WTO panel rules against US on Byrd amendment

by Chakravarthi Raghavan

GENEVA: A three-member dispute settlement panel at the WTO has handed down a ruling, published on 16 September, holding a US law which enables the payment of compensation to US complainants from anti-dumping duties to be WTO-illegal.

The Continued Dumping and Subsidy Offset Act of 2000 (CDSOA, or “Byrd amendment”) was enacted as part of a US appropriation law on agriculture and food and drug administration. The Byrd amendment adds a new section 754 to the US Tariff Act of 1930. This directs the redistribution of all funds from assessed duties recovered from an anti-dumping and countervailing duty order to affected domestic producers to be used by them for various stipulated purposes.

The US law was challenged by Australia, Brazil, Chile, the EC, India, Indonesia, Japan, Korea and Thailand, and subsequently and separately by Canada and Mexico. The three-member panel, named by the WTO Director-General, consisted of Luzius Wasescha, Maamoun Abdel-Fattah and William Falconer.

While holding the CDSOA to be violative of the WTO and its Anti-Dumping (AD) Agreement, the panel has said that it is a new and complex measure, and the panel has been confronted by the sensitive issues regarding use of subsidies as trade remedies.

“If members are of the view that subsidization is a permitted response to unfair trade practices,” the panel says, “we suggest that they clarify this matter through negotiations.”

The view that subsidization is a way of countering unfair trade practices was advanced by the US. Separately, Canada and the US have advanced a similar view in some disputes arguing that the OECD guidelines on subsidies and the OECD provisions that in cases of violation by a member another could match it, should be permitted by the WTO.

The panel held that the CDSOA operated against dumping and thus its measures were attracted by the WTO AD Agreement. The provisions in the CDSOA for compensating complainants and supporters out of the duties collected, the panel said, acted as a financial incentive to file or support anti-dumping complaints and applications, with supporters given greater incentives in fact than even the complainants.

The panel held that the CDSOA in effect provided for specific actions against dumping, and violated Article 18.1 of the AD Agreement which specified three “permissible” remedies (and thus no more) that could be applied: definitive anti-dumping duties, provisional measures and price undertakings.

As a consequence, the special provisions relating to the developing countries were also held to have been violated.

By requiring support for an anti-dumping petition as a prerequisite for receiving offset payments, the law in effect also mandated domestic producers to support anti-dumping complaints, and thus rendered “completely meaningless” the provisions of Art. 5.4 of the AD Agreement and Art. 11.4 of the Agreement on Subsidies and Countervailing Measures (SCM) about complaints to be initiated by the affected domestic industry, and the investigating authorities first satisfying themselves about the support required.

However, the panel found there was no mandatory requirement against the authorities’ use of price undertakings.

The panel found that Mexico in its complaint had not proved that the CDSOA per se violated the “specific” subsidy provisions of the SCM Agreement and thus caused “adverse effects.”

The ruling can be appealed by either of the parties to the dispute, failing which it will be automatically adopted by the Dispute Settlement Body within 60 days of 16 September, the date of official circulation of the report. (SUNS5192)           

From Third World Economics No. 289 (16-30 September 2002)