RESTRICTED
WORLD TRADE G/ADP/IG/W/2
8October 1997
ORGANIZATION(97-4281)
Original: English Committee onAnti-Dumping Practices
Informal Group onAnti-Circumvention
TOPIC 1-WHAT CONSTITUTES CIRCUMVENTION?
Paper bytheUnited States
Thefollowing communication, dated 7October 1997, hasbeenreceived fromthePermanent
Mission oftheUnited States.
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Introduction
TheMinisterial Decision onAnti-Circumvention wasadopted byGovernments atMarrakesh
andforms anintegral partoftheFinal ActEmbodying theResults oftheUruguay Round Multilateral
Trade Negotiations. ThisDecision acknowledged theproblem ofcircumvention andrecognized the
desirability ofapplying "uniform rulesinthisareaassoonaspossible" toprevent theevasion ofanti-
dumping andcountervailing measures resulting fromcircumvention.1TheDecision confirms thatthe
topicofcircumvention formed partofthenegotiations which preceded theAgreement onImplementation
ofArticle VIofGATT 1994 (Anti-Dumping Agreement) andreferred thismatter totheCommittee
onAnti-Dumping Practices forresolution. Tofulfil thismandate, theCommittee onAnti-Dumping
Practices established theInformal Group onAnti-Circumvention (Anti-Circumvention Group orGroup)
toexamine andresolve which rulesshould apply uniformly toaddress theproblem ofcircumvention.
TheGroup hasagreed tobegin thisdiscussion byidentifying thevarious ways inwhich theproblem
ofcircumvention canarise. Thispaper provides anoverview bytheUnited States ofthenature of
theproblem, including specific examples ofcircumvention. After discussing thenature oftheproblem,
theAnti-Circumvention Group canproceed todiscuss waysinwhich circumvention willbeaddressed.
1Decisions andDeclarations relating totheAgreement onImplementation ofArticle VIoftheAgreement onTariffs
andTrade 1994.
Decision onAnti-circumvention:
Ministers,
Noting thatwhile theproblem ofcircumvention ofanti-dumping measures formed partofthenegotiations which
preceded theAgreement onImplementation ofArticle VIofGATT 1994, negotiators were unable toagree onspecific text,
Mindful ofthedesirability oftheapplicability ofuniform rules inthisareaassoon aspossible,
DecidetoreferthismattertotheCommi tteeonAnti-dumpi ngPracticesestablishedunder theAgreement forresolution.G/ADP/IG/W/2
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What Constitutes Circumvention?
Circumvention istheevasion ofanti-dumping orcountervailing dutymeasures bymodifying
oraltering marginally thephysical nature, production orshipment ofmerchandise otherwise subject
toaanti-dumping orcountervailing dutymeasure inamanner which ultimately undermines thepurpose
andeffectiveness ofremedies provided forunder theWTO Anti-dumping Agreement andtheAgreement
onSubsidies andCountervailing Measures (SCM Agreement), andwhich WTO Members have
implemented intonational law.
Increasedglobalizationhasmadeitconsiderablymoredifficultfornationstoenforceanti-dumping
andcountervailingdutymeasures.Theproductionofgoodsisincreasinglyglobalandcompartmentalized;
partsorcomponents ofaproduct areoften manufactured intwoormore places, assembled inanother
location andshipped toyetanother destination. These advances inmanufacturing methods andstrategies
have increased concerns about theability offirms toevade anti-dumping andcountervailing duty
measures.
TheUnited States provides thefollowing threeclearexamples toillustrate howcertain producers
could, andsometimes do,evade anti-dumping andcountervailing dutymeasures. These examples have
beenprepared forillustrative purposes inorder toprovide abaseline bywhich toexamine thequestion
of"What Constitutes Circumvention?" Fewwould disagree thatthese examples represent clear-cut
cases ofcircumvention. Presented forpurposes ofdiscussion, theinstances described below donot
encompass, inanyway,theuniverse ofallpossible instances ofcircumvention. Byhighlighting them,
theUnited States doesnotmean toimply thatother situations, including variations ofthefactsgiven
inthese examples, would notalsoconstitute circumvention.
(a) Animporting country places ananti-dumping orcountervailing dutymeasure onnickel
(theelement)fromanexportingcountry.Theproductdescriptioninthemeasuredefines
nickel asconsisting ofatleast99%purenickel (which istheindustry standard). The
measure covers shipments fromtheexporting country thathaveaveraged 100tonsper
yearoverthelastfewyears. Theproducer/exporter intheexporting country responds
tothemeasure byadding asmall amount ofsilver tothenickel during itsproduction
process, sothattheresulting metal is98.5% purenickel, 0.5% silver, and1%normal
impurities. Exports ofindustry-standard nickel fromtheexporting country immediately
droptozeroandarereplaced by100tonsperyearofthenewalloy, which ismade
bythesame producers intheexporting country andsold, under theoriginal nickel
contracts, atprices andvolumes sosimilar astoreinforce thenotion thatthese are
thesame goods, sold tothesame customers, forsimilar purposes asthe
previously-exported nickel.
(b) Animporting country places ananti-dumping orcountervailing dutymeasure onhinges
fromanexporting country. Theproduct description inthemeasure describes complete
hinges,whicharewhattheexportingcountryhasbeenexporting.Theproducer/exporter
intheexporting country responds byshipping thetwohinge halves andpinseparately
totheimporting country, orathird country, where theyareassembled inamatter
ofminutes andsoldintheimporting country. Thehinge components aremanufactured
bythesameproducers intheexporting country andsoldatprices andvolumes sosimilar
astoreinforce thenotion thatthese arethesame goods, soldtothesame customers
intheimporting country, under theoriginal hinge contracts, forsimilar usesasbefore
theanti-dumping orcountervailing dutymeasure.G/ADP/IG/W/2
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(c) Animporting country places ananti-dumping orcountervailing dutymeasure onsalt
fromanexporting country. Theproduct description inthemeasure describes granular
salt,which iswhattheexporting country hasbeenexporting. Theproducer/exporter
intheexporting country responds totheanti-dumping orcountervailing dutymeasure
bycombining thesaltwithwater andexporting itassaline syrup. Thesyrup isproduced
bythesameproducers intheexporting country andsoldatprices andvolumes sosimilar
astoreinforce thenotion thatthese arethesame goods, soldtothesame customers
intheimporting country, under thesame contracts, forsimilar usesasbefore theanti-
dumping orcountervailing dutymeasure.
TheUnited States believes itisimperative thatinstances ofcircumvention beaddressed ina
timely fashion topreserve thecredibility ofWTO rules ontheenforcement ofanti-dumping and
countervailingdutymeasures.Whileuniformrulesaddressingcircumventionmustaddresssuchobvious
examples ofcircumvention asthose described above, theymustalsoaddress thecomplex realities of
modern production processes thatmaycreate incentives tocircumvent measures inother ways, aswell.
Insodoing, uniform rules oncircumvention should require theexamination ofavariety offactors
viewed intheir totality, toaccount forthewide range ofproduction methods utilized byglobal
manufacturers. Forexample, rulesoncircumvention should takeintoaccount suchfactors asthenature
oftheproduction processes employed; value-added considerations; sudden increases intheflowof
parts orcomponents from anation subject toananti-dumping orcountervailing dutymeasure; and
others. Anydiscussion ofuniform anti-circumvention rulesmustinclude examination ofabroad range
offactors relevant todetermining what constitutes circumvention, because theways inwhich
circumvention canoccur arenumerous, fact-specific andunpredictable.
Conclusion
GATT Members havelongsupported provisions providing relief fromunfair trade practices.
Thiswasconfirmed inthe1979Tokyo Round and,mostrecently, intheUruguay Round, where there
wasarecognition byGATT Members thatabalanced package oftradereforms mustinclude effective
anti-dumpingandcountervailingdutymeasures.Attemptstoevadethosemeasuresrequiretheapplication
ofuniform rulestoensure theefficacy ofthose measures. Tothisend,theMinisterial Decision states
thattheapplicability ofuniform anti-circumvention rules isdesirable.