. /.  WORLD TRADE  
ORGANIZATION  TN/RL/GEN/82 
17 November 2005 
 (05-5424) 
Negotiating Group on Rules Original:   English 
  
 
 
PROPOSAL ON AFFILIATED PARTIES 
 
Paper from the Separate Customs Territory  of Taiwan, Penghu, Kinmen and Matsu
 
 
 
 The following communication, dated 16 November 2005, is being circulated at the request of the Delegation of the Separate Customs Terr itory of Taiwan, Penghu, Kinmen and Matsu. 
 
 The submitting delegation has requested that th is paper, which was submitted to the Rules 
Negotiating Group as an informal document (JOB(05)/ 285), also be circulated as a formal document. 
 
_______________ 
 
 
I. SUMMARY OF THE PROPOSAL  
 
1.  The issue of “affiliation” has been the s ubject of proposals by “Friends of Anti-Dumping 
Negotiations” (FANs)
1, Brazil2 and other Members.  These proposals aim to establish guidance on the 
treatment of the transaction data between the affilia ted parties by setting forth a clearer definition of 
“affiliated party” in the Anti-Dumping Agreement, and/or establishing an arm’s-length price test for 
the transactions between affiliated parties.  This pr oposal does not address the issue of how to define 
“affiliated party”, though the proponents agree that a clearer set of definition is desirable.  
 
2. What this proposal does is to focus on the arm’s-length price test.  As a matter of principle, 
authorities should not presume that all price data between affiliated parties are unreliable.  The 
transaction price, even between affiliated parties, should be accepted by the authorities unless it fails 
the arm’s-length price test.  In this regard, the pur pose of this proposal is similar to the purpose of the 
proposal submitted by FANs.  This proposal allows  greater flexibility for both the investigating 
authority and the responding party in carrying out the arm’s-length price test.   
  
II. PROPOSED TEXT  
 
 Article 2 of the ADA should be amended by adding a new paragraph or annex to give 
guidance on the arm’s-length price test to the tran sactions between affiliate d parties.  The amended 
text shall be read as:   2.X "To determine whether the transaction between affiliated parties is acceptable for the 
purpose of this Article, the fact that the buyer and the seller are affiliated within the meaning 
of this Article shall not in itself be grounds for regarding the transaction price as 
unacceptable.  If, in the light of information be fore the investigating authority, it appears to 
                                                     
 
1 TN/RL/W/146 and TN/RL/GEN/19 
2 TN/RL/GEN/67 TN/RL/GEN/82 
Page 2  
 
the authorities concerned that the price is not reliable because of the affiliation, it shall 
communicate its concerns to the exporter or producer involved and the exporter or producer 
shall be given a reasonable opportunity to respond." 
  In a sale between affiliated parties, the tr ansaction price shall be accepted whenever the 
exporter or producer involved demonstrates, that su ch price closely approximates* to one of the 
following during the period of investigation:   (i) the transaction price in sales of identical  or most similar products in commercially 
representative quantities to unaffiliated parti es in the same country as the affiliated 
party;  
  (ii) the price of identical or most similar products as determined on the basis of the price 
at which the goods are first resold in the gr eatest aggregate quantity to an independent 
buyer in the same country as the affiliated party, after making appropriate deductions 
for costs, duties and taxes incurred, or prof its accrued, between sale to the affiliated 
party and resale to the first independent buyer; 
  (iii) the price of identical or most similar pr oducts as determined on the basis of the cost of 
production in the country of origin plus  a reasonable amount for administrative, 
selling and general costs and for profits realized on domestic sales, in case of 
domestic transactions, or realized on export sales in case of export transactions.  
 ____________________________ New footnote : * The investigating authority may determine on a case-by-case basis the appropriate 
percentage of variation that constitutes such close approximation in price.  However, in no case shall 
the percentage be lower than [X] percent.  The sa me percentage shall apply for variations both above 
and below the price being compared to in items (i), (ii) or (iii).  
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