This is a guest post from trade lawyer Adarsh Ramanujan:
The Appellate Body, in its report circulated on April 7, 2015, rejected Viet Nam’s appeal in US – Shrimp II (Viet Nam) (DS429). The appeal was limited to one Article 11, DSU claim, covering the Panel’s rejection of Vietnam’s “as such” challenge to Section 129(c)(1) of the URAA. As many readers would know, Section 129 URAA is the mechanism used by the United States to engage in the re-determination of findings found to be WTO inconsistent.
The AB’s conclusion in this dispute may not come as much of a surprise. The Panel had found that Viet Nam had not established Section 129(c)(1) to be “as such” inconsistent with several provisions of the AD Agreement and Viet Nam went on appeal only under Article 11, DSU concerning this finding. According to the Panel Report, Viet Nam’s challenge was specific to Section 129(c)(1) of the URAA, which states that the re-determinations made under a Section 129 proceeding shall apply only to
“unliquidated entries of the subject merchandise that are entered or withdrawn from warehouse, for consumption on or after…the date on which the Trade Representative directs the administering authority…to implement that determination”.
Viet Nam’s claim before the Panel was that for “prior unliquidated entries”, the US lapplies the earlier WTO-inconsistent findings and not the new re-determined findings and that this was “as such” inconsistent with various provisions of the AD Agreement.
The Panel rejected this challenge by Viet Nam primarily on factual grounds – the fact that the specific measure under challenge, i.e. Section 129(c)(1) URAA, does not actually preclude the US from applying the new re-determined Section 129 findings to prior unliquidated entries. The Panel did so by looking at the text of the Section 129(c)(1) URAA (para. 7.259) and also drew support for this understanding from other domestic instruments placed on record. More importantly, the Panel also considered the US’ submission that other alternative mechanisms exist to tackle such “prior unliquidated entries” - (i) pass a new legislation / amend existing law, (ii) modification or a regulation / practice under Section 123 URAA and (iii) through administrative reviews – and that some of these approaches have been used in the past. (Paras. 7.265-7.266). Evidence was placed on record about the last two alternatives actually being used earlier by the US.
The AB did not find the Panel to have committed any error that reached the threshold of Article 11, DSU. I don’t intend to go into provide a detailed analysis of the AB’s reasoning – suffice to say, I have no reservations on the overall analysis in the AB Report. Two items, however, I wanted to open up for discussion:
- First, one needs to take a hard look at the Panel and the AB’s willingness to apparently accept the first two alternatives suggested by US, viz. passing a new law and modification of regulation / practice under Section 123. Ex facie, these two alternatives, in my opinion, are non sequiturs. All Members inherently possess the sovereign power to pass new laws or amend existing laws / regulations / practices in order to bring them into conformity with WTO laws – but the fact that this sovereign power exists obviously cannot be a relevant factor in assessing the WTO consistency of an existing law. As for subsequent administrative reviews as an alternative is considered, it would cover “prior unliquidated entries” only in particular circumstances and that too, only to particulate entries, depending on the timing of the whole exercise. On appeal, the United States also did mention other alternatives (para.4.28) – mutual agreement with other Members to cover such “prior unliquidated entries” as well as through potential judicial remand proceedings (discretionary). The again, the point remains the former is still a matter of sovereign power and the latter will not always consistently be applied.
- Perhaps pressing on these made more sense in this dispute because of – (i) the measure challenged by Viet Nam, and (ii) the nature of the claim raised in this respect. This is the second point I wish to emphasize upon. On point (i), as the Panel made clear in several instances in its Report, Viet Nam’s challenge was specifically directed to Section 129 (c)(1) (which, by the way, is much narrower than their Panel Request). On point (ii), the claim raised by Viet Nam was an “as such” challenge to Section 129(c)(1). One of the arguments raised by Viet Nam on appeal was the fact that all the other alternatives suggested by US in this dispute may have dealt with only a subset of “prior unliquidated entries” and not the entire universe of “prior unliquidated entries” (See AB Report, para. 2.5 for more details).The AB observes:
“4.19. …Instead, as we see it, the Panel responded to the argument that Viet Nam had made, that is, that Section 129(c)(1) "serves as an absolute legal bar to any refund of duties [for] prior unliquidated entries" and sets out an "express prohibition against duty refunds for prior unliquidated entries". Thus, the Panel examined whether Viet Nam had established that Section 129(c)(1), in and of itself, precludes implementation of DSB recommendations and rulings with respect to prior unliquidated entries, rather than requiring Viet Nam to show that Section 129(c)(1) precludes implementation of DSB recommendations and rulings in all circumstances.”
“4.24. … we note that Viet Nam did not specifically argue before the Panel that Section 129(c)(1) precludes implementation of DSB recommendations and rulings in respect of "Category 1 entries". Nonetheless, it claimed that Section 129(c)(1) precludes implementation with respect to prior unliquidated entries and is, therefore, inconsistent "as such" with Articles 1, 9.2, 9.3, 11.1, and 18.1 of the Anti-Dumping Agreement. Hence, in order to make an objective assessment of the matter before it, the Panel was required to examine whether Viet Nam had demonstrated that Section 129(c)(1) necessarily operates, at least in certain circumstances, to preclude implementation of DSB recommendations and rulings.”
“4.25. …Our reading of the Panel Report suggests that the Panel was not persuaded that Viet Nam had demonstrated that Section 129(c)(1) precludes implementation of DSB recommendations and rulings in any circumstance…”
“4.27. To us, there appears to be a tension between Viet Nam's assertion that Section 129(c)(1) precludes implementation of DSB recommendations and rulings with respect to prior unliquidated entries, on the one hand, and Viet Nam's recognition that alternative mechanisms available to the United States may result in WTO-consistent action, on the other hand…” (Emphasis supplied in bold)
What if Viet Nam had not raised the typical “as such” claim and did not restrict its claim to just Section 129(c)(1) URAA? We know now from the AB Report in Argentina – Import Measures (DS438/444/445), which was circulated on 15 January, 2015, that “as such” or “as applied” claims are not the exhaustive set of the type of claims that may be raised in any dispute. A reading of that Report suggests that complainants may define the “measure” under challenge in any manner they choose and are not bound to categorize them as a written rule, unwritten rule of norm of general and prospective application, established practice etc.; nor are they bound to be stuck to a water-tight distinction of “as such” versus an “as applied” claims. Any act or omission can be challenged as a “measure” and what needs to be proved in each case, will vary with how the complainants classify the measure (AB Report, Argentina – Import Measures, para. 5.108). At least, that appears to be my understanding from this Report.
What if, taking into account the much wider flexibility afforded by Argentina – Import Measures, a complainant raises a challenge to the “omission of not having a legal mechanism that would mandatorily extend application of WTO consistent re-determinations for all ‘prior unliquidated entries’”? One cannot certainly dispute the fact that Section 129 URAA is “but one tool in a toolbox by which the United States can implement DSB recommendations and rulings”, to quote the US. However, the fact remains that all the other “tools in [the] toolbox” put forth by the United States in this dispute do not necessarily apply and do not mandatorily extend the application of WTO-consistent re-determinations in all cases of “prior unliquidated entries”. The problem, realistically speaking, lies in the fact that this is not a consequence of any single provision or rule, whether written or unwritten; it is simply the inevitability of what is not provided anywhere – an omission of a systemic nature.
