WORLD TRADE  
ORGANIZATION  WT/DS219/13 
23 March 2004 
 
 (04-1279) 
 Original:   English 
  
 
EUROPEAN COMMUNITIES – ANTI-DUMPING DUTIES ON 
MALLEABLE CAST IRON TUBE OR PIPE FITTINGS FROM BRAZIL 
 
Communication from the European Communities
 
 
 
 The following communication, dated 17 March 2004, from the delegation of the European Commission to the Chairman of the Dispute Settlemen t Body, is circulated at the request of that 
delegation.  
_______________ 
 
  On 18 August 2003, the Dispute Settlement Body ("DSB") of the World Trade Organization ("WTO") adopted an Appellate Body Report ("ABR") and a Panel Report ("PR") as modified by the 
ABR on the case "European Communities – Anti-Dumping Duties on Malleable Cast Iron Tube or 
Pipe Fittings from Brazil". 
  It should be recalled that the Reports, as above , requested the European Communities to bring 
the measure that had been challenged into conf ormity with the WTO Agreement on Implementation 
of Article VI of the General Agreement on Tari ffs and Trade 1994 ("ADA") as regards the following 
aspects: 
  (i) Article 2.4.2 of the ADA: in "zeroing" negative dumping margins in its dumping 
determination. 
  (ii) Articles 12.2 and 12.2.2 of the ADA: failure to make directly discernible, from the 
published provisional or definitive determin ations, that the European Communities 
addressed, or explained the lack of significance, of the following injury factors listed in Article 3.4 of the ADA: wages, productiv ity, return on investments, cash flow, 
ability to raise capital and magnitude of the actual margin of dumping. 
 
 (iii) Article 6.2 and 6.4 of the ADA: failure to  disclose to the interested parties during the 
anti-dumping investigation the informati on on injury factors listed above under 
point (ii). 
  Pursuant to Article 21.3(b) of the DSU, the European Communities and Brazil agreed that the 
reasonable period of time for the European Co mmunities to implement the recommendations and 
rulings of the DSB would be 7 months, thus e xpiring on 19 March 2004.  The European Communities 
reassessed its findings related to the contested measure by taking fu lly into account the findings and 
conclusions set out in the Panel and Appellate Body Reports, as explained in the Council Regulation 
(EC) No 436/2004 of 8 March 2004 attached herewith.  It has, thus, fully complied with the DSB 
rulings and recommendations in this dispute a nd within the deadline agreed upon between the 
disputing parties. WT/DS219/13 
Page 2  
 
 COUNCIL REGULATION (EC) No 436/2004 
 
of 8 March 2004 
 
amending Regulation (EC) No 1784/2000 imposing a definitive anti-dumping duty and 
collecting definitively the provisional duty imposed on imports of certain malleable cast iron 
tube or pipe fittings originating in Brazil, th e Czech Republic, Japan, the People's Republic of 
China, the Republic of Korea and Thailand 
 
 
THE COUNCIL OF THE EUROPEAN UNION, 
 Having regard to the Treaty establishing the European Community, and in particular Article 133 thereof,  
Having regard to Council Regula tion (EC) No 1515/2001 of 23 July 2001, on the measures that may 
be taken by the Community following a report adopted by the WTO Dispute Settlement Body concerning anti-dumping and anti-subsidy matters
1, 
 Having regard to Council Regulation (EC) No 384/96 of 22 December 1995 on protection against 
dumped imports from countries not members of the European Community ('the Basic Regulation')
2, 
 
Having regard to the proposal made by the Commission after consultation of the Advisory Committee,  Whereas: 
 
A.  EXISTING MEASURES 
 (1) The Council, by Regulation (EC) No 1784/2000 of 11 August 2000 imposed a definitive anti-
dumping duty on imports of certain malleable cast  iron tube or pipe f ittings originating in 
Brazil, the Czech Republic, Japan, the People's Re public of China, the Republic of Korea and 
Thailand (the 'Definitive Regulation')
3. The Definitive Regulation was preceded by 
Commission Regulation (EC) No 449/2000 of 28 February 2000 imposing a provisional anti-
dumping duty on imports of certain malleable cast  iron tube or pipe f ittings originating in 
Brazil, the Czech Republic, Japan, the People's Re public of China, the Republic of Korea and 
Thailand and accepting an undertaking offered by an exporting producer in the Czech 
Republic (the 'Provisional Regulation')4. 
  
B.  REPORTS ADOPTED BY THE DISPUTE SETTLEMENT 
BODY OF THE WTO 
 (2) On 18 August 2003, the Dispute Settlement B ody ('DSB') of the World Trade Organisation 
('WTO') adopted an Appellate Body report ('ABR' ) and a Panel report ('PR') as modified by 
the ABR on the case 'European Communities (E C) – anti-dumping duties on malleable cast 
                                                     
 
1 OJ L 201, 26.7.2001, p. 10. 
2 OJ L 56, 6.3.1996, p. 1.  Regulation as last amended by Regulation (EC) No 1972/2002 (OJ L 305, 
7.11.2002, p. 1). 
3 OJ L 208, 18.8.2000, p. 8. 
4 OJ L 55, 29.2.2000, p. 3.  WT/DS219/13 
 Page 3 
 
 
 iron tube or pipe fittings from Brazil'5 (the ABR and PR are hereinafter referred to as the 
'Reports'). 
 (3) The Reports requested the Eu ropean Communities to bring the measure into conformity with 
the WTO Agreement on Implementation of Article  VI of the General Agreement on Tariffs 
and Trade 1994 ('ADA') as regards the following aspects: 
 
(i) Article 2.4.2 of the ADA: in 'zeroing'  negative dumping margins in its dumping 
determination. 
 
(ii) Articles 12.2 and 12.2.2 of the ADA: failure to make directly discernible, from the 
published provisional or definitive determin ations, that the European Communities 
addressed, or explained the lack of significance, of the following injury factors listed in Article 3.4 of the ADA: wages, productiv ity, return on investments, cash flow, 
ability to raise capital and magnitude of the actual margin of dumping. 
 
(iii) Article 6.2 and 6.4 of the ADA: failure to  disclose to the interested parties during the 
anti-dumping investigation the informati on on injury factors listed above under 
point (ii). 
 (4) The Commission reassessed the findings by taking into account the recommendations set out 
in the Reports on the basis of information whic h was collected in the original investigation 
which took place in 1999/2000.  Unless otherw ise stated, the assessment made in the 
Definitive Regulation remains valid. The reass essment shows that injurious dumping still 
exists although at a slightly lower level. 
 
 
C.  PROCEDURE 
 (5) Following the adoption of the ABR by the DSB th e interested parties in this proceeding, i.e. 
the Brazilian exporting producer and the Community  industry ('CI'), received disclosure of 
the facts and considerations on the dumping ca lculation and the injury factors mentioned 
under recital 3(ii). All parties were informed of  the essential facts and considerations on the 
basis of which it was intended to amend and co nfirm the Definitive Regulation.  They were 
also granted a period within which to make repr esentations subsequent to this disclosure. All 
interested parties were granted an opportunity to be heard by the Commission. However, no 
such hearing was requested by any interested party. 
 
(6) All comments submitted by the interested pa rties were considered and, where appropriate, 
reflected in the amended findings. 
 (7) It is recalled that the investigation of dumping covered the period from 1 April 1998 to 31 
March 1999 (investigation period 'IP'). The investig ation relating to the trends relevant in the 
context of the injury assessment covered the pe riod from 1 January 1995 up to the end of the 
IP (i.e. 31 March 1999). This period will be referred to as 'the period considered'. 
  
                                                     
 
5 Document WT/DS219/10 of 27 August 2003. WT/DS219/13 
Page 4  
 
 D.  AMENDED AND CONFIRMED FINDINGS 
 
1.  PRODUCT UNDER CONSIDERATION AND LIKE PRODUCT 
 (8) The product concerned is thread ed malleable cast iron tube or pipe fittings which are joined 
by a screwing joining system, falling within CN-c ode ex 7307 19 10 (TARIC code 7307 19 10 11 and 
7307 19 10 19).  The Reports do not affect the findings  set out in the Definitive Regulation as regards 
the product under consider ation and like product. 
  
2.  DUMPING 
 
2.1. Introduction 
 (9) The following will detail the reassessed finding s based on the recommendations in the 
Reports concerning the practice of 'zeroing' wh en establishing the weighted average dumping 
margin. 
 (10) All other calculation methods applied are those used in the original investigation. For further 
details, reference is made to the Pr ovisional and Definitive Regulation. 
 
2.2. Brazil 
 (11) It is recalled that during the original inv estigation Indústria de F undição Tupy Ltda was the 
only known exporting producer of the product concerned in Brazil. 
 
(12) As to the findings concerning normal valu e, the export price and adjustments made in 
accordance with Article 2(10) of the Basic Regul ation, no changes have been necessary. For 
further details, reference is made  to recitals 20 to 31 and 35  to 49 of the above mentioned 
Provisional and to recitals 24 to  27, 30, 31, 38 to 43, 46 to 48 and 51 to 54 of the Definitive 
Regulation. 
 
(13) As in the Provisional and Definitive Regula tions, the weighted average normal values of each 
type of the product concerned exported to the European Community were compared to the weighted average export price of each corresponding type of the product concerned. In compliance with the recommendations of the Re port, no 'zeroing' was applied in calculating 
the overall dumping margin. 
 
(14) The revised dumping margin expressed as a percentage of the cif import price at the 
Community frontier is: 
 
Indústria de Fundição Tupy Ltda: 32 %. 
 
(15) The level of cooperation wa s high. Consequently, the revised residual dumping margin is set 
at the same level as for Indústria de  Fundição Tupy Ltda, i.e. 32 %. 
 
2.3. Disclosure 
 
(16) The above revised findings on dumping were discl osed to all interested parties subject to the 
present investigation which were granted the possibility to present their views and comments 
and to be heard by the Commission. 
 (17) None of the parties concerned objected to the Commission findings on dumping.  WT/DS219/13 
 Page 5 
 
 
  
3.  DEFINITION OF THE COMMUNITY INDUSTRY 
 (18) The findings concerning the definition of the CI, summarised in recitals 65 to 68 of the 
Definitive Regulation remain unaffected by th e recommendations and conclusions set out in 
the Reports. 
  
4.  INJURY 
 
4.1. Imports from the countries concerned and price undercutting 
 (19) The findings set out in recitals 69 to 94 of the Definitive Regulation remain unaffected by the 
recommendations in the Reports. 
 
4.2. Situation of the Community industry 
 
4.2.1. Preliminary remark 
 (20) This part sets out the reassessed findings based on the recommendations in the Reports 
concerning the injury analysis. The Reports conc lude that the Community acted inconsistently 
with Articles 12.2 and 12.2.2 of the ADA by failing to make directly discernible from the 
published provisional or definitiv e determinations that the Eu ropean Community addressed or 
explained the lack of significance of the following injury factors listed in Article 3.4 of the ADA: wages, productivity, return on investme nts, cash flow, ability to raise capital and 
magnitude of the actual margin of dumping. It is  recalled that these injury factors have been 
examined during the original investigation. Howe ver, as they were at the time considered not 
to be significant, and were therefore not include d in the analysis made available to the public, 
they were only laid down in an internal note to the file. 
 
4.2.2. Situation of the Community industry as set out in the Provisional and Definitive 
Regulations 
 
(21) It is recalled that in rec itals 160 and 161 of the Provisiona l Regulation it was concluded that 
the CI suffered material injury within the meani ng of Article 4(1) of the Basic Regulation. It 
was found that the situation of the CI deterior ated during the IP, in particular because of a 
decline in production, production capacity, sales and market share. Moreover, the CI suffered 
a significant loss of employment and a declin e in investments, as well as an increase of 
stocks. As to the capacity utilisation, its in crease is explained by the reduced production 
capacity. 
 
4.2.3. Re-examination of the injury findings in the light of the recommendations and ruling 
of the DSB 
 
(22) In addition to the injury factors as set out in  recitals 150 to 159 of the Provisional Regulation, 
i.e. production, production capacity, capacity u tilisation, sales volume, market share, sales 
prices, stocks, profitability, employment and i nvestments, the following injury factors were 
analysed, and, following the Reports recomme ndations, are now set out in detail below. 
 
4.2.3.1. Wages 
 (23) Wages, expressed as the total annual labour co st for the production of the product concerned 
developed as follows: WT/DS219/13 
Page 6  
 
  
Table 1 
 
Wages 
 
 1995 1996 1997 1998 IP 
Total annual labour costs 
(EUR '000) 44 730 48 479 48 375 46 995 47 132 
Index  100 108 108 105 105 
Source: Annual accounts of the CI.  
 
 
(24) Wages increased by around 5 % between 1995 and the IP. When taking 1996 as a starting 
point, the wages decreased by around 3 %. 
 (25) This factor follows roughly the general development of wages in the sector and the 
movements in employment observed for the CI. Between 1996 and the IP this factor declined 
by 3 %, which was in line with the developments  of employment mentione d at recital (158) of 
the Provisional Regulation (decrease of 6 % between 1995 and IP, slight decline of around 1 % between 1996 and IP). 
 
4.2.3.2. Productivity 
 
(26) Productivity, measured as the output of  persons employed, developed as follows: 
 
Table 2 
 
Productivity 
 
 1995 1996 1997 1998 IP 
Production in tonnes per employee 21,58 19,47 19,76 20,84 20,82 
Index  100 90 92 97 96 
Source: Verified questionnaire replies of the CI.  
 
 (27) Productivity fluctuated over the period exam ined but an overall fall of 4 % was experienced 
over the period 1995 to the IP. Productivity increased by around 7 % between 1996 and the 
IP. This factor is in line with employmen t and production figures which were already 
mentioned at recitals 150 and 1 58 of the Provisional Regulation. 
 
4.2.3.3. Return on investments ('ROI') 
 
(28) ROI, which is calculated by dividing the CI financial result (profit or loss) by the amount of 
investments, developed as follows: 
  WT/DS219/13 
 Page 7 
 
 
 Table 3 
 
ROI 
 
 1995 1996 1997 1998 IP 
ROI – 6,55 % 3,72 % – 2,78 % – 0,70 % – 2,72 % 
Source: Verified questionnaire replies of the CI and their annual accounts.  
 
 
(29) ROI developed from -6,55 % to -2,72 % be tween 1995 and the IP. However it is recalled, 
that, as explained at recital 157 of the Provisiona l Regulation, the financial result of the CI 
was negatively affected, in an exceptional way, by costs associated with  a plant closure in 
1995. Moreover, that year was also marked by restructuring efforts of two producers included 
in the definition of the CI, in particular w ith the aim of production rationalisation and of 
investments required to implement the Community's  environmental legislation. This also had 
a negative impact on the financial r esult of the CI. On this basis, it is considered that the year 
1995 was unrepresentative of the situation of the CI and cannot be considered as a meaningful 
basis for analysing trends on ROI. 
 
(30) This remark also applies to other injury f actors which include the financial results of the CI, 
e.g. cash flow as explained at recital 33 below. 
 (31) When comparing the year 1996 to the IP, ROI decreased by 6,4 percentage points, from 
3,72% to -2,72 %. The negative development of  ROI was broadly in line with the negative 
development of profitability, which decreased  by 2,3 percentage points during the same 
period. 
 
4.2.3.4. Cash flow 
 (32) Cash flow developed as follows: 
 
Table 4 
 
Cash flow 
 
 1995 1996 1997 1998 IP 
Cash flow 
(EUR '000) 10 522 12 799 19 339 12 236 12 205 
Index  100 122 184 116 116 
Index   100 151 96 96 
Source: Annual Accounts of the CI.  
 
 (33) It should be noted that the turnover of the product concerned has always represented over 
50 % of the total turnover of all the activities of the CI, as reported in the audited accounts. 
The above table shows the cash flow for the product concerned calculated on the basis of a 
turnover allocation for the years from 1995 to 1998. Given that audited accounts were not 
available for the IP, cash flow was calculate d on the basis of the total turnover and the 
turnover for the product concerned verified dur ing the investigation. As explained in WT/DS219/13 
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 recital (29), the financial result achieved by th e CI in 1995 was negatively affected in an 
exceptional way by costs associated  with a plant closure and restructuring and therefore that 
year cannot be considered as a meaningful re presentative basis for analysing trends on cash 
flow. Between 1995 and 1998 cash flow increased  by around 16 % and remained stable 
during the IP. When taking 1996 as a starting point cash flow decreased by around 4 % up to 
the end of the IP. It was found, that the negativ e development of cash flow was broadly in line 
with the negative development of profitability. 
 
4.2.3.5. Ability to raise capital 
 
(34) During the original investigation there was no claim from the CI (nor any indication), that it 
encountered problems to raise the capital needed for its activity. However, it is clear that the 
significant deterioration in the financial situation of the CI (see in particular profitability, cash 
flow and ROI), may negatively affect the ability to raise capital in the near future. 
 
4.2.3.6. Magnitude of the actual margin of dumping 
 (35) As concerns the impact on the CI of the ma gnitude of the actual margin of dumping, given the 
volume and the prices of the imports from the countries concerned, this impact cannot be considered negligible. This finding remains valid notwithstanding the reduction of the 
dumping margin for one of the expor ters as explained in recital 14. 
 
(36) The Brazilian exporting producer objected to th e Commission's finding that the impact of the 
magnitude of the actual dumping margin on the Community industry was not negligible. According to the Brazilian producer, the diffe rence of almost 50 % between the dumping 
margin and the underselling margin was evidence of a very large difference in the cost of 
production of the Community producers on th e one hand and the Brazilian exporter on the 
other hand. Therefore, it was claimed that even if dumping were totally eliminated the imports from Brazil would still substantially undercut the non-injurious price of the 
Community industry. The Brazilian exporting produc er argued finally that in the context of a 
highly sensitive price market, the impact of the actual margin of dumping would thus clearly be negligible, contrary to the Commission's findings. 
 
(37) It has to be recalled that according to Article 3(5) of the Basic Regulation, the factor 
'magnitude of the actual margin of dumping' is examined in the framework of the analysis of 
the state of the domestic industry. In this context, it is the Community's consistent practice to set the actual dumping margin in relation to the state of the domestic industry taking into 
account the volume and the prices of the imports from the country concerned. An analysis as 
the one proposed by the Brazilian exporter, i.e.  a comparison of the dumping margin with the 
underselling margin leading to conclusions with respect to a difference in cost of production 
between exporting producers and the Community industry would by far exceed the framework set by Article 3(5) of the Basic Regulation and would bring in an element of causal link into such an analysis. This is clearly not required by Article 3(5) of the Basic 
Regulation and would wipe out the distinction between the analysis of the state of the 
Community industry on the one hand and the causal link between dumping and injury on the other hand, which is in any event considered separately. In this context it should be also noted 
that the underselling margin is calculated fo r the purpose of applying the 'lesser duty rule' 
according to which the anti-dumping duty is set at the level of either the dumping or the 
injury margin whichever is lower. It has to be  underlined that the application of the 'lesser 
duty rule' and thus the calculation of the under selling margin is not a WTO obligation. Even 
assuming – for the sake of argument and withou t recognising the substance of the Brazilian 
exporter's claim – that a comparison between the cost of production of the exporting producer 
and Community producers were warranted in this  context, such an analysis could only be  WT/DS219/13 
 Page 9 
 
 
 based on a comparison of the dumping margin with the undercutting (not the underselling) 
margin. The levels of both margins are howeve r comparable. Therefore, without dumping, the 
price difference between imports from Brazil and the sales of the Community industry would be minimal. 
 
(38) Therefore, the argument had to be rejected. 
 
4.2.4. Comments of the exporting producer on certain injury factors 
 (39) The Brazilian exporting producer claimed that for certain injury factor s (profitability, ROI, 
cash flow, ability to raise capital) the year 19 95 had not been considered for the trend's 
analysis. It was claimed that 1995 was disregar ded for those factors which otherwise would 
have demonstrated a positive development. A ccording to the Brazilian exporting producer 
this constitutes an inconsistent and discrim inatory approach and does not fulfil the 
requirement of an objective and unbiased examina tion contrary to Articles 3.1 and 17.6 (i) of 
the ADA. 
 (40) Firstly it should be noted, that with regard  to profitability, no new determination has been 
made for the purpose of implementing the Reports. It has to be recalled that in the framework 
of the dispute settlement proceedings, Brazil put forward exactly the same arguments as the ones referred to above concerning profitabilit y. The arguments were turned down by the 
Panel and no recommendation at all was made with regard to this factor. The factor 
'profitability' has therefore not been reassessed. 
 (41) Secondly, it should be noted that — in line w ith the original investigation — the trends with 
regard to the injury indicators which had been  analysed but which had not been made public 
during the original investigation, have been analysed as from 1995. This also relates to the 
factor 'ability to raise capital'. In particular for two injury factors (ROI and cash flow) it has 
been considered that the year 1995 was an exceptional year and could thus not be considered meaningful for the reasons set out in detail at r ecitals 29 and 33. In fact it is recognised by 
several Panel and AB reports that the assessment of  the injury factors is not limited to a rigid 
comparison of the beginning and the end of the years of the period considered. It should also 
be noted that the Brazilian exporting producer  has not contested the substance of the 
reasoning set out in recital 29. 
 (42) As to the alleged inconsiste ncy of the approach, the following has to be noted. It is precisely 
for reasons of consistency with the analysis of the original investigation, that it is necessary – 
for the purpose of implementing the Reports – to analyse cash flow and ROI, which are 
directly derived from profitability, on the sa me basis as profitability in the original 
investigation for which 1995 could reasonably be  excluded from the trend analysis according 
to the conclusions of the Reports. The approach  chosen by the EC authorities was therefore 
consistent and objective. 
 
(43) Therefore, the arguments had to be rejected. 
 
4.2.5. Conclusion on injury 
 (44) Based on the above analysis, it is concl uded that the findings in respect of wages, 
productivity, return on investments and cash flow  were in line with certain other factors 
analysed and made public during the original in vestigation. As regards the ability to raise 
capital, there was no claim that the CI encounter ed any difficulty to raise the capital needed 
for its activity. This factor, however, should be seen in the light of the continuous degradation 
of the financial situation of the CI. As regard s the margin of dumping, it is concluded that, WT/DS219/13 
Page 10  
 
 given the volume and the prices of the impor ts from the countries concerned, its impact 
cannot be considered negligible. 
 (45) Based on the above, it is confirmed that th e Community industry suffered material injury 
during the period considered. 
 
 
5.  CAUSATION 
 (46) The contents and conclusions reached in recitals 101 to 114 of the Definitive Regulation 
remain unaffected by the Reports a nd the re-examined injury analysis. 
 (47) The Brazilian exporter contended that the in jury of the Community industry was not caused 
by dumped imports, but by the lack of productivity of the Community industry as evidenced by the almost 50 % difference between the dum ping margin and the underselling margin and 
by the fact that the Community industry had undergone restructuring efforts in 1995 with the 
aim of rationalising production. The similarity of this argument with the one made with regard to the magnitude of the dumping margin re ferred to above at recital 36 is evident. The 
Brazilian exporter claimed in addition that while  the Commission had analysed the difference 
in cost of production, it had however limited th is analysis to differences regarding energy 
consumption linked to the difference of qualit y and production processes between black heart 
and white heart fittings. 
 (48) It has to be recalled that in the framework  of the dispute settlement proceedings, Brazil put 
forward exactly the same arguments as the ones referred to above. The arguments were turned 
down by the Panel and the Appellate Body a nd no recommendation at all was made with 
regard to the causal link analysis. 
 (49) Therefore, the arguments mentioned in recital 47 had to be rejected.   
6.  COMMUNITY INTEREST 
 
(50) The contents and conclusions reached in r ecitals 178 to 186 of the Provisional Regulation and 
115 to 117 of the Definitive Regulation rema in unaffected by the Reports and the re-
examined injury analysis. 
 
 
7.  AMENDED MEASURES 
 (51) As shown above, a full examination of the f acts established and the conclusions reached in 
the original investigation, taking account of the recommendations and rulings set out in the 
Reports, demonstrates that imports from Brazil were still injuriously dumped, although at a 
slightly lower level, 
   WT/DS219/13 
 Page 11 
 
 
 HAS ADOPTED THIS REGULATION: 
 
Article 1 
 
The table in Article 1(2) of Regulation (EC) No 1784/2000 is hereby amended as follows for products 
originating in Brazil: 
 
Country Definitive duty 
(%) TARIC additional code 
Brazil 32,0 – 
 
 
Article 2 
 
This Regulation shall enter into force on the day following its publication in the Official Journal of 
the European Union . 
 
 This Regulation shall be binding in its entirety and directly applicable in all Member States. 
 Done at Brussels, 8 March 2004. 
 
 
  For the Council  The President 
 D. AHERN  
 
__________