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Countervailing Measures Concerning Certain Products from the European Communities

Key Facts
Short Title: US — Countervailing Measures on Certain EC Products
Respondent: United States
Third Parties: Brazil; Mexico; China; Korea; India;
Complaintant(s): European Communities;
Dispute Number: DS212
Link to Dispute Site: http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds212_e.htm
Dispute Subject(s): Change of Ownership; Countervailing Duty; Steel;
Dispute Status: Concluded
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. 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.

Appellate Body and Panel Compliance Reports (Article 21.5) Adopted

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:

1. 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.

2. 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.

Implementation Status 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 analyze 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 analyzing 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.

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. 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 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. On 17 November 2005, the United States submitted its first status report.

 

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

Panel Proceedings
Brief DateBrief Description
03/26/2002Replies of the United States to the Questions of the EC from the Second Meeting of the Panel (pdf)
03/26/2002Replies of the United States to the Questions of the Panel from the Second Meeting of the Panel (pdf)
03/20/2002Oral Statement of the United States at the Secon Meeting of the Panel (pdf)
03/11/2002Second Written Submission of the United States (pdf)
03/04/2002Replies of the United States to Questions from the Panel and from the EC from the First Panel Meeting (pdf)
02/19/2002Oral Statement of the United States at the First Meeting of the Panel (pdf)
01/23/2002First Written Submission of the United States (pdf)
01/23/2002Exectutive Summary of the First Written Submission of the United States (pdf)

Appeal Proceedings
Brief DateBrief Description
10/22/2002Oral Statement of the United States
09/19/2002Appellants's Submission of the United States (pdf)

Recourse by the European Communities to Article 21.5 of the DSU
Brief DateBrief Description
03/18/2005U.S. Comments on Brazil’s Answers to Panel Questions (pdf)
03/18/2005U.S. Comments on EC Answers to Panel Questions (pdf)
03/14/2005U.S. Answers to Questions from the EC (pdf)
03/14/2005U.S. Answers to Panel Questions (pdf)
03/01/2005U.S. Oral Statement (pdf)
12/15/2004Executive Summary of the U.S. First Submission (pdf)
12/08/2004U.S. First Submission (pdf)