REQUEST BY THE EUROPEAN COMMUNITIES FOR ENHANCED THIRD
The European Communities has requested enhanced third party rights in the case concerning the 1916 Act, seeking to be present at all substantive meetings and to submit statements Japan has agreed to this request and also seeks access to all relevant documents related to the case However, the United States opposes the expansion of third party rights for the European Communities, arguing that the current circumstances do not justify it The U.S emphasizes that full transparency is maintained within the WTO, as it will publicly share its submissions and oral statements Additionally, the U.S points out that both Japan and the European Communities will have access to each other's non-confidential submissions, as required by the Dispute Settlement Understanding (DSU) The U.S further asserts that both Japan and the European Communities have sufficient opportunities to express their views and respond to U.S arguments as individual complaining parties.
In the case concerning Hormones, the panel opted for expanded third-party rights, intending to conduct concurrent deliberations based on arguments from both cases, including joint expert presentations Despite the United States' clear objections to this approach, the panel proceeded, prompting the U.S to seek enhanced third-party rights to ensure its ability to respond and avoid ex parte submissions The United States emphasized that the current panel has not indicated a plan for concurrent deliberations, and, following the principles established in the Hormones case, it would not support such an approach Consequently, both the European Communities and Japan will have the opportunity to respond to U.S arguments that the panel will consider in their respective cases.
23 See WT/DS162/3 That panel was established on 26 July 1999 and composed on 11 August 1999 (WT/DS162/4).
24 As stated in the European Communities' letter to the Chairman of the Panel, dated 25 August 1999
25 Panel Report on EC Measures Concerning Meat and Meat Products (Hormones), adopted on
13 February 1999, WT/DS26/R/USA, WT/DS48/R/CAN (hereinafter "Panel Report on European Communities
The current framework for party rights allows third parties to submit additional information during their panel process; however, the Dispute Settlement Understanding (DSU) lacks any provisions for such submissions The Panel's stance throughout the proceedings regarding the European context has been clearly articulated.
Communities' request is reflected in section VI.B.1 of this report.
OVERVIEW OF THE CLAIMS OF THE PARTIES AND FINDINGS REQUESTED
i.8 Japan contests the maintenance and application of the 1916 Act by the United States.
Specifically, the maintenance and enforcement of the 1916 Act violates the following US obligations under the WTO agreements:
(a) Article VI:2 of the GATT 1994 and Article 18.1 of the Anti-Dumping Agreement by allowing the application of penalties other than anti-dumping duties to remedy dumping;
(b) Article VI of the GATT 1994 and Article 1 of the Anti-Dumping Agreement by applying an anti-dumping measure without conducting the requisite investigation and establishing the requisite facts;
Article VI of the GATT 1994 and Article 2 of the Anti-Dumping Agreement stipulate that the determination of normal value must adhere to specific comparison criteria; however, certain interpretations may deviate from these established guidelines, leading to inconsistencies in compliance.
(d) Article VI of the GATT 1994 and Article 3 of the Anti-Dumping Agreement by providing for application of an anti-dumping measure without establishing material injury or threat thereof;
(e) Article VI of the GATT 1994 and Articles 4 and 5 of the Anti-Dumping Agreement, inter alia, by not limiting the parties that may pursue an anti-dumping claim;
(f) Article VI of the GATT 1994 and Article 9 of the Anti-Dumping Agreement by providing for the imposition of impermissible penalties outside the scope and directives of Article 9;
Article VI of the GATT 1994 and Article 11 of the Anti-Dumping Agreement fail to impose a time limit on anti-dumping measures and do not mandate regular assessments to determine the necessity of their ongoing enforcement.
(h) Articles 1 and 18.1 of the Anti-Dumping Agreement by failing to comply with
Article VI of the GATT 1994 and Articles 2, 3, 4, 5, 9 and 11 of the Anti-Dumping Agreement;
Article III:4 of the GATT 1994 addresses the issue of less favorable treatment for imports under the 1916 Act compared to domestic products, which are governed by the significantly less stringent Robinson-Patman Act.
Article XI of the GATT 1994, along with the 1916 Act, addresses the improper application of prohibitions or restrictions, while Article XVI:4 of the WTO Agreement and Article 18.4 of the Anti-Dumping Agreement further regulate these trade practices.
Japan argues that the 1916 Act is inconsistent with the GATT 1994 Articles III:4, VI, and XI, as well as the Anti-Dumping Agreement and the WTO Agreement Consequently, Japan requests the Panel to recommend that the United States align the 1916 Act with these international provisions and ultimately repeal it Conversely, the United States contends that Japan has not demonstrated that GATT Article VI:2 and Article 18.1 of the Anti-Dumping Agreement require anti-dumping duties to be the sole remedy for dumping Should the Panel dismiss this assertion, Japan's challenge under Article VI and the Anti-Dumping Agreement would be rendered ineffective, eliminating the need to consider whether these agreements apply.
The United States contends that if the Panel assesses whether the 1916 Act complies with Article VI:2 and the Anti-Dumping Agreement, it should find that Japan has not proven the Act's incompatibility with US WTO obligations The US argues that the 1916 Act can be interpreted in alignment with domestic competition law, which it has historically been Consequently, the Act is not governed by Article VI:2 of the GATT 1994 or the Anti-Dumping Agreement Additionally, the US requests a ruling that the 1916 Act aligns with Article III:4, asserting that its interpretation as parallel to domestic competition law does not lead to national treatment issues The US emphasizes that the standards for relief under the 1916 Act have never been fulfilled in cases involving importers and imported goods Lastly, the US seeks a ruling that the 1916 Act is consistent with Article XI of the GATT 1994, noting that the only relief available under the Act has not been met.
The 1916 Act, being monetary in nature, does not violate the quantitative restrictions outlined in Article XI of the GATT 1994 The United States argues that the Act can be interpreted in a manner that aligns with its WTO obligations and has been consistently interpreted this way Therefore, under Article XVI:4 of the WTO Agreement, there is no obligation for the United States to amend the law.
TRADE EFFECTS OF THE 1916 A CT AND THEIR RELEVANCE TO THE
i.15Japan asserts that the 1916 Act has a substantial negative impact on Japan-US trade One is the
The "chilling effect" on Japanese exports arises from the potential liabilities under the 1916 Act, which discourages Japanese trading firms from importing products once litigation commences, despite the Wheeling-Pittsburgh case not resulting in criminal or civil penalties The protracted and costly nature of such litigation, coupled with the risk of treble damages and attorney fees, further deters these firms from engaging in trade.
Japan asserts that, regardless of whether the 1916 Act is classified as an anti-dumping law, the United States would still violate Articles III:4 and XI of the GATT 1994, as well as Article XVI:4 of the WTO Agreement.
The United States emphasizes that Japan, as the complainant in this dispute, bears the responsibility to prove a violation of the WTO Agreement This assertion is supported by the Appellate Body Report on the case concerning U.S measures affecting imports of woven wool shirts and blouses from India.
23 May 1997, WT/DS33/AB/R, para 14 (hereinafter Appellate Body Report on "United States – Shirts and
The 1916 Act poses a significant threat to importers, particularly those in the steel industry, due to the potential for severe civil and criminal liabilities Japanese companies have notably reduced their shipments to the U.S to avoid the risk of treble damages associated with the Act, as the uncertainty surrounding legal compliance creates a chilling effect on trade The vague pleading and proof requirements further complicate matters, leading these companies to halt imports rather than risk misjudgment Additionally, the litigation process has proven to be costly and disruptive for Japanese trading firms, prompting some non-Japanese defendants to settle out of court with Wheeling-Pittsburgh, highlighting the burdensome nature of the legal challenges posed by the 1916 Act.
- buy a certain amount of steel from the plaintiff during 1999; and
- restrict their imports of foreign steel 31 i.19In the view of Japan, these settlements demonstrate the third type of negative impact of the
The 1916 Act is being exploited by US companies to extract settlements from foreign entities, which disrupts free trade and threatens the stability of the global trading system If this trend continues unchecked, it could jeopardize the integrity of the World Trade Organization (WTO) framework.
The concept of treble damages is designed to impose a significant penalty for legal violations, encouraging individuals to avoid actions that could breach the law The US Supreme Court has recognized that treble damages aim to punish past misconduct and deter future unlawful behavior, rather than lessen the accountability of wrongdoers Japan cites Texas as a relevant example in this context.
According to data from the companies, exports from Japan to the United States by the three Japanese defendants have decreased significantly, measured in thousand metric tons (MT).
April to September 1998: 149/month (average)
On November 20, 1998, the Wheeling-Pittsburgh Steel Corporation, a US-based company, lodged a complaint under the 1916 Act against nine companies, which included three prominent Japanese trading firms: Mitsui & Co., Marubeni America Corp., and Itochu International Inc Japan, recognized as a leading steel-producing nation, played a significant role in this case.
In 1998, the US steel market was Japan's largest export destination for steel, prompting the Japan Iron and Steel Exporters Association and other exporters to urge the Japanese government to intervene Their concerns centered on the 1916 Act, which they believed conflicted with WTO regulations and could hinder trade in steel products, particularly hot-rolled steel, posing a significant barrier to Japan's steel exports to the United States.
Japan argues that the 1916 Act is likely to lead to increased litigation, as individual U.S companies can initiate cases without needing majority support or evidence of dumping They believe this undermines Japan's legitimate trading interests, regardless of the lack of current court liability determinations Conversely, the United States contends that Japan's claims of negative impacts from the 1916 Act lack substantiation and should be dismissed, noting that Japan has not proven the Act caused a decline in steel exports Instead, the decrease is more likely linked to a 1998 anti-dumping petition Furthermore, the U.S asserts that even if Japan's allegations were credible, they would not affect the Panel's evaluation of the 1916 Act's compliance with WTO obligations, as trade effects are only relevant in a compensation context following an adverse panel finding.
THE DISTINCTION BETWEEN DISCRETIONARY AND MANDATORY
The United States contends that when a party challenges a statute, as Japan does in this case, the initial inquiry for the Panel is to determine if the statute in question is mandatory or discretionary Established GATT 1947 and WTO jurisprudence indicate that only legislation that requires actions inconsistent with WTO obligations can be deemed WTO-inconsistent.
Canada - Measures Affecting the Export of Civilian Aircraft recently stated:
"We recall the distinction that GATT/WTO panels have consistently drawn between discretionary legislation and mandatory legislation For example, in United States -
The panel emphasized that previous rulings have established that legislation requiring actions contrary to the General Agreement can be contested, while laws that only grant discretionary power to executive authorities do not face the same challenge.
[ ] to act inconsistently with the General Agreement could not be challenged as such; only the actual application of such legislation inconsistent with the General
Agreement could be subject to challenge"[citation omitted]." 32
The 32 Panel Report on Canada regarding measures impacting the export of civilian aircraft was adopted on August 20, 1999, and is referenced as WT/DS70/R, para 9.124 This report cites the Panel Report on the United States concerning measures that affect the importation, internal sale, and use of tobacco.
On October 4, 1994, the United States highlighted a crucial distinction between mandatory and discretionary legislation, which served as the foundation for the panel's ruling in the case of EEC - Regulation on Imports of Parts (BISD 41S/131, para 118).
The panel determined that the anti-circumvention provision of the European Communities' anti-dumping legislation does not conflict with the GATT 1947 obligations, despite the European Communities implementing GATT-inconsistent measures under it This conclusion was based on the understanding that the provision merely authorizes action by the EEC Commission and Council without mandating specific duties or measures Furthermore, the United States highlighted that panels have recognized instances where legislation that explicitly directs GATT-inconsistent actions does not compel such actions if it allows authorities the discretion to avoid them, as illustrated in the case of United States - Taxes on Petroleum and Certain Imported Substances, where the Superfund Act required importers to provide information for tax assessments, but the panel found that the lack of issued regulations meant the action was not mandated.
The regulations under the Superfund Act raise questions about their potential to eliminate the penalty tax and achieve full equivalence between domestic and imported products, as mandated by Article III:2 While it is concerning that the Act directs U.S tax authorities to impose a tax that contradicts the national treatment principle, the ability to issue regulations offers a pathway to avoid this tax Therefore, the existence of penalty rate provisions does not inherently violate U.S obligations under the General Agreement, similar to the situation observed in Thailand regarding import restrictions.
The panel reviewed Thailand's Tobacco Act, which allows for higher tax rates on imported cigarettes compared to domestic ones, granting Thai officials the authority to impose discriminatory tax rates; however, this does not make the statute mandatory The conclusion was that the potential for the Tobacco Act to be applied in a way that contradicts Article III:2 is insufficient to deem it inconsistent with the General Agreement Additionally, in a similar case, United States – Tobacco, the panel determined that a law did not necessitate actions contrary to GATT when its language allowed for various interpretations, including those that could align with GATT principles.
33 Panel Report on EEC - Regulation on Imports of Parts and Components, adopted on 16 May 1990, BISD 37S/132 (hereinafter "EEC – Parts and Components").
36 Panel Report on United States - Taxes on Petroleum and Certain Imported Substances, adopted on
17 June 1987, BISD 34S/136 (hereinafter "United States – Superfund").
38 Panel Report on Thailand - Restrictions on Importation of and Internal Taxes on Cigarettes, adopted on 7 November 1990, BISD 37S/200 (hereinafter "Thailand - Cigarettes").
The United States highlighted that the panel's findings indicated the tax rates implemented by Thailand were consistent with its obligations, as they were non-discriminatory It was mandated that fees must be uniform regardless of inspection cost differences; otherwise, it would violate Article VIII:1(a) of the GATT 1947, which prohibits fees exceeding the services provided The U.S contended that "comparable" does not necessitate "identical," asserting that the law allows for a fee structure aligned with the actual costs of services rendered, a position the panel supported.
"[T]he Panel noted that there was no clear interpretation on the meaning of the term
The term "comparable," as defined in the 1993 legislative amendment, encompasses a variety of meanings, including its ordinary interpretation The Panel noted that this broad range of interpretations could align with the understanding presented by the United States in this case, which may allow the USDA to meet its obligations effectively.
Article VIII:1(a) prohibits imposing fees that exceed the cost of services provided, while ensuring compliance with U.S law The Panel concluded that the complaining party failed to prove that U.S law could not be applied to keep inspection fees for tobacco within service cost limits The United States argues that the distinction between discretionary and mandatory legislation in GATT 1947/WTO jurisprudence is not tied to specific WTO agreements or government branches, and it applies broadly across various contexts, including Article III and Article VIII This distinction stems from a general principle aimed at preventing conflicts between national and international law, reflecting both international norms and U.S practices that prioritize interpretations of statutory language to align with international obligations.
National courts are required to apply domestic laws, even if they appear to conflict with international law, although there is a presumption that such conflicts do not exist Given that international law is based on the consensus of states, it is unlikely that a state would intentionally create a law that contradicts international obligations Therefore, national laws that seem to conflict with international law should be interpreted in a way that avoids such conflicts whenever possible In the United States, it is a fundamental principle that Congress should not be interpreted to violate international law if an alternative interpretation exists While domestic law may take precedence over conflicting international obligations, ambiguous statutes should be construed to align with the U.S.'s international commitments This aligns with GATT 1947 jurisprudence, which emphasizes the presumption against conflicts between national and international laws.
43 Ibid (emphasis added by the United States)
44 Oppenheim’s International Law, 9th ed., pp 81-82 (footnote omitted).
45 Murray v Schooner Charming Betsy, 6 U.S (2 Cranch) 64, 118 (1804) (hereinafter "Charming Betsy").
46 Footwear Distributors and Retailers of America v United States, 852 F Supp 1078, 1088 (CIT), appeal dismissed, 43 F.3d 1486 (Table) (Fed Cir 1994), citing DeBartolo Corp v Florida Gulf Coast
The United States asserts that the 1916 Act is open to interpretations consistent with WTO obligations, countering Japan's challenge to the Act's existence Japan must prove that the Act not only allows for WTO-inconsistent actions but also mandates them, a burden it has not met U.S courts have consistently interpreted the 1916 Act as aligning with domestic unfair competition laws, which comply with WTO standards, particularly under Article VI of GATT 1994 The Act's anti-trust nature distinguishes it from anti-dumping statutes, and while Japan claims the Act is mandatory, U.S courts maintain that they have the discretion to interpret it in a WTO-compliant manner Thus, the 1916 Act does not inherently conflict with international obligations.
47 The United States refers to United States - Tobacco, Op.Cit., para 123.
In response to Japan's inquiry, the United States clarifies that its argument does not imply an acknowledgment that the 1916 Act can be interpreted in a way that conflicts with WTO regulations.
49 494 F Supp at 1223 (emphasis added by the United States).
The United States highlights that Japan recognizes the Zenith III court's application of anti-trust standards to assess liability, and Japan does not contest that WTO agreements allow for anti-trust measures.
Japan clarifies to the United States that the term "injury element" refers to the intention of harming or undermining an industry in the U.S., or obstructing the establishment of such an industry, as outlined in the 1916 Act Additionally, Japan references a recent statement made by the panel regarding Canada’s measures affecting exports.
Canadian Aircraft that in contrast to legislation granting executives authority to act inconsistently with the WTO
"[…] panels had consistently ruled that legislation which mandated action inconsistent with the General Agreement could be challenged as such […]." 52