WORLD TRADE
ORGANIZATIONTN/RL/W/45
27 January 2003
(03-0556)
Negotiating Group on Rules Original:  English
REPLIES TO QUESTIONS TO OUR FIRST CONTRIBUTION (TN/RL/W/6)
Paper from Brazil;  Chile;  Colombia;  Costa Rica;  Hong Kong, China;
Israel;  Japan;  Korea;  Norway;  Singapore;  Switzerland and Thailand
We thank Members for the questions and comments put forward at the meetings of the
Negotiating Group on Rules in October and November 2002.  This paper replies to the questions to
our first paper.  The questions and comments would help further understanding by all Members of the
issues which we have indicated, according to the Doha mandate, in our previous papers.  Meanwhile,
we would urge other Members to indicate the issues of their interest, if any, to the Negotiation Groupon Rules as soon as possible.
1. Sales in the Ordinary Course of Trade
[Comments from Australia]
The proponents suggest strengthening Article 2.2.1 of the WTO Agreement on Anti-Dumping
(ADA) to include a definition of “reasonable period of time” and to allow investigating authorities to
disregard sales below cost when prices provide for the recovery of all costs in the period for dumping
investigation.
“A reasonable period of time” is not defined in the ADA.  However, the last sentence in
Article 2.2.1 illuminates the meaning of “a reasonable period of time” by treating costs as being
recoverable within a reasonable period of time should the criterion set out therein be satisfied.  The
rationale underlying this is probably to give effect to commercial reality that businesses do make
losses from time to time, whether deliberately as a loss leader or merely due to global downturn in
demands.  Costs should however be regarded as recoverable if they can be recouped through sales
over a longer period of time which in this case would be the investigation period.
Even though the meaning of “a reasonable period of time” is not defined in the ADA, that
phrase, when read in light of the last sentence, can be taken to mean “period of investigation” as the
test provided in Article 2.2.1 is whether the price of the goods is above the weighted average per unit
costs for the period of investigation.  This allows the exporter to assess the weighted average costs of
the goods for the investigation period for the purpose of determining whether such product is
profitable in the long run.
Based on the foregoing, Australia considers that the term “a reasonable period of time” is
implicitly clear in light of the test set out in Article 2.2.1.  Australia agrees that there would be some
merit in examining the definition of “reasonable period of time” provided that definition is consistent
with the present understanding of the phrase as set out in Article 2.2.1.TN/RL/W/45
Page 2
[Question from the EC]
Do the proponents have any views on whether the "reasonable period of time" in
Article 2.2.1. ADA should be identical with the "investigation period on dumping"?
[Question from the United States]
Although the submission contains a heading on “sales in the ordinary course of trade”, which
is addressed in Article 2.2, the discussion is limited to the test for disregarding sales below the cost of
production, as described in Article 2.2.1 (which is only one type of sale outside the ordinary course of
trade).
Does the submission propose a discussion of th e sales-below-cost test under Article 2.2.1, or
of the broader “ordinary course of trade” concept under Article 2.2?
Reply
The current text of Article 2.2.1 provides several ways for the authorities to disregard home
market or third country sales for the purpose of calculation of the normal value.  Certain terms in the
Article are left undefined or vaguely explained.  Article 2.2.1 should be improved to provide a clear
guidance to Members on which sales should be used for the calculation of the normal value.
The current text of Article 2.2.1 does not have a definition of “a reasonable period of time”.
We are of the opinion that, when determining cost recovery, a reasonable period must be found
reflecting the normal operating cycle rule referred to in the general accepted accounting principles of
the member countries.  Such a reasonable period would normally cover more than one year.  In
addition, the AD Agreement does not have a provision setting forth an appropriate period of aninvestigation, as we separately propose to clarify.
In responding to a question from the United Stat es, we understand that the discussion of sales
“in the ordinary course of trade” is not limited to sales-below-costs but also include other sales like
affiliated party transactions, which are discussed se parately.  The other aspects of “ordinary course of
trade” may be explored separately.
2. Constructed Value
[Comments from Australia]
Document TN/RL/W/6 proposes that Article 2.2.2 of the ADA be elaborated to provide clear,
comprehensive and representative criteria for calculating a constructed normal value.
• Do the proponents consider that Article 2.2.2 should provide a hierarchy of options?
Article 2.2.2 gives authorities discretion in calculating the selling, general and administrative
costs and profit where actual data, pertaining to ordinary course of trade sales of like goods by the
producer/exporter, is not available.  Currently the discretion is limited to three non-hierarchical
options.
Australia considers that while it may be possible to negotiate a hierarchy for the existing
options, it is difficult to envisage useful criteria for the basis of the hierarchy.  As pointed out in the
EC- Bed Linen  case “[g]iven … that each of the three options is in some sense ‘imperfect’ in
comparison with the chapeau methodology, there is, in our opinion, no meaningful way to judgeTN/RL/W/45
Page 3
which option is less imperfect – or of greater authority - than another …”, ( EC-Bed Linen
WT/DS141/R, para 6.61).
The example provided in Document TN/RL/W/6 does illustrate the discretion available in
article 2.2.2 but Australia considers that this is desirable, given the myriad of circumstancesinvestigating authorities are faced with and the inherently imperfect nature of constructing a normal
value.
[Question from the EC]
Would the issue raised also encompass the question as to whether there should be more than
the 4 methods set out in Art. 2.2.2?  Are there already any thoughts as to the introduction of ahierarchy of methods under Art. 2.2.2 and, if so, what hierarchy?
As far as each of the 4 methods set out in Article 2.2.2 is concerned, do the proponents
envisage to add further criteria beyond the existing ones as interpreted by panel and AB reports?
[Question from the United States]
The submission asserts that Article 2.2.2 does not provide clear guidance for the use of
information for the calculation of constructed value, leading to “anomalous results”.  The submission
questions whether the Members should elaborate clearer, more comprehensive and representativecriteria when calculations of constructed value are made.  As an illustrative example of a situation
presumably leading to “anomalous results”, the submission describes a situation concerning the
appropriate profit rate to use in calculating constructed value when home market sales of one of the
companies subject to investigation are not representative and cannot be used for comparison to export
sales.  In the example, the investigating authority c ould choose to apply either a lower profit rate from
the broader industry (tableware), or a weighted average of the profit rates of two other companies
subject to the investigation that make the subject merchandise (disposable spoons).
(a) The concept of constructed value ultimately deals with the appropriate way to allocate costs
of production and profit.  Practices in this regard vary from Member to Member, industry to
industry, and firm to firm.  While the United States agrees that comprehensive rules are
generally beneficial, this may be an instance in which greater flexibility is necessary to takeinto account the circumstances of each case.  Could adoption of comprehensive criteria
eliminate the necessary flexibility to consider the accounting practices of a particular firm or
industry?  For example, such criteria potentially may greatly increase the burden on
responding exporters who could be required to report information as specified in Agreement
rules, rather than in accordance with their books and records.
(b) Regarding the “illustrative example” given on page 2, should an investigating Member be
concerned that profits from company B and C may be artificially depressed by the very
alleged dumping they are investigating?  Is there reason to believe that the profit margin for
spoons is greater or less than that for tableware as a whole?  If not, could an investigatingMember reasonably conclude that a profit figure drawn from a broader spectrum of
companies is likely to be more representative?
Reply
Article 2.2.2 of the AD Agreement does not provide clear guidance for the use of information
to calculate constructed value.  Owing to the lack of clarity and guidance in various aspects of this
Article, investigating authorities could potentially abuse the ambiguities and arbitrarily “construct”
artificially high dumping margins to the detriment of the interest of exporters and domestic users.TN/RL/W/45
Page 4
Such ambiguities are also not conducive to the predictability, consistency and transparency of the
rules in determining “constructed value”.  Both Australia and EC have noted one such aspect for
manoeuver: if the exporters or producers’ actual data on administrative, selling and general costs and
for profits is deemed not adequate, the investigat ing authority may use any of the three alternative
methodologies set out under Article 2.2.2(i)-(iii) to determine the profit to be used in constructedvalue.  There is no protection given to the exporters or producers concerned if the investigating
authorities concerned happen to choose the methodology resulting in the highest margins.  Such a
possibility for “picking or choosing” of methodologies is one of the areas which could lead to
arbitrarily high dumping margins.
Owing to the lack of clear, comprehensive and representative criteria on calculations of
constructed value, there are other rooms for abuses such that constructed value could be artificially
inflated, thus raising dumping margins arbitrarily.  For example, investigating authorities may define“the same general category of products” under Article 2.2.2 (i) in such a way that only those products
with higher margins of profits are included.  Similarly, when data of “other exporters or producers
subject to investigation in respect of production and sales of the like product” is used under Art. 2.2.2
(ii), there are rooms for abuses in “picking” those exporters or producers with higher profit margins or
costs.  It is the very nature under this article that so many different “methodologies” and thereforedata could be picked and chosen which give rise to rooms for abuses.  Clearer guidance and tighten
discipline in this article could certainly deter abuses and enhance legitimate trade interests of all
Members.
3. Cyclical Markets
[Comments from Australia]
The proponents suggest that Article 2.4 does not provide for the performance of cyclical
markets, especially in the cases of perishable goods, to be taken into consideration when comparing
normal value with export price.
• Can the current provisions be made to “fit” cyclical market situations?
[Question from the EC]
Could the proponents expand on which precise parameters should guide investigating
authorities in setting the investigation period for perishable goods or goods in a rapidly growing
manufacturing sector?
Reply
One form of a cyclical market is one where supply and/or demand changes according to a
certain important and predictable pattern.  The typical example is the cyclical supply of agricultural
products in countries subject to seasons.  Other types of cyclical markets are those where demand
peaks during certain times of the year.  In the case of a rapidly growing manufacturing sector, there
are cases in which cost of production changes according to a certain important and predictable pattern.
We would like to clarify that we are not implying that Article 2.4. does not provide any
guideline to  the situation of cyclical markets. Article 2.4. says that due allowance shall be made in
each case on its merits, for differences which affect price comparability including differences in
conditions and terms of sale, taxation, levels of trade, quantities, physical characteristics, and anyother difference which are also demonstrated to affect price comparability. In this regard even thoughTN/RL/W/45
Page 5
the current provisions contain some useful  guidance to deal with the market situation, such as the “
fair comparison “ principle, it is important to  elaborate a  more specific commitment.
We have underlined that in some cases the unreasonable application of mechanical rules
creates unfairness.  One problem that we would like to solve is the artificial determination of dumping
margins which affect perishable goods in particular.
An important perspective to tackle the problem would be that the investigation authorities,
when setting the investigation period and when assessing a reasonable period of time, take into
account the various economic and other relevant conditions pertaining to the cycle in question.
4. Prohibition of Zeroing
[Comments from Australia]
The proponents suggest that Article 2.4.2 should be clarified to explicitly rule out zeroing.
Article 2.4.2 sets out the different methodologies for establishing dumping margin of the productduring the investigation period.  The methodologies set out therein are as follows:
• A comparison of a weighted average normal value with a weighted average of prices of all
comparable export transactions; or
• A comparison of normal value and export prices on a transaction-to-transaction basis; or
• A comparison of a normal value established on a weighted average basis to prices of
individual export transactions if certain conditions are satisfied.
The methodologies set out in Article 2.4.2 do not allow negative margins to be converted into
zero value.  Article 2.4.2 in fact requires comparison to be made between weighted average normal
value with a weighted average of all comparable export prices or on a transaction-to-transaction basis
which impliedly requires all transactions to be captured in the comparison exercise.  By artificially
inflating negative margins to zero value, the inves tigation authorities are in fact ignoring the negative
margins by neutralising them into zero value.  Th is seems to be at odds with the requirements of
Article 2.4.2 which never allow this form of manipulation by the investigating authorities.
As the words used in Article 2.4.2 do not impliedly or expressly admit a construction which
permits “zeroing” of negative margins, Australia considers that Article 2.4.2 does not require anyclarification to expressly rule out zeroing.
[Question from the EC]
Does this proposal go beyond the ruling of the AB in Bed Linen  on zeroing?  Should the
prohibition of zeroing also cover the method set out in the last sentence of Article 2.4.2?  If so, what
would be the difference between the first method described in the first sentence of Article 2.4.2 andthe method set out in this last sentence?
[Question from the United States]
The submission asserts that Article 2.4.2 recognizes that average dumping margins should be
based on the average of “all” comparisons, including those that generate negative margins.  The
submission proposes that Article 2.4.2 be clarified to explicitly rule out “zeroing”.TN/RL/W/45
Page 6
Please explain further the assertion that average dumping margins should be based on an
average of “all” comparisons, considering that such a requirement is not included in Article 2.4.2.
What is the basis for the implicit view that Members are required to offset dumping amounts by the
amount by which distinct products have not been dumped?
Reply
One of the purposes in an anti-dumping investigation is to determine whether a product under
consideration, as a whole, is dumped during the period of investigation and, if so, to what extent its
magnitude of dumping is.  A zeroing practice, which picks a part of sales of a product during the
period of investigation and rejects other sales of the same product, artificially creates “dumping”, and
artificially inflates the magnitude of dumping.  This  basic concept must apply to all cases,irrespective of dumping margin calculation methodologies, such as weighted average-to-weighted
average, transaction-to-transaction, and weighted average-to-transaction comparison methodologies.
We note that the Appellate Body’s decision correctly adjudicated in Bed Linen
1 that the AD
Agreement prohibits zeroing.  We are of the opini on that the AD Agreement should explicitly prohibit
in all cases “zeroing” practices.
5. Cumulative Assessment of Injury
[Comments from Australia]
The proponents propose strengthening Article 3.3 to include the factors that should be taken
into account when assessing the conditions of competition between the imported goods and the
conditions of competition between the imported goods and the like domestic goods.
The question of developing criteria is currently being considered by the Working Group on
Implementation.  Australia considers that there would be merit in examining this issue in the light of
the Working Group’s consideration of proposed criteria.
[Question from the EC]
The example given seems also to raise the question of the "product concerned".  What is the
view of the proponents on the relationship between the issue of cumulation and the issue of the
product concerned?
Reply
As mentioned in document TN/RL/W/6, we consider that it is important to review Article 3 in
order to clearly set out the factors that should be analysed in order to determine whether a cumulative
assessment of imports is appropriate in light of the conditions of competition between the imported
products and the conditions of competition between the imported products and the domestic likeproduct.  We agree with Australia that, in doing so, it would be useful to examine this issue in the
light of the Working Group on Implementation’s consideration of proposed criteria.
With regard to the EC question, it is important to note that the question of the “product
concerned” is a general one, that is, it applies to all investigations, regardless of the number ofcountries involved.  As the Anti-Dumping Agreement does not establish criteria for the definition of
                                                     
1 EC – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India  (WT/DS141/R,
WT/DS141/AB/R, adopted March 12, 2001).TN/RL/W/45
Page 7
the product under investigation, some aspects related to the definition of the products have been raised
in the discussions on the criteria for cumulative assessment.
Nevertheless, it is important to keep in mind that even if an adequate definition of the product
under investigation is adopted, in circumstances where more than one country is under investigation,it is necessary to examine whether the cumulative assessment of imports is appropriate in light of the
conditions of competition between the imported products and the conditions of competition between
the imported products and the like product.  Several aspects that have already been pointed out in
document G/ADP/AHG/W/121/Rev.1 are relevant to this analysis such as: geographical areas,
overlapping time-periods of sales, trends of prices, levels of price undercutting, etc.
6. Causal Relationship between Dumping and Injury
[Comments from Australia]
The proponents suggest that the provisions of Article 3.5 merit further elaboration by
developing procedures and criteria to analyse the causal relationship.
Australia does not consider that there is a lack of clarity in Article 3.5.  Article 3.5 requires
that adequate regard be given to other factors.
The question of causal link has been the subject of several recent WTO dispute settlement
cases relating to anti dumping and safeguards measures.  The Thailand Steel  case emphasised that
although Article 3.5 requires that regard must be given by authorities to known factors other than
dumped imports which are causing injury, this did not mean that there was an express requirement for
an authority to examine these factors on their own initiative.  However, they could choose to do so.
[Question from the EC]
Could the proponents explain whether they have already any preliminary ideas as to the
practical implementation of the AB doctrine of "separate and distinguish"?  Should there be a
quantitative analysis?  How should such methodologies work in practice?
Reply
The causal relationship between dumping and injury has recently been subject to several
WTO dispute settlement cases.
In order to clarify and improve the Anti-Dumping Agreement some key aspects of the
interpretation of recent panels regarding the causal link between dumping and injury should be
incorporated into the Anti-Dumping Agreement.
Inter alia , in the AB ruling in "United States – anti-dumping measures on certain hot-rolled
steel products from Japan", the panel found that the investigating authority, in order to comply with
Article 3.5, must make an appropriate assessment of the injury caused to the domestic industry by the
other known factors, and they must separate and distinguish the injurious effects of the dumped
imports from the injurious effects of those other factors. In our view Article 3.5 should be clarified
and improved accordingly.
Separating and distinguishing the injurious effects from the different causal factors could be a
difficult exercise.  However, if it is not possible to separate and distinguish the effects of the different
factors it is not possible to say whether the injurious effects are caused by the dumped imports or not.TN/RL/W/45
Page 8
The particular methodology by which investigating authorities can separate and distinguish
the injurious effects of dumped imports from the effects of the other known causal factors is not
established in the Anti-Dumping Agreement.  An appropriate methodology to separate and distinguish
the effects of the factors should be found, so that the injuries caused by the other factors are notattributed to the dumped imports.
Procedural requirements for the investigating authority to consider these issues should be
adjusted accordingly.  For instance, the investigatin g authority should be required to respond to all of
the arguments made by the parties on the issue of causation.  Often, the foreign exporters raise
causation arguments that are never addressed by the authority in the importing country.  Finding of
causation is a decisive element in the decision to impose anti-dumping duties, and it is reasonable torequire the investigating authority to address and explain their evaluations of all the issues that are
raised.
7. Threat of Material Injury
[Comments from Australia]
The proponents suggest that Article 3.7 should be strengthened to clearly define the factors to
be considered when assessing threat of injury.
• What further factors should be considered?
Could the factors that lead to a determination that threat exists be more clearly set out in Article 3.7?
[Question from the EC]
Which factors other than those contained in Article 3.4 and declared applicable by the AB
should be listed for a finding of threat of material injury under Article 3.7 ADA?
[Question from the United States]
The submission questions whether the “discipline” of Article 3.7 concerning determinations
of threat of material injury should be strengthened and the description of the Article 3.7 factors be
clarified and improved.
Do the proponents maintain that any of the current Article 3.7 factors are unclear?  If so,
which ones?
Reply
It follows from Article 3.7 that a determination of a threat of injury shall be based on facts
and not merely on allegation, conjecture or remote possibility.  Article 3.7 further identifies certaincircumstances, which would give grounds for expecting future injury.
However, the article does not prescribe how to analyse the potential impact of such
circumstances on the domestic producers of the li ke product.  In our opinion Article 3.7 would be
clarified and improved if the determination of thre at of injury includes a specific requirement for an
assessment of all the factors required to determine actual injury.TN/RL/W/45
Page 9
Existing terms are not clearly defined.  It is, for instance, not clear which timeframe may be
applied under the term “foreseen and imminent”.  However, it is clear that the further into the future
one foresees a threat of material injury, the more this determination will be based on speculation, not
facts.  It may be appropriate to enter into discussions on detailing this and other terms used in
Article 3.7.
Also, there may be additional factors that should be listed in Article 3.7.  Based on the above,
it is our view that Article 3.7 is in need of improvement.
8. Threshold under Article 5.8
[Comments from Australia]
The proponents suggest an increase of the de minimis  margin of dumping and negligible
volume of dumped imports to unspecified levels and the role of de minimis  in the duty collection
process.
• Do the proponents consider that the de minimis  and negligible volume levels should be
increased for both developed and developing countries?
• How do the proponents relate this to cumulatively assessing injury?
• Could the proponents explain when (that is, in what circumstances) would de minimis  play a
role in the duty collection?
[Question from the EC]
Do the proponents already have a precise idea as to the appropriate levels for de minimis  and
negligibility margins?
[Question from the United States]
The submission asserts that the current 2 per cent de minimis  level contained in Article 5.8 is
not sufficient to reflect the “high degree of variance and uncertainty resulting from crude
methodologies”.  The submission suggests that the “role” of de minimis  in the duty collection process
could be revisited.  Finally, the submission questions whether the 3 per cent negligible volumethreshold is sufficient to justify injury when the volume of total imports is small.
(a) In light of the detailed methodologies provided in the Anti-Dumping Agreement, please
explain why the proponents believe that the current 2 per cent de minimis  dumping margin
threshold is insufficient.
(b) Do the proponents contend that the reason for the existence of a de minimis  threshold in the
Agreement is concern about a degree of inaccuracy?  If so, what is the basis for this
contention?
(c) What evidence supports the conclusion that the degree of variance and uncertainty in
dumping calculations is greater than 2 per cent?
(d) Please explain what is meant by “the role of de minimis  in duty collection process”.
(e) The submission states that the current 3 per cent negligible volume threshold is insufficient to
justify injury when the volume of total imports is small.  Does the comment go to whether theTN/RL/W/45
Page 10
current 3 per cent volume threshold in Article 5.8 is sufficient to justify a finding of material
injury or whether it is sufficient to justif y an investigating authority to conduct an injury
analysis?
Reply
The AD Agreement does not explain the rationale for the current negligible thresholds and
de minimis .  These thresholds should be reviewed and improved, taking into account the actual impact
on imports, uncertainty of dumping margin calculations, and the international business.  The current
three and seven percent negligible thresholds permit an investigation to proceed even where the actual
volume of dumped imports is so insignificant that it is incapable of injuring the domestic industry.
The current two percent de minimis  threshold does not fully reflect various aspects of dumping
margins and their calculations.  These aspects may include, but not limited to, (i) unavoidable
calculation errors in dumping margins and its base data;  (ii) dumping margins that are incapable of
injuring the domestic industry;  and (iii) predictability of injurious dumping.
Article 9.3 of the AD Agreement establishes that  "The amount of the anti-dumping duty shall
not exceed the margin of dumping as established under Article 2" and contemplates two systems for
the assessment of this duty: it could be assessed on a retrospective basis or on a prospective basis.
Under the current system of duty collection, if a Member adopts the retrospective system, a
determination of the actual final liability to be paid is made after the order has been in place for a
given period of time; for this purpose, the Member calculates a new margin of dumping, which maybe different from the one calculated in the course of the investigation. If this new margin is
"de minimis ", it would be reasonable that no anti-dumping duty be collected. Additionally, we
understand that the same threshold established in Art. 5.8 should be applied when defining the
"de minimis " margin for collection purposes.  Likewise, if a Member adopts the prospective system,
the Agreement establishes that the Member shall have a procedure for refund. In this case, it would bereasonable that if the Member determines that the margin of dumping is " de minimis ", as established
in Article 5.8, there should be prompt refund of the duty paid.
9. Facts Available
[Comments from Australia]
The proponents raise the issue of more stringent rules to provide more clarity to discipline the
excessive use of “facts available”.
Australia considers that there may be merit in examining criteria that could be used to
determine whether or not to grant an extension of time for information.  The Working Group onImplementation has adopted a recommendation on the elements that are relevant in determining
whether or not to grant an extension.  This recommendation could also form the basis for setting out
criteria in the ADA for granting an extension of time.
Australia notes the relevance of the Appellate Body (AB) findings in the US – Hot Rolled
Steel case.  The AB found that there was no failure by the exporter to cooperate and get information
from an associated company and that the degree of cooperation was not an absolute standard and
unreasonable burdens could not be imposed on exporters.
Reliance was placed on the wording of Article 6.8 that regard should be given to supply
information in a “reasonable period” which was determined by having regard to (WT/DS184/AB/R,
para 85)TN/RL/W/45
Page 11
(i) the nature and quality of the information submitted
(ii) the difficulties encountered by an invest igating exporter obtaining the information
(iii) the verifiability of the information and ease with which it can be used
(iv) whether other interested parties would be prejudiced if the information is used
(v) whether the acceptance of the information would compromise the ability of the
investigating authorities to conduct the investigation expeditiously and
(vi) the number of days by which the investigated exporter missed the applicable time limit.
[Question from the EC]
Which precise clarifications beyond Annex II to the ADA and the panel/AB doctrine do the
proponents have in mind?
[Question from the United States]
The submission claims that the “facts available” are often used to “penalize” exporters who
cannot submit certain data.  The submission questions whether it is appropriate to elaborate more
stringent rules to discipline the “excessive” use of “facts available”.  The submission provides an
illustrative example of a situation where facts available are applied to a respondent that has not
provided resale prices of a customer in which the respondent has a 10 per cent equity interest and over
which it has no “legal” control.
(a) Given that legal control may stem from a basis other than equity ownership, in the
proponents’ view, what criteria should an inve stigating authority examine in assessing legal
control?
(b) How should authorities assess facts which may indicate a degree of de facto  control, even in
the absence of legal control?  For example, how should authorities examine cross-ownership,
contractual or familial relationships, or indications of economic power between the entities
(such as might exist if the respondent is the customer’s sole supplier) which may indicate an
ability of the producer to obtain the information?
(c) In the example given, to the extent the price between the exporter and importer is unreliable
because of “association”, such price may be disregarded under Article 2.3.  In such a
situation, the authority must have information regarding the importer’s resales in order to
conduct the analysis required by Article 2.4.  Assuming the authority finds that there is no
legal control between the parties, what importa nce would the proponents attach to a finding of
a significant overlap in the boards of directors of the exporter and importer?  Whatimportance would the proponents attach to a finding that the owner of the exporter and the
owner of the importer are, for example, brothers?
(d) Do the proponents agree that there is a danger of abuse from parties that claim  lack of legal
control, without revealing information about de facto  control, and on that basis refuse to
provide information necessary to the calculations under the Agreement?
Reply
We believe that the use of adverse facts available should be strictly limited.  However, in fact,
there are many cases where affirmative determinations are made on the basis of the adverse facts
available in spite of the fact that respondents have acted to the best of their ability and been fully
cooperative.TN/RL/W/45
Page 12
Article 6.8 of the AD Agreement and Annex II provide some guidance for the application of
“facts available”.  However these rules are not clear enough to describe in which circumstances the
authorities can resort to “facts available”.  In light of the basic understanding that the anti-dumping
duties should be imposed to the extent necessary to counteract injurious effects of dumping, we
consider that the abuse of the “facts available” should be strictly limited.  The authorities should notbe allowed to resort to such method unless they make necessary efforts to obtain information from
respondents.  The authorities, when they resort to the facts available method, should provide sufficient
explanation, including the reasons why they consider the information invalid and the justification to
what extent the information must be totally or partially rejected.
The questions from the US are related to the item of affiliated party transactions.  Therefore
replies provided in that section might be helpful in resolving the US’s concern.
10. Lesser Duty Rule
[Comments from Australia]
Australia considers that this is an issue which merits examination.
• Do the proponents consider that the lesser duty rule, in some circumstances, should be a
mandatory consideration or should be mandatory in application?
• The illustrative example also raises issues of the calculation of the lesser duty.  Is this issue of
concern to the proponents?
[Question from the United States]
Noting that Article 9.1 encourages, but does not require, the application of a duty no higher
than that necessary to offset injury, the submission questions whether it is appropriate to apply
anti-dumping duties that are higher than necessary to counteract injury.
While anti-dumping duties offset the amount of dumping, they may not counteract the injury
suffered as a result of the dumping.  For example, in an industry plagued by dumping, companies mayhave been forced to lay-off well-trained workers,  shut production facilities, cut-back on research and
development expenditures, and suffer other injuries which may take many years and significant
investment to repair.  What is the basis for the statement that anti-dumping duties are specifically
designed to counteract injury being suffered by the domestic industry?
Reply
It is our common understanding that anti-dumping measures should only be applied to the
extent necessary to counteract injurious dumping, which is one of the basic concepts of the AD
Agreement.  Although Article 9.1 is not a mandatory provision, it encourages Members to apply the
duty less than the margin of dumping if such lesser duty would be adequate to remove the injury to
the domestic industry.  However, increasingly, anti -dumping measures are imposed in excess of what
is required to address the injurious dumping. Our proposal simply aims at improving the Agreement
by realizing the spirit of this Article.  We will address the question of whether mandatory application
rather than a mere consideration is appropriate in order to realize the spirit of this Article.
We recognise that the way to calculate lesser duty is an important area to be addressed in this
negotiation.TN/RL/W/45
Page 13
11. Sunset of Anti-Dumping Orders
[Comments from Australia]
The proponents suggest that the exception rule in Article 11.3 is over-applied and invariably
leads to a continuation of measures.
In the illustrative example provided, the exporter no longer exports to country A, but is still
subject to anti-dumping action after the measures have been continued (following a sunset review).
• Do the proponents consider that measures should expire after the 5 year period, without the
“likelihood” question being put?
[Question from the EC]
Which additional criteria can make sunset reviews more practical? Is the absence of imports
in the proponents' view always a reason to automa tically terminate measures in a sunset review?
[Question from the United States]
The submission asserts that the general rule in the AD Agreement is that anti-dumping orders
should be terminated after five years; however, an expansive use of the “exception” in the Agreement
has turned the continuation of the order into a de facto  practice.  The submission provides an
illustrative example where, upon imposition of an order, a company stops shipping to the country that
imposed the order.  The company does not participat e in the sunset review because it has no plans to
export to that country again, yet the importing country continues the order anyway as a result of itssunset review.
(a) On what grounds do the proponents conclude that termination of orders after five years is a
“general rule”, and the conduct of a sunset re view an exception, when, in fact, Article 11.3
states that orders should be terminated unless a sunset review indicates otherwise?
(b) What is the basis for equating the conduct of a sunset review with the continuation of an
order, when a sunset review may reveal that an order should be terminated?  What is the basis
for the conclusion that the continuation of orders has become a “ de facto  practice”?
(c) Do the proponents agree that one reason a resp ondent may withdraw from a market is that it
cannot sell in that market unless it engages in the unfair trade practices which have beenremedied by the anti-dumping order?
(d) How would the proponents suggest that Members analyze the necessarily predictive question
of the “likelihood” of future dumping and injury?
Reply
The wording of Article 11.3, on its face, makes it clear that the termination of a measure
after five years is the general rule, which should be followed ‘unless’ particular circumstances can be
identified that justify a departure from the rule.  In other words, the phrase following ‘unless’ should
be understood as providing a limited exception to the normal rule that measures  expire  after five
years.  Parties supporting continuation of the measure should bear the burden to demonstrate the
likelihood of dumping and injury, in order to benefit from the exception.TN/RL/W/45
Page 14
At the end of the Uruguay Round, Article 11.3 wa s welcomed as a major achievement of the
UR negotiations and it was expected that the provision would put an effective end to the practice of
unduly extending anti-dumping measures.  The record of the implementation of Article 11.3,
however, has been discouraging.  In many of th e WTO Members, where anti-dumping measures have
been frequently resorted to, the percentage of measures terminated through the Article 11.3 sunset
review has been dismally low.  There are several important reasons to explain this discrepancy
between the initial expectations and the record of implementation.
First of all, in the practice of certain WTO Members, the burden of proof is reversed and
placed disproportionately upon the exporters to demonstrate that the termination of measure is not
likely to lead to dumping and injury.  Often, the burd en is excessively heavy.   Such a practice is not
consistent with Article 11.3, and it should be clarified that the parties supporting continuation of the
measure bear the burden to demonstrate the likelihood of dumping and injury.
Secondly, Article 11.3 does not provide sufficient guidelines for determining the likelihood
of continued dumping.  As suggested by the US through its comments, the ‘likely’ standard ofArticle 11.3 is necessarily ‘predictive’.  The combination of the ‘predictive’ nature of the likely
standard and the absence of clear guidelines to ma ke such a prediction has allowed the investigating
authorities to base their findings not upon facts, but on mere allegations and conjecture regarding
future events.
In order to deal with this point, we are of the opinion that the WTO Members should agree
upon a set of factors that should be considered by investigating authorities in making ‘predictions’
about the likelihood of dumping and injury.  If Members are allowed to apply their different and often
arbitrary standards to ‘predicting’ the likelihood, as today, there will be no means for the WTO to
establish multilateral control over the sunset review and the discrepancy between initial expectationand the dismal record of implementation would continue.
12. Public Interest
[Comments from Australia]
The proponents suggest the ADA be strengthened to ensure that relevant information
pertaining to public interest be taken into account in a more substantive manner.
The ADA contains no provisions dealing with public interest.  Australia does not consider
that a public interest test should be included in the Negotiating Group on Rules consideration of issuesas it is ultimately a matter for each country to determine under its own law.
The discussion in the Working Group on Implementation on the question of public interest
has highlighted various approaches to consideration of the question of public interest.  One view is to
approach the question of public interest in the co ntext of the application of the lesser duty rule.
However, this does not address the question of whether measures should not be imposed at all.  For
example, regard can be given to whether the industry will benefit from the imposition of measures or
if the negative effect of the imposition of measures on interested parties would be disproportionate
when compared to its positive effect.
[Question from the EC]
What are the proponents' ideas as to how a public interest test should be tailored?  Should it
only be a procedural requirement to collect certain information or should it also encompass a test withTN/RL/W/45
Page 15
substantive criteria to be taken into account by investigating authorities?  If so, are there already any
ideas as to possible substantive criteria?
Reply
Article 6.12 of the AD Agreement should be improved -- introducing more substantive
criteria. The purpose of a public interest provision should be to lower or eliminate AD duty in view of
broader public interest considerations.
The AD Agreement allows for the imposition of measures when the domestic industry is
faced with injurious dumping.  However, it is necessary to evaluate during the course of investigation
how other interests (i.e. consumers, downstream users, etc.) may be affected, if measures are imposedin full or in part.
As Australia mentions, discussions were held in the Working Group on Implementation to the
effect that there are a variety of practices as to which parties are allowed to present information (i.e.
consumers, industrial users, competition authorities); when (i.e. at what stage of the investigation);and how the public interest is considered (i.e. wh ich factors).  Answering these questions –who, when
and how—will guide the procedural as well as su bstantive issues related to public interest.
If no common understanding is reached as to how to consider public interest, it could very
well happen that the negative effect of the AD duty on the consumers and industrial users of that goodbe larger than the positive effects of the AD duty for the domestic industry. In this case, the net impact
for the country as a whole would be negative and consequently the measure would be contrary to the
objectives of the WTO which are to improve overall welfare through trade and its disciplines.
Introducing more substantive obligations of public interest would also strengthen the content
of article 6.12 of the AD Agreement, and give substance to the opportunity for industrial users and
consumer organizations to provide information on an AD investigation.
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