WORLD TRADE
ORGANIZATIONTN/RL/W/31
25 November 2002
(02-6507)
Negotiating Group on Rules Original:  English
REPLIES TO ADDITIONAL QUESTIONS TO OUR
SECOND CONTRIBUTION (TN/RL/W/10)
Paper by Brazil,  Chile;  Colombia;  Costa Rica;  Hong Kong, China;  Israel;
Japan;  Korea;  Norway;  Separate Customs Territory of Taiwan, Penghu,
Kinmen, and Matsu;  Singapore;  Switzerland;  and Thailand
We thank Members for additional questions and comments put forward at the meeting of the
Negotiation Group on Rules in October 2002.  This paper replies to additional questions to our secondpaper.  The questions and comments would help further understanding by all Members of the issues
which we have indicated, according to the Doha mandate, in our previous papers.  Meanwhile, we
would urge other Members to indicate the issues of  their interest, if any, to the Negotiation Group on
Rules as soon as possible.
1. Definition of Product under Investigation/Consideration and Like Product
Question
●Given the complexity of today's markets, what kind of "appropriate criteria" do the
proponents have in mind in order to determine the product scope?
Reply
We consider that the basic criteria to determine the product scope should be, for example, the
characteristics of the product, uses of the products that correspond to those characteristics as well asthe degree of interchangeability, fungibility or substitutability of those products. Based on these
criteria, it would be possible to determine whether the products covered by a description are
effectively destined to the same market or whethe r they are destined to different markets. If the
products referred to by petitioners or reviewed ex officio by authorities for possible investigation are
destined to different markets, i.e. they have differ ent applications and are not closely substitutes, they
could not be considered as a single product covered by a single antidumping investigation.
2.  Definition of Domestic Industry
Question
●What would - in the view of the proponents - constitute a major proportion of the domestic
industry?TN/RL/W/31
Page 2
Reply
In our view, as mentioned in our answer1 to a question previously posed by Australia, the
investigating authorities should use “the domestic producers as a whole of the like products” as the
primary definition for “domestic industry”.  This should be the rule for definition for “domesticindustry”. Only in exceptional cases where the authorities are not able to consider the “domestic
producers as a whole of the like products”, it should examine producers whose collective output of the
products constitutes a major proportion of the total domestic production of those products. In these
cases, the investigating authorities should explain the reasons why the domestic producers of the like
product as a whole are not used. We are of the opinion that “major proportion” of the domestic
industry would be established if the authorities examine producers that represent more than 50% of
the total domestic production of the like product.  Only by analysing a truly major proportion (morethan 50%) of the domestic producers can investigating authorities make consistent injury
determinations.
4. Initiation Standards
Question
●What are the proponents' ideas on making the current initiation standards as interpreted by
panels and the AB stricter short of requiring the same standards as for the imposition of
measures?
Reply
We believe that initiation standards should be improved.  Most of the time, the outcome of the
initiation is the imposition of AD duties. Furthermore, the initiation of an investigation has animmediate chilling effect on the market, both on sales opportunities and in investment decisions.
Article 5.2 of the AD Agreement establishes the information that should be included in an
application. And paragraph 3 requires that the in vestigating authorities examine the accuracy and
adequacy of the evidence provided in the application.  We 
are of the opinion that investigations
should also not be initiated if the investiga ting authority determines that the evidence or
information contained in the application for an initiation is substantially biased.  Theauthorities should also demonstrat e that the analyzed elements are sufficient to justify the
initiation of the investigation, and should present this demonstration in the public notice of
the initiation or make it available through a separate report.
It is not suggested that the same standards fo r final determinations apply to initiation.  In
terms of the evidence required at the time of the initiation of an investigation, the Grey Portland
Cement Panel Report2, determined that evidence should be le ss than that required for preliminary or
final determinations, but “sufficient” to justify an initiation. In addressing “sufficient” the Panel says
that investigating authority may not ignore other provisions of the AD Agreement.  In other words,the application should contain sufficient evidence on dumping, injury and causation in such manner
that an unbiased and objective investigating authority could determine that there was sufficient
evidence to initiate an investigation.
In summary, as it is stated in document TN/RL/W/10 the main purpose of this proposal is to
clarify the interpretation of the terms “examine”, “accuracy” and “adequacy”, in order to make it sure
                                                     
1 See (TN/RL/W/18) at page 3.
2 WT/DS/156/R-AB/R (Guatemala-Mexico)TN/RL/W/31
Page 3
that the information received from the petitioner satisfy all the requirements set out in article 5.2 and
it is strictly reliable. The competent authority should carry out the above task by analyzing the
information received from the petitioner and examinin g the accuracy of data by gathering information
from public records, intra-governmental records, and other available sources, as appropriate.
5. Determination of Normal Value – Affiliated Parties and Their Transactions
Question
●Are the proponents suggesting the inclusion of a single threshold for shareholding above
which transactions between affiliated parties should be discarded?  How could - in the
proponents' view - "positive evidence showing that the transfer price between affiliated partiesis unreliable" look like?
Reply
As discussed in our answer to a question previously posed by Australia,3 we are of the
opinion that there are three dimensions in considering the affiliated party transactions: (i) thresholds
for the authorities to initiate inquiries on affiliated party transactions, including request for
information maintained by the affiliated party;  (ii) criteria to find that the transfer price between
affiliated parties is not “in the ordinary course of trade”;  and (iii) appropriate methods to adjust or
revise the transfer price.  Questions presented to us are related to the first two dimensions.
We believe that the initiation of inquiries to affiliated party information must be based on
certain evidence showing actual control by one party over the other party.  First, these parties must
appear to be affiliated.  Criteria in footnote 11 would be a good basis for further consideration of the
criteria on this aspect.  We note that the AD Agreement also should have a specific discipline on acertain level of small shareholding, which could not be evidence for initiation of such inquiries.  The
generally accepted international standards would provide some good yardsticks for our further
consideration on this threshold.
Further, there shall be evidence showing the actual control by one party over the other party,
for example, secondment of a party’s official/employees to its affiliated party relevant to the
transaction in question, sales by a party at the below cost of production to the other party, or otherspecial supports provided to the affiliated party.  Mere fact of relationship, cross-ownership, etc.,
should not condemn companies without some actual proof of control.
In addition, the authorities’ determination that the transfer price is not “in the ordinary course
of trade” must be based on the positive evidence showing that the transfer price was substantiallydifferent from the transaction price between unaffiliated parties because of the affiliation.  In the case
of sales, for example, the transfer price must be substantially different from the sales price to
unaffiliated parties in similar sales conditions.
6. Injury Determination
Question
●What kind of additional guidance do the proponents envisage that can be given beyond the
vast body of panel and AB decisions on this issue?
                                                     
3 See TN/RL/W/18 at pages 4-5.TN/RL/W/31
Page 4
Reply
Dispute Settlement panels and the Appellate Body have confirmed that the authorities must
consider all elements as listed in Articles 3.1, 3.2 and 3.4 and all other known elements as listed in
Article 3.5 in determining existence of injury to domestic industry through the effects of dumping.The panel in Thailand – H-beams  case has also confirmed that the injury analysis must contain “a
persuasive explanation as to how the evaluation of relevant factors led to the determination of
injury.”
4  The Appellate Body has stated with respect to Article 3.5 that the authorities “must separate
and distinguish the injurious effects of the dumped imports from the injurious effects of []other
factors.”5   The Appellate Body acknowle dges, however, that no particular methods or approaches are
prescribed in the AD Agreement.6  The scope of review by panels and the Appellate Body on
individual injury determinations, however, were limited because Article  3 provides little guidance onhow the authorities should analyze these factors in determining injury.
It is our view that Members should make substantial progress in clarifying a fair, reasonable
and rigorous approach to the various injury factors as listed in Article 3.4, and to other factors set out
in provisions of Articles 3.1 through 3.5.  According to Article 3.1, injury determination involves,inter alia, an objective examination of both a) the volume of the dumped imports and the effect of the
dumped imports prices in the domestic market for the like product, and b) the impact of those imports
on domestic producers. These elements are further elaborated in Articles 3.2 and Article 3.4. Article
3.5 spells out the requirement for demonstration of a causal relationship leading to injury through the
effects of dumping as set forth in Articles 3.2 and 3.4. Article 3.5 further provides guidance withrespect to which factors other than the effects of dumped imports that shall be examined in
determining such a causal relationship.  It is therefore necessary to clarify the relationship between
Article 3.4 and other provisions of Article 3 to establish more meaningful guidance for injury
determination.
The AD Agreement should also require the authorities to explain its injury determination in
details, explaining what information is used.  Such guidance will provide more transparency in injury
investigations and determinations, and will reduc e arbitrary injury determinations.  For instance,
improved standards and procedures for public notices and explanations of determinations, which
provide the public and any interested party with al l facts, methods and assessments, will provide for
independent scrutiny.  It is our observation that determinations of injury in many cases are
insufficient.  This, in our view, demonstrates the need to improve the discipline.
7. Price Undertaking
Question
●Given the complexity of today's business reality, how workable can precise criteria for
rejecting undertakings be in the proponents' opinion?  How do developing country interests
come into play here other than through the link to Article 15 second sentence ADA?
                                                     
4 Thailand -- Anti-Dumping Duties on Angles, Shapes, and Sections of Iron or Non-Alloy Steel and H-
Beams from Poland  (WT/DS122/R) (28 September 2000), para. 7.236.  See also Egypt – Definitive Anti-
Dumping Measures on Steel Rebar from Turkey , (WT/DS211/R) (8 August 2002) para.7.46.
5 United States – Antidumping Measures on Certain Hot-Rolled Steel Products from Japan
(WT/DS/184/AB/R) (28 February 2001), para. 226.
6 Id., para. 224TN/RL/W/31
Page 5
Reply
Article 8.3 of the AD Agreement gives some guid elines in terms of rejecting undertakings.
On the one hand, it establishes some criteria (i.e. great number of exporters, general policy reasons).
On the other hand, it defines some transparency requirements (i.e. give reasons for rejecting, provideopportunity to comment). However, the language of the provision is ambiguous; as a result, the
discretion provided to authorities to refuse proposals for price undertaking is wide.  Difficult as it may
be, it seems important to clarify and improve those criteria.
Members’ practices could help us in this process.  For example, some authorities reject
undertakings because not all exporters are covered by these undertakings (idea of “all” or “nothing”).
Why will it not be acceptable to apply price undertaking to some exporters and AD duties to the rest?Some other authorities do not even provide any explicit procedures for price undertakings that
exporters could follow.  If the price undertaking prevents injury, why should the authority be able to
deny such undertaking?
Other authorities accept price undertaking only if the differences of prices is equivalent to the
margin of dumping.  However, article 8.1 of the AD Agreement establishes that is “desirable that the
price increases less than the margin of dumping if such increases would be adequate to remove the
injury”.  In this context, the price undertaking could –and must—be less than the margin of dumping
if it is enough to remove injury.
In addition, regarding article 8, if the investig ating authorities can verify the information
submitted by exporters, and can monitor the undertaking; why is acceptance of price undertakings not
possible?
Clarification of the criteria on acceptance and/or rejection of price undertakings will provide
an incentive for exporters to return to their business based on the undertakings.  This will benefit
developing as well as developed countries.
As regard to Article 15, we would also like to stress that price undertakings are not the only
possibility of constructive remedies that authorities should explore.
8. Reviews
Question
●Do the proponents consider the recurrence anal ysis as carried out by many investigating
authorities when it comes to reviews an appropriate methodology?  If not, what othermethodology would be more appropriate?
Reply
With respect to reviews of various kinds, the two conspicuous problems which have been
identified so far are the a) arbitrary rules applied to the reviews and b) the high tendency of abusing
the term “likely” in Articles 11.2 and 11.3.
While further discussion is necessary to properly address the ‘likelihood’ issue, in our view,
the AD Agreement should make it explicitly clear that many of the detailed substantive provisionsof the AD Agreement, in particular those contained in Articles 2 through 6, also apply to the
Articles 9 and 11 reviews as well.TN/RL/W/31
Page 6
The imposition of an anti-dumping measure depends on the proper establishment, and
unbiased and objective evaluation, of detailed facts and arguments presented by petitioners and
respondents.  Given that these facts are highly technical in nature, and are normally presented in an
adversarial manner, they must be assessed pursuant to detailed procedural and substantive rules
governing the imposition of anti-dumping measures.
In our view, the importance of establishing multilateral control over the imposition of anti-
dumping measures applies not only to the original investigation, but also with equal force to all the
subsequent phases of an anti-dumping measure, including the various reviews provided for in
Articles 9 and 11.
Articles 9 and 11, per se,  do not presently contain detailed substantive provisions governing
the conduct of the reviews provided for in those Articles.  To ensure that the investigating
authorities assess detailed facts and arguments presented and conduct proper dumping and injury
determinations pertaining to these reviews, therefore, the AD Agreement should make it explicitly
clear that many of the detailed substantive provisions provided elsewhere in the AD Agreement
apply to Articles 9 and 11 reviews in the same manner as to the initial anti-dumping investigation.
9. Constructed Export Price:  methodology for construction
Question
●Do the proponents disagree that the current rules on level of trade adjustments ensure in most
cases a fair comparison between normal value and CEP?
Reply
In a joint submission to the rules negotiation, we suggested that there is an asymmetry in the
calculation of constructed export price (“CEP”) and normal value (“NV”), and that rules should be
clarified to prevent an unfair outcome.  A Member responded in the July session that the issue is
simply a revisit of the issue already discussed in  the Uruguay Round (“UR”), and that any discussion
of asymmetry should focus on how the issue relates to the treatment of the level of trade.
As suggested by the Member, the issue of asymmetry was an important concern during the
UR.  In the discussions, it was effectively argued that the problem could be resolved through ensuring
that comparison between normal value and export price is made at the same level of trade.  In our
understanding, the present text of the AD Agreement, Article 2.4 with its focus on the level of trade,
reflects such an argument.
The problem is that there is an impossibly high burden of proof placed upon respondents to
get the level of trade (“LOT”) adjustment, and, as a consequence, it is notoriously difficult to get the
LOT adjustment.  As a result, the asymmetry continues between the calculation of normal value and
CEP, especially with respect to indirect costs.  For example, some Members deduct advertisement
expenses from the calculation of CEP, while the expenses of the same nature are included in thecalculation of normal value.  Furthermore, the deduction of profit from the CEP is made in an
arbitrary manner, adding to the asymmetry.
Conclusively, irrespective of the progress made during the UR and the present text of
Article 2.4, focusing upon the level of trade, the asymmetry continues.  Thus, there is no reason whythe fact that the issue was addressed in the UR should preclude a comprehensive review of the
important issue in the on-going negotiations.
__________