The legacy of the Byrd Amendment controversies: Rethinking the principle of good faith

Journal of World Trade

Volumn 37, Issue 5, 2003, Pages 921-958

  Jung, Youngjin ^a   Lee, Sun Hyeong ^a,b  

^a GEORGETOWN UNIVERSITY LAW CENTER   (United States)

^b Yun Kang Jeong and Han Law Firm   (South Korea)

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EID: 33645326145     PISSN: 10116702     EISSN: None     Source Type: Journal    
DOI: 10.54648/trad2003048     Document Type: Article

References (145)

1. 19 U.S.C. § 1675c (West Supp. 2001). § 754 of the Tariff Act of 1930.
2. Respectively, Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (hereinafter "AD Agreement") and Agreement on Subsidies and Countervailing Duties (hereinafter "SCM Agreement").
3. AB Report, United States - Continued Dumping and Subsidies Offset Act (CDSOA), WT/DS217/AB/R, WT/DS234/AB/R, adopted 16 January 2003, para. 7.34.
4. In the GATT and WTO context, these are complaints brought under GATT Article XXIII:(1)(b), where the nullification or impairment of a benefit of a party does not conflict with GATT provisions and other WTO texts, in contrast to Article XXIII(1)(a), which refers to direct violations of the GATT obligations. The lethargic performance of non-violation complaints has been more pronounced in the WTO than in the GATT. There has been no single successful non-violation complaint since the launch of the WTO. See Ernst-Ulrich Petersmann, Violation-Complaints and Non-Violation Complaints in Public International Law, G.Y.I.L. 34 (1991), 175, 224.
5. For a critical account of a non-violation complaint, see Sung-joon Cho, GATT Non-Violation Issues in the WTO Framework: Are They the Achilles' Heel of the Dispute Settlement Process?, 39 Harv. Int'l L.J. 2 (1998), 311, 351.
6. The Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, Public Law 106-387, 114 Stat. 1549, §§ 1001+1003.
7. The provision was subject to controversy because it was included in a conference report. Chairman Archer of House Ways and Means Committee protested against the bill because of substantive and procedural reasons. The matter, he said, was "outside the scope of conference" and within the "trade and tariff jurisdiction of the Committee on Ways and Means". He also noted that the amendment raised "serious substantive concerns" that needed to be considered by the committee, hinting that it may be in violation of subsidy rules. US groups other than the steel industry also urged repeal of the law because of the distortion of trade remedy laws. Trading partners had hoped that the legislation would not be implemented, as the Clinton Administration signed it reluctantly. The bill was patterned after § 61, which had been introduced the year before, and was supported by the United Steelworkers of America. Byrd Amendment on AD, CVD Duties Prevails in Conference, Inside US Trade, 6 October 2000, available at .
8. 19 U.S.C. § 1674c(a).
9. Annual Report (Final): Table 1 CDSOA FY 2002 Disbursements, and Annual Report (Final): Table 1 CDSOA FY 2001 Disbursements, available at .
10. The projected amount was $39 million a year. Neil King Jr, Trade Imbalance: Why Uncle Sam Wrote a Big Check to a Sparkler Maker, Wall Street Journal, 5 December 2002, at A1.
11. United States Tariff Act of 1930, § 754(b)(4), 114 Star. 1549A-73. Other expenses include: healthcare benefits to employees, pension benefits to employees, environmental equipment, training, or technology.
12. C.F.R. § 159.61(a).
13. U.S.C. § 1675c(b)(1)(B)
14. C.F.R. § 159.61(b)(2)(ii).
15. See Richard J. Pierce Jr, Antidumping Law as a Means of Facilitating Cartelization, 67 Antitrust L. (2000), 725, 728. In the later 1989, cartel members in the ferrosilicon industry used anti-dumping laws to drive out importers. After they did so, however, the cartel members chose to produce more from non-US facilities, thereby "replacing non-cartel imports that were being sold at market prices with higher priced cartel imports from other countries".
16. AB Report, CDSOA, as note 3 above, at para. 7.39.
17. AB Report, CDSOA, as note 3 above, at para. 297. "We have recognized the relevance of the principle of good faith in a number of cases. Clearly, therefore, there is a basis for a dispute settlement Panel to determine, in an appropriate case, whether a Member has not acted in good faith." WT/DS217/AB/R, WT/DS234/AB/R.
18. AB Report, CDSOA, as note 3 above, at para. 298.
19. AB Report, India - Patent Protection for Pharmaceutical and Agricultural Chemical Products (WT/DS50/AB/R), adopted 16 January 1998 (reversing the Panel's finding that legitimate expectations of members and private right holders concerning conditions of competition must be taken into account in interpreting the TRIPs Agreement).
20. AB Report, European Communities - Customs Classification of Certain Computer Equipment (WT/DS62, 67, 68/AB/P,), adopted 22 June 1998 (reversing the Panel's finding that legitimate expectations is relevant to interpreting a Schedule in the context of a violation complaint regarding GATT Article II: 1).
21. Petersmann, as note 4 above, at 224.
22. He specifically mentions "benefits accruing under GATT" and "balance of reciprocal concessions". See also Thomas Cottier and Krista N. Scheler, "Good Faith and the Protection of Legitimate Expectations in the WTO", in Marco Bronckers and Reinhard Quick (eds), New Directions in International Economic Law (The Hague: Kluwer Law International, 2000), p. 48. The WTO system needs to "extend its jurisprudential basis beyond the limits of the texts."
23. Petersmann, as note 4 above, at 225-226.
24. See William N. Eskridge Jr, Dynamic Statutory Interpretation (Cambridge, MA: Harvard University Press, 1994).
25. Sir Robert Jennings et al., Oppenheim's International Law (9th edn, Harlow: Longman, 1992).
26. John R. Magnus et al., What Do All These Adverse WTO Decisions Mean?, GULC Trade Update, 30 January 2003 (on file with the authors)
27. Sir Ian Sinclair, The Vienna Convention on the Law of Treaties (2nd edn, Manchester: Manchester University Press, 1984), p. 119
28. Panel Report, United States - Sections 301-310 of the Trade Act of 1974, WT/DS152/R, 1999, para. 7.68.
29. David Palmeter and Petros C. Mavroidis, The WTO Legal System: Source of Law, 92 A.J.I.L. 3 (July 1998), 398.
30. Ian Brownlie, Principles of Public International Law (5th edn, Oxford: Clarendon Press, 1998), p. 3.
31. Panel, Report, Korea - Meassures Affecting Government Procurement, WT/DS163/R, adopted 1 May 20002, at. para. 7.94.
32. For instance, in EC - Hormones, the AB held that "it cannot be lightly assumed that sovereign states intended to impose upon themselves the more onerous, rather than the less burdensome, obligation (in dubious)" (AB Report, EC - Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R, 1998, para. 165.
33. In Chile - Alcoholic Beverages, the AB held that "Members of the WTO should not be assumed, in any way, to have continued previous protection or discrimination through the adoption of a new measure. This would come close to a presumption of bad faith" (AB Report, Chile - Taxes on Alcoholic Beverages, WT/DS87/AB/R, WT/DS110/AB/ R, 1999, para.74.
34. See Edmond McGovern, International Trade Regulation (Exeter: Globefield Press, 1995, updated), § 1.1212.
35. Bin Cheng, General Principles of Law: As Applied by International Courts and Tribunals (Grotius Society, 1987), p. 114.
36. AB Report, United States - Anti-Dumping Measures on Certain Hot-Rolled Steel Products From Japan (hereinafter US Hot-Rolled Steel), WT/DS184/AB/R, adopted 24 July 2002, at paras 101, 193.
37. Ibid., para. 101, quoting AB Report, Shrimp Products, para. 158.
38. US - Hot-Rolled Steel, para. 193.
39. Cottier and Schefer, as note 20 above, at 49.
40. Anthony D'Amato, "Good Faith", in KudolfBemhardt (ed.), Encyclopedia of Public International Law, Vol. (Amsterdam: Elsevier North Holland, 1992), pp. 599-661.
41. Article 31 also states that the "context" for the purpose ofthe interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes, any agreement and instrument in connection with the conclusion of, and relating to the treaty. It further states: "3. There shall be taken into account together with the context: (a) any subsequent agreement ... regarding the interpretation of the treaty or the application of its provisions; (b) any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation; (c) any relevant rules of international law applicable in the relations between the parties.
42. A sfecial meaning shall be given to a term if it is established that the parties so intended".
43. Panel Report, US - Sections 301-310 of the Trade Act of 1974, WT/ DS152/R, adopted 22 December 1999, para. 7.22.
44. Id.
45. Cheng, as note 31 above, at 106.
46. Ibid., citing Jay Treaty (Article VII) Arbitration (1794): The Betsy (1797) 4 Int. AdJ., M.S., p. 179, at p. 239.
47. Ibid., at 117,
48. citing North Atlantic Coast Fisheries case (1910).
49. AB Report, European Communities - Trade Description on Sardines, WT/DS231/AB/R, adopted 26 September 2002, para. 278.
50. Cottier and Scheler, as note 20 above, at 50.
51. Ibid., at 51.
52. AB Report, United States - Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R, adopted 6 November 1998, at para. 158.
53. See, e.g., Panel Report, EC - Anti-dumping Duties on Imports of Cotton-Type Bed Linen from India, WTDS141/R, adopted 12 March 2001, para. 6.89. Here, India argued as a matter of good faith that EC is estopped from advocating an interpretation ofthe AD Agreement that is different from that ofthe European Court ofFirst Instance.
54. Cottier and Schefer, as note 20 above, at 53.
55. Cheng, as note 31 above, at 111, quoung Greco-Turkish arbitash Arbitral Tribunal, Megalidis case (1926).
56. See, generally, Panel Report, United States - Continued Dumping and Subsidy Offset Act of 2000 (CDSOA), WT/DS217,234/R, adopted 16 September 2002, at paras 7.44 and 7.61.
57. Tara Gingerich, Comment: Why the WTO Should Require the Application of the Evidentiary Threshold Requirement in Anti-dumping Investigations, 48 Am. U.L. Rev. (October 1998), 135, 138 and 147,
58. citing Raj Bhala, Rethinking Anti-dumping Law, 28 Geo. Wash. J. Int'l L. & Econ. 1 (1995), 56.
59. Ibid., at 56.
60. AB Report, CDSOA, at para. 278.
61. Panel Report, CDSOA, as note 50 above, at paras 7.64-7.65.
62. Ibid., at para. 281.
63. DSU Articles 3.2 and 19.2.
64. Second Submission of the United States, US Continued Dumping and Subsidy Offset Act of 2000, 27 February 2002, para. 86
65. Panel Report, CDSOA;, as note 50 above, at para. 7.42.
66. Panel Report, CDSOA, as note 50 above, para. 7.42, n. 300.
67. Ibid., at para. 4.108, argument of Chile and Japan.
68. Second Submission of the United States, CDSOA, 27 February 2002, para. 71.
69. Ibid., at para. 81.
70. First Submission of the United States, CDSOA, 14 January 2002, para. 118.
71. As note 61 above, at para. 77.
72. Ibid., at para. 83.
73. Ibid., at para. 78.
74. Ibid., at para. 72.
75. AB Report, CDSOA, as note 3 above, at para. 298.
76. Ibid., at para. 290.
77. As note 61 above, para. 75.
78. Ibid., at para. 82.
79. Ibid., at para. 91.
80. The Panel acknowledges that the costs of filing a petition may be costly, but that the costs of supporting are low. In any event, they are meagre in comparison to litigation costs.
81. As note 60 above, para. 84.
82. As note 63 above, para. 125.
83. Ibid., at para. 127.
84. Panel Report, CDSOA, as note 50 above, para. 4.64, citing to, e.g., "Amendments to the Anti-Dumping Code: Submission by Canada", MTN.GNG/NG8/W/65, 22 December 1989, Section I(a)(i), p. 1. (exhibit CDA-9).
85. As note 63 above, at para. 119.
86. AB Report, CDSOA, as note 3 above, para.123.
87. Edwin A. Vermulst and Folkert Graafsma, WTO Disputes: Anti-Dumping, Subsidies and Safeguards (London: Cameron May, 2002), p. 187.
88. Panel Report, EC - Bed Linen, as note 47 above, at para. 6.216.
89. Id.
90. AB Report, CDSOA, as note 3 above, para. 125
91. Ibid., at para. 4.64,
92. citing "Statement of Administrative Action", in Message from the President of the United States Transmitting the Uruguay Round Agreements, Texts of Agreements Implementing Bill, Statement of Administrative Action and Required Supporting Statements, H.R. Doc. No. 103-316, Vol. 1 at 656 (1994), p. 812 (Exhibit CDA-10).
93. Panel Report, CDSOA, as note 50 above, para. 4.68.
94. As a large trading economy, the distortion in the US economy may also adversely affect prices in the world economy, but we will not delve deep into this effect in this article.
95. "The distributions shall be made on a pro rata basis based on new and remaining qualifying expenditures." 19 USC § 1675c(d)(3).
96. CFR § 159.61(a).
97. Alan O. Sykes, Countervailing Duty Law: An Economic Perspective, 89 Columbia L. Rev. 2 (1989), 199-263, at 255,
98. quoting Avinash Dixit, International Trade Policy for Oligopolistic Industries, 94 Economic J. (1983), 1-16, at 11.
99. AB Report, CDSOA, as note 3 above, at para. 7.39.
100. In 1997, in the dry pasta manufacturing industry, the 4 largest companies out of 249 total companies comprised 57.1 percent of the market. In steel product manufacturing, 16.7 percent comprised the 4 largest companies out of the total 503 companies. In the ball-bearing industry, the 4 leading companies out of 116 total comprised 49.4 percent. Data for share of value of shipments, from Concentration Ratios in Manufacturing: 1997 Economic Census, US Census Bureau, US Department of Commerce, Issued June 2001, available at .
101. One anomaly seems to be the crawfish tail meat sector.
102. In fact, domestic producers may have industry associations, which may act on "behalf" of the producers. The industry association, as a consortium of the firms, could be considered as one interested entity engaging in monopolistic behaviour as regards anti-dumping/countervail investigations.
103. Pierce, as note 14 above, at 739-740.
104. Conscious parallelism is a form of cartel without an express agreement. Each firm makes decisions on output and pricing based on knowledge of the competitors' prices and costs, observations, and expectations of the other competitors' behaviour. Pierce, as note 14 above, at 721.
105. "Tacit collusion, sometimes called oligopolistic price coordination or conscious parallelism, describes the process, not in itself unlawful, by which firms in a concentrated market might in effect share monopoly power, setting their prices at a profit-maximizing, supracompetitive level by recognizing their shared economic interests and their interdependence with respect to price and output decisions." Brook Group Ltd. v. Brown & Williamson Tobacco, 509 U.S. 209, 227 (holding that respondents were not liable for price discrimination through oligopolistic price coordination because the petitioner failed to demonstrate competitive injury as a matter of law).
106. Pierce, as note 14 above, at 742.
107. Price elasticity of demand is the percentage change in quantity divided by the percentage change in price. Hal Varian, Intermediate Microeconomics: A Modern Approach (5th edn, New York: Norton, 1999), p. 266.
108. If the elasticity of a good is greater than 1 in absolute value, it has an elastic demand. If it is less than 1 in absolute value, it is inelastic. The elasticity of demand for a good depends mostly on how many close substitutes it has. Ibid., at 267-268.
109. Some of the main beneficiaries of the CDSOA disbursements were pasta makers, who took $2.3 million, candle makers, and crawfish tail sellers. The imports have not declined very much despite the high duties. Surprisingly, the steel industry took only $29 million, which is 14 percent of total disbursements. This is because steel imports declined sharply since the tariffs were imposed. King, as note 9 above.
110. See Sykes, as note 89 above, at 225. In such case, the foreign producers have no choice but to continue to sell to the importing country, in this case the United States.
111. Pierce, as note 14 above, at 740.
112. The analysis can probably include foreign exporters who did not have to pay the duties.
113. Sykes, as note 89 above, at 209. "Even when subsidized import competition is potentially contrary to the national economic interest, countervailing duties are rarely, if ever, the appropriate policy response in theory or in practice."
114. King, as note 9 above.
115. Sykes, as note 89 above, at 211.
116. Paul R. Krugman and Maurice Obstfeld, International Trade: Theory and Policy (2nd edn, London: HarperCollins, 2000), pp. 262-281.
117. See Bush Officials Signal Byrd Implementation Despite Opposition, Inside US Trade, 16 February 2001. "[A] The Consuming Industries Trade Action Coalition's ... public comment submission said that the Byrd law 'sets a policy of giving away government funds in a way that distorts the operation of our nation's anti-dumping and countervailing duty laws, encouraging petitions and discouraging trade'." It also contended that the Byrd provision "hurts US industries that rely on raw materials and components for their products because it would hand over AD/CVD duties to domestic competitors of foreign suppliers". Available at .
118. Dan Ikenson, Steel and Its Protection Boss, Cato Institute Center for Trade Policies Studies, 25 January 2002, available at .
119. Jagdish Bhagwati, Directly Unproductive Profit-Seeking (DUP) Activities, Political Economy and International Economics (Cambridge, MA: MIT Press, 1991), pp. 129-134.
120. See note 6 above.
121. King, as note 9 above.
122. Sykes, as note 89 above, at 212.
123. The arbitrator, Yasuhei Taniguchi, determined that repeal of the statute was not the only method of implementation for the recommendation, that the United States may consider alternative methods in implementing the Appellate Body recommendation. Also, he found that the "reasonable period of time" for implementation was neither six months from the adoption of the Appellate Report by the DSB, as argued by the Complaining Parties, nor 15 months as suggested by the United States, but 11 months, which ends on 27 December 2003. Award of the Arbitrator, United States - Continued Dumping and Subsidies Offset Act, Recourse to Arbitration under DSU Article 21.3(c), WT/DS217/14, WT/DS234/ 22, circulated 13 June 2003.
124. Already, the reimbursements sought for the year 2002 exceed that of 2001 by 19.1 percent. The sum requested for the year 2001 was $1,189,592,904,865.54, and for 2002 was $1,416,828,122,355.75
125. See, e.g., AD Agreement Article 1, Article 18.1.
126. Congressional records show that legislators repeatedly refer to "illegal dumping"; they give no explanation of why a particular phenomenon in imports is "dumping" or why it is "illegal dumping". See, e.g., 146 Cong. Rec. S11855, S11858 (daily edn, 15 December 2000).
127. U.S.C. § 72 (West 2002).
128. U.S.C. §§ 60-71.
129. See, e.g., Wheeling-Pittsburgh Steel Corp. v. Mitsui Co., 35 F.Supp.2d 597 (S.D. Ohio 1999);
130. Geneva Steel Co. v. Ranger Steel Supply Corp., 980 F.Supp. 1209 (D. Utah 1997);
131. Helmac Products Corp. v. Roth Corp., 814 F.Supp. 581 (E.D. Mich. 1993).
132. See Wheeling-Pittsburgh, ibid. (domestic steel company's claim against importers of Japanese and Russian hot-rolled steel need not be dismissed, because the 15 USC § 72 has protectionist reach beyond domestic antitrust laws, as it seeks to prevent "injury to industry" from cutthroat pricing by international manufacturers, and did not have to meet traditional predatory discrimination pleading requirements).
133. AB Report, United States - Anti-Dumping Act of 1916 (1916 Act), WT/DS136, 162/AB/R, adopted 26 September 2000.
134. No domestic producer has won by suit under the 1916 Act. See, e.g., Wheeling-Pittsburgh Steel Corp. v. Mitsui Co., 35 F.Supp.2d 597 (S.D. Ohio 1999);
135. Geneva Steel Co. v. Ranger Steel Supply Corp., 980 F. Supp. 1209 (D. Utah 1997);
136. Helmac Products Corp. v. Roth Corp., 814 F.Supp. 581 (E.D. Mich. 1993).
137. If both the International Trade Commission and the Import Administration make affirmative preliminary determinations (within 190 days of initiation of the anti-dumping investigation, or 130 days for countervailing duty investigation) importers are required to post a bond or cash to cover an estimated amount for the duties which would be collected in the event that an AD or CVD order is issued upon the completion of the investigations.
138. King, as note 9 above.
139. For the year 2001, companies put in requests for a total of $1.2 trillion, which is about 10 percent of the US annual GDP. For example, the ball-bearing maker Torrington sought $23.4 billion. Its total sales that year were $1.1 million. King, as note 9 above.
140. See, generally, Pierce, as note 14 above.
141. Alan O. Sykes, Externalities in Open Economy Antitrust and their Implications for International Competition Policy, 23 Harvard J. L. & Pub. Pol'y (2000), 89, 94.
142. Douglas E. Rosenthal, Antitrust and Anti-dumping: The Twain Collide, Antitrust Report (August 2001).
143. But see Laurent A. Ruessmann, Implications of the WTO 1916 Act Decision (Part 1): Did the WTO Outlaw the Use of National Antitrust Rules with Regard to Crossborder Predatory Pricing?, Int. T.L.R. 5 (2001).
144. See also Hiroko Yamane, The Anti-dumping Act of 1916: A Victory at What Cost?, Int. T.L.R. 1 (2001).
145. AB Report, Hot-Rolled Steel, as note 32 above, para. 193.