WORLD TRADE
ORGANIZATIONTN/RL/W/6
26 April 2002
(02-2421)
Negotiating Group on Rules Original:  English
ANTI-DUMPING:  ILLUSTRATIVE MAJOR ISSUES
Paper from Brazil;  Chile;  Colombia;  Costa Rica;  Hong Kong, China;  Israel;  Japan;
Korea;  Mexico;  Norway;  Singapore;  Switzerland;  Thailand and Turkey
The following communication, dated 26 April 2002, has been received from the Permanent
Missions of Brazil;  Chile;  Colombia;  Costa Rica;  Hong Kong, China;  Israel;  Japan;  Korea;Mexico;  Norway;  Singapore;  Switzerland;  Thailand and Turkey.
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It is a matter of public record that there is a continuing increase in the use of contingency
measures worldwide and particularly anti-dumping measures.  We, like other Members, have been
concerned with the misuse of anti-dumping measures and the consequent trade restrictive effects.  The
Ministers in Doha have provided a mandate whereby such undesirable consequences can be avoided
by clarifying and improving the rules of the AD Agreement.
This paper is a first contribution to the deliberation of the Negotiating Group on Rules
concerning the provisions of the AD Agreement.  Further contributions will be made for future
sessions of the Negotiating Group. As such, this paper does not necessarily represent the full view of
every co-sponsor.  Likewise, we encourage other Members to contribute with their points of view.  At
a later stage, and in light of the evolution of the discussions in the Negotiating Group, we will, on an
individual or collective basis, develop specific proposals with the appropriate clarifications andimprovements to be agreed upon in the negotiations.
This paper indicates some issues for relevant provisions that we seek to clarify and improve,
including the ruling out of abusive interpretation of the current AD Agreement.
The issues are indicated in the order of the articles of the Agreement.  Consequently the order
is not an indication of priority.
In order to facilitate the understanding of the issues involved, some examples are provided.
By definition, the examples are limited. They cannot reflect the full scope of the problems andprovisions in question.
In indicating the issues, some questions are raised with the purpose of promoting the
discussion while giving a sense of the direction the negotiations should have.TN/RL/W/6
Page 2
ANTI-DUMPING: ILLUSTRATIVE MAJOR ISSUES
1. Sales in the Ordinary Course of Trade
Article 2.2.1 establishes that sales of the like product in the domestic market of the exporting
country or sales to a third country at prices below per unit (fixed and variable) costs of production
plus administrative, selling and general costs may be treated as not being in the ordinary course of
trade by reason of price and may be disregarded in determining normal value only if the authorities
determine that such sales:
- are made within an extended period of time (normally one year but shall in no case be
less than six months);
- are made in substantial quantities (weighted average selling price of the transactions
under consideration for the determination of the normal value is below the weighted
average per unit costs, or the volume of sales below per unit costs represents not less
than 20 per cent of the volume sold in transactions under consideration for thedetermination of the normal value); and
- are at prices which do not provide for the recovery of all costs (prices which are
below per unit costs at the time of sale are below weighted average per unit cost)
within a reasonable period of time.
This provision merits further clarification.  For example, what should be the definition of
“reasonable period of time”? Should the investigating authorities be allowed to disregard sales below
cost even when their prices provide for the recovery of all costs in the period for dumping
investigation?
2. Constructed Value
Article 2.2.2 of the current AD Agreement does not provide clear guidance for the use of
information used to calculate constructed value.  This failure to elaborate on a general principle leads
to anomalous results.
Shouldn’t we elaborate clearer, more comprehensive and representative criteria when
calculations of constructed value are made?
(An Illustrative Example)
Assume that Company A produces, among other products, disposable spoons and
sells this products mainly as exports.  Its home market sales are not representative.
Also assume that the profit margin realized by Company A in its sales of the same
general category of products (tableware) in the domestic market is 2 per cent.  The
petitioners in a dumping case claim that the investigating authority should use the8 per cent profit rate of the overall tableware industry as shown in the public
statistics of the exporting country.  Company A proposes instead to use the 3 per cent
profit rate that represents the weighted average of Company B and Company C profit
rates, both also under investigation and producers of disposable spoons in the
exporting country. Under the current rules, the authority has complete discretion.The investigating authorities could choose the tableware industry’s overall profit
data to calculate the constructed value of Company A’s disposable spoons, and
disregard the more logically relevant data on profit rates for disposable spoons.TN/RL/W/6
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3. Cyclical Markets
Anti-dumping rules should reflect market realities.  As a general principle, Article 2.4 makes
clear that any comparison between prices must be "fair." Yet there are many instances where
authorities apply unreasonable mechanical rules at the expense of fairness.  This problem isparticularly acute in the sector producing perishable goods.  It should be noted that similar situation
would arise in the case of rapidly growing manufacturing sector.
(An Illustrative Example)Many perishable goods are sold in highly cyclical markets, where in some months
prices are high because of peak demand, and in some months prices for those sameproducts are low.  Nonetheless producers of perishable goods must make sales at the
price at the time of sale.  Perishable items cannot be put in inventory to be sold later.
Flowers are a good example of this type of industry.  Mechanical application of the
current rules punishes such industries.  Depending on arbitrary assumptions about
when to begin and end the period being investigated, authorities can artificiallyinflate the dumping margin.  Should such industries be considered to be "dumping" in
the down months, even though the prices will quite predictably increase in a few
months due to cyclical demand factors? Does it make sense to punish exporters who
happen to be located in regions with different seasonal cycles, so that high supply
and lower prices can occur at times when there may be seasonal shortages in othermarkets? Since many perishable goods are critical sources of foreign revenue for
developing countries, does it make any sense to ignore the basic principle of a "fair
comparison" to create artificial dumping margins?
4. Prohibition of Zeroing
Average dumping margins by definition should be based on the average of all comparisons,
including those that generate negative margins.  Article 2.4.2 currently recognizes this general
principle.  The Appellate Body as well as panel has ruled that zeroing practice is inconsistent with
Article 2.4.2.  Shouldn’t Article 2.4.2 be clarified so as to explicitly rule out zeroing?
(An Illustrative Example)
Assume that Company P petitions to its authorities that the motorcycles imported
from Company Q should be subject to AD duties.  Assume further that Company Q
produces three product lines within the same category: type A, type B, and type C.  In
the course of the AD investigation, sales of all specific products are included, the
negative dumping margins offset the positive dumping margins, and overall thecompany is not dumping.  If the negati ve dumping margins are ignored, then this
singling out of only the positive dumping margins creates dumping where none would
otherwise exist.
5. Cumulative Assessment of Injury
Article 3.3 of the current AD Agreement recognizes the general principle of cumulatively
assessing injury, if the authorities determine, among other conditions, that a cumulative assessment of
the effects of imports is appropriate in light of the conditions of competition between the imported
products and the conditions of competition between the imported products and the like domestic
product.TN/RL/W/6
Page 4
Notwithstanding, the Agreement does not establish what factors should be analyzed to make
that determination .  As a result inappropriate determinations related to the “conditions of competition”
can be made.
What factors should be considered to evaluate if the conditions of competition between the
imported products from both countries and between them and the like domestic product are the same?
Current practice on cumulation of small exporters from different countries demonstrate a need to
clarify this aspect.
(An Illustrative Example)Country X initiates an anti-dumping inves tigation on imports of “raw chemical
material” from country A and country B.  The product originating from country A is
imported by producers of fertilizer and producers of synthetic fibre import the
product originating from country B.  That is, the products from both countries present
different uses and are not substitutable.
In such a case, is it appropriate to cumula tively assess the import from country A
with the import from country B?
6. Causal Relationship between Dumping and Injury
The AD Agreement  does not sufficiently describe methodologies for establishing a causal
relationship between dumping and injury, apart from the basic principle provided in Article 3.5 of theAD Agreement.  In practice, authorities too often impose AD measures even when factors other than
dumping are the substantial causes of the injury being experienced by the domestic industry.
The obligations set forth in Article 3.5 should be rigorously observed.  Moreover doesn’t
Article 3.5 merit further elaboration? In order to improve and clarify the Agreement, isn’t it important
to develop the procedures and criteria utilized to analyze the causal relationship, with a view to ensure
that, even in the presence of other factors, a causal relationship will be found only when there is clear
and substantial link between the dumped imports and the injury?
(An Illustrative Example)Suppose imports of oranges are alleged to cause injury to orange farmers in the
importing country.  But at the same time , other factors --drought, harmful insects,
economic recession involving reduced consumption -- also cause injury at the same
time.  Under the current standards of AD Agreement, authorities do not necessarily
analyze these alternative causes in a systematic and comprehensive manner.  Too
often, the difficulty of disentangling alternative causes leads to arbitrary conclusions.
7. Threat of Material Injury
Article 3.7 of the current AD Agreement requi res that injury must be “foreseen and
imminent” to find the threat of material injury and lists some factors for consideration.  Shouldn’t this
discipline be strengthened? This provision does not clearly define factors such as those in Article 3.4in making this determination.  Isn’t it necessary to clarify and improve the description of the factors to
be considered so that investigating authorities have more concrete guidance?
8. Threshold under Article 5.8
Since dumping margin calculation methodologi es employ numerous assumptions, the current
2 per cent de minimis  level is not sufficient to reflect the high degree of variance and uncertaintyTN/RL/W/6
Page 5
resulting from crude methodologies.  The role of de minimis  in duty collection process could also be
revisited.
Furthermore, when the volume of total import itself is small, is the current 3 per cent
negligible volume threshold sufficient to justify injury?
9. Facts Available
The AD Agreement provides for the use of “facts available” as a tool to facilitate
investigating procedures.  This methodology, however , is often used to penalize exporters who cannot
submit certain data.  Isn’t it appropriate to elaborate more stringent rules to provide more clarity to
discipline the excessive use of “facts available”?
(An Illustrative Example)Suppose a respondent has tried to gather information on the resale prices of its
customer in an exporting country, which was owned 10 per cent by the respondent.But since the respondent has no legal control over the customer, the customer refuses
to supply the information.  Since the respondent was not able to supply requested
information, the respondent was regarded as not acting to the best of its ability and
as not fully cooperative.  Consequently, the investigating authority used “facts
available” to calculate an exaggerated dumping margin.  Is this fair?
10. Lesser Duty Rule
Article 9.1 of the current AD Agreement encourages, but does not require the importing
country to apply the “lesser duty” -- a duty no higher than that necessary to offset any injury being
suffered by the domestic industry.  Given that AD duties are specifically designed to counteract injurybeing suffered by the domestic industry, is it appropriate to apply AD duties that are higher than
necessary to counteract that injury?
(An Illustrative Example)Suppose a textile company in country A exports its products to country B, and the
products were determined to be dumped with a 40 per cent dumping margin.However the domestic price of textile products in country B was not significantly
different from the imported prices -- only 5 per cent higher -- and the relative price
gap between domestic and import prices never exceeded 10 per cent over the entire
period that was investigated.
Should the AD duty be imposed at 40 per cent? Would it not be more appropriate to
adjust the dumping margin to reflect the degree of underselling?
11. Sunset of Anti-Dumping Orders
The general rule in the current AD Agreement is that anti-dumping orders should be
terminated after 5 years.  In practice, however, an expansive use of the exception (sunset reviews to
continue the order) turns the continuation of the order into a de facto practice.  How can this be
justified?
(An Illustrative Example)TN/RL/W/6
Page 6
Assume that Company A is a watch producer that has been subject to a 50 per cent
AD duty on the export of its watches.  Because of this high duty, Company A has
stopped exporting.  Because of its ceased export, all previous customers shifted to
domestic producers.  In the meantime, Co mpany A has developed its own customers
in third countries, and is constructing new watch facilities for its export to thesecountries. After 5 years, the investigating authorities initiate a sunset review.
Company A did not participate in the sunset review because it has no plans to export
to that country. However the investigating authorities decide to continue imposing the
AD duty, accepting domestic industry’s claims that Company A would restart
injurious dumping if the dumpi ng duty is terminated.
Should such an AD duty be continued? How can the absence of exports be deemed to
establish the likelihood that injurious exports will resume in the future? Is mereallegation or remote possibility enough? Under these facts, when would the order
ever be terminated? If the order is never terminated, what is the meaning of a sunset
procedure?
12. Public Interest
The current AD Agreement imposes no substantiv e obligations on the authorities to take the
broader public interest into account.  Shouldn’t the current AD Agreement be further strengthened in
order to ensure that relevant information pertaining to public interest would be taken into account in
more substantive manner?
(An Illustrative Example)
Suppose a petition was filed against imported down feathers so as to protect 1,000
jobs in the down feather industry.  Domestic down jacket producers strongly oppose
the petition.  These jacket producers document that they would not be able to competewith imported down jackets, if imported down feather prices increase significantly,
and that 5,000 jobs in this downstream industry will be lost if the AD duties are
imposed.  In addition, a consumer associati on of the importing country also expresses
concern that prices of down jacket would rise dramatically if an anti-dumping order
is imposed.  The association shows that cost to consumers is four times larger than
the gain to the domestic producers.  Yet an administrative authority ignores all of
these claims, and imposes high dumping duti es against the imported down feathers.
Are such AD duties rational?  Should the authorities take into account the interests of
the other economic sectors affected by the AD measure?
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