Continued Dumping and Subsidy Offset Act. ( The Byrd Amendment ) -- Team # 6 -- (Spring 2006)

1. Continued Dumping and Subsidy Offset Act.   (The Byrd Amendment)-- Team # 6 --(Spring 2006)

2. Brief History of the CDSOA • Originally authored by Sen. DeWine, the CDSOA was passed in 2000 by the 106th Congress into public law 106-387 as an amendment title X of the Agricultural Spending Bill. • Sen. Byrd (WV) rallied support to see through this bill, hence the name “The Byrd Amendment” • Signed by President Clinton on the 28th of October 2000, the CDSOA modifies the Tariff Act of 1930. • The CDSOA provides that the United States Commissioner of Customs ("Customs") shall distribute, on an annual basis, duties assessed pursuant to a countervailing duty order, an antidumping order, or a finding under the US Antidumping Act of 1921, to "affected domestic producers“ i.e. petitioners for "qualifying expenditures.

3. The Modus Operandi of the CDSOA • The premise of this bill is/was to promulgate the indirect subsidization of the domestic firm operation in a discreet act of clientelism and proctectionalism against foreign genuine efficient operation in today’s global economy. • The ITC is empowered by this act to determine which companies supported the purpose(s) of the Byrd Amendment. • Funds generated by customs are kept in a special account and later disbursed after the countervailing duties have been levied against the importer and succinct determination has been made per the local firms eligibility.

4. CDSOA @ the WTO • Less than eight weeks after enactment, the bill received international recognition. • The EU and eight other countries requested consultation with the US. • Five months later, Canada and Mexico joined the complaining parties, both being NAFTA member Countries. • This case is the largest case ever brought to the WTO.

5. The Issues Grounds for complaints were that the CDSOA: a. is a  "specific action against dumping and subsidization" that is not in accordance with the Anti-Dumping Agreement or the SCM Agreement, and as such is WTO-inconsistent and b. undermines the value of, and thus violates, the requirements in the AD and SCM Agreements that dumping and countervailing duty investigations not proceed unless they are supported by a specified percentage of the domestic industry.

6. The Resolution • On Sept. 16th 2002, the DSB reached and delivered a resolution that the US was not in compliance with specific agreements cited by the complaining parties. • The US filed an appeal with the Appellate body. • The Appellate body rejected the panel decisions on Article 18.1 of the AD Agreement and Article 32.1of the SCM Agreement and concurred on the second argument i.e. Article 5.4 of the AD Agreement and Article 11.4 of the SCM Agreement. • In December 2005 the Byrd Amendment was voted out/repealed by congress and will be chronologically phased out to end by Oct. 2007.

7. Specific WTO Agreements • Anti-Dumping Agreement (ADA) • Agreement on Subsidies and Countervailing Measures (SCM Agreement) • GATT 1994 • WTO Agreement 

8. Agreement on implementation of Article VI of the General Agreement on Tariffs and Trade 1994(The Anti-dumping Agreement) • The AD Agreement governs the application of anti-dumping measures by Members of the WTO. • Anti-dumping measures are unilateral remedies which may be applied by a Member after an investigation and determination by that Member, in accordance with the provisions of the AD Agreement, that an imported product is “dumped” and that the dumped imports are causing material injury to a domestic industry producing the like product.

9. SCM Agreement • The Agreement on Subsidies and Countervailing Measures is intended to build on the Agreement on Interpretation and Application of Articles VI, XVI and XXIII which was negotiated in the Tokyo Round. This agreement does two things: • it disciplines the use of subsidies, and • it regulates the actions countries can take to counter the effects of subsidies. It says a country can use the WTO’s dispute settlement procedure to seek the withdrawal of the subsidy or the removal of its adverse effects. Or the country can launch its own investigation and ultimately charge extra duty (known as “countervailing duty”) on subsidized imports that are found to be hurting domestic producers.

10. AD-CVD? • People sometimes refer to the two together • Dumping and subsidies = a special offsetting import tax. • But there are also fundamental differences • Dumping is an action by a company. • Subsidies is an action by a government that acts • AD Agreement only concerns the actions governments may take against dumping. With subsidies, governments act on both sides: they subsidize and they act against each others’ subsidies. • Therefore, the subsidies agreement disciplines both the subsidies and the reactions.

11. DS 217 of 12/2000 • DS 217 agreed together that the Act appears to be not in conformity with the obligations of the United States under the GATT, the ADA and the ASCM. In particular, the Act seems to be inconsistent with the obligations of the United States under: • - Article 18.1 of the ADA, in conjunction with Article VI:2 of the GATT and Article 1 of the ADA; • - Article 32.1 of the ASCM, in conjunction with Article VI.3 of the GATT and Articles 4.10, 7.9 and 10 of the ASCM; • - Article X (3)(a) of the GATT; • - Article 5.4 of the ADA and Article 11.4 of the ASCM; • - Article 8 of the ADA and Article 18 of the ASCM; and • - Article XVI.4 of the Marrakech Agreement establishing the WTO, Article 18.4 of the ADA and Article 32.5 of the ASCM. • Complainant • Australia, Brazil, Chile, the European Communities, India, Indonesia, Japan, Korea and Thailand • Third Parties • Argentina, Canada, Costa Rica, Hong Kong, Israel, Mexico, Norway

12. DS 234 of 5/2001 • Canada and Mexico consider that the Act appears to be inconsistent with the obligations of the United States under the Marrakesh Agreement establishing the WTO, as well as the GATT, the ADA and the SCMA. In particular, the Act seems to be inconsistent with the obligations of the United States under: • Article 18.1 of the ADA in conjunction with Article VI:2 of the GATT and Article 1 of the ADA; • Article 32.1 of the SCMA, in conjunction with Article VI:3 of the GATT and 10 of the SCMA; • Article X(3)(a) of the GATT; • Article 5.4 of the ADA and Article 11.4 of the SCMA; • Article 8 of the ADA and Article 18 of the SCMA; • Article 5 of the SCMA; and • Article XVI:4 of the Marrakesh Agreement establishing the WTO, Article 18.4 of the ADA and Article 32.5 of the SCMA. • Complainants • Canada and Mexico • Third Parties • Argentina, Australia, Brazil, Costa Rica, European Communities, Hong Kong, India, Indonesia, Israel, Japan, Korea, Norway, Thailand

13. Position of the Parties • According to the complainants, the Byrd Amendment is inconsistent with the obligations of the United States under several provisions of the AD Agreement, and the SCM Agreement, in conjunction with the GATT and the WTO Agreement. • In particular, the Act is alleged to be inconsistent with the obligations of the United States under: • (i) Article 18.1 of the ADA in conjunction with Article VI:2 of the GATT and Article 1 of the ADA; • (ii) Article 32.1 of the SCM Agreement, in conjunction with Article VI:3 of the GATT and Articles 4.10, 7.9 and 10 of the SCM Agreement; • (iii) Article X(3)(a) of the GATT; • (iv) Article 5.4 of the ADA and Article 11.4 of the SCM Agreement; • (v) Article 8 of the ADA and Article 18 of the SCM Agreement; • (vi) Article 5 of the SCM Agreement; and • (vii) Article XVI:4 of the Marrakesh Agreement establishing the WTO, Article 18.4 of the ADA and Article 32.5 of the SCM Agreement.

14. 21 December 2000 DS217requested consultation with the US 6 February 2001 consultation in Geneva failed between DS217 and US 21 May 2001DS234 requested consultation with the US 29 June 2001 consultation in Geneva failed to resolve the issue between DS234 and US 12 July 2001 DS217 requested the est. of panel. 10 August 2001DS234 requested the est. of panel. 23 August 2001DS217 DSB establish panel. 10 September 2001DS234 DSB est. panel, but in doing so agreed that the panel would examine both cases together. (DS217 & DS 234) 15 October 2001, all 11 complainants (from both DS217 & DS234) requested the Director-General to determine the composition of the Panel. 25 October 2001, the Panel was composed. 17 April 2002, the Chairman of the Panel informed the DSB that the Panel would not be able to complete its work in six months since the parties were given the maximum amount of time for preparing submissions and oral statements. The Panel expected to complete its work by July 2002. 16 September 2002, the Panel Report was circulated to Members Time Line

15. Decisions of the Panel 16 September 2002 The Panel Report, circulated to the Members of the World Trade Organization, found that the CDSOA is inconsistent with Articles 5.4, 18.1 and 18.4 of the  Anti-Dumping Agreement; Articles 11.4, 32.1 and 32.5 of the  SCM Agreement; Articles VI:2 and VI:3 of the GATT 1994; and Article XVI:4 of the  WTO Agreement.  - Concluded that the CDSOA nullifies or impairs benefits accruing to the Complaining Parties under the  Anti-Dumping Agreement, the  SCM Agreement  and the 1994 GATT to the extent it is inconsistent with those agreements. Consequently, the Panel recommended that the DSB request the United States to bring the CDSOA into conformity with its obligations under the  Anti-Dumping Agreement,  the  SCM Agreement  and the 1994 GATT, and consider repealing the Byrd Amendment.

16. Decisions of the Appellate Body • Upholds the finding of the Panel, in paragraphs 7.51 and 8.1 of the Panel Report, that the Byrd Amendment is a non-permissible specific action against dumping or a subsidy, contrary to Article 18.1 of the  Anti-Dumping Agreement  and Article 32.1 of the SCM Agreement; • Consequently upholds the Panel's finding, in paragraphs 7.93 and 8.1 of the Panel Report, that the Byrd Amendment is inconsistent with certain provisions of the  Anti-Dumping Agreementand the SCM Agreement  and that, therefore, the United States has failed to comply with Article 18.4 of the  Anti-Dumping Agreement, Article 32.5 of the SCM Agreement  and Article XVI:4 of the  WTO Agreement; • Upholds the Panel's finding, in paragraph 8.4 of the Panel Report, that, pursuant to Article 3.8 of the DSU, to the extent that the CDSOA is inconsistent with provisions of the  Anti-Dumping Agreement  and the  SCM Agreement,  the Byrd Amendment nullifies or impairs benefits accruing to the Complaining Parties under those Agreements;

17. Distribution Process • Customs responsible for the annual distribution of antidumping and countervailing duties assessed during the preceding fiscal year. • Customs publishes in the Federal Register a notice of intent to distribute • Potentially eligible affected domestic producers submit "qualifying expenditures" incurred • Customs distributes funds from assessed duties in proportion to qualifying expenditures identified in certifications received.

18. Real Economic Effects • Largest filing U.S. Producers rewarded • Affected competition internationally and nationally in several industries • Many sanctioned products are components in finished goods, thereby raising their production costs (softwood lumber, DRAC semiconductors, Ball bearings, etc.) • The threat of retaliatory sanctions has also become a growing obstacle for U.S. exporters. • To date, Canadian softwood lumber producers have paid over $5.1 billion in cash deposits. The majority of these duties are currently suspended as the result of ongoing litigation

19. Example 2 • The 2000 law known as the Byrd amendment, after sponsor Sen. Robert Byrd, D-W.Va., had redirected about $1 billion in fees from government to corporate coffers through September. The largest chunk, $205 million, went to steel producer Timken Co. of Canton, Ohio. • According to U.S. Customs, total Byrd disbursements to U.S. producers amounted to US$ 231 million in 2001, US$ 330 million in 2002, US$ 240 million in 2003, US$ 284 million in 2004 and US$ 226 million in 2005.

20. Major Beneficiaries • Seven major industries received CDSOA payments—bearings, steel, candles, pasta, dynamic random access memory (DRAM) semiconductors, crawfish, and softwood lumber • Company Amount paid Amount claimed Industry • The Timken Company $205,328,783 $59,990,348,732 Bearings • The Torrington Company 135,349,304 22,175,725,680 Bearings • Candle-lite 56,759,989 1,285,509,591 Candles • MPB Corporationc 55,131,485 9,158,867,720 Bearings • Zenith Electronics Co. 33,412,990 23,270,258,343 TVs • Micron Technology 33,389,988 9,093,423,782 DRAMs • Lancaster Colony Co. 26,225,555 1,382,869,375 Candles • U. S. Steel Corp. 22,925,628 590,935,208,013 Steel • Home Fragrance Holdings 20,394,804 444,243,884 Candles • Wellman 15,681,319 1,291,294,651 Polyester fiber

21. Major Affected Foreign Interests • EU Steel and bearings makers • Canadian Softwood lumber producers • Korean DRAM producers • Chinese electronics and candle exporters

22. Petitions Filed after Byrd Amendment

23. GAO Survey/Report • Leading recipients reported benefits to varying degrees, and non-recipients complained about being disadvantaged • In four industries—bearings, candles, crawfish, and pasta—recipients generally reported benefits, but some non-recipients complained that the disbursements werehaving negative effects on them • GAO Report argues that the Byrd Amendment hurts the U.S. economy in four ways: • 1. the Bureau of Customs and Border Protection ("CBP") faces implementation problems.. • 2. Byrd Amendment limits benefits to producers that filed a petition for relief or that publicly supported the petition during an investigation of whether imports caused injury. Given this eligibility requirement, a single company received one fifth of all Byrd Amendment payments through fiscal year 2004, only two companies received one third of such payments, and only five companies received half, with one of those top five companies owning two of the other top five. Paradoxically, some U.S. companies have benefited most when dumping has continued despite imposition of high duties.

24. Report Cont’d • 3. The WTO has found the Byrd Amendment to be "inconsistent" with the WTO Antidumping Agreement, because disbursement not only punishes foreign producers but also rewards their U.S. competitors. Products subject to retaliation include live swine, fish, oysters, cigarettes, dairy products, wine, paper products, clothing, sweet corn, industrial belts, steel products, fork lift trucks and printing machines. • 4. The federal deficit has arguably placed a burden on supporters of the Byrd Amendment now to justify disbursements that decrease governmental revenues in a time of budgetary constraints.

25. Asking for Sanctions • WTO gave until the end of 2003 for US to comply with their ruling. • On 26 Jan 2004, Canada, Brazil, Chile, the European Union, India, Japan, Mexico, and South Korea, requested authorization from the WTO to retaliate by suspending tariff concessions and other obligations to the United States.

26. Retaliation Sanctions – 24 Aug 2004 • The WTO arbitrators gave a green light for all eight WTO Members who requested sanctions to retaliate up to more than $150 million against the U.S. • Countries include: Brazil, Canada, Chile, the EU, India, Japan, Korea, and Mexico • Only 4 have actually done so: Canada, the EU, Japan, and Mexico totaling $110M to date. • Japan did not begin sanctions until Sept 2005. • The level of sanctions may vary every year so as to reflect the wide variations in the amount of payments from one year to the other.

27. Sanctioned Products • Starting last May 1 sanctions were imposed on a variety of U.S. goods including paper, clothing, wine, machinery, cigarettes and oysters.

28. Implementation - US Pt. of View:Repealing the Amendment • 3 Feb 2003 – Bush Admin recommended repealing the Act as “double dipping” was occurring. • “Supermajority” opposed the repeal in the Senate. • Other Option: Disbursements instead go to Workers and Committees, called Trade Adjustment Assistance (TAA).

29. Implementation - US Pt. Of View Repealing the Amendment #2 • 1 Feb 2006: Bill was officially passed (216-214), and President Bush agreed to sign it as a part of the Deficit Reduction Act of 2005. • According to the Office of the US Trade Representative, “We are very pleased…the necessary steps [have been taken] to repeal the Byrd Amendment," said Rob Portman. • Disbursements will return to the US Treasury as done previously. • Delay for 2 years as compromise for passing the bill. On or after October 1, 2007, duties will no longer be distributed to U.S. producers.

30. ImplementationRepealing the Amendment #3 • Since 2001, the Byrd Amendment has resulted in payments of more than $1.26 billion to U.S. companies affected by low-cost imports. Fully $476 million of that amount has gone to one corporation, the Timken Co. and its subsidiaries. And last year, more than half of all pay-outs went to five companies • Does this show justifiably why the WTO ruled against the Byrd Amendment?

31. Proposal:What could have happened? • #1: US never repealed the Amendment • Retaliatory Sanctions would continue and US would continue to be labeled as the country that acts “outside” of the ruling International Institutions in place, taking matters into their own hands. • #2: US repealed and replaced Amendment with Trade Adjustment Assistance (TAA) • Instead of businesses directly receiving the “subsidies,” the disbursements would go to affected communities and workers. • Many felt that this would arguably comply with WTO obligations because it would not tie disbursements to the beneficiary’s support for a petition. • Others argue that the idea of helping the manufacturers is lost when implementing this bill – the Bingaman-Snowe bill.

32. Proposal:What could have happened? • #3: US immediately repealed the Amendment as it blatantly ignores the “spirit” of the WTO. • Companies receiving the benefits from the amendment would be hurt by the alleged dumping by other nations. They would have no time to adjust to these changes. • #4: US repealed the Amendment, but gave approximately 2 yrs to enact as a compromise. • As the largest case ever brought before the WTO, and sanctions fervently imposed, the US’ decision to repeal was the best decision in our minds – benefits outweigh the costs. • Although helping industries that have been affected by unfair trade measures, the US needs to “play by the rules” and take their case to the WTO as well – or make strides in the DOHA round of negotiations. • Running a huge federal deficit - frees up monies for other areas. • In Hong Kong, it was requested that the US “crackdown” on dumping; however, US negotiators refused to change anti-dumping laws.

33. Sources • http://www.citac.info/press/release/2005/12_21.php • http://www.dbtrade.com/publications/byrd_amendment_panel_presentation.pdf • http://www.asil.org/insights/insigh98.htm#_ednref8 • http://www.ebearing.com/legislation/2000act.htm • http://www.blonnet.com/2004/09/17/stories/2004091700031000.htm • http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds217_e.htm • http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds234_e.htm • http://www.internationaltraderelations.com/WTO.Byrd%20Amendment%20(AB%201.16.03)(Edited).htm • http://www.solon.org/Treaties/GATT/artvi.pdf • http://www.worldtradelaw.net/uragreements/scmagreement.pdf • http://www.worldtradelaw.net/uragreements/adagreement.pdf • http://www.wto.org/English/docs_e/legal_e/04-wto_e.htm • http://www.gao.gov/new.items/d05979.pdf • http://www.dfait-maeci.gc.ca/tna-nac/disp/byrdback-en.asp • http://www.usitc.gov/trade_remedy/731_ad_701_cvd/byrd.htm • http://www.eurunion.org/news/press/2003/2003003.htm • http://www.williamsmullen.com/news/articles_detail/136.htm • http://www.upi.com/NewsTrack/view.php?StoryID=20060201-060754-2129r • http://www.meti.go.jp/english/information/data/cWTOByrd050801e.html • http://geneva.usmission.gov/Press2006/0202ByrdRepeal.html • http://www.washingtonpost.com/wp-dyn/content/article/2005/12/21/AR2005122102074.html • http://www.steel.org/AM/Template.cfm?Section=Home&CONTENTID=12753&TEMPLATE=/CM/ContentDisplay.cfm • http://64.233.179.104/search?q=cache:eWMJ1b3wr48J:www.williamsmullen.com/news/articles_detail/136.htm+Byrd+Amendment&hl=en&gl=us&ct=clnk&cd=10 • http://www.ftn.fedex.com/usbulletin/021606.htm