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TWN Info Service on WTO and Trade Issues (Nov19/19)
28 November 2019
Third World Network

US failed to comply in dispute over Indian steel products
Published in SUNS #9022 dated 19 November 2019

Geneva, 18 Nov (Kanaga Raja) - A compliance panel at the World Trade Organisation (WTO) has ruled that the United States has failed to comply with an earlier WTO ruling concerning the imposition

by the United States of countervailing duties (CVDs) on imports of certain hot-rolled carbon steel flat products from India.

The panel, in a large number of issues of non-compliance raised against the US, ruled that India had failed to prove its case, but held in favour of India, and against the US on the substantive issues of non-compliance, namely the US failure to bring its laws into compliance with the provisions of the Subsidies and Countervailing Measures (SCM) Agreement.

In the ruling issued on 15 November, in a dispute brought by India against the US under Article 21.5 of the Dispute Settlement Understanding (DSU), the compliance panel concluded that to the extent that the US measures at issue are inconsistent with the Subsidies and Countervailing Measures (SCM) Agreement and the GATT 1994, they have nullified or impaired benefits accruing to India under these agreements.

The Panel also concluded that the United States has failed to implement the recommendations and rulings of the Dispute Settlement Body (DSB) to bring 19 USC 1677(7)(G)(i)(III) (its legislative provision) into conformity with its obligations under the SCM Agreement.

The Panel said India has demonstrated that the United States has taken no measure to bring 19 USC 1677(7) (G)(i)(III) - which was found to be inconsistent "as such" with Articles 15.1-15.5 of the SCM Agreement in the original dispute - into compliance with the United States' obligations under the SCM Agreement.

The Panel further found that India has demonstrated that the United States acted inconsistently with Articles 10 of the SCM Agreement and VI of the GATT 1994.

To the extent that the United States has failed to comply with the recommendations and rulings of the DSB in the original dispute, those recommendations and rulings remain operative, it said.

The Panel recommended that the United States bring its measures into conformity with its obligations under the SCM Agreement and the GATT 1994.

In accordance with Article 16 of the DSU, the Panel report shall be adopted by the DSB within 20 to 60 days of its circulation, unless the DSB decides by consensus not to adopt the report, or either the US or India decide to appeal it.

The measures in question relate to the re-investigation by the US on whether to apply countervailing duties on imports of certain hot rolled carbon steel flat products from India, as well as a US legislative measure concerning assessments of injury to domestic firms arising from competing subsidized imports.

The Panel rejected India's claims that compliance measures undertaken by the US were inconsistent with the "public body" and "benefit" provisions of the SCM Agreement.

On India's claims concerning specificity, the Panel found that the US re-investigation erred with respect to one subsidy programme. It, however, rejected other specificity claims made by India.

With one exception, the Panel also rejected India's claims regarding injury findings in the US re-investigation.

The Panel found that the United States had not implemented the findings of inconsistency from the original dispute concerning the Appellate Body's "as such" finding in respect of the US legislative measure.

BACKGROUND

According to the Panel report, the compliance dispute concerns India's claims against measures taken by the United States to comply with the recommendations and rulings of the Dispute Settlement Body (DSB) in the original proceeding in United States - Countervailing Measures on Certain Hot-Rolled Carbon Steel Flat Products from India.

On 5 June 2017, India requested consultations with the United States, and consultations were held on 13 July 2017 and 4 October 2017.

These consultations failed to resolve the dispute.

On 29 March 2018, India requested the establishment of a panel, and at its meeting on 27 April 2018, the DSB referred this dispute to the original panel in accordance with Article 21.5 of the DSU.

India requested the Panel to find that:

a. The United States' failure to amend or repeal 19 USC 1677(7)(G)(iii) is inconsistent with the DSB recommendation in this dispute as well as Articles 15.1, 15.2, 15.3, 15.4, and 15.5 of the SCM Agreement.

b. The United States' determination regarding the existence of a financial contribution is inconsistent with Article 1.1(a)(1) of the SCM Agreement.

c. The United States' determination regarding de facto specificity of "sale of high grade iron ore by [National Mineral Development Corporation]", "Mining rights of Iron Ore" and "Mining of Coal" is inconsistent with Articles 2.1(c) and 2.4 of the SCM Agreement.

d. The United States' failure to provide a notice of information which it required from India and rejection of information voluntarily submitted by India during Section 129 Determination is inconsistent with Article 12.1 of the SCM Agreement.

e. The United States' failure to inform India and all interested parties of the essential facts under consideration which form the basis for the decision as to whether to apply definitive measures is inconsistent with Article 12.8 of the SCM Agreement.

f. The exclusion of and the failure to adequately explain the exclusion of (i) available in-country benchmarks for iron ore; and (ii) National Mineral Development Corporation (NMDC)'s export prices, as benchmarks, when determining benefit conferred by the alleged programmes titled "sale of high grade iron ore by NMDC" and "Mining rights of Iron Ore" is inconsistent with the chapeau to Article 14 and Article 14(d) of the SCM Agreement.

g. The continued imposition of CVDs against the Steel Development Fund (SDF) programme without accounting for the borrower's cost in obtaining loans under that programme is inconsistent with the chapeau of Article 14 and Article 14(b) of the SCM Agreement.

h. The United States' failure to consider the existence of a link or relationship or explanatory force between the import of the alleged subsidized imports and the price of the domestic like products is inconsistent with Articles 15.1 and 15.2 of the SCM Agreement.

i. The United States' failure to examine and evaluate the existence of a link or relationship or explanatory force between the alleged subsidized imports and the state of the domestic industry is inconsistent with Articles 15.1 and 15.4 of the SCM Agreement.

j. The erroneous examination of causal link by the United States is inconsistent with Articles 15.1 and 15.5 of the SCM Agreement.

k. The unilateral termination of the CVD rate agreed between JSW (JSW Steel Limited) and the US Department of Commerce (USDOC) in the Amended Final Results of Countervailing Duty Administrative Review Pursuant to Court Decision, 75 FR 80455 dated 22 December 2010 and between Tata and the USDOC in the Amended Final Results of Countervailing Duty Administrative Review Pursuant to Court Decision, 76 FR 77775 dated 14 December 2011 is inconsistent with Article 19.3 of the SCM Agreement.

l. The continued imposition of CVD against new subsidy programmes pursuant to Section 129 Determination pertaining to 2004, 2006, 2007, and 2008 administrative reviews (ARs) is inconsistent with Articles 21.1 and 21.2 of the SCM Agreement.

m. The imposition of CVD against "Mining rights of Iron Ore" and "Mining of Coal" is inconsistent with Articles 21.1 and 21.2 of the SCM Agreement.

n. As a consequence of the inconsistencies mentioned herein above, the measures are inconsistent with Article 10 of the SCM Agreement and Article VI of the GATT 1994.

India requested the Panel to find that the United States has failed to comply with the recommendations and rulings of the DSB.

The United States requested that the Panel find that the United States has complied with the recommendations and rulings of the DSB and that the US measures taken to comply are not inconsistent with the SCM Agreement or the GATT 1994.

The United States further requested that the Panel reject India's claims to the contrary.

CONCLUSIONS AND RECOMMENDATIONS

The Panel concluded as follows:

a. With respect to India's claims under Article 1.1(a)(1) of the SCM Agreement, India has not demonstrated that the US Department of Commerce (USDOC) acted inconsistently with Article 1.1(a)(1).

b. With respect to India's claims under Article 14(d) of the SCM Agreement:

i. India has not demonstrated that the USDOC applied an incorrect legal standard, and thus acted inconsistently with Article 14(d) as a matter of law, in rejecting the domestic pricing information.

ii. India has not demonstrated that the USDOC acted inconsistently with Article 14(d) by failing to undertake an objective examination of, and explain sufficiently, the basis for rejecting the prices in the association price chart as not representing actual transactions.

iii. India has not demonstrated that the USDOC acted inconsistently with Article 14(d) on the basis that its treatment of the domestic pricing information was not based on an objective examination.

iv. The Panel exercised judicial economy with regard to India's claim that the USDOC acted inconsistently with Article 14(d) by failing to explain adequately the reasons for rejecting the Tata price quote on the basis of disclosing confidential data.

v. India has not demonstrated that the USDOC acted inconsistently with Article 14(d) by failing to make an objective assessment by failing to explain why the Tex Report is more appropriate than the domestic pricing information.

The Panel exercised judicial economy over whether India's allegation of error in this regard comprised a separate claim.

vi. India has not demonstrated that the USDOC acted inconsistently with Article 14(d) by rejecting the NMDC's export prices as a benchmarking source.

c. India's claim under Article 14(b) of the SCM Agreement is not within the scope of the present compliance proceedings under Article 21.5 of the DSU, the Panel said.

And in any case, the Panel also concluded that India has not demonstrated that the USDOC acted inconsistently with Article 14(b) by failing to make adjustments to its benefit benchmark to accommodate the SDF (Steel Development Fund) levy as an entry cost incurred by the loan recipients.

d. The Panel exercised judicial economy with regard to India's claims under the chapeau of Article 14 of the SCM Agreement.

e. With respect to India's claims under Article 2.1(c) of the SCM Agreement:

i. India has not demonstrated that the USDOC acted inconsistently with Article 2.1(c) in its assessment of the "length of time" factor for the NMDC's sales of high-grade iron ore.

ii. The USDOC acted inconsistently with Article 2.1(c) of the SCM Agreement by failing to provide a reasoned and adequate explanation for its finding that the mining leases for iron ore programme was de facto specific.

iii. In respect of the "mining leases for coal" programme, India has not demonstrated that the USDOC acted inconsistently with Article 2.1(c) of the SCM Agreement by failing to consider the mandatory factors under that provision.

iv. In respect of the "mining leases for iron ore" programme, the USDOC acted inconsistently with Article 2.1(c) of the SCM Agreement by failing to take account of the length of time during which that programme had been in operation.

India has not demonstrated that the USDOC acted inconsistently with Article 2.1(c) of the SCM Agreement by failing to consider the extent of diversification of the Indian economy with respect to that programme.

v. The Panel exercised judicial economy with regard to India's claim that the USDOC acted inconsistently with Articles 1.2 and 2.4 of the SCM Agreement.

f. With respect to India's claims under Article 12.1 of the SCM Agreement:

i. The Panel exercised judicial economy with regard to India's claim that the USDOC acted inconsistently with Article 12.1 regarding the Tata price quote.

ii. India's claim that the USDOC acted inconsistently with Article 12.1 regarding the legal implications of the NMDC's Miniratna status is not within the scope of the present compliance proceedings under Article 21.5 of the DSU, the Panel said.

g. With respect to India's claims under Article 12.8 of the SCM Agreement, India has not demonstrated that the USDOC acted inconsistently with Article 12.8 by failing to disclose the two matters referred to by India.

[India had claimed that the USDOC acted inconsistently with Article 12.8 of the SCM Agreement by failing to disclose two "essential facts" in the Section 129 Preliminary Determination, which in turn inhibited the Government of India's ability to defend its interests.

[First, India submitted that the USDOC failed to mention the export restrictions on iron ore as a reason for rejecting the NMDC's export price as a benchmark under Article 14(d) in the Section 129 Preliminary Determination, despite relying on this fact in the Section 129 Final Determination.

[Second, India submitted that the USDOC's Section 129 Preliminary Determination failed to analyse the mandatory "length of time" and "diversification" factors in relation to the NMDC's sale of high-grade iron ore, and instead addressed these for the first time in the Section 129 Final Determination.]

h. With respect to India's claims under Articles 21.1 and 21.2 of the SCM Agreement:

i. India's claim under Articles 21.1 and 21.2 concerning the USDOC's investigation of "new subsidies" in the 2004 to 2008 administrative reviews and the inclusion of these subsidy programmes in the Section 129 Determination is not within the scope of the present compliance proceedings under Article 21.5 of the DSU, said the Panel.

ii. India failed to establish that the USDOC investigated "new subsidies" in the Section 129 proceedings, and therefore has not demonstrated that the USDOC acted inconsistently with Articles 21.1 and 21.2 of the SCM Agreement.

i. India's claim that the US failure to amend 19 USC 1677(7)(G)(i)(III) is inconsistent with the DSB recommendation in this dispute as well as with Articles 15.1-15.5 of the SCM Agreement is within the Panel's terms of reference, the Panel said.

India has demonstrated that the United States has taken no measure to bring 19 USC 1677(7)(G)(i)(III) - which was found to be inconsistent "as such" with Articles 15.1-15.5 of the SCM Agreement in the original dispute - into compliance with the United States' obligations under the SCM Agreement.

j. With respect to India's claims under Articles 15.1 and 15.2 of the SCM Agreement:

i. India's claims that, in the Section 129 proceedings, the USITC (United States International Trade Commission) acted inconsistently with Articles 15.1 and 15.2 by using flawed methodology and data and ignoring data from the original determination are not within the scope of the present compliance proceedings under Article 21.5 of the DSU, said the Panel.

ii. India has not demonstrated that the USITC, in its price undercutting analysis, acted inconsistently with Articles 15.1 and 15.2.

k. With respect to India's claims under Articles 15.1 and 15.4 of the SCM Agreement, India has not demonstrated that the USITC acted inconsistently with Articles 15.1 and 15.4 by failing to examine and evaluate the existence of a link or relationship or explanatory force between the subsidized imports and the state of the domestic industry.

l. With respect to India's claims under Articles 15.1 and 15.5 of the SCM Agreement:

i. India has not made a prima facie case that the USITC acted inconsistently with Articles 15.1 and 15.5 by failing to demonstrate that the subsidized imports caused injury to the domestic industry.

ii. India has not demonstrated that the USITC, in its non-attribution analysis, acted inconsistently with Articles 15.1 and 15.5 by failing to consider the impact of goods from Brazil, Japan, and the Russian Federation, and the contraction in demand.

iii. India's claim that the USITC, in its non-attribution analysis, acted inconsistently with Articles 15.1 and 15.5 by failing to examine the causes for the closure of certain plants is outside the scope of these compliance proceedings, said the Panel.

iv. India has demonstrated that the USITC acted inconsistently with Articles 15.1 and 15.5 by failing to consider the impact of dumped imports from China, Kazakhstan, Romania, Chinese Taipei, and Ukraine on the injury suffered by the domestic industry and to separate and distinguish it from the effects of subsidized imports and of other known factors.

m. With respect to India's claims under Article 19.3 of the SCM Agreement, India has not demonstrated that the USDOC acted inconsistently with Article 19.3.

n. As a consequence of the Panel's findings of inconsistency with respect to the Section 129 re-investigation under Articles 2.1(c) and 15.1-15.5 of the SCM Agreement, India has demonstrated that the United States acted inconsistently with Articles 10 of the SCM Agreement and VI of the GATT 1994.

 


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