RESTRICTED  WORLD TRADE  
ORGANIZATION  TN/RL/M/12 
25 March 2004  
 
(04-1366) 
Negotiating Group on Rules  
   
SUMMARY REPORT OF THE MEETING 
HELD ON 16 MARCH 2004 
 
Note by the Secretariat
 
  
1. The Negotiating Group on Rules ("the Group") held a formal meeting on 16 March 2004. 
A. ADOPTION
 OF THE  AGENDA 
2. The Group adopted the following agenda: 
 A. ADOPTION OF THE AGENDA 
 
 B. COMPILATION OF ISSUES AND PROPOSALS IDENTIFIED BY   
  PARTICIPANTS IN THE NEGOTIATING GROUP ON RULES – TN/RL/W/143   C. PAPERS SUBMITTED SINCE THE LAST MEETING OF THE GROUP    (i) ANTI-DUMPING 
 
  (ii) SUBSIDIES AND COUNTERVAILING MEASURES, INCLUDING     FISHERIES SUBSIDIES   D. ORGANIZATION OF THE WORK OF THE GROUP 
 
 E. OTHER BUSINESS    - Identification of contact persons     
B. COMPILATION
 OF ISSUES  AND  PROPOSALS  IDENTIFIED  BY PARTICIPANTS  IN 
THE  NEGOTIATING  GROUP  ON RULES  – TN/RL/W/143   
3. The Chairman stated that the Compilation put toge ther in one place, in a systematic fashion, 
all issues raised and proposals made to date by Pa rticipants in respect of Anti-Dumping and Subsidies 
and Countervailing Measures, including Fisheries Subs idies, thus offering an overview of the range of 
issues and proposals before the Group, clustered by  subject matter. The Compilation was not intended 
to provide a detailed explanation of issues and propo sals, but rather to give an overview of their key 
elements. Conceptual elements, general policy positions , etc. were not reflected in this document, but 
were contained in the original submissions liste d in the Annex to the Compilation. The Compilation 
reflected the range of issues and proposals put before  the Group as of the date of its circulation; it 
would be periodically updated to reflect the iden tification of additional issues and proposals. The 
placement of issues and proposals within the Compilation did not and could not prejudice their 
substance.  The Chairman inv ited delegations' comments and conc rete suggestions regarding the 
manner in which their issues and/or propo sals were addressed in the Compilation.  TN/RL/M/12 
Page 2  
 
4. All Participants taking the floor welcomed th e Compilation, which they considered to be 
useful and well-organized.  One Participant hoped th at a revised version could be made available 
before the summer break, and encouraged Particip ants to submit drafting suggestions as soon as 
possible.  Another Participant noted that, while th e Compilation was useful, it could not be considered 
the sole basis for the Group's future work; th e Group should continue discussions based on the 
original submissions and questions and answers, which contained valuable technical details and 
analysis. This Participant suggested that the Co mpilation identify the Participants submitting the 
relevant proposals.  A third Participant noted that  the Compilation did not limit or prejudice the future 
work of the Group or preclude the submission of future proposals. 
C. PAPERS
 SUBMITTED  SINCE  THE  LAST  MEETING  OF THE  GROUP 
 (i) ANTI-DUMPING    
 
5. The first paper, entitled "Proposal on Issues Re lated to Affiliated Parties" (TN/RL/W/146), 
was sponsored by 11 Participants. A co-sponsor intr oducing the paper referred to problems relating to 
the concept of affiliation in the AD Agreement.  On e problem was the lack of a clear definition of 
affiliation for the purpose of dumping margin calcula tions. This caused some investigating authorities 
to develop their own definitions and expand the scope  of investigations unnecessarily.  Such practices 
were burdensome to respondents, and it was not r easonable for the authorities to resort to facts 
available just because a respondent could not res pond to such widely-expanded inquiries. Another 
problem was that the authorities sometimes abused th eir discretion with respect to the treatment of 
transactions between affiliated parties, choosing data that increased dumping margins. The paper 
proposed to clarify the definition of affiliation and improve the treatment of such transactions. The 
definition of affiliation proposed adopted the criteri on of "control", under which one party is regarded 
as being affiliated to other parties when it controls , is controlled by, or is under common control with 
the others. This definition was based on the idea of "identity of economic interests" and was 
consistent with the criteria of "consolidation" in  internationally accepted accounting standards. The 
treatment of affiliated party transactions proposed was simple and transparent so as to prevent the 
authorities from picking and choosing data on a result-oriented basis.  
6. Other co-sponsors elaborated further on the pa per. It could not be assumed that affilation 
automatically resulted in unreliable prices, and stri cter disciplines and definitions were needed to 
clarify when and to what extent data from actu al transactions could be discarded.  Reference was 
made to instances where authorities adopted an exce ssively broad interpreta tion of affiliation which 
led to the unreasonable disregard of actual data and ex cessive resort to facts available.  It was also 
highlighted that the relationship between parties ha d to be objectively identified by considering 
economic interests between them and analysing the pow er to control each other.  While the authorities 
might have to test sales to affiliated parties for the purpose of determining normal value, there was a 
need for reliable and justifiable data related to sales expenses and costs. The co-sponsors also called 
for clear guidelines prohibiting investigation of affilia ted parties exporting the same product as if they 
were a single responding party.  The co-sponsors inte nded to propose additional disciplines relating to 
Article 2 of the ADA, in particular other issues releva nt to transactions in the ordinary course of trade, 
with a view to strictly regulating practices leading to biased results such as zeroing and the automatic 
discarding of transactions between affiliates or transactions involving sales below cost.            
7. Divergent views were expressed regarding this  paper. One participant expressed concern 
regarding the proposed definition of affiliated par ties. Simply because parties were found to be 
affiliated did not necessarily mean that sales between them would be disregarded – this determination 
turned on a second-level examination of prices, th e nature of the relationship and the purpose for 
which the sales were to be used. An unduly narr ow definition of affiliation could prevent the 
authorities from examining such issues.  The spons ors proposed a narrow and legalistic definition of 
affiliation based solely on the legal power to exerci se voting rights on companies' shares, while many 
factors could cause the authorities to examine a sale with greater care.  Affiliated parties could have  TN/RL/W/12 
 Page 3 
 
 
many reasons to cooperate in setting prices, not th e least of which may be simple accounting or tax 
planning purposes.  While the paper noted the comple x problems associated with affiliated parties, the 
proposed solution would do little more than turn a b lind eye to the problem.  One way to move this 
issue forward would be to discu ss how the sponsors determined affiliation, and how they have 
overcome the problems discussed.  
8. Another Participant welcomed the paper, both because the huge information requirements 
imposed by some investigating authorities regard ing transactions between affiliated parties could 
render cooperation prohibitively expensive, and because clarification could make dumping 
determinations more predictable.  As for the so lutions proposed, the definition of affiliation proposed 
(normally a 50 per cent shareholding) was a very high  threshold and did not cover all situations where 
prices were not at arm's-length, such as where co mpanies were linked by shareholdings below the 
50 per cent threshold but had family links.  Regard ing what should be done where transactions took 
place between affiliated parties and prices were influe nced by the relationship, the issue was complex.  
The proposal envisioned that, where it was not possi ble to simply discard such transactions, because 
for example few if any transactions remained, the authorities should nevertheless use the affected 
transactions.  This Participant was not comfortable w ith such an approach.  There was a balance to be 
struck between the search for reliable data and the need to avoid excessive information collection 
from respondents, and the proposal privileged the latter aspect.  Participants should strive to reconcile 
these objectives in a more optimal way.   
9. One Participant referred to Article 15 of the Customs Valuation Agreement for guidance as it 
contained a definition of related parties and provided tests to be applied in determining the 
acceptability of the transaction value. While the Customs Valuation Agreement served a different 
purpose, it dealt with the same concept and could be  relevant.  Another Par ticipant queried how the 
proposals in the paper related to the transaction- to-transaction methodology which is a preferred 
methodology for small economies.  
10. A co-sponsor reacted to the comments made. Rega rding the definition of affiliated parties, 
established practice based on international acc ounting standards for tax and accounting purposes 
should be the basis of all the discussions from now on. The proponents' purpose was to bring further clarity and predictability to dumping calculations , and to avoid hampering the normal business 
activities of, or imposing unnecessary burdens on, respondents. There could be many instances where prices would be influenced, however the ability of one party to influence another was not enough to 
deem transaction prices unreliable. Such influen ce was the very essence of the ordinary course of 
business and the authorities should not interfere in such activities.  
11. The second paper discussed was entitled "Replies by  the European Comm unities to Questions 
on TN/RL/W/67 – Reflection Paper of the European Communities on a Swift Control Mechanism for Initiations" (TN/RL/W/142).  The Participant posing the questions continued to have concerns and 
questions about the procedure proposed for discussion in the Group.  It queried what relevance, if any, 
establishment of such a panel would have on requ ests to extend the deadline for submission of 
questionnaire responses under Article 6.1.1, and whet her such panels might be requested solely to 
give parties more time to respond to questionnaires.  In addition, the Participant was concerned about  
the proposal on binding arbitration.. Was the sponsor  suggesting that an importing Member should be 
forced into binding arbitration before its actions  were found to be inconsistent with the AD or 
Subsidies Agreement?  It also believed that in  order for a swift contro l mechanism to function 
properly, parties needed prompt access to the factual information which led to initiation. If the Group 
were to pursue this issue, it would need to discuss how to adopt enforceable requirements on 
transparency of initiation procedures.  
12. 
The third paper discussed was entitled "Replies by  Argentina to Comments and Questions by 
Egypt (TN/RL/W/81 & 67) – TN/RL/W/144. The Participant posing the questions commented, with 
respect to the determination of the normal value in circumstances where producers and exporters are TN/RL/M/12 
Page 4  
 
associated within the meaning of Article 2.3 of the ADA, that it failed to understand what could 
prevent the investigating authorities from taking into account manifest distortions resulting from such 
an association. The Participant was also of the opin ion that the reference to the terms "association" 
and "compensatory arrangement" in Article 2.3 provided sufficient guidance to the investigating 
authorities in determining the reliable/unreliable natu re of the export price. It considered that the 
absence of disputes concerning the application of Article 2.3 since the establishment of the WTO 
provided an interesting indication on the lack of necessity to clarify or improve this matter.       
13. The fourth paper discussed was entitled "Replies to the Questions from India on 
TN/RL/W/35" – TN/RL/W/147.  The sponsor of the pa per emphasised that procedural fairness was an 
important theme and was essential to the rule of law in the legal and administrative systems of civil 
societies. These concepts not only helped to en sure a fair and open decision-making process that 
benefited all WTO Members, but also helped to maintain the strength and effectiveness of the 
instruments. The sponsor encouraged other Me mbers to share their experiences and ideas for 
implementing and improving investigatory procedures and procedural fairness rules at the national 
level.   
(ii) SUBSIDIES AND COUNTERVAILING MEASURES, INCLUDING FISHERIES 
  SUBSIDIES 
14. The only paper referred to in this contex t was entitled "Replies to Questions Posed by 
Australia (Document TN/RL/W/135) on Canada's  Submission on Improved Discussions under the 
Agreement of Subsidies and Countervailing M easures" – TN/RL/W/145. There was no discussion 
regarding this paper.  
D. ORGANIZATION
 OF THE  WORK  OF THE  GROUP 
15. For the purposes of this agenda item, the Chairman  turned the meeting into informal mode to 
exchange views regarding the organization of the future work of the Group. At the end of these 
discussions, the Chairman reverted to formal mode  to announce that the next meeting of the Group 
would be held on 26-28 April 2004. The meeting woul d include detailed discussions in informal mode 
regarding elaborated proposals.  In order to be discussed in informal mode at the April meeting, 
elaborated proposals had be submitted to the Secr etariat by COB on Thursday, 8 April 2004 so that 
they could be translated and circulated as Job docum ents.  As a matter of fairness to all Participants, 
the Chairman intended to be very firm with respect to this deadline.  Participants were requested to 
exercise restraint in not submitting too many elaborat ed proposals at the outset, keeping in mind that 
they would have a full opportunity to put in elabor ated proposals on all issues.  Participants were 
further requested to ensure that such elaborated proposals were sufficiently precise and detailed as to 
permit a useful and comprehensive discussion, and to be prepared to  discuss and explain in depth the 
details of and rationales for such elaborated proposals.    
E. OTHER  BUSINESS 
16. The Chairman referred to his request that the S ecretariat assemble a list of contact persons for 
the Rules negotiations.  He invited participants who had not yet done so to identify their contact 
person(s) to the Secretariat.  Although the list had no official status, it could facilitate communications 
with and among participants.  
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