G/ADP/Q1/EU/13  
G/SCM/Q1/EU/13  
 
22 October 2018 
(18-6619) Page: 1/4 
Committee on Anti -Dumping Practices  
Committee on Subsidies and Countervailing Measures  Original: English  
 
NOTIFICATION OF LAWS  AND REGULATIONS UND ER 
ARTICLE S 18.5 AND 32.6 OF THE AGREEMENT S 
REPLIES TO QUEST IONS POSED BY KAZAKHSTAN1 REGARDING  
THE NOTIFICATION OF THE EUROPEAN UNION2 
The following communication, dated 19 October 2018, is being circulated at the request of the 
Delegation of the European Union.  
 
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Question 1  
 
Recital (3) of the Regulation elucidates, "in light of experience gained in past 
proceedings, it is appropriate to clarify the circumstances in which significant 
distortions af fecting to a considerable extent free market forces may be deemed to 
exist". Could the European Union, please, explain what kind of experiences are implies 
in this provision? If it is possible, please indicate the exact cases and / or situations.  
 
Reply  
 
There is a multitude of sources on the basis of which the European Commission gains experience 
relevant for its trade remedy practice. This includes the Commission's own anti -dumping 
investigations and may therefore be reflected in the decisions on imposit ion of anti -dumping 
measures. However, all areas of engagement with trading partners, as well as day -to-day business 
practice of economic operators may inf orm the Commission's experience.  
 
The Regulation is therefore not necessarily based only on experienc e originating in anti -dumping 
investigations or specific instances of case -law. 
 
Question 2  
 
Amendments introduced by the Regulation include, inter alia, a new paragraph 6(a) into 
Article 2, which determines the specific circumstances in which it is not ap propriate to 
use domestic prices and costs in the exporting country in the anti -dumping 
investigations. Kazakhstan kindly asks the European Union to clarify how the provisions 
reflected in subparagraph (b) of Article 2.6(a) of the Regulation comply with WT O 
norms, including Article 2 of the Agreement on implement ation of Article VI of the 
GATT  1994?  
 
Question 3  
 
Taking into account the above -mentioned questions 1 -2, Kazakhstan would like to ask 
the European Union to clarify what was the legal basis to adopt  mentioned in Regulation 
amendments: gained experiences or WTO norms? In addition, which provisions of WTO 
rules justify these amendments, in particular, Article 2.6a (b) of the Regulation?  
 
                                                
1 G/ADP/Q1/EU/ 8-G/SCM /Q1/EU/ 8. 
2 G/ADP/N/1/EU/3/Suppl.2 -G/SCM/N/1/EU/2/Suppl.2.  G/ADP/Q1/EU/13 • G/SCM/Q1/EU/13  
 
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  Reply  to questions 2 and 3  
 
I will reply to questions 2 and 3 together because they are closely linked. The new rules were 
introduced into EU's law taking account of the applicable WTO law (incl uding relevant 
jurisprudence). It goes without saying that the EU respects all its relevant obligations under the 
WTO law an d, indeed, we are confident that there is no conflict between the EU's new dumping 
calculation rules and the Covered Agreements. The EU is pleased to have had the opportunity in 
April and again today to explain a number of substantive and pr ocedural elemen ts of the new 
EU legislation in the context of replying to the questions raised by Kazakhstan. At the same time, 
as was stated at the AD Committee meeting in April,  this is not the right forum to enter into 
comprehensive legal discussion of some core conce pts of the Anti -Dumping Agreement.  
 
Question 4  
 
Paragraph 6a(a) of Article 2 of the Regulation mentions that "it is not appropriate to use 
domestic prices and costs in the exporting country due to the existence in that country 
of significant distortions wi thin the meaning of point (b), the normal value shall be 
constructed exclusively on the basis of costs of production and sale reflecting 
undistorted prices or benchmarks , subject to the following rules". The Republic of 
Kazakhstan kindly asks the European Union to clarify how the above -mentioned 
provision is in -line with the sixth indent of Article 2.6a(a) establishing to be "without 
prejudice to Article 17 assessment shall be done for each exporter and producer 
separately"?  
 
Reply  
 
Their purpose of the new  dumping calculation rules is to provide a method for establishing a 
comparable normal value in specific situations. These special circumstances are when it has been 
determined that domestic prices or costs are affected by significant distortions. While th e 
significant distortions will indeed originate from government inter vention as described in 
Article  2(6a)(b) of the Regulation, the new rules will not apply because of government intervention 
in abstracto . Rather, they will apply because the significant d istortions affect prices or c osts of the 
product concerned. Any investigation will always examine evidence that aims at demonstrating 
that costs or prices of a party remain undistorted, despite the existence of government distortions.  
 
Question 5  
 
Paragrap h 6a(a) of Article 2 of the Regulation determines that "the normal value shall 
be constructed exclusively on the basis of costs of production and sale reflecting 
undistorted prices or benchmarks, and the sources the Commission may use include:… if 
it consi ders appropriate, undistorted international prices, costs, or benchmarks". Could 
the European Union explain the precise meaning of the phrase "if it considers it 
appropriate" in this particular context? How the European Union intends to determine 
whether i t is appropriate to use undistorted international prices, costs, benchmarks or 
not? In addition, please clarify is there a definition of "undistorted international prices, 
costs, benchmarks"? Could you please give examples of distorted international prices , 
costs, benchmarks"? Please provide a WTO provision or a WTO jurisprudence that allows 
the European Union to substitute normal value incurred with international prices, costs, 
benchmarks? Could the European Union please clarify this?  
 
Reply  
 
Article  2(6a)(a) of the Regulation introduces a list of sources which the Commission may use when 
constructing the normal value. First the EU would highlight that the list is not closed and therefore 
sources than those explicitly mentioned could potentially be used. However, it is likely that in most 
cases, the Commission will rely on sources included in the list. Second, the identification of the 
relevant source to be used in any given investigation will be decided on the basis of the 
assessment of the evidence on th e file. This assessment includes the facts and arguments 
presented to the Commission by interested parties in the course of any given investigation. The 
choice between sources falling under the first and second indent would in particular depend on the 
availability of relevant and reliable data meeting the conditions explained in the relevant 
provisions. Thus, for instance, there could be a situation that there is no corresponding cost G/ADP/Q1/EU/13 • G/SCM/Q1/EU/13  
 
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  information readily available in a third country presenting a similar lev el of economic development 
as the exporting country under investigation. In that case, the source covered by the first indent 
will not as a practical matter be available. In short, the analysis will be case specific and there are 
no rules that apply a prio ri, irrespective of the circumstances prevailing in the particular case. As 
far as Kazakhstan asks for a quotation of WTO rules or DSB rulings, I refer to the reply given to 
questions 2 and 3.  
 
Question 6  
 
Paragraph 6a(a) Article 2 of the Regulation sets o ut that "significant distortions are 
those distortions which occur when reported prices or costs, including the costs of raw 
materials and energy, are not the result of free market forces because they are affected 
by substantial government intervention. In  assessing the existence of significant 
distortions regard shall be had, inter alia, to the potential impact of one or more of the 
following elements:  …". 
 
a. Please explain does the Agreement on implement ation of Article VI of the 
GATT  1994 give opportunity of constructing normal value in the case of "significant 
distortions"?  
 
b. In particular, as one of the elements that provide an opportunity to believe that 
significant distortions exist, the European Union indicates the presence of significant  
number of enterprises operating under the ownership, control or policy supervision or 
guidance of the authorities of the exporting country.  
 
Please clarify whether this element is based on the provis ions of Article 2.7 of the 
Anti-Dumping Agreement and (or) the second Supplementary Provision to paragraph 1 
of Article VI of GATT 1994 contained in Annex I to GATT 1994 (Notes and Supplementary 
Provisions)?  
 
If the reply is positive, Kazakhstan would like to remind that allegedly signi ficant role of 
government in the sector is not equal to the monopoly and the government ownership 
does not necessarily demonstrate the existence of government control. In the dispute 
United States – Countervailing Duty Measures o n Certain Products f rom Chi na, Panel 
concluded that "evidence of government ownership, in itself, is not evidence of 
meaningful control of an entity by government ". 
 
If the reply is negative, please explain what is the legal basis of the abovementioned 
provision?  
 
Reply  
 
As mentione d in reply to questions 2 and 3 the new rules were introduced into the EU's law taking 
account of the applicable WTO law (including relevant DSB rulings). The EU respects all its relevant 
obligations under the WTO law and, indeed, we are confident that the re is no conflict between the 
EU's new dumping calculation rules and the Covered Agreements. Here again as in our response to 
questions 2, 3 and 5, Kazakhstan aims at having a discussion about the legal merits of the new 
rules. As I have said before, the c ommittee is not the right forum for having such a discussion.  
 
The provision of Article 2(6a)(b) of the Regulation reflects the fact that significant distortions can 
take various forms and can be caused by a number of factors. Therefore, Article 2(6a)(b) contains 
a non -exhaustive list of elements which can have relevant impact on the formation of prices and 
costs. Each of these elements can, in turn, occur in a variety of formats and because of a wider 
range of actions. The list in Article 2(6a)(b) enumera tes some typical distortive elements.  
 
As a matter of example, state influence on businesses can be exercised through not only formal 
channels, such as ownership or control of statutory bodies of an enterprise, but also by employing 
other, more indirect, and equally relevant means (for example setting industrial policies that 
contain specific quantitative and qualitative objectives). Similarly, while the formal legal 
framework theoretically ensuring free play of market forces can be in place, e.g. with res pect to 
bankruptcy or corporate law, the inadequate implementation of the relevant legislation may G/ADP/Q1/EU/13 • G/SCM/Q1/EU/13  
 
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  effectively result in significant market distortions (for instance by tolerating the market presence 
and continued operation of business entities which are i nsolvent under the applicable law).  
 
Given the multitude of elements which may result in significant distortions, as well as the broad 
spectrum of forms in which these elements may occur, the importance of the distortive elements 
detected in each anti -dump ing investigation will be assessed by the Commission on a case -by-case 
basis, taking due account to all relevant legal and factual elements.  
 
 
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