G/ADP/AHG/W/198  
 
23 September 2013  
(13-5055)  Page: 1/3  
Committee on Anti-Dumping Practices 
Working Group on Implementation 
 Original: English  
 
HOW DO MEMBERS DETERMINE WHETHER THERE HAS BEEN A SIGNIFICANT 
PRICE UNDERCUTTING BY THE DUMPED IMPORTS? – ARTICLE 3.2 
PAPER BY BRAZIL 
The following communication, dated 19 September 2013, is being circulated at the request of the 
Delegation of Brazil. 
 
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The Anti-Dumping Agreement does not objectively define when the negative effects of dumped imports on the domestic industry should be consid ered significant. An example of such gap is not 
having clear criteria to determine when a price undercutting caused by dumped imports has had 
significant effect on the domestic industry. 
 Therefore, Brazil is pleased to take this opport unity to discuss its experience and concerns with 
regard to Article 3.2 of the Agreement on Implem entation of Article VI of the General Agreement 
on Tariffs and Trade 1994 – ADA.  
1  CALCULATION OF THE INJURY MARG IN CAUSED BY PRICE UNDERCUTTING 
1.1  Definition and scope The injury margin calculated by Brazil refers to the amount of undercutting caused by dumped 
imports. This value results from the subtraction of the internalized weighted average price of the 
imported product under investigation from the price of the domestic like product in the Brazilian 
market.  
Since the period of injury investigation is separated into five sub-periods of 1 year each, Brazil 
calculates an injury margin for each one of those sub-periods. As to the imports considered, the injury margin calculated by Brazil for each sub-period takes into account a cumulative assessment 
of all imports subject to the investigation from all investigated origins, given that the provisions 
established in Article 3.3 of the Anti-Dumping Ag reement are met. If such provisions cannot be 
met, then the injury margin shall be calculated for each investigated origin individually.  
1.2  Price of the like product in the Brazilian market 
In order to calculate the price of the domestic li ke product in the Brazilian market, Brazil simply 
takes the ex-works sales price of such product, which is the sales price net of any kind of sales tax 
or sales expense and of domestic freight. 
 It is important to notice that the price of the domestic like product in the Brazilian market does not 
undergo any kind of adjustments which could be used  to compensate the effect of price depression 
caused by dumped imports. Since this effect redu ces the price of the domestic like product in the 
Brazilian market, it automatically creates an illusion that the undercutting caused by dumped imports is less than it actually would be if the prices in the Brazilian market had not been 
depressed. If such prices were to be corrected  to compensate the price depression caused by G/ADP/AHG/W/198 
 
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  dumped imports, then there would be a higher amount of undercutting. Therefore, it is always 
necessary to assess these two possible effects of dumped imports on prices simultaneously.   1.3  Internalized weighted average price of the imported product 
The internalized weighted average price of the imported product is calculated based on the 
internalized weighted average CIF sales price of the imported product under investigation, net of any kind of sales tax or expenses with which it could be charged inside the Brazilian territory. 
 
In order to reach that value, Brazil calculates the weighted average CIF price for each sub-period of injury investigation, based on the prices effectively paid for all products under investigation exported to Brazil from the investigated countri es during each sub-period. Brazil obtains these 
values from Brazil’s Federal Revenue (RFB). 
 After that, Brazil calculates the total amount of internalization costs for each sub-period, including 
the import tax and other internalization expenses  (other taxes and fees), which will then be 
divided by the quantity of imports and added to the weighted average CIF price previously 
determined for each sub-period. 
 
The total amount paid on import tax is also obtained from the RFB and is divided by the total CIF value of imports under investigation, in order to obtain the average percentage of the unit CIF price of the imported products which represents such tax. This percentage is then multiplied by the 
unit CIF price previously found. 
 The calculation of the internalization expenses is done differently at the beginning of the 
investigation and at the phases of preliminary and final determinations. At the recommendation of 
initiation of an investigation, the percentage used to calculate this value is based on data presented by the petitioner. However, when thes e expenses are calculated further on in the 
investigation, the data used are those submitted to the Department of Trade Remedies as 
responses to the importer’s questionnaire. After re aching these percentages, Brazil calculates the 
unit amount of internalization expenses by multiplying the percentage found by the weighted average CIF price per unit. 
 
The final price of the imported product used in the calculation of the injury margin results from the sum of the unit weighted average CIF price with  the average amount of import tax per unit and 
the average amount of internalization expenses per unit. 
 1.4  Possible adjustments 
Although the determination of the injury margin is usually done on ex-works and CIF basis, 
depending on the conditions of payment or on the location of the domestic industry within the Brazilian territory and of the port through which the imported products will be internalized, it might be necessary to consider some other expenses, such as domestic freight and financial costs. 
 
2  DETERMINATION OF THE RELEVANCE OF THE UNDERCUTTING CAUSED BY IMPORTS 
Brazil cannot quantify a minimum injury margin which must be reached in order for the 
undercutting caused by dumped imports to be considered significant. Due to that, the 
determination of whether a certain injury margin represents a significant damage caused by dumped imports on prices is based on the relationship between the injury margin found and the 
analyses of possible depression or suppression of  the prices of the domestic like product in the 
Brazilian market.  Concerning the depression of prices in the domestic market, it must be analyzed if the injury 
margin found is the reason of a possible decrease in the prices of the domestic like product in each 
sub-period. This analysis usually compares the evolution of the price of the domestic like product in the Brazilian market from the first sub-period to the fifth sub-period and from the fourth sub-
period to the fifth sub-period. 
 As for the suppression of price increases related to the domestic like product, Brazil takes into 
consideration the evolution of the domestic industry’s production cost. If such cost has increased 
more than the price of the domestic like produc t, then it is possible to consider that the G/ADP/AHG/W/198 
 
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  undercutting caused by dumped imports prevented th e prices of the domestic like product in the 
Brazilian market from following the increase in the production cost, resulting in a forced reduction of the domestic industry’s profit margin.  
Nevertheless, it must be emphasized that the anal yses of depression and suppression of the prices 
of the domestic like product must also take into consideration other elements, other than the dumped imports, which may also have caused injury to the domestic industry in the sub-periods of 
injury investigation. 
 
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