RESTRICTED
WORLD TRADE G/ADP/Q1/EEC/15
G/SCM/Q1/EEC/15
ORGANIZATION 15April 1998
(98-1502)
Original: English Committee onAnti-Dumping Practices
Committee onSubsidies andCountervailing Measures
NOTIFICATION OFLAWS AND REGULATIONS UNDER
ARTICLES 18.5AND 32.6OFTHE AGREEMENTS
Replies oftheEUROPEAN COMMUNITY to
Follow-up Questions from JAPAN1
Thefollowing communication, dated 9April 1998, hasbeenreceived from thePermanent
Delegation oftheEuropean Commission.
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Q1. When products (notforexport) aresoldthrough asales subsidiary onlytothedomestic
independent buyers (e.g.retailers) inthedomestic market, andwhen exported products aresold
through asales subsidiary intheECtoindependent buyers intheECmarket, bothsubsidiaries
should betreated asbeing atthesame leveloftrade. Inthiscase, doestheCommission consider
thatsalespricefromthesalessubsidiarytotheindependentbuyersinthedomesticmarketrepresent
adifferent leveloftrade from export price attheex-factory level?
Reply
Ifsalesprices from asingle salessubsidiary ofthemanufacturer toindependent retailers on
thedomestic market arecompared withex-factory export prices paidbyadistributing salessubsidiary
intheCommunity, theywould beconsidered torepresent different levels oftrade. Thisisbecause
theprices referred toonthedomestic siderepresent prices toendretailers, while those ontheexport
siderepresent prices toanintermediate distributor.
Q2. Ifyes,should notanadjustment bemade sothatnormal value isestablished atalevel
equivalent tothatoftheexport price (i.e.deducting costs incurred onthedomestic subsidiary)
under theprovisions ofArticle 2.10(d) oftheECAnti-Dumping Regulation?
Reply
Normal value should always beestablished atalevel equivalent tothatoftheexport price;
exporters aretherefore invited tosubmit anddemonstrate anyclaim foranadjustment inthisrespect
from theoutset ofevery investigation. Article 2.10(d) oftheECAnti-Dumping Regulation would
beapplied intheabove example inorder thatthenormal value bemade representative ofsalesprices
toadistributor, since theexport price willhavebeenestablished atthislevel.
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Q3. Ifno,what istherationale oftreating thedomestic manufacturer andthedomestic
subsidiary atthesame level?
Reply
Theonlyrationale fortreating thedomestic manufacturer andthedomestic subsidiary atthe
same levelcould beifbothentities wereselling theproduct concerned toanidentical subsequent level
inthedistribution chain. Thenumber ofhands passed through isnotinitselfanindicator ofchanging
levels oftrade.
Q4. According toArticle 2.10(d)(i), "itisshown thattheexport price, including aconstructed
export price, isatadifferent leveloftrade from thenormal value andthedifference hasaffected
price comparability which isdemonstrated by...(underline added)". Suppose there exists the
difference oflevel oftrade, what isthecriteria ondetermining whether thedifference oflevel
oftrade hasaffected price comparability?
Reply
Demonstrable differences inlevels oftrade onanexporter 'sdomestic market should havea
direct effect onprice comparability. Theprices charged byamanufacturer towholesale distributors,
forexample, could onlybeidentical totheonward prices charged bythose distributors toretailers
ifthedistributors wereoperating entirely ataloss. Orputanother way,iftheCommission ispresented
withasetofuniform prices, some ofwhich arenominally those charged toretailers andtheothers
todistributors, aleveloftrade adjustment would besuperfluous since theselection ofeither group
ofsales forthedumping margin calculation would givethesame result. Insuch acase, price
comparabilitywouldbedeemedunaffectedbythesupposeddifference.Normally,therefore,thecriterion
fordetermining whether price comparability isaffected byadifference inleveloftrade issimply that
theprices charged reflect thedifferent functions performed byeachlevel.
Q5. What doesanexporter have toshow tosatisfy thecriteria described above?
Reply
InorderfortheCommissiontomakeanadjustmentforleveloftrade,itasksexporterstoprovide
information onprices paidorpayable byitsdomestic customers, andtospecify thelevel(s) oftrade
atwhich itconsiders these customers tooperate. TheCommission hasanumber ofoptions inorder
toidentify domestic sales attheright level. Itmaydirectly useprice information provided bythe
exporter concerned, orpriceinformation fromanother exporter should thisbemore appropriate. Thus
ifanyoneoftheexporters investigated canprovide details ofsalesonitsownmarket atalevelequivalent
tothatusedforestablishing export prices, theCommission mayusethisevidence tocalculate an
adjustment factor inorder tobring alldomestic salestotheappropriate level. Nevertheless, itmay
bethatnoneoftheexporters canprovide evidence ofprices fortransactions attheappropriate level,
since anaccurate equivalent totheexport price level doesnotexistonthatmarket. Insuchcases,
theCommission maystillgrantareasonable adjustment, inlinewiththeprovisions ofsub-paragraph (ii)
ofArticle 2.10(d).
Q6. According toArticle 2.4oftheWTO Anti-Dumping Agreement, "Due allowance shall
bemade ...,fordifferences which affect price comparability, including differences in...,level
oftrade, ...,andanyother differences which arealsodemonstrated toaffect price comparability
(underline added)". This provision indicates thatthedifference inlevel oftrade affects priceG/ADP/Q1/EEC/15
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comparability. Does theCommission impose theburden ofproof onexporters thatthedifference
inleveloftrade affects price comparability?
Reply
Article 2.4oftheWTO Anti-Dumping Agreement states thatallowance shallbemade "ineach
case,onitsmerits, fordifferences which affect pricecomparability". Thelistofexamples ofpossible
suchdifferences, including leveloftrade, isnon-exhaustive, butisclearly subject totheassumption
thatprice comparability isshown tobeaffected -"...andanyother differences which arealso
demonstrated toaffect price comparability" [emphasis added]. Asstated intheprevious answer the
Commission actively seeks therequisite information fromexporters, andprovides forsituations where
quantitative evidence onwhich tobasealeveloftrade adjustment isunavailable.
Q7. Ifso,howdoestheCommission justify itunder theprovision, "The authorities ...shall
notimpose anunreasonable burden ofproof onthose parties" inArticle 2.4oftheWTO Anti-
Dumping Agreement?
Reply
Aburdenofproofandcooperationmustrestwiththeexporterunderinvestigation-thestipulation
inArticle 2.4oftheWTO Anti-Dumping Agreement underlines thefactthatthisburden should not
beunreasonable.
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