Dispute Settlement Reports 2003

United States – Rules of Origin for Textiles and Apparel Products (WT/DS243) Report of the Panel 2309(304) I. INTRODUCTION 2316(2) II. FACTUAL ASPECTS 2318(4) A. Section 334 of the Uruguay Round Agreements Act 2318(2) B. Section 405 of the Trade and Development Act of 2000 2320(2) C. 19 CFR § 102.21 2322(1) III. ARGUMENTS OF THE PARTIES 2322(71) A. First Written Submission of India 2322(13) 1. Introduction 2322(1) 2. Factual Background 2323(2) (a) Section 334 of the Uruguay Round Agreements Act 2323(1) (b) The Amendments to Section 334 in Section 405 of the Trade and Development Act of 2000 2324(1) 3. Legal Argument 2325(10) (a) The Measures at Issue 2325(1) (b) The Measures at Issue are Rules of Origin within the Meaning of Article 1 of the RO Agreement 2325(1) (c) The Measures at Issue are Subject to the Disciplines set out in Article 2 of the RO Agreement 2325(1) (d) The Measures at Issue are Inconsistent with Article 2(b) of the RO Agreement 2326(7) (e) The Measures at Issue are Inconsistent with Article 2(c) of the RO Agreement 2333(1) (f) The Measures at Issue are Inconsistent with Article 2(d) of the RO Agreement 2334(1) (g) The Measures at Issue are Inconsistent with Article 2(e) of the RO Agreement 2335(1) 4. Conclusion 2335(1) B. First Written Submission of the United States 2335(11) 1. Introduction 2335(2) 2. Factual Background 2337(2) (a) The Agreement on Rules of Origin 2337(1) (b) Section 334 of the Uruguay Round Agreements Act 2338(1) (c) Section 405 of the Trade and Development Act of 2000 2339(1) 3. Procedural Background 2339(1) 4. Legal Argument 2340(6) (a) Section 334 is Consistent with Article 2(b) 2341(2) (b) Section 405 is Consistent with Article 2(b) 2343(1) (c) Section 334 and Section 405 are Consistent with Article 2(c) 2344(1) (d) Consistent with Article 2(d), the Rules are not Discriminatory 2345(1) (e) The Administration of the Rules is consistent with Article 2(e) 2345(1) 5. Conclusion 2346(1) C. Oral Statement of India at the First Meeting of the Panel 2346(8) D. Oral statement of the United States at the First Meeting of the Panel 2354(6) 1. Introduction 2354(3) (a) The Agreement on Rules of Origin 2356(1) (b) Section 334 of the Uruguay Round Agreement Act 2356(1) (c) Section 405 of the Trade and Development Act of 2000 2356(1) 2. Legal Analysis 2357(2) (a) Section 334 is Consistent with Article 2(b) 2357(1) (b) Section 405 is Consistent with Article 2(b) 2358(1) (c) Section 334 and Section 405 are Consistent with Article 2(c) 2358(1) (d) Consistent with Article 2(d), the Rules are not Discriminatory 2359(1) (e) The Administration of the Rules is Consistent with Article 2(e) 2359(1) 3. Conclusion 2359(1) E. Second Written Submission of India 2360(14) 1. Introduction 2360(1) 2. Legal Argument 2360(13) (a) The Measures at Issue 2360(1) (i) The Fabric Forward Rule 2360(1) (ii) The DP2 Rule for Fabric of Silk, Cotton, Man-Made Fibre or Vegetable Fibre 2361(1) (iii) The DP2 Rule for Products of 7 HTS Headings 2361(1) (iv) The Fabric Forward Rule for Products of 7 HTS Headings Made of Cotton, Wool or Fibre Blend with more than 16% Cotton 2361(1) (b) The Measures at Issue are Inconsistent with Article 2(b) of the RO Agreement 2362(1) (i) Definition of the Terms "trade objectives" 2362(1) (ii) The Prevention of Quota Circumvention as Defined by the United States is the Pursuit of a Trade Objective 2362(1) (iii) The Senate Report Shows that Section 333, not Section 334, was Passed to Implement the Anti-Circumvention Provisions of the ATC 2363(1) (iv) Section 334 is Being Used as an Instrument to Protect the United States Domestic Industry 2363(1) (v) Section 405 is Being Used as an Instrument to Favour the European Communities 2364(1) (c) The The Measures at Issue are Inconsistent with the Second Sentence of Article 2(c) of the RO Agreement 2365(1) (i) The Measures at Issue Require the Fulfilment of a Condition not Related to Manufacturing or Processing 2365(1) (ii) The Measures at Issue pose Unduly Strict Requirements 2366(1) (d) The Measures at Issue are Inconsistent with the First Sentence of Article 2(c) of the RO Agreement 2367(1) (i) The Basic Interpretative Issue 2367(1) (ii) Article 2 (c) does not Require the Showing of an Actual Restrictive, Distorting and Disruptive Impact on International Trade Reflected in Trade Statistics 2367(1) (iii) Article 2 (c) Requires Members to Refrain from Adopting and Maintaining Rules of Origin which Create Conditions of Competition with Restrictive, Distorting and Disruptive Effects on International Trade 2368(1) (iv) The Measures at Issue Establish Conditions of Competition with Restrictive, Distorting or Disruptive Effects on International Trade 2370(1) (e) The Measures at Issue are Inconsistent with Article 2(d) of the RO Agreement 2370(1) (i) Provisions that Prohibit Discrimination (treatment no less favourable) have been Interpreted as Prohibiting both de jure and de facto Discrimination 2370(1) (ii) De facto Discrimination is Covered by Article 2 (d) of the RO Agreement 2371(1) (iii) Section 405 Discriminates on a de facto Basis in Favour of the European Communities 2371(1) (f) The Effect of Section 405 is to Impose Differentially Disadvantageous Consequences 2371(1) (g) The Differential Effects Created by Section 405 are Unjustifiable 2372(1) 3. Findings and Recommendations Requested 2373(1) F. Second Written Submission of the United States 2374(9) 1. Introduction 2374(1) 2. India has Failed to Establish that Section 334 of the URAA is Inconsistent with United States Obligations under the RO Agreement 2375(8) (a) The Goals of Section 334 are not Impermissible Trade Objectives in the Context of Article 2(b) 2375(3) (b) India has not Shown that Section 334 Restricts, Distorts or Disrupts International Trade 2378(1) (i) India's Analytical Framework is Inconsistent with Article 2(c) 2378(1) (ii) The Interpretation of "restrictive, distorting, disruptive effects" 2380(2) (c) India has not Shown that Section 405 is Discriminatory or that it Restricts, Distorts and Disrupts International Trade 2382(1) 3. Conclusion 2383(1) G. Oral Statement of India at the Second Meeting of the Panel 2383(5) H. Oral Statement of the United States at the Second Meeting of the Panel 2388(5) 1. Introduction 2388(1) 2. Section 334 2389(3) 3. Section 405 2392(1) 4. Conclusion 2393(1) IV. ARGUMENTS OF THE THIRD PARTIES 2393(10) A. Third-Party Submission of China 2394(2) B. Third-Party Submission of The European Communities 2396(5) 1. Disciplines under Article 2 of the RO Agreement and their Effect on Members' Freedom to Choose their Rules of Origin 2396(1) 2. Article 2(b) of the RO Agreement 2397(2) (a) "Trade objective" 2397(1) (b) "Used as Instrument to Pursue Trade Objectives Directly or Indirectly" 2397(1) (i) Section 334 – Protection of Domestic Industry 2398(1) (ii) Section 405 – Favouring the European Communities over other Countries 2399(1) 3. Article 2(c) 2399(1) (a) Points Related to the Meaning of Certain Elements 2399(1) (b) Existence of a de minimis Threshold Regarding Restrictive, Distorting or Disruptive Effects 2400(1) (c) How to Demonstrate Effect 2400(1) 4. Article 2(d) 2400(1) C. Third-Party Submission of the Philippines 2401(2) V. INTERIM REVIEW 2403(1) VI. FINDINGS 2403(75) A. Measures at Issue 2403(4) B. Overview of the Parties' Claims and Arguments 2407(1) C. Preliminary Remarks 2408(3) 1. Burden of Proof 2408(1) 2. Applicable Rules of Interpretation 2409(1) 3. Disciplines Prescribed by Article 2 of the RO Agreement 2410(1) D. India's Claims in Respect of Section 334 and Section 405 2411(66) 1. India's Claims under Article 2(b) of the RO Agreement 2411(26) (a) Article 2(b) of the RO Agreement 2411(4) (b) Consistency of Section 334 with Article 2(b) of the RO Agreement 2415(16) (c) Consistency of Section 405 with Article 2(b) of the RO Agreement 2431(6) 2. India's Claim under Article 2(c), First Sentence, of the RO Agreement 2437(21) (a) Article 2(c), First Sentence, of the RO Agreement 2437(9) (b) Consistency of the Measures at Issue with Article 2(c), First Sentence, of the RO Agreement 2446(1) (i) India's Arguments as Developed in India's First Written Submission 2446(1) (ii) India's Arguments as Developed Subsequent to India's First Written Submission 2456(2) 3. India's Claims under Article 2(c), Second Sentence, of the RO Agreement 2458(9) (a) Article 2(c), Second Sentence, of the RO Agreement 2458(4) (b) Consistency of the Measures at Issue with Article 2(c), Second Sentence, of the RO Agreement 2462(1) (i) "Fulfilment of a condition not related to manufacturing or processing" 2462(1) (ii) "Unduly strict requirements" 2465(2) 4. India's Claim under Article 2(d) of the RO Agreement 2467(10) (a) Article 2(d) of the RO Agreement 2467(5) (b) Consistency of Section 405 with Article 2(d) of the RO Agreement 2472(5) E. India's Claims in Respect of the Implementing Customs Regulations 2477(1) F. India's Claims in Respect of the Application of the Measures at Issue 2478(1) VII. CONCLUSION 2478(2) ANNEX A ANSWERS OF PARTIES TO QUESTIONS 2480(93) ANNEX A-1 ANSWERS OF INDIA TO QUESTIONS FROM THE PANEL FOLLOWING THE FIRST MEETING 2480(31) ANNEX A-2 ANSWERS OF THE UNITED STATES TO QUESTIONS FROM THE PANEL FOLLOWING THE FIRST MEETING 2511(13) ANNEX A-3 ANSWERS OF THE UNITED STATES TO QUESTIONS FROM INDIA FOLLOWING THE FIRST MEETING 2524(3) ANNEX A-4 ANSWERS OF INDIA TO QUESTIONS FROM THE PANEL FOLLOWING THE SECOND MEETING 2527(16) ANNEX A-5 ANSWERS OF THE UNITED STATES TO QUESTIONS FROM THE PANEL FOLLOWING THE SECOND MEETING 2543(14) ANNEX A-6 ANSWERS OF INDIA TO QUESTIONS FROM THE UNITED STATES FOLLOWING THE SECOND MEETING 2557(3) ANNEX A-7 COMMENTS OF INDIA ON ANSWERS OF THE UNITED STATES TO QUESTIONS FROM THE PANEL FOLLOWING THE SECOND MEETING 2560(11) ANNEX A-8 COMMENTS OF THE UNITED STATES ON ANSWERS OF INDIA TO QUESTIONS FROM THE PANEL AND TO QUESTIONS FROM THE UNITED STATES FOLLOWING THE SECOND MEETING 2571(2) ANNEX B ANSWERS OF THIRD PARTIES TO QUESTIONS ANNEX B-1 - ANSWERS OF CHINA TO QUESTIONS FROM THE PANEL 2573(22) ANNEX B-2 ANSWERS OF THE EUROPEAN COMMUNITIES TO QUESTIONS FROM THE PANEL 2584(6) ANNEX B-3 ANSWERS OF THE PHILIPPINES TO QUESTIONS FROM THE PANEL 2590(5) ANNEX C 19 CFR § 102.21 2595(18) European Communities – Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil (WT/DS219) Report of the Appellate Body 2613(3) I. INTRODUCTION 2616(2) II. ARGUMENTS OF THE PARTICIPANTS AND THE THIRD PARTICIPANTS 2618(16) A. Claims of Error by Brazil – Appellant 2618(8) 1. Devaluation of the Brazilian Real During the Period of Investigation: Article VI:2 of the GATT 1994 and Article 1 of the Anti-Dumping Agreement 2618(2) 2. Data for SG&A and Profits: Article 2.2.2 of the Anti-Dumping Agreement 2620(1) 3. Cumulation: Articles 3.2 and 3.3 of the Anti-Dumping Agreement 2621(1) 4. Exhibit EC-12: Articles 3.1, 3.4, and 17.6(i) of the Anti-Dumping Agreement 2622(1) 5. Disclosure of Information: Articles 6.2 and 6.4 of the Anti-Dumping Agreement 2623(1) 6. Implicit Analysis of the "Growth" Factor: Article 3.4 of the Anti-Dumping Agreement 2624(1) 7. Causality: Article 3.5 of the Anti-Dumping Agreement 2624(2) B. Arguments of the European Communities – Appellee 2626(6) 1. Devaluation of the Brazilian Real During the Period of Investigation: Article VI:2 of the GATT 1994 and Article 1 of the Anti-Dumping Agreement 2626(1) 2. Data for SG&A and Profits: Article 2.2.2 of the Anti-Dumping Agreement 2627(1) 3. Cumulation: Articles 3.2 and 3.3 of the Anti-Dumping Agreement 2628(1) 4. Exhibit EC-12: Articles 3.1, 3.4, and 17.6(i) of the Anti-Dumping Agreement 2629(1) 5. Disclosure of Information: Articles 6.2 and 6.4 of the Anti-Dumping Agreement: 2629(1) 6. Implicit Analysis of the "Growth" Factor: Article 3.4 of the Anti-Dumping Agreement: 2630(1) 7. Causality: Article 3.5 of the Anti-Dumping Agreement 2631(1) C. Arguments of the Third Participants 2632(25) 1. Japan 2632(1) 2. United States 2633(1) III. ISSUES RAISED IN THIS APPEAL 2634(1) IV. DEVALUATION OF THE BRAZILIAN REAL DURING THE PERIOD OF INVESTIGATION: ARTICLE VI:2 OF THE GATT 1994 AND ARTICLE 1 OF THE ANTI-DUMPING AGREEMENT 2635(9) V. DATA FOR SG&A AND PROFITS: ARTICLE 2.2.2 OF THE ANTI-DUMPING AGREEMENT 2644(7) VI. CUMULATION: ARTICLES 3.2 AND 3.3 OF THE ANTI-DUMPING AGREEMENT 2651(6) VII. EXHIBIT EC-12: ARTICLES 3.1, 3.4, AND 17.6(I) OF THE ANTI-DUMPING AGREEMENT 2657(5) A. Article 17.6(i) of the Anti-Dumping Agreement 2658(3) B. Articles 3.1 and 3.4 of the Anti-Dumping Agreement 2661(1) VIII. DISCLOSURE OF INFORMATION: ARTICLES 6.2 AND 6.4 OF THE ANTI-DUMPING AGREEMENT 2662(5) IX. IMPLICIT ANALYSIS OF THE "GROWTH" FACTOR: ARTICLE 3.4 OF THE ANTI-DUMPING AGREEMENT 2667(4) X. CAUSALITY: ARTICLE 3.5 OF THE ANTI-DUMPING AGREEMENT 2671(12) A. "Known Factors Other than the Dumped Imports which at the Same Time are Injuring the Domestic Industry" 2672(4) B. Non-Attribution 2676(7) 1. European Communities' Procedural Objection 2678(1) 2. Merits of Brazil's Claim 2679(4) XI. FINDINGS AND CONCLUSIONS 2683(2) ANNEX 1: NOTIFICATION OF AN APPEAL BY BRAZIL UNDER PARAGRAPH 4 OF ARTICLE 16 OF THE UNDERSTANDING ON RULES AND PROCEDURES GOVERNING THE SETTLEMENT OF DISPUTES 2685(4) Cumulative Index of Published Disputes 2689