RESTRICTEDWORLD TRADE
ORGANIZATIONG/ADP/IG/W/42
5 November 2001
(01-5414)
Committee on Anti-Dumping Practices
Informal Group on Anti-CircumventionOriginal:  English
TOPIC 2 – WHAT IS BEING DONE BY MEMBERS CONFRONTED
BY WHAT THEY CONSIDER TO BE CIRCUMVENTION?
REPLIES TO CIRCUMVENTION SCENARIOS PRESENTED IN THE MEETING
OF THE INFORMAL GROUP ON CIRCUMVENTION OF OCTOBER 2001
Replies of the EUROPEAN COMMUNITIES to
Questions from HONG KONG, CHINA1
The following communication, dated 31 October 2001, has been received from the Permanent
Delegation of the European Commission.
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Example 1:  Fibre and tow
1. We note that tow is classified under a different customs heading from that of fibre and
was not caught under the AD investigation of the fibre.  We would like to know whether tow
existed at the time of the original AD investigation.  If it did exist, why hadn’t it been included
in the original AD investigation on fibre?
Reply
The complaint on the basis of which the original AD investigation was initiated concerned
only fibre and evidence of injurious dumping caused by the imports concerned was provided just inrelation to imports of fibre and not in relation to tow (which was traded at the time of the original
investigation just in negligible volumes).  The in vestigation was therefore initiated only as regards
imports of fibre and the inclusion of tow in the scope of the investigation would have unnecessarily
widened the product scope.
2. During the circumvention investigation, woul d the investigating authority find out if tow
had been imported at dumped prices?
Reply
As the EC pointed out in the paper submitted at the last meeting, during the circumvention
investigation, investigators would also want to confirm that the circumstances of dumping concerning
tow are similar to those observed for fibre.
                                                     
1 G/ADP/IG/W/38G/ADP/IG/W/42
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3. When the investigation authority examin ed the injury issue during the original
investigation on fibre, would they investigate whether there was injury to producers of tow in
addition to those of fibre?
Reply
Given that the scope of the original AD investigation covered only imports of fibre, the injury
investigation would have been limited to imports of fibre.
4. Would the EC investigating authority contem plate handling this case by initiating a
fresh AD investigation on tow, as suggested by New Zealand in G/ADP/IG/W/35?
Reply
At the outset, it should be noted that under EC legislation new anti-dumping investigations
must be completed within 15 months as of initiation, whilst anti-circumvention investigations are
carried out generally within 9 months as of initiation.
Furthermore, the EC would have reasons to suspect that there is circumvention and to initiate
an anti-circumvention investigation, if the change of  pattern of trade clearly shows that importing tow
started simultaneously with or after the initiation of the anti-dumping investigation on fibre and no
other economic justification, apart from the imposition of the duty, exists for the increase of theimports of tow and the decrease of the imports of fibre and if there is evidence that the circumstances
of dumping are similar to those observed for fibre and if the remedial effects of the original measures
are undermined in terms of the prices and/or quantities of the imports of tow.
Example 2:  Motorcycles and motorcycle parts
5. Before determining the scenario as circumvention of AD duty on motorcycles, would the
investigating authority examine whether there were any legitimate commercial reasons which
resulted in the shift of assembly location of motorcycles from Country B2 to Country A?3
and
7. When the investigating authority examin ed the injury issue during the original
investigation on motorcycles, would they exam ine whether there had been injury to the
producers of parts for motorcycles as well?  Would  it be possible that the "domestic industry"
of motorcycle parts might be different from that of motorcycles? For instance, the industry
producing parts might also produce parts for other vehicles or industrial users, rather thanproducing complete motorcycles.
Reply
Certainly yes.  In this scenario, investigators would try to ascertain whether the change of
pattern of trade coincided with the initiation of the anti-dumping investigation on motorcycles or with
the imposition of anti-dumping duties.  Furthermore, it would be examined whether there is any other
economic reason, apart from the imposition of the duty, which justifies for the increase in imports of
motorcycle parts and the decrease in imports of motorcycles.  If the change in the pattern of trade did
coincide with the imposition of the duty, and there was no economic justification other than the
                                                     
2 Country B means the exporting country.
3 Country A means the importing country.G/ADP/IG/W/42
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imposition of the duty, then investigators would focus their attention on the nature of the assembly
operation in country A.
Given that the scope of the original AD investigation covered only imports of motorcycles,
the injury investigation would have been limited to imports of motorcycles as well.  It is indeedpossible that the domestic industry of motorcycle parts is different at least to a certain extent from that
of motorcycles.
6. New Zealand suggests in G/ADP/IG/W/35 that this example would depend on the
classification of the parts shipments. We are interested to know whethe r the EC investigating
authority would consider solving this case of alleged circumvention by applying General Rule
2(a) of the Harmonized System
4.
Reply
On the basis of the EC's Court of Justice jurisprudence5, General Rule 2(a) of the Harmonized
System would not necessarily be applicable to such cases.
8. In this case, the shipments of motorcycle parts are spread over various containers and
shipments and they are routed to several cu stoms entry points.  We wonder whether the
problem of split consignment is unique to AD.  To what extent could the problem be addressed
at the level of customs classification and customs investigation under customs-to-customscooperation?
Reply
We have no experience in this field although we see at least for a market like the EC, given
the numerous possibilities of splitting consignments, great practical problems in a solution of the
problem along the lines envisaged by Hong Kong.
Example 3:  Mobile phones from a third country assembled from parts from Country B
9. To what extent could this scenario be reso lved through the application of rules of origin
on the mobile phones concerned?  If assembly operations in Country C6 are too minor to be
origin-conferring, the phones imported from Country C should still fall within the scope of the
AD order on phones from Country B after the minor assembling work.
Reply
If the application of the rules of origin leads to the conclusion that mobile phones are
originating in Country B, the phones imported from Country C would still fall within the scope of the
anti-dumping measures on phones originating in Country B.
If the application of the rules of origin leads to a different conclusion, investigators would
look carefully at the value of the parts and the ‘value added’ of the assembly operation.  If at least 60
                                                     
4 General Rule 2(a) of the Harmonized System provides that “ any reference in a heading to an article
shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, theincomplete or unfinished article has the essential characte r of the complete or finished article.  It shall also be
taken to include a reference to that article complete or finished (or falling to be classified as complete orfinished by virtue of this Rule), presented unassembled or disassembled. ”
5 Case C-99/1994, Robert Birkenbeul GmbH & co KG vs. Hauptzollamt  Koblenz (1996) ECR-1791.
6 Country C is a third country, other than Country A and Country B.G/ADP/IG/W/42
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per cent of the total value of the parts originate in country B, and the value added in country C is less
than 25 per cent of the manufacturing cost, then circumvention could be suspected.
In addition, it should be noted that origin investigations are very difficult to carry out,
particularly if non-preferential origin was used.  Indeed, the EC authorities do not have jurisdiction inthe exporting country and encounter a lot of difficulties to obtain co-operation.  However, an anti-
circumvention investigation permits to the investig ating authorities to established findings on the
basis of the information available if no cooperation is obtained from the exporters.
Example 4:   Steel pipes from Country C
10. Would the investigating authority consider th e reaction of the importers in Country A to
start importing from Country C as genuine and legi timate market operations in response to the
rise in costs resulting from the imposition of AD duties on steel pipes from Country B?
11. This example may be divided into two possibilities.  The first possibility would be where
origin-conferring manufacturing operations did take place in Country C.  In this case, wouldthe investigating authority consider whether busin essmen might be simply making the most of
different countries’ comparative advantage by locating their market operations at the most
cost-effective place?
12. This may also be an example of "goods in transit", as suggested by New Zealand.  In this
case, the goods would retain their country B or igin.  In this situation, could the alleged
circumvention be dealt with by an origin investigation under relevant customs rules?
Reply
Obviously, if it is shown that the imports from country C are indeed produced by the
manufacturer located in that country, no circumvention would be suspected (unless the production is
based on intermediary products equally subject to the same anti-dumping measure).
Example 5:   Laptop computers from Country C by assembling parts from Country B
13. To what extent could the situation in this example be dealt with by applying rules of
origin?
Reply
Please refer to our reply to question 9.
14. Would the investigating authority consid er the replacement of imports by laptop
computers from Country C a legitimate response  to the rise in costs resulting from the
imposition of the AD duty against Country B?
Reply
If imports originating in Country B are replaced by imports originating in Country C and if
operations in Country C add a substantial value to the parts assembled, i.e. more than 25 per cent of
the manufacturing cost, and if the value of the parts used from country B is not important, i.e. lessthan 60 per cent, this would indicate that the assembly operation is not a mere transplant aimed at
circumventing the anti-dumping measures imposed on imports originating in Country B but a genuine
investment based on a variety of economic reasons.G/ADP/IG/W/42
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The EC has difficulties to understand the relevance of the criterion 'rise in costs resulting from
the imposition of the AD duty against Country B'.  After all, the AD duty is only meant to eliminate
the margin of dumping or the margin of injury, wh ichever is lower.  The existence of such AD duty,
which was imposed in conformity with WTO AD rules, cannot serve as a justification of
circumvention practices.
15. Were there imports of laptop computers from Country C at the time of the original
investigation on imports of Country B?  Why hadn't laptops from Country C been included in
the original AD order?
Reply
Given that at the time of initiation of the original anti-dumping investigation, there was no
evidence of injurious dumping being caused to the Community industry by imports of laptop
computers originating in Country C, the investigation was initiated only against imports of laptop
computers originating in Country B.
16. During the circumvention investigation, wo uld the investigating authority find out if
laptop computers from Country C had been imported at dumped prices?
Reply
During the circumvention investigation, investigators would also want to confirm that the
circumstances of dumping concerning imports of  laptop computers originating in Country C are
similar to those observed for imports of laptop computers originating in Country B.
Example 6:  Chemical and newly classified chemical
17. We note that the modified product is under a different customs classification from that
of the product subject to the AD order.  Would  the investigating authority consider whether
they are in fact different products and targeting at different markets?
Reply
In such a case, it would be important to look at the chemical with additive, to see whether or
how it altered the chemical, and its end use.  The fact that, in this example, the newly-classified
chemical with additive is sold to the same categories of customers for the same purposes and that this
practice only started after the imposition of AD dut y, would lead to suspicions of circumvention.
18. Did the chemical with additive exist at the time  of original investigation?  If it did exist,
why hadn't it been included in the AD investigation on the original chemical?  Was the
exclusion of the chemical with additive in the investigation simply an omission or a considered
decision by the petitioning indust ry or the investigating authority?
Reply
The chemical with additives did not exist at the time of initiation of the original investigation.
Had it existed, the EC investigating authority would have assessed if the chemical with additives
could be considered to be a like product to the original chemical in order to determine whether it hadto be included in the scope of the investigation.
19. When the investigating authority examin ed the injury issue during the original
investigation on the original chemical, would they consider whether there was injury to theG/ADP/IG/W/42
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producers of the altered chemical?  Would it be  possible that the "domestic industry" of the
altered chemical was different from  that of the original chemical?
Reply
Had the chemical with additives existed at the time of initiation of the original investigation
and had it been considered a like product to the original chemical, the EC investigating authority
would have assessed if imports of both chemicals or iginating in the country or countries concerned by
the investigation were causing injury to the Co mmunity industry.  These issues are routinely
examined prior to any initiation of an AD investigation.
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