RESTRICTEDWORLD TRADE
ORGANIZATIONG/ADP/IG/W/19
27 May 1999
(99-2136)
Committee on Anti-Dumping Practices
Informal Group on Anti-CircumventionOriginal:  English
TOPIC 1 – WHAT CONSTITUTES CIRCUMVENTION?
Replies to Questions Posed by the UNITED STATES1 to
JAPAN
The following communication, dated 27 April 1999, has been received from the Permanent
Mission of Japan.
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Nickel Example
Q1. If a full examination of the facts demonstrated that the new alloy was a perfect
substitute for 99 per cent pure nickel, would this strengthen the argument that the new alloywas being used to circumvent the order?
Reply
The fact that two products, one subject to anti-dumping duties and the other not subject to
anti-dumping duties, are substitutable, has little to do with whether the substituted product is being
injuriously dumped or not.  Taking steel as an example, there is a continuum of dimensions,
chemistries, and processes which make up the whole of flat rolled steel.  They are classified on the
basis of thickness, chemical content (carbon steels, alloy steels, stainless steels, etc.), and processing
(hot rolled, cold rolled, coated, etc.).  Within this continuum, some products belonging to one
category may be substitutable for products within a different category, at least for some purposes.
However, if circumvention means that injurious dumping continues in the form of imports of asubstitutable product outside anti-dumping duties, there must be a direct and perfect linkage between
the new product and the existence of dumping and injury.  Even if the new alloy is a perfect substitute
for 99 per cent nickel, which is almost impossible to confirm, this assumption does not prove that
dumping (i.e. export at less than normal value) or subsequent injury exist with respect to the new
alloy.
Q2. Would it strengthen the case for finding ci rcumvention if the new alloy was being sold to
the same customers as before the order under th e same contracts for the same price, and the
customers had agreed to the substitution on the ba sis that the change in the composition of the
metal was insignificant?
                                                     
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Reply
The real question here is how close we can get to a determination of dumping and injury
without a full investigation as required by the Anti-dumping Agreement.  Here, the US has expanded
the hypothesis to include an apparent investigation of export price of the new alloy.  However, some
assumptions still have to be made in order to dete rmine that dumping and injury are occurring.  For
example, is the new alloy sold in the exporting country and, if so, at what price?  Are there producers
in the importing country which make the new alloy but do not make the product subject to anti-
dumping duties?  Are there other uses for the new alloy and different conditions of competition
affecting pricing?  These and a host of other issues pose the questions of whether the new alloy is
being dumped and injuring a domestic industry producing the new alloy.  The US hypothesis does not
address these issues.  Therefore, it demonstrates that full dumping and injury investigation on the new
alloy is necessary to conclude that the requisite findings of dumping and injury are present.
Q3. Would it strengthen the argument for finding  circumvention if, instead of adding 0.5 per
cent silver to the nickel, the producer added 0.5 p er cent steel, which reduced the value of the
new alloy and rendered it useless for any purpose other than manufacturing stainless steel?
Reply
If the new alloy with 0.5 per cent nickel is not subject to anti-dumping duties, the
presumption is that it is a different product from the product subject to the duties and is lacking the
requisite findings of dumping and injury.  The existence of circumvention should have a direct andperfect linkage with the existence of dumping and injury.  If the new alloy is exported below normal
value and causing injury to the domestic industry producing the same product, it could be subject to
anti-dumping duties.  However, the conditions can only be confirmed by dumping and injury
determination on the new alloy.  The mere fact that a product with a minor alteration is an alternative
to a product already subject to anti-dumping duties, is not enough to prove that the altered product isexported below normal value or is adversely affecting the domestic industry producing the altered
product.
Q4. Japan's paper states that "it is always po ssible to define the product coverage precisely
to include products with minor alternations in the original investigation".  Does this mean thatevery possible variation must be identified and specified, or would it be possible to state
generally that minor variations were covered?
Reply
The scope of anti-dumping duties shall be limited to the product that is actually dumped and
causing injury to the corresponding domestic industry.  If a product with minor alterations exists at thetime of original investigation, such a product can be included within the scope of the original
investigation.  However, if a minor altered product was not anticipated as being dumped or did not
exist at the time of original investigation, the presumption is that it is a different product from the
product subject to the anti-dumping duties and is lacking the requisite findings of dumping and injury.
Hinge Example
Q5. If the foreign producer freely admitted that  its sole purpose in shifting the assembly
operation to a third country had been to circumven t the order, and that the shift in the location
of assembly otherwise was commercially disadvantageous, would this strengthen the argumentthat the exports of hinge components were circumventing the order?G/ADP/IG/W/19
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Reply
No.  Intent is not a factor in determining whether to impose anti-dumping duties or not.  Even
if the foreign producer makes the admission provided for in the US hypothesis, this does not bear on
the question of whether the complete hinges assembled in the third country are exported at less than
normal value.  The producer in the third country is free to export the hinges at the normal valuewhether the shift in the location of assembly was commercially advantageous or disadvantageous for
the producer.  Normal value is determined based on a hierarchy of criteria and is not the same for all
countries in which a supplier has a facility.  Under the US theory, even if the producer in the third
country exports the complete hinges at or more than normal value, the hinges would be subject to
anti-dumping duties.
Salt Example
Q6. If it were demonstrated that the channels of distribution, customers, and uses of saline
syrup were all identical to those for salt, would this strengthen the case for finding
circumvention?
Reply
No.  These factors do not provide evidence of ei ther dumping or injury.  Assume that saline
syrup and salt are sold, through the same channels of distribution, to the same customers and with the
same end-uses as salt.  If salt is found to be dumped, should we then also assume that the substitute,saline syrup, is dumped?  Clearly, there is no evidence that saline syrup is either exported at less than
normal value or that the industry producing saline syrup is injured.  While it could be the case in some
circumstances that both products are being injuriously dumped, it cannot be determined by channels
of distribution, customers, or end-uses.
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