|Short Title||Full Case Title and Citation|
|Brazil – Aircraft (Article 21.5 – Canada)||Panel Report, Brazil – Export Financing Programme for Aircraft, Recourse by Canada to Article 21.5 of the DSU ("Brazil – Aircraft (Article 21.5 – Canada) "), WT/DS46/RW, adopted 4 August 2000, as modified by the Appellate Body Report, WT/DS46/AB/RW, DSR 2000:IX, 4093.|
|Brazil – Aircraft (Article 21.5 – Canada II||Panel Report, Brazil – Export Financing Programme for Aircraft, Second Recourse by Canada to Article 21.5 of the DSU ("Brazil – Aircraft (Article 21.5 – Canada II) "), WT/DS46/RW/2, adopted 23 August 2001, DSR 2001:XI, 5481.|
|Canada – Aircraft Credits and Guarantees||Panel Report, Canada – Export Credits and Loan Guarantees for Regional Aircraft ("Canada – Aircraft Credits and Guarantees"), WT/DS222/R and Corr.1, adopted 19 February 2002.|
|Canada – Aircraft (Article 21.5 – Brazil)||Appellate Body Report, Canada – Measures Affecting the Export of Civilian Aircraft, Recourse by Brazil to Article 21.5 of the DSU ("Canada – Aircraft (Article 21.5 – Brazil) "), WT/DS70/AB/RW, adopted 4 August 2000, DSR 2000:IX, 4299.|
|EC – Sugar Exports (Australia)||GATT Panel Report, European Communities – Refunds on Exports of Sugar – Complaint by Australia, adopted 6 November 1979, BISD 26S/290.|
|EC – Sugar Exports (Brazil)||GATT Panel Report, European Communities – Refunds on Exports of Sugar – Complaint by Brazil, adopted 10 November 1980, BISD 27S/69.|
|EEC – Wheat Flour Subsidies||GATT Panel Report, European Economic Community – Subsidies on Export of Wheat Flour ("EEC – Wheat Flour Subsidies"), 21 March 1983, unadopted, SCM/42.|
|Indonesia – Autos||Panel Report, Indonesia – Certain Measures Affecting the Automobile Industry ("Indonesia – Autos"), WT/DS54/R, WT/DS55/R, WT/DS59/R, WT/DS64/R and Corr.1, 2, 3, 4, adopted 23 July 1998, DSR 1998:VI, 2201.|
|Japan – Alcoholic Beverages II||Appellate Body Report, Japan – Taxes on Alcoholic Beverages ("Japan – Alcoholic Beverages II"), WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November 1996, DSR 1996:I, 97.|
|US – Corrosion-Resistant Steel Sunset Review||Appellate Body Report, United States – Sunset Review of Anti-Dumping Duties on Corrosion-Resistant Carbon Steel Flat Products from Japan ("US – Corrosion-Resistant Steel Sunset Review"), WT/DS244/AB/R, adopted 9 January 2004.|
|US – Countervailing Measures on Certain EC Products||Appellate Body Report, United States – Countervailing Measures Concerning Certain Products from the European Communities ("US – Countervailing Measures on Certain EC Products"), WT/DS212/AB/R, adopted 8 January 2003.|
|US ‑ Export Restraints||Panel Report, United States – Measures Treating Exports Restraints as Subsidies ("US – Export Restraints"), WT/DS194/R and Corr.2, adopted 23 August 2001, DSR 2001:XI, 5767.|
|US – FSC||Appellate Body Report, United States – Tax Treatment for "Foreign Sales Corporations" ("US – FSC"), WT/DS108/AB/R, adopted 20 March 2000, DSR 2000:III, 1619.|
|US – Norwegian Salmon CVD||GATT Panel Report, Imposition of Countervailing Duties on Imports of Fresh and Chilled Atlantic Salmon from Norway ("US – Norwegian Salmon CVD"), adopted 28 April 1994, BISD 41S/II/576.|
|US – Section 211 Appropriations Act||Appellate Body Report, United States – Section 211 Omnibus Appropriations Act of 1998 ("US – Section 211 Appropriations Act"), WT/DS176/AB/R, adopted 1 February 2002.|
|US – Upland Cotton||Panel Report, United States – Subsidies on Upland Cotton ("US – Upland Cotton"), WT/DS267/R, and Corr.1, 8 September 2004.|
|US – Lead and Bismuth II||Panel Report, United States – Imposition of Countervailing Duties on Certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom ("US – Lead and Bismuth II"), WT/DS138/R and Corr.2, adopted 7 June 2000, as upheld by the Appellate Body Report, WT/DS138/AB/R, DSR 2000:VI, 2623.|
|US – Lead and Bismuth II||Appellate Body Report, United States – Imposition of Countervailing Duties on Certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom ("US – Lead and Bismuth II"), WT/DS138/AB/R, adopted 7 June 2000, DSR 2000:V, 2595.|
"To examine, in the light of the relevant provisions of the covered agreements cited by the European Communities in document WT/DS273/2, the matter referred to the DSB by the European Communities in that document, and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements."
"If there is no agreement on the panelists within 20 days after the date of the establishment of a Panel, at the request of either party, the Director-General, in consultation with the Chairman of the DSB and the Chairman of the relevant Council or Committee, shall determine the composition of the panel by appointing the panelists whom the Director-General considers most appropriate in accordance with any relevant special or additional rules or procedures of the covered agreement or covered agreements which are at issue in the dispute, after consulting with the parties to the dispute. The Chairman of the DSB shall inform the Members of the composition of the panel thus formed no later than 10 days after the date the Chairmen receives such a request."
· The Act Establishing the Export-Import Bank of Korea ("KEXIM"), any implementing decrees and other regulations, alleged to specifically allow and enable KEXIM to provide Korean exporters of capital goods with financing at preferential rates.
· The pre-shipment loan ("PSL") and advance payment refund guarantee ("APRG") schemes established by KEXIM.
· The individual granting of pre-shipment loans and advance payment refund guarantees by KEXIM to Korean shipyards, including Samho Heavy Industries ("Samho-HI" or "SHI"), Daedong Shipbuilding Co. ("Daedong"), Daewoo Heavy Industry ("DHI"), Daewoo Shipbuilding and Marine Engineering ("Daewoo-SME", or "DSME"), Hyundai Heavy Industries ("Hyundai-HI", or "HHI"), Hyundai Mipo ("MIPO"), Samsung Heavy Industries ("Samsung") and Hanjin Heavy Industries & Construction Co ("Hanjin").
· Corporate restructuring measures including debt forgiveness, debt and interest relief and debt-to-equity swaps, affecting Daewoo-SME, Samho-HI, and Daedong) .
· The Special Tax Treatment Control Law ("STTCL"), in particular the special taxation on in-kind contribution (Article 38) and the special taxation on spin-off (Article 45-2) scheme.
"Korea, through the KEXIM Act, KEXIM Decree and Interest Rate Guidelines provides prohibited subsidies, inconsistent with Article 3.1 and 3.2 of the SCM Agreement";
"Korea, through the establishment and maintenance of the APRG and preshipment loan programmes provides prohibited subsidies, inconsistent with Article 3.1 and 3.2 of the SCM Agreement";
"Korea, through individual grants of APRGs and preshipment loans provided prohibited subsidies, inconsistent with Article 3.1 and 3.2 of the SCM Agreement";
"Korea, by providing subsidies to Daewoo-SME/Daewoo-HI, Samho-HI/Halla-HI, and STX/Daedong through (i) workout plans and restructuring plans; (ii) tax concessions provided to Daewoo-HI/Daewoo-SME; and (iii) the grant of KEXIM APRGs and pre-shipment loans, has caused serious prejudice to the interests of the European Communities in violation of Articles 5(c) and 6.3(c) of the SCM Agreement."
The evidence contained in Exhibit Korea-83 relates to APRGs provided to shipyards that fall outside the scope of
the EC's these prohibited export subsidy claims.
Shipyards do not always select the APRG provider by itself. Sometimes, they are compelled to make use of the financial institutions, domestic or foreign, designated by the ship owners for issuing the APRGs regardless of whether the premium rates by such institutions are higher than those offered by other financial institutions. (emphasis supplied)
I am writing to you in respect of Korea's request for preliminary rulings dated 29 August 2003. This letter concerns only Korea's request regarding the suspension or adaptation of the Annex V procedure pending issuance of the preliminary rulings sought by Korea. It does not address the substance of any of the requested preliminary rulings.
In Section II.D of its request, Korea submits that the Annex V procedure should be immediately suspended until such time as the Panel has issued preliminary rulings on the issues raised by Korea in its request. In the alternative, Korea asks (Section I, para. 6) that replies to the Facilitator's questionnaires should only be submitted to the Panel (through the Facilitator), but not to the parties, until such time as the Panel has had the opportunity to make the preliminary rulings requested by Korea. In its comments dated 2 September 2003, the European Communities submits that there is no basis to suspend or otherwise interrupt the Annex V procedure.
First, the Panel notes that, in accordance with paragraph 2 of Annex V, the Annex V procedure in the present case was initiated by the Dispute Settlement Body ("DSB"). There is no provision in Annex V which envisages the suspension of that procedure, either by the DSB itself or by any other body. In the absence of any provision explicitly authorising the Panel to suspend a procedure initiated by the DSB, the Panel has no authority to grant Korea's request for suspension of the Annex V procedure.
Second, we understand paragraph 4 of Annex V to mean that the Annex V procedure is under the control of the Facilitator. In light of paragraph 4, we do not see any scope for intervention by the Panel in procedural issues relating to Annex V. We further note that Korea already asked the Facilitator to suspend or adapt the Annex V procedure in the third paragraph of a letter dated 8 August 2003, and that Korea's request was rejected by the Facilitator in a letter to the parties dated 11 August 2003.
For the above reasons, we reject Korea's request that the Panel should suspend or adapt the Annex V procedure.
1. Korea asserts that the EC abused the Annex V procedure by using it to obtain information for (Part II) claims in respect of which the Annex V procedure does not apply. In particular, Korea asserts that the EC used the Annex V procedure (which it claims is reserved for Part III claims) to obtain information regarding non-shipbuilding sectors, even though its Part III claims were limited to the shipbuilding sector. Korea asserts that the EC did so in order to obtain information to support its Part II claims, which do extend beyond the shipbuilding sector, but which in Korea's opinion fall outside the scope of the Annex V process.
2. Korea submits that the Panel should exclude from its consideration under Part II of the SCM Agreement any evidence or information obtained under the Annex V procedure. Korea also submits that the Panel could decide to exclude any and all evidence obtained in the context of the Annex V process from the evidence considered by the Panel in reaching its decision as to the EC’s claims under both Part II and Part III of the SCM Agreement.
3. We note that the information at the heart of Korea's preliminary objection relates to the individual APRG and PSL transactions identified in paragraphs 170 and 172 of the EC's first written submission. In requesting transaction-specific APRG and PSL information from Korea, the Facilitator carefully limited the scope of the request to APRG and PSL transactions relating to "companies (involved (directly or indirectly) in trade in commercial vessels) ". In conformity with that request, the transaction-specific information provided by Korea did not extend beyond the commercial vessels sector. As a result, the transaction-specific information at issue does not extend beyond the commercial vessel sector. Furthermore, the relevant information concerns the existence of subsidization, and was relied on by the EC in respect of its Part III claims. We note that paragraph 2 of Annex V envisages the gathering of such information as necessary "to establish the existence and amount of subsidization". In addition, paragraph 5 of Annex V states that the designated representative's report to the Panel should include "data concerning the amount of the subsidy in question". In our view, therefore, the information relied on by the EC in support of its Part III claims regarding the existence of subsidization was properly gathered under the Annex V procedure. The EC therefore did not abuse the Annex V procedure in seeking that information.
4. We must now consider whether or not the EC was entitled to use that information for the additional purpose of supporting its Part II claims. In particular, the question is whether information properly gathered under the Annex V mechanism regarding the existence of alleged subsidization, which was properly relied on by the EC in support of its Part III serious prejudice claims against certain alleged subsidies, could also be used in the context of Part II claims concerning the same alleged subsidies.
5. In the context of the EC's Part III claims, we must determine whether or not the relevant APRG and PSL transactions constitute subsidies. In doing so, we are bound by the provisions of Article 1 of the SCM Agreement. At paragraphs 170 and 172 of the EC's first written submission, the EC is requesting us to perform the same analysis of subsidization20 in respect of the same measures in the context of its Part II claims. We see nothing in Annex V that would require us to ignore our Part III analysis of subsidization when reviewing the EC's Part II claims which concern allegations of the same subsidization in respect of the same measures. Nor indeed do we see any requirement in the SCM Agreement to perform this analysis more than once for any given measure alleged to be a subsidy.
6. In any event, even if we were precluded from relying on the relevant Annex V information when determining the existence of subsidization in the context of the EC's Part II claims, at the very least any finding of the existence of subsidization in respect of the EC's Part III claims would compel us to "seek" that very same information (i.e., regarding the same alleged subsidies) from Korea under Article 13.1 of the DSU. In other words, the very same information would in any event be brought before the Panel, but only much later in the proceedings, after the Panel had made findings regarding the existence of subsidization in respect of the EC's Part III claims. We recall that there is no textual basis for requiring us to rule that the relevant Annex V information is not directly admissible in respect of the EC's Part II claims. We therefore see no basis for ruling that the relevant information should only enter the record indirectly, and much later in the proceedings, via Article 13.1 of the DSU.
7. For the above reasons, we decline to rule that the EC was precluded from using information that was properly gathered under the Annex V mechanism regarding the existence of alleged subsidization, and properly relied on by the EC in respect of its Part III serious prejudice claims against certain alleged subsidies, in support of additional Part II claims concerning the same alleged subsidies.
Since the European Communities has indicated that there will be no actionable subsidy claims in respect of products other than commercial vessels, there is simply no need for us to consider whether or not the request for establishment was sufficiently specific in respect of other products.
Except where inevitable for maintaining the international competitiveness to facilitate the export, or for promoting the overseas investment or overseas exploitation of natural resources, the interest rates, discount rates and fee rates applicable to loans, discounts and guarantees... shall be so set as to cover the operating expenses, commissions for undertaking of delegated operations, interest on borrowed funds, and depreciation of assets which [KEXIM] incurs.
In our view, a conclusion that PROEX III could be applied in a manner which confers a benefit, or even that it was intended to be and most likely would be applied in such a manner, would not be a sufficient basis to conclude that PROEX III as such is mandatory legislation susceptible of inconsistency with Article 3.1(a) of the SCM Agreement.81
"the Panel may wish to do as the EC requests and make a ruling that foreign lenders can be part of the market, but such a ruling would be completely beside the issue of choosing an appropriate benchmark. The EC cites the Appellate Body report in
US -- Lumber CVD Final as support for its position, but that only serves as an illustration of the "straw man" argument the EC is using."82
[BCI: Omitted from public version.]
The United States advances arguments based on the negotiating history of footnote 5 in support of its broad interpretation of that footnote to apply to the first paragraph of item (k). In this respect, it points out that in a Chairman's text of the SCM Agreement known as Cartland III, footnote 5 provided as follows:
"Measures expressly referred to as not constituting export subsidies shall not be prohibited under this or any other provision of this Agreement." (emphasis added).
As the United States correctly observes, a new Chairman's text (known as "Cartland IV") was released just a few days later. In that new text, the word "expressly" was dropped from the footnote, which took its present form. In the view of the United States, this change demonstrates that the drafters "intended to expand, rather than restrict" the scope of footnote 5, and that "they did not intend the sort of narrow construction of footnote 5 advanced by Canada and the EC."
We agree with the United States that the deletion of the term "expressly" appears to have broadened the scope of footnote 5 in Cartland IV beyond its scope in Cartland III. We do not agree, however, that it served to broaden footnote 5 to the extent suggested by the United States. As we discussed above, the Illustrative List contains – and already contained at the time of Cartland III and IV – a number of provisions that include affirmative statements that arguably represent authorizations to use certain measures. The language of Cartland III ("expressly referred to") could have precluded asserting that footnote 5 applied to any of these provisions, and it may be that the purpose of the modification was to rectify this situation. If on the other hand the intention of the drafters in changing footnote 5 had been to extend the scope of that footnote to cover situations where the Illustrative List merely referred to things that were export subsidies, they might have been expected to modify the structure of the second part of the footnote, and not merely delete the word "expressly". At the very least, we conclude that the implications of the negotiating history referred to by the United States are inconclusive and cannot lead us to disregard the ordinary meaning of the footnote.
Of course, it could be argued that, based on an a contrario argument, the Illustrative List permits admitted export subsidies even where those subsidies do not fall within the scope of footnote 5. As we have already indicated, however, the drafters have provided us with a specific textual provision that addresses the issue when the Illustrative List can be used to demonstrate that a measure is not a prohibited export subsidy. The fact that this footnote was adjusted on at least one occasion suggests that the drafters gave this issue consideration and provided the answer to this question. If we were to conclude that the Illustrative List by implication gave rise to "permitted" measures beyond those allowed by footnote, we would be calling into serious question the raison d'être of footnote 5.123
6.59. The same situation exists in respect of item (j) of the Illustrative List. Brazil argues that its interpretation of the first paragraph of item (k) is necessary to allow it to meet export credit terms provided by developed country Members through export credit guarantees. If footnote 5 is interpreted broadly to encompass the first paragraph of item (k), however, it presumably would also apply to item (j) and thus "permit" export credit guarantees at premium rates adequate to cover long-term operating costs and losses, even where the guarantees constituted a subsidy contingent upon export performance within the meaning of Article 3.1(a). As Canada points out, however, in the case of a government guarantee, a lending bank establishes financing terms in light of the risk of the guarantor government, not the borrower. Developed countries generally present a lower risk of default than developing countries, and a developing country may often be perceived as posing a higher risk than even the borrower to whom a guarantee might be extended. As a result, while developing countries in theory could utilise any "safe harbour" under item (j) to provide loan guarantees at the same premium rates as developed countries, the effect of guarantees by developing country Members on the interest rate of the guaranteed export credits would be minimal or non-existent in most cases. In other words, a broad reading of footnote 5 would, in respect of item (j), allow developed countries to support export credits at interest rates that would be consistently lower than those of export credits supported by developing countries.
6.60. If, on the other hand, we interpret footnote 5 in accordance with its ordinary meaning, and conclude that it does not apply to items such as the first paragraph of item (k) and item (j), then all WTO Members are faced with a common set of rules in respect of export credit practices. First, they can ensure that those practices do not confer a benefit within the meaning of Article 1 and are therefore not subsidies. Because the existence of benefit is determined based on the existence of a benefit to a recipient, and without regard to whether there is a cost to the government, all Members compete on a level playing field in respect of this assessment, i.e., a measure which constitutes an export subsidy when provided by Brazil ipso facto will also constitute a subsidy when provided by Canada, and vice versa.127
Moody's typically rates bank loans anywhere from on a par with a given borrower's senior implied rating to three refined categories above senior implied. The rating differential between a firm's bank loans and other debt obligations is not a reflection of a greater or lesser probability of default. Rather it is a consideration of higher expected recovery values for bank loans over the same borrower's bonds as a result of loan structure and security."151
the EC now abruptly starts to allege that a benchmark with a 1-year duration should be used in certain cases. In support, the EC alleges that the base rates for certain instances of PSLs are [BCI: Omitted from public version]. This is non-sensical. As has been established and thus far alleged by the EC itself, a proper benchmark must be a facility conferred with similar terms and conditions. The term must be assessed based on its duration, not the name of base rates.165
Parties shall submit all factual evidence to the Panel no later than during the first substantive meeting, except with respect to evidence necessary for purposes of rebuttals, answers to questions or comments made for purposes of rebutting answers provided by others. Exceptions to this procedure will be granted upon a showing of good cause. In such cases, the other party shall be accorded a period of time for comment, as appropriate.