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See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 10 November
2000, the EC requested consultations with the US concerning the continued
application by the United States of countervailing duties on a number of
products. In particular, the EC claimed that the application of the “same person” methodology by the US, and the continued
imposition of duties based on it, are in breach of Articles 10, 19 and 21
of the SCM Agreement, because there is no proper determination of a
benefit to the producer of the goods under investigation, as required by
Article 1.1(b) of the SCM Agreement. The EC included in this request for
consultations 14 US countervailing duty orders1
where this “same
person” methodology was applied. All these cases involve alleged
non-recurring subsidies granted to firms prior to a change of ownership;
On 1 February 2001, the EC requested further
consultations with the US.
Panel and Appellate Body proceedings
Failing consultations and further to the
request of the EC, the DSB established a panel at its meeting of 10
September 2001. Brazil, India and Mexico reserved their third-party
rights. On 25 October 2001, the EC requested the Director-General to
determine the composition of the Panel. On 5 November 2001, the Panel was
composed. On 18 April 2002, the Chairman of the Panel informed the DSB
that it would not be able to complete its work in six months due to the
complexity of the matter. The Panel expected to complete its work by mid
July 2002.
On 31 July 2002, the Panel Report was circulated to the
Members. The Panel concluded that where a privatization is at arm’s length
and for fair market value, the benefit from a prior non-recurring
financial contribution bestowed upon the state-owned producer no longer
accrues to the privatized producer. Therefore, the Panel found that both
the 12 countervailing duty determinations and Section 1677(5)(F) were
inconsistent with WTO Law.
On 9 September 2002 the US notified its decision to
appeal certain issues of law covered in the Panel Report and certain legal
interpretations developed by the Panel. The United States sought review by
the Appellate Body of the conclusions of the Panel set forth in paragraphs
8.1(a) —(d) and 8.2 of the Panel Report.
On 9 December 2002, the Appellate Body Report was
circulated to Members. The Appellate Body:
- upheld the Panel’s findings, in paragraphs
8.1 (a), (b) and (c) of the Panel Report, that the United States has acted
inconsistently with Articles 10, 14, 19.1, 19.4, 21.1, 21.2 and 21.3 of
the SCM Agreement, by imposing and maintaining countervailing duties
without determining whether a “benefit” continues to exist in
twelve countervailing duty determinations;
- reversed the Panel’s finding, in paragraph
8.1(d), first sentence, of the Panel Report, that “[o]nce an
importing Member has determined that a privatization has taken place at
arm’s-length and for fair market value, it must reach the conclusion that
no “benefit” resulting from the prior financial contribution (or
subsidization) continues to accrue to the privatized producer”; and
- reversed the Panel’s conclusion, in paragraph
8.1(d), second sentence, of the Panel Report, that Section 771(5)(F) of
the Tariff Act 1930, as amended, 19 U.S.C. § 1677(5)(F), is inconsistent
with the SCM Agreement.
- upheld the Panel’s conclusion, in paragraph
8.2 of the Panel Report, that, insofar as the United States has infringed
its obligations under the SCM Agreement, as set out in paragraphs 8.1(a),
(b), and (c) of the Panel Report, these actions of the United States
constitute prima facie nullification or impairment of benefits accruing to
the European Communities, pursuant to Article 3.8 of the DSU; and, because
the United States has failed to rebut this presumption, the United States
has in fact nullified or impaired benefits accruing to the European
Communities under the SCM Agreement.
The Appellate Body recommended that the DSB request the
United States to bring its measures and administrative practice (the “same person” methodology) into conformity with its obligations
under that Agreement. On 8 January 2003, the DSB adopted the Appellate
Body Report and the Panel Report, as modified by the Appellate Body
Report.
Implementation of adopted reports
At the DSB
meeting on 27 January 2003, the US indicated that it intended to comply
with the recommendations and rulings of the DSB in a manner that respected
its WTO obligations and that, in that connection, it would need a
reasonable period of time to implement them. The EC urged the US to
promptly bring its measures into conformity with the recommendations and
rulings of the DSB. The EC indicated that, since the principle underlying
the findings in this case had been established by the Appellate Body in an
earlier case (US — Imposition of countervailing duties on lead and bismuth
carbon steel from the UK), and as such the US should by now know what it
had to do to bring its measures into conformity with WTO disciplines, the
reasonable period of time had to be short. On 10 April 2003, the parties
notified the DSB that they had agreed on a reasonable period of time for
implementation of 10 months (from 8 January 2003 to 8 November 2003)
At the DSB meeting on 7 November 2003, the US presented
its first status report where it stated that on 23 June 2003, the US
Department of Commerce (DOC) published a notice announcing a modification
of the manner in which the Department would analyse the question of
whether a subsidized, government-owned company remained subsidized after
it was “privatized”; the DOC had also issued final revised
determinations for each of the twelve countervailing determinations that
were at issue on 24 October 2003; and as a result of these measures, the
US considered that it had brought its measures into full conformity with
the recommendations and rulings of the DSB. The EC said that while the
amending legislation was to be welcomed, as it established a presumption
that a company would not be deemed to have benefited from prior subsidies,
if the company had been privatized in an arm’s length, fair market value
transaction, certain elements of the legislation gave rise to concern; it
would appear that some of the factors which had to be taken into account
by the DOC in its determination went beyond “governmental economic
and other policies”. The EC further stated that while the EC was
satisfied with the results of the DOC’s re-examination in eight out of the
twelve privatization cases, it regretted the decision that an analysis of
privatization was not necessary to implement the DSB rulings in the other
four cases, and that the EC was evaluating the reasons given for such an
omission and its consequences on the implementation process. Mexico said
that it, as a third-party, was in the process of analysing whether the new
US measure fully complied with the recommendations and rulings of the DSB.
At the DSB meeting on 1 December 2003, the EC
reiterated its concerns regarding some aspects of the US implementation of
the DSB’s rulings. In particular, the EC was concerned with the treatment
of the four cases where the DOC had refused to examine the nature of the
privatizations. He said that discussions were ongoing on this matter to
explore the possibility for a mutually acceptable solution. However, the
EC reserved its right to initiate compliance proceedings. The US said that
it had complied with the DSB’s recommendations in this case. The US was
disappointed to hear that the EC had some concerns regarding certain
aspects of the revised determinations and was ready to discuss with the EC
possible approaches to these concerns. Brazil said that its companies
suffered commercial damages as a result of the US methodology, which was
WTO-inconsistent.
At the DSB meeting on 19 June 2006, the United States said that it had implemented the DSB's recommendations and rulings in this dispute.
Compliance proceedings
On 17 March 2004, the EC, considering that the measures taken by the US to comply with its WTO obligations were unsatisfactory, requested the US to enter into consultations under Articles 4 and 21.5 of the DSU and Article 30 of the SCM Agreement. On 16 September 2004, pursuant to Articles 6 and 21.5 of the DSU, Article 30 of the SCM Agreement and Article XXIII of GATT 1994, the EC requested that the panel be established, as it disagrees with the US as to the existence or consistency with a covered agreement of measures taken to comply with the recommendations and rulings of the DSB.
In particular, the EC claims and requests the Panel to find the following:
- That in the sunset review Certain Corrosion-Resistant Carbon Steel Flat Products from France (C-427-810) (Case No. 9), the United States failed to properly examine the existence, continuation or likelihood of recurrence of subsidization. In particular, with regard to the privatization concerned, it improperly analysed whether the price for employees and retirees' shares constituted a subsidy or that it led to any continuation of a countervailable subsidy. This is inconsistent with Articles 10, 14, 19.4, 21.1and 21.3 of the SCM Agreement and Article VI: 3 of GATT 1994.
- That in the following sunset reviews:
- Cut-to-Length Carbon Steel Plate from United Kingdom (C-412-815) (Case No. 8);
- Cut-to-Length Carbon Steel Plate from Spain (C-469-804) (Case No. 11),
The EC considers that the United States failed to properly determine whether, in these cases, there was continuation or recurrence of subsidization and injury, because it did not examine the nature of the privatizations in question and their impact on the continuation of the alleged subsidization. This is inconsistent with Articles 10, 14, 19.4, 21.1, and 21.3 of the SCM Agreement and Article VI:3 of GATT 1994, according to the EC.
At its meeting of 27 September 2004, the DSB established the panel. Brazil, Korea and China reserved their rights as third parties. On 8 October 2004, the Panel was composed.
On 4 January 2005, the Chairman of the Panel informed the DSB that the Panel expected to complete its work in May 2005.
0n 17 August 2005, the Panel Report was circulated to Members. In the Panel Report, the European Communities prevailed only on its claims regarding (i) the US failure to examine the privatizations of BS plc (UK) and Aceralia (Spain); and (ii) the treatment of new evidence in the UK Section 129 proceedings. All other EC claims were either dismissed or rejected.
On 27 September 2005, the Panel Report was adopted by the DSB.
1. Original imposition of countervailing duties
(post-WTO
measures): Stainless Sheet and Strip in Coils from France (C-427-815); Certain
Cut-to-Length Carbon Quality Steel from France (C-427-817); Certain Pasta from
Italy (C-475-819); Stainless Steel Sheet and Strip in coils from Italy
(C-475-821); Certain Stainless Steel Wire Rod from Italy (C-475-823); Stainless
Steel Plate in coils from Italy (C-475-825); Certain Cut-to-length
Carbon-quality steel plate from Italy (C-475-827). Administrative reviews:
Cold-Rolled Carbon Steel Flat Products from Sweden (C-401-401); Cut-to Length
Carbon Steel Plate from Sweden (C-401-804); Grain-oriented electrical steel from
Italy * (C-475-812). Sunset reviews: Cut-to-Length Carbon Steel Plate from
United Kingdom (C-412-815); Certain Corrosion-Resistant Carbon Steel Flat
Products from France (C-427-810); Cut-to-Length Carbon Steel Plate from Germany
(C-428-817); Cut-to-Length Carbon Steel Plate from Spain (C-469-804).
* Preliminary determination, plus final sunset results
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