Wednesday, August 1, 2018

Kenneth Todd Wallace, WTO panel finds that U.S.’s Continued Dumping and Subsidy Offset Act of 2000 which provides for distribution of anti-dumping and countervailing duty payments to “affected domestic producers” constitutes unfair trade practices


WTO panel finds that U.S.’s Continued Dumping and Subsidy Offset Act of 2000 which provides for distribution of anti-dumping and countervailing duty payments to “affected domestic producers” constitutes unfair trade practices

In December 2000, Australia, Brazil, Chile, the EU, India, Indonesia, Japan, Korea and Thailand asked for consultations with the U.S. about an amendment to the U.S. Tariff Act of 1930 called the Continued Dumping and Subsidy Offset Act of 2000 (CDSOA). Congress enacted it as part of the Agriculture, Rural Development, Food and Drug Administration and Related Agencies Appropriations Act 2001, [Pub.L. No. 106-387, 114 Stat. 1549, sections 1001-1003] (also referred to as the “Byrd Amendment”). Canada and Mexico later sought consultations regarding the same matter. On October 25, 2001, the World Trade Organization (WTO) Dispute Settlement Body (DSB) appointed a dispute settlement panel to address these concerns.

The CDSOA amends Title VII of the Tariff Act of 1930 by adding a new Section 754 entitled “Continued Dumping and Subsidy Offset.” It provides that “Duties assessed pursuant to a countervailing duty order, an anti-dumping duty order, or a finding under the Antidumping Act of 1921 shall be distributed on an annual basis under this section to the affected domestic producers for qualifying expenditures. Such distribution shall be known as ‘the continued dumping and subsidy offset.’” According to an EU press release, the U.S. distributed almost $207 million of the proceeds collected pursuant to the Act in January 2002.

The Act defines “affected domestic producer” as “a manufacturer, producer, farmer, rancher or worker representative ... that (A) was a petitioner or interested party in support of the petition with respect to which an anti-dumping duty order, a finding under the Antidumping Act of 1921, or a countervailing duty order has been entered ...”

“Qualifying expenditures” is defined as “expenditure[s] incurred after the issuance of the anti-dumping finding or order or countervailing duty order in any of the following categories: (A) Manufacturing facilities. (B) Equipment. (C) Research and development. (D) Personnel training. ...”

The complainants argued that these “offsets” constitute measures against dumping and subsidization which the GATT does not contemplate. Neither does the Anti-Dumping Agreement (AD Agreement), or the Subsidies and Countervailing Measures Agreement (SCM Agreement).

In fact, these “offsets” provide a strong incentive for U.S. parties to file or support anti-dumping and anti-subsidy measures, thereby distorting the application of the AD and SCM Agreements. Further, the “affected domestic producers” will have a vested interest in receiving funds and this will impede any resolution of such trade disputes.

The U.S. countered that CDSOA authorizes “government payments” and that the distributions comport with GATT, Article VI and the AD and SCM Agreements. Moreover, there is no evidence that the U. S. will administer CDSOA in an unreasonable or partial manner (see Article X:3(a) of GATT 1994) so as to affect anti-dumping and countervailing duty investigations.

The various complainants argued to the contrary. For example, Australia argued that the Act leaves no discretion as to its implementation. Further, to the extent that a measure provides for “specific action against dumping” other than permissible responses under Article 18.1 of the AD Agreement, in conjunction with GATT Article VI:2 and Article 1 of the AD Agreement, it is at war with trading rules. The only permissible responses are either a definitive anti-dumping duty, or a provisional measure or a price undertaking.

Brazil asserted that the CDSOA would unduly broaden the remedies (a) by providing monetary damages, and (b) by subsidizing injured industries to allegedly offset damages from dumped or subsidized imports. If the WTO accepts the CDSOA, other countries would follow the U.S. lead and implement similar laws. This would lead to a chaotic burgeoning of anti-dumping and countervailing duty investigations.In its Report of September 16, 2002, the Panel agrees that the CDSOA violates trading rules. The Panel makes two main findings. The first is that CDSOA is inconsistent with AD Articles 5.4, 18.1 and 18.4, SCM Articles 11.4, 32.1 and 32.5, Articles VI:2 and VI:3 of GATT 1994, and Article XVI:4 of the WTO Agreement. On the other hand, the CDSOA does not clash with AD Articles 8.3 and 15, SCM Articles 4.10, 7.9 and 18.3, and Article X:3(a) of GATT 1994.

Ultimately, the Panel noted that the CDSOA is a new and complex law. If Members consider subsidization an allowable response to unfair trade practices, they should work such matters out through negotiation. In this case, the Panel suggested that the ideal solution would be for the U.S. to repeal the CDSOA.

Citation: United States - Continued Dumping and Subsidy Offset Act of 2000 (WT/DS217/R) (16 September 2002). [See Panel Report at “www.wto.org”; European Union in US news release No. 50/02, September 16, 2002].


*** Mr. Kenneth Todd Wallace is an attorney and founding partner of the law firm. He has nearly 20 years of experience in the legal and business professions with established excellence in trial advocacy, negotiation, strategic and initiative planning, government relations, mergers and acquisitions, and team building. See http://www.walmey.com/