THE WTO DISPUTE SETTLEMENT SYSTEM IN 2019: THE CASE LAW OF THE

APPELLATE BODY BEFORE ITS DEMISE

edited by GIORGIO SACERDOTI*

1. THE FINAL CHAPTER OF THE APPELLATE BODY TO ITS PARALYSIS ON 11 DECEMBER 2019

The year 2019 was marked by a cataclysmic event for the WTO, the demise of the Appellate
Body (AB) on 11 December 2019. At this date, as an effect by the protracted blockage by the
United States of the reappointment process of AB members by the Dispute Settlement Body (DSB),
the AB was left with just one member (Ms Hong Zhao from China) bringing it to its paralysis. Ten
appeals have been left pending without any clear perspective of how, when and by whom they
would be decided in order to bring the underlying disputes to conclusion. There is no apparent way
out from this stalemate in the near future, since the US has refused to engage with other WTO
members on possible consensual reforms of the AB.
The US criticisms of the AB are well known, but this does not render them justified, nor does
it justify the blockage. Besides claiming that the AB has improperly engaged in “judicial activism”
(whatever this may mean, considering that the AB decides, and must decide without any discretion,
only cases which are appealed to it, resolving all the claims submitted by the parties), the United
States has accused it (sometimes in unusually harsh terms) of improper “gap-filling” of provisions
left vague by negotiators, and of “over-reach”, by exercising functions beyond its mandate,
notwithstanding that the self-imposed interpretive restraint of the AB is generally recognized to the
contrary.
The United States has also objected to the AB’s lack of compliance with the 90-day limit to
issue its reports (although delays have been due to the complexity of many cases and the limited
human resources available to the AB to respect effectively this unreasonably short deadline),1 and
to individual AB members’ remaining in office beyond their terms to complete appeals entrusted
to them (although such extensions are provided for under Rule 15 of the AB Working Procedures,
and have been practiced for more than 20 years). The United States has advocated the use of more
judicial economy to avoid decisions of issues raised in appeal but not strictly necessary to resolve
the dispute (which the United States has labelled “obiter dicta” and “advisory opinions”). The
United States has denied that panels must – or perhaps more accurately, are expected to – follow
the precedents of the AB “absent cogent reasons”, as the AB has stated, though specifying that its

*
Of the Board of Editors, Emeritus Professor of International Law, Bocconi University, Milan; former Chairman
of the WTO Appellate Body. This review was carried out within the framework of the Ph.D. program in International
Law and Economics of the Ph.D. School of Bocconi University in Milan. Professor Giorgio Sacerdoti authored Section
1 and coordinated the work with Viktoriia Lapa, Bocconi Ph.D. Individual reviews of WTO cases were authored by
Ph.D. candidates Antonia Von Appen, Diana Catalina Royero Avila, Roberto Isibor, Maria Chiara Meneghetti, Mara
Agoletti and Federico Marengo, as indicated on the bottom of each review. The editing was done by Diana Wade and
Viktoriia Lapa.
1
This is the well-known “judicial trilemma”: three features are valuable in an adjudicatory system, but only
two can be obtained at a time: quality of the decisions; speed of proceedings; cost containment, see DUNOFF and
POLLACK, “The Judicial Trilemma”, AJIL, 2017, p. 225 ff. At the WTO, notwithstanding verbal complaints, members
have de facto preferred quality of the reports and cost containment to respect of the stringent deadlines of the DSU.

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reports are binding only upon the parties.2 The role of past decisions of the AB as guidelines for
the panels is, however, the natural consequence of the review and clarification functions entrusted
to the AB, also keeping with the objective of stability and predictability in the application and
interpretation of the rules spelled out in the Dispute Settlement Understanding (DSU).3
It is significant that the US criticisms are not addressed to key aspects such as the
independence, impartiality and competence of the AB (which, if they had been, would be
worrisome). Rather, they address operational features that do not hamper the AB functioning. The
practices of the AB that the United States criticizes such as authorizing outgoing members to be
assigned to pending cases, have, on the contrary, helped the smooth operation of the AB. Most
WTO members do not share these criticisms and have objected to the blocking of the appointments
by the United States.4 They have, however, refrained from labelling the US attitude as abusive and
contrary to good faith (as it is) – a cardinal principle underlying dispute settlement that is spelled
out in Article 3.10 of the DSU. They have preferred, understandably, to deal with the US position
in diplomatic negotiating terms rather than by confronting the United States. At the end of 2018,
various groups of WTO members tabled no less than 18 proposals to address the issues raised by
the United States with a view to finding solutions and unblocking the appointment process before
the disappearance of an operative AB at the end of 2019.
The United States has refused to engage in those proposals and has refrained from tabling its
own proposal of reforms, notwithstanding the repeated invitations of other members to do so. The
United States claims that the WTO membership must first clarify “why [the AB] has felt free to
disregard the rules of the DSU”, exceeding its authority and “straying from the role agreed for it
by the WTO Members”.5 This is a hefty, unsupported accusation directed at more than 25
distinguished lawyers, diplomats, judges, academics and national senior trade experts from 16
different countries whom the WTO members have chosen by consensus over 20 years to settle their
disputes (and who did so with general satisfaction!).
Among the proposals submitted by WTO members to address the “concerns” of the US
without undermining the key features of the rule-based two-tiers dispute settlement system, in

2
See Appellate Body Report, US – Stainless Steel (Mexico), adopted on 20 May 2018, WT/DS/344/AB/R, para.
160.
3
All the US criticisms expressed in various DSB meetings in 2018-2019 have been summarized in one lengthy
document in February 2020: see United States Trade Representative, “Report on the Appellate Body of the World
Trade Organization”, 2020, available at:
<https://ustr.gov/sites/default/files/Report_on_the_Appellate_Body_of_the_World_Trade_Organization.pdf>. For a
rebuttal see PETERSMANN, “How should WTO members respond to the WTO Appellate Body crisis?”, International
Economic Law and Policy Blog, 13 December 2018, available at:
<https://worldtradelaw.typepad.com/ielpblog/2018/12/ulli-petersmann-on-how-should-wto-members-respond-to-the-
wto-appellate-body-crisis.html>; and PETERSMANN, “Guest Post: WTO [email protected]: Hidden in plain
sight”, International Economic Law and Policy Blog, 17 March 2020, available at:
<https://ielp.worldtradelaw.net/2020/03/guest-post-wto-adjudicationmetoo-hidden-in-plain-sight.html>. Support for
certain US criticisms has been expressed by the US member of the AB, Thomas Graham, shortly after the end of his
mandate, in a speech delivered at Georgetown University on 5 March 2020, expressing harsh criticisms at the modus
operandi of the AB: see GRAHAM, “The Rise (and Demise?) Of the WTO Appellate Body”, available at:
<https://iielaw.org/wp-content/uploads/2020/03/The-Rise-and-Demise-of-the-WTO-Appellate-Body.pdf>.
4
At each DSB session a group of more than 120 WTO members go on putting on the agenda the item of
reappointment of AB members.
5
See e.g. US Mission to International Organizations in Geneva, “Statements Delivered by Ambassador Dennis
Shea – WTO General Council Meeting, July 23, 2019”, available at:
<https://geneva.usmission.gov/2019/07/23/statements-delivered-by-ambassador-dennis-shea-wto-general-council-
meeting-july-23-2019/>.

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December 2018 the EU, jointly with two partially different groups of countries, submitted to the
General Council two proposals.
The first proposal is meant to resolve the impasse on the filling of vacancies at the AB by
addressing some of the concerns raised by the US, the aim being that of “improving the DSU”
while “preserving the essential features of the system and of its Appellate Body”.6 This
Communication, tabled by the EU together with a wide range of diverse WTO members (China,
Canada, India, Norway, New Zealand, Switzerland, Australia, Korea, Iceland, Singapore and
Mexico), includes proposals as to “Transitional rules for outgoing AB members”, “The meaning
of municipal law as an issue of fact”, “Findings unnecessary for the resolution of the dispute” and
the “The issue of precedent”. The document concludes by proposing that in view of the urgency of
the matter and so as to allow for the appointments to take place swiftly, these amendments be
adopted by the General Council as soon as possible, pursuant to Articles IV(2) and X(8) of the
Marrakesh Agreement (therefore by consensus).
The second Communication, tabled by the EU, China and India, proposes “Additional
Amendments” to the DSU, to include one single longer term of office (six to eight years) for AB
members with a view to reinforce their independence, increasing their number from seven to nine
with full time appointment. Transitional arrangements for outgoing members would enable them
to decide cases as long as the hearing takes place within their term in office. There would be an
automatic timely launching of the AB selection process to replace outgoing AB members when
vacancies are anticipated or arise.7 These are clearly more far-reaching proposals on which
consensus is currently lacking.8

1.1. Ambassador Walker’s proposed General Council Decision of 15 October 2019

At the beginning of 2019, the General Council (GC) appointed New Zealand’s Ambassador
David Walker as a “Facilitator” to try to find a solution between the US complains and the other
members’ proposals. Indeed, following extensive consultations, on 15 October 2019 Ambassador
Walker has come forward with a Report to the GC proposing a “Draft GC Decision on Functioning
of the Appellate Body”, addressing the following issues:9
- transitional rules for outgoing AB members (who could complete a case only if the hearing
has taken place within their term);
- 90-day deadline (to be extended only with the consent of the litigants or in case of force
majeure);
- municipal law (to be considered as an issue of fact not reviewable on appeal);
- “advisory opinions” (the AB shall not address issues not raised by the parties or not
necessary to resolve the dispute;

6
WTO, General Council, “Communication from the European Union, China, Canada, India, Norway, New
Zealand, Switzerland, Australia, Republic of Korea, Iceland, Singapore and Mexico to the General Council”, 23
November 2018, WT/GC/W/752.
7
WTO, General Council, “Communication from the European Union, China, India and Montenegro to the
General Council”, 26 November 2018, WT/GC/W/753.
8
At the General Council meeting of 12-13 December 2018, the US Ambassador stated that the proposals
submitted by the European Union and other members failed to address US concerns. They would rather “endorse the
very practice the US has repeatedly complained of”.
9
General Council, “Agenda item 4 – Informal process on matters related to the functioning of the Appellate
Body – Report by the Facilitator, H.E. Dr. David Walker (New Zealand)”, 15 October 2019, JOB/GC/222.

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 - precedent (dispute settlement proceedings do not create precedent, and previous reports
should be taken into account to the extent they are relevant in a subsequent dispute);
- “overreach” (panels and AB cannot add or diminish WTO members rights as stipulated in
Articles 3(2) and 19(2) DSU; panels and the AB shall interpret the Anti-Dumping Agreement in
accordance with its Article 17(6)(ii)).
Academia has also engaged in the issue.10 Even these modest “quick-fix” proposals have
however not been considered by the United States as a meaningful basis for starting negotiations,
thus showing the lack of any interest by the US to avoid the demise of the AB.11

1.2. The post-December 2019 outlook for the Appellate Body: is Article 25 appeal arbitration a
way forward?

The paralysis of the AB has been aggravated by the decision of its remaining members,
shortly before 11 December 2019, to deal only the three pending appeals for which a hearing had
already taken place, contrary to expectations that they would complete all pending appeals. The
rumours of internal quarrels on this decision and of conflicts with the AB secretariat director,
Werner Zdouc, have added a sad note to the final days of operations of the AB.12 A non-happy end
after a glaring successful story of resolving disputes stretching over a quarter of a century.
The WTO is now left lacking a fundamental leg. It must be hoped that most members will
go on respecting the rules even if such respect will not be fully ensured by the DSS anymore. The
result might be a return to a GATT-type of DSS, with de facto veto by the losing party in sensitive
cases. Whether such situation would be temporary or not, it cannot be said at this point.13
The stranglehold on the AB14 is liable in turn to paralyze the panel phase as well, since panel
reports appealed “in the void” can neither be adopted by the DSB nor finally decided at the
appellate stage. Disputes would (and will) remain unresolved and breaches would not be
sanctioned. The whole WTO system of reciprocal rights and duties risks becoming unenforceable.
Such paralysis of the binding WTO rules-based DSS appears to be coherent with the trade policy
objectives of the current United States administration. It is well known that its preference goes to
unilateral protectionist measures and to bilateral deals, often obtained by bullying the other parties

10
See Sacerdoti, “Guest Post: A consensual “Quick-Fix” for the WTO Appellate Body is possible if there is the
will!”, International Economic Law and Policy Blog, 17 October 2019, available at:
<https://ielp.worldtradelaw.net/2019/10/guest-post-a-consensual-quick-fix-for-the-wto-appellate-body-is-possible-if-
there-is-the-will.html>, suggesting an authoritative interpretation of the DSU by unanimous decision of the General
Council based on Art. IX (2) of the WTO Agreement; PAYOSOVA, HUFBAUER and SCHOTT, “The Dispute Settlement
Crisis in the World Trade Organization: Causes and Cures”, Peterson Institute for International Economics Policy
Brief, March 2018, available at: <https://www.piie.com/system/files/documents/pb18-5.pdf>. See also BACCHUS,
“Saving the WTO’s Appeals Process”, CATO Blog, 12 October 2018, available at: <https://www.cato.org/blog/saving-
wtos-appeals-process>; VIDIGAL, “Living Without the Appellate Body: Multilateral, Bilateral and Plurilateral
Solutions to the WTO Dispute Settlement Crisis”, Journal of World Investment and Trade, 2019, p. 862 ff.; CREAMER,
“From the WTO’s Crown Jewel to Its Crown of Thorns”, AJIL Unbound, 2019, p. 51 ff.
11
See “Inside US Trade”, World Trade Online, 18 October 2019, available at: <www.insidetrade.com>.
12
See “WTO Infighting Grows as Appellate Panel Nears Disfunction”, Bloomberg, 3 December 2019, available
at: <https://www.bloomberg.com/news/articles/2019-12-03/wto-infighting-escalates-as-appellate-panel-nears-
disfunction>.
13
For an analysis see PAUWELYN, “WTO Dispute Settlement Post 2019: What to Expect?”, JIEL, 2019, p. 297
ff.
14
Furthermore, the United States blocked the approval of the WTO 2020 budget until it had obtained the
suppression of almost all the AB allocation.

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and threatening to foreclose them from the US market. In the present situation, no authority will
be able to review and sanction any such WTO non-compliant measures.
In order to avoid not only the paralysis of the appellate process but also the consequent
paralysis of effective panel proceedings and indeed of the whole DSS, the European Union
announced in June 2019 the launch of an “interim solution” to cope with the absence of the AB.
The proposal suggests that parties to a dispute would agree beforehand on a reciprocal bilateral or
plurilateral basis, on an alternative “appeal arbitration” under Article 25 DSU, to be resorted to as
long as the AB is inoperative.15 Canada joined first, then Norway, and the initiative continues to
gain momentum. In January 2020, in the margins of Davos, the European Union announced that it
had reached agreement with 14 additional WTO members, including China, Brazil, Korea and
Mexico, for the “Multi-Party Interim Appeal-Arbitration Arrangement” (MPIA) which was
finalized at the end of March.16 However, even if accepted by many WTO members, this alternative
has several shortcomings, first of all that it would not be applicable to the United States. It would
lead to a bifurcated regime within the WTO, with some countries on the one hand remaining subject
to a binding dispute settlement system, and some on the other hand escaping effective enforcement
of its rules.
Even with the EU solution in place, a situation where any major player is not bound by
compulsory rule-based dispute settlement risks making the whole WTO framework a sham of what
was intended in 1995, without any shared reason to debilitate the system.
Renouncing independent rule-based adjudication and going back to the GATT system, where
ad hoc panel reports did not establish a consistent jurisprudence and were little more than advisory
opinions or non-binding conciliation proposals, would not be effective within a multilateral system.
Nor would such an approach be consistent with the carrying out of international trade under a
legally predictable framework, as demonstrated in the current “trade wars”.

1.3. Recourse to the dispute settlement system in 2019

As of the end of 2019, 593 cases had been registered, resulting in 249 panel reports and 139
AB reports issued since the beginning of the operation of the dispute settlement system in 1995.17
25 cases were pending at the panel stage at the end of 2019.18 In 2019, 10 reports have been issued
by panels of which 6 have been appealed. No panel report has been issued yet in the disputes
concerning the US measures of 2018 increasing the duties on steel and aluminium imports based
on security reasons, nor on the cases filed by the US against the “countermeasures” adopted by
some of the States targeted by the US duties.

15
European Commission, “Commission Reinforces Tools to Ensure Europe’s Interests in International Trade”,
12 December 2019, available at:
<https://trade.ec.europa.eu/doclib/press/index.cfm?id=2091#:~:text=12%20December%202019-
,Commission%20reinforces%20tools%20to%20ensure%20Europe's%20interests%20in%20international%20trade,W
orld%20Trade%20Organization%20(WTO)>.
16
See EU, “WTO multi-party interim appeal arbitration arrangement”, 24 January and 27 March 2020, available
at: <www.consilium.europa.eu/en/press/press-releases/2020/04/15/council-approves-a-multi-party-interim-appeal-
arbitration-arrangement> (with text attached).
17
These data are available at: <https://www.wto.org/english/tratop_e/dispu_e/dispu_current_status_e.htm>.
18
Disputes pending before the same panel against the same measure by the respondent member are counted as
one. The figure includes five suspended cases upon request of the parties.

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 Since the Appellate Body has decided to issue reports only on the three pending appeals in
which the hearing had taken place before 11 December 2019,19 the following ten other appeals
have remained pending: EU – Energy Package (DS476); Colombia – Textiles, Article 21.5
(DS461); India – Iron and Steel Imports (DS518); Thailand – Cigarettes (Philippines), Article 21.5
(DS371); US – Countervailing Measures on Pipe and Tube (DS523); US – Differential Pricing
Methodologies on Lumber (DS534); US – Renewable Energy (DS510); Thailand – Cigarettes
(Philippines), Article 21.5 II (DS371); India – Export Related Measures (DS541); EC – Aircraft,
Article 21.5 II (DS316); US – Carbon Steel, Article 21.5 (DS436).
The destiny of these appeals is uncertain. The first example is not encouraging as to a rule-
based finalization of these disputes. In announcing its intention to appeal a panel report in a dispute
with India just after the demise of the AB, the US made the announcement that it “will confer with
India so the parties may determine the way forward in this dispute, including whether the matters
at issue may be resolved at this stage or to consider alternatives to the appellate process”.20 India
appears to have accepted in part the US position, since both parties announced shortly thereafter
that they would keep any appeal and cross-appeal on hold until “an Appellate Body Division can
be established to hear and complete any appeal”.21
The six reports issued by the Appellate Body in 2019 are being reviewed hereafter.
The most important report issued by the DSS in 2019 is however, probably, the panel report
(adopted by the DSB without appeal on 26 April 2019) where the defence of the security exception
of Article XXI(b)(iii) GATT has been addressed for the first time in the dispute (DS 512) between
Ukraine and Russia concerning restrictions to transit imposed by the latter. The panel, chaired by
former AB member Georges Abi-Saab, found that the defence of Article XXI is “self-judging”
only in part, contrary to the position taken by Russia, supported by the US as a third party. More
specifically, it concluded that the requirement of subparagraph (iii) that the measure at issue be
“taken in time of war or other emergency in international relations” is capable of objective
determination by a panel.

2. APPELLATE BODY REPORT, UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL
AIRCRAFT (SECOND COMPLAINT), RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE EUROPEAN
UNION22

2.1. Introduction and main facts of the dispute

By issuing the AB Report on 28 March 2019, the WTO laid down the final ruling in the
proceedings of United States – Measures Affecting Trade in Large Civil Aircraft (second
complaint), Recourse to Article 21.5 of the DSU by the European Union, which represents the
European counter-case in one of the world’s largest corporate trade disputes that has been going

19
Morocco – Hot Rolled Steel (DS513), adopted on 8 January 2020, reviewed infra, where the AB report has
just acknowledged that the appeal by Morocco had been withdrawn; Canada – Supercalendered Paper (DS505),
adopted on 5 March 2020; Australia – Plain Packaging (DS435, 441). We plan to review the two latter (and last)
current AB reports in our WTO dispute settlement review of 2020.
20
US – Countervailing Measures on Certain Hot-Rolled Carbon Steel Flat Products from India: Notification of
an Appeal by the United States under Article 16 of the DSU, 18 December 2019, WT/DS436/21.
21
Joint Communication from India and the United States, 16 January 2020, WT/DS436/22.
22
Adopted on 11 April 2019, WT/DS353/AB/RW.

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on for 15 years between the EU and the US concerning their (WTO-illicit) subsidies provided in
favor of their respective Large Civil Aircraft (LCA) industries.
Following the request by the US for consultations with the European Communities (EC) in
2004,23 both parties have brought cases before the dispute settlement system of the WTO, alleging
the other party provided subsidies in the amount of billions prohibited and/or actionable under the
Agreement on Subsidies and Countervailing Measures (SCM Agreement) and the General
Agreement on Tariffs and Trade (GATT) 1994.
The claim of the US, challenging EU subsidies in favor of Airbus, came to a final conclusion
in the form of the AB Report of 15 May 2018, adopted together with the modified panel report on
28 May 2018, ruling that European governments had not fully implemented DSB recommendations
and thereby continued to back Airbus with illicit subsidies in its competition with Boeing.24
Subsequently, the proceedings under Article 22 DSU were resumed and lead to the Decision of the
Arbitrator on the amount of retaliation measures, allowing for suspension of concessions.25 The
US was thereby awarded the right to impose additional tariffs on EU goods worth US$7.5 billion.26
This ruling accounts for the highest authorization on retaliatory tariffs in WTO history.27
Conversely, the report under review here represents the final AB Report in the case brought
by the EU against US subsidies to Boeing. It should be recalled that upon request by the EC,28 the
original panel in the proceedings of US – Large Civil Aircraft (2nd complaint) was established on
17 February 2006. Its report was circulated to the Members on 31 March 2011, confirming that
certain tax exemptions and non-tax incentives, such as research and development support,
implemented by the US federal, state and local governments in favor of Boeing, qualified as
prohibited specific subsidies as well as subsidies causing serious prejudice under the SCM
Agreement.29 Both parties appealed to certain issues of law and legal interpretation of the panel
report. In response, the AB circulated its report to the Members on 12 March 2012, in which it
upheld a number of the original panel’s findings with regard to conferred benefits to Boeing that
stood in conflict with the SCM Agreement. The AB report and panel report, as modified by the AB
report, were adopted by the DSB on 23 March 2012.
In line with their declaration of intent to implement the DSB recommendations, the US
undertook certain actions to withdraw incompatible subsidies or remove their adverse effects on
foreign LCA industries. Upon expiry of the 6-month time frame stipulated in Article 7.9 SCM
Agreement, that lasted until 23 September 2012, the US informed the DSB of having fully
complied with their obligations. The EU however deemed the implemented measures insufficient
and requested the establishment of a compliance panel pursuant to Article 21.5 DSU on 11 October

23
The US requested consultations with the European Communities and certain member states (Germany,
France, the United Kingdom, and Spain) on 6 October 2004, which evolved into the parallel proceeding of: European
Communities and Certain member States – Measures Affecting Trade in Large Civil Aircraft, WT/DS316; European
Communities requested consultations with regard to their claims on 27 June 2005.
24
Appellate Body Report, EC – Large Civil Aircraft, adopted on 28 March 2018, WT/DS316/AB/RW; whereas
the proceedings in the Second Recourse to Art. 21.5 DSU are still ongoing as of today, considering the issuance of the
compliance panel report on 2 December 2019 (WT/DS316/RW2) and the EU’s notification to appeal.
25
Decision by the Arbitrator on EC – Large Civil Aircraft, Recourse to Article 22.6 of the DSU by the EU,
circulated on 2 October 2019, WT/DS316/ARB.
26
Authorization to retaliate granted by the DSB on 14 October 2019.
27
Office of the US Trade Representative, “U.S. Wins $7.5 Billion Award in Airbus Subsidies Case”, 10
february 2019, available at: <https://ustr.gov/about-us/policy-offices/press-office/press-releases/2019/october/>.
28
As of 1 December 2009, the EU replaced and succeeded the EC.
29
Panel Report, US – Large Civil Aircraft (2nd complaint), adopted on 23 March 2012, WT/DS353.

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2012 against the background of the alleged failure of the US to implement the recommendations
and rulings of the original DSB. On 9 June 2017, the compliance panel’s report was released.

2.2. The Compliance Panel Report

In its report, the compliance panel came to the result that a number of measures of the US
with regard to their LCA industry were inconsistent with the SCM Agreement. The report was
divided in five main sections, with the following key conclusions being reached:

2.2.1. Alleged non-compliance with Article 7.8 – Measures to consider within the meaning of
Article 7.8 of the SCM Agreement

Before addressing the question of substantive compliance with Article 7.8 SCM Agreement,
the panel had to decide upon the scope of the proceedings. Considering that the EU’s claims were
not only related to pre-2007 but also post-2006 measures, the outcome relied to a large extent on
the premise that in addition to the particular subsidy measures implemented in the past that had
been dealt with in the DSB recommendations and rulings, actions taken after the conclusions of
the original proceeding were also subject to reassessment by the DSB under Article 7.8 SCM
Agreement.30
In light of the AB’s analysis in US – Upland Cotton (Article 21.5 – Brazil),31 the panel
concluded that in order to give meaning and effect to the obligation stated under Article 7.8 of the
Agreement, its scope was not limited to the particular pre-2007 measures, which had been
considered inconsistent with the Agreement, but that subsidy measures also granted after the
reference period could be challenged by the EU and had, hence, to be analyzed for non-compliance.

2.2.2. Whether certain measures and claims are outside of the Panel´s terms of reference or
otherwise outside the scope of the proceeding

The US filed for preliminary ruling on the matter of certain challenged measures being
outside the terms of reference for purposes of Article 6.2 DSU or otherwise outside the scope of
the proceeding under Article 21.5 DSU.32 Supposedly, these claims were beyond the scope of the
dispute defined by the original panel request, as they were not sufficiently closely connected to
other actions for which compliance obligations had been established by the DSB. Indeed, several
of the EU’s claims referred to measures that had not been challenged or had been unsuccessfully
challenged during the original proceeding.
The panel ruled that previously unsuccessfully brought claims were not per se outside the
scope of the proceeding.33 A reassessment of claims would rather align with the key concept of a
positive and effective resolution to a dispute as long as it did not compromise the finality of the
30
Art. 21.5 DSU Panel Report, US – Large Civil Aircraft (2nd complaint), adopted on 11 April 2019,
WT/DS353/RW, para. 6.30 ff.
31
Ibid., paras. 6.34 and 6.36; referring to Appellate Body Report, US – Subsidies on Upland Cotton – Recourse
to Article 21.5 of the DSU by Brazil, adopted on 20 June 2008, WT/DS267/AB/RW.
32
Ibid., para. 7.1 ff.
33
Ibid., paras. 7.41 and 7.130.

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DSB recommendations and rulings, as would be the case with claims that had not been definitely
resolved in the original proceeding.34 Moreover, the panel recalled the premises of the “close nexus
test”,35 which should be applied to determine whether “undeclared” measures have a particularly
close relationship with an action that has already been assessed by the DSB. Therefore the “timing,
nature, and effects” of the relevant measures shall be examined against their “factual and legal
background”.36 In light of this reasoning, various of the claims brought by the EU were indeed
accepted within the scope of the current proceedings, such as four original Washington tax
measures and the aeronautics Research and Development (R&D) measure granted by the Federal
Aviation Authority (FAA).37 Also, several payments and measures providing access to US
Department of Defense (DOD) facilities, equipment and employees in favor of Boeing funded
under the original 23 DOD Research, Development, Test and Evaluation Program (RDT&E
program) were challenged by the EU, but considered to be only partly covered by the scope of the
proceeding.38

2.2.3. Whether the US has withdrawn the subsidy within the meaning of Article 7.8 of the SCM
Agreement

As to the merits of the case, the panel first examined whether the US had withdrawn the
subsidy according to Article 7.8 of the Agreement.39 To this end, each allegation brought by the
EU was examined as to (1) represent a financial contribution, (2) confer a benefit on Boeing, (3)
involve a specific subsidy, and eventually, (4) the respective amount was assessed.

(i) NASA and DOD aeronautics R&D subsidies

With regard to the National Aeronautics and Space Administration (NASA) and DOD
aeronautics R&D subsidies, the panel distinguished between pre-2007 and post-2006 measures.
The EU argued that the US had failed to withdraw the pre-2007 subsidy by modifying patent license
agreements to the terms of procurement contracts without removing the benefits conferred to
Boeing. The panel approached this question by comparing the allocation of patent rights between
the commissioning party (NASA and DOD) and the commissioned party (Boeing) and came to the
conclusion that the grant of limited commercial use licenses of Boeing-owned patents did not
sufficiently alter the original balance of rights as to remove the benefit, but continued to favor
Boeing, which is why the alterations did not constitute a withdrawal of the subsidy within the
meaning of Article 7.8 SCM Agreement.40 Moreover, the panel also upheld the EU’s claim with
regard to post-2006 NASA aeronautics R&D subsidies provided through procurement contracts

34
Ibid., paras. 7.41, 7.52, 7.129 and 7.150.
35
Ibid., para. 7.65 ff.
36
Ibid., para. 7.66.
37
Ibid., paras. 7.53 and 7.291.
38
Ibid., para. 7.240.
39
The Article reads: “Where a panel report or an Appellate Body report is adopted in which it is determined
that any subsidy has resulted in adverse effects to the interest of another Member […], the Member granting or
maintaining such subsidy shall take appropriate steps to remove the adverse effects or shall withdraw the subsidy”.
40
Ibid., para. 8.28.

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that were held to involve specific subsidies within the meaning of Articles 1 and 2 SCM
Agreement.41

(ii) Post-2006 subsidies

In total, seven categories of post-2006 measures were challenged by the EU to be inconsistent

with the SCM Agreement.42 Moving to the group of non-aeronautics post-2006 subsidies, the panel
examined illicit support with regard to: (1) FSC/ETI measures; (2) tax abatements related to the
issuance of Industrial Revenue Bonds (IRBs) by the City of Wichita, Kansas; (3) Washington state
and local measures; and (4) South Carolina local measures. Whereas the panel rejected the EU’s
claim on (1) FSC/ETI measures and (2) tax subsidies related to Wichita, it upheld the alleged failure
to withdraw (3) Washington state and local measures as well as (4) three out of eleven challenged
South Carolina measures.

2.2.4. Whether the US has failed to take appropriate measures to remove the adverse effects, within
the eaning or Article 7.8 of the SCM Agreement

The EU claimed that certain unwithdrawn subsidies continued to have a market distorting
effect in the post-implementation period. It therefore argued that a number of R&D subsidies
operated through aspects of a “technology causal mechanism”, while others operated through a
“price causal mechanism”, both of which continued to influence Boeing’s LCA sales and prices to
the detriment of the European LCA industry.
The panel did not follow the EU’s argument with regard to twin-aisle LCA, deciding that any
possible “head-start” for Boeing arising from aeronautics R&D subsidies had lost its impact by the
time of the post-implementation period.43 Furthermore, the panel ruled that the EU had failed to
establish the existence of new technology effects of the particular post-2006 aeronautics R&D
subsidies with regard to the 767-9/10 and 777X. It however upheld the EU’s claims that the
appropriate steps to remove adverse effects had not been taken with regard to three single-aisle
LCA sale campaigns and two geographic markets.

2.2.5. Claims under Articles 3.1 and 3.2 of the SCM Agreement and Article III:4 of the GATT 1994

Eventually, the panel examined the EU’s claims concerning subsidies conflicting with
Articles 3.1 (a) and (b) and 3.2 of the SCM Agreement as well as Article III:4 of the GATT 1994,
all of which were either held to be inconsistent or rejected for failure of the EU to demonstrate that
the relevant subsidies were contingent upon the use of domestic over imported goods, respectively
upon export performance.

41
Ibid., para. 8.287.
42
These seven categories were: NASA aeronautics R&D measures; DOD aeronautics R&D measures; FAA
aeronautics R&D measure; tax exemptions and exclusions under FSC/ETI legislation and successor legislation; tax
abatements provided through IRBs issued by the City of Wichita; Washington state and local measures; and South
Carolina measures.
43
Ibid., para. 9.186.

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2.2.6. Conclusions of the Panel Report

In light of the foregoing, the panel came to the conclusion that the US had failed to comply
with DSB recommendations and rulings, given that certain measures were still inconsistent with
its obligations under the SCM Agreement. In particular, the panel held that the US had not taken
the “appropriate steps to remove the adverse effects or […] withdraw the subsidy” as stated under
Article 7.8 SCM Agreement, but continued to be in violation of Articles 5(c) and 6.3(a), (b) and
(c) of the SCM Agreement. Hence, the DSB recommendations and rulings of the original
proceedings should remain operative to the extent that the US had failed to comply with them.44

2.3. The Appellate Body Report

In response to the release of the compliance panel report, the EU filed an appeal against
certain issues of law and legal interpretations. The US also decided to cross-appeal the ruling. The
AB report was thereupon circulated on 28 March 2019.45 Although the AB report overturned
several of the compliance panel’s findings, it overall upheld the conclusion that the US continued
to disregard its obligations within the SCM Agreement due to a number of subsidy measures
initialized or maintained by the US in favor of national LCA producers.
In detail, the AB report included the following key findings:

2.3.1. FSC/ ETI tax concession under Article 1.1(a)(1)(ii) of the SCM Agreement

The EU had raised the question whether the US continued after 2006 to grant subsidies to
Boeing in the form of tax concessions under Foreign Sales Corporation and Extraterritorial Income
Exclusion (FSC/ETI) measures. In order to assess whether these measures qualified as financial
contributions under Article 1.1(a)(1)(ii) SCM Agreement, a comparison had to be drawn between
the tax treatment of comparably situated taxpayers and the treatment applied to the alleged subsidy
recipients.
The AB held that the panel erred in its interpretation of Article 1.1(a)(1)(ii) SCM Agreement
by focusing on the eligible taxpayer instead of the government conduct. The ruling on whether “a
government revenue that is otherwise due is foregone” cannot hinge on the fact that the potential
subsidy recipient does not take advantage of concessions and continues to pay government revenue
that is effectively not due; rather, only whether a tax concession is made available by the
government shall be crucial.46 On this basis, the AB reversed the panel’s rejection of the EU’s
claim that the US continued to provide financial contributions in the form of FSC/ETI tax
concessions. Moreover, the AB completed the legal analysis with the result of Boeing still being
entitled to illicit subsidies by FSC/ETI tax concessions after 2006.

2.3.2. Wichita IRBs under Article 2.1(c) of the SCM Agreement

44
Ibid., para. 11.10 ff.
45
Appellate Body Report, cit. supra note 22.
46
Ibid., para. 5.153.

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 The EU challenged the panel’s interpretation of Article 2.1(c) SCM Agreement. In this
regard, the question was whether the term “disproportionality” in “granting of disproportionately
large amounts of subsidy to certain enterprises” should be determined by evaluating the amounts
granted during the entire period of the subsidies programme, or by focusing only on a limited period
of time. The AB confirmed that the panel had rightfully assumed the relevant time period to start
only after the end of the implementation period in the specific circumstances of this case.47
However, ultimately the AB rejected the panel’s application of Article 2.1(c) SCM Agreement, due
to its finding that no disparity existed between the expected and actual distribution of the tax
benefits provided. The AB, being unable to complete the legal analysis, could not definitely
establish whether the IRBs constituted specific subsidies.

2.3.3. South Carolina Measures (Economic Development Bonds and MCIP Job Tax Credits)

On appeal, the AB had to scrutinize the panel’s assessment of several factors within the
second sentence of Article 2.1(c) SCM Agreement. With regard to the interpretation of the term
“limited number”, the AB came to the same conclusion as the panel, acknowledging that it had to
be assessed on a “case-by-case basis, taking into account the particular characteristic of the subsidy
programme and the circumstances of the case”.48 Although assuming a different interpretation of
the term “certain enterprises” than the panel by determining that it had to be made in light of all
relevant characteristics, including the nature and purposes of the activities and markets of eligible
enterprises, the AB did not reverse the panel’s rejection of the EU’s claims on the grounds that it
did not hinge on the misinterpretation. The AB did however reverse the panel’s ruling with regard
to the assessment of “predominant use”, since the panel had excluded a potentially relevant
category of evidence brought forward by the EU. Due to the absence of sufficient factual findings
by the panel, the AB was unable to complete the legal analysis.49
Furthermore, the AB reversed the panel’s finding that the EU had failed to establish that the
South Carolina multi-country industrial park (MCIP) job tax credits were “specific” within the
meaning of Article 2.2 SCM Agreement. According to Article 2.2 SCM Agreement, a subsidy is
“specific” when it is “limited to certain enterprises located within a designated geographical region
within the jurisdiction of the granting authority”.
With regard to the South Carolina MCIP, the compliance panel had concluded that the
subsidy was indeed available only to taxpayers within the MCIP; however, the panel had rejected
the EU’s claim on the grounds that the tax credits were not “limited” to enterprises within a
designated region due to the prompt availability of MCIP designation to any company upon
request.50
The AB took the opposite standpoint and declared the MCIP income tax credits to represent
a locally restricted subsidy in the sense of Article 2.2 SCM Agreement, being a measure that is
“explicitly or implicitly limited to entities that are engaged in economic activities in the market”.51
The mere prospect of becoming part of an MCIP in the future and thereby qualifying for the

47
Ibid., para. 5.198.
48
Ibid., para. 5.237.
49
Ibid., para. 5.276.
50
Art. 21.5 DSU Panel Report, cit. supra note 30, para. 8.931.
51
Art. 21.5 Appellate Body Report, cit. supra note 22, para. 5.304.

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additional tax credits should not suffice to countervail the explicit regional limitation. Following
the completion of the legal analysis, the AB thus qualified the MCIP job tax credits provided to
Boeing as “specific” subsidies within Article 2.2 SCM Agreement.

2.3.4. Findings regarding adverse effects

(i) Continuity of adverse effects from original reference period

When determining whether the US had taken appropriate steps to remove continuing adverse
effects within Article 7.8 SCM Agreement, the issue of the relevant time period had to be
addressed. The EU claimed that adverse effects continued to be caused by subsidies where LCA
orders had occurred prior to the end of the implementation period but deliveries remained
outstanding for after the implementation period. The AB shared this view, thereby reversing the
panels interpretation,52 on the grounds that the market phenomena of price suppression and lost
sales were not limited to the moment of an LCA order but may still have an effect through the point
of delivery.
Nonetheless, the AB found that the panel did not err in its conclusion that the EU’s arguments
were unsupported by the evidence and/or in contradiction with the findings of the original
proceedings, and therefore upheld the panel’s overall rejection of the EU’s claims with regard to
the adverse effects of the pre-2007 aeronautics R&D subsidies in the post-implementation period.

(ii) Technology effects of US aeronautics R&D subsidies

With regard to technology effects of pre-2007 aeronautics R&D subsidies, the AB faulted
the panel for not properly analyzing the counterfactual question on acceleration effects, which not
only could have had an impact on the launch of the 787, but also on its first delivery.53 Thus, the
AB reversed the panel’s finding, but could not complete the legal analysis.

(iii) Price effects

In determining possible price effects, the AB declined the request by the US to reverse the
panel’s ruling on a Washington State B&O tax rate reduction. Indeed, according to the AB there
was a basis for the panel to assume that Boeing had been able to profit from subsidies by higher
LCA sales, that, in return, allowed the producer to cut prices in particular price-sensitive sales
campaigns in the single-aisle LCA market.54 The AB therefore agreed with the panel that this
measure had caused significant lost sales in the single-aisle LCA Market within the meaning of
Articles 6.3(a) and (b) of the SCM Agreement with respect to five particularly price-sensitive sales
campaigns.
Also in respect to the matter of price effects, the AB faulted the panel for its applied legal
standard in establishing causation under Articles 5 and 6.3 SCM Agreement. The AB held that the

52
Ibid., para. 5.344.
53
Ibid., para. 5.415.
54
Ibid., para. 5.569.

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panel was too demanding by requiring that untied subsidies effectively altered LCA pricing
behavior in order for them to represent a genuine and substantial cause of lost sales.55 In fact, untied
subsidies should be considered to already have caused significant adverse effects by enhancing
Boeing’s pricing flexibility, regardless of whether these subsidies altered the pricing of its LCA
programs.56 Hence, the AB reversed the panel’s findings, though without being able to complete
the legal analysis to whether the untied subsidies of the Washington State B&O tax credits for
preproduction/aerospace product development caused adverse effects in the LCA market.
The DSB adopted the AB report as well as the panel report, as modified by the AB report,
on 11 April 2019.

2.4. Concluding remarks

The dispute between Boeing and Airbus, respectively the US and the EU with regard to LCA,
is considered one of the most complex and most expensive proceedings in the history of the WTO.57
So far, none of the DSB rulings and recommendations could achieve an accommodating solution
or settlement for the parties in this politically charged conflict; rather the contrary is the case. The
final ruling regarding the complaint brought by the US against EU subsidies provided the basis for
new retaliatory tariffs in an already strained transatlantic trade relationship,58 whereas the ongoing
proceeding of the US challenging the EU’s compliance under EC – Large Civil Aircraft
(WT/DS316), Second Recourse to Article 21.5 DSU has given rise to new menaces.59
In addition, the Arbitrator’s decision on the amount of retaliation that the EU may impose
against the US for supporting Boeing is expected for 2020 and could pave the way for the EU to
impose additional levies on US imports.60 According to WTO rules, the amount of damages is
determined not based on the sums provided through subsidies, but on the negative impact of the
illicit market intervention.
During the final years of these proceedings, the WTO dispute settlement bodies have
regularly considered both parties to be in violation of their commitments under the DSU. Also,
both parties have consistently presented these decisions as victories for their own LCA producers.
Accordingly, as a response to the AB report of 28 March 2019, John Harrison, Airbus general
counsel, declared the ruling to be a “clear victory for the EU and Airbus”,61 while the White House

55
Ibid., para. 5.538.
56
Ibid.
57
AGAH, “WTO Dispute Settlement Body developments in 2010”, March 2011, available at:
<https://www.wto.org/english/tratop_e/dispu_e/speech_agah_4mar10_e.htm>.
58
Decision by the Arbitrator, cit. supra note 25; Office of the US Trade Representative, cit. supra note 27.
59
Upon issuance of the Compliance Panel Report on 2 December 2019, the US Trade Representative Robert
Lighthizer proclaimed: “The EU’s frivolous case proves that strong action is needed to convince the EU that its
interests lie in eliminating these market-distorting subsidies now and in the future, so that our industries can compete
on a level playing field”: Office of the US Trade Representative, “United States Wins for the Sixth Time in Airbus
Subsidies Dispute”, 2 December 2019, available at: <https://ustr.gov/about-us/policy-offices/press-office/press-
releases/2019/december/united-states-wins-sixth-time>.
60
The proceedings on remedies are filed under Art. 22.6 DSU. Upon the EU’s request dated 5 June 2019, the
Arbitrator resumed its work on the arbitration proceedings.
61
“WTO rules US failed to stop unfair tax break to Boeing”, Financial Times, 28 March 2019, available at:
<https://www.ft.com/content/e60abfbc-5179-11e9-b401-8d9ef1626294>; see also European Commission, “EU scores
final victory in the WTO Boeing dispute”, 28 March 2019, available at:
<https://ec.europa.eu/commission/presscorner/detail/en/IP_19_1892>.

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proclaimed the decision to be “a major win for the US” with reference to the remaining actionable
subsidy, which was said to be much less than the billions of subsidies originally alleged by the
EU.62
Not only has this dispute consumed an exorbitant amount of time and money from the parties,
but it has also limited the WTO in its capacities by tying up considerable resources due to the
volume of evidence to be reviewed and the particular complexity of these long-running
proceedings.63 Moreover, continuous litigation with disputable outcome, in view of the insufficient
implementation of the rulings and recommendations on both sides, is bound to harm the reputation
of the WTO.
The central question, where this “battle of giants” is heading, becomes even more evident
against the background of the current WTO crisis, which is threatening the operation of the rule-
based settlement system of trade disputes. In December 2019, the WTO’s AB has been rendered
non-operational due to non-replacement of six out of seven of its members.64 The interim
arrangement agreed upon recently by several member states does not involve the US.65
In these times of rising global trade tensions paired with the biggest crisis of the WTO ever
since its outset in 1995, the most promising approach to solving this transatlantic conflict may be
a bilateral settlement, that would conciliate opposing interests and smooth ruffled feathers through
negotiations, as opposed to imposing rulings by an international body. The alternative, a continuous
exchange of blows on tariffs, is not in the interest of neither of the parties to the dispute, nor the
global economy.
ANTONIA VON APPEN*

3. APPELLATE BODY REPORT, KOREA – IMPORT BANS, AND TESTING AND CERTIFICATION
REQUIREMENTS FOR RADIONUCLIDES 66

3.1. Introduction and main facts of the dispute

The accident at the Fukushima Dai-ichi Nuclear Power Plant (FDNPP) after the Great East
Japan Earthquake in March 2011 released radionuclides (nuclides that are radioactive) into the
atmosphere, the ocean, and soil causing radioactive contamination that affected Japan and
neighboring countries.67 It led to the change of a number of policies in Japan. Different aspects
such as energy production and energy conservation policies have been reconsidered after the

62
Ibid.
63
This is also manifested by the fact that the AB has regularly exceeded its maximum time frame of 90 days
for issuing an AB report (Art. 17.5 DSU).
64
SACERDOTI, “The Stalemate Concerning the Appellate Body of the WTO: Any Way Out?”, Questions of
International Law, 2019, p. 37 ff., available at: <http://www.qil-qdi.org/the-stalemate-concerning-the-appellate-body-
of-the-wto-what-way-out/>.
65
European Commission, “EU and 15 World Trade Organization members establish contingency appeal
arrangement for trade disputes”, 27 March 2020, available at:
<https://ec.europa.eu/commission/presscorner/detail/en/IP_20_538>.
*
Ph.D. candidate in International Law and Economics, Bocconi University, Milan.
66
Adopted on 26 April 2019, WT/DS495/AB/R.
67
Panel Report, Korea – Import bans, and testing and certification requirements for radionuclides, circulated
on 22 February 2018, WT/DS495/R, paras. 1.1 and 2.1.

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disaster and not only in Japan, but also in the European Union and Korea.68 Additionally,
international trade was impacted by the incident.
The present case arose from measures to protect food from radioactive contamination
adopted by Korea concerning a range of food products imported from Japan after the nuclear
disaster at the power plant. The Korean measures enormously affected Japan’s food exportation
because the cost of product bans and additional testing requirements would be almost half the value
of the average of fishery products exported.69 However, Japan considered that only the following
measures (originally provisional) introduced by Korea between 2011 and 2013 were in breach of
Korea’s WTO obligations: product specific bans, blanket import bans, and additional testing and
certification requirements concerning the presence of certain radionuclides in fishery and
livestock.70
Japan considered that Korea’s measures were excessive and in breach of several articles of
the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement), the
GATT 1994 and the DSU. Hence, Japan requested consultations with Korea on 21 May 2015 and
thereafter demanded the constitution of a Panel on 20 August 2015 whose Report was released on
22 February 2018. Both parties appealed in April 2018. On 8 June 2018, the AB informed the DSB
that it would not be possible for it to issue its report within the time frame set forth in Article 17.5
(60-90 days) due to various circumstances, such as an overload of work and the overlap in the
composition of the Divisions hearing different appeals due to the vacancies in the Appellate
Body.71 Finally, the AB Report was circulated on 11 April 2019 and was adopted by the DSB along
with the modified Panel Report on 26 April 2019. On 4 June 2019 Korea announced that it
implemented the AB Report by way of re-publishing the details of the certain measures.

3.2. The Panel Report

3.2.1. Korea’s breaches according to Japan

Once the Panel was constituted, Japan requested that it establish that Korea had not complied
with several obligations, such as transparency requirements laid down in Article 7 and Paragraphs
1 and 3 of Annex B to the SPS Agreement in respect of Korea’s import bans and additional testing
requirements; Articles 2.3 and 5.6 of the SPS Agreement as to Korea’s import ban on some fisheries
products and additional testing requirements; and Article 8 and Paragraphs 1(a), 1(c), 1(e) and 1(g)
of Annex C to the SPS Agreement as to Korea’s additional testing requirements.72

3.2.2. Korea’s breaches according to Japan

The Panel addressed some major issues: Korea’s measures as SPS measures; the operation
of testing requirements; provisional measures; the level of trade-restrictiveness of Korea’s
measures; non-discrimination; control, inspection and approval procedures; and transparency
68
MATSUKAWA, Consumer Energy Conservation Behavior After Fukushima. Evidence from Field Experiments,
1st ed., Singapore, 2016, p. 13.
69
Panel Report, cit. supra note 67, para. 7.154.
70
Ibid., paras. 2.113-2.115.
71
Appellate Body Report, cit. supra note 66, para. 1.7.
72
Panel Report, cit. supra note 67, para. 3.1.

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obligations. The analysis and findings of the Panel present a special interest because it was the first
time that protective measures adopted due to radioactive contamination of food or other urgent
health protecting measures were analyzed under the SPS Agreement.
The Panel first concluded that all the Korean actions were SPS measures under Article 1.1
and Annex A(1)(b) to the SPS Agreement and thus had to be consistent with the Agreement.73
Japan claimed that all the measures adopted by Korea were contrary to Article 5.6 SPS
Agreement because they were more trade-restrictive than required. To support its claim, Japan
suggested a single alternative measure to all the challenged measures consisting of “testing for
caesium, to verify that the products’ caesium content does not exceed Korea’s level of 100 Bq/kg,
as a means to control both caesium contamination and contamination from additional
radionuclides”.74 The Panel first assessed Korea’s Appropriate Level of Protection (ALOP). Then,
the Panel established that the adoption of the 2013 additional testing requirements, the blanket
import ban, and the maintenance of these and all the other Korean measures were more trade-
restrictive than required. The Panel applied a test used by the AB under Article 5.6 and as a result
determined that Japan’s alternative proposal was technically available, economically feasible and
significantly less trade restrictive than the measures Korea adopted.75 However, the Japanese
proposal would not have achieved Korea’s ALOP when additional testing requirements (2011),
product specific import bans (2012), and the blanket import ban (2013, only regarding Pacific cod
from Fukushima and Ibaraki) were introduced.76 Thus, these measures were not more trade-
restrictive than required at the moment they were adopted.77 On the other hand, the Panel found
that the maintenance of the measures, at the moment the Panel was established, made them more
trade-restrictive than required because Japan’s alternative proposal could have achieved Korea’s
ALOP at a less trade-restrictive level.78 The Panel established the same finding for the 2013
additional testing requirements and the blanket import ban regarding 28 fishery products since
Japan’s alternative measure would have achieved Korea’s ALOP.79
Moreover, the Panel analyzed the temporariness of the measures under Article 5.7 SPS
Agreement. This article provides specific requirements for adopting or maintaining a SPS measure.
According to the Panel, Korea did not review the measures within a reasonable period of time,
thus, for the Panel this fact was a clear sign that the measures were trade-restrictive.80
With regard to Article 2.3 SPS Agreement, the Panel found that the adoption of the blanket
import ban on 28 fishery products, and Korea’s maintenance of the product-specific bans on Pacific
cod and Alaska pollock, and the 2013 blanket import ban for all 28 fishery products were
discriminatory under Article 2.3 first sentence.81 Concerning additional test requirements, the Panel
concluded that Korea did not demonstrate that the point-of-sale testing and pre-market testing on

73
Ibid., para. 7.32.
74
Ibid., paras. 7.120 and 7.241.
75
Ibid., para. 7.116. In Australia – Salmon, the AB upheld a Panel’s reasoning in which to establish
inconsistency with Art. 5.6 SPS Agreement, the complainant must demonstrate that there is an alternative measure that
fulfils three requirements: i) is reasonably available taking into account technical and economic feasibility; ii) achieves
the Member’s appropriate level of sanitary or phytosanitary protection; and iii) is significantly less restrictive to trade
than the SPS measure contested. This test was applied in this dispute.
76
Ibid., para. 7.253.
77
Ibid., paras. 7.254-7.256.
78
Ibid., para. 7.256.
79
Ibid., para. 7.255.
80
Ibid., para. 7.341.
81
Ibid., para. 7.325.

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domestic products was equivalent to the additional testing applied to Japanese products.82
Therefore, the Panel established that Korea’s adoption of the 2013 pre-market additional testing
requirements and the maintenance of the 2011 and 2013 pre-market additional testing requirements
exclusively on Japanese products were discriminatory under Article 2.3 first sentence as well.83
The Panel came to these conclusions as a consequence of finding that similar conditions
prevailed in Japan and other Members regarding the adoption of the 2013 additional testing
requirements and the blanket import ban (except for the ban on Pacific cod from Fukushima and
Ibaraki), and that similar conditions existed also regarding the maintenance of all challenged
measures.84 Consequently, the Panel determined that the import bans and the additional testing
requirements arbitrarily or unjustifiably discriminated between Members because these measures
were “not rationally connected to the objective of protecting Korea’s population against the risk
arising from consumption of contaminated food products”.85 Due to its findings with regard to the
first sentence of Article 2.3, the Panel decided that the measures and their maintenance equally
constituted a disguised restriction on international trade, thus, they were also inconsistent with the
second sentence of Article 2.3.86 As a consequence, the Panel exercised judicial economy on
Japan’s alternative arguments for the inconsistency of the measures with the second sentence of
Article 2.3.87
Regarding Article 8 and Annex C to the SPS Agreement, the Panel explained that these
provisions apply to procedures that check and ensure the fulfillment of SPS measures.88 Korea
maintained that the 2011 and 2013 additional testing requirements did not fall within the scope of
Article 8 and Annex C. The Panel established that these measures did fall within the scope of these
provisions because procedures governed by Annex C are not limited to “control, inspection and
approval procedures”.89 The Panel on the other hand concluded that Japan had not demonstrated
that Korea’s adoption and maintenance of the 2011 and 2013 additional testing requirements did
not comply with Annex C(1), subparagraphs (a), (c), (e) and (g) to the SPS Agreement and, as a
consequence, with Article 8.90
As to the transparency obligations under Article 7 and Annex B to the SPS Agreement, the
Panel established that Korea failed to respect these provisions concerning the publication of the
challenged measures.91 Additionally, the Panel found that Korea did not comply with Annex B(3)
and Article 7 of the SPS Agreement because Korea’s SPS Enquiry Point did not properly answer
Japan’s questions.92
In conclusion, the Panel found that the challenged measures did not meet the conditions set
out in Articles 5.6, 2.3, 7 and Annex B(1) and B(3) to the SPS Agreement as explained above.
Hence, for the Panel, Korea deprived Japan of the rights granted by the SPS Agreement.93

82
Ibid., para. 7.332.
83
Ibid.
84
Appellate Body Report, cit. supra note 66, para. 5.89.
85
Panel Report, cit. supra note 67, para. 7.343.
86
Ibid., para. 7.359.
87
Ibid., para. 7.360.
88
Ibid., para. 7.365.
89
Ibid., para. 7.368.
90
Ibid., para. 7.447.
91
Ibid., para. 7.503.
92
Ibid., para. 7.520.
93
Ibid., para. 8.6.

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Consequently, the Panel asked Korea to put its measures in compliance with the SPS agreement
pursuant to Article 19.1 DSU.94

3.3. The Appellate Body Report

After the circulation of the Panel’s report, on 9 April 2018, Korea notified the DSB of its
intention to appeal.95 On 16 April 2018, Japan appealed as well.96 The AB examined the following
issues: Articles 2.3, 5.6, 5.7, 7, 8 and Annex B (1), (3) and C (1) (a) to the SPS Agreement, the
Panel’s treatment of evidence, and the Panel’s expert selection.

3.3.1. Article 5.6 of the SPS Agreement

Korea claimed that the Panel’s finding that it had not complied with Article 5.6 was incorrect
because the Panel did not accurately consider Korea’s ALOP.97 To establish whether the Panel’s
finding relating to this Article was correct or not, the AB examined Korea’s ALOP. Moreover, the
AB evaluated whether an alternative measure proposed by the complainant would achieve the
protection claimed by the respondent.98 In this case, the ALOP was taken into account to supervise
radioactivity levels that could affect food safety in Korea.99 The AB decided that the Panel erred
when it mentioned that Japan’s alternative measure would be consistent with Korea’s ALOP.100
This decision was based on the fact that although the Panel had acknowledged that Korea’s ALOP
was multi-faceted, it did not properly take into account the ALOP’s quantitative and qualitative
elements, which would have been instrumental for establishing whether a measure was achieving
Korea’s ALOP or not.101 Hence, the Panel’s finding concerning Article 5.6 was reversed.

3.3.2. Article 2.3 of the SPS Agreement

The AB reviewed the Panel’s interpretation of Article 2.3 SPS Agreement in connection with
three findings. The first one referred to the Panel’s finding that similar conditions prevailed in
Japan and in other Member States concerning the adoption of certain measures and the maintenance
of all challenged measures.102 The second finding of the Panel reviewed was that the import bans
and the additional testing requirements arbitrarily or unjustifiably discriminate between
Members.103 The third finding related to Korea’s measures that were applied in a manner which
would constitute a disguised restriction on international trade.104

94
Ibid., para. 8.7.
95
Appellate Body Report, cit. supra note 66, para. 1.6.
96
Ibid.
97
Ibid., para. 5.2.
98
Ibid., para. 5.38.
99
Ibid., para. 5.35.
100
Ibid., para. 5.38.
101
Ibid.
102
Ibid., para. 5.89.
103
Ibid., para. 5.51.
104
Ibid., para. 5.52.

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 The AB considered that the analysis carried out by the Panel was not complete because it did
not take into account territorial conditions that could influence the formulation of SPS measures
and as a consequence there were no similar conditions between Japan and other Members.105
Hence, the AB reversed the Panel’s findings regarding Article 2.3 and explained that it was thus
not necessary to address Korea’s additional claims of error.106

3.3.3. Article 5.7 of the SPS Agreement

The AB addressed four questions concerning the Panel’s findings relating to Article 5.7 SPS
Agreement. The first question was whether the Panel erred under Articles 6.2, 7, and 11 of the DSU
because it made decisions under Article 5.7 SPS Agreement.107 The second question was whether
the Panel made a mistake when interpreting and applying Article 5.7 because according to this
Article, the burden of proof fell upon Korea.108 The third question was whether the Panel’s
interpretation and application of Article 5.7 were wrong. Concerning Article 5.7, the Panel found
that Korea did not establish that: (i) the significant scientific evidence had been insufficient for the
product-specific import bans, the blanket import ban, and the 2013 additional testing requirements,
(ii) the blanket import ban and the 2013 additional testing requirements had been adopted based on
available pertinent information, and (iii) Korea had revised its measures within a reasonable
period.109 For the fourth question, the AB asked whether the Panel carried out an objective
assessment of the case under Article 11 of the DSU by engaging in “internally inconsistent
reasoning”.110
The AB gave its answer by explaining that Japan did not mention Article 5.7 when it asked
for the constitution of the Panel.111 However, Korea did cite Article 5.7 when it was refuting Japan’s
claims, but it was used to give a context to its arguments under Articles 2.3 and 5.6 of the SPS
Agreement.112 Hence, the first question was tackled by the AB by ascertaining that the Panel
exceeded its mandate when it applied Article 5.7 and therefore, this action was in breach of Articles
7.1 and 11 of the DSU.113 As a consequence the AB declared the Panel’s findings to be moot and
without legal effect.114 Additionally, the AB considered that the other questions under Article 5.7
should not have been taken into account due to its previous conclusion. As a consequence of having
reversed the Panel’s findings regarding Articles 2.3 and 5.6 of the SPS Agreement, the AB
considered that it was not necessary for it to examine both parties’ appeals in respect of the
treatment of the evidence by the Panel.

3.3.4. Selection of experts under Article 11 of the DSU

105
Ibid., para. 5.91.
106
Ibid.
107
Ibid., para. 5. 94.
108
Ibid.
109
Ibid., para. 5.103.
110
Ibid., para. 5.119.
111
Ibid., para. 5.118.
112
Ibid.
113
Ibid., para. 5.121.
114
Ibid.

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 Korea appealed the Panel’s decision to consult with experts in radionuclides in marine
environments. The AB evaluated whether the Panel acted contrary to Article 11 DSU, by selecting
two experts whom Korea had objected to on the basis that their previous statements or participation
in risk assessments related to the FDNPP (for instance, the 2013 United Nations Scientific
Committee on the Effects of Atomic Radiation (UNSCEAR) Report to the General Assembly)
could possibly affect their independence or impartiality.115 However, the Panel found that Korea’s
objections “were either unsubstantiated or did not demonstrate any reasonable concerns about
conflict of interest, bias, or partiality on the part of these experts”.116
Korea claimed that these experts were decisive for the Panel’s findings relating to consistency
of the Korean measures concerning Articles 2.3, 5.6, and 5.7 of the SPS Agreement. It is regrettable
that the AB has not expressed its views on this issue since the AB did not examine the merits of
this claim. This was considered to be unnecessary since the AB had already declared as wrong the
Panel’s findings under Articles 2.3 and 5.6 and without effect those under Article 5.7.117

3.3.5. Article 7 and Annex B(1) to the SPS Agreement

The AB agreed with the Panel’s finding on Annex B(1) to the SPS Agreement regarding the
meaning of “conditions”. This term was understood by the AB as a requirement for a new SPS
regulation.118 In spite of having agreed on the Panel’s finding, the AB modified the part where the
Panel concluded that Annex B (1) requires, in every case, that the publication of an SPS regulation
must contain “specific principles and methods” that would apply to goods.119 For the AB, this
interpretation depends on each measure, and certain circumstances must be taken into account, for
instance, the nature of the SPS regulation, the goods covered, and the nature of the implicated SPS
risks.120 Hence, only this part of the finding was modified.
The AB agreed with the Panel’s finding that the expression “all fishery products” in the
blanket import ban lacked the required clarity.121 Hence, Korea did not comply with Annex B(1)
and Article 7 SPS Agreement because it did not make public the complete objective of the ban.122
This assessment was also applied to press releases announcing the 2011 and 2013 additional testing
requirements because some information was missing, for instance, the levels of caesium and iodine
that would trigger the tests, radionuclides that would be tested and maximum levels of
radionuclides that would cause the rejection of the product.123
Concerning the accessibility of all the SPS measures, the AB stated that Korea did not
provide a satisfactory explanation as to how the press releases announcing the SPS measures and
the websites with information about them could be found and accessed.124 Therefore, the Panel’s
finding of Korea’s failure to make the measures available to the Members interested was upheld.

115
Ibid., para. 5.128.
116
Panel Report, cit. supra note 67, para. 1.27.
117
Appellate Body Report, cit. supra note 66, para. 5.130.
118
Ibid., para. 6.8.
119
Ibid.
120
Ibid.
121
Ibid., para. 6.9.
122
Ibid.
123
Ibid., para. 5.194.
124
Ibid., para. 5.195.

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 Korea had appealed the Panel’s finding regarding accessibility of the SPS measures arguing
that the Panel acted inconsistently with Article 11 of the DSU. Korea maintained that it was
incorrect for the Panel to ask Korea to bring evidence on an undisputed matter, especially given
that the Panel never asked Korea to supply archived version of the webpages.125 In this regard, the
AB found that the Panel failed to make an objective assessment of the matter “on account of the
Panel’s failure to engage with the pertinent evidence on the record and to seek information on the
publication dates of the press releases at issue that the Panel considered necessary for its
finding”.126 As a consequence, the AB declared that the Panel acted inconsistently with Article 11
DSU.

3.3.6. Article 7 and Annex B(3) to the SPS Agreement

Annex B(3) of the SPS Agreement provides that an SPS Enquiry Point must offer answers
to all reasonable questions asked by Members and it is responsible to provide relevant documents.
This Annex is connected with Article 7 because its purpose is to comply with transparency
obligations in the SPS Agreement. In this dispute, Japan claimed that Korea breached its
transparency obligations. On 24 June 2014, Japan made a request to the SPS Enquiry Point
regarding information and documents about technical and legal issues of the Korean measures.
Korea’s answer was “substantively inadequate and incomplete”.127 On 13 November 2014, Japan
made a second request about technical information and did not receive any reply.128 The Panel
stated that the formality of creating an SPS Enquiry Point was not sufficient to comply with Annex
B(3) and Article 7 because it did not provide information and documents requested by Japan.129
Korea appealed this finding and maintained that the Panel did not interpret correctly Annex B(3)
and Article 7.130
The Panel had stated that “while an incomplete answer would not necessarily lead to an
inconsistency with Annex B(3), a failure to respond would result in an inconsistency with this
provision”.131 By contrast, the AB maintained that an assessment under Annex B(3) demands an
analysis of all the significant aspects, including “the total number of questions received by the
enquiry point and the proportion of and the extent to which questions were answered, the nature
and scope of the information sought and received, and whether the enquiry point repeatedly failed
to respond.”132 Hence, the AB considered the first question asked by Japan to be answered, even
though it was incomplete. Concerning Japan’s second request in which it received no reply, the AB
considered it to be a failure of the SPS Enquiry Point.133 Subsequently, the AB stated that a single
failure was not a violation of Annex B(3).134 Therefore, for the AB, there had not been a violation
of these provisions because it was an Enquiry Point’s single failure. As a consequence, the Panel’s
findings under Article 7 and Annex B(3) to the SPS Agreement were reversed.

125
Ibid., para. 5.178.
126
Ibid., para. 5.187.
127
Panel Report, cit. supra note 67, para. 7.504.
128
Ibid.
129
Appellate Body Report, cit. supra note 66, para. 5.200.
130
Ibid., para. 5.203.
131
Ibid., para. 5.209.
132
Ibid., para. 5.211.
133
Ibid.
134
Ibid., para. 5.212.

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3.3.7. Article 8 and Annex C(1)(a) to the SPS Agreement

According to Japan, the Panel erred in its interpretation and application of Article 8 and
Annex C(1)(a) to the SPS Agreement because it did not presume “likeness” between Japanese
imported products and Korean domestic products with regard to the 2011 and 2013 additional
testing requirements.135
The Panel analyzed presumption of “likeness” by interpreting a concept developed by the
AB under the General Agreement on Trade and Services (GATS) in Argentina – Financial Services
because Korea – Radionuclides (Japan) was the first dispute in which presumption of “likeness”
was evaluated under the SPS Agreement.136 In Argentina – Financial Services, the AB established
that when a measure differentiates products only taking into account their origin, a complainant
does not necessarily have to identify “likeness” under traditional standards because it can be
presumed. In Korea – Radionuclides (Japan), the Panel stated that origin was not the only
requirement to presume “likeness” under the SPS Agreement. The Panel established that “[…] a
panel must not assume that, simply because origin is a criterion for distinguishing between
products, the measures satisfy the test to apply the presumption. Rather, a panel must address the
parties’ arguments with respect to whether the distinction is based on grounds in addition to
origin”.137 For the AB, the presumption of “likeness” under the SPS Agreement required a further
analysis because SPS measures are created to protect human, animal, or plant life or health from
certain risks and require a procedure to check and ensure their fulfillment. Thus, for the AB, the
Panel should have analyzed whether that procedure is capable of distinguishing between products
based exclusively on their origin and as a result presuming “likeness” under Annex C(1)(a).
However, the AB decided not to reach a conclusion with regard to the Panel’s interpretation
that likeness may be presumed under Annex C(1)(a). The AB justified its decision on the grounds
that the Panel found that the 2011 and 2013 additional testing requirements did not make a
distinction based exclusively on origin because these measures also considered the FDNPP
accident and certain health-related concerns.138 Therefore, the Panel, in any case, would not have
been in a position to presume that Japanese and Korean products were “like” with regard to the
procedures under consideration.139 As a consequence, the AB upheld the Panel’s finding regarding
Japan’s failure to establish that imported and domestic products can be presumed to be “like”.
Thus, the Panel’s finding that Japan has failed to establish that Korea acted inconsistently with
Annex C(1)(a) and Article 8 of the SPS Agreement was also upheld.

3.4. Concluding remarks

This dispute was particularly important for the WTO because it addressed certain issues for
the first time, namely, SPS measures introduced in order to cope with radioactive contamination of
food and presumption of likeness under the SPS Agreement. With regard to SPS measures, the AB

135
Ibid., paras. 5.222 and 5.227.
136
Ibid., para. 5.223.
137
Ibid.
138
Ibid., para. 5.235.
139
Ibid., para. 5.234.

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elucidated certain procedures that are essential to decide on the matter, for instance, how to evaluate
a Member’s ALOP to determine whether a less trade-restrictive alternative measure is possible.
Moreover the AB explained certain concepts such as a Member’s autonomy to regulate and the
extraterritorial effects of measures under the SPS Agreement.140 Concerning presumption of
likeness, the AB established that a further analysis should have been done by the Panel in order to
interpret a concept that is usually used under other agreements. However, the AB decided not to
do such an analysis because it was not necessary in view of the fact that the Panel, in any case,
would not have been in a position to presume that Japanese and Korean products were “like”.
Hence, presumption of likeness under the SPS Agreement is a concept that remains open.
On the other hand, scientific evidence plays a key role in the adoption of sanitary or
phytosanitary measures, such as the Korean restrictive actions. The SPS Agreement states that any
sanitary or phytosanitary measure must be based on scientific principles and it cannot be
maintained without sufficient scientific evidence. The SPS Agreement also provides that in events
where relevant scientific evidence is insufficient, the measures can be based on available pertinent
information. However, the SPS Agreement does not specify how to determine whether relevant
evidence is sufficient or not. By contrast, the SPS Agreement leaves wide discretion to Members
with regard to the analysis of scientific evidence. Such an uncertainty may damage Members that
may eventually lose a dispute. In light of the foregoing, the AB is ultimately in charge of reviewing
in appeal a panel’s analysis whether scientific evidence is sufficient or not. In this dispute, the AB
report relied on previous WTO jurisprudence, rather than reviewing scientific evidence as had been
analyzed by the Panel. The importance of this case lies in the fact that concepts developed in this
report could apply in future cases of food protection from radioactive contamination and other
sources.
In this dispute, the AB reversed the Panel’s findings with respect to Article 2.3, Article 5.6,
and Annex B(3) to the SPS Agreement. Conversely, the AB upheld the Panel’s findings under
Article 7, Article 8, Annex B(1) and Annex C(1)(a) to the SPS Agreement. However, the AB
modified a part of the finding under Annex C(1)(a). Regarding the Panel’s findings under Article
5.7 SPS Agreement, the AB declared them moot and of no legal effect. Furthermore, the AB stated
that the Panel acted inconsistently with Article 11 DSU. The conclusions reached by the AB
showed strong criticism towards the Panel’s decision making in this dispute with regard to the
Panel’s interpretation and application of the SPS Agreement, the Panel’s evaluation of scientific
evidence, and the Panel’s compliance with the DSU.
From a practical point of view, the AB Report was a great loss for Japan since Japanese
seafood exports to Korea declined considerably after the Korean restrictions.141 Moreover, Korea
is one of Japan’s major trade partners and its restrictive measures worsened Japan’s existing
challenges after the nuclear accident. Thus, the Japanese government stated that it was disappointed
that its requests were not accepted, and as a consequence Japan will continue to ask Korea to cancel
its measures through diplomatic intercourses.142 By contrast, Korea expressed its appreciation of
this WTO’s ruling.143

140
GAGLIANI, “The Extraterritorial and Post-Discrimination Dimension of the SPS Agreement Put to the Test
in Korea-Radionuclides (Japan) Case”, DCI, 2019, p. 647 ff., p. 670.
141
“South Korea WTO appeal succeeds in Japanese Fukushima food dispute”, Reuters, available at:
<https://www.reuters.com/article/us-japan-southkorea-wto/south-korea-wto-appeal-succeeds-in-japanese-fukushima-
food-dispute-idUSKCN1RN24X>.
142
Ibid.
143
Ibid.

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 It should be made clear that SPS measures are designed to protect human, animal or plant
life in spite of the negative consequences for a Member. In Korea – Radionuclides (Japan), for
example, Japan was severely affected by the Korean measures introduced to protect food from
radioactive contaminants. A Member that is the addressee of these measures will face adverse
effects because it must not only recover from a natural disaster but also face prejudice to its exports.
For those issues, the WTO developed the Natural Disasters and Trade Project in 2018, which is
aimed at evaluating the impact of natural disasters on trade and determining whether the
multilateral trading system can assist Members whose trade is affected by such events.144
This dispute was significant to illustrate aspects, such as the radioactive contamination of
food, which do not commonly hinder international trade. It is regrettable that the AB Report did
not make a decision on hot issues such as the level of scientific evidence and presumption of
likeness under the SPS. The COVID-19 pandemic of early 2020 and the measures taken by WTO
members in response which have hampered international trade, although not based on the SPS
Agreement, show the relevance of this first case on WTO constraints in respect of national health
protective measures affecting international trade.
DIANA CATALINA ROYERO ÁVILA*

4. APPELLATE BODY REPORT, United States – Countervailing Duty Measures on Certain

Products from China145

4.1. Introduction and main facts of the dispute

The AB report circulated on 16 July 2019 is the most recent report in a long dispute between
the US and China.146 The key issue throughout this case has been the countervailing duties imposed
by the US on a range of goods, as well as the underlying investigation leading to the issuance of
such measures.147
From 2007 to 2012, the United States Department of Commerce (USDOC) issued several
preliminary and final determinations in 17 countervailing duty investigations against Chinese
products.148 Since 2012, China has contested these measures alleging that they were inconsistent
with Article VI GATT 1994 and with several provisions of the SCM Agreement.
The case was first brought before the WTO DSB on 20 August 2012, when China presented
a complaint against the US claiming that its commerce authority, USDOC, acted in violation of
several SCM obligations while carrying out investigations and issuing its determinations.149 The

144
ADINOLFI, “International Economic Law (2018)”, Yearbook of International Disaster Law, 2019, p. 426 ff.,
p. 430.
*
Ph.D. candidate in International Law and Economics, Bocconi University, Milan.
145
Adopted on 15 August 2019, WT/DS437/AB/RW.
146
Ibid.
147
A brief summary of the key findings of this dispute is available at:
<https://www.wto.org/english/tratop_e/dispu_e/cases_e/1pagesum_e/ds437sum_e.pdf>.
148
Ibid. The measures concerned the following Chinese products: solar panels; wind towers; thermal paper;
coated paper; tow behind lawn groomers; kitchen shelving; steel sinks; citric acid; magnesia carbon bricks; pressure
pipe; line pipe; seamless pipe; steel cylinders; drill pipe; oil country tubular goods; wire strand; and aluminium
extrusion.
149
Request for Establishment of Panel by China, United States – Countervailing Duty Measures on Certain
Products From China, 21 August 2012, WT/DS437/2.

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Panel then issued a mixed ruling, rejecting part of China’s claims, but finding that the US acted
inconsistently with some of its obligations under the WTO.150 China appealed the decision and the
US cross-appealed the same. The AB reversed several of the Panel’s findings. Among the others,
it established that USDOC’s countervailing duty determinations were inconsistent with Articles
14(d) and 1.1(b) of the SCM Agreement given that the use of China’s in-country prices, as “benefit
benchmarks”, was improperly rejected.151
In 2015, the US informed the DSB that it intended to implement DBS’s recommendations
and rulings in a reasonable period of time,152 which an Arbitration Tribunal fixed for 1 April
2016.153 In particular, USDOC revised 12 of the countervailing determinations, keeping the related
duties in place.
Nevertheless, on 8 July 2016, China requested the establishment of a Compliance Panel
pursuant to Article 21.5 of the WTO DSU, in connection with the alleged failure of the US to
implement the recommendations and rulings of the DSB in issuing these further determinations.154
On 21 March 2018, the Compliance Panel report was circulated155 and then appealed by US
and cross-appealed by China. On 15 August 2019 the AB report and the Compliance Panel report,
as revised by the AB, were adopted by the DSB.156

4.2. The Panel Report

The Compliance Panel assessed the following revised USDOC measures: (i) determinations
made by the USDOC to comply with DSB’s recommendations and rulings in the original
proceeding; (ii) the “Public Bodies Memorandum”;157 (iii) the original USDOC determination in
the Solar Panels investigation; (iv) subsequent periodic and sunset reviews of the countervailing
duty orders identified in China’s panel request, and subsequent determinations; and (v) all relevant
US “instructions and notices” and related conducts.158
In the revised measures at issue, USDOC concluded that Chinese state-owned and state-
invested enterprises (SOEs/SIEs) provided inputs to Chinese exporters for less than adequate
remuneration. The conclusion was based on two main findings: (i) SOE/SIE were public bodies
under the SCM Agreement; (ii) the domestic market in China is characterized by a price distortion

150
Panel Report, United States – Countervailing Duty Measures on Certain Products from China, adopted on
16 January 2015, WT/DS437/R.
151
Appellate Body Report, United States – Countervailing Duty Measures on Certain Products from China,
adopted on 16 January 2015, WT/DS437/AB/R.
152
Communication from the US, United States – Countervailing Duty Measures on Certain Products from
China, 17 February 2015, WT/DS437/12.
153
Award of the Arbitrator, Arbitration under Art. 21.3(c) of the Understanding on Rules and Procedures
Governing the Settlement of Disputes, United States – Countervailing Duty Measures on Certain Products from China,
9 October 2015, WT/DS437/16.
154
Request for the Establishment of a Panel, Recourse to Art. 21.5 of the DSU by China, United States –
Countervailing Duty Measures on Certain Products from China, 14 July 2016, WT/DS437/21.
155
Final Panel Report, Recourse to Art. 21.5 of the DSU by China, United States – Countervailing Duty
Measures on Certain Products from China, adopted on 15 August 2019, WT/DS437/RW.
156
Cit. supra note 145.
157
The Public Bodies Memorandum is a US document describing the links between the Chinese government
and state-owned or state-invested enterprises in China.
158
Cit. supra note 155, section 2.1.

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that justifies the use of third-country prices as a benchmark for assessing the granted export
benefits.
China requested the Panel to find if the measures at issue were in violation of the SCM
Agreement Articles 1.1(a)1, 1.1(b), 2.1(c), 2.2, 11.3, 12.7, 14(d), 19.1, 10.3, 19.4, 21.3 and 32.1;
and Article VI:3 GATT.159 Despite the fact that China failed to demonstrate part of its claims, the
Compliance Panel found that some USDOC measures were inconsistent with the SCM
Agreement.160
The following paragraphs will thus address some of the most relevant findings and
conclusions of this Compliance Panel report.

4.2.1. Article 1.1(a)(1) of the SCM Agreement161

One of the main China’s claims was that USDOC “applied an improper legal standard in its
public body determinations”.162 In addition, China presented also an “as such” claim against the
“Public Bodies Memorandum” upon which USDOC relied on for issuing its public body
determinations.163
The main focus of the Compliance Panel’s inquiry under Article 1.1(a)(1) SCM Agreement
has been assessing if the entity carrying out the alleged conduct can be defined as a “public body”.
The analysis must be made by investigating the entity’s core characteristics and its relationship
with the government in light of the legal and economic framework of the relevant Member.164
The Compliance Panel then argued that the conduct of an entity could be the evidence of its
core characteristics, but that it is not strictly necessary to focus on the connection between the
former and the specific “government function”. The Panel thus rejected China’s interpretation of
Article 1.1(a)(1) SCM Agreement. In fact, the Article at stake does not require that an investigating
authority, such as USDOC, inquiries into whether an entity is exercising a government function
when engaging in one of the specific conducts listed in SCM Agreement (Article 1.1(a)(1)
subparagraphs (i)-(iii) and the first clause of subparagraph (iv)).165 Therefore, the Panel concluded
that USDOC’s public body determinations were consistent with the SCM Agreement as they were
based on a proper legal standard.166
Furthermore, the Compliance Panel found that the Public Bodies Memorandum is “as such”
a measure following within the scope of its jurisdiction under Article 21.5 DSU but not “as such”
inconsistent with SCM Agreement obligations. Indeed, the Compliance Panel stated that the Public
Bodies Memorandum did not restrict in a “material way” the USDOC’s discretion to act
consistently with Article 1.1(a)(1).167

159
Ibid., section 3.1.
160
Ibid., section 8.
161
Art. 1.1(a)1 SCM Agreement states: “there is a financial contribution by a government or any public body
within a territory of a Member […]”, and then list a number of specific conducts.
162
Cit. supra note 155, para 7.6.
163
Ibid.
164
Ibid, para. 7.22 ff.
165
Ibid.
166
Ibid., paras. 7.36 and 7.136.
167
Ibid., para. 7.142.

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4.2.2. Article 8 and Annex C(1)(a) to the SPS Agreement168

Another central claim of China concerned the alleged fact that USDOC improperly rejected
China’s prices as a benchmark “by relying on an incorrect legal standard under Article 14(d), and
on the erroneous conclusion that Chinese prices for the inputs at issue are not ‘market-
determined’”.169
In order to analyze this claim, it is necessary to determine what Article 14(d) means with a
remuneration “less than adequate” and which is the relevant term of comparison. In this regard, the
Compliance Panel examined whether, according to the Article at issue, in-country prices were to
be used as the exclusive benchmark in all situations.170
The Compliance Panel concluded that Articles 1.1(b) and 14(d) of the SCM Agreement do
not limit an investigating authority’s recourse to out-of-country price benchmarks. However, in-
country prices may be disregarded only in very limited circumstances.171
The Compliance Panel also found that various forms of government intervention could lead
to price distortion and that there is no one single type of quantitative or price comparison analysis
in all cases.172 Nevertheless, in four of the USDOC investigations at issue, the Compliance Panel
concluded that the USDOC did not provide enough evidence of the fact that the price of inputs in
China was distorted.173

4.2.3. Article 2.1(c) of the SCM Agreement174

A further interesting claim made by China is grounded on the alleged USDOC failure to “to
take account of the length of time during which the subsidy programme has been in operation”
under Article 2.1(c) SCM Agreement.

168
Art. 1.1(b) SCM Agreement states: “a subsidy shall be deemed to exist if: a benefit is thereby conferred”;
while Art. 14(d) SCM Agreement states: “[t]he provision of goods or services or purchase of goods by a government
shall not be considered as conferring a benefit unless the provision is made for less than adequate remuneration, or the
purchase is made for more than adequate remuneration. The adequacy of remuneration shall be determined in relation
to prevailing market conditions for the good or service in question in the country of provision or purchase (including
price, quality, availability, marketability, transportation and other conditions of purchase or sale)”.
169
The Panel found that, even if limited, the circumstances in which in-country prices might be disregarded “go
beyond the sole circumstance in which prices are determined, de jure or de facto, by the government”, see Final Panel
Report, cit. supra note 155, para 7.143.
170
E.g. see also Appellate Body Report, United States – Countervailing Measures on Certain Hot-Rolled
Carbon Steel Flat Products from India, adopted on 19 December 2014, WT/DS436/AB/R, section 4.4.
171
Final Panel Report, cit. supra note 155, para. 7.164.
172
Ibid., para. 7.176.
173
Ibid., paras. 7.206 and 7.223-224.
174
Art. 2.1(c) SCM Agreement states: “[I]n order to determine whether a subsidy, as defined in paragraph 1 of
Article 1, is specific to an enterprise or industry or group of enterprises or industries (referred to in this Agreement as
‘certain enterprises’) within the jurisdiction of the granting authority, the following principles shall apply: […] (c) if,
notwithstanding any appearance of non-specificity resulting from the application of the principles laid down in
subparagraphs (a) and (b), there are reasons to believe that the subsidy may be specific, other factors may be considered.
Such factors are the use of a subsidy program by a limited number of certain enterprises, predominant use by certain
enterprises, and how to grant a subsidy. In applying this subparagraph, account shall be taken of the extent of
diversification of economic activities within the jurisdiction of the granting authority, as well as of the length of time
during which the subsidy program has been in operation”.

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 The Compliance Panel found that China has demonstrated that the US acted inconsistently
with Article 2.1(c). Furthermore, it noted that to determine whether a subsidy is de facto granted
to certain enterprises under a “plan or scheme”, information that merely indicates “repeated
transactions” does not necessarily demonstrate systematic activity regarding the existence of an
unwritten subsidy program.175

4.3. The Appellate Body Report

With reference to the issues addressed above, both the US and China appealed the
Compliance Panel report, challenging its reasoning and legal interpretation, but the AB in
substance upheld all findings by the Panel and its interpretation of the provisions at issue.
However, interestingly, one of the members of the AB Division disagreed with the majority
on most points, appending to the report a single separate, in part concurring, in part dissenting,
lengthy opinion, as discussed below.176

4.3.1. Article 1.1(a)(1) of the SCM Agreement

The AB upheld the finding of the Compliance Panel with regards to Article 1.1(a)(1) SCM
Agreement, thus: (i) that Article 1.1(a)(1) does not prescribe a connection of a particular degree or
nature between an identified government function and the particular financial contribution
(conduct) at issue; (ii) USDOC’s public body determinations were not based on an improper legal
standard.177
The AB found that the absence of an express delegation of governmental authority does not
necessarily preclude concluding that an entity is a “public body” under Article 1.1(a)(1) SCM
Agreement.178 A public body determination must be conducted on a case-by-case basis. In this
regard, a holistic approach is necessary which takes into due account: (i) evidence that an entity is
exercising governmental functions, especially if it is a sustained and systematic practice; (ii)
evidence of the scope and content of the relevant government policies; (iii) evidence of the
meaningful control over an entity by the government; and (iv) whether the conduct or functions of
an entity are ordinarily classified as governmental in the legal order of the relevant Member.
Therefore, according to this test, “a public body is an entity that possesses, exercises or is vested
with governmental authority”.179
On the issue at stake the AB report contains a separate concurring opinion of one member of
the Division. This member found that “the majority has repeated an unclear and inaccurate
statement of the criteria for determining whether an entity is a public body” and “disagree[d] with

175
See Final Panel Report, cit. supra note 155, para. 7.288.
176
The individual opinion comprises 13 single-space pages with 89 footnotes (para. 5.242 ff.). The members of
the division were T. Graham, U.S. Bathia and S.B.C. Servansing.
177
Ibid., para. 5.105.
178
See also: Appellate Body Report, United States – Definitive Anti-Dumping and Countervailing Duties on
Certain Products from China, adopted on 25 March 2011, WT/DS379/AB/R, para. 317, where the AB rejected the
view of “public body” as an entity controlled by a government and instead focused on whether the latter possesses,
exercises or is vested with government authority.
179
Ibid., paras. 5.95-96.

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the majority’s implication that a clearer articulation of the criteria is neither warranted nor
necessary”.180
According to this member, the criteria that should be applied to the assessment are the
following:

Whether an entity is a public body must be determined on a case-by-case basis with

due regard being had for the characteristics of the relevant entity, its relationship with
the government, and the legal and economic environment prevailing in the country in
which the entity operates. […] [Instead t]here is no requirement for an investigating
authority to determine in each case whether the investigated entity ‘possesses, exercises
or is vested with governmental authority’.181

4.3.2. Articles 1.1(b) and 14(d) of the SCM Agreement

The Appellate Body upheld the finding of the Compliance Panel under Articles 1.1(b) and
14(d) of the SCM Agreement, with reference to the question of whether in-country prices are
distorted as a consequence of government intervention.182
The AB firstly concluded that an investigating authority might reject in-country prices only
on the grounds of a price distortion resulting from government intervention in the market, not just
because of the presence of government intervention itself.183 Then, regarding the specific issue on
how to find an in-country price distortion, the AB’s deemed it necessary to follow the same line of
reasoning already supported in prior cases.184
Indeed, rejecting the challenges of the US,185 the AB held that under Article 14(d) SCM
Agreement there may be different ways to demonstrate that prices are distorted, including a

180
Ibid., para. 5.243.
181
Ibid., para. 5.248 and section 6.3.
182
Ibid., para. 5.147.
183
Ibid.
184
Ibid., para. 5.152 ff. In particular, reference is made to the following cases: US – Anti-Dumping and
Countervailing Duties (China), cit. supra note 178; US – Carbon Steel (India), cit. supra note 170; Appellate Body
Report, Recourse by Canada to Art. 21.5 of the DSU, United States – Final Countervailing Duty Determination with
Respect to Certain Softwood Lumber from Canada, adopted on 20 December 2005, WT/DS257/AB/RW; and Appellate
Body Report, United States – Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New
Zealand and Australia, adopted on 16 May 2001, WT/DS177/AB/R. According to these precedents, findings on price
distortion need to be reached on a case-by-case basis, without predetermined strict requirements (e.g. to evidence that
government prices are artificially low). The rationale is not to rely on in-country prices when they are not market
determined. In this regard, it is necessary to analyze the market to determine whether particular in-country prices can
be relied upon. Indeed, “the proposed in-country prices will not be reflective of the prevailing market conditions [and
thus they should be rejected] when they deviate from a market-determined prices as a result governmental intervention”
(US – Carbon Steel (India), para. 4.155).
185
Ibid., paras 5.152-153: “[…] [the US] argues that the Panel examined the USDOC’s determinations by
looking only for a single kind of price analysis, specifically, one that would demonstrate the ‘deviat[ion]’ between ‘in-
country prices’ and ‘a market-determined price’ (reference is made to US – Carbon Steel (India), para 4.155) […] [i]n
relying on the notion of ‘deviation from a market determined price’ as the legal standard for recourse to out-of-country
prices, the Panel erroneously considered that ‘distortion of internal prices, justifying resort to out-of-country
benchmarks, is only evident in the difference between the price of the good being assessed and a market-determined
price in the same country’”; according to the US “such that an explanation of why in-country prices are distorted
requires, in each case, a showing of the extent of deviation, or the quantification of the difference, between two different
price points. The United States points out that, under this approach, ‘[w]here no in-country prices are market

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quantitative assessment, price comparison methodology, a counterfactual, or qualitative analysis.
Specifically, in order to determine whether in-country prices are distorted, it is necessary to assess
the relevant facts on a case-by-case basis. In this regard, an investigating authority should take into
account the characteristics of the market being examined, as well as its nature, other than the
quantity and quality of the information in its possession.186 In other terms:

[i]nvestigating authorities have discretion to choose the specific method or type of

analysis for purposes of determining the existence of price distortion. However, while
there may be different ways to make this demonstration, and while impact of
government intervention on prices need not necessarily be direct, whatever method is
chosen, and whatever the evidence relied upon, investigating authorities must establish,
by providing an adequate explanation based on evidence, how price distortion actually
results from government intervention in the market.187

On the issue at stake, the AB report contains a separate dissenting opinion.188

The dissenting member concurs with the majority in finding that Article 14(d) does not
require a domestic authority to rely on in-country prices in all circumstances. However, according
to the opinion, by finding that the USDOC did not provide an “explanation of how government
intervention actually results in price distortion”,189 the majority is effectively interpreting Article
14(d) as “imposing an obligation on investigating authorities to always justify recourse to out-of-
country prices through a quantitative analysis of in-country prices, regardless of whether those
prices have already been found to be distorted, including in cases where they have not even been
placed on the record”.190 According to the dissenter there is no basis in Article 14(d) for this
approach and it is unclear what the majority considered the USDOC was required to do in order to
establish that government intervention entailed a price distortion.191

4.3.3. Article 2.1(c) of the SCM Agreement

The AB upheld the finding of the Compliance Panel under Article 2.1.(c) SCM Agreement.192
The AB concluded that it is correct to say that, whereas an investigating authority makes a finding
of de facto specificity under Article 2.1(c) – based on an analysis of whether there has been “use
of a subsidy programme by a limited number of certain enterprises”193 – it is necessary to consider

determined, price distortion cannot be demonstrated’. Thus, in the United States’ view, the requirements articulated
by the Panel ‘would effectively preclude an investigating authority from relying on other types of evidence of
government interventions in the market unless it could identify the effect of such interventions’”.
186
Ibid., section 5.3.3.1.
187
Ibid., paras. 5.157-158: the AB argues that the findings in US – Carbon Steel (India), cit. supra note 170,
para. 4.155, should not be intended as a “mere example of a situation when prices might not be market-determined, as
the [US] seems to suggest”. On the contrary, they reflect the understanding that different methods may be chosen for
demonstrating government intervention.
188
Ibid., section 5.5.2.
189
Ibid., para. 5.250.
190
Ibid.
191
Ibid., para. 5.259.
192
Ibid., para. 5.241.
193
Ibid., para. 5.228.

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the length of time during which the subsidy program has been in operation and, previously, to
properly identify the relevant subsidy program.
Also on this issue the AB report contains a separate dissenting opinion by the same Division
member.
That member argued that “the majority fundamentally misunderstood the role of Article 2.1
within the SCM Agreement, giv[ing] the term ‘subsidy programme’ a [strict] meaning that is not
supported by the text and that is unreasonable, and ignored reasoning and analysis by the USDOC
that was part of the case and should have been considered”.194 The majority’s decision “is wrong
in several important respects”195 and, “if followed in the future, would enable circumvention of the
disciplines of the SCM Agreement and even discourage the transparent management of
subsidies”.196

4.4. Concluding remarks

It is not a surprise that the relevant findings have led to a strong dissent by one Division
member.197
The report at issue is of a systematic relevance also in light of the unusual separate opinion
contained therein,198 above all if this circumstance is viewed within the context of the present crisis
of the WTO settlement system. In this regard, it is worth noting how the separate opinion clearly
support the US position on the various issues.
Moreover the separate opinion, in a more general sense, backs the criticism of the US against
an alleged de facto precedent doctrine in WTO law.199 This is clear from the final paragraph (5.281)
of the separate opinion: “I respectfully submit that it would be beneficial for the dispute settlement
system if future litigants, and panels in adherence to their mandate under Article 11 DSU, would
continue to take into account separate opinions such as this along with past Appellate Body
Reports, without regarding either as necessarily determinative”.
The official reactions of the US and China to the report were in sharp contrast. The USTR
released a statement against the decision. It pointed out that “the WTO appellate report undermines
WTO rules, making them less effective to counteract Chinese SOE subsidies […]”. Also on this

194
Ibid., para. 5.270. In particular, among others, the AB’s Member refers to the “systematic governmental
activity” notion.
195
Ibid., para. 5.280.
196
Ibid., para. 5.270.
197
QIN, “Benchmarking under SCM 14(d): How should China’s in-country competition be treated?”,
International Economic Law and Policy Blog, 21 July 2019, available at:
<https://ielp.worldtradelaw.net/2019/07/benchmarking-under-scm-14d-how-should-chinas-in-country-competition-
be-treated-.html>.
198
LESTER, “Separate Opinion in Today’s Appellate Body Report”, International Economic Law and Policy
Blog, 16 July 2019, available at: <https://ielp.worldtradelaw.net/2019/07/separate-opinion-in-todays-appellate-body-
report.html>; and LEWIS, “Dissents”, 20 March 2018, available at:
<https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3141411>.
199
LESTER and BACCHUS, “Of Precedent and Persuasion: The Crucial Role of an Appeal Court in WTO
Disputes”, CATO Institute, 12 September 2019, available at: <https://www.cato.org/publications/free-trade-
bulletin/precedent-persuasion-crucial-role-appeals-court-wto-disputes>; and United States, “Statement by the United
States at the Meeting of WTO Dispute Settlement Body”, 18 December 2018, available at:
<https://geneva.usmission.gov/wp-content/uploads/sites/290/Dec18.DSB_.Stmt_.as-deliv.fin_.public.pdf>.
Regarding the critics to an alleged “WTO precedent doctrine”, see the sources cit. supra note 198 and Appellate Body
Report, cit. supra note 145, para. 5.244.

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occasion, the US expressed its criticism of the functioning of the AB and restated its determination
to “take all necessary steps to ensure the end of Chinese commercial alleged misconducts”.200
China’s Ministry of Commerce, in its turn, released a communication in which it stressed how the
US has abusively tried to impose countervailing duty measures on Chinese products, severely
hampering the normal export of Chinese goods to the US and, thus, urging the latter “to take
concrete measures to fix wrong practices in countervailing duty investigations and create a fair and
stable global trade environment […]”.201
Despite the conclusion of this compliance proceeding, the legal battle is far from being over
(as well as the trade war among the two parties). Indeed, on the grounds of the alleged US failure
to comply with the previous DSB’s recommendations, China has already requested the
authorization to apply the remedies granted under Article 22 DSU.202
ROBERTO ISIBOR*

5. APPELLATE BODY REPORT, UKRAINE — ANTI-DUMPING MEASURES ON AMMONIUM NITRATE203

5.1. Introduction and main facts of the dispute

In recent years, the trade war between Ukraine and Russia has resulted in a spike of disputes
before the WTO. Ukraine lodged the first complaint in October 2015 to challenge a set of Russian
measures affecting importation of Ukrainian equipment (DS499).204 Since then, both countries
continued to clash before WTO panels, challenging a variety of measures affecting traffic in transit
through borders (DS512),205 importation and transit of certain Ukrainian products (DS532),206 and
measures that imposed bans on certain Russian products (DS525).207
The dispute on ammonium nitrate dates back to November 2015. Just one month after
Ukraine’s first complaint, Russia also took action challenging certain measures taken by Ukraine
to impose anti-dumping duties on imports from Russia of ammonium nitrate, a substance used in
fertilizers. In 2008, the Intergovernmental Commission on International Trade (ICIT), Ukraine’s
local authority in charge of anti-dumping investigations, imposed a 10.78% duty on the
importations of such substance from Russian producers and exporters (the 2008 Decision). JSC
MCC EuroChem (EuroChem), one of the impacted Russian producers, successfully challenged the
2008 Decision before a Ukrainian national court. Following the court’s ruling, in 2010 ICIT

200
Office of the US Trade Representative, “Statement on WTO Appellate Report on China Countervailing
Duties”, 16 July 2019, available at: <https://ustr.gov/about-us/policy-offices/press-office/press-
releases/2019/july/statement-wto-appellate-report-china>.
201
“MOFCOM spokesman makes remarks on the WTO Appellate Body Report on US Countervailing Measure
(China)”, 17 July 2019, available at:
<http://english.mofcom.gov.cn/article/newsrelease/policyreleasing/201907/20190702885932.shtml>.
202
The matter is now referred to arbitration. See Recourse to Art. 22.2 of the DSU by China, United States –
Countervailing Duty Measures on Certain Products from China, 18 October 2019, WT/D437/30; and Recourse to Art.
22.6 of the DSU by United States, United States – Countervailing Duty Measures on Certain Products from China, 28
October 2019, WT/D437/31.
*
Ph.D. candidate in International Law and Economics, Bocconi University, Milan.
203
Adopted on 30 September 2019, WT/DS493/AB/R/12.
204
DS499: Russia – Measures affecting the importation of railway equipment and parts thereof.
205
DS512: Russia – Measures Concerning Traffic in Transit.
206
DS532: Russia – Measures Concerning the Importation and Transit of Certain Ukrainian Products.
207
DS525: Ukraine – Measures relating to Trade in Goods and Services.

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amended its 2008 Decision by imposing a duty of 0% on the concerned product (the 2010
Decision). However, pursuant to an interim and expiry review conducted by the Ukraine Ministry
of Economic Development and Trade (MEDT), which reiterated the cry to impose anti-dumping
duties on imports of ammonium nitrate from Russia, in 2014 ICIT issued an extension decision to
impose a 36.03% duty on all imports of the substance from Russian producers, including
EuroChem (the 2014 Decision).
Based on Ukrainian persistent conduct and upon failure of consultations between the two
countries, on 29 February 2016 Russia requested the establishment of a panel before the WTO.

5.2. The Panel Report

The Panel was established on 22 April 2016. Russia’s claims focused mainly on: (i)
Ukrainian authorities’ determinations relating to dumping and likelihood-of-dumping; (ii) certain
injury-related aspects of such determinations; and (iii) the wrongful treatment of EuroChem in the
original investigation phase and in the review phase. Further, Russia raised a number of minor
claims concerning the scope of the Panel’s terms of reference and the conduction of investigations.
The Panel Report208 was circulated to the parties on 20 July 2018 and adopted on 30 September
2019.

5.2.1. Claims on dumping and likelihood-of-dumping determinations

The claim on dumping and likelihood-of-dumping determinations revolved around violations

of Articles 2.2.1.1, 2.2.1 and 2.2. of the Anti-Dumping Agreement.
These provisions concern the “determination of dumping” as set out in Article 2 of the Anti-
Dumping Agreement, which depends on the pricing behavior of exporters or producers.
Specifically, Article 2.2.1.1 provides that costs shall “normally” be calculated on the basis of
records kept by the exporter or producer, provided that two conditions are met: (i) that such records
are in accordance with the generally accepted accounting principles of the exporting country and
(ii) that they reasonably reflect the costs associated with the production and sale of the product
under consideration. If these conditions are not met, authorities may adjust the price in order to
bring it to normal market value. Article 2.2 identifies circumstances in which an investigating
authority does not have to determine normal value on the basis of domestic sales and may instead
construct normal value on the basis of “the cost of production in the country of origin plus a
reasonable amount for administrative, selling and general costs and for profits”. The investigating
authority must in fact ensure that the information collected is used to calculate the cost of
production in the country of origin and is required to adequately adapt the information it collects
to reach that value. Finally, Article 2.2.1 describes a methodology for determining whether below-
cost sales in the domestic market may be treated as outside the ordinary course of trade and thereby
disregarded from the calculation of normal value.
In the determination of dumping margins, Russia argued that Ukrainian authorities
discretionally rejected the prices – recorded in the company records – paid by the investigated
Russian producers for gas used to produce ammonium nitrate, and replaced it with a surrogate gas

208
Panel Report, Ukraine – Anti-Dumping Measures on Ammonium Nitrate, circulated on 20 July 2018 and
adopted on 30 September 2019 as amended by the Appellate Body Report, WT/DS493/R.

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price.209 Relying on the second condition established by Article 2.2.1.1, Ukraine replied that its
authorities were justified in rejecting the producers’ gas prices contained in their records because
in Russia the prices were distorted due to state regulation of the gas sector.210 Russia further claimed
that the new surrogate prices did not actually reflect the real cost of gas in Russia. The calculation
made by Ukrainian authorities was based on the export prices of gas from Russia to the German
border (considered to be a reliable parameter since Germany is the biggest consumer of Russian
natural gas), but according to Russia such prices were not properly adjusted to reflect the country-
of-origin (i.e. Russia) actual prices, as required by Article 2.2.211 On the contrary, Ukraine argued
that its authorities adequately adjusted the export prices of Russia to Germany, according to the
necessary transportation expenses.212
The Panel did not support Ukraine’s arguments. It considered that the lowering of prices
resulting from government regulation is not the purpose of the inquiry under Article 2.2.1.1, whose
focus is on the reliability of “records” of national market prices, regardless of market-distortion
effects due to government action. Moreover, it did not find any evidence that gas sold below cost
affected the reliability of the Russian producers’ records. Hence, it concluded that Ukrainian
authorities acted inconsistently with Article 2.2.1.1, in the absence of a solid justification for price
replacement.213 With regard to the surrogate price, the Panel also found that Ukraine violated
Article 2.2 because it found no explanations in the investigation reports as to why adjustments for
transportation expenses were adequate to adapt the German gas prices to the actual costs in
Russia.214 Consequentially, the DSB Panel also upheld Russia’ claim that Ukraine acted in
violation of Article 2.2.1 because the ordinary-course-of-trade test performed by Ukrainian
authorities was distorted as it was based on the replaced surrogate price of gas and not, as it should
have been according to Article 2.2.1.1, on the reported gas cost of the investigated Russian
producers.215
Based on the foregoing, with reference to determinations of likelihood-of-dumping, the Panel
found that Ukrainian authorities acted inconsistently with Articles 11.2 and 11.3 of the Anti-
Dumping Agreement in relying on dumping margins calculated inconsistently with Articles 2.2,
2.2.1 and 2.2.1.1.216

5.2.2. Treatment of Eurochem and injury-related claims

Russia claimed that the Ukrainian authorities acted inconsistently with Article 5.8 of the
Anti-Dumping Agreement in respect of their treatment of EuroChem in the original investigation
phase as well as in the underlying reviews. In particular, Russia maintained that Ukrainian
authorities failed to exclude EuroChem from the scope of the original anti-dumping measures (the
2008 Decision) and imposed a 0% anti-dumping duty instead of excluding the producer from the
2010 determination, although it was found to have a de minimis dumping margin in the original

209
Ibid., para. 7.82.
210
Ibid., paras. 7.78 and 7.83.
211
Ibid., para. 7.93.
212
Ibid., para. 7.99.
213
Ibid., paras. 7.91-7.92.
214
Ibid., para. 7.103.
215
Ibid., para. 7.118.
216
Ibid., paras. 7.131-7.133.

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investigation phase.217 Article 5.8, in fact, provides that an investigation shall be terminated in
cases where authorities determine that the margin of dumping is de minimis, hence that no
determination should even follow in that instance. Further, Russia also contested the inclusion of
the producer in the scope of the underlying 2014 Decision. On its part, Ukraine argued that no
legally valid de minimis dumping margin was determined for EuroChem in the original
investigation phase and that Article 5.8 does not apply to the review phase (in which margin
calculated for EuroChem in the underlying reviews was in any case not de minimis).
Notwithstanding, the DSB Panel concluded that, based on factual matter, the producer had to be
considered having a de minimis dumping margin also in the investigation phase, as claimed by
Russia.218
On the other hand, the Panel rejected Russia’s allegations on the injury-related claim,
according to which Ukrainian authorities acted inconsistently with Articles 11.1, 11.2 and 11.3 of
the Anti-Dumping Agreement because they relied on injuries that were not compliant to the criteria
set by Article 3 of the Anti-Dumping Agreement. The Panel noted that Ukrainian authorities did
not make an injury determination under Article 3, and that, in any case, Article 11 did not require
to make any of such determinations.219

5.2.3. Procedural claims under the DSU and the Anti-Dumping Agreement

A number of procedural claims were also raised before the Panel. Under Article 6.2 DSU,
Ukraine questioned the scope of Russia’s panel request, claiming that the wording of the request
limited Russian challenge solely to the 2014 expiry and interim review measure, excluding the
2008 Decision and the 2010 Decision (which were only mentioned in a footnote of the Russian
request). The Panel rejected this argument and concluded that a panel request must be read as a
whole, footnotes included.220
Further, Russia raised additional claims under some provisions of the Anti-Dumping
Agreement on the way in which Ukrainian authorities conducted their investigations. The Panel
upheld only Russia’s claim under Article 6.9,221 dismissing all other requests and exercising
judicial economy on a number of others claims.

5.3. The Appellate Body Report

On 23 August 2018, Ukraine notified the DSB of its decision to appeal to the Appellate Body
certain issues of law and legal interpretations of the Report of the Panel.

217
Ibid., para. 7.135.
218
Ibid., paras. 7.152 and 7.157.
219
Ibid., para. 7.163.
220
Along the same line, see Appellate Body Report, US – Countervailing and Anti-Dumping Measures (China),
adopted on 22 July 2014, WT/DS449/AB/R, para. 4.39; see also Panel Report, Indonesia – Import Licensing Regimes,
preliminary ruling of the panel, adopted on 22 November 2017, WT/DS477/R; WT/DS478/R, para. 3.15.
221
Specifically, Russia claimed that Ukrainian authorities failed to disclose essential facts and give sufficient
time to the interested parties to review and respond in order to defend their interests, contrary to Article 6.9 of the Anti-
Dumping Agreement: see Panel Report, cit. supra note 208, paras. 7.228, 7.249 and 7.255.

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5.3.1. Procedural claims: Articles 6.2, 7.1, and 11 of the DSU

5.3.1.1. Identification of challenged measures and Panel’s terms of reference

First, taking up a claim rejected in the first instance, Ukraine sustained that the Panel erred
under Article 6.2 DSU in including in the scope of its analysis the 2008 Decision and the 2010
Decision. It stressed once again that the way in which Russia’s panel request was formulated could
not be interpreted as including those Ukrainian measures, which were mentioned only incidentally,
without a sufficiently detailed explanation.222 The Appellate Body, on the contrary, agreed with
the Panel’s conclusions that Russia’s panel request identified those decisions as specific measures
at issue, in a way that sufficiently linked those measures to Russia’s claim under Article 5.8 Anti-
Dumping Agreement. Thus, according to the Appellate Body, the 2008 Decision and the 2010
Decision correctly fell within the Panel’s terms of reference.223 On this basis, the Appellate Body
rejected Ukraine’s consequential claim that the Panel erred under Articles 7.1 and 11 of the DSU
by ruling on Russia’s claim under Article 5.8 Anti-Dumping Agreement, as it related to the 2008
Decision and the 2010 Decision.224

5.3.1.2. Objective assessment of EuroChem treatment

Ukraine further claimed the Panel violated Article 11 DSU by not carrying out its analysis
under Article 5.8 Anti-Dumping Agreement in an objective manner. Specifically, leveraging on an
argument rejected in first instance, Ukraine sustained that the Panel did not take into consideration
the fact that neither Ukrainian courts nor investigating authorities calculated a dumping margin for
Eurochem, hence no decision explicitly stated that the dumping margin was below de minimis.225
The Appellate Body examined the Panel’s reasoning and concluded that the Panel provided
a reasoned and coherent explanation in reaching the conclusion that the combined effect of the
Ukrainian court judgments and the 2010 Decision was that the dumping margin for EuroChem in
the original investigation phase was de minimis. In fact, the Panel correctly considered that by
virtue of the Ukrainian court judgment (that annulled the imposition of dumping duties on
Eurochem) and the 2010 Decision (that imposed a 0% duty on Eurochem), there was at that point
no basis under Ukrainian law for a dumping margin or an anti-dumping duty with respect to
EuroChem. As a consequence, these decisions had to be interpreted as a de minimis dumping
determination under WTO law, that triggered Ukraine’s obligation under Article 5.8 to exclude
EuroChem from the scope of the anti-dumping investigation. Therefore, the AB found no violation
of Article 11 DSU and upheld the Panel’s findings that Ukraine acted inconsistently with Article
5.8 Anti-Dumping Agreement in relation to the 2008 Decision, the 2010 Decision and the 2014
Decision.226

5.3.1.3. Articles 2.2.1.1, 2.2.1 and 2.2 of the Anti-Dumping Agreement

222
Appellate Body Report, cit. supra note 203, para. 6.1.
223
Ibid., paras. 6.36 and 6.37.
224
Ibid., para. 6.39.
225
Ibid., para. 6.40.
226
Ibid., paras. 6.57-6.58.

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5.3.1.3.1. Reliability of records

First, Ukraine claimed that the Panel did not correctly interpret and apply the second
condition set forth in the first sentence of Article 2.2.1.1 Anti-Dumping Agreement when it found
that MEDT did not provide an adequate basis for rejecting the gas price reported in the company
records. According to Ukraine, the relevant inquiry under the second condition concerned “the
reliability and accuracy of the costs recorded in the records of the producers/exporters”.227 Yet, the
Panel did not adequately consider whether the conditions in the domestic Russian market and the
conditions of sales of gas affected the reliability of those records and disregarded the conclusion
of Ukrainian authorities that, due to government regulation, the costs incurred by the investigated
Russian producers were lower than prices in other countries or other export prices of gas from
Russia, and hence not reliable.228
Recalling the Panel’s reasoning, the AB observed that the first sentence of Article 2.2.1.1
requires that costs “normally” be calculated on the basis of records kept by the exporter or producer
under investigation, provided that the two conditions set forth in the first sentence of Article 2.2.1.1
are met (i.e. compliance of records with local requirements and records’ reliability). The AB did
not exclude that there may be circumstances other than those in the two conditions, in which the
obligation to base the calculation of costs on the records does not apply, but it did not explore the
nature of such circumstances or whether they existed in the case at stake.229
The AB then focused on the second condition and it noted that the condition to “reasonably
reflect” the costs associated with the production and sale of the product under consideration applies
to the “records” of the exporter or producer under investigation In other words, the condition
relates to whether the records kept by the exporter or producer under investigation suitably and
sufficiently correspond to or reproduce those costs that have a genuine relationship with the
production and sale of the specific product. The AB concluded that there is no standard of
“reasonableness” that governs the meaning of “costs” itself, which would allow investigative
authorities to find the analysis of a price different from the domestic one.230 Thus, it upheld the
Panel’s findings that the circumstance that cost of gas incurred by Russian producers was not
reasonable compared to international standards as it did not provide an adequate basis under the
second condition for Ukrainian authorities to reject the reported gas cost and resulted in a violation
of Article 2.2.1.1 of the Anti-Dumping Agreement.231

5.3.1.3.2. Ordinary-course-of-trade test

Ukraine further challenged the Panel’s finding that Ukraine acted inconsistently with Article
2.2.1 Anti-Dumping Agreement because, in conducting its “ordinary-course-of-trade test”, MEDT
relied on costs calculated inconsistently with Article 2.2.1.1 Anti-Dumping Agreement. Following

227
Before the Panel, as well as on appeal Ukraine referred to EU – Biodiesel (Argentina) to support its
arguments, interpreting the Panel and the Appellate Body in that case to have recognized “non-arm’s length
transactions” and “other practices” as “exceptions” under that second condition, as such transactions and practices may
affect the “reliability” of the records. Neither the Panel, nor the Appellate Body accepted this interpretation.
228
Appellate Body Report, cit. supra note 203, paras. 6.90-6.92.
229
Ibid., paras. 6.96 and 6.97.
230
Ibid., para. 6.88.
231
Ibid., para. 6.106.

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the same reasoning adopted by the Panel, the AB noted that Ukraine’s claim under Article 2.2.1
was consequential to its claim under Article 2.2.1.1. Having upheld the Panel’s finding under
Article 2.2.1.1 Anti-Dumping Agreement, the AB also upheld the Panel’s conclusion that Ukraine
acted inconsistently with Article 2.2.1.232

5.3.1.3.3. Cost of production in the “country of origin”

Finally, Ukraine claimed that the Panel erred in its interpretation and application of Article
2.2 Anti-Dumping Agreement in finding that MEDT failed to calculate the cost of production “in
the country of origin” (i.e. Russia) when constructing normal value.233 The AB considered
Ukraine’s arguments under Article 2.2 to be dependent on its claim that the Panel erred in its
interpretation and application of the second condition in the first sentence of Article 2.2.1.1.
Ukraine maintained in fact that the cost of production under Article 2.2. could not be calculated on
the basis of costs rejected according to that second condition. Thus, it should legitimately be
calculated from third countries parameters. The AB considered this argument to be based on the
assumption that the Panel findings was in violation of Article 2.2.1.1 and therefore rejected
Ukraine’s challenge recalling that it upheld the Panel’s finding under that provision.234
The Appellate Body next addressed a number of claims on the Panel’s interpretation of
Article 2.2. that were not dependent on its conclusions on Article 2.2.1.1.
In particular, Ukraine claimed the Panel erred in considering that the findings in US –
Softwood Lumber IV on the interpretation of Article 14(d) SCM Agreement, that Ukraine raised in
the first instance, were not relevant by analogy with the case at hand. The AB however agreed with
the Panel and stated that such findings do not refer to the costs that may be used to construct normal
value under Article 2.2 Anti-Dumping Agreement and therefore cannot be applied in this case.235
Finally, the AB rejected Ukraine’s claim that the Panel erred in finding that the gas price
used to calculate the normal value was not sufficiently adapted to reflect the costs in the “country
of origin” as provided by Article 2.2 Anti-Dumping Agreement. The AB highlighted that the Panel
found that Ukrainian investigating authorities did not explain why adjustment for transportation
expenses were adequate to adapt the export price of gas to reflect the cost in the country of origin.
In addition, the AB noted that Ukraine, beside relying on the transport expenses adjustments, did
not bring any other evidence to support that Ukrainian investigating authorities adequately adapted
the export price of gas to ensure it reflected the costs of production in Russia. Therefore, the AB
saw no reason to question the Panel’s conclusion that such adjustments were not sufficient to
comply with the requirement set in Article 2.2.236

5.4. Conclusions

The WTO decision was welcomed by the Russian Federation and EuroChem, who not
surprisingly expressed their satisfaction for the AB’s decision. At the DSB meeting on 28 October

232
Ibid., para. 6.108.
233
Ibid., para. 6.105.
234
Ibid., paras. 6.113-6.114.
235
Ibid., paras. 6.115-6.118.
236
Ibid., paras. 6.119-6.123.

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2019, Ukraine informed the DSB that it intended to implement the DSB’s recommendations in this
dispute but that it would need a reasonable period of time to do so.
It remains to be seen how the trade war between the two countries will evolve following the
development of the other claims that are still pending before the WTO and whether the two
countries will follow the recommendations of the DSB.237 Deference towards the WTO ruling
might either have a cooling effect on the trade antagonism between Russia and Ukraine, or, on the
contrary, exacerbate their relationship, with negative cascade effects on the parallel political
clashes that are still ongoing.
MARIA CHIARA MENEGHETTI*

6. APPELLATE BODY REPORT, KOREA – ANTI-DUMPING DUTIES ON PNEUMATIC VALVES FROM

JAPAN238

6.1. Introduction and main facts of the dispute

Following a 2014 investigation, the Republic of Korea determined that its domestic industry
suffered material damage as a consequence of dumped imports of pneumatic transmission valves
from Japan. On 19 August 2015, Korea imposed anti-dumping duties. On 15 March 2016, Japan
requested consultations for discussing Korea’s measure. Since the consultation failed to resolve the
matter, a Panel was set up on 4 July 2016. The panel Report was circulated on 12 April 2018.239

6.2. The Panel Report

6.2.1. Key legal issues

Japan’s claim alleged that Korea’s anti-dumping duties on pneumatic valves from Japan
constitute a breach of its WTO obligations under the Anti-Dumping Agreement (ADA).240 Korea
requested the Panel to determine whether Japan’s claims pursuant to Articles 3.1, 3.2, 3.4, 3.5, and
4.1 of the ADA fell beyond the terms of reference of the Panel. Korea also requested the Panel to
evaluate ex officio whether Japan’s remaining claims fell within the same terms of reference.
Furthermore, Korea asked that all claims for which the Panel found to have competence be rejected
on the merits.241 The claims can be grouped in 5 main clusters: (1) the Panel’s terms of reference;
(2) definition of domestic industry; (3) determination of the injury (4) confidential treatment of
information; (5) disclosure of essential facts.

237
On 4 February 2020, the Appellate Body ruled in favor of Ukraine in Case DS499, Russia – Measures
affecting the importation of railway equipment and parts thereof, adopted on 5 march 2020, WT/DS499/AB/R. Despite
acknowledging that “Ukraine failed to demonstrate that Russia systemically prevented the importation of Ukrainian
railway products into Russia”, the Appellate Body agreed with Ukraine that the measures adopted by Russia, which
denied Ukraine suppliers access to the Russian market, were discriminatory as they applied less favorable conditions
to Ukrainian manufacturers in comparison with Russian and European ones.
*
Ph.D. candidate in International Law and Economics, Bocconi University, Milan.
238
Adopted on 30 September 2019, WT/DS504/AB/R.
239
Panel Report, Korea – Anti-Dumping Duties on Pneumatic Valves from Japan, adopted on 18 April 2018,
WT/DS504/R.
240
Ibid., para. 7.2.
241
Ibid., para. 7.3.

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6.2.2. Terms of reference (Article 6.2 DSU)

The Panel found that Japan’s request fell outside the terms of reference in respect to a number
of issues: (a) Japan’s claim concerning the definition of domestic industry (Articles 3.1 and 4.1 of
the ADA); (b) Korea’s analysis on the increase in the volume of dumped imports (Articles 3.1 and
3.2 of the ADA); (c) the consideration of the effects of dumped imports on prices (Articles 3.1 and
3.2 of the ADA); (d) the impact of dumped imports on the state of the domestic industry242 (Articles
3.1 and 3.4 of the ADA);243 (e) failure by the Korean Investigation Authority (KIA) to weigh
adequately all known factors (Articles 3.1 and 3.5 of the ADA); (f) failure by the KIA to inform
the parties of the key facts constituting the backdrop to the decision to impose anti-dumping
measures (Article 6.9 ADA); (g) failure by the KIA to give public notice of their final determination
(Articles 12.2 and 12.2.2 of the ADA); (h) Japan’s consequential claim (Article VI GATT 1994).244
The Panel held that to merely mention the first part of Article 3.1, or to deploy its wording
in the panel request, is not normally considered sufficient to clearly present an allegation of a
violation of the ADA. The Panel concluded that an allegation in a panel request that an investigating
authority’s assessment was not grounded on positive evidence and on an objective examination
must provide a sufficient summary of the legal grounds of the complaint in order to introduce the
issue with the clarity, as required under Article 6.2 DSU.245

6.2.3. Definition of domestic industry (Articles 3.1 and 4.1 ADA)

Japan claimed that the Korea Trade Commission’s (KTC) definition of the domestic industry
was not based on an objective examination of positive evidence as required by Articles 3.1 and 4.1
of the ADA.246 On the other hand, Korea averred that the clarity requirements under Article 6.2
DSU had not been fulfilled, and therefore the claim fell outside of the Panel’s terms of reference.247
The Panel concluded that Japan’s request with regard to the claim was not sufficiently precise
so as to serve the dual function of (a) identifying the grounds for the Panel’s terms of reference
pursuant to Article 7.1 DSU; and (b) presenting the nature of the dispute to other WTO Members.248
The Panel found that the claim fell outside of the Panel’s terms of reference, thereby declining to
either consider it further or resolve it.249

6.2.4. Determination of the injury

242
With the exception of the failure of domestic investigation authorities to evaluate two of the specific factors
mentioned in Art. 3.4 ADA.
243
With the exception of the claim that certain factors have been considered in isolation and dismissed without
adequate examination.
244
Panel Report, cit. supra note 239, para 8.1.
245
Ibid., para. 7.35.
246
Ibid., para. 7.38.
247
Ibid., para. 7.39.
248
Ibid., para. 7.65.
249
Ibid., para. 7.67.

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 Japan’s panel request outlined six claims challenging the KIA’s injury determination
pursuant to Article 3 ADA. The Panel found that Japan’s panel request failed to meet the
requirements of Article 6.2 DSU to “provide a brief summary of the legal basis of the complaint
sufficient to present the problem clearly”. The Panel held that Japan’s claims 1250 and 2,251
concerning the KIA’s analysis of the volume of the dumped imports and price effects of such
imports, were not within its terms of reference. The Panel held that Japan’s claim 3, insofar as it
related to the KIA’s examination of two of the specific economic factors listed in Article 3.4, was
within the Panel’s jurisdiction, while the remaining part fell outside the terms of reference.252
Moreover, the Panel stated that Japan’s claims 4253and 6,254 concerning the KIA’s causation
analysis, fell within its terms of reference. Lastly, the Panel ruled that Japan’s claim 5 was within
the Panel’s terms of reference, so long as it referred to the adequacy of the KIA’s examination
concerning certain known factors (other than the dumped imports) harming the domestic
industry.255
In the light of the above, the Panel concluded that the KIA acted compatibly with Articles
3.1 and 3.4 in relation to its examination of the impact of dumped imports on the state of the
domestic industry.256 The KIA, however, behaved inconsistently with Articles 3.1 and 3.5 on
certain aspects of its causation determination.257

6.2.5. Treatment of confidential information (Article 6.5 ADA)

On the interpretation and application of Article 6.5, Japan argued before the Panel that Korea
acted in a manner that was incompatible with the provision. The KTC allegedly allowed for the
confidential treatment of information submitted by the applicants without showing good cause or
conducting an examination that would justify confidentiality. The Panel held that “good cause” to
justify confidential treatment was missing, thus KIA violated Article 6.5.
As to whether Korea correctly complied with Article 6.5.1 ADA, Japan claimed that, in
relation to some documents, the KTC failed to request the submitting parties to produce a non-
confidential summary of the information subject to confidentiality restrictions. The Panel
concluded that KIA behaved inconsistently with Article 6.5.1 by failing to request the non-
confidential summary.

6.3. The Appellate Body Report

6.3.1. Key legal issues

The issues analysed by the AB on appeal by both Korea and Japan can be grouped in 5
clusters: (1) the interpretation and application of Article 6.2 DSU to panel requests; (2) the

250
Ibid., para. 7.94.
251
Ibid., para. 7.131.
252
Ibid., paras. 7.170-7.175.
253
Ibid., para. 7.235.
254
Ibid., para. 7.226.
255
Ibid., paras. 7.241-243.
256
Ibid., para. 7.192.
257
Ibid., para. 7.272.

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definition of domestic industry; (3) the determination of the injury; (4) confidential treatment of
information and disclosure of essential facts; and (5) completing the legal analysis.
The AB upheld the Panel on its interpretation of Article 6.2 but reversed its decision on the
following issues: (a) the incompatibility of the definition of “domestic industry” with Articles 3.1
and 4.1 of the ADA; (b) the inconsistency of the assessment of the volume of dumped imports with
Articles 3.1 and 3.2 of the ADA; (c) the incompatibility of the price effects assessment of the
dumped imports with Articles 3.1 and 3.2 of the ADA as well as with Article 3.4; and (d) the
inconsistency of disclosing key facts with Article 6.9 ADA.

6.3.2. Panel’s terms of reference (overall reasoning on Article 6.2 of the DSU)

In respect of Korea’s challenges before the Panel of the adequacy of Japan’s panel request,
the AB found the Panel to have correctly identified the dual function of a panel request: firstly, to
govern the panel’s terms of reference while defining the scope of its jurisdiction; secondly, to fulfil
a due process objective by providing other Members with notice as to the nature of the
complainant’s case and allowing for an appropriate response.258
In the same vein, the AB,259 in line with the Panel’s reasoning, held that a panel request’s
compliance with the requirements of Article 6.2 shall be assessed on the face of the request itself,
on a case-by-case basis.260 The AB went on to explain that defects in the panel request cannot be
cured through later submissions in the course of panel proceedings. The first written submission of
the complaining party may nevertheless be useful for confirming the meaning of the wording
utilised in the panel request.261
The AB restated262 that a panel request shall provide a “brief” summary of the legal basis of
the complaint so as to present the problem “plainly” under Article 6.2. To this end, a panel request
shall plainly connect the measures taken to the provisions allegedly breached.263 However,
although identifying the treaty provision that the respondent allegedly violated is always
“necessary” and a “minimum prerequisite”,264 it may not be enough to fulfil the requirements of
Article 6.2 depending on the specific circumstances of a case (e.g. the nature of the relevant
measure, the manner in which it is detailed in the panel request or the nature of the allegedly
breached provisions).265

258
Appellate Body Report, cit. supra note 238, para. 5.4.
259
Here restating (para. 5.12-5.15) the reasoning deployed by the AB in Appellate Body Reports, China – HP-
SSST (Japan)/China – HP-SSST (EU), adopted on 28 October 2015, WT/DS454/AB/R; WT/DS460/AB/R.
260
Appellate Body Report, cit. supra note 238, para. 5.5.
261
Ibid., para. 5.5.
262
The AB Reports, China – HP-SSST (Japan) / China – HP-SSST (EU), cit. supra note 259, para. 5.15 (quoting
AB Reports, China – Raw Materials, adopted on 22 February 2012, WT/DS394/AB/R; WT/DS395/AB/R;
WT/DS398/AB/R, para. 220; US – Countervailing and Anti-Dumping Measures (China), cit. supra note 220, para.
4.8, in turn quoting Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews, adopted on 17 December
2004, WT/DS268/AB/R, para. 162): “Regarding the requirement that a complainant provide a “brief summary” that is
sufficient to “present the problem clearly”, the Appellate Body has explained that a panel request must “plainly connect
the challenged measure(s) with the provision(s) of the covered agreements claimed to have been infringed”. Thus, “to
the extent that a provision contains not one single, distinct obligation, but rather multiple obligations, a panel request
might need to specify which of the obligations contained in the provision is being challenged”.
263
Appellate Body Report, cit. supra note 238, para. 5.6.
264
Ibid., para. 5.6.
265
Ibid., para. 5.9.

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6.3.3. Definition of domestic industry (Articles 3.1 and 4.1 of the ADA)

Japan’s panel request challenged the KIA’s definition of the domestic industry. The Panel
held that Japan’s allegation qualified as “essentially generic” and in contrast with the requirements
of Article 6.2 DSU, thereby declining jurisdiction. Japan appealed this decision and requested the
AB to complete the legal analysis. Japan submitted that the Panel failed to assess the nature of the
relevant obligation in each case, and that, in relation to the claims pursuant to Article 3.1, the Panel
focused disproportionately on the part of Japan’s request that referenced this provision.
The AB reversed the Panel’s ruling. The AB noted how Japan’s request referred to both
Articles 3.1 and 4.1 of the ADA, thereby clearly identifying the provisions that had allegedly been
violated. Japan had also clarified that it focused specifically on that part of the measure regarding
the definition of the domestic industry and its alleged incompatibility with Korea’s obligations
under Articles 3.1 and 4.1. The AB held that the combination of both articles established a distinct,
well-defined obligation with reference to the definition of the domestic industry. Furthermore, the
AB stated that Japan’s request put in association the relevant measure with the provisions of the
agreement that had allegedly been breached in a plain manner, thereby fulfilling the requirement
of Article 6.2. According to the AB, Japan provided a brief summary of the legal grounds of the
claim, thereby clearly displaying the problem in compliance with the meaning of Article 6.2
DSU.266
Japan’s request that the AB complete the legal analysis was declined.267 The AB held that
due process considerations, when the panel did not examine a claim at all or carry out a full
exploration of the issues or scrutiny of the relevant evidence, prevented it from completing the
legal analysis.268

6.3.4. Determination of the injury

The AB analysed Korea’s claim that the Panel was mistaken in its interpretation and
application of Article 3.5 ADA “by subsuming all of the obligations of Articles 3.2 and 3.4 of the
ADA under that provision in addressing Japan’s ‘independent’ causation claim”. The AB then
turned to examining Japan’s claim that the Panel erred in its approach to resolving Japan’s
“independent” causation claim because it omitted to take into account “volume, price effects, and
impact” as essential building blocks for any causation finding pursuant to Article 3.5. Furthermore,
the AB assessed Japan’s claim that the Panel improperly declined to evaluate the lack of
meaningful correlation in the context of the obligation under Article 3.5 and, as a consequence,
was mistaken in its approach towards Japan’s claim 4 in relation to the failure to prove a causal
link.269

6.3.4.1. Causation

266
Appellate Body Report, cit. supra note 238, para. 6.4.
267
Ibid., para. 5.38.
268
Ibid.
269
Ibid., para. 5.184.

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 The AB clarified that in relation to a claim pursuant to Article 3.5, a panel is tasked with
“reviewing an investigating authority’s demonstration that dumped imports are, through the effects
of dumping, as set forth in paragraphs 2 and 4, causing injury to the domestic industry”. The AB
stated that a panel must review whether the investigating authority properly linked the results of its
analyses assessing the necessary evidence and factors under Article 3.5, when ultimately drawing
the causal relationship between dumped imports and domestic industry injury. The AB specified
that a panel’s review shall not examine whether each one of the intertwined elements of this
determination fulfils the applicable requirements outlined in Article 3.2 or Article 3.4. The AB thus
concluded that the sentence “through the effects of dumping, as set forth in paragraphs 2 and 4” of
Article 3.5 does not warrant a re-examination by the Panel of the examination conducted pursuant
to Articles 3.2 and 3.4 of the ADA.270 The AB held that the Panel effectively incorporated the
requirements in Article 3.2, first sentence whilst omitting to properly apply the requirements
outlined in Article 3.5 in its evaluation of the causation claim at issue. In the light of this finding,
the AB concluded that Panel erred in its application of Article 3.5.271
In relation to price effects in the context of claim 6, Japan alleged that the KTC’s analysis of
the price effects of the dumped imports “independently” undermined its causation determination.272
The AB stated that to the extent that an investigating authority deploys price comparisons in its
analysis of the price effects of dumped imports, price comparability shall be ensured. The AB
upheld the panel’s finding that the KTC should have ensured price comparability so far as it relied
on the price differentials for its findings that dumped imports had price-suppressing and price-
depressing effects on the domestic like product. In the same vein, the AB found that the Panel was
correct in finding that, given the consistent overselling by the dumped imports and the fact that the
average prices of the models of dumped imports involved in the individual instances of
“underselling” were higher than the average prices of the corresponding domestic models, an
explanation and analysis of how and to what extent the prices of the domestic like product had been
affected was necessary. The AB held that the Panel employed the requirements of Article 3.2,
rather than those outlined in Article 3.5, regardless of the fact that it was assessing a claim under
Article 3.5. In a claim under the latter provision, the AB found that a panel’s review shall not focus
on whether each of the interlinked components of the causation determination itself fulfils the
applicable requirements pursuant to their respective provisions. Thus, the AB ultimately concluded
that the Panel erred in its application of Article 3.5.273
Lastly, in relation to the examination of the impact of dumped imports in its claim 6 Japan
argued that, given that the KTC failed to establish any logical connection between the effects of
the dumped imports pursuant to Article 3.2 and the condition of the domestic industry for the
purpose of its impact analysis under Article 3.4, this undermined its causation determination. The
AB joined the Panel in finding that, for the purposes of Article 3.4, in order to assess the impact of
dumped imports on the domestic industry properly, an investigating authority is not to connect that
examination with its consideration of the volume and the price effects of the dumped imports. In
the same vein, the AB upheld the Panel’s finding that the undertaking of a reasoned causation and
non-attribution analysis is not required as part of Article 3.4. However, the Panel’s examination of
the alleged flaws in the KIA’s impact analysis primarily focused on whether the KTC’s impact

270
Ibid., para. 5.280.
271
Ibid., para. 5.282.
272
For a summary of the Panel’s conclusions on such matter, see ibid., para. 5.283.
273
Ibid., para. 5.284.

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examination was in line with the requirements outlined in Article 3.4, as opposed to Article 3.5. In
the view of the AB, the Panel effectively incorporated the requirements of Article 3.4 and did not
properly apply those of Article 3.5.274

6.3.4.2. Magnitude and margins of dumping

On appeal,275 Japan argued that the Panel cast aside its arguments about volume correlation
and price correlation by merely referencing its own earlier findings on Japan’s “independent”
causation claim.276 The AB recalled that the analysis pursuant to Article 3.5 calls for the
establishment of “the causal relationship between subject imports and injury to the domestic
industry”. The AB in line with the Panel’s findings clarified that evidence that does not fall neatly
within the frame of Articles 3.2 and 3.4 may nevertheless be useful to prove a causal relationship
pursuant to Article 3.5. As a consequence, upward trends in imports and a downturn in the
performance indicators of the domestic industry, when happening at the same time, could point to
the existence of a causal connection between an increase in imports and a material injury to the
domestic industry. While such a circumstance cannot ipso facto demonstrate causation the lack
thereof would cast serious doubts on its existence and require a very compelling analysis to
disprove this assumption. Therefore, the existence of a correlation, although indicative, does not
prove a causal link to exist. In the same vein, its existence is not ruled out by a lack of correlation,
provided that a very compelling explanation is given to that effect.277
With respect to the alleged lack of correlation in volume trends, the AB held that the Panel
reviewed the requirements under Article 3.2, first sentence, as opposed to those under Article
3.5.278 As the Panel relied on the same reasoning in its rejection of Japan’s arguments concerning
the lack of correlation in volume trends the AB concluded that the Panel was mistaken in this regard
as well.279
With respect to price trends, the AB noted that the Panel concluded that Japan fell short of
proving that insufficient price correlation was enough to establish that a reasonable and unbiased
investigating authority could not have properly found a causal relationship between the dumped
imports and the domestic industry injury in light of the facts and arguments at its disposal.280 The
AB also recalled its assessment of the Panel’s analysis of the diverging trends in the context of
Japan’s claim 6. Accordingly, the AB found that the Panel’s analysis of the issue of diverging price
trends was grounded on the relevant requirements pursuant to Article 3.2, thereby leaving out the
causation requirements under Article 3.5.281
Concerning profit trends Japan averred that the Panel focused on the KTC’s statements that
domestic-industry profits fell in 2012 as a consequence of the increased competition with imported
products, despite the fact that in 2012 the volume of imports and the market share of imports both
waned, while the average prices of imports went up. Japan therefore argued that the claim that in

274
Ibid., para. 5.285.
275
For a summary of the Panel’s findings, see ibid., para. 5.288.
276
Ibid., para. 5.289.
277
Ibid., para. 5.291.
278
See supra the section on causation (6.3.4.1) for further detail on this topic.
279
Ibid., para. 5.293.
280
Ibid., para. 5.296.
281
Ibid., para. 5.297.

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2012 there was an increased competition with imports had no foundation.282 The AB held that
Japan’s argument misrepresented the KTC’s findings. The KTC did not point towards an increase
in competition in 2012. On the other hand, as the Panel also observed, the KTC stated that the
domestic industry’s operating loss worsened from 2011 to 2012, as a consequence of the increase
of operating costs that was a response to the competition with the dumped imports.283 The AB
therefore upheld the Panel’s finding that the KTC’s assessment of the relationship between the
operating losses of the domestic industry in the course of the entire investigation period and the
dumped imports was reasonable and grounded on the underlying facts.284

6.3.5. Confidential treatment of information and disclosure of essential facts (Articles 6.5 and
6.5.1)

The Panel found in favour of Japan that the KIA acted inconsistently with Articles 6.5 and
6.5.1 of the ADA. The AB upheld the panel’s finding that evidence that such an objective
assessment was carried out must appear in the relevant supporting documentation. The AB recalled
that the Panel could not check whether the KIA “actually engaged in a consideration of whether
the submitters of the information had shown good cause for confidential treatment of the
information in question”. The AB upheld the conclusion of the Panel that an investigating authority
shall evaluate objectively whether the request for confidential treatment had been sufficiently
substantiated, i.e. “good cause” was found to exist.285
Moving to whether the Panel correctly applied Article 6.5.1 ADA, the AB agreed with the
Panel that Article 6.5.1 required the investigating authorities to request sufficiently accurate non-
confidential summaries from the submitting parties so as to foster a reasonable understanding of
the substance of the confidential information. In these circumstances, it upheld the Panel’s finding
that Japan demonstrated that KIA acted inconsistently with Article 6.5.1.286

6.3.6. Completing the legal analysis (Articles 6.9)

Having reversed the Panel’s finding that Japan’s claim under Article 6.9 ADA fell outside
the Panel’s terms of reference, the AB turned to Japan’s request for completion of the legal analysis
under that provision.287 Japan requested the AB to complete the legal analysis and to find that
Korea acted inconsistently with Article 6.9 ADA due to the fact that the KTC made no disclosure
of the “essential facts” ahead of its “final determination”.288
The AB noted that a number of factual disagreements between the participants still persisted,
namely what KIA documents constitute the “final determination” and when this determination was
reached, or what constitutes “disclosure” documents. As a result, the participants disagreed on
which investigation documents should be examined for the purpose of determining the “disclosure”

282
Ibid., para. 5.298.
283
Ibid., para. 5.300.
284
Ibid., para. 5.301.
285
Ibid., para. 6.29.
286
Ibid., para. 6.31.
287
Ibid., para. 5.463.
288
Ibid., para. 5.464. For further information on Japan’s argument, see paras. 5.465-468.

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of essential facts.289 The Panel’s finding that the claim fell outside its terms of reference means that
the Panel neither considered nor resolved these issues.290 Because key issues were not addressed
by the Panel and neither sufficient factual findings by the Panel nor uncontested facts on the record
could be found, the AB found no basis to assess whether Korea complied with Article 6.9 by failing
to disclose the “essential facts” under consideration.291

6.4. Concluding remarks

The importance of this report lays especially in the clarification by the AB on the various
issues of due process raised in this case. First, the AB restated the requirements of a Panel request
outlined in HP-SSST.292 It clarified once more that a panel request fulfils two main functions: (i)
governing a panel’s terms of reference and defining the scope of the panel’s terms of reference,
and (ii) ensuring due process by notifying the respondent, inter alia, regarding the nature of the
complainant and enabling an appropriate response. Compliance with such objectives shall be
examined according to the “face of the panel request, on a case-by-case basis”. Subsequent
submissions cannot cure panel request defects but may be taken into consideration with the purpose
of confirming the meaning of the wording utilised in the panel request. A “brief summary of the
legal basis of the complaint sufficient to present the problem clearly”, pursuant to Article 6.2, is
only achieved when panel requests plainly connect the measure(s) with the provision(s) of the
relevant agreements which have allegedly been breached. Identifying a treaty provision claimed to
have been infringed although “necessary” and a “minimum prerequisite”, may not be enough to
meet the requirements of Article 6.2 depending on the circumstances of the case being
considered.293
In respect of confidential treatment, the AB also confirmed its reliance on previous case
law.294 The investigating authority was found under an obligation to justify the confidential nature
of the information by showing “good cause”.295 Furthermore, the AB outlined that Article 6.5.1
establishes a clear obligation upon the applicants to provide non-confidential summaries of their
confidential information, and to ensure that they were sufficiently detailed to allow a reasonable
understanding of the substance of such information.296 ha formattato: Inglese (Stati Uniti)
MARA AGOLETTI*

289
Ibid., para. 5.476.
290
Ibid., paras. 5.477-478.
291
Ibid., para. 6.33.
292
Ibid., para. 5.6. The AB restates the requirements outlined in AB Reports, China – HP-SSST (Japan)/China
– HP-SSST (EU), cit. supra note 259, para. 5.12-5.15.
293
On this topic, see the commentary on Appellate Body Report, Korea – AD on Pneumatic Valves from Japan
(DS504), Trade Law Guide, available at: <www.tradelawguide.com>.
294
Appellate Body Report, cit. supra note 238, para. 5.398. In particular, Appellate Body Report, EC –
Fasteners (China), adopted on 28 July 2011, WT/DS397/AB/R, paras 5.37-39 and Appellate Body Reports, China –
HP-SSST (Japan)/China – HP-SSST (EU), cit. supra note 259, para. 5.97.
295
Appellate Body Report, cit. supra note 238, para. 5.379.
296
Ibid., para. 5.382.
*
Ph.D. candidate in International Law and Economics, Bocconi University, Milan.

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7. APPELLATE BODY REPORT, MOROCCO – ANTI-DUMPING MEASURES ON CERTAIN HOT-ROLLED
STEEL FROM TURKEY297

7.1. Introduction and main facts of the dispute

This dispute, in which Turkey was the complainant and Morocco the respondent, concerned
definitive anti-dumping measures that Morocco had imposed in 2013-2014 on imports of certain
hot-rolled steel products from Turkey. Morocco initiated anti-dumping investigations on 21
January 2013; then, after the preliminary affirmative determination of dumping, injury and
causation, imposed provisional anti-dumping duties on certain Turkish hot-rolled steel on 29
October 2013. Lastly, the final affirmative determination of dumping, injury and causation was
released on 12 August 2014, coming into force on 26 September 2014.298
Turkey complained about the imposition of definitive anti-dumping duties and certain
aspects of the investigation by Moroccan authorities. According to Turkey, these measures were
inconsistent with: (a) Articles 1, 3.1, 3.2, 3.4, 3.5, 5.10, 6.8, 6.9, 18.1 and paragraphs 1, 3, 5, 6 and
7 Annex II of the ADA; and (b) Articles I:1, VI, X:1, X:2, X:3(a) and XI:1 of the GATT 1994.
The DSB established a panel, as requested by Turkey, on 27 February 2017, whose report
was circulated on 31 October 2018. Morocco appealed the Panel Report on 20 November 2018.
On 15 January 2019, upon expiry of the 60-day period established on Article 17.5 DSU, the
Appellate Body informed the DSB that it would not be able to circulate its report by the end of the
legal time-frame, because of the complexity of this appeal and the backlog of pending appeals. On
4 December 2019 Morocco withdrew the appeal in the dispute since the contested measures had
expired. As a consequence, consistent with past practice, the AB took note of the withdrawal of the
appeal without entering into the merits of the appeal.

7.2. The Panel Report

7.2.1. Procedural claims. Articles 6.5, 6.8, and 6.9 of the Anti-Dumping Agreement, and
paragraphs 1, 3, 5, 6, and 7 of Annex II

The Panel found that some claims made by Turkey fell outside the terms of reference for
jurisdictional or procedural reasons. First, it disregarded the claims made under Articles 6.5 and
6.5.1 ADA in respect of the confidential treatment of the domestic industry’s break-even threshold
because they were new claims introduced in the panel request. According to the Panel, not only did
they expand the scope of the dispute and change its essence, but they also did not evolve from the
claim under Article 3.1 ADA subject to consultations.299 Second, it declined to rule on the claim
under Article 6.9 ADA concerning the alleged failure to inform all interested parties of the break-
even threshold.300
Then, the Panel also considered the claim related to Morocco’s conclusion of the
investigation beyond 18 months after initiation as provided for in Article 5.10 ADA. Morocco

297
Adopted on 8 January 2020, WT/DS513/AB/R and WT/DS513/AB/R/Add.1.
298
Panel Report, Morocco – Anti-Dumping Measures on Certain Hot-Rolled Steel from Turkey, adopted on 8
January 2020, WT/DS513/R, paras. A.2.2-A.2.4.
299
Ibid., para. 7.45.
300
Ibid., para. 7.59.

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concluded the investigation in 18 months and 22 days after its initiation. Contrary to Morocco’s
argument, the Panel took the view that requests from interested parties in the underlying
investigation did not justify a delay in concluding the investigation beyond 18 months, thus finding
that Morocco acted inconsistently with Article 5.10 ADA in exceeding that time limit.301
Moreover, the Panel concluded that Morocco had acted inconsistently with Article 6.8 ADA
by rejecting the information reported by the Turkish producers investigated by the Moroccan
authorities regarding the entirety of their export sales and by establishing the margins for dumping
based on facts available.302 In connection with this aspect, the Panel did not consider it necessary
to further assess if Morocco, in resorting to the facts available, had acted inconsistently with its
duties under paragraphs 1, 3, 5, 6, and 7 of Annex II.
It also found that Morocco did not act consistently with Article 6.9 ADA because it had failed
to inform all interested parties (two investigated Turkish producers) of “essential facts” on the
competent authority’s recourse to facts available regarding their alleged failure to report the
entirety of their export sales. The Panel, on the one hand, upheld Turkey’s claim that certain
essential facts had not been disclosed at all. In particular, they were essential facts: (a) in respect
of the alleged failure to report additional, unidentified export sales that the competent authority
considered the producers to have failed to report;303 (b) in respect of the calculation of the facts
available rate;304 and (c) used by Morocco in cross-checking the facts available rate.305 However,
on the other hand, the Panel found that Turkey’s claim that certain essential facts had not been
disclosed in sufficient time to allow producers to defend their interests was not established.306

7.2.2. Substantive claims (material retardation). Articles 3.1 and 3.4 of the Anti-Dumping
Agreement

Turkey contested Morocco’s determination that the establishment of the domestic industry
producing certain hot-steel products in Morocco had been materially retarded as a consequence of
dumped imports from Turkey. The Panel, on jurisdictional and procedural grounds, dismissed
Turkey’s claim under footnote 9 of Article 3 concerning Morocco’s finding of “establishment”,
since in its panel request the former did not “provide a brief summary of the legal basis of the
complaint sufficient to present the problem clearly”, as required by Article 6.2 DSU.307 Secondly,
since Turkey introduced the claim under Article VI:6(a) of the GATT 1994 regarding Morocco’s
finding of “establishment” in a late stage of the proceedings (after providing the Panel with written
submissions and only in response to the Panel’s written questions), the Panel declined to rule on
it.308
Nonetheless, the Panel concluded that Morocco violated Article 3.1 ADA in determining that
the domestic industry was “unestablished” and Articles 3.1 and 3.4 ADA in evaluating whether
Turkish imports had “materially retarded” that industry’s establishment.

301
Ibid., para. 7.78.
302
Ibid., para. 7.104.
303
Ibid., para. 7.121.
304
Ibid., para. 7.126.
305
Ibid., para. 7.131.
306
Ibid., para. 7.137.
307
Ibid., para. 7.18.
308
Ibid., para. 7.65.

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 As a starting point, the Panel considered that Article 3.1 ADA can be violated independently
when an erroneous act or omission, such as an erroneous finding that the domestic industry in
question is unestablished, affects the overall injury analysis. Therefore, the Panel evaluated
Morocco’s measure under Article 3.1 ADA independently of any other provision in Article 3.309
The Panel concluded that Morocco had not ascertained, based on positive evidence and an objective
examination, whether the domestic industry had been established, thus acting inconsistently with
Article 3.1 ADA in determining that the domestic industry was unestablished.310
Particularly, in evaluating whether Morocco acted inconsistently with Article 3.1 ADA in
finding that the industry was unestablished, the Panel considered that Morocco in its establishment
analysis had not properly evaluated the temporal criterion. A material injury analysis requires a
review of historical data for at least three years and Morocco did not properly find that the particular
industry (Maghreb Steel) had produced hot-rolled steel for a period inadequate to consider it an
established industry.311 The Panel also found that Morocco had not properly evaluated the market
share criterion, because it had improperly disregarded Maghreb Steel’s total market share (arguing
that that share consisted of captive transfers of hot-rolled steel)312 and improperly rejected this
company’s share in the merchant market sales (alleging that the sales were made at a loss).313 In
addition, the Panel found that Morocco had not properly concluded that the industry had not met
its break-even threshold314 and had not properly evaluated the production stability criterion.315
Finally, according to the Panel, Morocco had not properly evaluated the “new industry” criterion.
Morocco did not explain why the investment of the Maghreb Steel was towards a “new industry”
and not a new product line, and did not provide a reasoned and adequate explanation for its finding
that the company was a new industry.316
Then, the Panel assessed Morocco’s determination that the establishment of the domestic
industry was retarded. In this regard, the panel concluded that Morocco acted inconsistently with
Articles 3.1 and 3.4 ADA because: (a) it had failed to evaluate 5 of the 15 injury factors listed in
Article 3.4, in particular, return on investments, actual and potential negative effects on cash flow,
growth, wages, and ability to raise capital or investments;317 (b) it had disregarded the captive
market in its injury analysis;318 and (c) it had based its injury determination without an objective
examination, since it relied on the McLellan report (on which the Business Plan was based) without
properly investigating the significance of inaccuracies in that report.319
In the light of the foregoing, the Panel suggested that Morocco bring the measures in question
into conformity with its obligations under the Anti-Dumping Agreement,320 whose implementation
method was left to the discretion of the respondent.321

309
Ibid., para. 7.151.
310
Ibid., para. 7.219.
311
Ibid., para. 7.166.
312
Ibid., para. 7.175.
313
Ibid., para. 7.191.
314
Ibid., para. 7.198.
315
Ibid., paras. 7.206-207.
316
Ibid., para. 7.218.
317
Ibid., para. 7.262.
318
Ibid., para. 7.278.
319
Ibid., para. 7.288.
320
Ibid., para. 8.7.
321
Ibid., para. 8.9.

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7.3. The Appellate Body Report

As Morocco informed the AB of its decision to withdraw the appeal and Turkey joined its
counterpart in the withdrawal, the AB limited the content of its Report to describing the Panel’s
findings and summing up the procedural aspects of the case. Consistent with past practice in such
instances, the AB did not assess the substantive legal issues raised in the appeal. The AB considered
that since Morocco had withdrawn from the appeal, its work had been completed.

7.4. Concluding remarks

The AB issued its report on 10 December 2019, the last day the AB could constitute a
quorum.
This dispute touched upon some interesting topics. On the procedural aspects, the AB
followed a practice according to which when an appeal has been withdrawn pursuant to Rule 30(1)
of the Working Procedures for the Appellate Review, it issues a brief report taking note of the
withdrawal of the appeal (as it did in India – Autos).322 Thus, the AB did not review the measure
underlying the dispute and it considered that with the issuance of the summary of the procedural
history of the case its task has been finished.
In its statement at the DSB of 20 January 2020, where the AB report was adopted, the United
States stated that the document issued by the AB was an “advisory opinion” and not an AB report323
because it was rendered in breach of the requirements of Article 17 DSU, i.e. beyond 90 days since
the notification to the DSB of the intention to appeal. It further stated that as the AB does not have
authority to deliver advisory opinions, the document issued was not subject to the adoption
procedures established in Article 17.14 DSU. Nonetheless, the United States did not place
objections to the adoption of the report since both parties found a positive solution to the dispute,
which is the objective of the dispute settlement mechanism (Article 3.7 DSU).
It is important to highlight that the mere fact that the AB renders its report exceeding the time
limits does not, per se, alter the nature of the AB reports. When the AB hears appeals from panel
cases and renders a decision on the case, this document is a report for the purposes of the DSU.
Additionally, considering the high workload of the AB,324 the complexity and diversity of the
complaints, the need to translate the reports in the official languages, the lack of restrictions on the
length of submissions and number of exhibits that parties may submit, and the increased
involvement of private attorneys (that usually raise many more legal claims than government
lawyers),325 it would be unrealistic to demand the AB to adhere to a rigid compliance with

322
Appellate Body Report, India – Measures Affecting the Automotive Sector, adopted on 19 March 2002,
WT/DS146/AB/R; WT/DS175/AB/R.
323
“Statement by the United States at the Meeting of the WTO Dispute Settlement Body”, 8 January 2020,
available at: <https://geneva.usmission.gov/wp-content/uploads/sites/290/Jan8.DSB_.Stmt_.as-deliv.fin_.public-
1.pdf>.
324
WTO, “Annual Report 2019”, available at: <https://www.wto.org/english/res_e/booksp_e/anrep19_e.pdf>.
According to this report, WTO member states initiated 38 new disputes in 2018, doubling the number of disputes
raised in 2017.
325
REICH, “The Effectiveness of the WTO Dispute Settlement System: A Statistical Analysis”, European
University Institute Working Papers, 2017, available at:
<https://cadmus.eui.eu/bitstream/handle/1814/47045/LAW_2017_11.pdf>.

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exceptionally short timeframes, even without taking into account that the numbers of its members
had been reduced by the lack of reappointments (due precisely to the United States).
Concerning the Panel findings, it is worth noting, first, that the Panel followed previous
Panel326 and AB327 decisions that the adherence to the 18-month time-limit for the antidumping
investigations is mandatory and allows for no exception whatsoever,328 not even for delays due to
requests from interested parties. The strictness of this rule was shown in the case at hand, where
the investigation had exceeded the time-limit by 22 days.
Secondly, as to the legal aspects, the case raised novel questions concerning the qualification
of “material retardation of the establishment of the domestic industry”. As a starting point, the
Panel considered that to conclude that a domestic industry is unestablished, the assessment must
be based on positive evidence and objective examination as required by Article 3.1 ADA.329 It
further added that while this article does not prescribe a specific methodology that an investigating
authority must follow in evaluating whether a domestic industry is established, if the national
authority relies on assumptions, these assumptions must be derived as reasonable inferences from
credible basis of facts, and must be sufficiently explained.
Finally, the Panel noted that Article 3.1 ADA can be violated independently when an
erroneous act or omission, such as an erroneous finding that the domestic industry in question is
unestablished, affects the overall injury analysis. Therefore, the Panel evaluated Morocco’s
measure under Article 3.1 independently of any other provision in Article 3.
Although both parties withdrew their appeals, and the measures that had triggered the dispute
expired, the controversy does not seem to have ended. This assumption is based on the outcome of
the WTO’s DSB meeting that took place on 27 January. In this meeting Turkey regretted that
Morocco’s anti-dumping measure had been replaced by a safeguard measure.330 Therefore,
whereas the DS513 (Morocco – Hot-Rolled Steel) has been concluded, Turkey may be preparing
the field for a new and separate dispute based on the Agreement on Safeguards.
FEDERICO MARENGO*

326
See Panel Report, Mexico – Olive Oil, adopted on 21 October 2008, WT/DS341/R, para 7.121.
327
Appellate Body Report, Mexico – Anti-Dumping Measures on Rice, adopted on 20 December 2005,
WT/DS295/AB/R, para. 282 (quoting Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews, cit.
supra note 262, para. 242, quoting in turn Appellate Body Report, US – Hot-Rolled Steel, adopted on 23 August 2001,
WT/DS184/AB/R, para. 73, quoting in turn Panel Report, US – Hot-Rolled Steel, adopted on 23 August 2001,
WT/DS184/R, para. 7.54).
328
Panel Report, cit. supra note 298, para. 7.78.
329
Ibid., para. 7.149. The Panel based its position on Panel Report, Argentina – Poultry Anti-Dumping Duties,
adopted on 19 May 2003, WT/DS241/R, paras. 7.283-7.285; Appellate Body Report, US – Hot-Rolled Steel, cit. supra
note 327, paras. 211-214; Panel Report, EU – Biodiesel (Argentina), adopted on 26 October 2016, WT/DS473/R, paras.
7.413, 7.415, and 7.431; Panel Report, Mexico – Anti-Dumping Measures on Rice, adopted on 20 December 2005,
WT/DS295/R, paras. 7.65 and 7.86-7.87; Panel Report, EC – Countervailing Measures on DRAM Chips, adopted on
3 August 2005, WT/DS299/R; and Panel Report, China – Cellulose Pulp, adopted on 23 May 2017, WT/DS483/R,
para. 7.13.
330
WTO, “Members adopt panel ruling in Australia-Indonesia paper duty dispute”, 27 January 2020, available
at: <https://www.wto.org/english/news_e/news20_e/dsb_08jan20_e.htm>.
*
Ph.D. candidate in International Law and Economics, Bocconi University, Milan.

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Electronic copy available at: https://ssrn.com/abstract=3578938