WORLD TRADE
ORGANIZATIONWT/DS212/4
10 August 2001
(01-3975)
Original:  English
UNITED STATES – COUNTERVAILING MEASURES CONCERNING
CERTAIN PRODUCTS FROM THE EUROPEAN COMMUNITIES
Request for the Establishment of a Panel by the European Communities
The following communication, dated 8 August 2001, from the Permanent Delegation of the
European Commission to the Chairman of the Disp ute Settlement Body, is circulated pursuant to
Article 6.2 of the DSU.
_______________
The European Communities hereby requests the establishment of a panel pursuant to
Articles 4 and 6 of the Understanding on Rules and Procedures Governing the Settlement of Disputes,
Article 30 of the Agreement on Subsidies and Countervailing Measures (the SCM Agreement) andArticle XXII of the General Agreement on Tariffs and Trade 1994 with respect to the practice of the
United States of America of imposing countervailing duties on certain products exported from the
European Communities without establishing the existence of a financial contribution or a benefit to
the producers under investigation and hence the existence of a countervailable subsidy as defined in
the SCM Agreement.  These duties have been imposed  after privatisations or changes of ownership in
reliance, inter alia,  on § 771(5)(F) of the Tariff Act 1930 (19 USC § 1167(5)) and are based on an
incorrect analysis of the existence of a countervailable subsidy benefiting the producer concernedduring the period of investigation or review.
On 10 November 2000 and on 1 February 2001, the European Communities requested
consultations with the United States on the above matter with a view to reaching a mutually
satisfactory solution
1. Consultations were held on 7 December 2000 and 3 April 2001 in Geneva but
have not led to a satisfactory resolution of the matter.
The full factual background is set out in the requests for consultations. Despite the
interpretation of the SCM Agreement developed by the Appellate Body and Panel in United-States –
Imposition of countervailing duties on certain hot-rolled lead and bismuth carbon steel productsoriginating in the United Kingdom
2, the United States, when imposing countervailing duties on a
producer, fails to examine whether there is a subsidy to the producer concerned in circumstances
where a financial contribution was granted to a previous owner of a company or its productive assets
and there has been a change of ownership or privatisation thereof at arm's-length for fair market value.
                                                     
1 Docs WT/DS212/1, G/L/415 , G/SCM/D37/1 of 27 November 2000 and WT/DS212/1/Add.1,
G/L/415/Add.1, G/SCM/D37/1/Add.1 of  6 February 2001
2 Panel Report, United States – Imposition of Countervaili ng Duties on Certain Hot-Rolled Lead and
Bismuth Carbon Steel Products Originating in the United Kingdom ("United States – Leaded Bars") ,
WT/DS138/R, adopted 7 June 2000, as upheld by the Appellate Body Report, WT/DS138/AB/R.WT/DS212/4
Page 2
The United States continues to levy countervailing duties based on what the United States has
called its "change-in-ownership methodology", which was found inconsistent with the United States'
WTO obligations in United States – Leaded Bars (the "old change-in-ownership methodology").
The United States authorities have also applied what they claim is a "new change-in-
ownership methodology" to certain European Communities producers.  This new change-in-
ownership methodology has been applied, inter alia,  in the final results of an administrative review
concerning Grain Oriented Electrical Steel from Italy , one of the measures on which consultations
have taken place3. This new change-in-ownership methodology replicates the essential features of its
predecessor which were found inconsistent with the United States’ WTO obligations in United States
-Leaded Bars.  It ignores the consideration paid by the current producer in the privatisation or change
of ownership, instead purporting to undertake an analysis of whether the buyer is "for all intents andpurposes" the "same person" as the company which had received a financial contribution before
privatisation. The United States has intimated that it will use this new change-in-ownership
methodology in future countervailing duty investigations.
The European Communities considers, theref ore, that the old change-in-ownership
methodology still applied in 12 countervailing duty orders listed in Annex 1
4, and the new change-in-
ownership methodology applied , inter alia, in the administrative review in Grain Oriented Electrical
Steel from Italy, and more generally the refusal of the United States to correctly apply the SCM
Agreement, as interpreted by the Panel and Appellate Body in United States - Leaded Bars,  are
inconsistent with the United States’ obligations  under the WTO Agreement. In particular, but not
necessarily exclusively, the European Communities requests a panel to examine the consistency of
these measures with the following provisions:
— Articles 1.1, 10, 14(d) of the SCM Agreement insofar as these articles require an authority to
establish the existence of a financial contribution and benefit (and hence a countervailablesubsidy);
— Footnote 36 to Article 10 of the SCM Agreement which provides that countervailing duties
may only be imposed in order to offset a subsidy bestowed upon the manufacture, production
or export of any merchandise, as provided for in Article VI:3 of GATT 1994;
— Article 19.1 of the SCM Agreement which in particular provides that a countervailing duty
may only be imposed if the existence of a subsidy has first been determined ;
— Article 19.3 of the SCM Agreement which in pa rticular requires investigating authorities
promptly to establish an individual countervailing duty rate for new exporters who were not
subject to the original investigation;
— Article 19.4 of the SCM Agreement, which provides that no countervailing duty shall be
levied on any imported product in excess of the amount of the subsidy found to exist
calculated in terms of subsidisation per unit of the subsidised and exported product;
— Article 21.1 of the SCM Agreement, which provides that a countervailing duty shall remain in
force only as long as and to the extent necessary to counteract subsidisation;
                                                     
3 In other instances, the U.S. authorities have applied the new change-in-ownership methodology in the
context of court-ordered remand determinations.
4  Since the request for consultations, one order has been terminated (Cold-rolled Carbon Steel Flat
Products from Sweden C-401-401) and another order has been limited to recurring subsidies, pursuant to an
agreement between the exporter concerned and DOC (Certain Pasta from Italy C-475-819)WT/DS212/4
Page 3
— Article 21.2 of the SCM Agreement, which in particular requires investigating authorities to
determine whether there is a continuing need for the application of countervailing duties in
the light of the information before it;
— Article 21.3 of the SCM Agreement, which in particular provides that countervailing duties
are to expire after five years unless it is determined that the expiry of the duty would lead to
continuation or recurrence of subsidisation and injury;
— Article 32.5 of the SCM Agreement which requires Members to ensure the conformity of
their laws, regulations and administrative procedures with the provisions of the SCM
Agreement; and,
— Article XVI.4 of the WTO Agreement, which requires Members to ensure the conformity of
their laws, regulations and administrative procedur es with their obligations as provided in the
annexed Agreements.
Moreover, the European Communities considers that § 771(5)(F) of the US Tariff Act of
1930, to the extent that it allows the Department of Commerce to impose countervailing duties
without assessing the existence of a countervailable subsidy after a privatisation or change of
ownership, is also inconsistent with the United States’ obligations under the above provisions of the
WTO Agreement.
The European Communities requests that the pane l be established with the standard terms of
reference.WT/DS212/4
Page 4
Annex 1
US Change-in-Ownership methodology
There are 12 US CVD orders involved, although in one case, Grain-Oriented Electrical Steel
from Italy, two measures – an administrative and a sunset review – are under dispute.  The DOC file
number is given in each case.
For each order, the full reference of the measure concerned is set out in the requests for
consultations.  Documents WT/DS212/1, G/L/ 415 , G/SCM/D37/1 of 27 November 2000 ("1st
request") and WT/DS212/1Add.1, G/L/415/Add.1,  G/SCM/D37/1/Add.1   of 6 February 2001 ("2nd
request") refer.   Unless otherwise stated, all page numbers refer to the 1st request and "SC" refers to
"Specific Case", as used in the first request.
Original imposition of countervailing duties (post-WTO measures)
1 Stainless Sheet and Strip in Coils from France
Page 4 SC No 1C-427-815
2 Certain Cut-to-Length Carbon Quality Steel from France
Pages 5-6  SC No 2C-427-817
3 Certain Stainless Steel Wire Rod from Italy
Page 7 SC No 4C-475-821
4 Stainless Steel Plate in Coils from Italy
Page 8 SC No 5C-475-823
5 Stainless Steel Sheet and Strip in Coils from Italy
Page 9 SC No 6C-475-825
6 Certain Cut-to-Length Carbon-Quality Steel Plate from Italy
Pages 10-11 SC No 7C-475-827
Administrative reviews
7 Cut-to Length Carbon Steel Plate from Sweden
Pages 12-13 SC No 9C-401-804
8 Grain-Oriented Electrical Steel from Italy * C-475-812
Sunset reviews
9 Cut-to-Length Carbon Steel Plate from United Kingdom
Pages 15-16  SC No 11C-412-815
10 Certain Corrosion-Resistant Carbon Steel Flat Products from France
Pages 16-17 SC No 12C-427-810
11 Cut-to-Length Carbon Steel Plate from Germany
Pages 17-18  Sc No 13C-428-817
12 Cut-to-Length Carbon Steel Plate from Spain
Pages 18-19 SC No 14C-469-804
* Definitive determination in administrative review in 2nd request ; final sunset results Pages 14-15 SC No 10.
__________