Inside US Trade - Vol. 18, No. 35
In a ruling against a 1916 U.S. antidumping law, the Appellate Body of the World Trade Organization this week affirmed that anti-dumping laws are covered by a dispute settlement principle established in the original General Agreement on Tariffs and Trade and carried forward into the WTO.
The Appellate Body found that members can challenge another country's antidumping law even though they are not challenging the specific application of that law in a given instance. The ruling rejected the U.S. argument that a challenge to an antidumping law is only possible if it has been applied to impose a definitive or provisional antidumping duty or to negotiate a certain floor price for a product that had been subject to investigation.
This may make it hard for the U.S. to pursue what some observers say is a larger U.S. effort to argue that WTO challenges should be limited to the implementation of specific laws, rather than focusing on the statutes themselves. If a WTO ruling is focused on the application of a law, it is easier for the U.S. to argue that no change in legislation is required, these observers say.
The ruling will also have implications for pending challenges of U.S. antidumping cases on hot-rolled and plate steel, which challenge the application of U.S. law as well as the law on its face, one private-sector source said.
The Appellate Body ruling on this aspect of the case upheld the decision of the initial WTO panel that the European Union and Japan could challenge the U.S. 1916 Act, which allows private parties in the U.S. to sue importers of unfairly priced products in U.S. court, even though companies had not been harmed by a specific court decision.
"[T]he GATT and the WTO case law firmly establishes that dispute settlement proceedings may be brought based on the alleged inconsistency of a Member's legislation as such with that Member's obligations," the Appellate Body said in its Aug. 28 finding. "We find nothing, and the United States has identified nothing, inherent in the nature of antidumping legislation that would rationally distinguish such legislation from the ambit of generally-accepted practice that a panel may examine legislation as such."
The issue of whether a law as such can be challenged arose in the context of the Appellate Body's determination that the panel had correctly decided it had jurisdiction over the 1916 Act. The law allows private parties to bring civil actions and seek criminal proceedings against importers who have sold foreign products at prices substantially less than those charged for the same product in foreign markets. If an importer is found criminally liable, he is subject to a fine and/or imprisonment. Several civil actions have been brought in U.S. courts under this law in recent years.
In upholding the panel's jurisdiction finding, the Appellate Body pointed out that the practice of challenging legislation as such was firmly established under GATT 1947, and that the panel decisions articulating and applying this practice form part of GATT jurisprudence. Under Article XVI:1 of the Agreement establishing the WTO, GATT jurisprudence provides guidance to the WTO and therefore to panels and the Appellate Body.
In addition, the Appellate Body said, WTO members affirm in Article 3.1 of the Dispute Settlement Understanding that they adhere to the "principles for the management of disputes heretofore applied under Article XXII and XXIII of GATT 1947." It also pointed out that a number of panels in the WTO have dealt with the challenges to legislation as such, independent of application in specific circumstances.
The Appellate Body also specifically addressed the U.S. argument that Article 17.4 of the Antidumping Agreement does not allow challenges to an antidumping law in absence of specific applications. The Appellate Body pointed out that Article 17.4 does not specifically address the issue of whether a country can challenge antidumping legislation as such. But when read in conjunction with Article 18.4 of the Antidumping Agreement, it is clear that the Antidumping Agreement allows both types of challenges, the Appellate Body found. Article 18.4 obliges WTO members to bring their laws into conformity no later than the date that the WTO Agreement goes into effect.
If a member could not bring a challenge to a law as such until a country had used it to impose final or preliminary dumping duties or negotiate a price undertaking, the examination of antidumping legislation as such would be deferred, the Appellate Body said. This would diminish the effectiveness of Article 18.4, the Appellate Body ruled.
In upholding this jurisdiction finding, the Appellate Body also addressed the issue of whether the 1916 Act constitutes discretionary legislation as defined by GATT jurisprudence. GATT jurisprudence has established the concept that a law cannot be found to violate international rules if it gives a country's executive branch the discretion to interpret the law consistent with its international trade obligations.
But the Appellate Body agreed with the panel that this distinction was not relevant in this case, contrary to U.S. claims. The U.S. had argued that the 1916 Act should be considered a discretionary law because U.S. courts have interpreted it in different ways, either as an antitrust or an antidumping statute.
The Appellate Body found that discretion in the context of GATT jurisprudence is limited to the executive branch, and that U.S. court decisions relate to the meaning of the law, not how to apply it consistent with the WTO.
In addition to the jurisdictional issue, the Appellate Body upheld all other legal conclusions of the panel. It found that the rules of the WTO as articulated in Article VI of the GATT 1994 and the Antidumping Agreement applied to the law because it incorporates elements of dumping. The Appellate Body also upheld the panel's ruling that the 1916 Act is inconsistent with these rules for a number of reasons, including the fact that its penalties go beyond the responses to dumping that these rules authorize and its absence of procedures for handling antidumping complaints. In addition, the law is inconsistent, the Appellate Body found, because it does not establish a test on whether unfair pricing hurts a domestic industry as required under the WTO rules.
At press time, it was unclear whether the EU and Japan would press for speedy implementation of the panel, which could lead to a change in U.S. law.
The Appellate Body did not consider additional appeals of the EU and Japan related to arguments that the law violated the national treatment of GATT under Article III:4 and a Japanese argument that it violated Article XI of the GATT because it imposed trade restrictions other than those authorized under that provision.
It also did not address whether the law violated Article XVI:4 of the WTO Agreement, which obliges members to conform their laws with WTO rules. The Appellate Body stated that it did not need to address these issues because it had already ruled against the law on other grounds.
The Appellate Body upheld the ruling of the panel to refuse to grant enhanced party rights to Japan and the European Union, which would have given them a bigger role in each other's panel proceedings. The EU and Japan brought two separate challenges to the 1916 Act. The same panel heard both cases and issued two separate reports, but in view of the similarities of issues raised in the two appeals, all parties agreed that one Appellate Body would review both panel findings in one report.
In upholding the panel's decision that Article VI of the GATT and the Antidumping Agreement apply to the 1916 Act, the Appellate Body said the price discrimination test incorporated into the law falls within the definition of dumping in Article VI.1.
This definition in Article VI:1 states that dumping is the sale of exports below the price charged for the product in the exporter's home market or the cost of production plus selling costs and profits.
The U.S. appealed the panel's decision that Article VI applies to the law with the argument that the GATT of 1994 only is relevant when a member imposes antidumping duties, not when it takes other actions and when a law specifically targets dumping within the meaning of Article VI.1.
The U.S. argued that the 1916 Act provides for civil and criminal fines and imprisonment and specifically targets predatory pricing, not dumping. It also argued that Article VI.2 allows members antidumping measures other than antidumping duties.
Article VI.2 states that countries may remedy dumping with antidumping duties, but it does not specify that these are the only remedies that can be imposed, the Appellate Body said. It pointed out that the text of Article VI is inconclusive as to whether it regulates all possible measures members may take to counteract dumping.
But the scope of the provision is clarified when read together with Article 18.1 of the Antidumping Agreement, which states that no "specific action" against dumping can be taken except in accordance with the GATT 1994 as interpreted by the Dumping Agreement, which precludes the use of civil or criminal fines. This applies to situations that contain constituent elements of dumping as defined by the Article VI.1 and the Antidumping Agreement, the Appellate Body said.
The Appellate Body also backed the panel's reasoning that the applicability of Article VI also implies the applicability of the Antidumping Agreement.
When these provisions are read together, international rules limit permissible responses to dumping to definitive antidumping duties, provisional measures, and price undertakings, it said.
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