GENEVA, Sept 16: The World Trade Organization (WTO) ruled on Monday that the United States had violated key trade agreements with a law that channels anti-dumping duties on imports to US firms making similar products.

The anti-dumping duties are levied on goods found by a US trade court to have been shipped to the United States at below production cost.

The law, widely known as the Byrd Amendment, requires proceeds of the duties to be passed on to US companies, which complain that the cheap imports have undermined their business.

A WTO panel — created at the request of the 15-nation European Union and 10 other members of the trade body — ruled that the Byrd Amendment should be brought into line with WTO rules.

The three-man panel said the best way to do this would be to repeal the law, proposed by Democratic Senator Robert Byrd of West Virginia.

Congress passed the law in 2000 against the advice of then President Bill Clinton’s administration. Charlene Barshefsky, trade representative at the time, warned that the Byrd Amendment contradicted WTO rules.

But the law quickly won the support of new President George W. Bush.

The law caused an uproar in the WTO, where dozens of countries said it undermined principles of the global trading system by encouraging US firms facing cheap foreign competition to claim they were being hurt by dumped imports.

The panel effectively supported this argument, saying the law encouraged US companies to apply for compensation “irrespective of their need for relief...” and that this was “inconsistent with the principle of good faith.”

Bush administration officials argued that WTO accords do not state what countries can, or cannot do, with the proceeds of anti-dumping levies.

But the panel rejected this argument, saying the Byrd Amendment’s provisions were not a “permissible remedy”.

However, the panel rejected a Mexican complaint that the law amounted to a subsidy to US firms producing goods that compete specifically with imports from Mexico. The panel ruled that Mexico had failed to show it had been specially targeted.

Given the Bush administration’s high-profile support for the amendment, trade diplomats said it was likely the United States would appeal to the WTO’s quasi-judicial Appellate Body, extending the case by at least three to six months.—Reuters