184-13.doc - World Trade Organization

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184-13.doc - World Trade Organization


    19 February 2002 ORGANIZATION





    under Article 21.3(c) of the

    Understanding on Rules and Procedures

    Governing the Settlement of Disputes

    Award of the Arbitrator

Florentino P. Feliciano


     Page 1

I. Introduction

    1. On 23 August 2001, the Dispute Settlement Body (the "DSB") adopted the Appellate Body

    12 and the Panel Report , as modified by the Appellate Body Report, in United States Anti-Report

     3Dumping Measures on Certain Hot-Rolled Steel Products from Japan ("US Hot-Rolled Steel"). At

    the DSB meeting of 10 September 2001, the United States informed the DSB, pursuant to Article 21.3 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (the "DSU"), that

    it would implement the recommendations and rulings of the DSB in this dispute and that it would

    4require a "reasonable period of time" to do so, under the terms of Article 21.3 of the DSU.

    2. In view of its inability to reach an agreement with the United States on the period of time reasonably required for implementation of those recommendations and rulings, Japan requested that

    5such period be determined by binding arbitration pursuant to Article 21.3(c) of the DSU.

    3. By joint letter of 6 December 2001, the United States and Japan notified the DSB that they had agreed that the duration of the "reasonable period of time" for implementation should be determined through binding arbitration, under the terms of Article 21.3(c) of the DSU, and that I should act as

    6Arbitrator. The parties had indicated in a previous letter that they had agreed to extend the time period

    7for the arbitration to 19 February 2002. Notwithstanding this extension of the time period, the parties stated that the arbitration award would be deemed to be an award made under Article 21.3(c) of the DSU. My acceptance of the designation as Arbitrator was conveyed to the parties by letter of

    810 December 2001.

    4. Written submissions were received from the United States and Japan on 4 January 2002, and an oral hearing was held on 18 January 2002.

     1Appellate Body Report, WT/DS/184/AB/R.

    2Panel Report, WT/DS184/R.








    Page 2

II. Arguments of the Parties

    A. The United States

    5. The United States requests me to fix the "reasonable period of time" at 18 months, so that that period will expire on 23 February 2003.

    6. The United States submits that implementation will entail a multi-faceted process that may include extensive consultations with Congress, legislative action, internal analysis and revision of certain policies and practices, and a recalculation of the dumping margins. It anticipates that the process will require 14 months for the enactment of amending legislation and 4 additional months to apply this legislation to the anti-dumping investigation at issue.

    7. In the present case, the United States argues that the legal forms of implementation and the technical complexity of the necessary measures constitute particular circumstances that justify a "reasonable period of time" in excess of 15 months under Article 21.3(c).

    8. The United States explains that this case requires a sequential combination of forms of implementation. The first step involves the enactment of a statute amending Section 735(c)(5)(A) of the United States Tariff Act of 1930, as amended, which refers to the calculation of the "all others" rate. The "all others" rate is defined in this statute as the rate of dumping duty that is imposed on companies that were not individually investigated. Following the enactment of the amending statute, the Department of Commerce of the United States will be required to issue an amended determination in the anti-dumping investigation at issue. The United States maintains that this second step can be carried out only after enactment of this legislation, given that the administering authority must apply the amended statute.

    9. The United States further states that, in addition to amending the statute relating to the "all others" rate and applying it, there are other recommendations and rulings to be implemented. These other recommendations and rulings are already in the process of being implemented and their implementation will be completed within the time period required to pass the legislative change mentioned earlier. As an example, the United States mentions the need to change the administrative practice with respect to the exclusion of home market sales on the basis of the "99.5 percent" or "arm's length" test. No additional time is separately sought to carry out such change of practice. 10. The United States submits that a period of 14 months to make the necessary legislative changes is reasonable in the light of the United States legal system and prior experience. The end of this period would correspond, according to the United States, to the end of the current (2002) session of the United States Congress when there is greater likelihood of enactment of the implementing legislation.


     Page 3

    11. According to the United States, a period of 14 months for implementation of the necessary legislation is consistent with past arbitration awards under Article 21.3(c) of the DSU. The United States points, in this regard, to the time periods set by the arbitrators in several previous


    12. In describing the procedures for introduction and consideration of legislation in the United States Congress and the timeframe applicable to these procedures, the United States explains that the earliest date a bill can be introduced is during the month of January, when its Congress convenes. The process is complex and a bill must move through numerous stages, none of which has well-defined timetables. To illustrate the volume of its legislative business, the United States notes that a total of 5,514 bills were introduced during the First Session of the 106th Congress and only 170 of these bills became law. The United States points out that at every step of the process, legislators have the ability to control the progress of a bill or to seek additional time for its consideration. Most bills that do become law are not enacted until the last weeks or months of a legislative session. Fifteen of 25 major trade laws enacted since 1930 became law at the end or after a session of the United States Congress. 13. According to the United States, the actions that must be undertaken in the anti-dumping investigation at issue following enactment of the amending statute include: calculation of the "all others" rate based on the new methodology; preparation of a draft redetermination to provide to interested parties for comment as required under domestic law; issuance of a final redetermination; and, finally, correction of clerical errors.

    14. The United States maintains that the Agreement on Implementation of Article VI of the General

    Agreement on Tariffs and Trade 1994 (the "Anti-Dumping Agreement") contains a number of due

    process and transparency obligations that should be taken into account in determining the amount of time required to issue the dumping redetermination. Reference is made to, for example, Articles 6.2, 6.4 and 12 of the Anti-Dumping Agreement. The United States stresses that these due process

    safeguards are no less significant in the context of a redetermination based on the DSB's recommendations and rulings and argues, therefore, that the arbitrator's award should respect these safeguards as reflected in United States law and regulations.

     9The United States refers to Award of the Arbitrator, Japan Taxes on Alcoholic Beverages Arbitration under Article 21.3(c) of the DSU ("Japan Alcoholic Beverages II"), WT/DS8/15, WT/DS10/15, WT/DS11/13,

    14 February 1997, DSR 1997:I, 3; Award of the Arbitrator, European Communities Regime for the Importation, Sale and Distribution of Bananas Arbitration under Article 21.3(c) of the DSU ("EC Bananas III"),

    WT/DS27/15, 7 January 1998, DSR 1998:I, 3; Award of the Arbitrator, EC Measures Concerning Meat and Meat Products (Hormones) Arbitration under Article 21.3(c) of the DSU ("EC Hormones"), WT/DS26/15,

    WT/DS48/13, 29 May 1998; Award of the Arbitrator, United States Anti-Dumping Act of 1916 Arbitration under Article 21.3(c) of the DSU ("US 1916 Act"), WT/DS136/11, WT/DS162/14, 28 February 2001; and,

    Award of the Arbitrator, United States Section 110(5) of the US Copyright Act Arbitration under Article 21.3(c) of the DSU ("US Section 110(5) Copyright Act"), WT/DS160/12, 15 January 2001.


    Page 4

    15. The United States thus submits that the practical minimum to recalculate the "all others" rate and to make a draft redetermination available to interested parties is at least 30 days following the enactment of the amending legislation. This would be followed by a 30-day period to allow for comments from interested parties. Then, an additional time period of 30 days are required to produce a final redetermination. Finally, 30 days are added to make any necessary corrections. These time periods add up to 4 months following the 14 months required for the enactment of the amending legislation. The United States requests, therefore, that the "reasonable period of time" be set at 18 months.

    B. Japan

    16. Japan submits that a period of 10 months from the date of adoption of the Panel Report, as modified by the Appellate Body, and up to 23 June 2002, is a "reasonable period of time" for implementation by the United States of the recommendations and rulings of the DSB. 17. According to Japan, in order to implement the rulings and recommendations of the DSB, the United States must:

    (i) amend the statutory provision on the "all others" rate to remove the requirement that

    these rates exclude only those margins based "entirely" on the facts available;

    (ii) adopt an even-handed "arm's length" test for determining whether the home market

    sales to affiliates are made in the ordinary course of trade;

    (iii) recalculate Kawasaki Steel Corporation's ("KSC") dumping margin incorporating the

    new "arm's length" test and not applying adverse facts available to KSC's

    United States sales through its affiliated company in the United States;

    (iv) recalculate Nippon Steel Corporation’s ("NSC") dumping margin incorporating the

    new "arm's length" test and not applying facts available (i.e., using NSC's submitted

    weight conversion factor);

    (v) recalculate NKK Corporation’s ("NKK") dumping margin incorporating the new

    "arm's length" test and not applying facts available (i.e., using NKK's submitted

    weight conversion factor);

    (vi) recalculate the "all others" dumping margin incorporating the change in the statutory

    provision; and,


     Page 5

    (vii) redetermine whether the domestic industry is materially injured by reason of subject

    imports while ensuring that the merchant and captive markets are examined in a like

    or comparable way, and that the proper standard is applied to avoid attributing the

    effects of other causes to imports.

    18. Japan argues that Article 21.1 of the DSU requires "prompt compliance" with the recommendations and rulings of the DSB. It asserts further that the implementing Member bears the burden of proving that "prompt" or "immediate" compliance is "impracticable". Japan then refers to the arbitrator's award in Canada Patent Protection of Pharmaceutical Products Arbitration under

     10Article 21.3(c) of the DSU ("Canada Pharmaceutical Patents") , and asserts that this burden

    increases with the length of the proposed period for implementation. Japan contends that the United States has failed to meet this burden.

     1119. Referring to the arbitrator's award in Canada- Pharmaceutical Patents, Japan argues that in

    an arbitration under Article 21.3(c) of the DSU, as a general rule, only factors relating to actual implementation within the Member's domestic legal system may be considered. In past arbitrations, arbitrators have considered as relevant such circumstances as the means of implementation, the complexity of the measures, and the existence of mandatory time limits for procedures under domestic law, while refusing to consider other circumstances, such as the "contentiousness" of the implementation, the ongoing structural adjustment or the adverse effects on domestic producers and consumers within the implementing Member. Relying on these considerations, Japan submits that any domestic hurdles of a non-legal nature that the United States' implementation efforts may face are irrelevant to the analysis under Article 21.3(c).

    20. According to Japan, the maximum time period within which the United States should implement the DSB's recommendations and rulings is 10 months. The United States should be able to complete the amendment of its statute within a period of seven months from the date the DSB adopted the Panel Report as modified by the Appellate Body. Japan states that amendments to the "Foreign

     10Award of the Arbitrator, WT/DS114/13, 18 August 2000.



    Page 6

    Sales Corporations" legislation were enacted in three and a half months from the date of introduction of the amending bill and that the Byrd Amendment was enacted in less than one month from the date it was attached to another bill. The amendment required in the present case to make the statute consistent with the Anti-Dumping Agreement is only the deletion of one word"entirely". Japan additionally explains

    that in respect of the "arm's length" test, the United States does not need to amend its existing regulations, but rather needs only to correct its administrative practice. In the view of Japan, the United States should be able to complete this change in administrative practice within the seven months that Japan proposes be allocated for the enactment of the amending legislation.

    21. Japan contends that once the statute is amended, the United States can complete the recalculations of all dumping margins within a period of one month. This period is similar to that used by the United States during the original less-than-fair-value investigation. Japan does not see why the United States needs to collect new information to perform the recalculations; the changes needed are simple changes to the pertinent programming code.

    22. Japan also submits that the injury redetermination can be carried out within 45 days after the dumping recalculation is issued. The United States International Trade Commission (the "USITC"), the agency responsible for performing the injury analysis, can begin its work immediately, even while the other agencies are carrying out their own tasks. The facts and analysis necessary for this purpose have already been established. Forty-five days is the period normally given to the USITC to take the dumping margins into consideration.

    23. Japan finally contends that the remaining procedures, including those required under United States law, can be completed within two weeks from the date the USITC completes its injury redetermination. These procedures include the consultations with the United States Congress required under the Uruguay Round Agreements Act and the publication of the redeterminations in the Federal

    Register. United States law does not provide any maximum or minimum time periods to carry out these procedures. Japan requests, therefore, that the "reasonable period of time" for implementation of the recommendations and rulings of the DSB by the United States be set at 10 months from the adoption of the Appellate Body Report.


     Page 7

III. Reasonable Period of Time

    24. My task in this arbitration is to determine the "reasonable period of time", as that term is used in Article 21.3 of the DSU, for the implementation of the recommendations and rulings of the DSB in US Hot-Rolled Steel.

    25. It is useful to recall the essential principle and rule that WTO Members are committed to

    12"prompt compliance" with DSB recommendations and rulings and that "prompt compliance" translates

     13into "immediate" compliance. When, however, such "immediate" compliance is "impracticable," then

    the Member bound to comply becomes entitled to "a reasonable period of time" within which to

    14comply. It is similarly salutary to recall that the 15-month period mentioned in Article 21.3(c) of the DSU is expressly designated as "a guideline for the arbitrator" (emphasis added): the "reasonable

    period of time" to implement panel or Appellate Body recommendations "should not exceed 15 months" from the date of adoption of the panel or Appellate Body Report, which period may, however, be

    15"shorter or longer", "depending upon the particular circumstances." I do not see any basis for reading

    the 15-month guideline as establishing a fixed maximum or "outer limit" for "a reasonable period of

    time." Neither, of course, does the 15-month guideline constitute a floor or "inner limit" of "a

     reasonable period of time". In US Hot-Rolled Steel, the implementation of which is involved here,

    the Appellate Body had occasion to interpret the phrase "reasonable period" found in Article 6.8 of the Anti-Dumping Agreement and "reasonable time" used in paragraph 1 of Annex II of that Agreement. "The word 'reasonable'", the Appellate Body stated:

    … implies a degree of flexibility that involves consideration of all of

    the circumstances of a particular case. What is "reasonable" in one set

    of circumstances may prove to be less than "reasonable" in different

    circumstances. This suggests that what constitutes a reasonable period

    or a reasonable time under Article 6.8 and Annex II of the Anti-

    Dumping Agreement, should be defined on a case-by-case basis, in the

    light of the specific circumstances of each investigation.

    In sum, a "reasonable period" must be interpreted consistently with the

    notions of flexibility and balance that are inherent in the concept of

    "reasonableness", and in a manner that allows for account to be taken 16of the particular circumstances of each case.

     12Article 21.1 of the DSU.

    13Article 21.3 of the DSU.



    16Appellate Body Report, supra, footnote 1, paras. 84-85.


    Page 8

26. Although, in the above excerpt the Appellate Body dealt with the Anti-Dumping Agreement,

    and not the DSU, the essence of "reasonableness" so articulated is, in my view, equally pertinent for an arbitrator faced with the task of determining what constitutes "a reasonable period of time" in the context of the DSU.

    27. As already noted, the DSB adopted the Panel's recommendations as modified by the Appellate Body in US Hot-Rolled Steel. The overall recommendation was that the United States bring its measures found to be inconsistent with the Anti-Dumping Agreement and the Marrakesh Agreement

    Establishing the World Trade Organization (the "WTO Agreement") into conformity with its

    obligations under those Agreements. The United States measures found to be WTO-inconsistent, pertinent for present purposes, were the following:

    (a) the application of "facts available" to NSC, NKK and KSC in the determination of the

    dumping margins of NSC, NKK and KSC;

    (b) Section 735(c)(5)(A) of the United States Tariff Act of 1930, as amended, and the

    United States' application of this provision in connection with the determination of

    the anti-dumping duty rate for exporters which were not individually investigated (the

    "all others" rate) in this case;

    (c) the exclusion from the calculation of normal value, as outside "the ordinary course of

    trade", of certain home market sales to parties affiliated with an investigated exporter

    on the basis of the "99.5 percent" or "arm's length" test; and

    (d) the application of Section 771(7)(C)(iv) of the United States Tariff Act of 1930, as

    amended, known as the captive production provision, in the determination in this case

    of injury sustained by the United States' hot-rolled steel industry. 28. In Argentina Measures Affecting the Export of Bovine Hides and the Import of Finished

     Leather: Arbitration under Article 21.3(c) of the DSU ("Argentina Hides and Leather"), the Arbitrator

    stated that:

    [T]he non-conforming measure is to be brought into a state of

    conformity with specified treaty provisions either by withdrawing

    such measure completely, or by modifying it by excising or

    correcting the offending portion of the measure involved. Where the

    non-conforming measure is a statute, a repealing or amendatory

    statute is commonly needed. Where the measure involved is an

    administrative regulation, a new statute may or may not be necessary, *but a repealing or amendatory regulation is commonly required.

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