 
 RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/DSB/M/165 
30 March 2004 
 (04-1432) 
Dispute Settlement Body 
17 February and 19 March 2004  
 
 
 
MINUTES OF MEETING 
 
Held in the Centre William Rappard  
on 17 February and 19 March 2004  
 
Acting Chairperson:  Mrs. Mary Whelan (Ireland) 
Chairman:  Mr. Shotaro Oshima (Japan) 
 
 
Subjects discussed : Page  
1. Surveillance of implementation of recommendations adopted by the DSB.........................2  
(a) United States – Anti-Dumping Act of 1916:  Status report by the United States.......................2  
(b) United States – Section 211 Omnibus Appropr iations Act of 1998:  Status report by 
the United States .............................................................................................................. ...........3  
(c) United States – Anti-dumping measures on certain hot-rolled steel products from 
Japan:  Status report by  the United States...................................................................................4  
(d) Chile – Price band system and safeguard measures relating to certain agricultural 
products:  Status report by Chile.............................................................................................. ...4 
(e) United States – Continued Dumping and Subsidy Offset Act of 2000:  Status report 
by the Unite d States ........................................................................................................... .........5  
2. United States – Laws, regulations and methodology for calculating dumping 
margins ("zeroing")............................................................................................................ ......6  
(a) Request for the establishment of a pa nel by the European Communities...................................6  
3. European Communities – Measures affecting trade in commercial vessels........................7  
(a) Request for the establishment of a panel by Korea.....................................................................7  
4. United States – Final countervailing duty determination with respect to certain 
softwood lumber from Canada................................................................................................9  
(a) Report of the Appellate Body and Report of the Panel...............................................................9  
5. Proposed nominations for the indicative list of governmental and non-
governmental panelists ......................................................................................................... ..12 
6. Mexico – Measures affecting the import of matches............................................................12  
(a) Statement by  Mexico ............................................................................................................ ....12  
7. Election of Chairperson........................................................................................................ ..12 
 WT/DSB/M/165 
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 1. Surveillance of implementation of recommendations adopted by the DSB 
(a) United States – Anti-Dumping Act of 1916:   Status report by the United States 
(WT/DS136/14/Add.23 – WT/DS162/17/Add.23) 
 (b) United States – Section 211 Omnibus Appropr iations Act of 1998:  Status report by the 
United States (WT/DS176/11/Add.16) 
 (c) United States – Anti-dumping measures on certain hot-rolled steel products from Japan:  
Status report by the United States (WT/DS184/15/Add.16) 
 
(d) Chile – Price band system and safeguard measu res relating to certain agricultural products:  
Status report by Chile (WT/DS207/15/Add.4) 
 (e) United States – Continued Dumping and Subsid y Offset Act of 2000:  Status report by the 
United States (WT/DS217/16/Add.1 – WT/DS234/24/Add.1) 
 
1. The Chairperson
 recalled that Article 21.6 of the DSU required that "unless the DSB decides 
otherwise, the issue of implementation of the re commendations or rulings shall be placed on the 
agenda of the DSB meeting after six months follo wing the date of establishment of the reasonable 
period of time pursuant to paragraph 3 and shall remain on the DSB's agenda until the issue is 
resolved".  She proposed that the five sub-items  to which she had just referred be considered 
separately. 
(a) United States – Anti-Dumping Act of 1916:  Status report by the United States 
(WT/DS136/14/Add.23 – WT/DS162/17/Add.23) 
2. The Chairperson  drew attention to document WT/D S136/14/Add.23 – WT/DS162/17/Add.23, 
which contained the status report by the United St ates on progress in the implementation of the DSB's 
recommendations in the case concerning the US Anti-Dumping Act of 1916. 
3. The representative of the United States  said that his country had provided an additional status 
report in these disputes on 5 February 2004, in accordan ce with Article 21.6 of the DSU.  As noted in 
the report, legislation repealing the 1916 Act was pe nding in both the US Senate and the US House of 
Representatives. On 29 January 2004, HR 1073, which would repeal the 1916 Act, had been 
favourably reported out of the Committee on the Judi ciary of the US House of Representatives.  The 
US administration was continuing to work with Congress to achieve further progress in resolving 
these disputes with the EC and Japan. 
4. The representative of the European Communities  said that the EC noted that the Committee 
on the Judiciary had voted on a bill that would re peal the 1916 Anti-Dumping Act.  The EC strongly 
hoped that this demonstrated a rene wed determination of the United States to respect its international 
obligations.  However, the EC expected the United St ates to inform the DSB as to what further steps it 
would take to ensure that there was no further dela y in the implementation of the WTO ruling.  Also, 
the EC noted that the bill referred to the House fl oor would not terminate th e pending court cases.  
The EC reminded the United States and the DSB that  it had accepted to extend the original period of 
time for implementation and then to suspend th e arbitration preceding on the express understanding 
that the repealing bill would also terminate the pending litigation. 
5. The representative of Japan  said that the lengthy period of non-compliance by the United 
States with the DSB's recommendations and rulings in  this proceeding was of an extreme concern not 
only to Japan, but also to the WTO dispute settleme nt system.  Japan urged the United States not to 
lose any more time in fulfilling its obligations unde r the WTO Agreement.  While Japan noted that  WT/DSB/M/165 
 Page 3 
 
 
 HR 1073 had been reported out of the House Committee on the Judiciary, it pointed out with much 
regret that this particular bill was without retr oactive effect. She recalled that Japan had been 
demanding that the legislation repealing the 1916 Act mu st have proper retroactive effect to terminate 
the pending cases.  The Japanese companies concerned were still incurring substantial damages, 
including significant legal costs, due to the cases brought against them under the 1916 Act.  The 
United States must make greatest efforts to ensu re the passage of the repealing bills and the 
termination of the pending cases at the earliest juncture during the second session of the 108th Congress.  Japan strongly requested the United St ates to make more detailed reports to the DSB 
on the status of all the bills pending before the Congress and on its concrete plans for securing the 
passage of the bills with the proper retroactive effect s.  Japan had not yet made a final decision on the 
reactivation of the DSU Article 22 arbitration.  Japan wished to remind the United States of its right to 
suspend concessions or other obligations. 
6. The DSB took note
 of the statements and agreed  to revert to this matter at its next regular 
meeting. 
(b) United States – Section 211 Omnibus Appropria tions Act of 1998:  Status report by the 
United States (WT/DS176/11/Add.16) 
7. The Chairperson  drew attention to document WT/DS176/11/Add.16, which contained the 
status report by the United States on progress in th e implementation of the DSB's recommendations in 
the case concerning US Section 211 Om nibus Appropriations Act of 1998. 
8. The representative of the United States  said that his country had provided a status report in 
this dispute on 5 February 2004, in accordance with Article 21.6 of the DSU.  The US administration 
continued to work with the US Congress with resp ect to appropriate statutory measures that would 
resolve this matter. 
9. The representative of the European Communities  said that there were presently two bills 
pending respectively in the House and in the Senate that would, inter alia , repeal Section 211.  These 
bills offered a basis to resolve this dispute to the benefit of all.  The EC, therefore, trusted that the US 
administration would support the repeal of Secti on 211 as a sign of US commitment to effective and 
non-discriminatory protection of intellectual property rights. 
10. The representative of Cuba  said that since 2 February 2002, when the DSB adopted the 
Appellate Body's findings and recommendations  concerning Section 211, the United States had 
continued to submit status reports that showed no progress in the consultations held by the US 
administration and Congress aimed at implementing those recommendations.  On 5 April 2002, the 
United States and the EC had informed the DSB in writing that they had agreed on a reasonable 
period of time for implementation of the DSB's recommenda tions in this case.  To this effect, they had 
agreed that the implementation period woul d in no event go beyond 3 January 2003.  On 
7 January 2003, these two Members had further agreed  to extend the reasonable period of time until 
30 June 2003 and, on that  date, they had again agreed to extend the implementation period until 
31 December 2003.  Finally, on 24 December 2003 the EC and the United States had agreed, for the 
third time, to extend the implementation period un til 31 December 2004.  More than two years had 
now elapsed, but the United States had not yet implem ented the DSB's decisions.  However, this was 
not an isolated case.  In this context, she noted th at at the present meeting, three other disputes were 
before the DSB, with regard to which implemen tation by the United States was still pending, with 
status reports that made no refere nce of any prompt settlement.  This undermined the credibility of the 
commitments undertaken by the Un ited States in the WTO and the credibility of the WTO itself.  
Cuba believed that there was every indication that th ese extensions had been contrived in order to take 
away from the Havana Club Holding its legitimate righ ts to the Havana Club mark, and also to bar the 
Cuban company, Cubaexports, from continued ownership of the mark in the United States.  She WT/DSB/M/165 
Page 4  
 
 noted, once again, that underlying the arbitrary, underhand and anti-Cuban nature of Section 211 was 
an obvious attempt to give preference to the commercial and political interests of Bacardi.  Cuban authorities had appraised developments in this pro cess on the basis that one of the principles of the 
WTO was to resolve promptly disputes in which a Member deemed its rights or benefits to be 
nullified or impaired.  They were accordingly concer ned to note scant and ineffective, not to say non-
existent, efforts made to meet fully the commitmen ts entered into.  She asked how much longer one 
had to wait for the United States to comply with th e decisions of the DSB and to repeal Section 211, 
which, it had been shown, was inconsistent with the WTO and its own trademark legislation.  Cuba 
again requested the United States to end this in terminable process of consultations between its 
administration and Congress, and in line with the WTO commitment to finally repeal Section 211. 
11. The DSB took note
 of the statements and agreed  to revert to this matter at its next regular 
meeting. 
(c) United States – Anti-dumping measures on certain hot-rolled steel products from Japan:  
Status report by the United States (WT/DS184/15/Add.16) 
12. The Chairperson  drew attention to document WT/DS184/15/Add.16, which contained the 
status report by the United States on progress in th e implementation of the DSB's recommendations in 
the case concerning US anti-dumping measures on certain hot-rolled steel products from Japan. 
13. The representative of the United States  said that his country had provided a status report in 
this dispute on 5 February 2004, in accordance with Article 21.6 of the DSU.  The US administration 
continued to work with the US Congress to address the recommendations and rulings of the DSB that 
had not been addressed by 23 November 2002. 
14. The representative of Japan  said that her country deeply regretted that the United States could 
not comply with the DSB's recommendations and ru lings before the end of the first session of the 
108th Congress in December 2003. The United States must fully implement the DSB's 
recommendations and rulings as soon as possible.  To  this end, Japan strongly requested that specific 
legislative amendments supported by the US ad ministration be introduced in the Congress for 
consideration and passage during the second session of the 108th Congress. 
15. The DSB took note  of the statements and agreed  to revert to this matter at its next regular 
meeting. 
(d) Chile – Price band system and safeguard measure s relating to certain agricultural products:  
Status report by Chile (WT/DS207/15/Add.4) 
16. The Chairperson  drew attention to document WT/DS207/15/Add.4, which contained the 
status report by Chile on progress in the implem entation of the DSB's recommendations in the case 
concerning price band system and safeguard measu res relating to certain agricultural products. 
17. The representative of Chile  said that given that his country had complied in both the form and 
the content with the DSB's recommendations and ruli ngs in this dispute, his delegation had nothing 
further to add to the statements made in the context of previous status reports as well as at the 
23 January 2004 DSB meeting. 
18. The representative of Argentina  said that, as Chile had stated in its most recent status report, 
Chile and Argentina continued to disagree, within the meaning of Article 21.5 of the DSU, as to the 
existence of measures taken to comply with th e DSB's recommendations and rulings, given that 
Argentina considered that Chile had failed to bring into conformity the measure found to be 
WTO-inconsistent in this dispute.  In this resp ect, he recalled that, on 24 December 2003, both  WT/DSB/M/165 
 Page 5 
 
 
 countries had signed an Understanding Regarding Procedures under Articles 21 and 22 of the DSU 
with respect to this dispute.  This Understandi ng had been notified to the DSB and circulated in 
document WT/DS207/16.  The parties to the dispute were now working on all the procedural options 
under this Understanding with a view to resolving their disagreement. 
19. The DSB took note  of the statements and agreed  to revert to this matter at its next regular 
meeting. 
(e) United States – Continued Dumping and Subsidy Offset Act of 2000:  Status report by the 
United States (WT/DS217/16/Add.1 – WT/DS234/24/Add.1) 
20. The Chairperson  drew attention to document WT/D S217/16/Add.1 – WT/DS234/24/Add.1, 
which contained the status report by the United St ates on progress in the implementation of the DSB's 
recommendations in the case concerning the US Conti nued Dumping and Subsidy Offset Act of 2000. 
21. The representative of the United States  said that his country had provided a status report on 
5 February 2004, in accordance with Article 21.6 of the DSU. As noted in the report, on 19 June 2003 
legislation to bring the Continued Dumping and Su bsidy Offset Act into conformity with the WTO 
obligations of the United States had been introduced in the US Senate (S. 1299).  In addition, as it had 
done in the previous year's budget proposal, on 2 February 2004, the US administration, once again, 
had proposed repeal of this Act in its budget propo sal for fiscal year 2005.  The US administration 
was continuing to work with Congress to achieve  further progress in resolving these disputes. 
22. The representative of the European Communities  said that for more than three years, the 
United States had illegally imposed on dumped and subsidized imports a double penalty.  The EC 
welcomed the fact that the US President's budget called for a repeal of the Byrd Amendment.  
However, the same proposal had been made in 2003 a nd there had been absolutely no action in the US 
Congress.  Even worse, a significant number of US Congressmen had opposed implementation of the 
WTO ruling and had instead called for a re-negotia tion of WTO rules.  The EC expected the US 
administration to actively work with Congressional l eaders in order to ensure rapid compliance with 
the US obligations under the WTO. Another round of illegal disbursements under the Byrd 
Amendment would be unacceptable. In the mean time, the EC and other co-complainants had 
proceeded to exercise their WTO rights.  The EC ho ped, however, that rapid implementation of the 
WTO ruling would make it unnecessary to suspend concessions vis-à-vis  the United States. 
23. The representative of Canada  said that his country noted the US status report and was 
disappointed that the United States had not made progress to comply with the DSB's rulings and recommendations.  As a result of the non-complianc e, on 26 January 2004, Canada and seven other 
members of the WTO had been forced to seek au thorization from the DSB to retaliate against the 
United States.  As his delegation had stated previous ly, Canada did not favour disruptions to trade and 
called again upon the United States to repeal the Byrd Amendment. 
24. The representative of Chile
 thanked the United States for its second status report and the 
statement made at the present meeting.  Chile noted  that in the budget proposal for the fiscal year 
2005, the United States had reiterated its proposal to repeal the CDSOA and to make the duties levied 
as of September 2003 the last to be distributed to the companies concerned.  Chile hoped that with this clear statement of intent, Congress would take appropria te steps to abolish this Amendment.  To that 
end, Chile called upon the US administration to re double its efforts with Congress to reach such a 
solution at the earliest possible date, thus obviating the need for Chile to implement the measures for 
which it had sought authorization from the DSB. 
25. The representative of Japan
 said that her country noted the second status report by the United 
States in this proceeding with great frustration a nd disappointment.  The content of the second report WT/DSB/M/165 
Page 6  
 
 was exactly the same as the first one, which showed the total lack of progress in implementation.  
Given the expiry of the reasonable period of tim e on 27 December 2003, Japan had no other option, 
but to request authorization from the DSB to susp end concessions and other obligations.  Japan was 
confident that the Arbitrators would find that Jap an's request fully satisfied the requirements of 
Article 22 of the DSU.  Japan looked forward to early issuance of the award by the Arbitrators.  Japan 
strongly urged the United States to implement the DSB's recommendations and rulings as soon as 
possible by repealing the Byrd Amendment. 
26. The representative of Korea
 said that his country appreciated the US status report.  Korea 
wished that the United States, through an eff ective co-operation between its administration and 
Congress, repeal the measure as soon as possible.  Like previous speakers, Korea could not accept  
further disbursements under the Byrd Amendment in the course of 2004. 
27. The representative of India  said that, like previous speakers, his country appreciated the 
intention of the United States to implement the DSB's recommendations, which was demonstrated by 
the inclusion of the intention to repeal the Byrd  Amendment in the 2005 budget proposal.  Like other 
speakers, India also urged the United States to repeal the CDSOA expeditiously so that those 
Members who had started their retaliation proceed ings would not need to proceed further. 
28. The DSB took note  of the statements and agreed  to revert to this matter at its next regular 
meeting. 
2. United States – Laws, regulations and methodology for calculating dumping margins 
("zeroing") 
(a) Request for the establishment of a panel by the European Communities (WT/DS294/7) 
29. The Chairperson  drew attention to the communication from the European Communities 
contained in document WT/DS294/7. 
30. The representative of th e European Communities  said that the EC's request for a panel 
explained in detail its conc erns with regard to the calculation me thodologies used by the United States 
to establish dumping margins, and the violations  of WTO rules that resulted thereof. On 
12 March 2001, the DSB had adopted the Panel and the Appellate Body Reports in the Bed-Linen 
dispute.  The reports had found that the EC's me thodology since then known as "zeroing" was WTO-
incompatible.  The EC had stopped the use of that methodology, in accordance with the DSB's 
recommendations.  Obviously, the WTO rules had to apply equally to every Member.  He noted that, 
in many of the specific cases listed in the EC's  request, the dumping margin would have been de 
minimis or even negative, if the United States had not used the zeroing methodology.  European 
exports had been subject to the burden of anti-dum ping duties where none should have been imposed 
or collected.  Furthermore, these duties directly fina nced the US competing products as a result of yet 
another violation of WTO obligations by the Unite d States;  i.e. the Byrd Amendment.  Several 
hundred million dollars of trade were involved.  Some of the products (hot-rolled steel, stainless bar, ball bearings) were major export items and other im portant products would inevitably be involved in 
the future if the United States was allowed to contin ue "zeroing ".  Therefore, the EC was requesting 
that a panel be established to examine the WTO co mpatibility of the US legislation, methodologies 
and specific determinations in a number of original investigations and administrative reviews as result 
of the use of zeroing in the establishment of the dumping margin. 
31. The representative of the United States
 said that, for several reasons, his country was 
disappointed that the EC had decided to escalate this matter by requesting a panel.  First, what this 
dispute was about was whether an adjustment had to be made for something that was not mentioned in 
either the GATT 1994 or the Anti-Dumping Agre ement; namely, a so-called "negative dumping  WT/DSB/M/165 
 Page 7 
 
 
 margin".  The EC appeared to believe that the defi nition of "dumping" – a term that was defined in the 
GATT and the Antidumping Agreement – should be m odified so as to reflect this extra-textual 
concept.  The United States disagreed.  The Unite d States also was disturbed by the assertion in the 
EC's panel request that the US method of calcula ting dumping resulted in the collection of anti-
dumping duties in excess of the actual dumping prac ticed.  The United States could not disagree 
more.  To the contrary, the US method – which took into account non-dumped transactions – ensured 
that the amount of duties collected equalled the actual dumping practiced.  The United States, of 
course, was aware that the Appellate Body had f ound the EC's method of calculating dumping to be 
WTO-inconsistent.  However, the US and EC methods were not identical, and the United States was confident that its method would be found to be consistent with its WTO obligations.  The United 
States suggested that the EC should reconsider its purs uit of its claims in this dispute.  Finally, the 
United States noted that it had had some difficulty understanding the nature of the EC's problem due 
to the fact that the EC's panel request contained sev eral cross-references to numbered "points" that did 
not, in fact, exist.  For example, at one point, the panel request stated that certain claims were made 
"for the reasons set out under point 3.1(b) below," but  there was no "point 3.1(b)".  In order for the EC 
to satisfy its obligations, and to accord the United States its rights, un der Article 6.2 of the DSU – as 
well as to avoid a wasteful procedural fight shoul d a panel be established on the basis of the current 
request – the United States invited the EC to withdr aw its current request and, if upon reconsideration 
it nevertheless decided to pursue this dispute, to submit a new request that complied with Article 6.2 
of the DSU.  Indeed, the United States understood that, on 16 February, in the evening, the EC had 
just submitted a revised panel request.  The United States would of course examine this new request, 
in particular to see if it addressed these concerns, but  for the moment it would simply note that it was 
a new request that had not been submitted 10 days pr ior to the present meeting and so could not  be 
considered at the present meeting.  For the fore going reasons, the United States was not in a position 
to agree to the establishment of a panel. 
32. The representative of Mexico
 said that his country had a substantial interest in this dispute, 
and, at an appropriate time, it would reserve its third-party rights to par ticipate in the panel's 
proceedings.  At this stage, Mexico wished to draw  the DSB's attention to a matter of concern.  He 
recalled that on 25 September 2003, Mexico had notif ied the United States of its substantial trade 
interest, and of its intention to be joined in the consultations.  To-date, Mexico had not yet received 
any response.  It was Mexico's understanding that the United States might wish to consider that 
Mexico did not have a substantial trade interest and would communicate that view.  Nevertheless, the 
consultations had taken place, but Mexico had never received any official communication.  It was a 
matter of concern that a Member that strived fo r greater transparency in the dispute settlement 
mechanism should fail to set an ex ample.  The DSU would become meaningless if it could not rely on 
the political will necessary to give meaning to its provisions. 
33. The representative of the United States  said that he had taken note of the comments made by 
Mexico and would refer them to his authorities.  However, his recollection was that following the 
receipt of an initial letter from Mexico requesting to be joined in consultations  held in this dispute 
under Article 4.11 of the DSU, the United States had responded with a letter setting forth its position 
on any claims of substantial trade interest  that might be made on this dispute. 
34. The DSB took note  of the statements and agreed  to revert to this matter. 
3. European Communities – Measures aff ecting trade in commercial vessels 
(a) Request for the establishment of a panel by Korea (WT/DS301/3) 
35. The Chairperson  drew attention to the communicati on from Korea contained in document 
WT/DS301/3. WT/DSB/M/165 
Page 8  
 
 36. The representative of Korea
 said that on 5 February 2004, his country had requested 
establishment of a panel with respect to the EC's me asures affecting trade in commercial vessels.  The 
request was focused on the so-called Temporary De fense Mechanism (TDM), which was based on the 
EC's Regulation 1177/2002, dated 27 June 2002, and the EC memb er States' measures implementing 
it.  Those measures raised systemic concern with re gard to the issue of un ilateralism, which was in 
conflict with the basic principle of the WTO dispute settlement system.  The EC  stated in its Council 
Regulation 1177/2002 that the TDM should be authorized to assist the EC's shipyards that had 
allegedly suffered adverse effects caused by unfai r Korean competition.  The TDM had been put in 
place at the end of September 2002 for a duration of 18 months.  The EC had also stated in the Regulation 1177/2002 that the TD M should only be authorized after the EC had initiated dispute 
settlement proceedings against Korea. He reca lled that the EC had initiated the proceedings, 
requesting consultations with Korea on 21 Oc tober 2002 under the WTO dispute settlement 
mechanism (DS273).  While any Member was within  its right to have recourse to the dispute 
settlement procedures, in this cas e, however, there was a serious problem because the EC had not 
awaited the outcome of the dispute-DS273-before taki ng countermeasures in the form of the TDM.  It 
was a grave violation of WTO rules to impose unila teral sanctions against another Member prior to 
the DSB's authorization. 
37. The TDM regulation stated that it was authoriz ing subsidization of the EC's shipbuilding 
industry only when there was a competing bid fro m a Korean shipyard.  Thus, the TDM was not a 
broad-based subsidy program meant to assist an ailing EC's industry. Instead, it constituted a 
unilateral determination of violation and a unilate ral imposition of a punitive measure aimed solely at 
one Member;  i.e. Korea.  Indeed, the very name of the TDM measure indicated its nature.  It was 
"temporary" because it was meant to be imposed onl y for the duration of the WTO dispute settlement 
proceedings.  But the SCM Agreement and the DSU were quite explicit that no Member might prejudge such proceedings.  In fact, the TDM was completely inconsistent with the position the EC 
has maintained for decades within the GATT and th e WTO.  Indeed, the EC had made the end of 
unilateralism the cornerstone of its Uruguay Round negotiating strategy.  Articles 23 of the DSU and 
32 of the SCM Agreement were quite clear in prohi biting such unilateral measures.  In particular, 
Article 32.1 of the SCM Agreement prohibited Members from taking specific actions against a 
subsidy of another Member except in accordance wi th the WTO Agreements.  But that was precisely 
what the EC had been doing under the TDM Regula tion as it specifically permitted EC subsidization 
when there was competition with Korean – a nd only Korean – shipbuilders.  Furthermore, 
Article 23.2(a) of the DSU specifically prohibited Members from making a determination to the effect 
that a violation had occurred, that benefits had been nullified or impaired or that the attainment of any 
objective of the covered agreements had been impe ded, except through recourse to dispute settlement, 
in accordance with the DSU provisions.  The EC had made precisely such a determination outside of 
the WTO dispute settlement process, even before initiating the WTO disput e settlement proceedings. 
38. Korea noted that its request for consultations in this dispute was broader than the measures 
identified in the present panel request.  Korea had de cided to proceed ahead with this portion of its 
claims at this point in time because the EC had proposed on 21 January 2004 to extend by one more 
year the TDM which had originally been set to expire by the end of March 2004.  The systemic 
importance of the issue had also been taken into  account as unilateralism of this sort had to be 
addressed without any further delay.  Korea had not  abandoned its other claims with respect to the 
subsidization of EC commercial vessels.  In a new dispute WT/DS307, Korea had requested, on 
13 February 2004, consultations with the EC.  It  had requested these new consultations since the 
scope of the consultations had been br oadened.  The new request included, inter alia , the Framework 
on State Aid to Shipbuilding, which provided for br oad based subsidization of the EC shipbuilding 
industry.  Furthermore, there continued to be issu es regarding whether the EC had provided prohibited 
and actionable subsidies causing adverse effects wh ich needed further consultations.  Finally, and 
turning back to the panel request, Korea believed that  the EC's measure specified in the panel request  WT/DSB/M/165 
 Page 9 
 
 
 constituted a clear violation of its obligation under th e WTO regime by the EC and its member States.  
Korea requested that a panel be establishe d with standard terms of reference. 
39. The representative of the European Communities  said that the EC was surprised to see 
Korea's panel request.  Korea had originally request ed consultations on a number of EC's measures in 
the shipbuilding area and had sent to the EC over 4 00 questions.  The EC and Korea then had held 
two rounds of consultations which,  however, due to the vast number of Korean questions, remained 
incomplete.  Korea had, at the time, suggested that a third round would follow to complete the 
discussion of these measures.  The EC was, therefor e, surprised to see that Korea had asked for a 
panel without completing the consultations. The su rprise was even greater considering that on 
13 February 2004, the EC had received a new re quest for consultations by Korea on the EC's 
measures in question, which it was now in the process of examining. However, as Korea's new 
consultations request also covered the measures with regard to which the panel was being requested at 
the present meeting, the EC had to express its disappr oval of this procedural manoeuvring by Korea.  
The EC, therefore, rejected Korea's request and w ould vigorously defend its measures in the event of 
a panel procedure. 
40. The representative of the United States  said that as the United States understood it, Korea 
claimed that the EC had done the following:  (i ) it had determined under its own domestic procedures 
that Korea's subsidies were inconsistent with its  obligations under the Subsidies Agreement;  and 
(ii) as a result of this determination, the EC ha d provided, or had authorized member States to 
provide, subsidies to the EC's shipyards.  Korea a ppeared to allege that the first determination was 
inconsistent with Article 23 of the DSU, based on the reasoning of the panel in the US – Section 301 
dispute, in which the EC was the complainant.  Ko rea appeared to allege that the resulting provision 
of subsidies was inconsistent with  Article 32.1 of the Subsidies Ag reement, based on the reasoning of 
the Panel and the Appellate Body in the Byrd Am endment dispute, in which the EC was also a 
complainant.  Suffice it to say that the United States would be following this dispute with the utmost 
interest. 
41. The representative of Korea  said that his delegation wished to make a short statement since 
the EC had expressed its surprise about Korea's new request for consultations, which had been filed 
on 13 February 2004.  He confirmed that two rounds of consultations had been held with the EC on 
this matter.  The EC had expressed its desire to continue with consultations.  However, what had 
prompted Korea's new request for consultations was the fact that the EC had extended the TDM 
regulations for one more year, which was a clear vi olation of its obligations under the DSU.  Korea 
looked forward to meaningful consultations under the new request and to any amicable solution to be 
found to this dispute. 
42. The DSB took note  of the statements and agreed  to revert to this matter. 
4. United States – Final countervailing duty de termination with respect to certain softwood 
lumber from Canada 
(a) Report of the Appellate Body (WT/DS257/AB/R ) and Report of the Panel (WT/DS257/R and 
Corr.1) 
43. The Chairperson  drew attention to the communication from the Appellate Body contained in 
document WT/DS257/10 transmitting the Appellat e Body Report on "United States – Final 
Countervailing Duty Determination with Respect to  Certain Softwood Lumber from Canada", which 
had been circulated on 19 January 2004 in document WT/DS257/AB/R, in accordance with 
Article 17.5 of the DSU.  In accordance with th e Decision on Procedures for the Circulation and 
Derestriction of WTO Documents contained in doc ument WT/L/452, the Appellate Body Report and 
the Panel Report pertaining to this case had been ci rculated as unrestricted documents.  She recalled WT/DSB/M/165 
Page 10  
 
 that Article 17.14 of the DSU required that:  "An A ppellate Body report shall be adopted by the DSB 
and unconditionally accepted by the pa rties to the dispute unless the DS B decides by consensus not to 
adopt the Appellate Body report within 30 days follow ing its circulation to Members.  This adoption 
procedure is without prejudice to the right of Members to express their views on an Appellate Body report". 
44. The representative of the United States
 said that on 5 February 2004 his country had been 
pleased to request that the adoption of the Panel and Appellate Body Reports in this dispute be put on 
the agenda of the present meeting.  The United Stat es thanked the Panel, the Appellate Body and the 
Secretariat for their diligence and hard work throug hout the course of this dispute.  Needless to say, 
the United States was pleased by the results.  The Pa nel and Appellate Body Re ports had rejected, in 
all major respects, Canada's claims that the United States had acted inconsistently with the Subsidies 
Agreement and the GATT 1994 in finding that Canada  had provided countervailable subsidies to its 
softwood lumber industry.  The United States was pa rticularly pleased that the Appellate Body had 
confirmed that countervailing duty administrators had the flexibility under the Subsidies Agreement 
to accurately determine whether government prices of  inputs were below market , even in cases where 
the local market price was itself distorted by government action.  The United States was also pleased 
that both the Panel and the Appellate Body had confirmed that a WTO Member providing low-cost 
inputs to specific companies could not avoid the disciplines of the Subsidies Agreement simply by 
using legal devices that related to the form, but not the substance, of the transaction.  These were both 
important principles that helped ensure that WT O subsidy disciplines remained meaningful.  The 
United States acknowledged the finding that it should  have investigated whether subsidies had been 
passed from one company to another through the sale of logs.  The United States was currently 
examining approaches to implementing this finding.  Finally, the United States, once again, wished to 
emphasize its appreciation for the excelle nt legal analysis in this dispute. 
45. The representative of Canada  said that his country wished to thank the Panel, the Appellate 
Body and the respective Secretariats for their work in  this matter.  While disappointed in certain of the 
findings, Canada welcomed these Reports and the additional clarity they had brought to the 
disciplines of the SCM Agreement.  At the present meeting, he wished to concentrate his comments 
on two substantive points and anothe r point raised by the Reports concerning the effective functioning 
of the WTO dispute settlement system.  First, he wi shed to turn to the findings of the Panel and the 
Appellate Body with respect to the pass-through i ssue.  That issue involved the extent to which 
benefits allegedly attached to an upstream input product, might be presumed to "pass-through" to the 
downstream subject goods.  The Panel and the Appellate Body 's clear answer had been that such a 
presumption was not permissible.  The Panel had found that the US Department of Commerce's pass-through analysis with respect to "sawmill-to-s awmill" transactions was inconsistent with the 
SCM Agreement and the GATT 1994.  The Appellate Body had upheld this finding and it had also 
found that the United States had conceded that a pass-through analysis was required for transactions 
between independent harvesters a nd downstream sawmills.  In making these findings, the Panel and 
the Appellate Body had confirmed a fundamental  principle of the SCM Agreement; i.e. an 
investigating authority might not presume the pass-thr ough of a subsidy:  it must establish it. In this 
instance, having been found to have imposed counter vailing duties in respect of practices that it had 
not properly established to be subsidies, the Unite d States should bring itself into compliance.  Doing 
so would significantly reduce the countervaili ng duty being applied to Canadian imports. 
46. He noted that Canada welcomed certain fi ndings of the Appellate Body concerning the 
"benefit" analysis under Article 14(d) of the SCM Agreement.  These included the Appellate Body's 
finding that countervailing measures could not be  used to offset differences in comparative 
advantages between countries – the precise purpose of the US cross-border comp arison in this case.  
Moreover, it had been concluded that an investiga ting authority should only be permitted to use a 
benchmark other than in-country private market prices in "very limited" circumstances.  In particular, 
the Appellate Body had indicated that such a benchmark could only be used where it had been  WT/DSB/M/165 
 Page 11 
 
 
 established first, that private prices of the goods in question in the country of provision were distorted, 
because of the predominant role of the government in the market as a provider of the same or similar goods and that the benchmark was representative of prevailing market conditions in the country of 
provision.  In Canada's view, ba sed on the Appellate Body's guidan ce, trade in Canadian softwood 
lumber with the United States was not one of these "very limited" circumstances.  Canada noted the 
US comments and respected the findings by the Depa rtment of Commerce.  However, evidence filed 
by Canada demonstrated that the Department of Commerce had not established that private stumpage 
prices in Canada were distorted.  Moreover, the benchmark used bore no re lationship with prevailing 
market conditions in Canada.  However, the Appellate  Body had been unable to find that the use by 
the United States of cross-border comparisons w as inconsistent with Article 14(d) of the 
SCM Agreement.  The Appellate Body had found th at it could not complete the Panel's analysis 
because the Panel had not made factual findings with respect to whether the prices in the country of 
provision were distorted or whether the benchmar k used by the United States was representative of 
prevailing market conditions in Ca nada.  Furthermore, there were no undisputed facts on the record 
that the Appellate Body could rely on. 
47. With regard to remand authority, he said that despite a proceeding that had lasted well over a 
year and the very considerable time and resources that had been expended on it, if Canada wished to 
pursue this matter in dispute settlement, the only r ecourse available to it under the current DSU rules 
would be to launch a whole new case.  This was by no means a unique or anomalous case.  He recalled that the same problem had arisen just two months ago in the Sunset Review  case brought by 
Japan, when the Appellate Body had found that it lacked  the factual basis to complete its analysis of 
the measure at issue.  These results, or more accurate ly, the lack of results, illustrated clearly the need 
for a remand authority for the Appellate Body.  Article 3 of the DSU emphasized that the prompt settlement of disputes was essential to the effectiv e functioning of the WTO system.  In cases like 
these, unless the Appellate Body had the authority to  remand issues back to the panel for additional 
factual findings, the prompt settlement of the dis pute would become unachievable and the functioning 
of the WTO system would be compromised.  The creation of a remand authority for the Appellate 
Body was one of the initiatives bei ng considered in the negotiations of the DSB in Special Session to 
clarify and improve the DSU.  This initiative ha d the unquestionable potential to significantly improve 
the functioning of the WTO dispute settlement system.  Canada, therefore, encouraged all Members to 
make it a priority in these negotiations.  Finally, he  said that Canada requested that the DSB adopt the 
Appellate Body Report and the rela ted Panel Report in this matter and that it recommend that the 
United States bring its measures into conformity. 
48. The representative of the European Communities
 said that the EC welcomed the clarifications 
provided by the Appellate Body on  important terms of the SCM Agre ement.  The EC particularly 
welcomed the clarification that the expression "goods  or services other than general infrastructure" in 
Article 1.1(a)(1)(iii) of the SCM Agreement covere d any in-kind payments.  The EC also welcomed 
the fact that the Appellate Body had referred to the French and Spanish language versions of the 
Agreement to interpret the term "goods" and considered that this  interpretative source should be 
adhered to systematically according to Article 33 of  the Vienna Convention.  Moreover, the Appellate 
Body had provided important guida nce regarding the benchmark to be used when determining the 
existence of a benefit resulting from the provision of goods by a government.  The EC agreed with the 
Appellate Body that in exceptional circumstances,  Article 14(d) of the SCM Agreement, did not 
require the use of the domestic private prices;  i.e.  when such private prices were themselves distorted 
by the predominant role of the government in prov iding the goods concerned.  The EC also agreed 
that the decision to disregard the existing private prices as the benchmark should be the result of a 
thorough investigation of the market in questio n and that the alterna tive benchmark should be 
determined cautiously and with due account of th e market conditions of the country of provision. WT/DSB/M/165 
Page 12  
 
 49. The DSB took note
 of the statements, and adopted  the Appellate Body Report contained in 
WT/DS257/AB/R and the Panel Report contained in  WT/DS257/R and Corr.1, as modified by the 
Appellate Body Report. 
5. Proposed nominations for the indicative list of governmental and non-governmental 
panelists (WT/DSB/W/251) 
50. The Chairperson  drew attention to document WT/D SB/W/251 which contained additional 
names proposed for inclusion on the indicative list in  accordance with Article 8.4 of the DSU.  She 
proposed that the DSB approve the names contained in document WT/DSB/W/251. 
51. The DSB so agreed . 
6. Mexico – Measures affecting the import of matches 
(a) Statement by Mexico 
52. The representative of Mexico , speaking under "Other Business", said that his country thanked 
Chile for withdrawing its request for consultations  concerning Mexico's measures affecting the import 
of matches (WT/DS232/3).  This withdrawal demonstrated that some problems in the day-to-day functioning of the DSU could be resolved with th e requisite political will and without the need of 
amending the DSU.  This was also a further demonstra tion of Mexico's interest in resolving issues in a 
satisfactory and expeditious manner.   Mexico hoped to be able to notify shortly mutually agreed 
solutions with regard to its disputes with Nicaragua  and Guatemala so that these matters could also be 
considered as terminated. 
53. The DSB took note
 of the statement. 
7. Election of Chairperson 
54. The Chairperson  said that, as Members were aware, the outgoing DSB Chairman, 
Amb. Shotaro Oshima, was unavoidably absent from Geneva and had asked her to propose that the meeting be suspended on this agenda item with a view to be reconvened at an appropriate and 
convenient time, probably just in advance of the next  regular DSB meeting on 19 March, if no special 
DSB meeting were to be held before that date.  De legations would be informed by fax as to when the 
meeting would be reconvened. 
55. The DSB agreed
 that the meeting be suspended on this agenda item. 
56. Upon the resumption of the DSB meeting on 19 March 2004 , the outgoing Chairman  recalled 
that on 17 February 2004, the DSB had suspended its meeting and had agreed to  reconvene in order to 
proceed with the election of Chairperson.  In light of this, he proposed to take up this agenda item.  He 
then said that first he wished to say a few words of thanks as this was his last meeting as Chairman of 
the DSB.  In this regard, he wished to thank all delegations for their support throughout the year.  He 
also wished to thank the members of the Secretariat who had supported him throughout the process, in 
particular the Director of the Council & TNC Divi sion and his staff as well as the Director of the 
Legal Affairs Division and his staff.  He also thanked the interpreters for their job.  He also wished to 
take this opportunity to express his gratitude to  Ambassador Mary Whelan of Ireland for her 
willingness to come to stand in for him when was no t able to chair meetings for various reasons, not 
only once but twice, despite her strenuous duties as Am bassador of the EC presidency.  Looking back 
at the past year, he said that he felt very fort unate for having been provided with the firsthand 
knowledge of this important pillar of the WTO, name ly the dispute settlement mechanism.  Currently, 
Members were in the process of negotiations and focu sed on trade liberalizing elements of the WTO.   WT/DSB/M/165 
 Page 13 
 
 
 However, the Dispute Settlement Body was a very important part of the WTO, which was the rules 
based organization.  He, therefore, felt very fortunate  to have been able to contribute  to the dispute 
settlement process and was now more aware of the impor tance of this WTO pillar.  He said that the 
new Chairperson to be elected at the present meeting was his good friend and a very able and committed person.  He was, therefore, very happy to be able to hand over the job to her.   
57. The outgoing Chairman
 recalled that at its meeting on 11 February 20041, the General 
Council had taken note of the consensus on a slate of names of Chairpersons to a number of WTO 
bodies, including the DSB.  On the basis of the understanding reached by the General Council, he 
wished to propose that the DSB elect, by acclamation, Ambassador Amina Mohamed (Kenya) as Chairperson of the DSB. 
58. The DSB so agreed
. 
59. The newly-elected Chairperson  thanked Members for the confidence bestowed on her by 
electing her to this high post.  Her election w as not only an honour and privilege for her and her 
delegation, but also a proud moment for her country - Kenya.  She expressed a very personal gratitude 
to the outgoing Chairman of the DSB and the ne w Chairman of the General Council, Ambassador 
Shotaro Oshima, for his dynamic and elegant leadership over the past year.  She thanked him for 
presiding over her election and believed that she c ould not have received the torch from a better and 
more able friend.  She said that she was consci ous of the heavy responsibility that she was assuming 
as Chairperson of the DSB and pledged to carry it out to the best of her ability, all the time aware of 
the central role of the DSB as a custodian of the ri ghts and obligations of the membership of the WTO 
and the backbone of the multilateral trading system.  She asked for Members' support and cooperation 
in carrying out this important task.  She tha nked and acknowledged the excellent support already 
provided to her by the Secretariat.  She said th at she felt fortunate to have such high quality 
professional support and was hopeful to have  a stimulating and productive year. 
60. The representatives of Argentina , Canada , Chile , Cuba , Djibouti , the European Communities , 
India , Japan , Korea  and the United States  expressed appreciation for the work done by the outgoing 
Chairman of the DSB and welcomed the newly-elected Chairperson of the DSB. 
61. The DSB took note  of the statements. 
__________ 
                                                      
1 WT/GC/M/85. 