WTO PANEL RULES AGAINST 1916 US ANTI-DUMPING LAW

by Chakravarthi Raghavan

Geneva, 2 Apr 2000 -- An 84-year old US anti-dumping law, enabling initiation of proceedings against imports on grounds of transnational price discrimination and for civil and criminal penalties other than a counter-vailing duty to offset a dumping margin has been held by a three-member WTO panel as violating US obligations under the WTO agreement and its annexed GATT 1994 and the Anti-Dumping agreement.

The ruling of the 3-member panel in the dispute raised by the European Communities against the US was handed down Friday. India, Japan and Mexico were third parties who intervened before the panel.

The seldom used US law has more recently been invoked and wielded by the US steel industry to threaten steel exports from Japan - as Japan put it in its third party pleadings to have a "chilling effect" on exports from Japan. A November 1998 litigation filed by the Wheeling-Pittsburg Steel Corporation against nine Japanese companies, including three Japanese trading firms, is pending before US courts. The EC initiated the action, contesting the 1916 law itself as such - not any particular application of it.

Japan as a third party cited the pending litigation initiated against Japanese parties. In terms of the Anti-Dumping Agreement, presumably Japan as a WTO member has to await the outcome of the US litigation before it can bring up a complaint against the application of measures under the US law.

But the EC action on the basis of the law itself - was one of the several cases initiated by the EC (the others being those challenging the US 'S.301' family of laws and the US Foreign Sales Corporation law providing subsidies to US exports) as a riposte to what the EC viewed as the US harassment of the EC over the banana case. The EC has won the other two cases.

But the panel arguments in the present case (about the effects of US administration statements to the Congress) is contrary to the "political view" taken by the S.301 panel in letting the US off the hook, by the view while holding prima facie the S.301 law a violation, took the US administration's statements that it would not apply the law contrary to its WTO obligations and did not call on the US to change its law. Neither the US nor the EC took the panel ruling in the S.301 case to the Appellate Body. The ruling against the US 1916 anti-dumping law can be appealed by either party within 60 days.

In this present case, the US contended before the panel that the disputed law was not an anti-dumping law, but an anti-trust law (to deal with monopolies and monopolistic practices), and hence not covered by its obligations under Article VI of the GATT 1994 or the WTO Anti-Dumping Agreement. The EC disputed this view.

The panel held that:

* the 'transnational price discrimination' test set out in the 1916 law met the definition of 'dumping' in Art VI:1 of the GATT 1994, and that by not providing exclusively for an injury test, the law violated Art VI:1 of the GATT 1994;

* by providing for imposition of treble damages, fines or imprisonment, instead of anti-dumping duties (to offset the dumping margin), the 1916 Act violated Art VI:2 of the GATT 1994;

* by not providing for a number of procedural requirements in the Anti-Dumping (AD) Agreement, the 1916 law violated Articles 1, 4 and 5.5 of the AD agreement;

* by violating Art VI:1 and VI:2 of the GATT 1994, the 1916 Act violated Art XVI:4 of the WTO Agreement (requiring members to bring their laws, regulations and measures into conformity with the WTO and its annexed agreements); and

* the US has thus nullified or impaired benefits to the EC under the WTO Agreement.

The panel recommended that the Dispute Settlement Body request the US to bring the 1916 Act into conformity with its obligations under the WTO.

The US law, enacted by the US Congress in 1916 under the heading of "Unfair Competition" in Title VIII of the US Revenue Act of 1916, and is codified in Title 15 of the US Code, entitled "Commerce and Trade".

The 1916 Act prohibits (as a business activity) international price discrimination where an importer has sold a foreign produced product within the US at a price "substantially less" than the price at which the same product is sold in the country of the foreign producer and the importer has undertaken this price discrimination 'commonly and systematically'.

The importer faces criminal or civil liability for such business activity if the importer has undertaken price discrimination "with an intent of destroying or injuring an industry in the United States or of preventing the establishment of an industry in the US or of restraining or monopolizing any part of trade and commerce in such articles in the United States."

The Act provides for a private right of action in a US Federal district court and remedy of treble damages for a private complainant, based on the injury sustained by that complainant in its business or activity, as well as for criminal penalties in an action brought by the US government.

The US also has other laws in this area:

* the Anti-dumping Act of 1921, empowering the US Treasury Secretary to impose duties on dumped goods without regard to the dumper's intent. The law was later repealed, but the subsequent 1930 Tariff Act (as amended) is built on the 1921 law, and is implemented through proceedings governed by regulations promulgated by the US Commerce Department and the US International Trade Commission. Both the repealed Anti-dumping Act of 1921 and the 1930 Tariff Act are codified in Title 19 of the US Code under the title "Customs Duties". Title VII of the Tariff Act of 1930 as amended, and its implementing regulations have been notified by the US to the WTO Committee on Anti-dumping Practices.

* The Clayton Act (the US anti-trust law), amended by the Robinson-Patman Act in 1936 applies the same principles to the conduct of a buyer and makes it unlawful for the buyer "knowingly to induce or receive discrimination in price" prohibited by the other parts of the Act. A violation of this provision is made subject to criminal penalties and is also actionable in a private right of action, where treble damages or injunctive relief is available.

The 1916 Act has been invoked infrequently, with the only reported case before 1970. The US Department of Justice, the US agency responsible for criminal prosecutions, has never successfully prosecuted a criminal case under the 1916 law, and no criminal sanctions have ever been imposed.

Japan, in its third party pleadings, has noted that given the fact of the protracted nature of such litigation, and the possible imposition of treble damages, the risk facing importers continuing to import was tremendous and prohibitive. The threat of retroactive imposition of duties was sufficient to deter imports. The eventual impact of the litigation brought against Japanese enterprises by Wheeling-Pittsburg would not result from the final judgement, but the actual negative effect on imports due to threat of civil liability or criminal sanctions.

But the panel has not dealt with the Japanese "facts", since these were only before it in terms of third party intervention, but on the basis of the EC complaint against the law itself.

The panel turned down the US view that the 1916 law should be treated as an anti-trust law, one aimed at predatory pricing and monopolist activities, and not an anti-dumping measure.

The panel held that a law that would counteract dumping as defined in GATT Art VI:1 would fall within its scope. The 'transnational price discrimination' text of the 1916 Act, the panel said, included the requirement about introduction of the product into US domestic commerce, and premised on comparison of two prices - one in the US and the other in the country of origin.

Though there were other variations, making the comparison "narrower", and there was no provision for "constructed value", nevertheless it was a dumping activity being dealt with. The fact that the 1916 law made the establishment of conditions of dumping more difficult did not take it outside the definition of the "dumping" in the GATT 1994 Art.VI:1 and hence per se outside the GATT law.

This meant that whenever any member addressed a practice that met the definition of Art VI:1, it had to be abide by the WTO rules governing anti-dumping, namely, defining the conditions under which counter-vailing dumping as such is allowed.

That the 1916 US law may have an anti-trust objective or categorised in US law as an anti-trust law did not make the law fall outside the scope of Art.VI. The US 1916 Act, the panel said, objectively addressed a type of transnational price discrimination that met the definition of dumping and thus subject to the disciplines of Art. VI.

Reviewing the historical context, the panel ruled that the US Congress when it passed the 1916 Act, was fully aware of the fact that the law addressed "dumping" and not another form of price discrimination. There was no indication that the price discrimination in the Act was to be understood in any particular anti-trust context. That the law, at the time of its enactment, was presented as "supplementing" or "complementing" unfair competition laws applied to domestic products, no clear distinction had yet been made in the US between unfair competition resulting from dumping and that from other practices.

"We therefore conclude that the historical context and the legislative history of the 1916 Act, while showing that there was an intent to parallel the rules applicable to US and foreign companies, do not lead us to conclude any differently than we have on the basis of the 1916 Act as such," the panel said.

Reviewing the various US court rulings, the panel said that some US courts, irrespective of their interpretations of the other parts of the 1916 Act, considered that the transnational price discrimination test had to be interpreted as "dumping", as it is understood in international trade and on basis of the US trade law standards.

Referring to other US court cases and interlocutory judgements, the panel concluded that the assessment by US courts of the price discrimination test of 1916 was based on the text of the Act. At best there was no clear evidence of the relevance and of a consistent application of the cost recoupment test or any other "anti-trust" standards as such as below cost prices. The US case law thus supported the panel's original conclusion that the US 1916 act addressed "dumping" within the meaning of Art VI:1 of the GATT 1994.

The panel further ruled that given the link between Art.VI of the GATT 1994 and the Anti-Dumping Agreement, the applicability of Art.VI to the 1916 Act also implied the applicability of the Anti-Dumping Agreement.

The panel ruled that the discretion granted to the US Justice Department to initiate a case under the 1916 Act should not be interpreted as making the 1916 Act a non-mandatory law. The US which raised this plea, the panel further ruled, had failed to supply convincing evidence that it was a "non-mandatory" legislation within the meaning of GATT 1947/WTO practice.

The 1916 law, to the extent that it provides for the identification of an "intent" by the defendant rather than for the injury requirements of Art.VI of GATT 1994 was not compatible with Art.VI:1.

The panel also held that the only course open to a country finding a case of dumping was to levy a countervailing duty to offset the dumping margin. By specifying that the purpose of anti-dumping measure is to "offset" dumping, not to impose punitive measures, Art VI:2, in its first sentence, limited the meaning of "may" used in it -- giving a member a choice between duty equal to the dumping margin and a lower duty, and not between anti-dumping duties and other measures.

Anti-dumping duties are "the only type of remedies allowed under Art.VI," the panel ruled.

Articles 1 and Art 18.1 of the Anti-Dumping Agreement, the panel said, provided the context of Art.VI in terms of the Vienna Convention, and hence the panel was entitled to consider these provisions, though the EC itself had not mentioned them as part of its claims. The panel was required to consider the Articles 1 and 18.1 of the Anti-dumping agreement under the general principles of interpretation of public international law. These provisions of the Anti-dumping Agreement limit the anti-dumping instruments that may be used by Members to those expressly contained in Art VI and the Anti-Dumping Agreement.

Except for provisional measures and price undertakings, the only type of measure foreseen is the imposition of duties.

Also, Art 9.1 of the anti-dumping agreement established an intimate link between calculation of a dumping margin and the final measures that may be imposed.

The panel thus held that Art VI:2 provided that only measures in the form of anti-dumping duties might be applied to counteract dumping as such, and that by providing for the imposition of fines or imprisonment or recovery of treble damages, the 1916 Act violated art. VI:2 of the GATT 1994.

The panel also said that adapting the 1916 Act to the injury requirements of Art.VI and replacing the sanctions currently provided for in that law with duties at the border "may not be totally sufficient to make the 1916 Act WTO-compatible."

To the extent that the 1916 Act did not require a minimum representation of a US industry to initiate action, it violated Art 4 of the Anti-Dumping Agreement. The 1916 Act also violated a number of procedural and due process requirements set out in Art.5.5 of the Anti-Dumping Agreement, and thus Art 1 of the Anti-Dumping Agreement.

The panel then went to rule that the Art. XVI:4 of the WTO required each member of the WTO to ensure conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed agreements of the WTO.

Since the 1916 Act violated Art.VI:1 and VI:2 of the GATT 1994, by violating those provisions, the US also violated Art XVI:4 of the WTO Agreement.

The panel recommended in its conclusions that the DSB request the US to bring the 1916 Act into conformity with its obligations under the WTO Agreement. (SUNS4640)

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

[c] 2000, SUNS - All rights reserved. May not be reproduced, reprinted or posted to any system or service without specific permission from SUNS. This limitation includes incorporation into a database, distribution via Usenet News, bulletin board systems, mailing lists, print media or broadcast. For information about reproduction or multi-user subscriptions please contact < suns@igc.org >