The Appellate Body ruling on the US 1916 anti-dumping law seems to sum up the legal situation of anti-dumping as that anti-dumping laws that provide remedies other than anti-dumping duties or price-undertakings could be challenged as such at the WTO, but challenges against actions could take place only after duties are levied, price undertakings or provisional measures are applied.

by Chakravarthi Raghavan

Geneva, 29 August 2000 -- Anti-dumping laws of WTO member countries that provide remedies other than anti-dumping duties or price-undertakings could be challenged as such at the WTO, but challenges against actions could take place only after duties are levied, price-undertakings or provisional measures are applied.

However, trade harassments caused by importing countries (or enterprises within them) against specific imports through repeated initiation of anti-dumping complaints and start of investigations on them can only be challenged after they result in levy of duties, price undertakings or provisional measures.

This appears to sum up the legal situation on anti-dumping questions at the World Trade Organization, after the latest Appellate Body (AB) rulings against the United States over its 1916 anti-dumping law which enables initiation of complaints, and civil or criminal penalties against importers of dumped products. While civil penalties can be imposed by courts on private complaints, criminal penalties can ensue if on the private complaints, the US Justice Department initiates proceedings before the courts.

Coupled with the ‘standard of review’ provisions applicable to anti-dumping disputes before the trade body, in terms of the WTO rights and obligations of countries, if a country has a legislation providing for anti-dumping remedies of levy of anti-dumping duty, seeking and getting a price undertaking, an exporting enterprise from a country against which an anti-dumping investigation is begun has first to undergo the costs and the procedures of presenting data and defending itself before the trade authorities and the courts of the importing country.

Only after the importing-country authorities complete these investigations and take a decision to levy an anti-dumping duty or get a price-undertaking from the exporter, and in some contingencies put in place provisional anti-dumping duties, can the country of the exporting enterprise initiate a complaint and take the issue for dispute settlement.

The case against the US 1916 law was brought by the European Union and Japan (as a result of initiation of private actions in the US against importers of steel products from the EU and Japan). Both the cases were heard separately, but by the same persons constituting the two panels, and resulted in rulings that the 1916 (seldom invoked) US law providing for civil and criminal penalties violated the WTO rules. The US took the issue up in appeal, and the Appellate Body Monday handed down rulings upholding the panels and rejecting the US appeal.

Though the EU and Japan complaints were separate and heard separately by panels, the membership of the panels were the same. Both the appeals were heard by the same division bench consisting of Mr. Julio Lacarte-Muro as presiding member and Mr.Claus-Dieter Ehelermann and Mr.Florentino Feliciano as members.

In an earlier case relating to anti-dumping, a dispute brought by Mexico against Guatemala (and referred to a panel) over Guatemala’s initiation of anti-dumping proceedings and the conduct of its investigations, the AB had ruled against Mexico, and had said that in terms of Article 17.4 of the Anti-Dumping Agreement, a definitive anti-dumping duty, the acceptance of a price undertaking or a provisional measure must be identified as part of the matter that is referred to the Dispute Settlement Body and sent to the panel.

That ruling was cited by the US as precluding the EU and Japan cases, where the law as such was challenged.

In the rulings in the present case, distinguishing its views on Article 17.4 of the Anti-Dumping agreement in the Mexico-Guatemala case and the current ones, the Appellate Body has said:

“Important considerations underlie the restrictions contained in Article 17.4. In the context of dispute settlement proceedings regarding an anti-dumping investigation, there is a tension between, on the one hand, a complaining Member’s right to seek redress when illegal action affects its economic operators and, on the other hand, the risk that a responding Member may be harassed or its resources squandered if dispute settlement proceedings could be initiated against it in respect of each step, however small, taken in the course of an anti-dumping investigation, even before any concrete measure has been adopted.  “In our view,” the AB division says in this ruling, “by limiting the availability of dispute settlement proceedings related to an anti-dumping investigation to cases in which a Member’s request for establishment of a panel identifies a definite anti-dumping duty, a price undertaking or a provisional measure, Article 17.4 strikes a balance between these competing considerations.”

This ‘internal balance’ struck in the ‘tension’ between interests of a complaining member and the member initiating an anti-dumping investigation, endorsed approvingly by the Appellate Body, seems to leave exporting countries, in particular developing countries, against whose exports enterprises in industrial countries start anti-dumping complaints, in a situation where costs of export trade can increase for new entrants who try to break into new markets through price competition.

When complaints are initiated, the exporting enterprises have to undergo the costs of defending themselves, providing detailed information to the importing country authorities and, as often happens, only to have all these brushed aside and cost-estimates made of the exported goods value to judge the existence or otherwise of dumping.

The methodology of the Anti-Dumping (AD)agreement to do these leave considerable scope to the investigators to ‘guesstimate’ the value, and the ‘standard of review’ rules applicable to a dispute panel consideration may well preclude a different view.

In any event, the developing country concerned could take up the case only after a provisional duty is set, a price undertaking is sought and given by the enterprise or a definite anti-dumping duty is levied.

But if (as has been done by the EU in respect of a number of other textiles and clothing imports from developing countries including India), anti-dumping investigations are initiated and terminated without action, and restarted again with a fresh complaint on the same product (even after a mere matter of days), whatever be ‘the chilling effect’ on the trade, and the harassment caused to the exporters, nothing can be done.

In one case where the EU investigations resulted in duties, India raised a dispute and the ruling of the panel (against the EU) is due to be handed down next week. The ruling due next week on the case by India against the EU over an anti-dumping duty on textiles and clothing exports may provide some indication of the thinking of the panels.

But in a number of cases where the EU initiated investigations and terminated them, only to restart investigations again, though it caused harassment, no dispute could be raised and trade security assured.

In upholding the EU and Japan complaints against the US 1916 law as such, the AB said while Article 17.4 of the AD agreement set out the conditions that must exist before the action by a national investigating authority in an anti-dumping investigation could be challenged. But this provision did not affect the right of a WTO member to bring a claim of inconsistency with the AD Agreement of an anti-dumping legislation as such. A reading of Article 17 of the AD agreement and of Article 18.4 (requiring members to bring their laws in line) imposed an obligation on each WTO member.

A reading of Article 18.1 showed that the only specific actions against dumping that could be taken were those authorized by Article VI of the GATT 1994 as interpreted by the AD agreement.

On whether the provisions of the US 1916 law were ‘mandatory’ that could be challenged as such or ‘discretionary’ provisions where only actions and measures could be challenged, the AB said the GATT practice and precedent distinguishing between mandatory and discretionary legislation (and restricting disputes in the latter case to measures taken under them) related only to discretion vested in the executive branch of a government.

The 1916 Act provided for two types of actions to be brought in a US federal court - one, a civil action by private parties and the second,a criminal action initiated by the US Department of Justice.

The panel had held that in a civil action, the judge had to apply the 1916 law, and as such it was a mandatory legislation. As for criminal action, the discretion of the US department of justice to initiate such action was not of such a nature as to convert it into “discretionary legislation,” and the US which had raised such a defence had not proved its case.

The AB upheld the panel’s conclusions.

The AB also upheld the contention that the 1916 US law was a legislation dealing with ‘dumping’, even though apart from the fact of ‘dumping’ it also envisaged the ‘predatory’ intent.

The provisions of Art. VI of GATT 1994, ‘condemning’ dumping and providing that in such an event an importing country ‘may’ initiate actions that may result in levy of an anti-dumping duty, which could be less than the margin of dumping, the AB said, meant that the importing member had a choice between imposing an anti-dumping duty or not as well as the choice of the margin of duty to be countervailed.

But the ‘may’, in the GATT provision, did not permit a member to take anti-dumping action through measures ‘other’ than levy of an anti-dumping duty.-SUNS4730

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

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