WORLD TRADE
ORGANIZATIONG/ADP/AHG/W/99
19 October 2000
(00-4344)
Committee on Anti-Dumping Practices
Ad Hoc Group on ImplementationOriginal:  English
PRACTICAL ISSUES AND EXPERIENCE  IN
APPLYING ARTICLE 2.4.2
Paper by New Zealand
The following communication, dated 18 October 2000, has been received from the Permanent
Mission of New Zealand.
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This paper should be read in conjunction with New Zealand's other comments on this topic
contained in papers G/ADP/AHG/W/70 and G/ADP/AHG/W/83.
In its paper G/ADP/AHG/W/89, the United States has asked a series of questions regarding
the use of the transaction-to-transaction methodology when establishing the existence of margins of
dumping, in order that it gain a better understanding of the merits of such a methodology.
New Zealand determines its methodologies on a case by case basis, but has a stated
preference to use the transaction-to-transaction methodology.
Prior to the verification of an overseas company the details of all shipments to New Zealand
are established from Customs data and importers' invoices.  These are entered into a spreadsheet and
form part of the record of the investigation.
During an on site verification visit the first task that the investigation team undertakes is to
establish that the terms of Article 2.2 are met in regard to sales being:
• Of sufficient quantity (>5 per cent);
• not sales at a loss; and
• arm's length transactions.
To answer the specific questions posed by the US, a study was made of four investigations in
order to gain some reliable, empirical data.  The results were as follows while a description of thepractice adopted in each case is attached in Annex 1.
Question 1: What criteria should be used  in selecting the appropriate normal value
transaction for comparison to a given export transaction?
The level of trade and volume of sales appear to be the criteria that New Zealand has
predominantly used in selecting the appropriate normal value transaction for comparison purposes.
(Refer to Annex 1: Question 1 for an expl anation of how this answer was derived).G/ADP/AHG/W/99
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Question 2: Should similarity of the merchandi se being compared or contemporaneousness
of the sales be a more important criterion?  If  a sale of similar, although not identical,
merchandise is made in the home market on the same day as the export sale under
consideration, but a sale of identical merchandise  is made in the home market one month later,
which home market transaction should be used for the comparison?  What considerations go
into making this selection?
As a general rule, investigators adopt the view that sales should be of goods which fall within
the description of like goods, as Article 2 continually refers to the term "like goods".
In all four cases, a range of comparable sales at as "nearly as possible to the same time" as
export sales to the New Zealand customer were identified in the company records and details were
recorded.  A few transactions involved compar ison outside a one month period.  The exclusion of
these sales was only done where investigators established that there would be no undue impact on the
calculation of the dumping margin.
(Refer to Annex 1: Question 2 for an expl anation of how this answer was derived).
Question 3: If several sales of identical merch andise are made in the home market on the
same day as the export sale, what factors should  be used in selecting a home market sale for
comparison?
It is the view of New Zealand investigators that if the selection of the comparable company is
done correctly (as per the criteria listed in Question 1 above) the sales to that customer will all have
been conducted at the same price and this would not be an issue.
If the sales have been made to several different customers who did not meet the criteria used
when selecting the comparable domestic company as per question 1, it would be our view that a "fair
comparison" would not be being made, as some or all of the selection criteria had not been met.
Question 4: How long a time may transpire before a particular home market sale is no
longer eligible for comparison under the transa ction-to-transaction methodology?  Would this
determination vary from case to case?  If s o, what considerations should go into making this
determination?
Actual practice will vary from case to case, but the research has shown that this question has
not been a particular problem to date.  Any consideration of discarding a home market comparison
would be governed by the need to make a "fair comparison".  If, because of the time difference, thecomparison became unfair for any reason, then it would not be sound to base a dumping comparison
on such information, and the other two acceptable methodologies of Article 2.4.2 would need to be
considered.
(Refer to Annex 1: Question 4 for an expl anation of how this answer was derived).
Question 5: To what extent, if at all, is a simi larity in the levels of trade of the home market
and export customer relevant to selecting a home market transaction for purpose of a
transaction-to-transaction comparison?  If it is a relevant consideration, how should it be
weighed against other criteria, such as simi larity of the merchandise being compared or
contemporaneousness of the sales?
As shown in the answer to question one above, this is seen as the primary selection factor in
New Zealand's transaction-to-transaction procedures.  The second selection factor usually involves aG/ADP/AHG/W/99
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volume of sale comparison as, in our experience, pricing and discounts is generally driven by the
quantities purchased.  This does not mean to say, however, that if some other factor is more
compelling, it would not be considered above the volume of goods sold.  The investigators consider
such issues on a case by case basis.
Question 6: Certain Members have indicated that their authorities normally apply a
transaction-to-transaction methodology.  Und er what circumstances would such Members
apply an average-to-average comparison methodology?
New Zealand would consider using an average-to-average methodology in the following
circumstances:
• if it was found that a fair comparison could not be made using the transaction-to-
transaction methodology e.g. several customers are at the same level of trade and havesimilar sales volumes to the New Zealand importer, and there is a significant variation in
price between those customers on the domestic market;
• when the investigation involved a large number of transactions to be individually verified
and doing so would present an administrative burden;
• if weighted average information was the only information that a company could provide,
and that information could be verified to the satisfaction of the investigators, New
Zealand would be guided by the provisions of Annex II (5).
General
New Zealand approaches each circumstance on a case by case basis.  New Zealand prefers to
use the transaction-to-transaction methodology as, unlike some other Member countries, it is normally
dealing with a small number of shipments, and a record of all shipments is readily accessible from
Customs data.
Our answer to Question 6 above indicates that there are circumstances where we are prepared
to adopt another methodology.  Whichever methodology is chosen, investigators are always mindful
of the requirement to make a "fair comparison" under paragraph 4 of Article 2 of the Agreement.
New Zealand notes that both the weighted average-to-weighted average and transaction-to-
transaction methodologies have equal standing under Article 2.4.2. of the Agreement.  Australia
proposed this item for discussion on the basis it considered that it would be useful to have an
exchange of views on the practices of Members and to see if there was any scope to develop
recommendations on what might be considered best practise.
If a consensus was reached amongst Members that in certain circumstances one or other of
the methodologies was a preferred method to use, New Zealand would be prepared to adopt
constructively consider such a guideline.G/ADP/AHG/W/99
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ANNEX 1
The above answers were based on an examination of four cases that the New Zealand Trade
Remedies Group have conducted.  This Annex provides some further amplification of how the
answers in the first part of this paper were derived.
The number of export shipments that had to be compared to domestic sales in each of the
cases looked at were: Case 1 = 42, Case 2 = 12, Case 3 = 29 and Case 4 = 420.
Question 1: Criteria used in selecting approp riate normal value transaction for comparison.
In the following cases, the investigating team s established the functions, distribution flows
and place in the distribution chain and volume of sales to establish the correct level of trade for the
New Zealand customer prior to the overseas verification visit being undertaken.
Case 1:
During verification for normal value purposes, the investigating team selected the domestic
customer that best matched the New Zealand customer, using the same criteria as above.  Once
selected, invoices for sales at the same time or as close as possible to the export transactions were
selected for establishing normal value base prices.
Case 2:
The primary criterion was to select a category of customer at the same level of trade as the
New Zealand importer.  Once this group of customers was established, the company with the sales
volume that was the closest match to the volumes of the New Zealand customer was selected forcomparison purposes and invoices for sales at the same time or as close as possible to the export
transactions were selected for establishing normal value base prices.
Case 3:Company 1:
There were only three customers in the domestic total market.  One of these was discarded as
sales were not at arms length.  The sales to the remaining two customers were both considered for
comparison purposes as neither purchased the fu ll mix of product exported to New Zealand.
The export sales were compared, in the majority of transactions, to domestic sales invoices
within one month of the date of the export sale.  Some sales were outside the one month timeframe,
but as prices did not change the investigators considered that they were appropriate for comparison
purposes.  An important consideration in this de cision was that sales were conducted at a fixed US
dollar exchange rate and the domestic currency was fixed to the US dollar.
Company 2:
There was no customer at the same level of trade as the export trade. There was only one
domestic customer with comparable volumes and product sales similar to that of the exports to
New Zealand.   Domestic invoices for sales at the same time or as close as possible to the exporttransactions were then selected for establishing normal value base prices.  Most were within one
month, but some exceeded this timeframe, but the investigators accepted a slightly longer timeframe
on the same basis as for Company 1.G/ADP/AHG/W/99
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Case 4:
The primary criterion was to select a category of customer at the same level of trade as the
New Zealand importer.  The second criterion was to establish a domestic customer who dealt with a
similar volume of goods to the New Zealand importer, as volume drove price and discounts.  Onceestablished, sales invoices at the same time or as close as possible to the date of the export
transactions were selected for establishing normal value base prices.
Question 2: Similarity of merchandise v contemporaneousness of sales.
Case 1:
In this case the contemporaneousness of sales was an issue for a small number of sales.  Some
sales could not be compared as the time lag was considered to be too distant to make a fair
comparison.  As number of transactions small, and taking all the circumstances into account, the
investigators ruled that omitting these shipments would not affect the outcome of the calculation of
the dumping margin.
Case 2:
This was not an issue in this case as it was possible to locate a domestic sale within a few
days of the export sale.
Case 3:
In this case, the match of the product was a significant criterion.  The contemporaneousness
of the sales took on lesser importance because of the unusual market circumstances surrounding fixedcurrency positions.
Case 4:
Direct comparison was possible in most instances.  Where this was not possible, a date closest
to the export transaction was used.  In this case the maximum time lag was 9 days, but it should be
noted that in no instance did the date of sale affect the price payable.
Question 4:  Length of time before transaction is no longer useful for comparison purposes.
Case 1:
All sales that were verified fell within one month of the export sale.  A few sales falling
outside the one-month period were considered not able to be compared and were excluded. (Also see
Q.2 above).
Case 2:
Most sales could be compared at the same date, but some sales were up to three days apart.
Case 3:
The majority of transactions were compared within a one month time period.  A small number
of comparisons relied on a period over one month, but investigators ruled that is was acceptable in
this case because of the circumstances outlined in Question 1 above.G/ADP/AHG/W/99
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Case 4:
For the majority of transactions, sales on the same dates were used.  Where this was not
possible the maximum period of lag was 9 days.
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