RESTRICTED
WORLD TRADE G/ADP/Q1/USA/2
G/SCM/Q1/USA/2
ORGANIZATION 16April 1997
(97-1650)
Original: English Committee onAnti-Dumping Practices
Committee onSubsidies andCountervailing Measures
NOTIFICATION OFLAWS AND REGULATIONS UNDER
ARTICLES 18.5AND 32.6OFTHE AGREEMENTS
Replies from theUNITED STATES
tofollow-up questions from HONG KONG1
Thefollowing communication, dated 11April 1997, hasbeenreceived from thePermanent
Mission oftheUnited States.
_______________
II. Conduct ofinvestigations
6. Allothers rate
Question 1:Follow-up toHKquestion 9(p13)
Wewould appreciate itiftheUScould explain howtheywould determine whether amargin
isbased largely ontheexporter ’sowndata. WilltheUSapply quantitative criteria toassess theimpact
oftheuseofbestinformation available onthedumping margin ascompared withtheresult which would
havebeenobtained bytheexclusive useoftheexporter ’sowndata?
Answer
When theinformation submitted byarespondent inthecourse ofanantidumping proceeding
isdeficient, theUnited States limits itsuseoffactsavailable toremedying thedeficiencies, or“plugging
thegaps.”Forexample, where arespondent failstosubmit information tosubstantiate itsclaim that
normal value should beadjusted toreflect physical differences between themerchandise soldineach
market, theUnited States maydisallow theadjustment, orbasetheadjustment onthefactsavailable.
Insuchcases, theresulting margin isstillbased “largely ”ontheinformation submitted bythe
respondent. However, where thedeficiencies inarespondent ’ssubmission aresoextensive thatthe
gapsoutweigh thereliable information, theUnited States willbasethedumping margin entirely on
thefactsavailable, suchastheinformation inthepetition. There isnoquantitative threshold forrejecting
anentire response. Thatdecision isaqualitative judgment thatdeficiencies intheresponse, taken
together, aresoextensive thattheydestroy thecredibility oftheremaining information asabasis for
calculating ameaningful dumping margin.
1G/ADP/Q1/USA/1-G/SCM/Q1/USA/1.G/ADP/Q1/USA/2
G/SCM/Q1/USA/2
Page2
Question 2:Follow-up toHKquestion 10(p13)
Would theUSexplain whatreasonable methods havetheyinmindindetermining anall-others
ratewhen:
(a) themargins established inrespect ofproducers/exporters subject toindividual
investigations areallbased onbestinformation available; and
(b) themargins established inrespect ofproducers/exporters subject toindividual
investigationsincludebothzero/deminimismarginsandthosebasedonbestinformation
available?
Answer
(a) Where themargins forallinvestigated companies arebased onthefactsavailable, the
all-others ratewillbethefacts available rate(ifthere isonly onerate) ora
weighted-average ofthefactsavailable rates(ifthere ismore thanoneratebased on
thefactsavailable).
(b) Where themargins forallinvestigated companies allareeither zero, deminimis ,or
based onthefactsavailable, theUnited States ’preferred methodology would beto
compute theweighted-average ofthezeroanddeminimis margins andthemargins
based onthefacts available, provided thevolume datawere available topermit
weight-averaging.
III. Anti-dumping methodology
4. Normal value
(b) Level oftrade adjustment
Question 3:Follow-up toHKquestion 27(p18)
What istherelevant USstatutory provisions formeasuring theleveloftrade difference by
reference toother products, other timeperiods orother products? What istherelevant USstatutory
provisions formaking appropriate adjustment inmaking suchameasurement? What istherationale
inreferring toother products, orother producers?
Answer
TheprovisionoftheUSstatuteaddressingleveloftradeisSection773(a)(7),19U.S.C.1677(b).
Thisprovision requires level-of-trade adjustments tobebased on“price differences between thetwo
levels oftrade inthecountry inwhich normal value isdetermined. ”There isnospecific provision
requiring theadjustment tobebased onsales ofother products oronsales inother timeperiods.
However, because aleveloftrade adjustment willbenecessary onlyifthere areinsufficient salesof
theforeign likeproduct inthehome market attheleveloftrade ofthesalestotheUnited States, it
follows logically thatsuchadjustments willhavetobebased onsome other sales. TheStatement of
Administrative Action accompanying theUruguay Round Agreements Act,which isauthoritative
concerning theinterpretation andapplication ofthestatute asamended bythatAct,provides that,where
information onsalesofthesame product bythesame company, during thesame timeperiod arenot
available, theDepartment ofCommerce mayresort tosalesofother products, during different time
periods, orbydifferent companies. Therationale forbasing theadjustment onthese other sourcesG/ADP/Q1/USA/2
G/SCM/Q1/USA/2
Page3
ofinformation isthatthepriceeffects, ifany,ofdifferent levels oftradearemarket determined. Relative
price differences canbeapplied todifferent products ortimeperiods.
Question 4:Follow-up toKorea question 10(p18)
TheUSseems toaccept thatitmight notalways bepossible, under itsstatute, toestablish
thenormal value atthesame leveloftrade oftheexport price/CEP andtoquantify theleveloftrade
difference. InthecaseofCEP, CEPoffset could bemade inestablishing thenormal value. This
adjustment isnotavailable inthecaseofexport price. Would theUSexplain howfaircomparison
canbeeffected when thenormal value cannot beestablished atthesame leveloftrade oftheexport
price under itsstatute andprice comparability isaffected asaresult?
Answer
Section 2.4oftheAntidumping Agreement provides thatadministering authorities shallmake
“dueallowances ”fordifferences between thelevel oftrade ofthesales ineachmarket ifprice
comparability hasbeenaffected. Likealladjustments, level-of-trade adjustments mustbeestablished
onthebasis ofevidence ontherecord. Where suchevidence islacking, noadjustment isrequired.
Insituations, however, where CEP sales areinvolved, theDepartment ofCommerce has
continued itstraditional practice ofallowing comparable expenses tothose forwhich theCEPdeduction
wasallowed tobededucted fromnormal value, uptotheamount ofsuchexpenses deducted fromthe
starting priceintheUnited States. Nothing intheAntidumping Agreement requires thattheCEPoffset
beallowed under anycircumstances. ThefactthattheUnited States grants theCEPoffset forCEP
saleswhere normal value isestablished atamore remote leveloftrade, butthere isnoevidence that
thedifferenceinleveloftradeaffectspricecomparability,issimplythecontinuationoftheUnitedStates’
traditional practice under itsprevious statute.
(c) CEPoffset
Question 5:Follow-up toHKquestion 28,Japan question 4(p19,20)
TheUSconsiders thatthemethodology prescribed inSec.773(a)(7)(B) would begreatly skewed
ifselling expenses deducted indetermining theconstructed export price werelimited tothose incurred
intheUS,while selling expenses deducted fromthenormal value wereunlimited. Would theUSexplain
inwhatwayitconsiders thatthemethodology would begreatly skewed? Would theindirect selling
expenses tobededucted under Sec.773(a)(7)(B) notbelimited tothose incurred intheforeign market?
Ifallindirect selling expenses incurred byasales function intheUSwere deducted under
Sec.772(d)(1)(D), would afaircomparison notrequire allindirect selling expenses incurred byan
identical sales function intheforeign market bededucted indetermining thenormal value?
Answer
Theconstructed-export-pricedeductionsunderSection772(d)donotremoveallsellingexpenses
from thestarting price intheUnited States. They remove onlyonelayer ofselling expenses -those
associated withtheactivities oftherelated reseller intheUnited States. Other selling expenses remain
intheconstructedexportprice.Itwouldskewthecomparisontodeductallhomemarketsellingexpenses
fromthestartingpriceofrelatedresellersinthehomemarket,whiletheconstructedexportpricecontains
suchexpenses. Thefaircomparison ofArticle 2.4isbetween theexport price(whether directly observed
orconstructed) andnormal value. Itisonlyafteranexport priceisestablished thatthefaircomparisonG/ADP/Q1/USA/2
G/SCM/Q1/USA/2
Page4
of2.4isrelevant. TheCEP offset isnotrequired bytheAgreement andisnotrelated tofair
comparisons.
(d) Profit adjustment
Question 6:
Indetermining theconstructed export price, Sec.772(d)(3) deducts profits allocated toexpenses.
Where thenormal value cannot beestablished atthesame leveloftrade astheCEPandthelevelof
trade differences cannot bequantified, Sec.773(a)(7)(B) provides foranoffset against theindirect
selling expenses incurred intheforeign country. Would there alsobededuction ofprofits allocated
tosuchexpenses inorder toeffect afaircomparison?
Answer
Article 2.4callsforthededuction ofprofit accruing between importation andresale when
constructing theexport price. Where theconstruction ofanexport price affects price comparability,
Article 2.4alsorequires thatnormal value beestablished attheleveloftradeoftheCEP, orthat“due
allowance ”bemade forthedifference. Where thedifference inleveloftradeaffects pricecomparability,
theUnited States willpermit anadjustment based ontheprice differences between thetwolevels.
These price differences willencompass differences inprofit between thetwolevels. Thus, profit is
aninherent partofanyadjustment which theUnited States willmake tonormal value duetoadifference
inthelevel oftrade. TheCEP offset doesnotinclude anamount forprofit ontheresale inthe
United States. Aswehaveexplained, however, theCEPoffset isgiven asamatter oftraditional
practice. Noprovision oftheADAgreement requires thattheCEPoffset inanyform begranted.
(e) Indirect selling expenses
Question 7:Follow-up toAustralia question 5
When comparison istobemade withtheCEP, thenormal value canbetheprice atthesame
level oftrade, byestablishing theprice atthesame level oftrade totheextent practicable
(Sec. 773(a)(1)(B)) andasnecessary effecting anyprescribed adjustment (Sec. 773(a)(6)) and
level-of-trade adjustment (Sec. 773(a)(7)(A)). Would dueallowance bemade forother differences
demonstrated toaffect price comparability andnotaccounted forbysuchstipulated adjustments?
Answer
Yes. Section 773(a)(6)(C)(iii) provides fornormal value tobeadjusted bytheamount ofany
difference between theprices ineachmarket thatare“nototherwise provided for”under thestatute
andaredueto“other differences inthecircumstances ofsale.”
8. Constructed value/cost ofproduction
(e) Constructed value
Question 8:Follow-up toHKquestion 32(p26)
Forthepurpose ofSec.773(e)(2)(B)(ii), bywhat yardstick would theUSconsider whether
sales ofthelikeproduct atprices below perunitcosts ofproduction plusSGAcosts are,byreason
ofprice, intheordinary course oftrade ornot?G/ADP/Q1/USA/2
G/SCM/Q1/USA/2
Page5
Answer
TheStatement ofAdministrative Action accompanying theUruguay Round Agreements Act
provides that,indetermining profit andSG&A inorder tocalculate constructed value, theDepartment
ofCommerce willignore salesnotmade intheordinary course oftrade, suchassalespriced below
cost. Thisisfullyconsistent withArticle 2.2.2 oftheAntidumping Agreement, which provides for
calculating profits onsalesintheordinary course oftrade.
IV. Administrative reviews
2. Comparison ofIndividual Transactions toAverages
Question 9:Follow-up toHKquestion 35(p28)
Isthereview anddetermination oftheamount ofanti-dumping dutyunder Sec.751(a) within
themeaning ofdetermination ofthefinalliability forpayment ofanti-dumping duties inArticle 9.3
oftheAgreement? Inaninvestigation initiated after1January 1995, would therulestipulated in
Sec.777A(d)(1) beapplicable tothedetermination ofdumping? Inaccordance withArticle 9.3and
Article 18.3.1 oftheAgreement, would thesame rulebealsoapplicable tothecalculation ofmargins
ofdumping inthedetermination oftheamount ofanti-dumping dutyunder Sec.751(a)?
Answer
Thereview anddetermination oftheamount ofantidumping duties under Section 751(a) is
a“determination ofthefinalliability forpayment ofantidumping duties ”within themeaning of
Article 9.3oftheAgreement. Section 777A(d)(1) isapplicable tothedetermination ofdumping in
investigations, butnotinadministrative reviews. Thisisconsistent withArticle 2.4.2 oftheAgreement,
which specifically limits therequirement thatdumping margins bebased oncomparison ofaweighted
averages-to-weighted averages orindividual transactions-to-individual transactions to“theinvestigation
stage”ofantidumping proceedings.
Neither Article 18norArticle 9.3negates thisspecific provision ofArticle 2.4.2. Article 18.3
simply specifies which investigations andwhich reviews willbegoverned bythenewAgreements,
rather thanbytheprevious GATT Codes. Itdoesnotrequire thatallprovisions which apply to
investigations alsoapply toadministrative reviews. Indeed, some provisions ofthenewAgreement
provide fordifferent treatment forreviews andinvestigations. Article 9.3simply provides thatthe
amount ofdumping duties should notexceed themargin ofdumping under Article 2.Aswehave
explained, Article 2doesnotrequire thatmargins inreviews bebased oncomparisons ofweighted
averages-to-weighted averages orindividual transactions-to-individual transactions.
Question 10:
Sec.751(a)(2)(B) provides foraccelerated review anddetermination ofanti-dumping duties
fornewexporters andproducers. Would thenewexporters andproducers beentitled totermination
upondeminimis margin under Sec.733,735and771(24)(A)(i), faircomparison between like-with-like
transactions under Sec.777A(d)(1), andexchange rateprovisions under Sec.773A? Ifnot,howwould
theUSexplain thedisparity intreatment between anexporter/producer subject toanADdutyanda
newunrelated exporter/producer subject toanaccelerated review, inboththeirfirsttimedetermination
ofdumping?G/ADP/Q1/USA/2
G/SCM/Q1/USA/2
Page6
Answer
Anewshipper review under Section 751(a)(2)(B) isanadministrative review under anexisting
dumping order, notanewinvestigation. Thus, there isnodisparity innotexcluding from theorder
newshippers found tohavezeroordeminimis dumping margins during anewshipper review. In
conducting newshipper reviews, theUnited States would follow thestatute asitapplies toadministrative
reviews. Asinother reviews, Section 777A(d) would notrequire thatdumping margins beestablished
onthebasis ofcomparisons ofweighted averages-to-weighted averages orindividual
transactions-to-individual transactions. Thisisconsistent withArticle 9.5oftheAgreement, which
requires administering authorities toconduct a“review ”toestablish individual dumping margins for
newexporters. Article 9.5doesnotgrant newexporters anewinjury test,orrequire thattheybe
excluded from theorder iftheyhavezeroordeminimis margins during theperiod covered bythe
review.
V. Miscellaneous
4. Multinational Corporations
Question 11:Follow-up toHKquestion 30(p34)
Would theapplication ofsec.773(d)(3) result inanormal value different fromthatotherwise
could havebeenobtained onthebasis ofdataregarding thecountry ofexport (origin) only? How
would theUSreconcile thisprovision withArticle 2.2oftheAgreement which establishes thenormal
value solely onthebasis ofdataregarding thecountry ofexport (origin)?
Answer
TheAntidumping Agreement issilent withrespect tomultinational corporations. Article 2.2
applies tosituations where there arenoorinsufficient salesinthedomestic market oftheexporting
country andprovides that,insuchsituations, normal value willbebased onthirdcountry salesoron
constructed value. Section 773(d)(3) addresses theverydifferent situation inwhich dumped salesby
asubsidiary intheexporting country aremade possible bytheparent company ’shigher-priced sales
intheparent company ’shome market. Insuchsituations, thesubsidiary ’ssalesintheexporting country
donotprovide ameaningful basis forcomparison tothesalesintheUnited States.
VI. Injury
5. Cross-cumulation
Question 12:Follow-up toHKquestion 22(p37)
Article 3.5oftheADAgreement provides thattheauthorities shallexamine anyknown factors
other thanthedumped imports which atthesametimeareinjuring thedomestic industry andtheinjuries
caused bytheseother factors mustnotbeattributed tothedumped imports. Howwould theUSreconcile
thisprovision withsection 771(7)(G) which permits cross cumulation ofthevolume andeffect ofdumped
andsubsidised imports?
Answer
Thecausation standard inArticle 3.5oftheADAgreement isnotsubstantively different than
itspredecessor provision inthe1979Code. TheGATT 1947Panel Report intheNorwegian Salmon
casefound thatthispredecessor provision didnotrequire theUSInternational Trade Commission to
isolate theinjury caused byother factors from injury caused byunfair imports. ADPanel Rep. atG/ADP/Q1/USA/2
G/SCM/Q1/USA/2
Page7
¶555(Nov. 30,1992). Thus Article 3.5doesnotrequire theCommission toseparate injury caused
bysubsidized imports from injury caused bydumped imports.
Because Article 3.5doesnotrequire theCommission toisolate injury caused byeachdiscrete
factor other thenthedumped imports, italsodoesnotsupersede theinstruction ofArticle 3.4thatthe
Commission consider allrelevant economic factors bearing onthestateofthedomestic industry in
examining theimpact ofthedumped imports onthedomestic industry. Thepresence ofother imports
inthemarket thataresubsidized, notdeminimis ,andcompete withthedomestic likeproduct andthe
dumped imports isclearly aneconomic factor relevant totheeffect ofthestateoftheindustry and
thuscanbeusedtohelpaidassessment oftheimpact ofdumped imports ontheindustry. Moreover,
cross-cumulation ofimports bytheCommission wasalsoalong-standing practice under the1979Tokyo
Round codes, which didnotaddress cumulation atall.
Others
Question 13:
When theUSadministering authority initiates aninvestigation, itdefines itsscope interms
ofaclass orkindofmerchandise, alikeproduct andanindustry. Suchascope inturndelimits the
boundaries oftheUSadministering authority ’sdetermination whether thepetition wasfiledonbehalf
ofaUSindustry.
When, inthecourse oftheinvestigation, theUSadministering authority subsequently modifies
thescope ofinvestigation (byenlarging orreducing it),howdoestheUSfulfilitsobligation toensure
thatthepetition remains filedonbehalf ofthenewly defined USindustry? IftheUSdoesnotreconsider
whether itsobligation remains fulfilled, onwhatlegal basis doesitrelyforsuchinaction?
When theUSadministering authority includes parts, components orsubassemblies inthescope
ofananti-dumping investigation, howdoesitdetermine thatsuchpetition isfiledonbehalf ofaUS
industry? What efforts aremade todetermine theviews andmarket shares oftheproducers inthe
USofparts, components orsubassemblies?
Answer
Atthetimeofinitiation, theUnited States determines thatantidumping petitions arefiledon
behalf ofthedomestic industry producing thelikeproduct. Although theUnited States sometimes
clarifies thescope ofantidumping investigations, itwould notenlarge thescope ofaninvestigation
soastoinvalidate itsfinding ofindustry support. Where subassemblies orcomponents ofthesubject
merchandise areincluded inthesubject merchandise, theUnited States willgivespecial consideration
totheirpotential effect onthedetermination ofthedomestic likeproduct prior toinitiation, toavoid
raising issues withrespect tothedetermination ofindustry support. Inanycase, therequirement of
industry support issolely forthepurpose ofinitiation. There isnorequirement thatitberedetermined
atalaterpoint intheproceedings.