[House Report 108-415]
[From the U.S. Government Publishing Office]
108th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 108-415
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REPEAL OF SECTION 801 OF REVENUE ACT OF 1916
_______
February 6, 2004.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Sensenbrenner, from the Committee on the Judiciary, submitted the
following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 1073]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the
bill (H.R. 1073) to repeal section 801 of the Revenue Act of
1916, having considered the same, reports favorably thereon
without amendment and recommends that the bill do pass.
CONTENTS
Page
Purpose and Summary.............................................. 2
Background and Need for the Legislation.......................... 2
Hearings......................................................... 6
Committee Consideration.......................................... 6
Vote of the Committee............................................ 6
Committee Oversight Findings..................................... 6
New Budget Authority and Tax Expenditures........................ 6
Congressional Budget Office Cost Estimate........................ 6
Performance Goals and Objectives................................. 7
Constitutional Authority Statement............................... 7
Section-by-Section Analysis and Discussion....................... 8
Changes in Existing Law Made by the Bill, as Reported............ 8
Markup Transcript................................................ 9
Dissenting Views................................................. 15
Purpose and Summary
H.R. 1073 repeals the Antidumping Act of 1916 as enacted in
Section 801 of the Revenue Act of 1916.\1\ The 1916 Act has
never formed the basis of a final ruling on the merits in any
Federal case. Nonetheless, on September 26, 2000, the Dispute
Settlement Body (``DSB'') of the World Trade Organization
(``WTO'') held that the 1916 Act violated United States
obligations under the General Agreement on Tariffs and Trade
(``GATT'') 1994, the Antidumping Agreement, and the WTO
Agreement.
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\1\ Revenue Act of 1916, ch. 463, Sec. 801, 39 Stat. 756, 798-99
(1916) (codified at 15 U.S.C. Sec. 72 (2003)).
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Decisions by the WTO are not self-executing. As a result,
on March 4, 2003, Chairman Sensenbrenner and Committee on Ways
and Means Chairman Thomas introduced H.R. 1073 to bring the
United States into conformity with these obligations by
repealing the 1916 Act. H.R. 1073 does not affect legal claims
filed after the WTO decision or pending before enactment of the
legislation.\2\ In addition, H.R. 1073 does not disturb other
existing antidumping remedies contained in U.S. trade law that
were not affected by the WTO ruling. As a result, U.S. industry
may continue to utilize the comprehensive and internationally-
compliant antidumping remedies enacted by the United States.
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\2\ The Committee is aware of one pending case brought under the
Antidumping Act of 1916: Goss International Corp. v. MAN Roland
Druckmaschinen Aktiengensellschaft No. C00-0035 (N.D. Iowa). On
December 4, 2003, a jury awarded Goss damages of $10.5 million from TKS
(Tokyo Kikai Seisakusho), a Japanese printing press manufacturer named
in the original suit for an alleged violation of the 1916 Act. TKS has
filed motions to reverse the jury verdict and alternatively for a new
trial.
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Background and Need for the Legislation
HISTORICAL CONTEXT
The 1916 Act was the first U.S. legislation designed to
afford relief against foreign exporters who ``dumped'' their
products into the U.S. market.\3\ In the aftermath of World War
I, the 64th Congress passed the Act in anticipation of
discriminatory pricing by foreign industries attempting to
restore pre-World War I markets through predatory trade
practices.\4\ Because the Act intended to place foreign
commercial interests in the same position as domestic
manufacturers ``with reference to unfair competition,'' the
1916 Act is regarded as a hybrid between trade and antitrust
law.\5\ This antitrust component forms the basis of the
Committee's jurisdiction over H.R. 1073.
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\3\ Antidumping and Countervailing Duty Laws, 3 Int'l Bus. & Law
Series (West) at 15-1 (July, 1998).
\4\ Zenith Radio Corp. v. Matsushita Elec. Indus. Co., 494 F. Supp.
1190, 1219 (E.D. Pa. 1980).
\5\ H.R. Rep. No. 64-922 at 9-10 (1916); see also Antidumping and
Countervailing Duty Laws, supra note 3, at 15-1.
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Under the 1916 Act, the importation of an article from a
foreign country into the United States constitutes unlawful
dumping if three elements are present. First, the price in the
United States must be ``substantially less'' than the ``actual
market price or wholesale price of such articles . . . in the
principal markets of the country of their production.'' \6\
Second, the international price discrimination must be ``common
and systematic.'' \7\ Third, the price discrimination must
occur ``with the intent of destroying or injuring an industry
in the United States, or preventing the establishment of an
industry in the United States, or of restraining or
monopolizing any part of trade and commerce in such articles in
the United States.'' \8\ If any person is held to have violated
all three elements, the 1916 Act provides for both criminal and
civil penalties, including imprisonment of up to 1 year and
treble damages.\9\
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\6\ 15 U.S.C. Sec. 72 (2002).
\7\ Id.
\8\ Id.
\9\ Id.
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SUBSEQUENT ANTIDUMPING LEGISLATION
The significance of the 1916 Act was ``eclipsed in large
part'' by subsequent antidumping legislation.\10\ Five years
after passing the 1916 Act, Congress enacted the more
comprehensive Antidumping Act of 1921 which was repealed by the
Trade Agreements Act of 1979.\11\ Under the 1979 Act, Congress
adopted a new antidumping law that now serves as the primary
statute for U.S. industry to obtain relief from international
price discrimination.\12\ These antidumping remedies remain
unaffected by the September 26, 2000 WTO decision. As a result,
U.S. industry may continue to avail itself of the more
comprehensive and internationally-compliant antidumping
remedies contained in the 1979 Act.
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\10\ Antidumping and Countervailing Duty Laws, supra note 3, at 15-
2.
\11\ Id.
\12\ Pub. L. No. 96-39, 93 Stat. 144 (1979).
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JUDICIAL CONSIDERATION OF THE 1916 ACT
Judicial consideration of the 1916 Act is quite limited for
a statute that has been in existence for nearly 88 years. The
relative lack of precedent prompted a Pennsylvania district
court in 1980 to note that ``this opinion [regarding the 1916
Act] and order not only involve an issue which is of first
impression, but also involve an Act which despite its venerable
age . . . is virtually a statute of first impression.'' \13\
U.S. companies aggrieved by predatory dumping have been
reluctant to pursue a cause of action based on the 1916 Act
since no plaintiff has ever succeeded with such a claim.\14\
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\13\ Zenith Radio Corp., 494 F. Supp. 1190 at 1243.
\14\ Note, Rethinking the 1916 Antidumping Act, 110 Harv. L. Rev.
1555, 1556 n. 7 (1997).
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In contrast to other antidumping remedies, a plaintiff who
seeks relief under the 1916 Act must first demonstrate that the
defendant had the requisite intent to destroy, injure, prevent,
restrain or monopolize the U.S. market when importing the
relevant product.\15\ The 1916 Act's requirement of actual
intent--instead of actual injury--permits a defendant to claim
that ``any price differentials are cost-justified or
attributable to other reasonable commercial considerations.''
\16\ In addition, no prima facie standards exist which might
shift the burden of proof to the defendant upon the
establishment of a threshold case.\17\ The elevated standard of
proof required to obtain judicial relief under the 1916 Act has
greatly limited its application in court.
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\15\ Id. at 1556.
\16\ Antidumping and Countervailing Duty Laws, supra note 3, at 15-
9.
\17\ Id.
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Despite the judicial track record of the 1916 Act, U.S.
companies have increasingly pursued causes of action under the
1916 Act in the last twenty years. The most recent and heavily
publicized cases involve the U.S. steel industry's pursuit of
antidumping relief during the 1998 steel import crisis.
Wheeling-Pittsburgh Steel Corporation filed a case in 1998
against nine U.S. subsidiaries of European and Japanese steel
companies.\18\ The case was never fully adjudicated because WHX
Corp., the owner of Wheeling-Pitt, ``reached out-of-court
settlements with several of the European traders'' and withdrew
all remaining lawsuits.\19\ While the 1916 Antidumping Act has
yet to be the basis for a final judicial victory, the
settlements with WHX Corp. were steep enough to concern the
European Union (EU) and Japan about the future use of the 1916
Act as a ``potential form of blackmail.'' \20\
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\18\ Nancy E. Kelly, WTO Report Challenges 1916 U.S. Act, American
Metal Market, Dec. 23, 1999, at 1.
\19\ Id.
\20\ Steel Importer Settles With Wheeling-Pittsburgh in 1916 Case,
Inside US Trade, Feb. 26, 1999, Vol. 17, No. 8 at 17.
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WORLD TRADE ORGANIZATION INVOLVEMENT
Primarily in response to the WHX Corp. settlements, the EU
and Japan filed separate WTO complaints alleging that the 1916
Act was inconsistent with provisions in GATT 1994, the
Antidumping Agreement of the Uruguay Round, and the WTO
Agreement.\21\ Two WTO panels held the 1916 Act inconsistent
with international trade obligations and the WTO Appellate Body
affirmed their findings in a combined decision on August 28,
2000. The Appellate Body's recommendations and rulings were
subsequently adopted by the Dispute Settlement Board of the WTO
on September 26, 2000.\22\
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\21\ Id.
\22\ United States--Antidumping Act of 1916, Report of the
Appellate Body, WT/DS136/AB/R (Aug. 28, 2000).
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The WTO concluded that the 1916 Antidumping Act was
inconsistent with: Article VI:1 and Article VI:2 of the GATT
1994; Articles 1, 4, 5.1, 5.2, 5.4, 5.5, 18 and 18.4 of the
Antidumping Agreement; and Article XVI:4 of the WTO Agreement.
Article VI:1 and Article VI:2 of GATT 1994 require that U.S.
antidumping laws provide exclusively for the material injury
test set forth under Article VI and allow only the
implementation of antidumping duties as a remedy for illegal
dumping.\23\ The WTO panel concluded that the 1916 Act fails to
require actual injury and provides for treble damages and
potential imprisonment in violation of international
obligations. The WTO panel held that the 1916 Act was
substantively inconsistent with both the Antidumping Agreement
and GATT 1994, and procedurally defective with respect to the
Act's judicial standing and notice provisions. To the extent
that the 1916 Act was found to violate any part of GATT 1994,
the United States was held to be in violation of Article XVI:4
of the WTO Agreement.\24\
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\23\ Id.
\24\ Id. Specifically, the Panel held that Article VI.2 of GATT
1994 provides that in order to offset or prevent dumping, a WTO Member
may levy on any dumped product an antidumping duty not greater in
amount than the margin of dumping involved with that product.
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At the Dispute Settlement Body meeting of October 23, 2000,
the United States Trade Representative (``USTR'') stated that
the U.S. intended to implement the DSB's recommendations and
rulings. The U.S. also stated that it required a reasonable
amount of time for implementation. An arbitrator determined
that a ``reasonable time'' in this case would be until July 26,
2001. However, the DSB extended the ``reasonable period'' of
time until December 31, 2001, or the end of the first session
of the 107th Congress, whichever came first.
During the 107th Congress, House Ways and Means Committee
Chairman Thomas introduced H.R. 3557 to repeal the 1916 Act and
render it inapplicable to pending and future cases. No further
legislative action was taken before the end of the ``reasonable
time period.'' In response to this delay, the EU and Japan
requested authorization from the WTO to suspend concessions
pursuant to Article 22.2 of the Dispute Settlement
Understanding on January 7, 2002. Both parties proposed that
the WTO allow them to enact their own legislation mirroring the
1916 Act. Several countries have expressed concern that this
retaliatory approach would result in an ``arms buildup of
protectionist measures.'' \25\ The U.S. objected to the
proposal and the DSB again referred the matter to arbitration.
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\25\ EU, Japan Agree to Give U.S. More Time To Comply With 1916
Act, Copyright Rulings, Daily Rep. for Exec., Jan. 22, 2002 at A3.
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U.S. negotiations with the EU and Japan have led to the
suspension of the arbitration process until June 30, 2002. The
EU and Japan warned, however, that the arbitration proceeding
would reactivate at the request of either party if no
substantial progress was made. Since that time, no formal
request has been made by either the EU or Japan. However, both
the EU and USTR have continued to informally press for action
on this measure. In late February of this year, the EU moved
closer to retaliating against the United States for not
repealing the 1916 Act.\26\ In congressional testimony on March
5, 2003, USTR Ambassador Zoellick urged Congress to ``live up
to its obligations under WTO rules'' by repealing the 1916
Act.\27\ On December 18, 2003, the EU Council approved a
regulation that bans the recognition and application of
decisions taken under the 1916 Act within EU countries. The
regulation also allows EU-based companies and citizens to claim
damages (with interest) for any penalties associated with its
application.\28\
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\26\ Tobias Buch & Guy De Jonquieres, EU List US Exports for
Possible Trade Sanctions, Fin. Times, Feb. 27, 2003 at 11; see also
Lamy Warns Washington on WTO Panels, Eur. Rep., March 12, 2003.
\27\ Administration Trade Agenda, 108th Cong. (2003) (statement of
Robert Zoellick, United States Trade Representative).
\28\ Aid to European Companies Faced with Complaints from America,
Agence Eur., Dec. 18, 2003.
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H.R. 1073-- PROSPECTIVE LEGISLATIVE COMPLIANCE
Several factors strongly favor prospective compliance with
the WTO's August 28, 2000 decision. First, WTO decisions are
not self-executing. Rather, they require the affirmative assent
of Congress. Automatic adherence to WTO decisions undermines
the legislative prerogative of Congress and the sovereignty of
the United States. Second, the justification for repealing the
1916 Act is to bring the United States into compliance with its
present WTO obligations: if WTO compliance does not require
retroactive repeal, then conforming legislation should not
extend to retroactive repeal. Third, both the Administration
and Congress have consistently taken the position that
retroactive repeal is not necessary to ensure compliance with
our WTO obligations in all cases, particularly those pertaining
to U.S. trade remedy laws.
For example, the Joint Report of the U.S. Senate Committee
on Finance, Committee on Agriculture, Nutrition, and Forestry,
and Committee on Government Affairs which accompanied
legislation implementing the Uruguay Round Agreements Act
explicitly states that compliance with WTO panels in trade
remedy cases applies prospectively only. The Joint Report
concludes that prospective application ``is consistent with the
general principle in the GATT, and in the future WTO, that
panel decisions do not have retroactive effect.'' \29\ In
addition, Article 19.1 of the WTO Dispute Settlement
Understanding states only that ``(w)here a panel or the
Appellate Body concludes that a measure is inconsistent with a
covered agreement, it shall recommend that the Member concerned
bring the measure into conformity with that Agreement.'' \30\
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\29\ See ``Joint Report of the Committee on Finance, Committee on
Agriculture, Nutrition and Forestry, and Committee on Governmental
Affairs of the United States Senate to accompany the Uruguay Round
Agreements Act,'' S. 2467, S. Rep. No. 412, 103d Cong., 2d Sess. 225
(1994).
\30\ Marrakesh Agreement Establishing the World Trade Organization,
Apr. 15, 1994, the Legal Texts: the Results of the Uruguay Round of
Multilateral Trade Negotiations 4 (1999), 1867 U.N.T.S. 154, 33 I.L.M.
1144 (1994).
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Hearings
No hearings were held in the Committee on the Judiciary on
H.R. 1073.
Committee Consideration
On January 21, 2003, the Committee met in open session and
ordered favorably reported the bill H.R. 1073 by a voice vote,
a quorum being present.
Vote of the Committee
In compliance with clause 3(b) of Rule XIII of the Rules of
the House of Representatives, the Committee notes that there
were no recorded votes during its consideration of H.R. 1073.
Committee Oversight Findings
In compliance with clause 3(c)(1) of Rule XIII of the Rules
of the House of Representatives, the Committee reports that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of Rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
New Budget Authority and Tax Expenditures
Clause 3(c)(2) of Rule XIII of the Rules of the House of
Representatives is inapplicable because this legislation does
not provide new budgetary authority or increased tax
expenditures.
Congressional Budget Office Cost Estimate
In compliance with clause 3(c)(3) of Rule XIII of the Rules
of the House of Representatives, the Committee sets forth, with
respect to H.R. 1073, the following estimate and comparison
prepared by the Director of the Congressional Budget Office
under section 402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, February 5, 2004.
Hon. F. James Sensenbrenner, Jr., Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1073, a bill to
repeal section 801 of the Revenue Act of 1916.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Annabelle
Bartsch, who can be reached at 226-2680.
Sincerely,
Douglas Holtz-Eakin.
Enclosure
cc:
Honorable John Conyers, Jr.
Ranking Member
H.R. 1073--A bill to repeal section 801 of the Revenue Act of 1916.
H.R. 1073 would repeal section 801 of the Revenue Act of
1916, which prohibits foreign firms from dumping goods in the
United States and subjects violators to both civil and criminal
penalties. A good is considered to be dumped if a foreign firm
sells it for less in the U.S. market than the firm does in its
home market. Based on information from the U.S. International
Trade Commission, CBO expects that enacting H.R. 1073 would
have no effect on Federal revenues or spending. Currently, U.S.
industries may seek relief from dumping under legislation
enacted subsequent to the 1916 law, so repealing section 801
would affect neither the ability to seek such relief nor the
collection of any resulting monetary penalties.
H.R. 1073 contains no private-sector or intergovernmental
mandates as defined in the Unfunded Mandates Reform Act, and
would impose no costs on State, local, or tribal governments.
This estimate was approved by G. Thomas Woodward, Assistant
Director for Tax Analysis, and Robert A. Sunshine, Assistant
Director for Budget Analysis. The CBO staff contact for the
estimate is Annabelle Bartsch, who may be reached at 226-2680.
Performance Goals and Objectives
H.R. 1073 does not authorize funding. Therefore, clause
3(c)(4) of Rule XIII of the Rules of the House of
Representatives is inapplicable.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of Rule XIII of the Rules of the
House of Representatives, the Committee finds the authority for
this legislation in article I, section 8 of the Constitution.
Section-by-Section Analysis and Discussion
Section 1. Repeal of Antidumping Provisions Under the Act of September
8, 1916
This section repeals the Antidumping Act of 1916 (Section
801 of the Act of September 9, 1916) which allows both criminal
and civil penalties for persons importing articles into the
United States at a price substantially less than actual market
price and with the predatory intent to injure U.S. industry.
Section 1(b). Effective Date.
This section states that the repeal of section 801 of the
Act of September 9, 1916 shall not affect any legal action
commenced before or pending on the date of enactment of this
bill.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets):
SECTION 801 OF THE ACT OF SEPTEMBER 8, 1916
CHAP. 463.--AN ACT to increase the revenue, and for other purposes.
[Sec. 801. That it shall be unlawful for any person
importing or assisting in importing any articles from any
foreign country into the United States, commonly and
systematically to import, sell or cause to be imported or sold
such articles within the United States at a price substantially
less than the actual market value or wholesale price of such
articles, at the time of exportation to the United States, in
the principal markets of the country of their production, or of
other foreign countries to which they are commonly exported,
after adding to such market value or wholesale price, freight,
duty, and other charges and expenses necessarily incident to
the importation and sale thereof in the United States:
Provided, That such act or acts be done with the intent of
destroying or injuring an industry in the United States, or of
preventing the establishment of an industry in the United
States, or of restraining or monopolizing any part of trade and
commerce in such articles in the United States.
[Any person who violates or combines or conspires with any
other person to violate this section is guilty of a
misdemeanor, and, on conviction thereof, shall be punished by a
fine not exceeding $5,000, or imprisonment not exceeding one
year, or both, in the discretion of the court.
[Any person injured in his business or property by reason
of any violation of, or combination or conspiracy to violate,
this section, may sue therefor in the district court of the
United States for the district in which the defendant resides
or is found or has an agent, without respect to the amount in
controversy, and shall recover threefold the damages sustained,
and the cost of the suit, including a reasonable attorney's
fee.
[The foregoing provisions shall not be construed to deprive
the proper State courts of jurisdiction in actions for damages
thereunder.]
Markup Transcript
BUSINESS MEETING
WEDNESDAY, JANUARY 28, 2004
House of Representatives,
Committee on the Judiciary,
Washington, DC.
The Committee met, pursuant to notice, at 10:04 a.m., in
Room 2141, Rayburn House Office Building, Hon. F. James
Sensenbrenner, Jr. [Chairman of the Committee] presiding.
Chairman Sensenbrenner. The Committee will be in order. A
working quorum is present.
Pursuant to notice, I now call up the bill H.R. 1073, ``to
repeal Section 801 of the Revenue Act of 1916'' for purposes of
markup, and move its favorable recommendation to the House.
Without objection, the bill will be considered as read and open
for amendment at any point.
[The bill, H.R. 1073, follows:]
Chairman Sensenbrenner. I have a lengthy statement which I
will summarize; and without objection, all Members will be able
to include opening statements in the record.
This bill repeals a provision of the Revenue Act that was
declared by the World Trade Organization appellate body to be
in violation of United States international trade agreements.
It is important to note that this law, which was passed in
1916, has never been utilized to obtain a final judgment on the
merits in any Federal court. I will stress that this
legislation, in no way, affects the ability of American
industry to seek anti-dumping relief under anti-dumping laws
contained in more comprehensive anti-dumping legislation, such
as the Trade Act of 1979. So it does allow U.S. litigants to
continue to utilize their existing anti-dumping remedies. The
bill also is only applicable prospectively, so anyone that does
have a cause of action under the Revenue Act of 1916 as of the
date of enactment of this bill will continue to have that cause
of action preserved.
I yield back the balance of my time, and recognize the
gentleman from Michigan.
Mr. Conyers. Thank you, Mr. Chairman, and my colleagues.
This is a measure which we have not had the benefit of a
hearing; it has not been through any Subcommittee, nor has the
full Committee ever discussed it before now, and so you would
have to assume that this is a very trivial matter before us
that does not warrant the regular process. But I view our
responsibility to more carefully examine the measures that lie
within our jurisdiction.
Now, the measure we are talking about is a law that has
been in existence since 1916 and has had numerous judicial
interpretations. And so if what we are doing here today is
considering its repeal, it would seem that there at least ought
to be a hearing to give some of us who may not hold themselves
out as experts on this subject the ability to understand what
it is we are doing and why. So, I would hope that--well, maybe
there is some reason that we have to operate so expeditiously.
If there is, I have not heard that, either. Well, we are just
starting the hearing. Maybe it will come out in a little while.
So somewhere along the line I am going to--since we are trying
to get to the floor, we ought to figure out how and what, under
what circumstances we can take this matter more thoroughly
under consideration. Our schedules aren't awfully heavy in
January or February, so I guess the bottom line is, what is the
rush?
Now, the repeal of this law. Question: Will it have a
detrimental effect on American jobs, or will it have a
beneficial effect upon American jobs? If anybody can help me
with that. I just raise it as a question, I have not researched
this, so I would be happy to yield to anybody for some
enlightenment about that. Jobs happens to be one of the big
issues in the year 2004 in which we have national elections,
because the economy is the second most important issue,
according to the polls examining what the American people think
is important, and how they will be judging those of us and
candidates in other races.
So I ask the question, is it helpful or hurtful? What we
are purporting to do here is to empower companies to bring
private anti-trust suits against foreign companies that import
their goods into our country at below-market prices. And, as a
matter of fact, the law has been used on several occasions
recently that have resulted in large settlements and judgments
favoring the United States and our workers. Now, if we take
away the ability to bring these actions, what does that signal?
Chairman Sensenbrenner. The gentleman's time has expired.
Without objection, all Members may insert opening statements
into the record. At this point, are there amendments? If there
are no amendments, a reporting quorum is not present. Without
objection, the previous question is ordered on the motion to
report the bill, and a vote will be taken once a reporting
quorum is present.
* * * * * * *
A reporting quorum being present, the question now is on
the motion to report the bill H.R. 1073 favorably. All in favor
will say aye. Opposed no. The ayes appear to have it. The ayes
have it. And the motion to report favorably is agreed to.
Without objection, the Chairman is authorized to move to go to
conference pursuit to House rules. Without objection, the staff
is directed to make any technical and conforming changes, that
all Members will be given 2 days as provided by the rules in
which to submit additional dissenting, supplemental, or
minority views.
Dissenting Views
We cannot support this effort to repeal the 1916
Antidumping Act,\1\ which empowers companies to bring private
antitrust suits against foreign companies that import their
goods at below-market prices. We object to repealing a law that
has been on the books for over 85 years in the absence of a
single hearing--either legislative or oversight. We object to
repealing a law that protects U.S. jobs and trade at a time
when job growth continues to lag and our trade deficit expands.
We object to acting as a rubber stamp for the World Trade
Organization, setting bad precedent that sends a signal to
other nations that they can harass the United States with
frivolous cases. And we object to the hypocrisy of hastily
repealing this law when there are other laws on our books that
have been held in violation of our WTO obligations that we have
not tried to repeal.
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\1\ Revenue Act of 1916, ch. 463, Sec. 801, 39 Stat. 756, 798-99
(1916) (codified at 15 U.S.C. Sec. 72 (2002)).
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I. BACKGROUND
H.R. 1073 repeals the Antidumping Act of 1916 as enacted in
Section 801 of the Act of 1916. The Antidumping Act allows both
criminal and civil penalties for persons importing articles
into the United States at a price substantially less than
actual market price and with the predatory intent to injure
American industry. On September 26, 2000, the Dispute
Settlement Body (DSB) of the World Trade Organization (WTO)
held that the Antidumping Act of 1916 violated United States
obligations under the General Agreement on Tariffs and Trade
(GATT) 1994, the Antidumping Agreement, and the WTO Agreement.
The 1916 Antidumping Act was the first piece of U.S.
legislation designed to afford relief against foreign exporters
who dumped their products into the U.S. market.\2\ In the
aftermath of World War I, Congress passed the Act in
anticipation of discriminatory pricing by foreign industries
attempting to restore pre-WWI markets.\3\ The Act intended to
place foreign competitors in the same position as domestic
manufacturers ``with reference to unfair competition.'' \4\ In
this regard, the Act is interpreted as a hybrid between trade
and antitrust law.\5\
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\2\ Antidumping and Countervailing Duty Laws, 3 Int'l Bus. & Law
Series (West) at 15-1 (July, 1998).
\3\ Zenith Radio Corp. v. Matsushita Elec. Indus. Co., 494 F. Supp.
1190,1219 (E.D. Pa. 1980).
\4\ H.R. Rep. No. 64-922 at 9-10 (1916).
\5\ Antidumping and Countervailing Duty Laws, supra note 3, at 15-
1.
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Under the Antidumping Act of 1916, the importation of an
article from a foreign country into the United States
constitutes unlawful dumping if three elements are met. First,
the price in the United States must be ``substantially less''
than the ``actual market price or wholesale price of such
articles . . . in the principal markets of the country of their
production.'' \6\ Second, the international price
discrimination must be ``common and systematic.'' \7\ Third,
the price discrimination must occur with the intent of
destroying, injuring, preventing, restraining, or monopolizing
``any part of trade and commerce in such articles in the United
States.'' \8\ If any person is held to have violated all three
elements, the 1916 Antidumping Act allows for the
implementation of both criminal and civil penalties, including
imprisonment and treble damages.\9\
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\6\ 15 U.S.C. Sec. 72 (2002).
\7\ Id.
\8\ Id.
\9\ Id.
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Five years after passage of the original legislation,
Congress passed the more comprehensive Antidumping Act of 1921,
which later was repealed by the Trade Agreements Act of
1979.\10\ Under the 1979 Act, Congress adopted a new
antidumping law, 19 U.S.C. Sec. 1673, that now serves as the
primary statute under which U.S. industry obtains relief from
international price discrimination. The Act used today does not
contain a ``predatory intent'' standard; if it is shown that
goods are sold below normal value and there is injury to an
industry, penalty duties are assessed at the border. However,
unlike the 1916 Act, there is no private right of action.
Rather, the entire domestic industry that claims to be harmed
by the dumping files a petition with the International Trade
Commission and the Commerce Department. If both entities reach
an affirmative decision that dumping has occurred, an order is
issued for the penalties.
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\10\ Id.
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The major obstacle for success under the 1916 Act has been
the burden of proving the injurious intent of the defendant
importer.\11\ Plaintiffs have historically had a difficult time
establishing that the defendants had the requisite intent to
destroy, injure, prevent, restrain or monopolize the U.S.
market with regards to the imported product. A requirement of
actual intent--instead of actual injury--allows an importer the
defense that ``any price differentials are cost justified or
attributable to other reasonable commercial considerations.''
\12\ In addition, no prima facie standards exist which might
shift the burden of proof to the defendant upon the
establishment of a threshold case.\13\
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\11\ Id. at 1556.
\12\ Antidumping and Countervailing Duty Laws, supra note 2, at 15-
9.
\13\ Id.
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Despite its judicial track record, U.S. companies have
increasingly pursued causes of action under the 1916 Act in the
last twenty years. The most recent and heavily publicized cases
involve the U.S. steel industry's pursuit of antidumping relief
during the 1998 steel import crisis. Wheeling-Pittsburgh Steel
Corporation filed a case in 1998 against nine U.S. subsidiaries
of European and Japanese steel companies.\14\ The case was
never fully adjudicated because WHX Corp., the owner of
Wheeling-Pitt, ``reached out-of-court settlements with several
of the European traders'' and withdrew all remaining
lawsuits.\15\
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\14\ Nancy E. Kelly, WTO Report Challenges 1916 U.S. Act, American
Metal Market, Dec. 23, 1999, at 1.
\15\ Id.
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Another case worth noting was brought by AK Steel Corp. in
the Southern District of Ohio in 2001. In that suit, AK Steel
alleged that Usinor, a French company, illegally interfered
with AK Steel's bare and hot dip aluminum coated stainless
steel business, which produces products for automotive exhaust
systems.\16\ While this case was pending in the district court,
AK Steel survived a motion to dismiss filed by the defendant,
thus indicating the court's determination that AK Steel had
pleaded a cause of action under the 1916 Act, including the
element of intent. However, that suit settled recently.
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\16\ Press Release, AK Steel Files Antitrust Suit Against French
Steel Company Usinor, S.A., Oct. 19, 2001.
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The only 1916 Act case now pending is an Iowa case in which
a jury found $10.5 million in actual damages against a Japanese
company on December 3, 2003 (since the 1916 Act calls for
treble damages, this means an award of $31.5 million). The
company has filed post-trial motions, and is likely to appeal.
This is the first jury award or criminal penalty in the 88-year
history of the Act.
Primarily in response to the WHX Corp. settlements, the EC
and Japan filed separate WTO complaints about the 1916
antidumping law, alleging that it is inconsistent with
provisions in GATT 1994, the Antidumping Agreement of the
Uruguay Round, and the WTO Agreement.\17\ Two WTO panels
considered the allegations and the WTO Appellate Body affirmed
their findings against the 1916 antidumping law in a combined
decision on August 28, 2000. The Appellate Body's
recommendations and rulings were subsequently adopted by the
Dispute Settlement Board of the WTO on September 26, 2000.
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\17\ Id.
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In response, on January 7, 2002, the EC and Japan requested
authorization from the WTO to suspend concessions pursuant to
Article 22.2 of the Dispute Settlement Understanding. Both
parties proposed that the WTO allow them to enact their own
legislation mirroring the 1916 Antidumping statute. Several
countries expressed their misgivings with the approach taken by
the EC and Japan, fearful that such a reaction may result in an
``arms buildup of protectionist measures.'' \18\ The U.S.
objected to the proposal and DSB referred the matter to
arbitration.
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\18\ EU, Japan Agree to Give U.S. More Time To Comply With 1916
Act, Copyright Rulings, Daily Report for Executives, Jan. 22, 2002 at
A3.
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On March 4, 2003, Chairman Sensenbrenner introduced H.R.
1073. Senator Grassley introduced a companion bill on the
Senate side, S. 1155.\19\ The three parties agreed to suspend
the arbitration in light of this legislation, to allow the
United States to continue to work for the passage of a bill
repealing the Act.
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\19\ S. 1080, introduced in the Senate by Senators Hatch and Leahy,
is retroactive. Retroactive repeal is not required by WTO practice or
precedent, and it has been argued that it would set a bad precedent for
other WTO disputes (like the Foreign Sales Corporation tax dispute, and
the Continued Dumping and Subsidy Offset/Byrd Amendment dispute).
Apparently, Senators Hatch and Leahy introduced the retroactive bill at
the request of the Bush Administration.
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The EC (but not Japan) reactivated the arbitration on
September 19, 2003. The arbitrator is scheduled to issue its
award early in 2004. Assuming the arbitrator concludes that the
EC has suffered harm, the EC could retaliate in a manner
consistent with the Iowa case jury award once the DSB meets to
authorize the retaliation.
On December 15, 2003, the EC Council approved a
``blocking'' regulation to prevent enforcement of 1916 Act
judgments in EC courts. The regulation also provides EC
companies with a right to recover any costs incurred in 1916
Act litigation. Conceivably, EC defendants in past 1916 Act
litigation, such as the Wisconsin and Ohio cases, could recover
attorneys' fees.
II. PREVIOUS LEGISLATIVE EFFORTS TO AMEND THE 1916 ACT
As recently as 1993 there were several major efforts to
strengthen the 1916 Act. This flurry of legislative activity
resulted from the fact that recent case law made it somewhat
difficult to establish a predatory pricing claim under
traditional antitrust law. Although the Supreme Court has not
laid down specific guidelines on the appropriate cost standard
for determining predatory conduct, in 1975 Professors Areeda
and Turner proposed that only prices below ``reasonably
anticipated marginal cost'' be deemed predatory \20\ (because
marginal price is difficult to measure, average variable cost
is often used as its surrogate). In its 1992 report on
antitrust/trade legislation, the ABA Antitrust Section asserted
that most circuits have adopted some close variant of the
Areeda & Turner test.
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\20\ Areeda & Turner, Predatory Pricing and Related Practices under
Section 2 of the Sherman Act, 88 Harv. L. Rev. 697 (1975).
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Senators Metzenbaum and Grassley introduced S. 99, the
``International Fair Competition Act of 1993'' on January 21,
1993.\21\ S. 99 would have amended the 1916 Act by codifying
the average total cost pricing standard for establishing a
predatory pricing antitrust claim against a foreign firm
enjoying a protected market. S. 99 was an effort to overcome
perceived deficiencies with regard to antitrust actions brought
against foreign firms engaged in anticompetitive below-cost
pricing. The Senate Judiciary Committee Report on predecessor
legislation, S. 2610, noted that when the 1916 Act was adopted,
it was intended to serve as a foreign counterpart to the price
discrimination prohibitions in the Clayton Act. The report went
on to note that the 1916 Act has not proved to be a viable
response to unfair foreign competition (in large part because
of difficulties in proving intent), nor have the other
antitrust laws or the trade laws. The report asserted that
deficiencies in our antitrust laws help account for the demise
of our domestic electronics industry (as illustrated in the
Supreme Court's Matsushita \22\ decision), and noted that a
number of other key U.S. industries are currently exposed to
unfair foreign competition. In his testimony before the
Subcommittee in a 1993 hearing on international competition in
the steel industry, Lloyd Constantine, a renowned antitrust
expert, indicated that he had drafted an initial version of S.
99. He argued that the bill's special antitrust standards were
warranted because of unique mechanisms for foreign firms
engaging in predatory pricing and price discrimination
practices through the use of a closed foreign home market and
an open U.S. market.
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\21\ S. 99 was cosponsored by Senators Grassley, Simon and Brown,
and was identical to S. 2610, compromise legislation approved by the
Senate Judiciary Committee by voice vote on July 30, 1992, and reported
September 16, 1992. A similar bill, H.R. 5348, was introduced by Mr.
Bryant (and cosponsored by Messrs Fish, Mazzoli, Synar and Glickman) in
the 102nd Congress on June 9, 1992.
\22\ Matsushita Electric Industrial Co., Ltd. v. Zenith Radio
Corp., 475 U.S. 574 (1986).
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Senator Specter introduced S. 332 on February 4, 1993.\23\
The legislation would have amended the 1916 Act to create a
civil action patterned on the antidumping law. The bill would
have permitted injunctive relief (or, in the event such relief
is inadequate, a single damage action) against any person who
imports or sells within the U.S. an article manufactured or
produced in a foreign country where: (i) the article is
imported or sold at less than the foreign market value or
constructed value of the article (as such terms are defined in
the antidumping laws); and (ii) the importation or sale (A)
causes or threatens material injury to industry or labor in the
U.S. or (B) prevents the establishment or modernization of any
industry in the U.S.
---------------------------------------------------------------------------
\23\ S. 332 was similar to S. 2508, legislation that was favorably
reported by the Senate Judiciary Committee by voice vote on August 12,
1992.
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S. 332 would also have eased a number of other potential
obstacles to litigation under the 1916 Act including, inter
alia (i) incorporating the 1916 Act within the Clayton Act
definition of the antitrust laws,\24\ (ii) allowing the
plaintiff to use final determinations by the Commerce
Department and the ITC in dumping proceedings as prima facie
evidence of below cost pricing and material injury, (iii)
requiring foreign exporters to appoint a U.S. agent for service
of process purposes, and (iv) authorizing the court to enjoin
imports until the defendant complies with a discovery request.
The bill also would have amended the 1916 Act to prohibit the
importation of subsidized foreign goods and amended Title 28 of
the U.S. Code to create a private right of action for customs
fraud.
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\24\ While cross-referencing the 1916 Act in the Clayton Act may
have clarified the applicability of certain aspects of the antitrust
laws (such as the availability of injunctive relief and the ability to
use governmental judgments and decrees as prima facie evidence in
private suits), it would also have subjected the 1916 Act to certain
defense-oriented antitrust jurisprudence.
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Finally, legislation introduced by Senator Danforth in 1980
\25\ would have amended the 1916 Act to shift the burden of
proof to the defendant once the plaintiff has made a prima
facie showing that good are being sold in the U.S. at less than
the foreign market value. (A similar statutory shifting of
burden of proof is employed for price discrimination actions
under Section 2 of the Clayton Act, and was utilized in the
Specter bill.)
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\25\ S. 223, 96th Cong., 2d Sess.
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III. ARGUMENTS
We oppose this legislation for several reasons.
First, we object to repealing the law in the absence of a
single legislative hearing. It is our duty and responsibility
as legislators to carefully examine and consider the laws
within our jurisdiction. Here we have a law that has been on
the books since 1916, and has been subject to various legal and
judicial interpretations. Surely the Committee on the Judiciary
owes it to the American people to do better than to repeal a
law under such rushed and expedited conditions.
Second, repeal of this law could well have a detrimental
effect on U.S. jobs. The Act empowers companies to bring
private antitrust suits against foreign companies that import
their goods at below-market prices. As a matter of fact, as
noted above, the law has been used on several occasions
recently that have resulted in significant settlements and
legal judgments favoring U.S. companies and their workers. If
we take away the ability to bring these actions, this sends the
signal that foreign companies are free to dump their products
without facing the risk of a private lawsuit.
Third, acting in haste to repeal this Act sets a very poor
precedent that we are willing to act as a rubber stamp for the
World Trade Organization. The mere fact that the WTO says the
U.S. is in violation of our WTO obligations does not mean that
Congress should ignore its duty to gather the facts and do an
analysis of the costs and benefits of having this statute on
our books.
It is important to note that there are a group of cases
involving statutory provisions that not only fall well within
any reasonable interpretation of our WTO obligations but,
equally important, have no demonstrable negative trade effects
on our trade partners. The most recent spate of cases--
including challenges to the 1916 Act and the Byrd
Amendment,\26\ as well as Canada's challenge to the rules for
refunding antidumping and countervailing duties--would seem to
be an abuse of the dispute settlement system, and may well
further weaken support for the WTO. In our view, our allies
have little business dragging the United States through time-
consuming proceedings to pursue claims about measures that have
little if any effect on actual trade. The dispute settlement
system exists to help resolve actual commercial problems. The
United States limits its use of the DS system on this basis,
but other Members do not. The main point is that as a matter of
principle, the United States should never simply bow to a
decision from Geneva that the very existence of one of our
statutes constitutes a breach, without the statute having been
applied and applied in violation of America's commitments.
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\26\ The Byrd Amendment is a two-year-old trade law, officially
known as the Continued Dumping and Subsidy Offset Act of 2000. It
directs U.S. Customs to distribute duties collected as a result of
antidumping and countervailing duty orders to domestic producers found
to be injured by foreign dumping and subsidies.
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At a minimum, rather than simply agreeing to unilaterally
repeal the 1916 Act, we should attempt to receive some
offsetting benefit out of it. For example, Senators Baucus and
Craig have introduced a bill that would deduct the cost of
countervailing duties in dumping cases (S. 219). Why are we not
looking at some kind of pro-jobs concession in exchange for
considering repeal of the 1916 Act?
Finally, repealing the 1916 Act demonstrates the
Administration's hypocrisy with respect to the U.S. trade
policy. In addition to the 1916 Act, the WTO has ruled against
the U.S. on two other U.S. statutes. In one, the European
Commission, on behalf of the Government of Ireland, challenged
two related sections of a U.S. copyright provision as a
violation of the Agreement on Trade-Related Aspects of
Intellectual Property Rights (``TRIPs''). The WTO found that
one of the provisions, 17 U.S.C. Sec. 110(5)(B), violates the
agreement by allowing certain businesses to play music without
compensating songwriters. Section 110(5)(B) says it is not
infringement of a copyright on a musical work for retail
establishments of a certain size having a certain number of
speakers or TV's to rebroadcast non-dramatic radio music unless
they charge for it or rebroadcast to a public audience. The end
result of the law is that songwriters do not get paid for music
they write that is played in these businesses. The WTO ruled
against the U.S. government on section 110(5)(B) on July 27,
2000. For approximately three years, the WTO and the European
Commission have urged the United States to repeal the law but
have been unsuccessful.\27\
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\27\ Aside from repealing the law, there were three options
available for the United States to come into compliance with its trade
obligations: (1) Compensation: Congress could have complied by amending
section 110(5)(B) so that bars and restaurants would have to pay some
royalty for the right to invoke it; (2)Trade Concession: instead of
complying and altering section 110(5)(B), the United States could have
asked the European Commission to accept a trade concession (i.e., the
United States could lower tariffs on European goods imported); (3)
Unilateral Sanction: the United States could refuse to comply and the
EC could invoke unilateral sanctions against the United States. This is
what occurred; the United States paid $3.3 million to the European
Commission. The payment was authorized to be made by the U.S. Trade
Representative in a supplemental appropriations bill that became public
law on April 16, 2003 (H.R. 1559).
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The other involves a trademark dispute. In Havana Club
Holdings, S.A. v. Galleon, S.A.,\28\ the Second Circuit held
that a lawsuit could not go forth because the United States
embargo against Cuba prevents marks appropriated by the Cuban
government from being recognized.\29\ The court based its
decision on what is commonly known as Section 211 of the 1998
appropriations bill, passed at the behest of then-Senator
Connie Mack (R-FL), which states that U.S. courts cannot
enforce rights pertaining to appropriated goods from Cuba. The
WTO has held that section 211 is in violation of the United
States's international obligations under TRIPs. The WTO held
that, while a law can say that U.S. courts cannot recognize
assets linked to confiscated property, section 211 violates
TRIPs because it is limited to assets from Cuba. Despite the
fact that section 211 violates our international trade
obligations, it has not been repealed.\30\
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\28\ 203 F.3d 116 (2d Cir. 2000).
\29\ The lawsuit was a trademark infringement case. During its
revolution, Cuba nationalized the Havana Club rum company from the
Arechabala family. At the time, ``Havana Club'' had been registered as
a trademark in the United States. Subsequent events led to two separate
companies seeking to market Havana Club rum. Pernod Ricard, a French
company, entered into a joint venture with the Cuban government to
extend the registration of ``Havana Club'' in 180 countries, including
the United States. In 1997, the Arechabala family sold its Havana Club
assets to Bacardi, a Bermuda company with U.S. subsidiaries.
Thereafter, Bacardi began to sell rum in the United States with the
name ``Havana Club.'' Pernod sued Bacardi for trademark infringement.
\30\ The main reason for this is the political situation associated
with recognizing Cuban marks. It is generally understood that section
211 remains in law because of the political issues surrounding trade
with Cuba. Another solution would be for Congress to expand the law so
it covers assets from every country. This has been rejected by
trademark lawyers because it would open up U.S. trademark holders to
disparate treatment in every other country.
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CONCLUSION
For all these reasons, we cannot support repealing the 1916
Antidumping Act. In the 88-year history of the Act, there has
been no showing that it has any negative trade effects on our
trade partners. In some circumstances it may serve as a useful
tool for U.S. companies that are harmed by predatory pricing by
foreign companies, or at the very least as a warning to foreign
companies that they cannot dump their products in the United
States without consequence. Finally, Congress should not simply
roll over and rubber stamp the WTO and the Bush Administration
without holding even one legislative or oversight hearing.
John Conyers, Jr.
Melvin L. Watt.
Sheila Jackson Lee.
Maxine Waters.
Tammy Baldwin.