. /.WORLD TRADE
ORGANIZATIONG/ADP/Q1/EEC/22
G/SCM/Q1/EEC/22
4 September 2003
(03-4632)
Committee on Anti-Dumping Practices
Committee on Subsidies and Countervailing MeasuresOriginal:  English
NOTIFICATION OF LAWS AND REGULATIONS UNDER
ARTICLES 18.5 AND 32.6 OF THE AGREEMENTS
Replies to the Questions Posed by the UNITED STATES1
Regarding the Notification of the EUROPEAN COMMUNITIES2
The following communication, dated 2 September 2003, has been received from the
Permanent Delegation of the European Commission.
_______________
Q1. In Article 1.2 of Council Regulation (EC) No 1972/2002 ("the Regulation"), the EC
provides three situations which it views as constituting a particular market situation.  Amongthe options specified is "when prices are artificially low."  Under what circumstances would the
EC disregard low prices pursuant to Article 1.2 which would not have been disregarded under
Article 2.2.1 of the AD Agreement (i.e. as outside the ordinary course of trade because they were
below the cost of production)?
Reply
At the outset, the EC would like to recall that  according to the first sentence of Article 2.2 of
the ADA, domestic sales prices can be disregarded "when there are now no sales of the like product in
the ordinary course of trade in the domestic market of the exporting country or when, because of a
particular market situation (…) such sales do not permit a proper comparison".  Thus, both concepts
spelled out in this provision have the same legal consequences.
Secondly, the EC does not have any practical experience yet in the application of the new EC
provision referred to by the United States.  Consequently, anything the EC offers as a reply at this
stage will have to be tested once the EC is confronted with the complexities of a real case.
Thirdly, the EC does not exclude that, when it comes to the practical application of the
notified provision, ultimately there might be (at least a partial) overlap between the ordinary course of
trade concept and the particular market situation concept.
More specifically, the particular market situation concept seems to be the more appropriate
sedes materiae  when the prices of the exporting producer subject to investigation are to a considerable
extent distorted because of structural reasons which significantly affect the economic sector in
question or its upstream sectors.  The term "structural reasons" should be understood as referring to
factors which affect the play of market forces to an extent that prices and costs can no longer be
                                                     
1 G/ADP/Q1/EEC/21-G/SCM/Q1/EEC/21
2 G/ADP/N/1/EEC/2/Suppl.3G/ADP/Q1/EEC/22
G/SCM/Q1/EEC/22
Page 2
considered as being the result of such play. An example falling under this category could be price
fixing.
Q2. What type of " non-commercial processing arrangements " does the EC believe would
give rise to a "particular market situation"  pursuant to Article 1.2 of the Regulation?
Reply
Again, the lack of practical experience in this field makes it difficult to give comprehensive
guidance in this respect.  In the light of this pr oviso, the EC would like to clarify that a simple
processing arrangement which implies an arm's length remuneration of the processor would certainly
not fall under this term.  However, if there are indications that the remuneration is not sufficient to
cover the full costs of the processing and/or if there are reasons to believe that other than purely
commercial considerations might have had an impact on the terms of the agreement.  It is expected
that this provision will mostly be relevant for non-commercial processing arrangements concerningthe product in question but it could potentially also cover such arrangements relating to upstream
products.
__________