fact that no regulation exists regarding the
case of aggregate investigations “does not imply” that the Member is
“required by law to deny any requests for expedited review where an
aggregate countervailing duty rate has been applied”. Therefore, the
Panel concluded that the laws and regulations that had been examined in
the case did not mandate a violation of the requirement in Article 19.3
to conduct an expedited review. For this reason, the Panel also found
that the Member is not required by law to violate Article 19.4 by
levying countervailing duties in excess of the amount of the subsidy
found:
“We consider that the fact that no regulation
exists regarding the apparently rare case of aggregate investigations
does not imply that the USDOC is required by law to deny any requests
for expedited review where an aggregate countervailing duty rate has
been applied. In other words, the USDOC Regulations are simply silent on
the issue.
We thus agree with the US that the fact that the
USDOC has not elected to codify specific rules for handling what could
potentially be an extremely large number of expedited reviews in an
aggregate case does not in any way diminish the Department’s statutory
authority to conduct such reviews. We therefore find that the fact that
19 C.F.R. § 351.214(k)(1) does not specifically address the possibility
of expedited reviews in aggregate cases does not prohibit such reviews
… We consider that the fact that no regulation exists regarding the
apparently rare case of aggregate investigations, does not imply that
exporters are denied by law the right to an expedited review where an
aggregate countervailing duty rate was applied. The US laws and
regulations cited by Canada thus do not mandate a violation of the
requirement under Article 19.3 SCM Agreement to conduct an expedited
review in order that the authority promptly establish an individual
countervailing duty rate for any exporter whose exports are subject to a
definitive countervailing duty but who was not actually investigated for
reasons other than a refusal to cooperate. For this reason also, we do
not find that the USDOC is required by law to violate Article 19.4 SCM
Agreement in the softwood lumber case by inevitably levying
countervailing duties in excess of the amount of the subsidy found.
In sum, we find that the above-cited US laws and
regulations concerning expedited reviews do not mandate a violation of
Article 19.3 SCM Agreement, or thereby, of Article 19.4 SCM
Agreement,
and thus reject Canada’s claims in this respect.”(397)
285. Finally, the Panel on US —
Softwood Lumber III, noting that no final determination had been made
and that no reviews of such a determination had been requested at the
time of the preliminary determination under review by the Panel, and
given the Panel’s findings that the Member’s laws and regulations
did not preclude the Member from acting consistently with Article 19.3
and Article 21, considered that with respect to expedited and
administrative reviews “it is not appropriate to rule on a potential
denial of a request for review if no such request has even been made.
The WTO dispute settlement system allows a Member to challenge a law as
such or its actual application in a particular case, but not its
possible future application.”(398)
3. Article 19.4
(a) General
286. Referring to the ordinary
meaning of Article 19.4, the Panel on US — Lead and Bismuth II stated
that “no countervailing duty may be imposed on an imported product if
no (countervailable) subsidy is found to exist with respect to that
imported product, since in such cases the amount of subsidy found to
exist with respect to the imported product would be zero. Thus, like
Article 19.1, Article 19.4 … establishes a clear nexus between the
imposition of a countervailing duty, and the existence of a (countervailable)
subsidy.”(399)
287. The Panel on US — Lead and
Bismuth II concluded that “consistent with the fundamental premise
underlying Articles 19.1, 19.4, and
21.1 of the SCM Agreement, and
Article VI:3 of the GATT 1994, and consistent with the object and
purpose of countervailing duties envisaged by Part V of the SCM
Agreement, we consider that a countervailing duty may only be imposed on
an imported product if it is demonstrated that a (countervailable)
subsidy was bestowed directly or indirectly on the manufacture,
production or export of that merchandise”.(400)
(b) Relationship with other Articles
288. With respect to the
relationship with Article 19.1, see paragraph 282 above.
289. With respect to the
relationship with Article 19.3, see paragraphs
284-285 above.
290. With respect to the
relationship with Article 21.1, see paragraph 287 above.
XX. Article 20 back to top
A. Text of Article 20
Article 20: Retroactivity
20.1 Provisional measures and
countervailing duties shall only be applied to products which enter for
consumption after the time when the decision under paragraph 1 of
Article 17 and paragraph 1 of Article 19, respectively, enters into
force, subject to the exceptions set out in this Article.
20.2 Where a final determination
of injury (but not of a threat thereof or of a material retardation of
the establishment of an industry) is made or, in the case of a final
determination of a threat of injury, where the effect of the subsidized
imports would, in the absence of the provisional measures, have led to a
determination of injury, countervailing duties may be levied
retroactively for the period for which provisional measures, if any,
have been applied.
20.3 If the definitive
countervailing duty is higher than the amount guaranteed by the cash
deposit or bond, the difference shall not be collected. If the
definitive duty is less than the amount guaranteed by the cash deposit
or bond, the excess amount shall be reimbursed or the bond released in
an expeditious manner.
20.4 Except as provided in
paragraph 2, where a determination of threat of injury or material
retardation is made (but no injury has yet occurred) a definitive
countervailing duty may be imposed only from the date of the
determination of threat of injury or material retardation, and any cash
deposit made during the period of the application of provisional
measures shall be refunded and any bonds released in an expeditious
manner.
20.5 Where a final determination
is negative, any cash deposit made during the period of the application
of provisional measures shall be refunded and any bonds released in an
expeditious manner.
20.6 In critical circumstances
where for the subsidized product in question the authorities find that
injury which is difficult to repair is caused by massive imports in a
relatively short period of a product benefiting from subsidies paid or
bestowed inconsistently with the provisions of GATT 1994 and of this
Agreement and where it is deemed necessary, in order to preclude the
recurrence of such injury, to assess countervailing duties retroactively
on those imports, the definitive countervailing duties may be assessed
on imports which were entered for consumption not more than 90 days
prior to the date of application of provisional measures.
B. Interpretation and Application of Article 20
1. Retroactive application of countervailing
duties
291. The Panel on US — Softwood
Lumber III noted that Article 20 only provides for the exceptional
retroactive application of definitive duties but not of provisional
duties:
“As its text indicates, Article 20.1 SCM
Agreement provides that provisional measures and countervailing duties
shall only be applied to products entering the country following the
imposition of such measures, ‘subject to the exceptions set out in
this Article’. While Article 20.2 and
Article 20.6 SCM Agreement
provide for explicit exceptions in the case of the definitive
countervailing duties, we find no similar exceptions relating to
provisional measures. Article 20.2 SCM Agreement sets forth the
circumstances in which definitive countervailing duties may be applied
retroactively for the period during which provisional measures were
applied. Similarly, in critical circumstances, Article 20.6 SCM
Agreement allows for the definitive duties to be assessed on imports
which entered the country from 90 days prior to the date of application
of the provisional measures.
…
… In respect of the starting-point for the
application of provisional and final measures, Article 20 SCM Agreement
thus establishes two exceptions to the general rule of non-retroactivity
of final countervailing duties and no exceptions to the general rule of
non-retroactivity of provisional measures. Nothing in Article 20 SCM
Agreement provides an exception to the rules relating to the minimum
period between initiation and application of provisional measures or the
maximum period of application of such measures as provided for in
Article 17.3 and 17.4 SCM Agreement.”(401)
292. On the basis of the “clear
language in the SCM Agreement”, the Panel on US — Softwood Lumber
III found that “the general rule of non-retroactivity applies to
provisional measures, without exceptions”, and concluded that the
retroactive application of the provisional measure imposed by the Member
was inconsistent with Article 20.6 of the SCM Agreement. (402) The Panel
agreed “that a Member is allowed to take measures which are necessary
to preserve the right to later apply definitive duties retroactively. In
our view, an effective interpretation of the right to apply definitive
duties retroactively requires that a Member be allowed to take such
steps as are necessary to preserve the possibility of exercising that
right.” The Panel considered that “what kind of measures may thus be
taken by the Member concerned will have to be determined on a
case-by-case basis”.(403)
293. However, the Panel on US —
Softwood Lumber III rejected the argument that suspension of liquidation
and the posting of a cash deposit or bond are necessary for the Member’s
authorities to collect definitive duties retroactively, as is expressly
permitted under Article 20.6 of the SCM Agreement. The Panel considered
on the basis of an “effective treaty interpretation” that the
express permission in Article 20.6 to apply definitive duties
retroactively up to 90 days prior to the application of the provisional
measures leads to the conclusion that Article 20.3 does not preclude the
imposition of definitive duties on entries for which no cash deposit or
bond was collected. The Panel held that:
“Article 20.3 SCM Agreement states that if the
amount guaranteed by the cash deposit is lower than the definitive
countervailing duty, the difference shall not be collected. If the
reverse is true, the excess amount shall be reimbursed and the bond
released in an expeditious manner. Article 20.3 SCM Agreement thus
concerns the wholly different issue of how to deal with a discrepancy
between the provisional and the final rates of the countervailing duty.
It does not address the retroactive imposition and collection of
definitive duties for the period before the application of provisional
measures. Article 20.6 SCM Agreement provides that definitive duties may
in certain circumstances be assessed on imports which were entered for
consumption from 90 days prior to the date of application of provisional
measures.
The text thus clearly indicates that the Agreement
allows for the retroactive application of definitive duties at a time when
no provisional measures were in place and thus no provisional
duties were collected. To accept the US argument that Article 20.3 SCM
Agreement would preclude a Member from collecting definitive duties for
the period prior to the date of application of provisional measures
would mean that a Member doing what Article 20.6 SCM Agreement expressly
allows for would be violating the Agreement nevertheless. We cannot
accept an interpretation which leads to this contradictory result. We
consider that the principle of effective treaty interpretation requires
the treaty interpreter to ‘read all applicable provisions of a treaty
in a way that gives meaning to all of them, harmoniously’(404)”(405)
2. Relationship between paragraphs 1, 2 and 6 of
Article 20
294. In this regard, see
paragraphs 291-293 above.
3. Relationship with other Articles
(a) Article 17.3 and 17.4
295. The Panel on US — Softwood
Lumber III considered that “Nothing in Article 20 SCM Agreement
provides an exception to the rules relating to the minimum period
between initiation and application of provisional measures or the
maximum period of application of such measures as provided for in
Articles 17.3 and 17.4 SCM Agreement.”(406) See also
paragraph 277 above.
XXI. Article 21 back to top
A. Text of Article 21
Article 21: Duration and Review of
Countervailing Duties and Undertakings
21.1 A countervailing duty shall
remain in force only as long as and to the extent necessary to
counteract subsidization which is causing injury.
21.2 The authorities shall review the
need for the continued imposition of the duty, where warranted, on their
own initiative or, provided that a reasonable period of time has elapsed
since the imposition of the definitive countervailing duty, upon request
by any interested party which submits positive information
substantiating the need for a review. Interested parties shall have the
right to request the authorities to examine whether the continued
imposition of the duty is necessary to offset subsidization, whether the
injury would be likely to continue or recur if the duty were removed or
varied, or both. If, as a result of the review under this paragraph, the
authorities determine that the countervailing duty is no longer
warranted, it shall be terminated immediately.
21.3 Notwithstanding the provisions of
paragraphs 1 and 2, any definitive countervailing duty shall be
terminated on a date not later than five years from its imposition (or
from the date of the most recent review under paragraph 2 if that review
has covered both subsidization and injury, or under this paragraph),
unless the authorities determine, in a review initiated before that date
on their own initiative or upon a duly substantiated request made by or
on behalf of the domestic industry within a reasonable period of time
prior to that date, that the expiry of the duty would be likely to lead
to continuation or recurrence of subsidization and injury.(52) The duty
may remain in force pending the outcome of such a review.
(footnote original) 52 When the amount of the
countervailing duty is assessed on a retrospective basis, a finding in
the most recent assessment proceeding that no duty is to be levied shall
not by itself require the authorities to terminate the definitive duty.
21.4 The provisions of
Article 12
regarding evidence and procedure shall apply to any review carried out
under this Article. Any such review shall be carried out expeditiously
and shall normally be concluded within 12 months of the date of
initiation of the review.
21.5 The provisions of this Article
shall apply mutates mutandis to undertakings accepted under Article
18.
B. Interpretation and Application of Article 21
1. Article 21.1
(a) Relationship with other Articles
296. With respect to the
relationship with Article 19.4, see paragraph 287 above.
2. Article 21.2
(a) General
297. In Brazil — Desiccated
Coconut, the Panel found that, if the SCM Agreement is not applicable,
the imposition of a countervailing duty is not covered by Article VI of
the GATT 1994. However, the Panel opined that even measures to which the
WTO Agreement is not “immediately applicable” will fall under the
SCM Agreement through reviews pursuant to Article
21.2:
“We recognize that these provisions regarding
review are not comparable in effect to the immediate application of the
WTO Agreement to all countervailing measures. The effect of reviews
regarding the continued need for imposition of countervailing measures
will likely be prospective and, depending on the date of imposition of
the measure and the circumstances subsequent to its imposition, the
exporting country Member may or may not be entitled to an immediate
review. Nevertheless, it is clear from this provision that measures to
which the WTO Agreement is not immediately applicable will nevertheless
be brought under WTO disciplines over time pursuant to reviews under
Article 21.2 of the SCM Agreement.”(407)
(b) Types of review under Article 21.2
298. The Panel on US — Softwood
Lumber III noted that Article 21.2 provides different kinds of reviews
but is silent on administrative reviews:
“Article 21.2 SCM Agreement deals with different
kinds of review mechanisms, requiring the authority to provide for the
right of interested parties to request the authorities to examine
whether the continued imposition of the duty is necessary to offset
subsidization, whether the injury would be likely to continue or recur
if the duty were removed or varied, or both. Thus, the first type of
review addresses the question of whether subsidization is present at
all, while the second type of review, by its very terms, has to do
primarily with injury questions, that is, the effect on the domestic
industry of changing or removing entirely the countervailing duty. This
second type of review thus does not have to do with finalizing the rate
of countervailing duty during a particular period for which estimated
duties have been collected, but rather with the underlying need and
rationale, from the standpoint of the affected domestic industry, for
maintaining a countervailing duty. In short, Article 21.2 SCM Agreement
is silent on the question of ‘administrative reviews’.”(408)
(c) Reviews not yet requested
299. In US — Softwood Lumber
III, the Panel considered that it was not appropriate to rule on a
potential denial of a request for a review, where such a request had not
been made:
“The WTO dispute settlement system allows a
Member to challenge a law as such or its actual application in a
particular case, but not its possible future application.”(409)
(d) “necessary to offset subsidization”
301. The Appellate Body on US —
Lead and Bismuth II agreed with the Panel that “while an investigating
authority may presume, in the context of an administrative review under
Article 21.1, that a ‘benefit’ continues to flow from an untied,
non-recurring ‘financial contribution’, this presumption can never
be ‘irrebuttable’”.(410)
302. The Appellate Body on US —
Lead and Bismuth II rejected the panel’s implied view that “in the
context of an administrative review under Article 21.2, an investigating
authority must always establish the existence of a ‘benefit’ during
the period of review in the same way as an investigating authority must
establish a ‘benefit’ in an original investigation”. The Appellate
Body stated:
“We believe that it is important to distinguish
between the original investigation leading to the imposition of
countervailing duties and the administrative review. In an original
investigation, the investigating authority must establish that all
conditions set out in the SCM Agreement for the imposition of
countervailing duties are fulfilled. In an administrative review,
however, the investigating authority must address those issues which
have been raised before it by the interested parties or, in the case of
an investigation conducted on its own initiative, those issues which
warranted the examination.”(411)
3. Article 21.3
(a) Self-initiation of sunset reviews
(i) General
303. The Appellate Body on US —
Carbon Steel agreed with the Panel that Article 21.3 of the SCM
Agreement does not prohibit the automatic self-initiation of sunset
reviews by investigating authorities:
“[O]ur review of the context of Article 21.3 of
the SCM Agreement reveals no indication that the ability of authorities
to self-initiate a sunset review under that provision is conditioned on
compliance with the evidentiary standards set forth in Article 11 of the
SCM Agreement relating to initiation of investigations. Nor do we
consider that any other evidentiary standard is prescribed for the
self-initiation of a sunset review under Article
21.3.
This is not to say that authorities may continue
the countervailing duties after five years in the absence of evidence
that the expiry of the duty would be likely to lead to continuation or
recurrence of subsidization and injury. Article 21.3 prohibits the
continuation of countervailing duties unless a review is undertaken and
the prescribed determination, based on adequate evidence, is made.
For all of these reasons, we agree with the Panel
that Article 21.3 of the SCM Agreement does not prohibit the automatic
self-initiation of sunset reviews by investigating authorities.(412)”(413)
(ii) Evidentiary requirements for
self-initiation of sunset reviews
304. The Appellate Body on US —
Carbon Steel observed that Article 21.3 explicitly contemplates the
termination of countervailing orders within five years, unless the
prescribed determination is made in a review. It further considered that
Article 21.3 requires initiation of such a review by the authorities (“on
their own initiative”) or based on “a duly substantiated request
made by or on behalf of the domestic industry”. The Appellate Body
remarked that the terms “duly substantiated” are applicable to the
authorization to initiate a review upon request, and not a
self-initiation situation. Finally, the Appellate Body noted that
Article 21.3 does not contain cross-references to evidentiary rules
relating to self-initiation of an investigation, and considered that
this omission did not mean that Article 11 evidentiary standards are
applicable to the self-initiation of sunset reviews under Article
21.3.
The Appellate Body considered:
“[W]e wish to underline the thrust of Article
21.3 of the SCM Agreement. An automatic time-bound termination of
countervailing duties that have been in place for five years from the
original investigation or a subsequent comprehensive review is at the
heart of this provision. Termination of a countervailing duty is the
rule and its continuation is the exception. The continuation of a
countervailing duty must therefore be based on a properly conducted
review and a positive determination that the revocation of the
countervailing duty would ‘be likely to lead to continuation or
recurrence of subsidization and injury’. Where the level of
subsidization at the time of the review is very low, there must be
persuasive evidence that revocation of the duty would nevertheless lead
to injury to the domestic industry. Mere reliance by the authorities on
the injury determination made in the original investigation will not be
sufficient. Rather, a fresh determination, based on credible evidence,
will be necessary to establish that the continuation of the
countervailing duty is warranted to remove the injury to the domestic
industry.
…
Article 21.3 requires the termination of
countervailing duties within five years unless the prescribed
determination is made in a review. Article 21.3 contemplates initiation
of this review in one of two alternative ways, as is made clear through
the use of the word ‘or’. Either the authorities may make their
determination ‘in a review initiated … on their own initiative’;
or, alternatively, the authorities may make the determination ‘in a
review initiated … upon a duly substantiated request made by or on
behalf of the domestic industry …’. The words ‘duly substantiated’
qualify only the authorization to initiate a review upon request made by
or on behalf of the domestic industry. No such language qualifies the
first method for initiating a sunset review, namely self-initiation of a
review by the authorities.
We believe the absence of any such cross-reference
to be of some consequence given that, as we have seen, the drafters of
the SCM Agreement have made active use of cross-references, inter alia,
to apply obligations relating to investigations to review proceedings.
In our view, the omission of any express cross-reference thus serves as
a further indication that the negotiators of the SCM Agreement did not
intend the evidentiary standards applicable to the self-initiation of
investigations under Article 11 to apply to the self-initiation of
reviews under Article 21.3.”(414)
305. While recognizing that the
lack of an explicit limitation is “not dispositive of whether any such
limitation exists”, the Appellate Body in US — Carbon Steel also
took into account the context of Article 21.3. In particular, the
Appellate Body noted that Article 21.4 explicitly states that the
detailed 12 regarding the conduct of an investigation apply to Article 21.3 reviews. As a result, it stated that this explicit cross-reference
to Article 12 suggests that evidentiary rules regarding the initiation
of an investigation contained in Article 11 “are not incorporated by
reference into Article 21.3”. For the Appellate Body, the fact that
the Article 11 rules governing these matters are not incorporated by
reference into Article 21.3 suggests that they do not apply to sunset
reviews:
“Article 21.2 differs from
Article 21.3 in that
the former identifies certain circumstances in which the authorities are
under an obligation to review (“shall review”) whether the continued
imposition of the countervailing duty is necessary. In contrast, the
principal obligation in Article 21.3 is not,
per se, to conduct a
review, but rather to terminate a countervailing duty unless a specific
determination is made in a review. We note that Article 21.2 sets down
an explicit evidentiary standard for requests by interested parties for
a review under that provision. In order to trigger the authorities’
obligation to conduct a review, such requests must, inter alia, include
‘positive information substantiating the need for review’. Article
21.2 does not, on its face, apply this same standard to the initiation
by authorities ‘on their own initiative’ of a review carried out
under that provision. Thus, Article 21.2 contemplates that, for reviews
carried out pursuant to that provision, the selfinitiation by the
authorities of a review is not governed by the same standards that apply
to initiation upon request by other parties.
As we have noted earlier, the fourth paragraph of
Article 21 explicitly applies to Article 21.3 reviews the detailed rules
set out in Article 12 of the SCM Agreement regarding evidence and
procedure in the conduct of investigations. However, the rules on
evidence and procedure contained in Article 12 do not relate to the
initiation of such investigations. Rather, the rules relating to
evidence needed to initiate an investigation are set out in Article
11,
which is not referred to in Article 21.4. The fact that the rules in
Article 11 governing such matters are not incorporated by reference into
Article 21.3 suggests that they are not, ipso facto, applicable to
sunset reviews.”(415)
306. The Appellate Body on US —
Carbon Steel concluded that there is no indication in the framework of
Article 21.3 that the authorities’ ability to self-initiate a sunset
review is conditional upon compliance with evidentiary standards in
Article 11 and that no other evidentiary standard is required for the
self-initiation of a sunset review under Article
21.3.
“[O]ur review of the context of Article 21.3 of
the SCM Agreement reveals no indication that the ability of authorities
to self-initiate a sunset review under that provision is conditioned on
compliance with the evidentiary standards set forth in Article 11 of the
SCM Agreement relating to initiation of investigations. Nor do we
consider that any other evidentiary standard is prescribed for the
self-initiation of a sunset review under Article
21.3.”(416)
(iii) De minimis standard
307. As regards the application of
the de minimis standards to sunset reviews, see paragraphs
250-257 above.
(b) Determination of likelihood of
continuation/recurrence of subsidization
(i) General
308. In findings not appealed to
the Appellate Body, the Panel on US — Carbon Steel referred to
Article
21.1 and 21.2 of the SCM Agreement and highlighted that
Article 21.3 of
the SCM Agreement puts into effect the purpose of the SCM
Agreement,
i.e. to regulate the imposition of countervailing duty measures:
“Article 21.3 reflects the application of the
general rule set out in Article 21.1 — that a CVD shall remain in
place only as long as necessary — in the specific instance where five
years have elapsed since the imposition of a CVD. Article 21.2 reflects
the same general rule in a different circumstance, when a reasonable
period has elapsed since the imposition of the duty, and it is deemed
necessary to review the need for the continued imposition of the duty.
We also note that one of the principal objects of the SCM Agreement is
to regulate the imposition of CVD measures. Article 21.3 effectuates
that purpose by providing that after five years, a CVD should be
terminated unless the investigating authorities determine that there is
a likelihood of continuation or recurrence of subsidization and injury.”(417)
(ii) Sufficient factual basis for the
non-determination
309. The Panel on US — Carbon
Steel considered any determination made by an investigating authority
under the SCM Agreement must be properly substantiated even if there is
no specific language in this regard in the Agreement itself. The Panel
referred to the similarity with safeguards and anti-dumping
investigations, and concluded that a determination of likelihood under
Article 21.3 of the SCM Agreement must rest on a sufficient factual
basis:
“In our opinion, although there is no specific
language in the SCM Agreement to that effect, it goes without saying
that any determination made by investigating authorities under the SCM
Agreement must be properly substantiated in order for that determination
to be legally justified. In this regard, the Appellate Body has stated
in US — Lamb:
‘[C]ompetent authorities must have a sufficient
factual basis to allow them to draw reasoned and adequate conclusions
concerning the situation of the “domestic industry”.’(418)
We recognise that the Appellate Body’s statement
refers to the basis of an injury determination in a safeguard
investigation. Yet, as far as the adequacy of the factual basis for a
determination is concerned, we see no reason to distinguish between
injury determinations in a safeguard investigation and a determination
of the likelihood of continuation or recurrence of subsidization in a
CVD sunset review.
We also note the decision of the Panel in US —
DRAMS in which the Panel stated:
‘Accordingly, we must assess the essential
character of the necessity involved in cases of continued imposition of
an anti-dumping duty. We note that the necessity of the measure is a
function of certain objective conditions being in place, i.e. whether
circumstances require continued imposition of the anti-dumping duty.
That being so, such continued imposition must, in our view, be
essentially dependent on, and therefore assignable to, a foundation of
positive evidence that circumstances demand it. In other words, the need
for the continued imposition of the duty must be demonstrable on the
basis of the evidence adduced.’(419)
Although the decision of the Panel was made as
part of a review under Article 11.2 of the AD Agreement we believe this
excerpt provides helpful guidance for our case relative to the adequacy
of the factual basis for a determination.
Based on the two foregoing decisions, we consider
that a determination of likelihood under Article 21.3 must rest on a
sufficient factual basis.
An investigating authority’s determination of
the likelihood of continuation or recurrence of subsidization should
rest on the evaluation of the evidence that it has gathered during the
original investigation, the intervening reviews and finally the sunset
review. In our view, a likelihood analysis based on this evidentiary
framework would be consistent with the requirements of Article
21.3.”(420)
310. In US — Carbon Steel, the
Panel further considered that one of the components of the likelihood
analysis was the assessment of the likely rate of subsidization:
“In our view, one of the components of the
likelihood analysis in a sunset review under Article 21.3 is an
assessment of the likely rate of subsidization. We do not consider,
however, that an investigating authority must, in a sunset review, use
the same calculation of the rate of subsidization as in an original
investigation. What the investigating authority must do under Article
21.3 is to assess whether subsidization is likely to continue or recur
should the CVD be revoked. This is, obviously, an inherently prospective
analysis. Nonetheless, it must itself have an adequate basis in fact.
The facts necessary to assess the likelihood of subsidization in the
event of revocation may well be different from those which must be taken
into account in an original investigation. Thus, in assessing the
likelihood of subsidization in the event of revocation of the CVD, an
investigating authority in a sunset review may well consider, inter alia,
the original level of subsidization, any changes in the original subsidy
programmes, any new subsidy programmes introduced after the imposition
of the original CVD, any changes in government policy, and any changes
in relevant socio-economic and political circumstances.”(421)
(c) Relationship with other paragraphs of
Article 21
(i) Article 21.2 and 21.4
311. In US — Carbon Steel, the
Panel reflected on the relationship between paragraphs
1, 2 and 3 of
Article 21: see paragraph 308 above.
312. The Appellate Body on US —
Carbon Steel noted the difference between paragraphs 2 and
3 of Article
21 as follows:
“Article 21.2 differs from
Article 21.3 in that
the former identifies certain circumstances in which the authorities are
under an obligation to review (‘shall review’) whether the continued
imposition of the countervailing duty is necessary. In contrast, the
principal obligation in Article 21.3 is not, per se, to conduct a
review, but rather to terminate a countervailing duty unless a specific
determination is made in a review. We note that Article 21.2 sets down
an explicit evidentiary standard for requests by interested parties for
a review under that provision. In order to trigger the authorities’
obligation to conduct a review, such requests must, inter alia, include
‘positive information substantiating the need for review’. Article
21.2 does not, on its face, apply this same standard to the initiation
by authorities ‘on their own initiative’ of a review carried out
under that provision. Thus, Article 21.2 contemplates that, for reviews
carried out pursuant to that provision, the self-initiation by the
authorities of a review is not governed by the same standards that apply
to initiation upon request by other parties.”(422)
313. In US — Carbon Steel, the
Appellate Body further noted the differing scope of Article 21.3 and
21.4:
“As we have noted earlier, the fourth paragraph
of Article 21 explicitly applies to Article 21.3 reviews the detailed
rules set out in Article 12 of the SCM Agreement regarding evidence and
procedure in the conduct of investigations. However, the rules on
evidence and procedure contained in Article 12 do not relate to the
initiation of such investigations. Rather, the rules relating to
evidence needed to initiate an investigation are set out in Article
11,
which is not referred to in Article 21.4. The fact that the rules in
Article 11 governing such matters are not incorporated by reference into
Article 21.3 suggests that they are not, ipso facto, applicable to
sunset reviews.”(423)
(d) Relationship with other Articles
(i) Article 11.6
314. The Appellate Body on US —
Carbon Steel confirmed the Panel’s finding in relation to the
self-initiation of sunset reviews that “nothing in the text of Article
11.6 provides for its evidentiary standards to be implied in Article
21.3”.(424) The Appellate Body on US — Carbon Steel commented:
“Before leaving our analysis of the text of
Article 21.3 of the SCM Agreement, we lastly note that the provision
contains no explicit cross-reference to evidentiary rules relating to
initiation, such as those contained in Article
11.6. We believe the
absence of any such cross-reference to be of some consequence given
that, as we have seen, the drafters of the SCM Agreement have made
active use of cross-references, inter alia, to apply obligations
relating to investigations to review proceedings. In our view, the
omission of any express cross-reference thus serves as a further
indication that the negotiators of the SCM Agreement did not intend the
evidentiary standards applicable to the self-initiation of
investigations under Article 11 to apply to the self-initiation of
reviews under Article 21.3.”(425)
315. The Panel on US — Carbon
Steel considered that the terms of Article 21.3 have to be interpreted
in light of their object and purpose and in context, which is the entire
SCM Agreement and, in particular, Articles 11.6, 11.9 and 15.3 thereof.(426)
(ii) Article 11.9
316. The Appellate Body on US —
Carbon Steel reversed the Panel’s finding that the de minimis standard
of Article 11.9 is implied in Article 21.3 and the Panel’s finding of
violations of the SCM Agreement. (427) The Appellate Body noted:
“[T]he text of Article 21.3 does not mention any
de minimis standard to be applied in sunset reviews. Nor does it make
any express reference to the de minimis standard set forth in Article
11.9 of the SCM Agreement.
[T]he lack of any indication, in the text of
Article 21.3, that a de minimis standard must be applied in sunset
reviews serves, at least at first blush, as an indication that no such
requirement exists. However, as the Panel itself observed, the task of
ascertaining the meaning of a treaty provision with respect to a
specific requirement does not end once it has been determined that the
text is silent on that requirement.(428) Such silence does not exclude the
possibility that the requirement was intended to be included by
implication.”(429)
317. However, ultimately,
the Appellate Body concluded:
“[A] finding on our part that the de minimis
standard of Article 11.9 is implied in sunset reviews under
Article 21.3
would upset the delicate balance of rights and obligations attained by
the parties to the negotiations, as embodied in the final text of
Article 21.3. Such a finding would be contrary to the requirement of
Article 3.2, repeated in Article 19.2 of the DSU, that our findings and
recommendations ‘cannot add to or diminish the rights and obligations
provided in the covered agreements’.”(430)
318. See paragraph 315 above.
(iii) Article 15.3
319. See paragraph 315 above.
(e) Relationship with other WTO Agreements
320. In US — Carbon Steel, the
Panel considered that it saw no reason to differentiate between injury
determination in a safeguard investigation and a determination of a
likelihood of continuation or recurrence of subsidization. See paragraph
309 above.
XXII. Article 22 back to top
A. Text of Article 22
Article 22: Public Notice and Explanation of
Determinations
22.1 When the authorities are
satisfied that there is sufficient evidence to justify the initiation of
an investigation pursuant to Article 11, the Member or Members the
products of which are subject to such investigation and other interested
parties known to the investigating authorities to have an interest
therein shall be notified and a public notice shall be given.
22.2 A public notice of the
initiation of an investigation shall contain, or otherwise make
available through a separate report,(53) adequate information on the
following:
(footnote original) 53 Where authorities provide
information and explanations under the provisions of this Article in a
separate report, they shall ensure that such report is readily available
to the public.
(i) the name of the
exporting country or countries and the product involved;
(ii) the date of initiation of
the investigation;
(iii) a description of the subsidy
practice or practices to be investigated;
(iv) a summary of the factors on which
the allegation of injury is based;
(v) the address to which
representations by interested Members and interested parties should be
directed; and
(vi) the time-limits allowed to
interested Members and interested parties for making their views known.
22.3 Public notice shall be given of
any preliminary or final determination, whether affirmative or negative,
of any decision to accept an undertaking pursuant to Article
18, of the
termination of such an undertaking, and of the termination of a
definitive countervailing duty. Each such notice shall set forth, or
otherwise make available through a separate report, in sufficient detail
the findings and conclusions reached on all issues of fact and law
considered material by the investigating authorities. All such notices
and reports shall be forwarded to the Member or Members the products of
which are subject to such determination or undertaking and to other
interested parties known to have an interest therein.
22.4 A public notice of the imposition
of provisional measures shall set forth, or otherwise make available
through a separate report, sufficiently detailed explanations for the
preliminary determinations on the existence of a subsidy and injury and
shall refer to the matters of fact and law which have led to arguments
being accepted or rejected. Such a notice or report shall, due regard
being paid to the requirement for the protection of confidential
information, contain in particular:
(i) the names of the
suppliers or, when this is impracticable, the supplying countries
involved;
(ii) a description of the
product which is sufficient for customs purposes;
(iii) the amount of subsidy
established and the basis on which the existence of a subsidy has been
determined;
(iv) considerations relevant to
the injury determination as set out in Article 15;
(v) the main reasons leading to
the determination.
22.5 A public notice of
conclusion or suspension of an investigation in the case of an
affirmative determination providing for the imposition of a definitive
duty or the acceptance of an undertaking shall contain, or otherwise
make available through a separate report, all relevant information on
the matters of fact and law and reasons which have led to the imposition
of final measures or the acceptance of an undertaking, due regard being
paid to the requirement for the protection of confidential information.
In particular, the notice or report shall contain the information
described in paragraph 4, as well as the reasons for the acceptance or
rejection of relevant arguments or claims made by interested Members and
by the exporters and importers.
22.6 A public notice of the
termination or suspension of an investigation following the acceptance
of an undertaking pursuant to Article 18 shall include, or otherwise
make available through a separate report, the non-confidential part of
this undertaking.
22.7 The provisions of this Article
shall apply mutatis mutandis to the initiation and completion of reviews
pursuant to Article 21 and to decisions under Article 20 to apply duties
retroactively.
B. Interpretation and Application of Article 22
1. Article 22.1 and 22.7
321. In US — Carbon Steel, the
Appellate Body noted that Article 22.1 and
22.7 on notification and
public notice obligations upon Members in the context of investigations
or reviews do not contain any evidentiary requirements per se.
“Article 22.1 imposes notification and public
notice obligations upon Members that have decided, in accordance with
all the requirements of Article 11, that the initiation of a
countervailing duty investigation is justified. Article 22.1 does not
itself establish any evidentiary rule, but only refers to a standard
established in Article 11.9:
Article 22.7 applies the provisions of
Article 22
‘mutatis mutandis to the initiation and completion of reviews pursuant
to Article 21’. To us, in the same way that Article 22.1 imposes
notification and public notice requirements on investigating authorities
that have decided, in accordance with the standards set out in Article
11, to initiate an investigation, Article 22.1 (by virtue of
Article 22.7) also operates to impose notification and public notice
requirements on investigating authorities that have decided, in
accordance with Article 21, to initiate a review. Similarly, in the same
way that Article 22.1 does not itself establish evidentiary standards
applicable to the initiation of an investigation, it does not itself
establish evidentiary standards applicable to the initiation of sunset
reviews. Such standards, if they exist, must be found elsewhere.”(431)
2. Relationship with other Articles
322. With respect to the
relationship with Article 11, see paragraph 321 above.
XXIII. Article 23 back to top
A. Text of Article 23
Article 23: Judicial Review
Each Member whose national legislation contains provisions on
countervailing duty measures shall maintain judicial, arbitral or
administrative tribunals or procedures for the purpose, inter alia, of
the prompt review of administrative actions relating to final
determinations and reviews of determinations within the meaning of
Article 21. Such tribunals or procedures shall be independent of the
authorities responsible for the determination or review in question, and
shall provide all interested parties who participated in the
administrative proceeding and are directly and individually affected by
the administrative actions with access to review.
B. Interpretation and Application of Article 23
No jurisprudence or decision of a competent WTO
body.
Part VI : Institutions
XXIV. Article 24 back to top
A. Text of Article 24
Article 24: Committee on Subsidies and
Countervailing Measures and Subsidiary Bodies
24.1 There is hereby established
a Committee on Subsidies and Countervailing Measures composed of
representatives from each of the Members. The Committee shall elect its
own Chairman and shall meet not less than twice a year and otherwise as
envisaged by relevant provisions of this Agreement at the request of any
Member. The Committee shall carry out responsibilities as assigned to it
under this Agreement or by the Members and it shall afford Members the
opportunity of consulting on any matter relating to the operation of the
Agreement or the furtherance of its objectives. The WTO Secretariat
shall act as the secretariat to the Committee.
24.2 The Committee may set up
subsidiary bodies as appropriate.
24.3 The Committee shall establish a
Permanent Group of Experts composed of five independent persons, highly
qualified in the fields of subsidies and trade relations. The experts
will be elected by the Committee and one of them will be replaced every
year. The PGE may be requested to assist a panel, as provided for in
paragraph 5 of Article 4. The Committee may also seek an advisory
opinion on the existence and nature of any subsidy.
24.4 The PGE may be consulted by any
Member and may give advisory opinions on the nature of any subsidy
proposed to be introduced or currently maintained by that Member. Such
advisory opinions will be confidential and may not be invoked in
proceedings under Article 7.
24.5 In carrying out their functions,
the Committee and any subsidiary bodies may consult with and seek
information from any source they deem appropriate. However, before the
Committee or a subsidiary body seeks such information from a source
within the jurisdiction of a Member, it shall inform the Member
involved.
B. Interpretation and Application of Article 24
1. Rules of procedure
323. At its meeting of 22 May
1996, the Council for Trade in Goods approved the rules of procedure for
the SCM Committee.(432)
324. Pursuant to
Article 32.7, the
SCM Committee reports to the Council for Trade in Goods on an annual
basis.(433)
2. Subsidiary bodies
(a) Permanent Group of Experts (PGE)
325. A decision taken on 13 June
1995 by the SCM Committee provided that “[t]he initial five persons
elected to the Permanent Group of Experts shall serve staggered terms of
office of 1, 2, 3, 4, and 5 years”.(434) It further provided that “[T]he
decisions as to which person shall serve which of these terms of office
shall be decided by lot after the initial membership of the PGE has been
established.” The initial slate of experts was elected on 6 March
1996.(435) Since then, the SCM Committee has elected experts as required,
according to the relevant process.(436) The PGE has not yet been called
upon to perform any of its envisaged duties and the Committee has not
yet approved any rules of procedure for the PGE.
(b) Informal Group of Experts (IGE)
326. By a decision of 13 June
1995, the Committee created an Informal Group of Experts(437) with the
following terms of reference:(438)
“To examine matters which are not specified in
Annex IV to the Agreement or which need further clarification for the
purposes of paragraph 1(a) of Article
6.”
(c) Working Party on Subsidy Notifications
327. By a decision of 22 February
1995, the Committee created a Working Party on Subsidy Notifications.(439)
The Working Party’s work is generally reflected in Chairs’ reports
in the minutes of the SCM Committee meetings.
3. Relationship with other Articles
328. With respect to the
relationship with Article
32.7, see paragraph 324 above and Section
XXXII below.
Part VII: Notification And Surveillance
XXV. Article 25 back to top
A. Text of Article 25
Article 25: Notifications
25.1 Members agree that, without
prejudice to the provisions of paragraph 1 of Article XVI of GATT
1994,
their notifications of subsidies shall be submitted not later than 30
June of each year and shall conform to the provisions of paragraphs 2
through 6.
25.2 Members shall notify any subsidy
as defined in paragraph 1 of Article
1, which is specific within the
meaning of Article 2, granted or maintained within their territories.
25.3 The content of notifications
should be sufficiently specific to enable other Members to evaluate the
trade effects and to understand the operation of notified subsidy
programmes. In this connection, and without prejudice to the contents
and form of the questionnaire on subsidies,(54) Members shall ensure that
their notifications contain the following information:
(footnote original) 54 The Committee shall
establish a Working Party to review the contents and form of the
questionnaire as contained in BISD 9S/193-194.
(i) form of a subsidy
(i.e. grant, loan, tax concession, etc.);
(ii) subsidy per unit or, in
cases where this is not possible, the total amount or the annual amount
budgeted for that subsidy (indicating, if possible, the average subsidy
per unit in the previous year);
(iii) policy objective and/or purpose
of a subsidy;
(iv) duration of a subsidy and/or any
other time-limits attached to it;
(v) statistical data permitting
an assessment of the trade effects of a subsidy.
25.4 Where specific points in
paragraph 3 have not been addressed in a notification, an explanation
shall be provided in the notification itself.
25.5 If subsidies are granted to
specific products or sectors, the notifications should be organized by
product or sector.
25.6 Members which consider that
there are no measures in their territories requiring notification under
paragraph 1 of Article XVI of GATT 1994 and this Agreement shall so
inform the Secretariat in writing.
25.7 Members recognize that
notification of a measure does not prejudge either its legal status
under GATT 1994 and this Agreement, the effects under this Agreement, or
the nature of the measure itself.
25.8 Any Member may, at any
time, make a written request for information on the nature and extent of
any subsidy granted or maintained by another Member (including any
subsidy referred to in Part IV), or for an explanation of the reasons
for which a specific measure has been considered as not subject to the
requirement of notification.
25.9 Members so requested shall
provide such information as quickly as possible and in a comprehensive
manner, and shall be ready, upon request, to provide additional
information to the requesting Member. In particular, they shall provide
sufficient details to enable the other Member to assess their compliance
with the terms of this Agreement. Any Member which considers that such
information has not been provided may bring the matter to the attention
of the Committee.
25.10 Any Member which considers that
any measure of another Member having the effects of a subsidy has not
been notified in accordance with the provisions of paragraph 1 of
Article XVI of GATT 1994 and this Article may bring the matter to the
attention of such other Member. If the alleged subsidy is not thereafter
notified promptly, such Member may itself bring the alleged subsidy in
question to the notice of the Committee.
25.11 Members shall report without
delay to the Committee all preliminary or final actions taken with
respect to countervailing duties. Such reports shall be available in the
Secretariat for inspection by other Members. Members shall also submit,
on a semi-annual basis, reports on any countervailing duty actions taken
within the preceding six months. The semi-annual reports shall be
submitted on an agreed standard form.
25.12 Each Member shall notify the
Committee (a) which of its authorities are competent to initiate and
conduct investigations referred to in Article 11 and (b) its domestic
procedures governing the initiation and conduct of such investigations.
B. Interpretation and Application of Article 25
1. General
(a) Questionnaire format for subsidy
notifications
329. At its meeting of 28 October
and 1 and 8 December 2003, the SCM Committee adopted a revised
Questionnaire Format for Subsidy Notifications under Article 25 of the
SCM Agreement and under Article XVI of the
GATT
1994,(440) which consists
of general rules relating to the notifications and information to be
provided in the notifications.
(b) Periodicity of submission and review of
subsidy notifications
330. At its meeting on 8 May 2003,
the Committee took note of the Chair’s statement concerning Members’
views that their resources would be best utilized by giving maximum
priority to submitting new and full subsidy notifications every two
years and by de-emphasizing the review of updating notifications in the
intervening years.(441) This was a continuation of the situation described
in the Chair’s statement of 31 May 2001, of which the Committee had
previously taken note.(442) The Committee adopted procedures for review of
2003 new and full subsidy notifications at its meeting on 8 May 2003.(443)
2. Article 25.7
331. The Panel on Canada —
Aircraft rejected the argument made by Brazil that assistance under the
Canada-Quebec Subsidiary Agreements on Industrial Development
(agreements pledging support by the Government of Canada to industrial
projects in Quebec) could conceivably be provided in the form of
non-repayable contributions.(444) In making this assertion, Brazil was
relying on the notification by Canada of these subsidiary agreements to
the SCM Committee, made pursuant to Article 25.2 of the SCM
Agreement;
the Panel held that the mere notification by Canada of the programme
under these subsidiary agreements was an insufficient basis for a
finding of a prima facie case that subsidiary agreement assistance was
provided in the form of non-repayable contributions. (445)
3. Article 25.11
(a) “shall report … all preliminary or
final actions”
332. At its meeting of 13 June
1995, the SCM Committee adopted the requirements for the minimum
information to be provided under Article 25.11 of the Agreement in the
reports on all preliminary or final countervailing actions.(446)
(b) “semi-annual reports”
333. At its meeting of 13 June
1995, the SCM Committee issued guidelines for information to be provided
in the semi-annual reports.(447)
(c) Relationship with other Articles
(i) Article 27.4
334. In the Brazil — Aircraft
dispute, Brazil argued that when determining whether a developing
country Member has increased the level of its export subsidies within
the meaning of Article 27.4 of the SCM Agreement, the Panel or the
Appellate Body should consider the Member’s budgetary appropriations
rather than actual expenditures. In making this argument, Brazil was
relying on Article 25 of the SCM Agreement, which provides that
notifications shall contain the “subsidy per unit or, in cases where
this is not possible, the total amount or the annual amount budgeted for
that subsidy…”. The Appellate Body on Brazil — Aircraft considered
Article 25 to be “considerably less useful as context in interpreting
the phrase ‘the level of its export subsidies’ in Article 27.4”.(448)
It noted that “Article 25 has a fundamentally different purpose from
Article 27 of the SCM Agreement. Whereas Article 25 aims to promote
transparency by requiring Members to notify their subsidies, without
prejudging the legal status of those subsidies, Article 27 imposes
positive obligations on developing country Members with respect to
export subsidies.”(449)
XXVI. Article 26 back to top
A. Text of Article 26
Article 26: Surveillance
26.1 The Committee shall examine
new and full notifications submitted under paragraph 1 of Article XVI of
GATT 1994 and paragraph 1 of Article 25 of this Agreement at special
sessions held every third year. Notifications submitted in the
intervening years (updating notifications) shall be examined at each
regular meeting of the Committee.
26.2 The Committee shall examine
reports submitted under paragraph 11 of Article 25 at each regular
meeting of the Committee.
B. Interpretation and Application of Article 26
335. As regards the procedures
adopted for review of new and full subsidy notifications, see paragraph
330 above.
Footnotes:
343. Appellate Body Report on US — Offset Act
(Byrd Amendment), paras. 281-282. back to text
344. (footnote original) We note that the parties’ submissions do not
suggest otherwise. back to text
345. Appellate Body Report on US — Offset Act (Byrd Amendment), para.
283. back to text
346. (footnote original) Panel Report, para. 7.63. back to text
347. (footnote original) Ibid., para. 7.66. back to text
348. Appellate Body Report on US — Offset Act (Byrd Amendment), para.
289. back to text
349. Appellate Body Report on US — Offset Act (Byrd Amendment), para.
291. back to text
350. Appellate Body Report on US — Offset Act (Byrd Amendment), para.
293. back to text
351. Appellate Body Report on US — Offset Act (Byrd Amendment), para.
294. back to text
352. Appellate Body Report on US — Offset Act (Byrd Amendment), para.
299. back to text
353. Appellate Body Report on US — Offset Act (Byrd Amendment), para.
298. back to text
354. Panel Report on US — Carbon Steel, para. 8.63. back to text
355. Appellate Body Report on US — Carbon Steel, paras. 66-67.
back to text
356. Appellate Body Report on US — Carbon Steel, para. 68.
back to text
357. Appellate Body Report on US — Carbon Steel, paras. 77-82.
back to text
358. Appellate Body Report on US — Carbon Steel, para. 83.
back to text
359. Appellate Body Report on US — Carbon Steel, paras. 67-68.
back to text
360. Appellate Body Report on US — Carbon Steel, para. 69.
back to text
361. Appellate Body Report on US — Carbon Steel, para. 72.
back to text
362. Appellate Body Report on US — Carbon Steel, para. 74.
back to text
363. Appellate Body Report on US — Carbon Steel, para. 77.
back to text
364. (footnote original) Panel Report on US — Carbon Steel, para. 8.60.
It is, for example, unclear to us whether the Panel considered the Note
to form part of the preparatory work of the treaty and intended to use
it as a supplementary means of treaty interpretation within the meaning
of Article 32 of the Vienna Convention. back to text
365. Appellate Body Report on US — Carbon Steel, paras. 77-78.
back to text
366. Appellate Body Report on US — Carbon Steel, para. 78.
back to text
367. (footnote original) The term “subsidization” is used in the
following Articles of the SCM Agreement: 6.1(a);
8.3; 11.9;
12.10; 15.3; 17.2;
18.2; 18.4; 19.4;
21.1; 21.2; 21.3; as well as in
Annex IV. back to text
368. Appellate Body Report on US — Carbon Steel, paras. 80-81.
back to text
369. Appellate Body Report on US — Carbon Steel, para. 90.
back to text
370. Panel Report on US — Lead and Bismuth II, para. 6.74.
back to text
371. Panel Report on US — Lead and Bismuth II, para. 6.74.
back to text
372. Panel Report on Canada — Aircraft Credits and Guarantees, para.
7.345. back to text
373. Appellate Body Report on Canada — Aircraft, para. 155, regarding
the contextual relevance of Article 14 for the purpose of determining
the existence of “benefit”. back to text
374. Panel Report on Canada — Aircraft Credits and Guarantees, para.
7.397. back to text
375. Panel Report on Canada — Aircraft Credits and Guarantees, para.
7.398. back to text
376. Panel Report US — Softwood Lumber III, para. 7.43. back to text
377. Panel Report US — Softwood Lumber III, para. 7.44. back to text
378. Panel Report US — Softwood Lumber III, paras. 7.46, 7.48 and 7.50.
back to text
379. (footnote original) We note that the US agrees that “As stated in
the chapeau to Article 14, and confirmed by the Appellate Body, the
benefit for purposes of paragraph 1 of Article 1 is the benefit to the
recipient.” US Answers to Questions from the Panel after the First
Meeting, para. 41. The Appellate Body in the Canada — Measures
Affecting the Export of Civilian Aircraft case interpreted the term “benefit”
in the SCM Agreement in the following manner:
“157. We also believe that the word ‘benefit’, as used in Article
1.1(b), implies some kind of comparison. This must be so, for there can
be no ‘benefit’ to the recipient unless the ‘financial
contribution’ makes the recipient ‘better off ’ than it would
otherwise have been, absent that contribution. In our view, the
marketplace provides an appropriate basis for comparison in determining
whether a ‘benefit’ has been ‘conferred’, because the trade
distorting potential of a ‘financial contribution’ can be identified
by determining whether the recipient has received a ‘financial
contribution’ on terms more favourable than those available to the
recipient in the market.” (emphasis added) Appellate Body Report,
Canada — Measures Affecting the Export of Civilian Aircraft,
WT/DS70/AB/R, adopted 20 August 1999, para. 157. back to text
380. Panel Report US — Softwood Lumber III, paras. 7.51-7.52.
back to text
381. Panel Report US — Softwood Lumber III, para. 7.53. back to text
382. Panel Report US — Softwood Lumber III, para. 7.58. back to text
383. Panel Report US — Softwood Lumber III, para. 7.59. back to text
384. Panel Report on Indonesia — Autos, paras. 14.173-14.174.
back to text
385. Panel Report on Indonesia — Autos, para. 14.176. back to text
386. Panel Report on Indonesia — Autos, para. 14.176. back to text
387. Panel Report on Indonesia — Autos, para. 14.177. back to text
388. Panel Report on Indonesia — Autos, para. 14.178. back to text
389. Panel Report on Indonesia — Autos, para. 14.192. back to text
390. Panel Report on Indonesia — Autos, para. 14.196. back to text
391. Panel Report on Indonesia — Autos, para. 14.197. back to text
392. Panel Report US — Softwood Lumber III, para. 7.100. back to text
393. Panel Report US — Softwood Lumber III, para. 7.100. back to text
394. (footnote original) Appellate Body Report, United States —
Standards for Reformulated and Conventional Gasoline, WT/DS/2/AB/R,
adopted on 20 May 1996, p. 23. back to text
395. Panel Report US — Softwood Lumber III, para. 7.102. back to text
396. Panel Report US — Softwood Lumber III, para. 7.136. back to text
397. Panel Report US — Softwood Lumber III, paras. 7.133 and
7.140-7.142. back to text
398. Panel Report US — Softwood Lumber III, paras. 7.156-7.157.
back to text
399. Panel Report on US — Lead and Bismuth II, para. 6.52.
back to text
400. Panel Report on US — Lead and Bismuth II, para. 6.57.
back to text
401. Panel Report US — Softwood Lumber III, paras. 7.93 and 7.100.
back to text
402. Panel Report US — Softwood Lumber III, para. 7.94. back to text
403. Panel Report US — Softwood Lumber III, para. 7.95. back to text
404. (footnote original) Appellate Body Report, Korea — Definitive
Safeguard Measure on Imports of Certain Dairy Products, WT/DS98/AB/R,
adopted on 12 January 2000, para. 81. back to text
405. Panel Report US — Softwood Lumber III, paras. 7.96-7.97.
back to text
406. Panel Report US — Softwood Lumber III, para. 7.100. back to text
407. Panel Report on Brazil — Desiccated Coconut, para. 277.
back to text
408. Panel Report US — Softwood Lumber III, para. 7.151. back to text
409. Panel Report US — Softwood Lumber III, para. 7.157. back to text
410. Appellate Body Report on US — Lead and Bismuth II, para. 62,
referring to the Panel Report on US — Lead and Bismuth II, para. 6.71.
back to text
411. Appellate Body Report on US — Lead and Bismuth II, para. 63. With
respect to the issue whether a national authority must conduct an
investigation on its own initiative or whether it can limit its
investigation to issues raised by the interested parties themselves, see
the Chapter on the Agreement on Safeguards, Section
IV.B.2(a). back to text
412. (footnote original) Panel Report on US — Carbon Steel, para 8.49.
back to text
413. Appellate Body Report on US — Carbon Steel, paras. 116-118.
back to text
414. Appellate Body Report on US — Carbon Steel, paras. 88, 103 and
105. back to text
415. Appellate Body Report on US — Carbon Steel, paras. 108 and 109.
back to text
416. Appellate Body Report on US — Carbon Steel, para. 116.
back to text
417. Panel Report on US — Carbon Steel, para. 8.91. back to text
418. (footnote original) Appellate Body Report on US — Lamb, para. 131.
back to text
419. (footnote original) Panel Report on US — DRAMS, para. 6.42.
back to text
420. Panel Report on US — Carbon Steel, paras. 8.92-8.95. back to text
421. Panel Report on US — Carbon Steel, para. 8.96. back to text
422. Appellate Body Report on US — Carbon Steel, para. 108.
back to text
423. Appellate Body Report on US — Carbon Steel, para. 109.
back to text
424. Panel Report on US — Carbon Steel, para. 8.19 back to text
425. Appellate Body Report on US — Carbon Steel, para. 105.
back to text
426. Panel Report US — Carbon Steel, para. 8.47. back to text
427. Appellate Body Report on US — Carbon Steel, paras. 92-97.
back to text
428. (footnote original) Panel Report, paras. 8.27-8.30. back to text
429. Appellate Body Report on US — Carbon Steel, paras. 64-65.
back to text
430. Appellate Body Report on US — Carbon Steel, para. 91.
back to text
431. Appellate Body Report on US — Carbon Steel, paras. 111-112.
back to text
432. G/C/M/10, section 1(iv). The text of the adopted rules of procedure
can be found in G/L/144. back to text
433. The reports are contained in documents G/L/31, 31/Corr.1, 126, 201,
267, 341, 341/Corr.1, 408, 655/Corr.1. back to text
434. G/SCM/4, para. 1. back to text
435. G/SCM/M/8; G/SCM/9. back to text
436. G/SCM/4. back to text
437. G/SCM/M/2, item O; G/SCM/5. back to text
438. For reports of the IGE, see documents G/SCM/W/415/Rev.2, G/SCM/M/16,
item H, G/SCM/W/415/Rev.2/Suppl.1 and G/SCM/M/24 item E. back to text
439. G/SCM/M/1, item P; G/SCM/1. back to text
440. G/SCM/6/Rev.1. See G/SCM/48, para. 213. back to text
441. G/SCM/M/46, item R.4. back to text
442. G/SCM/M/30, paras. 6-7. back to text
443. G/SCM/M/46, item R.5 and G/SCM/W/524. back to text
444. Panel Report on Canada — Aircraft, para. 9.256. back to text
445. Panel Report on Canada — Aircraft, para. 9.256. back to text
446. G/SCM/3. back to text
447. G/SCM/2. back to text
448. Appellate Body Report on Brazil — Aircraft, para. 149.
back to text
449. Appellate Body Report on Brazil — Aircraft, para. 149.
back to text
|
