World Trade Organization

• Author: International Law Group

A Dispute Settlement Panel of the World Trade Organization (WTO) has ruled in favor of the European Union (EU) in its dispute with the U.S. over countervailing duties imposed on certain steel originating in the United Kingdom (UK). Affected were certain hot- rolled lead and bismuth carbon steel products (leaded bars). The EU filed this complaint on June 12, 1998, claiming that the U.S. countervailing duties violated Articles 1.1(b), 10, 14 and 19.4 of the WTO Agreement on Subsidies and Countervailing Duties ("SCM Agreement"). Brazil and Mexico were third parties to the dispute and submitted arguments.

In 1993, the U.S. Department of Commerce established a subsidy rate of 12.69 percent on steel imports from United Engineering Steels Ltd. (UES). The state-owned British Steel Corporation (BSC) had set up UES in 1986. British Steel plc took over the assets of BSC in 1988. The UK Government then privatized British Steel plc in 1988 and sold its shares at fair market value. In 1995, UES became an affiliate of British Steel plc and changed its name to British Steel Engineering Steels (BSES). British Steel plc (now Corus plc) had been getting government subsidies before the privatization, but received no subsidies afterwards.

The U.S. imposed the countervailing duties in March 1993 for the subsidies that BSC received before the privatization in the years 1977/78 - 1985/86. The U.S. Department of Commerce classified the subsidies as non-recurrent and spread them out over 18 years (which is considered the useful life of production assets in the steel industry). The rationale of the countervailing duties was that a portion of the prior subsidies "traveled with" state company assets.

At issue are the reviews of the U.S. Department of Commerce (DOC) of the years 1994, 1995 and 1996. In its review of 1994, DOC set a subsidy rate of 1.69 % on imports from UES. After it reviewed 1995, the DOC raised the subsidy rate to 2.4 % for UES and to 7.35 % for BSES. In the 1997 review, the DOC lowered the BSES subsidy rate to 5.28%.

The EU argued that because British...