WT/DS184/R
Page A-1

Annex A

First Submissions by the Parties

Contents / Page
Annex A-1First written submission of Japan / 2
Annex A-2First written submission of the United States / 87
Annex A-3Response of Japan to Preliminary Objections of the United States / 245

ANNEX A-1

First written submission of Japan

(3 July 2000)

TABLE OF CONTENTS

Page

INTRODUCTION...... 8

I.PROCEDURAL BACKGROUND FOR DISPUTE SETTLEMENT IN THIS CASE..10

II.SUMMARY AND CONTEXT OF THE CHALLENGED ANTI-DUMPING MEASURES 10

A.TIMELINE FOR THE INVESTIGATIONS...... 10

B.POLITICAL CONTEXT FOR THE INVESTIGATIONS...... 12

C.ECONOMIC CONTEXT FOR THE INVESTIGATIONS...... 16

D.INTERNATIONAL RAMIFICATIONS FOR THE INVESTIGATIONS...... 18

III.STANDARDS OF REVIEW...... 19

A.ANTI-DUMPING AGREEMENT STANDARDS OF REVIEW...... 19

B.GATT 1994 STANDARDS OF REVIEW FOR CLAIMS UNDER ARTICLE X:3...... 20

IV.USDOC’S TREATMENT OF EVIDENCE AND APPLICATION OF “FACTS AVAILABLE” WAS INCONSISTENT WITH ARTICLES 2, 6, AND 9 AND ANNEX II OF THE ANTI-DUMPING AGREEMENT 20

A.BACKGROUND ON US LAW AND PRACTICE...... 21

B.USDOC’S ESTABLISHED PRACTICE OF APPLYING ADVERSE FACTS AVAILABLE TO PUNISH RESPONDENTS IS INCONSISTENT WITH ARTICLE 6.8 AND ANNEX II OF THE ANTI-DUMPING AGREEMENT 22

C.IN APPLYING ADVERSE FACTS AVAILABLE TO KSC, DOC VIOLATED ARTICLES2, 6, 9 AND ANNEX II OF THE ANTI-DUMPING AGREEMENT 24

1.Summary of the facts: USDOC’s application of adverse facts available for KSC.....24

2.The application of adverse facts available for KSC was inconsistent with the Anti-Dumping Agreement 26

(a)Article 6.8 and Annex II of the Anti-Dumping Agreement do not permit the use of adverse inferences in applying facts available 26

(b)KSC’s actions did not justify the “less favourable” result contemplated by Annex II of the Anti-Dumping Agreement 26

(c)USDOC’s failure to calculate constructed export price correctly for KSC is inconsistent with Article 2.3 of the Anti-Dumping Agreement 28

(d)USDOC’s excessive margin of dumping for KSC is inconsistent with Article 9.3 of the Anti-Dumping Agreement 29

D.IN APPLYING ADVERSE FACTS AVAILABLE TO NSC AND NKK, USDOC VIOLATED ARTICLES 2, 6, 9 AND ANNEX II OF THE ANTI-DUMPING AGREEMENT 30

1.Summary of the facts: USDOC’s application of adverse facts available for NSC and NKK 30

2.Application of facts available and use of adverse inferences against NSC and NKK was inconsistent with the Anti-Dumping Agreement 33

(a)USDOC’s application of adverse facts available was inconsistent with Article 6.8 and Annex II of the Anti-Dumping Agreement 33

(1)NKK and NSC submitted their corrections “within a reasonable period”...... 34

(2)Annex II, paragraph 5 mandates the acceptance of these corrections...... 34

(3)USDOC’s application of adverse facts available was inconsistent with Annex II, paragraph 7 35

(b)USDOC’S treatment of the evidence submitted by NKK and NSC was inconsistent with Article 6 of the Anti-Dumping Agreement 35

(1)USDOC failed to provide NKK with proper notice or a proper opportunity to respond and defend itself as required by Article 6.1 35

(2)USDOC failed properly to verify NKK’s and NSC’s factual corrections as required by Article 6.6 36

(3)USDOC impermissibly failed to take into account the difficulties faced by NKK and NSC as required by Article 6.13 37

(c)USDOC’s choice of adverse facts available is inconsistent with Article 2.4 of the Anti-Dumping Agreement 37

(d)USDOC’s application of facts available to NKK and NSC is also inconsistent with Article 9.3 of the Anti-Dumping Agreement 38

V.US LAW GOVERNING CALCULATION OF THE “ALL OTHERS” RATE, ON ITS FACE AND AS APPLIED HERE, IS INCONSISTENT WITH ARTICLE 9.4 OF THE ANTI-DUMPING AGREEMENT 38

A.BACKGROUND ON US LAW AND PRACTICE...... 38

B.SUMMARY OF THE FACTS: APPLICATION OF THE STATUTE AND ADMINISTRATIVE PRACTICE 39

C.USDOC'S INCLUSION OF PARTIAL FACTS AVAILABLE IN THE “ALL OTHERS” RATE IS INCONSISTENT WITH ARTICLE 9.4 OF THE ANTI-DUMPING AGREEMENT 40

1.On its face, the US statute is inconsistent with the requirement of Article 9.4 that authorities “shall disregard” margins based on facts available 40

2.USDOC’s specific calculation of the all others rate in the investigation of hot-rolled steel from Japan was also inconsistent with Article 9.4 41

VI.USDOC’S EXCLUSION OF CERTAIN HOME MARKET SALES FROM THE CALCULATION OF NORMAL VALUE, AND THE REPLACEMENT OF SUCH SALES WITH DOWNSTREAM SALES, ARE BOTH INCONSISTENT WITH ARTICLE 2 OF THE ANTI-DUMPING AGREEMENT 41

A.BACKGROUND ON US LAW AND PRACTICE...... 41

B.SUMMARY OF THE FACTS: APPLICATION OF THE ARM’S LENGTH TEST IN THE INVESTIGATION OF HOT-ROLLED STEEL FROM JAPAN 43

C.USDOC VIOLATED ARTICLE 2 OF THE ANTI-DUMPING AGREEMENT...... 44

1.Article 2.4 of the Anti-Dumping Agreement, in combination with Article 2.1, does not permit USDOC to treat sales to affiliates that fail the 99.5 per cent arm’s length test as outside the ordinary course of trade 44

2.The replacement of home-market sales to an affiliate with the affiliate’s resales is inconsistent with Article 2.2 of the Anti-Dumping Agreement 45

3.The “fair comparison” requirement in Article 2.4 prohibits the use of USDOC’s arm’s length test to discard sales to affiliates 46

(a)Exclusion of sales via application of the 99.5 per cent test is inconsistent with Article2.4 46

(b)Replacing a respondent’s home market sales with its affiliate’s downstream resales is inconsistent with Article 2.4 46

VII.USDOC’S CRITICAL CIRCUMSTANCES DETERMINATIONS ARE INCONSISTENT WITH ARTICLE 10 OF THE ANTI-DUMPING AGREEMENT 47

A.BACKGROUND ON US LAW AND PRACTICE...... 48

B.SUMMARY OF THE FACTS: USDOC’S CRITICAL CIRCUMSTANCES FINDINGS..49

C.USDOC VIOLATED ARTICLE 10 OF THE ANTI-DUMPING AGREEMENT...... 51

1.Article 10.6 does not permit a finding of critical circumstances based solely on threat of material injury 51

2.USDOC ignored the requirement of Article 10.7 to have sufficient evidence...... 53

(a)Article 10.7 expressly requires “sufficient evidence” that the elements of Article 10.6 have been met 53

(b)USDOC imposed provisional measures without having “sufficient evidence” within the meaning of Article 10.7 54

3.On its face, the US statute does not meet the “sufficient evidence” requirement of Article10.7 in making determinations under Article 10.6 56

4.Because USDOC’s preliminary critical circumstances findings and the relevant US statutory provisions violate Articles10.6 and 10.7, they also violate Article10.1. 56

VIII.USITC’S INJURY AND CAUSATION DETERMINATIONS WERE INCONSISTENT WITH ARTICLES 3 AND 4 OF THE ANTI-DUMPING AGREEMENT 57

A.THE CAPTIVE PRODUCTION PROVISION, BOTH ON ITS FACE AND AS APPLIED IN THIS CASE, IS INCONSISTENT WITH ARTICLES 3 AND 4 OF THE ANTI-DUMPING AGREEMENT 57

1.Background on US law and practice...... 57

2.The captive production provision on its face is inconsistent with Articles 3 and 4.....59

(a)The captive production provision ignores the Article 4.1 definition of the “domestic industry” as the entire productive output of the industry, not part of that output 59

(b)The captive production provision violates Article3.2 because it exaggerates subject import market share relative to all domestic production 60

(c)The captive production provision violates Article3.4 by requiring an evaluation of certain key factors based on a narrow segment of the industry 61

(d)The captive production provision violates the requirement of Article3.5 to establish a causal connection between the effects of dumping and the industry as a whole 63

(e)The captive production provision violates the Article3.6 requirement to analyze the effect of imports on all domestic production 64

(f)The captive production provision violates the Article 3.1 requirement that injury determinations be based on an “objective examination” 64

3.USITC applied the captive production provision in this case inconsistently with Articles3 and 4 of the Anti-Dumping Agreement 65

(a)Summary of the facts: Application of the captive production provision in the hot-rolled steel case 65

(b)The WTO-inconsistent captive production provision decisively influenced the USITC determination in the hot-rolled steel case 65

(1)A comparison of the 1993 and 1999 hot-rolled anti-dumping cases demonstrates the significant impact of the captive production provision 66

(2)Commissioner Askey’s dissent further demonstrates that the captive production provision fundamentally distorted the analysis of the majority 67

(c)The specific determination downplaying or ignoring the domestic industry as a whole violates Articles 3 and 4 of the Anti-Dumping Agreement 67

4.The captive production provision violates Article XVI:4 of the WTO Agreement.....69

B.USITC’S FINDING OF INJURY AND CAUSATION IS INCONSISTENT WITH ARTICLE 3 OF THE ANTI-DUMPING AGREEMENT 69

1.The requirements of Articles3.1, 3.4, and 3.5...... 69

2.USITC failed properly to consider relevant data...... 70

(a)USITC improperly diverged from its practice of analyzing industry trends over three years, in violation of Articles 3.1, 3.4, and 3.5 70

(b)USITC inadequately analyzed other alternative causes of injury, effectively attributing their impact to subject imports, in violation of Article 3.5 72

IX.THE UNITED STATES HAS VIOLATED ARTICLE X:3 OF GATT 1994 BECAUSE THE USDOC AND USITC INVESTIGATIONS WERE NOT CONDUCTED, AND THE DETERMINATIONS WERE NOT MADE, IN A UNIFORM, IMPARTIAL OR REASONABLE MANNER 74

A.THE OBLIGATIONS IMPOSED BY ARTICLEX:3(A) OF GATT 1994...... 75

B.USDOC’s And USITC’s Actions Were Non-Uniform, Partial And Unreasonable...... 78

1.USDOC accelerated all aspects of the proceeding despite its extraordinarily complicated nature 78

2.USDOC refused to follow its normal practice for correcting ministerial errors following preliminary determinations, thus subjecting NKK product to critical circumstances and requiring its importers to pay inflated and retroactive provisional measures 80

3.USDOC revised its policy on critical circumstances and then took the unprecedented action of ordering retroactive imposition of provisional measures prior to the preliminary dumping determination 80

4.While USDOC resorted to “facts available” in each instance where Japanese respondent companies made even the most minor, inadvertent mistake, USDOC and USITC took no adverse action when domestic companies refused to provide highly material information 82

5.USITC deviated from its prior practice by ignoring the US industry’s financial performance early in the period of investigation and instead contriving declining financial performance by comparing only two years 84

CONCLUSION...... 84

Business Confidential Information

In this Submission, including its Exhibits, Japan has placed Business Confidential Information in brackets ("[]"). The bracketed information is highly confidential. This information is provided solely for the purpose of fully informing the Panel of the factual details of the Hot-Rolled Steel investigations. Japanese respondents would be seriously harmed if this information were used for any other purpose or were made available to anyone outside the Panel, the Secretariat officials assisting the Panel, and the official legal team of the United States and the third parties — especially if this information were made available to any of Japanese respondents' competitors. Japan therefore respectfully requests that this information be protected and that it be omitted from the Panel's report.

INTRODUCTION

1.This submission sets forth Japan’s challenge to the US imposition of anti-dumping measures on Hot-Rolled Flat-Rolled Carbon-Quality Steel Products(“hot-rolled steel”) from Japan. Various provisions of the US anti-dumping law are, on their face, inconsistent with US obligations under the General Agreement on Tariffs and Trade 1994 (“GATT 1994”) and the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (“Anti-Dumping Agreement”). Furthermore, the application of US law in this investigation was inconsistent not only with numerous substantive provisions of these agreements, but also with Article X:3(a) of GATT 1994 and the well-established international legal obligation to apply one's laws in “good faith.” The improper imposition of these anti-dumping measures has essentially halted imports of the subject merchandise from Japan into the United States.

2.The anti-dumping measures on hot-rolled steel were imposed following various determinations made by the US International Trade Commission (“USITC”) and the US Department of Commerce (“USDOC”). These two agencies share responsibility for administering the US anti-dumping law, with USDOC determining dumping margins and USITC determining whether the domestic industry has been injured by imports.

3.In conducting the dumping investigation, USDOC violated Articles2, 6, 9 and 10, and AnnexII of the Anti-Dumping Agreement:

  • USDOC’s established practice of using adverse “facts available” in order to punish respondents for conduct USDOC deems uncooperative is inconsistent with Article 6.8 and Annex II of the Anti-Dumping Agreement.
  • USDOC’s application of adverse “facts available” to Kawasaki Steel Corporation (“KSC”) was inconsistent with Articles 2,6, and 9 and AnnexII because, although KSC provided all data under its control and cooperated with the investigation, USDOC punished KSC for not providing data controlled by a petitioner.
  • USDOC’s application of adverse “facts available” to NKK Corporation (“NKK”) and Nippon Steel Corporation (“NSC”) was also inconsistent with Articles2, 6 and 9 and Annex II because USDOC improperly rejected and refused to verify data that was provided in a timely manner and was verifiable.
  • On its face and as applied by USDOC, the provision of US law requiring that the dumping margin for non-investigated producers and exporters — known as the “all others” rate — be derived from margins calculated using partial “facts available” is inconsistent with Article9.4.
  • Using its well-established arm’s length test, USDOC excluded certain home market sales to affiliated parties from the normal value calculation, thereby failing to include sales in the ordinary course of trade in the calculation as required by Article 2.1 and failing to provide a “fair comparison ” as required by Article2.4. USDOC’s replacement of such sales with affiliated party resales also violated Articles 2.1, 2.2 and 2.4.
  • US law allowing retroactive imposition of provisional measures prior to a preliminary affirmative determination of dumping violates Article10. On its face, US law (termed “critical circumstances”) does not require a finding of “sufficient evidence” in support of the conditions set forth in Article 10.6 in making determinations under Article 10.7, in violation of Articles 10.6 and 10.7. As applied in this case, USDOC based its finding on petitioners’ allegations and press reports, and ignored USITC’s preliminary finding of only a threat of injury, also violating the requirements of Articles 10.1, 10.6, and 10.7.

4.The USITC injury investigation and determination violated Articles 3 and 4 of the Anti-Dumping Agreement:

  • The “captive production” provision of US law, on its face and as applied by USITC, is inconsistent with the requirements of Articles3 and 4. When certain facts are present, this provision requires USITC to focus on a narrow segment of the domestic industry rather than on the industry as a whole, improperly inflating any negative impact of imports and precluding an objective examination of all relevant factors and evidence. In this case, USITC effectively based its injury determination on only 30 per cent of the US industry’s US sales.
  • USITC’s determination that the requisite causal relationship existed between imports and injury to the domestic industry was inconsistent with Article3. Specifically USITC’s reliance on the US industry’s peak performance year of 1997 as the measure of whether imports were causing injury failed to satisfy the requirements of Article 3.1 and 3.4 that authorities make a determination based on positive evidence, properly evaluate all related factors, and conduct an objective examination.
  • USITC also failed to evaluate properly the effect on the US industry of known factors other than dumped imports, including the protracted General Motors strike, increased production by US mini-mills, and faltering US demand for pipe and tube, in violation of Article3.5.

5.In determining dumping, injury, and causation inconsistently with the provisions of the Anti-Dumping Agreement, the US also acted inconsistently with GATT 1994 Article VI.

6.The US compounded these violations by conducting investigations exhibiting a pattern of bias targeting Japanese respondents. The US thus violated GATT 1994 Article X.3 because its investigations were not complete and its determinations were not made in a uniform, impartial, and reasonable manner as required by Article X:3(a) of GATT 1994:

  • USDOC accelerated all aspects of the proceeding, despite its extraordinarily complicated nature.
  • USDOC declined to correct a significant unfavourable clerical error in its preliminary determination in violation of its own regulations.
  • USDOC revised its critical circumstances policy during the proceeding and then took the unprecedented action of determining it would retroactively impose provisional measures prior to its preliminary determination of dumping.
  • USDOC systematically resorted to adverse “facts available” in each instance where Japanese respondent companies made even the most minor, inadvertent mistake in submitting verifiable data. In stark contrast, USDOC and USITC refused to sanction US companies, including interested party petitioners, that purposefully withheld data. USITC compounded this violation by accepting (and relying on) the US steel companies’ data after the final briefs had been submitted and oral argument had concluded.
  • USITC improperly limited its analysis of the domestic industry to two years of the period investigated, thereby abandoning its normal practice and ignoring the fact that the industry performed better in the third year of investigation than the first.

7.Finally, by maintaining an anti-dumping law, regulations and administrative procedures that do not conform with US obligations under the WTO Agreements, the US violated Article XVI:4 of the WTO Agreement and Article 18.4 of the Anti-Dumping Agreement.

8.In light of these US violations, each of which Japan demonstrates in detail below, Japan requests that the Panel to issue the findings and make the recommendations set forth in the conclusion at the end of this submission.

I.PROCEDURAL BACKGROUND FOR DISPUTE SETTLEMENT IN THIS CASE

9.On 18 November 1999, the Government of Japan requested consultations with the US Government pursuant to Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), Article XXII:1 of GATT 1994, and Article 17.2 of the Anti-Dumping Agreement, regarding preliminary and final determinations in the USDOC and USITC anti-dumping investigations of hot-rolled steel products from Japan.[1]

10.Consultations were held on 13 January 2000. Unfortunately, the consultations failed to resolve the dispute.

11.On 11 February 2000, the Government of Japan requested the establishment of a panel pursuant to Article XXIII:1 of GATT 1994, Articles 4 and 6 of the DSU, and Article 17 of the Anti-Dumping Agreement, and requested that the Panel have the standard terms of reference provided for in Article 7.1 of the DSU.[2]

12.At its 20 March 2000 meeting, the Dispute Settlement Body (DSB) established a panel to examine the complaints of the Government of Japan. The Panel was constituted on 24May2000.[3]

13.The Panel’s terms of reference, pursuant to DSU Article 7, are: