WTO Dispute Regarding Countervailing Measures On Certain Hot-Rolled Carbon Steel Flat Products From India- Dispute DS436

WTO Dispute Regarding Countervailing Measures On Certain Hot-Rolled Carbon Steel Flat Products From India- Dispute DS436India and United States (U.S.) were pursuing a dispute before the World Trade Organisation (WTO) pertaining to certain hot-rolled carbon steel flat products exported from India to U.S. The final report of the Appellate Body has been released on 8th December 2014. Please see the document United States – Countervailing Measures on Certain Hot-Rolled Carbon Steel Flat Products from India – AB-2014-7 -Report of the Appellate Body (PDF) for more details. A summary of the same is available as WTO Summary of the Dispute Settlement of Dispute No DS436 between India and US (PDF).

This decision is a mixed one where India prevailed over U.S. on few issues while U.S. prevailed over India on others. Nevertheless it is a big relief for Indian steel exporters who were facing uncertainties till now. IPR Helpdesk of Perry4Law and PTLB is providing the crux of this decision in this work for the larger benefit of all stakeholders.

The key findings and conclusions of the Appellate Body are:

For the reasons set out in this Report, the Appellate Body:

(a) With respect to the Panel’s findings regarding the term “public body” under Article 1.1(a)(1) of the SCM Agreement:

(i) Reverses the Panel’s finding, in paragraphs 7.89 and 8.3.c.i of the Panel Report, rejecting India’s claim that the USDOC’s determination that the NMDC is a public body is inconsistent with Article 1.1(a)(1) of the SCM Agreement; and

(ii) Completes the legal analysis and finds that the USDOC’s determination that the NMDC is a public body is inconsistent with Article 1.1(a)(1) of the SCM Agreement;

(b) With respect to the Panel’s findings regarding financial contribution under Article 1.1(a)(1)(i) and (iii) of the SCM Agreement:

(i) Upholds the Panel’s finding, in paragraphs 7.241 and 8.3.d.i of the Panel Report, rejecting India’s claim that the USDOC’s determination that the GOI provided goods through the grant of mining rights for iron ore and coal is inconsistent with Article 1.1(a)(1)(iii) of the SCM Agreement; and

(ii) Upholds the Panel’s finding, in paragraphs 7.297 and 8.3.e.ii(1) of the Panel Report, rejecting India’s claim that the USDOC’s determination that the SDF Managing Committee provided direct transfers of funds is inconsistent with Article 1.1(a)(1)(i) of the SCM Agreement;

(c) With respect to the Panel’s “as such” findings regarding benefit under Article 14(d) of the SCM Agreement:

(i) Upholds the Panel’s finding, in paragraph 7.35 of the Panel Report, rejecting India’s claim that the US benchmarking mechanism is inconsistent with Article 14(d) of the SCM Agreement because it fails to require investigating authorities to assess the adequacy of remuneration from the perspective of the government provider before assessing whether a benefit has been conferred on the recipient;

(ii) Upholds, albeit for different reasons, the Panel’s finding, in paragraph 7.46 of the Panel Report, rejecting India’s claim that the US benchmarking mechanism is inconsistent “as such” with Article 14(d) of the SCM Agreement because it excludes the use of government prices as benchmarks;

(iii) Upholds the Panel’s finding, in paragraph 7.52 of the Panel Report, rejecting India’s claim that the use of “world market prices” as Tier II benchmarks provided for in Section 351.511(a)(2)(ii) of the US Regulations is inconsistent “as such” with Article 14(d) of the SCM Agreement; and

(iv) upholds, albeit for different reasons, the Panel’s finding, in paragraph 7.63 of the Panel Report, rejecting India’s claim that the mandatory use of “as delivered” benchmarks provided for in Section 351.511(a)(2)(iv) of the US Regulations is inconsistent “as such” with Article 14(d) of the SCM Agreement;

(d) With respect to the Panel’s “as applied” findings regarding benefit under Article 14 of the SCM Agreement:

(i) Declares moot and of no legal effect the Panel’s alternative findings, in paragraphs 7.160-7.165 of the Panel Report, on the ex post rationales put forward by the United States to justify the USDOC’s failure to consider certain domestic pricing information in assessing whether the NMDC provided iron ore for less than adequate remuneration;

(ii) Reverses the Panel’s findings, in paragraphs 7.189 and 7.192 of the Panel Report, rejecting India’s claims that the USDOC’s exclusion of the NMDC’s export prices in determining a Tier II benchmark is inconsistent with Article 14(d) and the chapeau of Article 14 of the SCM Agreement; and completes the legal analysis and finds that the USDOC’s exclusion of such prices is inconsistent with Article 14(d) and the chapeau of Article 14 of the SCM Agreement;

(iii) Reverses the Panel’s findings, in paragraphs 7.183 and 7.185 of the Panel Report, rejecting India’s claim that the USDOC’s use of “as delivered” prices from Australia and Brazil in assessing whether the NMDC provided iron ore for less than adequate remuneration is inconsistent with Article 14(d) of the SCM Agreement; and completes the legal analysis and finds that the USDOC’s use of such prices is inconsistent with Article 14(d) of the SCM Agreement;

(iv) Upholds the Panel’s finding, in paragraph 7.260 of the Panel Report, rejecting India’s claim that the USDOC’s construction of government prices for iron ore and coal is inconsistent with Articles 1.1(b) and 14(d) of the SCM Agreement; and

(v) Reverses the Panel’s finding, in paragraph 7.313 of the Panel Report, rejecting India’s claim as it relates to the USDOC’s determination that loans provided under the SDF conferred a benefit within the meaning of Articles 1.1(b) and 14(b) of the SCM Agreement, and finds that it is unable to complete the legal analysis;

(e) With respect to the Panel’s findings regarding specificity under Article 2.1(c) of the SCM Agreement:

(i) Upholds the Panel’s finding, in paragraph 7.135 of the Panel Report, that there was no obligation on the USDOC to establish that only a “limited number” within the set of “certain enterprises” actually used the subsidy programme;

(ii) Upholds the Panel’s finding, in paragraph 7.126 of the Panel Report, rejecting India’s argument that specificity must be established on the basis of discrimination in favour of “certain enterprises” against a broader category of other, similarly situated entities; and

(iii) Upholds the Panel’s finding, in paragraph 7.133 of the Panel Report, rejecting India’s argument that, if the inherent characteristics of the subsidized good limit the possible use of the subsidy to a certain industry, the subsidy will not be specific unless access to this subsidy is further limited to a subset of this industry;

(f) With respect to the Panel’s findings regarding the use of “facts available” under Article 12.7 of the SCM Agreement:

(i) Modifies the Panel’s interpretation of Article 12.7 of the SCM Agreement, in Section 7.7.5.1 of the Panel Report, and finds that Article 12.7 requires an investigating authority to use facts available that reasonably replace the missing necessary information with a view to arriving at an accurate determination, and that this also includes an evaluation of available evidence;

(ii) Finds that the Panel failed to comply with its duty under Article 11 of the DSU to make an objective assessment of the matter before it, and therefore reverses the Panel’s finding, in paragraphs 7.445 and 8.3.h of the Panel Report, that India failed to establish a prima facie case that Section 1677e(b) of the US Statute and Section 351.308(a)-(c) of the US Regulations are inconsistent “as such” with Article 12.7 of the SCM Agreement; and completes the legal analysis and finds that India has not established that Section 1677e(b) of the US Statute and Section 351.308(a)-(c) of the US Regulations are inconsistent “as such” with Article 12.7 of the SCM Agreement; and

(iii) Upholds the Panel’s finding, in paragraph 7.450 of the Panel Report, that India failed to establish a prima facie case of inconsistency with Article 12.7 of the SCM Agreement;

(g) With respect to the Panel’s findings regarding the USDOC’s examination of new subsidy allegations in administrative reviews:

(i) Upholds the Panel’s finding, in paragraphs 7.508 and 8.3.j of the Panel Report,  rejecting India’s claims that the USDOC’s examination of new subsidy allegations in administrative reviews related to the imports at issue is inconsistent with Articles 11.1, 13.1, 21.1, and 21.2 of the SCM Agreement; and

(ii) Reverses the Panel’s finding, in paragraphs 7.508 and 8.3.j of the Panel Report,  rejecting India’s claims that the USDOC’s examination of new subsidy allegations in administrative reviews related to the imports at issue is inconsistent with Articles 22.1 and 22.2 of the SCM Agreement, and finds that it is unable to complete the legal analysis in this regard;

(h) With respect to the Panel’s findings regarding “cross-cumulation” under Article 15.3 and Articles 15.1, 15.2, 15.4, and 15.5 of the SCM Agreement:

(i) Finds that the Panel did not err in finding that Article 15.3 and Articles 15.1, 15.2, 15.4, and 15.5 of the SCM Agreement do not authorize investigating authorities to assess cumulatively the effects of imports that are not subject to simultaneous countervailing duty investigations with the effects of imports that are subject to countervailing duty investigations; and

(ii) Finds that the Panel failed to comply with its duty under Article 11 of the DSU to make an objective assessment of the matter before it, and therefore reverses the Panel’s findings, in paragraphs 7.356, 7.369, 8.2.c, and 8.2.d of the Panel Report, that Section 1677(7)(G) of the US Statute is inconsistent “as such” with Article 15.3 and Articles 15.1, 15.2, 15.4, and 15.5 of the SCM Agreement; and completes the legal analysis and finds that Section 1677(7)(G)(iii) is inconsistent “as such” with Article 15.3 and Articles 15.1, 15.2, 15.4, and 15.5 of the SCM Agreement;

(i) Except for the findings in paragraphs 5.1.f.ii and 5.1.h.ii above, otherwise rejects all of India’s claims that the Panel failed to make an objective assessment of the matter before it, and therefore acted inconsistently with Article 11 of the DSU; and

(j) With respect to the Panel’s findings identified in paragraphs 5.1.c and 5.1.g above, rejects India’s claims that the Panel failed to provide a basic rationale for its findings, and therefore acted inconsistently with Article 12.7 of the DSU.

5.2. The Appellate Body recommends that the DSB request the United States to bring its measures found in this Report, and in the Panel Report as modified by this Report, to be inconsistent with its obligations under the SCM Agreement into conformity with that Agreement.

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