WORLD TRADE
ORGANIZATIONTN/RL/W/65
24 February 2003
(03-1127)
Negotiating Group on Rules Original:  English
KOREA’S COMMENTS ON CANADA’S SUBMISSION ON THE
ANTI-DUMPING AGREEMENT (TN/RL/W/47)
The following communication, dated 21 February 2003, has been received from the
Permanent Mission of Korea.
_______________
1. Korea welcomes Canada’s submission1 on the AD Agreement.  A large number of the issues
raised in the Canadian submission are in line with the 32 issues2 raised by the Friends of AD
Negotiations as well as the three broad objectives underlying the 32 issues.  The three broad
objectives were, as explained through a submission3 to the rules group, to clarify and improve AD
rules (1) to prevent abusive and excessive AD measures;  (2) to avoid excessive burden on
respondents;  and (3) to enhance the transparency, the predictability and fairness of the system.  A
large number of the issues raised in the Canadian submission, when implemented, would make a
welcome contribution to meeting such objectives.
2. Korea wishes to comment on some of the issues raised in Canada’s submission.  Korea’s
comments would be made on 5 broad baskets of issues, namely;  (1) initiation of investigation;(2) calculation of dumping margin;  (3) imposition of duties;  (4) review related issues;  and
(5) horizontal, systemic issues.
Initiation of Investigation
3. Korea has supported the view that the requirements for the initiation of an anti-dumping
investigation should be strengthened in various areas in view of the serious chilling effect that even
the initiation of investigation can have on the related trade.  In this connection, Korea supports many
of Canada’s suggestions, including the following:
- The proportion of domestic industry should be further clarified.  Without such a clarification,
an investigation could be initiated with the support of domestic producers representing a
relatively small proportion of the domestic production of like products, in certain cases as
small as 25 per cent of the total domestic production;
- As a related matter, the investigating authorities should be explicitly required to conduct an
‘objective’ assessment of the degree of industry support for the application;  and
                                                     
1 TN/RL/W/47
2 Contained in TN/RL/W/6,10,29 and 46
3 TN/RL/W/28TN/RL/W/65
Page 2
- Consideration should be made at an early stage with regard to the possibility of subjecting
initiation of investigations to swift di spute settlement procedures under the DSU.
4. Korea recalls that the idea of swift dispute settlement procedures for the initiation of
investigations received high degree of positive interests, when the proposal was first made by the EC
in the July session of the rules negotiation.4  Korea also recalls that many questions were raised to the
EC with respect to how to make the idea operational.  Korea looks forward to such initial interests and
queries leading to concrete discussions at an early stage of rules negotiations.
Calculation of dumping margin
5. Korea agrees with Canada that further guidance should be provided with respect to what and
what does not constitute “the ordinary course of trade” in the calculation of normal values.
Otherwise, the different definitions of “the ordinary course of trade”, developed by each WTOMember, would continue to be a source of confusion and conflict.
6. Canada’s submission contains a useful interpretation of Article 2.2.1 of the Anti-Dumping
Agreement .  According the submission,
“The test for profitability in Article 2.2.1 envisages that the transactions under
consideration for the determination of normal value should recover their full costswithin an extended period of time, normally a period of one year, which typically
coincides with the period of the dumping investigation.  However, the test also
recognizes that sales made at a loss at the time of sale should not be excluded if they
do not occur in substantial quantities or if they ultimately recover their costs over areasonable period of time.”  (emphasis in the original)
7. The interpretation of Article 2.2.1 has critical importance for the clarification of relevant
rules, for which the above-cited submission of Canada provides a good basis for discussion.  In this
connection, Korea wishes to raise the following questions with Canada:
- Article 2.2.1 provides two time frames:  (1) an ‘extended period of time’, normally to be one
year in accordance with footnote 4, within which period the authorities shall determine if thesales below cost was made in substantial quantities;  and (2) a ‘reasonable period of time’,
undefined in the present text, within which sales shall be made at prices to recover all costs.
In Canada’s practice, how is “a reasonable period of time” defined?
- In Canada’s view, could a WTO Member ignore the sales below cost made during a period of
investigation for the simple reason that sales made at a loss during the period was in
substantial quantities, namely 20 per cent, without considering if all costs were recovered
within a reasonable period of time?
8. Korea agrees with Canada that, depending upon products, the sales price could fluctuate
widely during a POI and thus fall below the cost of  production temporarily, even though they were the
sales in the “ordinary course of trade” as properly defined.  Article 2.2.1 should be clarified so thatsuch sales would be correctly reflected in the calculation of normal values.
Imposition of duties
9. With regard to the lesser duty rule, Canada suggests that the negotiating group should
consider ways to provide appropriate methodologies for the calculation of a duty before considering
                                                     
4 TN/RL/W/13TN/RL/W/65
Page 3
the wider application of lesser duty.  The lesser duty rule is an obligation arising from Article 9.1 of
the ADA.  It is not a question of if lesser duty rule should be applied, but how it should be done.
Thus, the discussions of the negotiating group should focus on the methodology of implementing the
lesser duty rule.
Reviews
10. With regard to the sunset review, Korea agrees with Canada that anti-dumping and
countervail measures are intended to provide temporary  relief and that the sunset review provision
was intended to ensure such a temporary  nature of the remedies.  However, as Canada points out, the
sunset provision was not effective in keeping certain  jurisdictions from keeping the measures in place
for “much longer periods of time”.  As the ITCB submission to the present session of the rules
negotiating group indicates, it is not rare for the measures to be kept in place for almost 20 years,when there was not any import of the item during the whole period.
11. In Korea’s view, such an outcome is largely due to the lacuna in Article 11.3.  It has allowed
each Member to develop arbitrary rules applicable to sunset reviews.  Such a lacuna should be
removed under the DDA mandate as a priority matter. An indicative list of factors that authorities
should consider in making determinations under Article 11.3, as suggested by Canada, would be oneof the possible improvements to provide Article 11.3 with further necessary guidance.
12. With regard to reviews in general, Canada seem s to suggest a two- pronged approach.  In the
first prong, the Agreements should be clarified to stipulate which provisions that were originally
intended to apply to initial investigations also apply to the various review provisions under the
Agreements.  Along the second prong, where certain provisions of the Agreements cannot bereasonably applied to reviews, consideration should be given to providing rules that apply specifically
to reviews.
13. Korea has been of the view that the lacunae in review related provisions and the arbitrary
rules of Members to fill the lacunae made it difficul t for the WTO to establish disciplines with respect
to various reviews.  The two-pronged approach, as suggested by Canada, will be helpful in removing
such lacunae.  As for the first prong clarificatio ns in Canada’s two-pronged approach, Korea believes
that the de minimis  rule, as stipulated in Article 5.8, and the guidance for comparing the normal value
with the export price, as stipulated in Article 2.4.2,  should apply to various review provisions under
the Agreements.
Horizontal, systemic issues
14. The Anti-Dumping Committee has completed several recommendations concerning mutually
agreeable practices for the application of the ADA.  There has been a question about the legal status
of such recommendations in the sense that they ar e not a part of the Agreement, nor “interpretation”
of the Agreement adopted in accordance with Article IX:2 of the WTO Agreement.  Canada’s
suggestion on the codification of these recommendations is worth a serious consideration.
15. Canada also suggests that interpretation of numerous aspects of the ADA and the ASCM,
provided by the DSB, be incorporated into the appr opriate Agreements.  This suggestion is also worth
a serious consideration.  As a preliminary step, the negotiating group could first agree upon the
threshold that should be applied in selecting the interpretations to be incorporated into appropriate
Agreements.
16. The threshold could be along the following line: if the interpretations were made in the
direction of clarification and improvement, the inco rporation would be helpful; if the interpretationsTN/RL/W/65
Page 4
were merely to the effect that a discipline is not clear from the text of the provision, then the provision
would have to be clarified and improved through negotiation, rather than adjudication.
__________