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The United States's enhanced continuous bond requirement [EBR] for goods subject to anti-dumping and countervailing duties was the focus of this dispute. Because of perceived problems with its ability to collect anti-dumping duties, the US amended its bonding requirements in 2004. Under the new rules, importers were required to secure a bond for an amount equal to the cash-deposit rate in effect on the date of entry of the merchandise multiplied by the importer's value of imports from the previous year, as well as pay cash deposits equal to the amount of anti-dumping duties per entry. The US claimed the additional deposit was reasonable and necessary to guarantee duty payment in case the anti-dumping duty increased during the administrative review. Thailand and India claimed that the additional deposit was unreasonable and an additional action against dumping and was therefore impermissible under GATT 1994 and the Anti-Dumping Agreement. The Appellate Body upheld the Panel's findings that while the Ad Note to Article VI:2 and 3 GATT 1994 authorizes the imposition of security requirements during the period following the imposition of an anti-dumping duty order, the additional security requirement resulting from the application of the EBR to shrimp was not ‘reasonable’ within the meaning of the Ad Note. The Appellate Body reversed the legal interpretation by the Panel that there is no obligation under the Ad Note to assess the risk of default by individual importers; however, the AB upheld the Panel's finding that the EBR is not ‘necessary’ within the meaning of Article XX(d) of the GATT 1994. As a result, the AB upheld the Panel's conclusion that the application of the EBR to shrimp was inconsistent with Article 18(1) of the Anti-Dumping Agreement because it was inconsistent with the Ad Note to Article VI:2 and 3 of the GATT 1994 and not justified by Article XX(d). We consider the AB's legal and economic reasoning to be largely correct. The US employed a sledgehammer to kill a mosquito and the AB used the concepts of ‘reasonableness’ in the Ad Note and ‘necessity’ in Article XX(d) to reject what fundamentally was a lack of proportionality, while leaving the door open for more reasonable application of bonding requirements.
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