WORLD TRADE
ORGANIZATIONWT/DS194/2
25 July 2000
(00-3076)
Original:  English
UNITED STATES – MEASURES TREATING EXPORT RESTRAINTS
AS SUBSIDIES
Request for the Establishment of a Panel by Canada
The following communication, dated 24 July 2000, from the Permanent Mission of Canada to
the Chairman of the Dispute Settlement Body, is circulated pursuant to Article 6.2 of the DSU.
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On 19 May 2000, the Government of Canada requested consultations with the Government of
the United States of America pursuant to Article 4 of the Understanding on Rules and Procedures
Governing the Settlement of Disputes (DSU), Article XXII of the General Agreement on Tariffs and
Trade 1994 and Article 30 of the Agreement on Subsidies and Countervailing Measures (the SCM
Agreement) concerning US measures that treat a restraint on exports of a product as a subsidy toproducers of other products made using or incorporating the restricted product if the domestic price of
the restricted product is affected by the restrain t.  In accordance with Article 4 of the DSU, that
request was notified to the Dispute Settlement  Body (DSB) and the Co mmittee on Subsidies and
Countervailing Measures.  The request was circulated to Members of the World Trade Organization
on 24 May 2000 (WT/DS194/1).
Canada and the United States held consultations in Geneva on 15 June 2000 with a view to
reaching a mutually satisfactory resolution of the matter.  Unfortunately, the consultations failed to
settle the dispute.
In view of the above, Canada hereby requests, pursuant to Articles 4 and 6 of the DSU,
Article XXIII of the GATT 1994 and Article 30 of the SCM Agreement that a Panel be established ata meeting of the DSB which Canada has request ed be held on 4 August 2000.  Canada further
requests that the Panel be established with the standard terms of reference set out in Article 7 of the
DSU.
The US measures at issue include section 771(5) of the Tariff Act of 1930
(19 U.S.C. § 1677(5)), as amended by the Urug uay Round Agreements Act (URAA), as interpreted
by the Statement of Administrative Action (SAA) accompanying the URAA (H.R. 5110, H.R.
Doc. 316, Vol. 1, 103d Cong., 2d Sess., 656, at 925-926 (1994)) and the Explanation of the Final
Rules (the Explanation or Preamble), US Depart ment of Commerce, Countervailing Duties, Final
Rule (63 Federal Register 65,348 at 65,349-51 (25 Nov. 1998) and US practice thereunder (theMeasures).
The SAA and Preamble require the United States to interpret section 771(5) of the URAA to
treat an export restraint as a subsidy if it has a price effect beneficial to users of the restricted product
in the restricted market.    Thus, under US countervailing duty law, an export restraint is considered to
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Page 2
satisfy the "financial contribution" element of the definition of "subsidy" in Article 1.1 of the
SCM Agreement.  This means that an export restraint that has a price effect beneficial to users of the
restricted product in the restricted market will be subject to countervailing duties if the other
requirements of US law are met (notably specific ity and material injury).  An export restraint,
however, is not encompassed in the definition of "financial contribution" in Article 1.1, regardless ofany price effect on the restrained product in its domestic market.  The Measures therefore establish
that the United States will impose countervailing duties against practices that are not countervailable
because they are not subsidies within the meaning of Article 1.1 of the SCM Agreement.
Canada requests that the Panel consider and find that:
(a) the Measures are inconsistent with the SCM Agreement, and in particular with Articles 1.1,
10 (as well as Articles 11, 17 and 19, as they relate to the requirements of Article 10) and 32.1
thereof;  and
(b) that as a result of the Measures, the United States has failed to ensure that its laws, regulations
and administrative procedures are in conformity with its WTO obligations as required byArticle 32.5 of the SCM Agreement and Article XVI:4 of the Agreement Establishing the
World Trade Organization.
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