WORLD TRADE
ORGANIZATIONTN/RL/W/25
16 October 2002
(02-5623)
Negotiating Group on Rules Original:  English
QUESTIONS FROM THE UNITED STATES ON PAPERS
SUBMITTED TO THE RULES NEGOTIATING GROUP
The following communication, dated 15 October 2002, has been received from the Permanent
Mission of the United States.
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INTRODUCTION
The purpose of the Rules Negotiating Group, as mandated by the Ministers in Doha, is to
clarify and improve disciplines under the Agreemen ts on Implementation of Article VI of the GATT
1994 and on Subsidies and Countervailing Measures, while preserving the basic concepts, principles
and effectiveness of these Agreements and their instruments and objectives, and taking into accountthe needs of developing and least developed participants.  Consistent with this mandate, we believe it
is essential that these negotiations be designed to maintain the strength and effectiveness of the trade
remedy laws, and complement a fully effective dispute settlement system which enjoys the confidence
of all Members.  The mandate goes even further and requires the Members to address the underlying
trade-distorting practices.  Enhanced disciplines on trade-distorting practices must be a central
objective in the Rules negotiations because these practices are frequently the root cause of unfair
trade.  Enhanced disciplines on trade-distorting practices will provide greater predictability in globaltrade and reduce the need to resort to trade remedy ac tions.  It is in the interest of all Members, both
users and non-users, that the mandate set by the Ministers be followed.
Based on the Ministers’ mandate, the United States believes that it is important that any
proposals submitted to the Group be consistent with preserving the effectiveness of disciplines onunfair trade practices.
The United States submits the following questions, which we hope will help to ensure that the
Ministers’ mandate will be fulfilled.  The United States reserves the right to submit additional
questions at a later date on these papers and on additional papers submitted to the Group.
ANTI-DUMPING
Brazil;  Chile;  Colombia;  Costa Rica;  Hong Kong, China;  Israel;  Japan;  Korea;
Mexico;  Norway;  Singapore;  Switzerland;  Thailand; and Turkey  Anti-Dumping: Illustrative
Major Issues (TN/RL/W/6, 26April 2002)
As a preliminary matter, we note that the submi ssion appears to equate the increase in the use
of anti-dumping measures with the misuse of such measures.  However, there are many alternative
explanations for the increase in such measures, such as increased trade or the elimination of less
transparent trade barriers caused by implementation of the Agreement on Customs Valuation.TN/RL/W/25
Page 2
1. Although the submission contains a heading on “sales in the ordinary course of trade”, which
is addressed in Article 2.2, the discussion is limited to the test for disregarding sales below the cost of
production, as described in Article 2.2.1 (which is only one type of sale outside the ordinary course of
trade).
Does the submission propose a discussion of th e sales-below-cost test under Article 2.2.1, or
of the broader “ordinary course of trade” concept under Article 2.2?
2. The submission asserts that Article 2.2.2 does not provide clear guidance for the use of
information for the calculation of constructed value, leading to “anomalous results”.  The submission
questions whether the Members should elaborate clearer, more comprehensive and representative
criteria when calculations of constructed value are made.  As an illustrative example of a situationpresumably leading to “anomalous results”, the submission describes a situation concerning the
appropriate profit rate to use in calculating constructed value when home market sales of one of the
companies subject to investigation are not representative and cannot be used for comparison to export
sales.  In the example, the investigating authority c ould choose to apply either a lower profit rate from
the broader industry (tableware), or a weighted average of the profit rates of two other companiessubject to the investigation that make the subject merchandise (disposable spoons).
(a) The concept of constructed value ultimately deals with the appropriate way to allocate costs
of production and profit.  Practices in this regard vary from Member to Member, industry to
industry, and firm to firm. While the United States agrees that comprehensive rules aregenerally beneficial, this may be an instance in which greater flexibility is necessary to take
into account the circumstances of each case.  Could adoption of comprehensive criteria
eliminate the necessary flexibility to consider the accounting practices of a particular firm or
industry?  For example, such criteria potentially may greatly increase the burden on
responding exporters who could be required to report information as specified in Agreementrules, rather than in accordance with their books and records.
(b) Regarding the “illustrative example” given on page 2, should an investigating Member be
concerned that profits from company B and C may be artificially depressed by the very
alleged dumping they are investigating?  Is there reason to believe that the profit margin for
spoons is greater or less than that for tableware as a whole?  If not, could an investigating
Member reasonably conclude that a profit figure drawn from a broader spectrum ofcompanies is likely to be more representative?
3. The submission asserts that Article 2.4.2 recognizes that average dumping margins should be
based on the average of “all” comparisons, including those that generate negative margins.  The
submission proposes that Article 2.4.2 be clarified to explicitly rule out “zeroing”.
Please explain further the assertion that average dumping margins should be based on an
average of “all” comparisons, considering that such a requirement is not included in Article 2.4.2.
What is the basis for the implicit view that Members are required to offset dumping amounts by the
amount by which distinct products have not been dumped?
4. The submission questions whether the “discipline” of Article 3.7 concerning determinations
of threat of material injury should be strengthened and the description of the Article 3.7 factors be
clarified and improved.
Do the proponents maintain that any of the current Article 3.7 factors are unclear?  If so,
which ones?TN/RL/W/25
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5. The submission asserts that the current 2 per cent de minimis  level contained in Article 5.8 is
not sufficient to reflect the “high degree of variance and uncertainty resulting from crude
methodologies”.  The submission suggests that the “role” of de minimis  in the duty collection process
could be revisited.  Finally, the submission questions whether the 3 per cent negligible volume
threshold is sufficient to justify injury when the volume of total imports is small.
(a) In light of the detailed methodologies pr ovided in the Antidumping Agreement, please
explain why the proponents believe that the current 2 per cent de minimis  dumping margin
threshold is insufficient.
(b) Do the proponents contend that the reason for the existence of a de minimis  threshold in the
Agreement is concern about a degree of inaccuracy?  If so, what is the basis for thiscontention?
(c) What evidence supports the conclusion that the degree of variance and uncertainty in
dumping calculations is greater than 2 per cent?
(d) Please explain what is meant by “the role of de minimis  in duty collection process”.
(e) The submission states that the current 3 per cent negligible volume threshold is insufficient to
justify injury when the volume of total imports is small.  Does the comment go to whether the
current 3 per cent volume threshold in Article 5.8 is sufficient to justify a finding of materialinjury or whether it is sufficient to justif y an investigating authority to conduct an injury
analysis?
6. The submission claims that the “facts available” are often used to “penalize” exporters who
cannot submit certain data.  The submission questions whether it is appropriate to elaborate morestringent rules to discipline the “excessive” use of “facts available”.  The submission provides an
illustrative example of a situation where facts available are applied to a respondent that has not
provided resale prices of a customer in which the respondent has a 10 per cent equity interest and over
which it has no “legal” control.
(a) Given that legal control may stem from a basis other than equity ownership, in the
proponents’ view, what criteria should an inve stigating authority examine in assessing legal
control?
(b) How should authorities assess facts which may indicate a degree of de facto  control, even in
the absence of legal control?  For example, how should authorities examine cross-ownership,
contractual or familial relationships, or indications of economic power between the entities(such as might exist if the respondent is the customer’s sole supplier) which may indicate an
ability of the producer to obtain the information?
(c) In the example given, to the extent the price between the exporter and importer is unreliable
because of “association”, such price may be disregarded under Article 2.3.  In such asituation, the authority must have information regarding the importer’s resales in order to
conduct the analysis required by Article 2.4.  Assuming the authority finds that there is no
legal control between the parties, what importa nce would the proponents attach to a finding of
a significant overlap in the boards of directors of the exporter and importer?  What
importance would the proponents attach to a find ing that the owner of the exporter and the
owner of the importer are, for example, brothers?TN/RL/W/25
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(d) Do the proponents agree that there is a danger of abuse from parties that claim  lack of legal
control, without revealing information about de facto  control, and on that basis refuse to
provide information necessary to the calculations under the Agreement?
7. Noting that Article 9.1 encourages, but does not require, the application of a duty no higher
than that necessary to offset injury, the submission questions whether it is appropriate to apply
anti-dumping duties that are higher than necessary to counteract injury.
While anti-dumping duties offset the amount of dumping, they may not counteract the injury
suffered as a result of the dumping.  For example, in an industry plagued by dumping, companies may
have been forced to lay-off well-trained workers,  shut production facilities, cut-back on research and
development expenditures, and suffer other injuries which may take many years and significantinvestment to repair.  What is the basis for the statement that anti-dumping duties are specifically
designed to counteract injury being suffered by the domestic industry?
8. The submission asserts that the general rule in the AD Agreement is that anti-dumping orders
should be terminated after five years; however, an expansive use of the “exception” in the Agreementhas turned the continuation of the order into a de facto  practice.  The submission provides an
illustrative example where, upon imposition of an order, a company stops shipping to the country that
imposed the order.  The company does not participat e in the sunset review because it has no plans to
export to that country again, yet the importing country continues the order anyway as a result of its
sunset review.
(a) On what grounds do the proponents conclude that termination of orders after five years is a
“general rule”, and the conduct of a sunset re view an exception, when, in fact, Article 11.3
states that orders should be terminated unless a sunset review indicates otherwise?
(b) What is the basis for equating the conduct of a sunset review with the continuation of an
order, when a sunset review may reveal that an order should be terminated?  What is the basis
for the conclusion that the continuation of orders has become a “ de facto  practice”?
(c) Do the proponents agree that one reason a resp ondent may withdraw from a market is that it
cannot sell in that market unless it engages in the unfair trade practices which have been
remedied by the anti-dumping order?
(d) How would the proponents suggest that Member s analyze the necessarily predictive question
of the “likelihood” of future dumping and injury?
India  Proposals on Implementation-related Issues and Concerns: Agreement on Subsidies and
Countervailing Measures/Anti-Dumping Agreement  (TN/RL/W/4, 25 April 2002)
1. India links developing countries’ inability to secure an increased share of international trade
to the imposition of anti-dumping measures against imports from developing countries.
Could India please explain the basis for its statement that anti-dumping actions have
prevented it and other developing countries from secu ring a share in the growth  in international trade?
2. India observes that from 1995 to the first half of 2001, 60 per cent of definitive anti-dumping
measures imposed were against imports from developing countries.  However, a significantpercentage of those measures were imposed by developing countries.  Moreover, the United States
notes that in recent years a majority of anti-dumping investigations have been initiated by developing
countries.  The targets of many of these antidumping investigations by developing countries have
been other developing countries.TN/RL/W/25
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Given this increased use of anti-dumping meas ures by developing countries, which would
better serve development goals:  reducing use of antidumping measures against developing country
exports, including by other developing countries, or reducing dumping into developing country
markets?
3. India identifies a “changed global trade and economic scenario, especially for exports from
developing countries”, and states that revisions to the de minimis  standard and negligible import
volume are necessary to address this changed scenario.  India offers detailed proposals.
(a) Would India please describe the specific changes to which it refers?
(b) How would revisions of de minimis  and negligibility standards address problems caused by
the changed scenario?
4. India proposes that Article 5.8 be amended to increase the de minimis  level from 2 per cent to
5 per cent for imports from developing countries.
(a) Would India please explain in more detail the justification for this proposal?(b) What is the specific basis for the 5 per cent figure which India proposes as the appropriate de
minimis  standard?
(c) Would India please explain how this propos al would address the problems of developing
countries that it has identified?
5.  India proposes that the de minimis  threshold should be extended to apply to all refund and
review proceedings, as well as to initial investigations.
Given that in the review phase, unlike in the investigation phase, there has already been a
finding of injurious dumping and, thus, exporters have prior notice that their pricing is subject to
further scrutiny for dumping, is it appropriate to apply a more stringent standard for pricing by those
exporters?
6. India proposes that, for developing countries only, Article 5.8 be amended to increase from
3 per cent to 5 per cent the threshold volume of dumped imports which should be regarded as
negligible.  In addition, India proposes that the stipulation that anti-dumping action can still be taken
against a country whose volume of imports is below this threshold, provided countries which
individually account for less than the threshold vo lume collectively account for more than 7 per cent
of the imports, be deleted.
(a) Would  India please explain in more detail the justification for this proposal?(b) In particular, how has India identified 5 per cent as the correct figure below which imports
from an individual country should be considered negligible?
(c) Would India agree that in many instances, dumped imports accounting for 5 per cent or less
of total imports may cause significant injury to a domestic industry?
(d) Would India agree that in many instances, dumped imports accounting for 7 per cent or less
of total imports may cause significant injury to a domestic industry?  If so, how does India
justify deleting the cumulative 7 per cent threshold provision?TN/RL/W/25
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7.  India proposes that the “lesser duty rule” in Article 9.1 be made mandatory when imposing
an anti-dumping duty against imports from a devel oping country Member by any developed country
Member.
(a) Would India please explain in more detail the justification for this proposal?(b) What methodologies would India recommend implementing for determining the duty
necessary to remove the injury to the domestic industry?
(c) Why should the mandatory lesser duty rule for imports from developing countries only apply
in cases brought by developed countries?
Brazil Implementation-related Issues  (TN/RL/W/7, 26 April 2002)
1. Brazil asserts that “the purpose of an anti-dumping measure is to remove injury caused by
dumped exports, the logical consequence of such a purpose being the convenience of a lesser duty, if
the latter is adequate to remove injury”.  Theref ore, Brazil proposes that, when investigating the
dumping of imports from a developing country, the application of the “lesser duty” rule shall be
mandatory.
(a) What methodologies would Brazil recommend implementing for determining the duty
necessary to remove the injury to the domestic industry?
(b) Is this proposal limited to anti-dumping cases brought by developed countries only?2. Brazil notes that the Agreement lacks a provision related to the definition of “product under
investigation”, allegedly allowing investigating authorities to “adopt a broad definition of the productunder investigation that could lead to arbitrary positive determinations of dumping and injury”.  What
experiences has Brazil had that have compelled it to raise this issue?
3. Brazil asserts that several key aspects of the steps involved in the calculation of dumping
margins need to be clarified and improved, such as the use of product categories and tests for sales in
the ordinary course of trade.
(a) What key aspects of the steps involved in determination of the margin of dumping does Brazil
believe require clarification?
(b) What does Brazil mean by “the use of product categories?”
(c) By “tests for sales in the ordinary course of trade,” is Brazil referring to the test of sales below
the cost of production under Article 2.2.1?
4. Brazil notes that the Agreement does not establish the factors to be analyzed when
determining, for purposes of cumulatively assessing injury, that a cumulative assessment of the effect
of imports is appropriate.  Brazil asserts that, as a result inappropriate determinations related to the
“conditions of competition” can be made.
(a) What key factors does Brazil believe should be analyzed when making a determination that it
is appropriate to assess injury cumulatively?
(b) Brazil asserts that the lack of factors to be analyzed can lead to a pattern of anti-dumping
application that is more restrictive and discretionary than the drafters of the Agreement
intended.  What experiences has Brazil had that have compelled it to raise this issue?TN/RL/W/25
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(c) To which “conditions of competition” is Brazil referring?
SUBSIDIES AND COUNTERVAILING MEASURES
India   Proposals on Implementation-related Issues  and Concerns: Agreement on Subsidies and
Countervailing Measures/Anti-Dumping Agreement  (TN/RL/W/4, 25 April 2002)
1. India asserts that the threat and imposition of countervailing duties have serious
adverse effects on developing country economies, including a fall in production, large
unemployment, decline in incomes and increase in poverty levels.
Could India please explain the specific factual basis for this assertion?
2.  India notes that characteristics of developing countries include high cost of capital, low
level of infrastructure development, inadequate integration and organization of the economy,
and poorly developed information networks.
(a) Could India please explain how its proposals would specifically ameliorate the economic
problems identified?
(b) Could India please explain why these problems could not more appropriately be addressed
directly?  General infrastructure development, for example, can be achieved through direct
government infrastructure investment, which is not restricted under the Subsidies and
Countervailing Measures Agreement.
Detailed Proposals:
Proposal 1:  A new provision to be added in Article 27.10 to provide for countervailing duties on
imports from developing countries being restricted only to that amount by which the subsidy
exceeds the de minimis  level.
(a) Could India please explain in more detail the justification for this proposal and how it would
meaningfully and directly address the economic problems of developing countries?
(b) Is this proposal likely to encourage developing countries to subsidize their exports?
Proposal 2:  Article 27.10 (b) shall be amended to provide for countervailing duty not being
imposed in the case of imports from developing  countries where the total volume of imports is
negligible, i.e. 7 per cent of total imports.
(a) Could India please explain in more detail the justification for this proposal?  In particular,
what is the specific basis for proposing 7 per cent as the figure below which imports shouldbe considered negligible?
(b) Is it India’s position that subsidized imports of 7 per cent or less can not cause adverse effects
to the domestic industry of a Member?
Proposal 3:  Article 27.2 shall be amended so that the prohibition in Article 3.1 (a) does not
apply to export subsidies granted by developing countries where they account for less than 5 per
cent of the f.o.b. value of the product.TN/RL/W/25
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(a) Could India please explain in more detail the justification for this proposal?  In particular,
what is the specific basis for setting the level for export subsidies at 5 per cent of the value of
the product?
(b) Is it India’s position that export subsidies are not trade-distortive?
Proposal 4:  Article 27.11 shall be amended to provide for the de minimis  level of subsidization
below which countervailing duty shall not be imposed in case of imports from developing
countries being raised above 3 per cent.
What specifically would India propose as the revised de minimis  level for developing
countries?  Would a different level apply to Members in Annex VII of the SCM Agreement?
Proposal 5:  Article 27.3 shall be amended so that the prohibition of paragraph 1(b) of Article 3
shall not apply to developing country Members. The reference to expiry of this flexibility after
five/eight years from the date of entry into force of the WTO Agreement shall be deleted.  It
should also be clarified that the provisions of the amended Article 27.3 shall be applicable
notwithstanding the provisions of any other agreement in the WTO acquis.
(a) Is it India’s position that making the receipt of a subsidy contingent upon the use of domestic
over imported goods is an appropriate economic development policy?  Can India point to any
economic literature which supports such a position?
(b) Is it India’s position that making the receipt of a subsidy contingent upon the use of domestic
over imported goods does not distort trade?
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