RESTRICTED
WORLD TRADE G/ADP/Q1/JPN/7
G/SCM/Q1/JPN/7
ORGANIZATION 12August 1996
(96-3181)
Original: English Committee onAnti-Dumping Practices
Committee onSubsidies andCountervailing Measures
NOTIFICATION OFLAWS AND REGULATIONS UNDER
ARTICLES 18.5AND 32.6OFTHE AGREEMENTS
Replies ofJAPAN1
toquestions posed bytheUNITED STATES2
Thefollowingcommunication,dated29July1996,hasbeenreceivedfromthePermanentMission
ofJapan.
_______________
NecessarynotificationsoflawsandregulationsandtheGuidelineareinthecourseofpreparation,
andwillbesubmitted bythenextmeeting oflegislation review.
CEPSales
1. Article 3specifies thatinthecaseofassociated andimporters theprice tothefirstunrelated
parties willbethebasis fordetermining selling price. Could youplease explain whatismeant
bythebasis? What, ifany,adjustments willbemade tothisprice?
Article 3oftheCabinet Order stipulates that"theselling price forexport shallbecalculated
onthebasisofthepricefordomestic saleatwhich theimported products arefirstresold toanyperson
whoisnotassociated withanyoftheexporters orimporters ofsuchproducts". Thispricefordomestic
sale(this"domestic sale"means thesaleinJapan) constitutes abasis, fromwhich various costsarising
normally between theex-factory levelintheexporting country andtheresale intheimporting country
suchasduty, tax,transportation fee,insurance fee,storage charge arededucted inorder toconstruct
theexport price.
Intermediate Country Sales
2. Inthecasewhere theexports toJapan areunder theconditions specified inArticle 2.5ofthe
A-DAgreement (through anintermediate country etc.)whatbasis willbeusedfordetermining
normal value?
Japan'slawsandregulations donothaveprovisions concerning theintermediate country sale.
Therefore, theprovisions ofArticle 2.5oftheADAgreement aredirectly applied.
1G/ADP/N/1/JPN/2+Corr.1-G/SCM/N/1/JPN/2+Corr.1.
2G/ADP/W/199+Suppl.1-G/SCM/W/211+Suppl.1, G/ADP/W/251-G/SCM/W/261.G/ADP/Q1/JPN/7
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Adjustments
3. Cantransaction stages beinterpreted tomean levels oftrade?
"Transaction stage" ismeant asthe"level oftrade" intheADAgreement.
Exchange Rates
4. Forpurposes ofdumping, willexchange rateconversions bemade consistent withArticles 4-7
oftheJapanese Customs law(Page 7)?
Japan'slawsandregulations donothaveprovisions concerning theconversion ofcurrencies
inthecalculation ofdumping margin.
Article 4.7oftheLawisapplied justfortheimposition ofanti-dumping duty, notforthe
calculation ofdumping margin.
Therefore, theprovisions ofArticle 2.4.1 oftheADAgreement aredirectly applied.
Price Averaging
5. Onwhat basis willnormal value becompared toexport price orconstructed export price
(transaction totransaction oraverage toaverage)?
Japan'slawsandregulations donothaveprovisions concerning thisbasis forcomparison.
Therefore, theprovisions ofArticle 2.4.2 oftheADAgreement aredirectly applied.
COST/COP
6. There doesnotappear tobeanyindication intheJapanese lawthatsalesmade below thecost
ofproduction willbedisregarded forpurposes ofdetermining normal value, willsuchsales
bedisregarded? Ifso,under whatconditions?
CV/General
Article 2oftheA-DCabinet Order (Page 41)provides thatnormal value maybebased on
costofproduction, plusSG&A, plusprofit, ifitcannot bebased onhome market salesbecause
there arenone intheordinary course oftrade orforother reasons. There arenoother
provisions governing COP/CV issues.
7. HowwillJapan calculate thecostofproduction? Under whatcircumstances might Japan not
utilize costrecords maintained byaproducer/exporter inthenormal course ofbusiness? Will
Japan make anyadjustments tothecostofproduction toaccount fornon-recurring and/or
start-up costs?
8. HowwillJapan calculate SG&A andprofit? WillJapan relyonlyoninformation provided
bytheproducer/exporter astoitsactual SG&A andprofit?
Japan'slawsandregulations donothaveprovisions concerning theadjustment tobemade
incalculation ofthenormal value.
Therefore, theprovisions ofArticles 2.2.1 and2.2.2 aredirectly applied.G/ADP/Q1/JPN/7
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COUNTERVAILING DUTIES
IDENTIFICATION, VALUATION
Conferral ofBenefit andAmount ofSubsidy
9. What method willbeusedfordetermining thesubsidy amount?
Withregard tothecriteria forCVD amount, theprovisions ofArticle 14oftheSCM Agreement
aredirectly applied.
INVESTIGATION PROCEDURES
BASIC PROCEDURES
Initiation/Industry Support
10. Article 4oftheA-DCabinet Order (page 42)defines "industry inJapan" as"theproducers
inJapan whose collective output ofthelikeproducts constitutes morethanasubstantial portion
ofthetotaldomestic production ofthelikeproducts". Article 4.1oftheA-DAgreement provides
fora"major proportion". Wastheuseofadifferent termintended toimply analternative
standard, particularly inlightoftheuseof"major proportion" inArticle 4oftheCVDCabinet
Order? (Translation problem?)
Thisdifference wascaused byatranslation error ("major proportion" isthecorrect translation
inplace of"substantial proportion" inArticle 4oftheCabinet Order relating toAnti-Dumping Duty).
Thecorrection willbesubmitted later.
11. Whyisthere noprovision requiring 50percentsupport fromdomestic production ofthose
expressing anopinion when there isopposition toapetition asrequired byArticle 5.4ofthe
A-DAgreement andArticle 11.4oftheSCM Agreement?
Theprovisions ofArticle 5.4oftheAgreement aredirectly applied andthemanner tofind
thedegree ofsupport isprovided forinArticle 5(2)oftheGuidelines.
DeMinimis Margins andNegligible Imports
12. Isthereaprovisionforterminationoftheinvestigationwherepreliminarymarginsaredeminimis
orimport volumes arenegligible inaccordance withArticle 5.8oftheA-DAgreement or
Article 11.9oftheSCM Agreement?
Japan'slawsandregulations donothaveprovisions concerning "deminimis "margin/amount
andnegligible volume ofimport.
Therefore, theprovisions ofArticle 5.8oftheADAgreement andArticle 11.9oftheSCM
Agreement aredirectly applied.
Aninvestigation isimmediately terminated inthecases where theinvestigation authorities find
thatthemargin ofdumping/subsidy amount islessthanthedeminimis level orthatthevolume of
dumped/subsidized imports isnegligible.G/ADP/Q1/JPN/7
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UNDERTAKINGS
13. Article 8.2oftheA-DAgreement states thatpriceundertakings shallnotbe"sought oraccepted"
fromexporters untilthere isapreliminary affirmative determination ofdumping andinjury
caused bydumping. However, Article 8.7oftheCustoms Law(page 16)allows anexporter
toofferanA-DpriceundertakingtotheGovernment"[w]henaninvestigationunderparagraph5
hasbeeninitiated". Similarly, Article 7.8oftheCustoms Law(page 10)allows anexporter
ortheauthorities oftheexporting country toofferaCVDundertaking "where aninvestigation
hasbeeninitiated under paragraph 6".Please explain thisapparent inconsistency.
According toArticles 7.10and8.8oftheLaw, theGovernment shall notaccept suchan
undertaking untilitcanbepresumed thatthere isthefactoftheimportation ofsubsidized/dumped
products andthefactofthematerial injury, etc.Thispresumption corresponds tothepreliminary
affirmative determination ofArticles 8.2/18.2 oftheAD/SCM Agreements.
Therefore, itisconsistent withArticles 8.2/18.2 oftheAD/SCM Agreements.
14. Article 8.8oftheCustoms Law(page 16)states thatA-Dundertakings maybeenacted "so
longasthetermofvalidity ofwhich islessthanfiveyears". However, Article 7.9ofthe
Customs Law(page 11)states thatthe"valid period should belimited within fiveyears" for
CVDundertakings. Does thisdifference inlanguage mean thatthegovernment hasdiscretion
toaccept aCVD undertaking foraperiod greater thanfiveyears?
Thisdifferencewascausedbyatranslationerror.TheexpressionofArticle7.9mustbereplaced
bythatofArticle 8.8.
ALLOTHERS, NEW SHIPPERS
AllOthers Rate
15. Howwilltherateforthose producers whohavenotbeenindividually investigated becalculated
inA-Dcases?
Inthecaseofsampling, theprovisions ofArticles 6.10and9.4oftheAgreement aredirectly
applied.
NewShippers
16. Theevidence required forinitiation ofanewshippers review includes evidence ontheamount
ofdumping (A-D Cabinet order Art.7.2(4) page 44))whatbasis intheAgreement existfor
requiring thisevidence prior toinitiation ofanewshipper review?
Thereview fornewshippers would beconducted onanaccelerated basis inaccordance with
Article 9.5oftheAgreement.
Thepurpose ofrequiring theevidence ontheamount ofdumping priortoinitiation ofthereview
assetoutinArticle 7.2(4) oftheCabinet Order, istofacilitate andaccelerate theinvestigation.G/ADP/Q1/JPN/7
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JUDICIAL REVIEW
TheJapanese A-D/CVD legislation submitted totheWTO contains noexplicit provision for
judicial review offinaladministrative A-DorCVDactions. Article 13oftheA-DAgreement
andArticle 23oftheSCM Agreement require thateachmember provide forjudicial review
ofsuchactions.
17. Canyouclarify whether independent judicial review isavailable inJapan forA-DandCVD
determinations, asrequired bytheA-DandSCM Agreements?
The litigation will befiled tocourts. Administrative measures including anti-
dumping/countervailing measures arecovered bytheJapanese judicial review systems.
Implementation ofadverse panel reports
18. IfJapan chooses toimplement anadverse WTO panel report, arethere anyprovisions under
Japanese lawspecifically forimplementing thepanel reports?
Japan'slawsandregulations donothaveanyspecific provisions concerning implementation
ofadverse panel reports. Amendment tothelegislation and/or regulation maybemade onacase-by-case
basis, ifnecessary, responding totheWTO panel reports.
Supplementary Questions
1. HowwilltheMinistry ofFinance define "material injury" toadomestic industry andthreat
thereof, andmaterial retardation intheestablishment ofadomestic industry inArticles 7.1
and8.1oftheCustom Law, (page 9and14)andwhatfactors willittakeintoconsideration
inreaching suchdefinitions toensure consistency withArticle 3oftheA-DAgreement and
Article 15oftheSCM Agreement?
Japan'slawsandregulations provide forneither thedefinition ofmaterial injury, threat thereof
andmaterial retardation intheestablishment ofdomestic industry (material injury, etc.)norfactors
tobeconsidered when assessing thematerial injury etc.
Therefore, Japan defines material injury, etc.asprovided forinArticle 3oftheADAgreement
andArticle 15oftheSCM Agreement.
2. There isnoapparent requirement inArticle 8oftheCustoms LaworintheA-DCabinet Order
forconsideration ofthemagnitude ofthedumping margin inassessing material injury. How
isthisconsistent withArticle 3.4oftheA-DAgreement?
Themagnitude ofthedumping margin istaken intoaccount intheexamination oftheimpact
ofthedumped imports, asprescribed inArticle 3.4oftheADAgreement.
3. There isnoapparent requirement intheArticle 7oftheCustoms LaworintheCVDCabinet
Orderthat,whenmakingthreatdeterminationsincountervailingdutyinvestigations,theMinistry
ofFinance mustconsider thenature ofthesubsidies inquestion. Howisthisconsistent with
Article 15.7oftheSCM Agreement?
Theprovisions ofArticle 15.7oftheSCM Agreement aredirectly applied.G/ADP/Q1/JPN/7
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4. What arethecriteria forthreat determinations articulated inArticles 7and8oftheCustoms
LawandintheA-DandCVDCabinet Orders, andhowdotheycomport withtherequirements
ofArticle 3.7oftheA-DAgreement andArticle 15.7oftheSCM Agreement thattheinjury
mustbe"based onfactsandnotmerely onallegation, conjecture orremote possibility" and
mustbe"clearly foreseen andimminent"?
Japan'slawsandregulations donothaveprovisions concerning thecriteria foradetermination
ofathreat ofinjury.
Considered aretheelements provided forinArticles 3.7/15.7 oftheAD/SCM Agreements
suchasclearly foreseen andimminent changes incircumstances.
5. Article 4.4oftheCVD Cabinet Order (Page 50)andArticle 7.4oftheA-DCabinet Order
(Page 45)appear todiffer substantively fromeachother. Article 4.4oftheCVDCabinet Order
requires thatpersons requesting anextension oftheperiod forimposition ofcountervailing
duties submit, among other information, evidence that"substantial injury" would belikely to
continue. Article 7.4oftheA-DCabinet Order requires forthecontinuation ofantidumping
duties thesubmission, among other things, ofthefactof"material injury" would belikely to
continue. Isadifferent standard being imposed, andifso,howisthisconsistent withtheSCM
Agreement which consistently applies astandard of"material injury" (seeSCM Agreement
Article 15)?
Thisdifference wascaused byatranslation error("material injury" isthecorrection translation).
Thecorrection willbesubmitted later.
Oral Questions
1. Could youplease explain whatadjustments willbemade inconstructing theexport price?
Inthecases where thereisnoexport priceorwhere itappears thattheexport priceisunreliable
because ofassociation oracompensatory arrangement between theexporter andtheimporter orthe
thirdparty, theexport pricemaybeconstructed onthebasisofthepriceatwhich theimported products
arefirstresold toanindependent buyer whoisneither associated norhascompensatory arrangements
withanyoftheexporters orimporters ofsuchproducts.
When theimported products haveundergone further processing orassembly, ortheproducts
arenotresold toanindependent buyer, theexport price maybeconstructed onsuchreasonable basis
astheauthorities maydetermine, inaccordance withtheprovision ofArticle 2.3oftheAgreement
onImplementation ofArticle VIoftheGATT 1994 ("the Agreement").
Adjustments forconstructing theexport pricewillbeallowed where necessary toensure afair
comparison withnormal value. Suchadjustments mayinclude adjustments fordirect selling expenses,
indirect selling expenses, differences insalesconditions, differences intaxation andprofits, onacase-by-
casebasis.
2. Willactual profits everbedisregarded iftheyarefound tobe"unreasonable?" Ifsocould
youplease explain thecircumstances?
TheAgreement doesnotappear tocontemplate thatactual profit would bedisregarded even
ifitisconsidered "unreasonable".G/ADP/Q1/JPN/7
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When thenormal value hastobeconstructed inaccordance withArticle 2.2oftheAgreement,
theamounts forprofit shall, aswellasthose foradministrative, selling andgeneral costs, bebased
onactual datapertaining toproduction andsales inordinary course oftrade ofthelikeproduct by
theexporter orproducer under investigation, asprovided forinArticle 2.2.2 oftheAgreement.
3. Inpractice howwillthegovernment ofJapan implement therequirements ofA-DArticle 6.5?
Article 11oftheCabinet Order forAnti-Dumping Duty (the"COAD") provides for:
With regard totheevidence anddocument which arebynature warranted tobetreated as
confidential, thedocument andtheevidence presented byinterested parties tobetreated as
confidential information aswellasdocuments which record evidences orally presented as
confidential byinterested parties, theobligation todisclose suchinformation tointerested parties
isexempted.
4. Does theGovernment ofJapan consider "ex-factory" tobealeveloftrade?
Comparison between theexport price andthenormal value shallbemade atthesame level
oftrade, normally attheex-factory level, andinrespect ofsalesmade atasnearly aspossible thesame
time, inaccordance withtheprovisions ofArticle 2.4oftheAgreement.
TheGOJconsiders:
Insomecircumstancestheidentificationof"ex-factory"levelinanexporterorproducer'ssystem
ofproduction andsalesmay, byitself, satisfy therequirement ofmaking comparison atthesame level
oftrade. Inother circumstances, anumber ofother factors mayalsoberelevant indetermining the
leveloftrade, inparticular thenature oftheseller andofthepurchaser, andthecosts involved inthe
terms onwhich thegoods were offered. Forexample, salestoanoriginal equipment manufacturer
("OEM") andsalestoaretailer would notnormally beconsidered tobeatthesameleveloftradebecause
ofthefundamental differences inthenature oftheiroperations anddifferences ofthecostelements
involved.
Forinstance, ifthehome-market price would betheprice toaretailer andtheexport price
ofidentical merchandise would bethattoanOEM, theprice could beadjusted toanex-factory basis.
Nonetheless,comparisonofthesetwosalesmaynotbeappropriateforthepurposeofdetermining
theexistence ofdumping, since thesalesmaynotbeconsidered tobemade atthesame leveloftrade.
Inthiscase, comparison should bemade onequivalent terms (e.g.ex-factory) andatacomparable
leveloftrade.
5. Could youplease explain howyouwilldetermine leveloftrade?
Comparison between theexport price andthenormal value shallbemade atthesame level
oftrade, normally attheex-factory level, andinrespect ofsalesmade atasnearly aspossible thesame
timeinaccordance withtheprovisions ofArticle 2.4oftheAgreement.
Ingeneral, export price andnormal value willbecalculated based onsalesatthesame level
oftrade. Thepresumption hereto isthatprices willbedifferent depending ontheleveloftrade.
Theleveloftrade willbedetermined onthebasis ofsuchfactors asthenature oftheseller
andofthepurchaser, andthecostsinvolved intheterms onwhich thegoods wereoffered. ConsiderationG/ADP/Q1/JPN/7
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ofthese factors mayleadtotheconclusion thatthere aredifferent levels oftrade thataffect theprice
comparability ofparticular sales.
6. Intheiroralresponse thedelegate ofJapan appeared tostatethattheA-Ddutywascollected
onac.i.f. basis. Isthiscorrect?
InJapan, thecustoms value ofimports is,inaccordance withtheCustoms Valuation Agreement ,
determined onthec.i.f. basis.
Thus, therateofdumping margin iscalculated bydividing thedumping margin (normally
calculated bycomparing export price andnormal value attheex-factory level inaccordance with
Article 2.4oftheAgreement) withc.i.f. price.
7. IftheA-Dcomparison ismade between prices which areadjusted fordifferences ininsurance
andfreight, willthecollection ofdutyonac.i.f. basis notresult intoomuch dutybeing
collected?
InJapan, thecustoms value ofimports is,inaccordance withtheCustoms Valuation Agreement,
determined onthec.i.f. basis.
Thus, therateofdumping margin iscalculated bydividing thedumping margin (normally
calculated bycomparing export price andnormal value attheex-factory level inaccordance with
Article 2.4oftheAgreement) withc.i.f. price.
Therefore, anti-dumping dutycollected onthec.i.f.basisdoestoexceed thevalue corresponding
tothedumping margin calculated inaccordance withArticle 2oftheAgreement.