RESTRICTEDWORLD TRADE
ORGANIZATIONG/ADP/IG/W/30
12 March 2001
(01-1189)
Committee on Anti-Dumping Practices
Informal Group on Anti-CircumventionOriginal:  English
REPLIES TO CIRCUMVENTION SCENARIOS PRESENTED IN THE
LAST MEETING OF THE INFORMAL GROUP ON CIRCUMVENTION
Paper by the European Communities
The following communication, dated 8 March 2001 has been received from the Permanent
Delegation of the European Commission.
_______________
Example 1
Fibre imported by country A from country B is subject to an anti-dumping duty.  After the
imposition of the anti-dumping duty, a marked substitution of imports of fibre by imports of “tow” –i.e. fibre in uncut form – originating in country B takes place.  As tow is classified under another
customs heading, it was not covered by the investigation and is therefore not subject to the anti-
dumping duty. Imports of tow clearly coincide with the imposition of the anti-dumping measure.
After importation, tow is cut into fibre; a relatively simple process, involving no particular
know-how and only very minor material investme nt.  The cutting operation, which is part of a
continuous process, generates extra costs in terms of packaging.  The hourly labour cost in country Ais higher then in country B.  The fibre is then sold for the same applications and to the same customers
as the fibre previously exported in cut form.
Action 1
First, the EC would analyse whether the change of pattern of trade clearly shows that the
practice of importing tow started simultaneously with or after the initiation of the anti-dumping
investigation on fibre.  Investigators would also want to know whether any other economic
justification, apart from the imposition of the duty, could be given by the exporters for the increase of
the imports of tow and the decrease of the imports of fibre. If, as in this example, the cost of
processing the tow is higher in country A than in country B, then investigators would probably start to
suspect circumvention.  This would be doubly true if the imports of tow substantially replaced in
terms of prices and quantities the imports of fibre and this practice undermined the remedial effects of
the anti-dumping duties on fibre. Finally, investigators would also want to confirm that the
circumstances of dumping concerning tow are similar to those observed for fibre.
In these circumstances, in order to re-establish the effectiveness of the original anti-dumping
duties on fibre, the measures could be extended to the imports of tow.G/ADP/IG/W/30
Page 2
Example 2
Motorcycles imported into country A from country B are subject to an anti-dumping duty.
After imposition of this duty, a marked substitution of imports in country A of motorcycles by imports
of motorcycle parts  shipped from country B takes place. Imports of the component motorcycle parts
clearly coincide with the imposition of the anti-dumping measures.
The shipments of motorcycle parts are spread over various containers and shipments and they
are routed to several customs entry points.  Therefore they cannot be classified as complete
motorcycles and are not covered by the anti-dumping duty.
Once imported into country A the motorcycle parts can easily be assembled.  This process
does not require any particular training, know-how, equipment or installations.  Hence, the extent ofinvestment in the importing country is minimal.  The assembled motorcycles are sold to the same
customers and for identical uses as the completed motorcycles that were produced and exported by
country B.
The value of the parts coming from country B represents a significant percentage of the value
of all the parts used, and the value added in country A to the parts assembled is relatively limited (as a
percentage of the total manufacturing cost).
Action 2
In this scenario, investigators would once again try to ascertain whether the change of pattern
of trade coincided with the initiation of the anti -dumping investigation on motorcycles or with the
imposition of anti-dumping duties.  It would also be important to check whether there is any other
economic justification, apart from the imposition of the duty, for the increase in imports of motorcycle
parts and the decrease in imports of motorcycles.  If the change in the pattern of trade did coincidewith the imposition of the duty, and there was no other economic justification other than the
imposition of the duty, then investigators would focus their attention on the nature of the assembly
operation in country A.  In particular, they would look at the value of the parts and the ‘value added’
of the assembly operation. If at least 60 per cent of the total value of the parts are imported from
country B, and the value added in country A is less than 25 per cent of the manufacturing cost, thencircumvention would start to be suspected.  The ma nufacturing cost would be the value of all parts
used, plus labour costs and factory overheads, but does not include SG&A costs or profit.
Investigators would also examine the situation of dumping of the parts in relation to the
normal values previously established.  Finally, investigators would analyse whether the effects of the
measures have been undermined by looking at prices and quantities of the imports of parts.
Example 3
Mobile phones imported by country A from country B are subject to anti-dumping duties.
Since the imposition of these anti-dumping duties the imports of mobile phones from country B have
been largely replaced by imports from country C (to which the anti-dumping measures are notapplicable).
Country B exports parts of mobile phones to country C.  These parts are then assembled in
country C and imported as mobile phones into country A.
The assembly of the parts is not particularly difficult (no specific training or know-how is
required, nor a considerable investment).  A substantial percentage of the parts used by country C toG/ADP/IG/W/30
Page 3
assemble the mobile phones come from country B and the value added to the parts in country C is
relatively insignificant.
The finished products - the assembled mobile phones - are exported to country A and sold to
the same categories of customer and for the same uses as the complete mobile phones previously
exported by country B.
Action 3
In example 3, the change of pattern of trade shows that the practice of importing mobile
phones from country C into country A started after the initiation of anti-dumping investigation on
mobile phones from country B into country A.
It is also clear that a substantial share of the parts used by country C to produce the mobile
phones comes from country B, that these parts are being assembled in country C and that the value
added to the mobile phones parts in country C is not important.
This may potentially undermine the remedial effects of the anti-dumping duties on mobile
phones imported from country B into country A, so as in example 2, investigators would look
carefully at the value of the parts and the ‘value added’ of the assembly operation.  If at least 60 per
cent of the total value of the parts originate in country B, and the value added in country C is less than
25 per cent of the manufacturing cost, then circumvention could be suspected.
In order to re-establish the efficiency of the original anti-dumping duties on mobile phones
from country B, it may be appropriate in these circumstances to extend the measures to imports of
mobile phones from country C.
Example 4
Steel pipes imported from country B to country A are subject to anti-dumping duties.  Since the
imposition of these duties, the imports of steel pipes from country B have been largely replaced by
imports of the same product from country C (not subject to the anti-dumping duties).
As a consequence of the anti-dumping measures, country B exports its steel pipes to country C.
Subsequently the pipes are exported by country C to country A and no anti-dumping duties are
payable.
There is only limited production of this product in country C.
Action 4
First, in order to assess whether circumvention exists, an analysis of the change of pattern of
trade would have to clearly show that the practice of importing steel pipes from country C intocountry A started simultaneously with the initiation of the anti-dumping investigation on steel pipes
from country B into country A or the imposition of the anti-dumping duties.  In addition, there would
have to be no other economic justification for the increase of the imports of steel pipes from country
C into country A and the decrease of imports of steel pipes from country B other than the imposition
of the duty.  Obviously, if it is shown that the imports from country C are indeed produced by themanufacturer located in that country, no circumvention would be found.
The investigation would have to demonstrate that these steel pipes are produced in country B,
then shipped to country C and imported from country C into country A without any transformation.G/ADP/IG/W/30
Page 4
This practice would obviously undermine the remedial effects of the anti-dumping duties on steel
pipes imported from country B into country A.
Finally, the situation of dumping concerning steel pipes from country C in relation to the
normal values previously established would have to be examined.  Investigators would also analyse
whether the effects of the measures have been undermined by looking at prices and quantities of theimports from country C.
Example 5
Laptop computers imported by country A from c ountry B are subject to anti-dumping duties.
Since the imposition of these anti-dumping duties the imports of laptops from country B have been
largely replaced by imports from country C (to which the anti-dumping measures are not applicable).
Country C assembles parts of laptops. The assembly of the parts is not particularly difficult
(no specific training or know-how is required, nor a considerable investment).  The parts used by
country C to assemble the laptops come from a variety of countries, including country B and the value
added to the parts in country C is reasonably significant.
The finished products - the assembled laptops - are exported to country A and sold to the
same categories of customer and for the same uses as the complete laptops previously exported by
country B.
Action 5
Once again, there would be an analysis of the change of pattern of trade to see whether the
practice of importing laptops from country C to country A started simultaneously with the initiation of
the anti-dumping investigation or the imposition of anti-dumping duties on laptops from country B.
Investigators would examine what percentage of the parts used by country C to produce the
laptops comes from other countries, including country B, and would then look at the value added to
the laptop parts in country C.
Given that, in this example, country C adds a substantial value to the parts assembled, it may
well be that this amounts to more than 25 per cent of the manufacturing cost. In these circumstances,
the investigation would be terminated.  Such a high value added would indicate that the assembly
operation is not a mere transplant aimed at circumventing the anti-dumping measures imposed on
country B but a genuine investment based on a variety of economic reasons.
Example 6
A chemical used in the agriculture industry im ported by country A from country B is subject
to an anti-dumping duty.  After imposition of th is duty, producers in country B mixed a tiny amount
of additive into the chemical concerned which does not make it a compound, or give it other qualities
and uses, but alters its customs classification.  As a result, it is no longer subject to the anti-dumpingduty.
The newly classified chemical is exported to country A and sold to the same categories of
customer and for the same uses as it was when previously exported by country B under a different
customs classification.G/ADP/IG/W/30
Page 5
Action 6
Investigators would analyse the change of pattern of trade to see whether the practice of
importing the chemical mixed with the tiny amount of additive started simultaneously with the
initiation of the anti-dumping investigation or the imposition of anti-dumping duties on the original
chemical.  They would also check whether no other economic justification than the imposition of theduty could be given by the exporters for the increase of the imports of chemical with additive and the
decrease of the imports of the chemical without additive.
It would also be important to look at the chemical with additive, to see whether or how it
altered the chemical, and its end use.  The fact that, in this example, the newly-classified chemical
with additive is sold to the same categories of  customer for the same purposes, would strengthen
suspicions of circumvention.
Nevertheless, as in all anti-circumvention cases, it would still have to be confirmed that the
price of the altered chemical subject to the circumvention investigation is below the normal value of
the unaltered chemical as established in the original investigation.  Equally, it would also be necessary
to examine whether the effects of the measures have been undermined by looking at prices andquantities of the imports of the chemical with the additive.
__________