The Anti-Dumping Agreement

1
The Anti-Dumping Agreement

• Edwin Vermulst
• Vermulst Verhaeghe Graafsma

2
Overview

• Anti-dumping duty (ADD) a duty levied on goods
  which have been sold (dumped) in the importing
  country
• at lower prices than on the domestic market of
  the exporting country or
• below their cost of production.
• ADD are a tool to shield domestic industries
  from low-priced third country imports.
• AD is the most frequently invoked trade defense
  instrument worldwide.

3
Presentation

1. Dumping
2. Injury
3. Procedures
4. WTO dispute settlement

4
1. Dumping

• Six essential steps in establishing whether goods
  have been dumped
• Determine the product under consideration
  (product concerned)
• Choose the investigation period (IP)
• Determine the export price
• Determine the normal value of the goods
• Compare the normal value to the export price and
• Calculate the dumping margin (i.e., the
  difference between the normal value and export
  price).

5
1. Dumping Export price

• Export price price actually paid/payable for
  goods when sold for export to the EU.
• IF
• 1) no export price exists OR 2) the export price
  is unreliable because the there is a relationship
  between the exporter and importer (ex.
  producing/exporting parent company and related
  importer)
• THEN
• The export price may be constructed using the
  price at which imported goods are first resold to
  an independent buyer.

6
1. Dumping Normal value (1/8)

• Normal Value normally determined on the basis
  of the price paid/payable by independent
  customers in the EXPORTING COUNTRY (e.g.,
  domestic sales).
• Cases when normal value CANNOT be determined on
  basis of sale price
• The exporter does not have sales of the like
  goods in the exporting country (i.e. domestic
  market)
• The sales are insufficient and therefore not
  representative (i.e., less than 5 of export
  sales to EC)
• Domestic sales are not made in the ordinary
  course of trade (e.g., domestic transactions are
  sold at a price below the cost of production)

7
1. Dumping Normal value (2/8)

• In the three instances when normal value CANNOT
  be based on domestic sales
• Normal value cost of production (in country of
  origin) reasonable amount for SGA costs
  (selling, general and administrative) and profit

8
1. Dumping Normal value (3/8)

• Three Unique Situations
• Domestic sales are not made in the ordinary
  course of trade sales below cost
• Domestic sales of like product/comparable models
  are representative (over 5) but some domestic
  sales are sold below cost of production. These
  may be treated as not being in the ordinary
  course of trade and may be excluded from normal
  value calculation if they are made within an
  extended period of time in substantial quantities
  at prices which do not provide for the recovery
  of all costs within a reasonable period of time.
  
• In practice, sales below cost are excluded when
• 1. Weighted average selling prices is below the
  weighted average per unit costs , OR
• 2. The sales represent more than 20 of the
  quantity of total domestic sales of the models
  concerned.

9
1) Dumping Normal value (4/8)

• Exclusion of sales below cost will increase the
  normal value and thereby makes a finding of
  dumping more likely.
• Sales below cost example
• Cost 50
• Quantity Normal Export
• Value Price
• Day 1 10 40 40
• Day 10 10 100 100
• Day 20 10 150 150
• Day 30 10 200 200
  
• WA 150 122.5
• Dumping amount 110
• Dumping margin 110/515 (CIF value) x 100
  21.14
• Note Dumping margin ((Normal value - export
  price)/CIF value) x 100

10
1. Dumping Normal value (5/8)

• (2) When domestic producers and distributors are
  related, some WTO members base normal value on
  the (higher) ex-distributor price.
  US-Hot-rolled Steel
• (3) Transshipments the normal value is typically
  the price in the country of export. Three
  exceptions
• Products are merely transshipped through the
  country of export
• Products are not produced in the country of
  export
• There is no comparable price in the country of
  export.
• In the above cases, the normal value for the
  country of origin may be used.

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1. Dumping Normal value (6/8)

• Non-market economy countries (NMEs) normal value
  is based on 1) the price or 2) constructed value
  in a market economy third country surrogate or
  analogue country.
• Market Economy Treatment normal value will be
  determined on the basis of the price paid/payable
  by independent customers in the exporting
  country, if
• On the basis of a properly substantiated claim,
  the producer in the NME can show that market
  economy conditions prevail with respect to
• 1. manufacture, and
• 2. sale of the like product concerned

12
1. Dumping Normal value (7/8)

• Market Economy Treatment (MET) claims must show
• Decisions regarding prices, costs and inputs
  (including raw materials), cost of technology and
  labour, output, sales and investment, are made in
  response to market signals reflecting supply and
  demand, without significant State interference,
  and costs of major inputs reflect market values,
• One clear set of basic accounting records
  independently audited in line with international
  accounting standards and applied for all
  purposes,
• Production costs and financial situation not
  subject to significant distortions carried over
  from the former NME economy system,
• Firms are subject to bankruptcy and property laws
  which guarantee legal certainty and stability for
  the operation of firms, and
• Exchange rate conversions carried out at the
  market rate.

13
1. Dumping Normal value (8/8)

• The European Commission consults with the
  Advisory Committee and allows the EUs producers
  of the product concerned to comment. It then
  makes its final determination whether the
  producer has met the five criteria.
• The determination must be made within three
  months of initiation the anti-dumping
  investigation.
• The determination remains in force throughout the
  investigation.

14
1. Dumping Fair Comparison (1/2)

• A fair comparison must be made between the
  export price and the normal value at the same
  trade level, at or about the same time, and
  taking into account differences which may affect
  price comparability.
• When the normal value and the export price are
  not on a comparable basis, adjustments must be
  made if the entity can demonstrate that the
  factors affect price comparability. They
  include
• Differences in commissions paid,
• After-sales costs,
• Costs of credit granted,
• Directly related transport and handling costs,
• Discounts, Rebates,
• Level of trade,
• Physical characteristics,
• Import charges and indirect taxes.

15
1. Dumping Fair Comparison (2/2)

• The adjustments can work either way, i.e.,
  depending on the circumstances they may increase
  or decrease the dumping margin.

16
1. Dumping Comparison methods

• Two general methods
• Weighted average to weighted average.
• Transaction-to-transaction basis.
• One exception weighted average normal value
  compared to prices of individual export prices IF
  two conditions are met
• Pattern of export prices differ significantly
  among different purchasers, regions or time
  periods.
• The exceptional method must be proven to be more
  appropriate.

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1. Dumping Dumping margin

• Amount by which the normal value exceeds the
  export price. The difference will be the ADD
  (unless the injury margin is lower).
• In the basic formula used by the European
  Commission, the export price is deducted from the
  normal value and the result is calculated as a
  percentage of the CIF (cost, insurance, freight)
  value.
• Normal value - export price x 100 dumping
  margin.
• CIF value
• The export price used in the numerator is not the
  same as the export price used in the denominator.
  

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1. Dumping Examples of Dumping Margin
Calculations (1/2)

• Example I Direct sales to unrelated
  customers (simple situation)
• DM 82 - 79 (3 / 100) x 100 3. Domestic and
  export sales prices are the same, but there is
  dumping margin because the ex factory export
  price is lower than the ex factory normal value.

Normal value Export price
Producer X --gt unrelated customer Producer X --gt unrelated EC customer
Sales price 100 CIF sales price 100
- duty drawback 5 - physical difference 5
- discounts 2 - discounts 2
- packing 1 - packing 1
- inland freight 1 - inland freight 1
- credit 5 - ocean freight/insurance 6
- guarantees 2 - credit 2
- commissions 2 - guarantees 2
- commissions 2
ex-factory price 82 ex-factory price 79
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1. Dumping Examples of Dumping Margin
Calculations (2/2)

• Example II Sales through subsidiaries
  (related parties)
• DM 122.5 91.3 (31.2/100) x 100 31.2.
  Normal value-deduct direct selling expenses
  mother company/domestic sales subsidiary,
  creating ex distributor price. If the EC deducted
  the same costs on both sides, DM would become
  98.5 - 91.3 (7.2/100) x 100 7.2.

Export price
X ---gt subs. ---gt unrelated customer 100 140 X ---gt EC subs. ---gt unrelated customer 100 140
- duty drawback 5 - discounts subs. 5
- discounts subs. 5 - inland freight subs. 0.5
- inland freight subs. 0.5 - credit by subs. 2
- packing 1 - guarantees by subs. 2
- credit by subs. 4 - net SGA subs. 17
- guarantees 2 - reasonable profit subs. (5) 7
- customs duties paid by subs. 8.2
ex distributor price 122.5 - constructed Export Price 98.3
- ocean freight/insurance 6
- inland freight 1
20
1. Dumping Zeroing (1/7)
Comparison methods, zeroing
Suppose four transactions of equal weight are
sold in the domestic market and the export market
as follows
21
1. Dumping Zeroing (2/7)
1st method WEIGHTED AVERAGE TO WEIGHTED AVERAGE

• Weighted average domestic price 125
• ( 50 100 150 200) / 4 125
• Weighted average export price 125
• (50 100 150 200) / 4 125

Thus no dumping would be found
22
1. Dumping Zeroing (3/7)
2nd method TRANSACTION-TO-TRANSACTION
METHOD One compares domestic prices and export
prices sold on or around the same date.
This method will lead to a finding of no dumping
23
1. Dumping Zeroing (4/7)
3rd method COMPARISON WEIGHTED AVERAGE NORMAL
VALUE WITH EXPORT PRICES ON A TRANSACTION-TO-TRANS
ACTION BASIS This less obvious comparison
method calculates a weighted average domestic
price and then compares this price with prices of
export transactions on a transaction by
transaction basis.
24
1. Dumping Zeroing (5/7)
3rd method COMPARISON WEIGHTED AVERAGE NORMAL
VALUE WITH EXPORT PRICES ON A TRANSACTION-TO-TRANS
ACTION BASIS

• Under this third method we find two transactions
  which are dumped and two transactions which are
  not or negatively dumped.
• The total dumping amount is 100.
• The total non-dumped amount is also 100.

25
1. Dumping Zeroing (6/7)
SIMPLE ZEROING

• Prior to the entry into force of the Uruguay
  Anti-Dumping Agreement this third method was
  routinely used by some authorities when comparing
  export prices with normal value and calculating
  dumping margins.
• They would then take the position that the third
  and the fourth transaction are not dumped and
  subsequently attribute a zero dumping amount to
  these third and fourth transactions practice of
  zeroing.
• The result was that non-dumped transactions could
  not be used to offset dumped transactions.
• This practice became later known as simple
  zeroing.

26
1. Dumping Zeroing (7/7)
SIMPLE ZEROING

• The total dumping amount in the example above is
  100 (75 on the first transaction and 25 on the
  second).
• Assuming that the total CIF price of the four
  export transactions is 525, this will give a
  dumping margin of 19,05 (100 / 525) x 100

27
2. Injury

• Four steps
• Like product
• Domestic Industry
• Injury
• Causation
• Community Interest
• The determination of injury must be based on 1)
  positive evidence and 2) involve an objective
  examination of
• The volume of dumped imports and their effect on
  EU prices
• The impact of the dumped imports on EU producers
  of like products.

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2. Injury (a) Like product

• Like product identical product or product with
  closely resembling characteristics
• Exception available data do not permit the
  identification of the domestic production of the
  like product. The assessment must be carried out
  taking into consideration the narrowest range of
  products.
• Product control numbers PCNs

29
2. Injury (b) Domestic Industry

• Domestic industry 1) all domestic producers of
  the like product or 2) those domestic producers
  whose collective output constitutes a major
  proportion of the total domestic production of
  those products
• Exceptions
• Producers related to exporters or importers or
  the producers are importers
• Regional industry.

30
2. Injury (c) Injury (1/5)

• Material Injury
• Based on Objective Examination of Positive
  evidence
• Cumulation the (injury) effects of a product
  from more than one country simultaneously subject
  to an AD investigation may be assessed together
  (cumulated) if
• the margin of dumping established in relation to
  the imports from each country is more than de
  minimis and the volume of imports from each
  country is not negligible and
• (b) a cumulative assessment of the effects of the
  imports is appropriate in light of 1) the
  conditions of competition between imported
  products and 2) the conditions of competition
  between the imported products and the like
  Community product.

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2. Injury (c) Injury (2/5)

• Sales
• Profits
• Output
• Market share
• Productivity
• Return on investments
• Capacity utilization
• Factors affecting domestic prices
• Magnitude of the dumping margin
• Cash flow
• Inventories
• Employment
• Wages
• Growth
• Ability to raise capital or investments

• Injury investigation period three years
• Evaluation of all relevant economic
  factors/indices including 15 factors

32
2. Injury (c) Injury (3/5)

• Threat of material injury
• It must be based on hard facts, not merely on
  allegation, conjecture or remote possibility.
• The change in circumstances which would create a
  situation in which the dumping would cause injury
  must be clearly foreseen and imminent.
• This conclusion should be based on factors such
  as
• Significant rate of increase dumped imports
• Substantial increase capacity of the exporter
• Whether imports entering EU at prices which will
  have a significant depressing/suppressing effect
  on domestic prices and
• Inventories of the product.
• The totality of the above factors must lead to
  the conclusion that further dumped exports are
  imminent and that failing protective action,
  material injury would occur.

33
2. Injury (c) Injury (4/5)

• Negligibility ADD will not be imposed when the
  injury is negligible-
• Imports account for less than 1 of the market
  share in the EC.
• The WTO standard is that injury is negligible if
  the volume of dumped imports from the exporting
  country accounts for less than 3 of the imports
  into the country running the AD investigation.
• However, while imports may have a high overall
  market share, i.e. more than 1, they may still
  be less than 3 of total imports. In such
  instances the WTO standard applies.

34
2. Injury (d) Causation

• Non-attribution the fundamental question is Was
  the injury caused by the dumped imports or by
  other factors ?
• Other factors (non-exhaustive list) include
• Volume prices of non-dumped imports
• contraction in demand
• changes in patterns of consumption
• Trade restrictive practices
• developments in technology
• performance of the domestic industry.

35
2.a Injury margins

• (1) Undercutting method

P S S S
DM 30 20 10
Price 100 110 90 80
IM 100 - 110 0 100 - 90 10 10 / 90 11 100 - 80 20 20 / 80 25
Duty 0 11 10
36
2.a Injury margins

• (2) Underselling method

Cost P 110 Profit P 13.2 TP 123.2
P S S S
Price 123.2 110 90 80
IM 123.2 - 110 13.2 13.2 / 110 12 123.2 - 90 33.2 33.2 / 90 36.88 123.2 - 80 43.2 43.2 / 80 54
Duty 12 20 10
37
2.b Injury Community Interest

• EU AD legislation (the Basic Regulation) requires
  the EC to determine whether the Community
  interest calls for intervention.
• The determination must be based on all of the
  various interests, including those of the
  Community industry, importers and user industry.
• AD measures may not be applied when the
  authorities conclude that it is not in the
  Community interest to apply the measures.

38
3. Procedure

• The primary objective of the procedural
  requirements of the WTO ADA and the Basic
  Regulation is to
• Ensure transparency of proceedings
• Give interested parties the opportunity to make
  their case known and provide adequate explanation
  of the determinations made.
• Procedural issues
• Submission of complaint.
• Initiation of the proceeding.
• AD investigation timeline.
• Application of duties
• ) EU Procedure and Judicial Review

39
3. Procedure (a) Submission of complaint (1/3)

• The European Commission (Commission) may initiate
  an investigation of its own accord but normally
  the Commission begins an investigation after
  receiving a complaint by/on behalf of the
  Community industry.
• Any individual/association can submit in writing
  a complaint to the Commission alleging dumping
  and resulting injury by non-EU suppliers.
• Complainants are typically associations
  representing producers in a section of the
  Community industry.

40
3. Procedure (a) Submission of complaint (2/3)

• The complaint should provide
• evidence of dumping
• the injury being caused to the domestic industry
  and
• a causal link between dumping of products on the
  EU market and alleged injury caused.
• The Commission must examine the accuracy and
  adequacy of the evidence submitted to determine
  whether the initiation of an investigation is
  justified.
• The Commission must notify the government of the
  exporting country after it has received a
  properly documented complaint, but before
  proceeding to initiate an investigation.

41
3. Procedure (a) Submission of complaint (3/3)

• Standing an investigation must not be initiated
  unless the Commission has concluded that the
  complaint was made by/on behalf of the Community
  Industry.
• The complaint has been made by/on behalf of the
  Community industry if it is supported by
  Community producers with a collective output that
  is more than 50 of the total production of the
  like product produced by that portion of the
  Community industry expressing either support for
  or opposition to the complaint.
• No investigation may be initiated when Community
  producers expressly supporting the complaint
  account for less than 25 of total production of
  the like product produced by the Community
  industry.

42
3. Procedure (b) Initiation of proceedings

• The Commission publishes a Notice of Initiation
  (NOI) in the Official Journal (OJ). The purpose
  is
• To inform affected importers and exporters, and
  representatives of the concerned exporting
  countries, and
• To commences the investigation into the alleged
  dumping and injury being caused simultaneously.
• The Commission sends out/makes available
• A questionnaire for EC producers
• A questionnaire for exporters
• A questionnaire for unrelated importers

43
3. Procedure (c) AD investigation timeline (1/2)

• Day - 45 Complaint lodged by Community industry
  with the EC.
• Day 1 Initiation of proceeding by publication of
  NOI. Interested parties invited to comment.
• Usually 37-day deadline for Questionnaire (Q)
  responses and requests for hearing/comments by
  interested parties (specified in
  NOI/Questionnaires) .
• Around Day 2 Letters and Qs to exporters,
  importers, Community industry, users, and/or
  consumers (interested parties).
• Day 38 Expiry deadline for
• Q responses,
• requests for a hearing or
• other comments by interested parties.
• Before/on Day 270 Publication in OJ of EC
  Regulation imposing provisional measures for 6
  months. Entry into force usually day after
  publication. -gt15-30 day deadline comments.
• Day 300 Expiry deadline, comments on provisional
  disclosure letters if there is 30-day deadline

44
3. Procedure (c) AD investigation timeline (2/2)

• Around Day 390 definitive disclosure letters
  sent to interested parties which co-operated in
  proceeding.
• At least 10-day deadline for interested parties
  which co-operated in proceeding.
• Around Day 400 Expiry deadline for comments.
• Day 405 to 425 EC analyzes comments.
• Around Day 425 EC conclusions sent to the
  Council.
• Before/on Day 455 Publication in the OJ a
  Council Regulation imposing definitive measures
  for 5 years. Entry into force usually day after
  publication

45
3. Procedure (d) Application of duties (1/4)

• Provisional duties provisional duties can be
  imposed no earlier than 60 days from the
  initiation of proceedings but not later than 9
  months from the initiation.
• The provisional duty is set with reference to the
  established provisional dumping margin (the
  lesser duty rule applies).
• Provisional measures may be a bond or security
  deposit.

46
3. Procedure (d) Application of duties (2/4)

• Definitive action
• Termination without measures e.g. the complaint
  is withdrawn, dumping margins are de minimis
  (less than 2) injury is negligible.
• Undertaking exporter undertakes to amend prices.
  The advantage of price undertaking is that the
  importer does not have to pay ADD.
• Definitive duties ADD are imposed for five
  years
• final facts establish that dumping has taken
  place
• dumping caused injury to Community industry and
• Community interest calls for application of
  definitive duties.
• Provisional measures are made final at the
  same time.

47
3. Procedure (d) Application of duties (3/4)

• Retroactivity
• In general, ADD can only be applied from the date
  on which the determination of 1) dumping 2)
  injury and 3) causality has been made.
• In certain cases, duties can be imposed
  retroactively
• Provisional Measures
• Final determination of injury, or
• Final determination of threat of injury
• 90 days prior to Provisional
• History of dumping which caused injury
• Massive dumped imports in a relatively short
  time.

48
3. Procedure (d) Application of duties (4/4)

• Interim Review after one year and changed
  circumstances.
• Newcomer Review to determine individual margins
  of dumping for new exporters in the exporting
  country which did not export the product during
  the period of the investigation.
• Expiry Review definitive duties must be
  terminated at the latest 5 years from their
  imposition unless the Commission determines in
  the course of an expiry review that the expiry
  of the duty would lead to a continuation or
  reoccurrence of dumping and injury.

49
3. Procedure () EU Procedure and Judicial
Review (1/2)

1. The European Commission 1) analyses the
   complaints, 2) decides which cases are initiated,
   and 3) carries out investigations.
2. Member States (in advisory committee) are
   consulted on the decision to initiate a
   proceeding and they are consulted before a
   decision to impose provisional or definitive ADD
   is taken.
3. Discussions about the imposition of definitive
   ADD occur in preparatory groups (Commercial
   Questions Group) decisions are taken in the
   COREPER and in the Council.
4. In case of Commission proposals to impose
   definitive measures, within one month of
   receiving the proposal, the Council must adopt
   it- unless it decides by a simple majority (13
   votes out of 25) to reject the proposal.
   Abstentions count in favor of Commission
   proposals to impose measures.

50
3. Procedure () EU Procedure and Judicial
Review (1/2)

• The Court of First Instance (CFI) and the
  European Court of Justice (ECJ) have jurisdiction
  to hear anti-dumping cases.
• The CFI may only hear direct actions.
• The ECJ may hear direct actions and preliminary
  rulings referred by the national courts.
• By virtue of Art. 173 EC Treaty, the CFI and ECJ
  can review the legality of certain acts of the
  Council and Commission including.
• Regulations and Decisions reached by the
  Commission or Council regarding the imposition of
  provisional/definitive duties and in relation to
  the termination of investigations, acceptance of
  price undertakings, etc.
• An application for judicial review may be brought
  on the basis of inter alia lack of competence or
  infringement of an essential procedural
  requirement.

51
4. WTO dispute settlement

• Claims must be sufficiently precise.
• New claims no principle of exhaustion for
  administrative remedies.
• Only governments can initiate AD disputes.
• Role of industry representatives (amicus curiae,
  part of the Member delegation).

52
4. WTO dispute settlement (1/3)

• Identification of one of these 3 measures
• Definitive AD duties
• Acceptance of price undertakings or
• Provisional measures
• Challenging national legislation

53
4. WTO dispute settlement (2/3)

• Special standard of review
• (i) in its assessment of the facts of the
  matter, the panel shall determine whether the
  authorities' establishment of the facts was
  proper and whether their evaluation of those
  facts was unbiased and objective. If the
  establishment of the facts was proper and the
  evaluation was unbiased and objective, even
  though the panel might have reached a different
  conclusion, the evaluation shall not be
  overturned
• (ii) the panel shall interpret the
  relevant provisions of the Agreement in
  accordance with customary rules of interpretation
  of public international law. Where the panel
  finds that a relevant provision of the Agreement
  admits of more than one permissible
  interpretation, the panel shall find the
  authorities' measure to be in conformity with the
  Agreement if it rests upon one of those
  permissible interpretations.

54
4. WTO dispute settlement (3/3)

• Developing Countries
• ADA, Article 15
• Developing countries particular situations must
  be taken into account by developed countries when
  imposing ADD.
• Constructive remedies must be explored before
  applying ADD duties.
• EC-Bed Linen, Panel
• Application of Article 15 only before definitive
  measures are imposed.
• Examples of constructive remedies include the
  imposition of anti-dumping duties in less than
  the full amount than those calculated, and price
  undertakings.
• Article 15 requires an authority "to actively
  consider, with an open mind, the possibility of
  such a remedy prior to imposition of an
  anti-dumping measure ."