WORLD TRADE
ORGANIZATIONG/ADP/IG/W/49
24 April 2003
(03-2170)
Committee on Anti-Dumping Practices
Informal Group on Anti-CircumventionOriginal:  English
CIRCUMVENTION
Paper from New Zealand
Background
Trade remedy measures in the form of anti-dumping duties can be applied when an
administering authority has established, after an investigation that, dumped imports have caused
material injury to a domestic industry.  Such duties are applied in order to offset the effects of thoseinjurious imports which are attributable to dumping.  If, however, exporters and importers circumvent
such determinations and avoid paying any duties that have been levied then these trade remedy
measures are rendered ineffective and the injurious impact of dumping will continue.  The practice is
known as circumvention and is of serious concern for all Members as it undermines the effectiveness
of trade remedy determinations.
Ministers gave the Informal Group on Anti-Circ umvention a task at the completion of the
Uruguay Round in April 1994.  Ministers recognised that circumvention was an area where no
agreement had been reached, but recognised that the issue had to be addressed.  The Ministerial
Decision on Anti-circumvention formed an integral part of the Final Act embodying the results of the
Uruguay Round, and Ministers decided to refer the matter to the Committee on Anti-Dumping
Practices, established under the Agreement, for resolution.  Part of that decision also highlighted thefact that, if possible, uniform rules in the area should be applied as soon as possible.
Since that time Members have been debating the topic under the guidelines of the Chairman’s
proposal in G/ADP/W/404 of 20 March 1997.  This paper outlined three broad areas and stages in to
which discussions on the informal consultations could be divided.  These were:
1. For the purpose of setting up the problem:
What constitutes circumvention?
2. For transparency purposes and on a without prejudice basis:
What is being done by members confronted with what they consider
to be circumvention?
3. For the purpose of reviewing the problem within the multi-lateral framework:
To what extent can circumvention be dealt with under the relevant
WTO rules?
To what extent can it not? andG/ADP/IG/W/49
Page 2
What other options may be deemed necessary?
Close to 50 papers have now been lodged by Members since this debate began and those
papers encompassed all of the above questions.  To date, however, none of the questions have been
satisfactorily answered.  The Committee must now deci de how to resolve this issue.  In order to do so
successfully the Committee should establish the parameters of this issue in a constructive way to
achieve resolution.  Once these matters have been settled then the Committee can proceed to deal with
the substantive issue of whether or not to draft specific rules to cover the practice known as
circumvention.  Accordingly New Zealand considers the best way to proceed is:
• Reach a resolution of how to determine what can be considered to be
circumvention;
• Determine the extent to which such circumvention practices can be dealt with
through existing mechanisms, whether related to anti-dumping processes or otherinstruments, for example, customs law and procedures;
• To the extent that circumvention practices cannot be dealt with through existing
measures and mechanisms, determine the extent to which the Anti-Dumping
Agreement would need to be amended to deal with such practices;
• Consider whether such amendments can remain within the basic principles of
Article 6 of the GATT 1994 and the Anti-dumping Agreement.
On the basis of such analysis members will be able to make judgements about the extent to
which they could accept changes to the text of the Anti-Dumping Agreement.  Such an analysis wouldalso help clarify the extent to which the existing anti-circumvention provisions in the national
legislation of some WTO members are consistent with the Anti-Dumping Agreement.
What is Circumvention?
At the Spring meeting of the Informal Gr oup in September 2002, New Zealand presented a
case (disassembled paintbrushes) where it considered that circumvention of an anti-dumping measure
was taking place, but under existing domestic laws and practice it appeared that the administering
authority was unable to take action.  At the conclusion of discussions surrounding this particular
example, it was suggested that New Zealand could present a paper to the next meeting based around anegative list of circumstances that it considered were clearly not circumvention.  This paper is a first
attempt to identify some of these circumstances.
A negative list would consist of a set of exampl es or practices which clearly do not constitute
circumvention and that, as such, there are likely to be other rules available to an administeringauthority to address such issues. This means that new rules would not need to be created to cover the
situation.  Inevitably, some questions of what "might" be considered to be circumvention might need
to be canvassed and the circumstances where circumvention is not taking place described.  As a "tool"
to examining what constitutes what might or migh t not constitute circumvention there is a need to
draw up a set of common principles that are based on procedural fairness and accountability, and still
observe the transparency provisions set out in the Agreement.G/ADP/IG/W/49
Page 3
NEGATIVE LIST
NOT CIRCUMVENTION
Fraud and Erroneous Entry of Goods
A category of practice that does not constitute circumvention is where a deliberate attempt
has been made to falsify documents or declare incorrect countries of origin when clearing goods.  In
such cases Customs law is available to deal with such practices and in such cases Customs Authorities
should be looking to take action (e.g. erroneous entry, defrauding the revenue, false valuation etc.)
under Customs Law.
Importers Changing Sources of Supply (Country Hopping)
Where an importer switches source of supply to a new country (the practice commonly
known as country hopping) certain elements of that decision would need to be studied before a
definite decision could be made.  A dumping investigation will establish that dumped imports from anexporter of a specific country  are causing material injury to a domestic producer of like goods in the
domestic market as a result of the dumping.
If, however, the importer decides to source the same or similar goods from a totally different
source, unrelated to that country named in the original investigation then this type of action shouldclearly not constitute circumvention and be on a negative list.
In New Zealand’s view the only way of establishing whether these goods are dumped, i.e.
sold at less than the normal value in the country of origin, is to undertake a new case investigating
those goods.  This particular practice has been canvassed in previous New Zealand papers dealingwith sugar imports from Belgium, Denmark and the Netherlands, where New Zealand considered that
it was necessary to undertake new investigations.
Parts to Goods
Another example where circumvention is clearly not taking place is where a determination
has been made on an important part of a machine or appliance.  An example discussed in this Groupwas where colour picture tubes from several countries were being imported into the United States.
Subsequent to the dumping determination being made, colour picture tubes from those countries were
shipped to a third country where they were then inco rporated into television sets and exported to the
United States.  The product was now incorporated into a television set and as such it could not be
viewed as subject to the anti-dumping order against co lour picture tubes.  It was clear, therefore, that
any new action (if necessary) would need to be taken against television sets as opposed to one part of
that television set.
SITUATIONS THAT MIGHT BE CIRCUMVENTION
Exporters Changing Sources of Supply
Where a final determination and duty is put in place and an exporter decides to change the
source of supply to an identical product from a new country, then there might be an argument that
circumvention is occurring, particularly if there is common ownership or the two sources are related.
Injury to the domestic industry will still occur and the industry and like goods questions remain
constant.  The issue would then be whether or not the goods are technically dumped from the new
source.  In such circumstances rules might be needed  to enable an administering authority to restrict
its investigation to the dumping aspect of such a circumstance.G/ADP/IG/W/49
Page 4
Minor Modifications to Goods
Several examples have been documented (for example: G/ADP/IG/W/1 by the European
Community and G/ADP/IG/W/2 by the United States ) by Member's where minor modification to the
strength of a chemical product or bulk importation of a product for repackaging once imported have
been experienced which are attempts to circumvent an anti-dumping determination.
New Zealand has also described a situation (G /ADP/IG/W/11) where plasterboard of sizes
outside those stipulated in the determination no tice were imported to avoid an anti-dumping duty.
The export price per m2 of the longer board was the same as that being imported under the
determination, it was being used in the same market and was causing and exacerbating any injury tothe domestic industry.  Under New Zealand law, a new investigation was required to cover a product
that only differed in length to that stipulated in the determination notice.
In such cases, the expense incurred by both the domestic industry and the administering
authority in conducting a new investigation is a cost that should not be borne in such circumstances.
Importation of Parts and Disassembled Goods
Cases involving imports of finished goods being subject to an anti-dumping determination
being replaced by disassembled goods or parts being shipped to a third country for assembly andsubsequent export are a more difficult category to analyse.  Some guiding principles already discussed
have been:
• the extent of investment in assembly plants in perhaps a third country;
• whether there has been a substantial transformation of goods.
A case could be made that in some circumstances, the above examples might not be viewed as
circumvention.  In deciding what might or might not  be circumvention it may be useful to use as a
starting point other WTO principles and disciplines such as those found in the valuation and rules of
origin Articles of the GATT.  There are also common rules used by Customs administrations on how
goods are to be classified under a Customs Tariff.
This does, however, present a particular problem in that Members do not use uniform rules in
these areas and any rules that may be considered necessary for the purposes of anti-dumping would
need to be negotiated and adopted by all Members.
Some general principles that may indicate that a particular situation is not circumvention
could involve an investigation of:
• the timing of new or altered such imports;
• whether or not there has been a substantial change in the pattern of trade of the
goods identified in the dumping determination; and
• establishing whether or not the interested parties involved are the same as in the
original investigation, related or totally new exporters.G/ADP/IG/W/49
Page 5
Timeliness of Action
What is clear is that all administering author ities should be able to combat instances of
genuine circumvention quickly and effectively or those domestic industries bringing cases will
continue to be damaged, sometimes leading to their closure.  This may be more of an issue fora small economy where domestic industries are on a smaller scale than those in larger
countries.
Most Members' laws allow the administering authority a period of 12 months to
complete an investigation.  If an administering authority is forced to conduct a full 12-month
investigation where there is a genuine case of circumvention, irreparable damage could be
caused to a domestic industry before any measure could be put in place.  Comment has beenmade in this forum that New Zealand is in a better position than some to combat
circumvention as an investigation in New Zealand must be completed in 180 days from the
date of initiation.
Unfortunately this is not necessarily the case.  One particularly large shipment of a
particular good circumventing a final determination could be enough to close down a small
scale, efficient industry in New Zealand or any similar small economies before a measure can
be legally put in place under existing rules.
Summary
New Zealand believes that several practices identified in this paper are either clearly not
circumvention or can be regarded as being circumvention only in certain circumstances.
It is New Zealand’s belief that as the use of anti-dumping measures increase cases of
circumvention will also grow.  At present some cas es of circumvention can be dealt with, while others
cannot.  We should work from the generally accepted fact that there is an issue here and that we have
been charged by Ministers to deal with it.  It is acknowledged that some of the solutions to this
problem may lie in other areas, for example, valuation, rules of origin and Customs practices such as
the use of the harmonised system of classification in customs tariffs.  We should bear this in mind
when we are looking to frame any rules that we mi ght think are necessary to combat this particular
problem.
New Zealand considers that the next step the Informal Group should take is that it clearly
identifies and obtains agreement on the circumstances/behaviours that are clearly not circumvention.
The Group should then look to develop some comm on principles to deal with cases which might be
circumvention, incorporating some of the ideas and situations described in this paper and the papersof other Members already submitted to this Group.
__________