WORLD TRADE  
ORGANIZATION  TN/RL/GEN/58 
13 July 2005 
 (05-3116) 
Negotiating Group on Rules Original:   English 
  
 
FURTHER COMMENTS ON LESSER DUTY PROPOSALS 
 
Paper from the United States
 
  
 The following communication, dated 6 July 2005, is being circulated at the request of the 
Delegation of the United States.   The submitting delegation has requested that th is paper, which was submitted to the Rules 
Negotiating Group as an informal document (JOB(05)/ 145), also be circulated as a formal document. 
 
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  The Friends of Antidumping Negotiations (the Friends)
1 and India2 have separately submitted 
proposals to the Negotiating Group on Rules (the Rules Group) to amend the Anti-dumping 
Agreement (ADA) to require the mandatory app lication of the "lesser duty rule" in anti-dumping 
investigations.  The United States has expressed its views on the "lesser duty rule" on many occasions.  In this paper, we would like to address several aspects of these recent proposals, focusing 
in particular on some of the methodological a nd practical problems we see with them.    
 
 While the Friends have voiced concerns about  inconsistencies in the practices of those 
Members who currently apply some form of the le sser duty rule, neither the Friends nor India are 
seeking to clarify the existing lesser duty provisi on in ADA Article 9.1, whose application is 
discretionary.
3  Instead, they are seeking an entirely ne w mechanism, whose application would be 
mandatory, to ensure that "the amount of the anti-dumping duty does not exceed the amount necessary 
to offset the injurious effect by dumped imports."4  
 
 As is clear from their most recent submissions, the proposals of India and the Friends would require an elaborate and complex set of new obliga tions for administering authorities, which in turn 
would involve a significant additional investigator y fact-gathering process.  However, the proponents 
have not demonstrated that there is a problem that  justifies this new mechanism and the imposition of 
such significant additional obligations
5  Before adding a series of elaborate and complicated 
                                                      
1 Proposal on Lesser Duty , TN/RL/W/119 (16 June 2003) ; Lesser Duty Rule, TN/RL/GEN/1 
(14 July 2004); Further Submission of Proposals on the Mandatory Application of the Lesser Duty Rule , 
TN/RL/GEN/43 (13 May 2005). 
2 Proposal on Mandatory Application of Lesser Duty Rule, TN/RL/W/170 (9 February 2005) ; Proposal 
on Mandatory Application of Lesser Duty Rule, TN/RL/GEN/32 (22 March 2005). 
3 Under Article 9.1, Members may choose to a pply the full margin of dumping in all cases. 
4 Communication from Brazil; Chile; Colombia; Costa Rica; Hong Kong, China; Israel; Japan; Korea, 
Republic of; Mexico; Norway; Singapore; Switzerland; Separate Customs Territory of Taiwan, Penghu, Kinmen 
and Matsu; Thailand; and Turkey , TN/RL/GEN/1 (14 July 2004), at 1. 
5 While the Friends have made numerous statements about anti-dumping duties being imposed in 
excess of what is necessary to addr ess injurious dumping, they have not provided any empirical evidence to 
support their assertions, and have not responded either formally or informally to US written questions seeking TN/RL/GEN/58 
Page 2  
 
 requirements to the ADA, Members should establish that there is an actual problem that requires a 
solution.     Discussions in the Rules Group to date have shown that, among those Members who currently 
have a "lesser duty" provision, there is no consen sus as to the appropriate methodology to use when 
applying such a provision.  Further, no Member ha s explained how any lesser duty provision it applies 
accurately assesses the level of injury to the domestic industry, much less actually removes the injury.  
Moreover, we also have concerns about the lack of transparency in  the methodologies and practices of 
Members applying this provision, as well as the lack of effective judicial review.  These concerns about the present experience with this provision shou ld be carefully assessed before any consideration 
of making the lesser duty rule, and all the complex obligations contained in these proposals, 
mandatory for all Members.  It is essential that we not add requirements to the ADA that would be workable only in non-transparent systems without effective judicial review.   Although Article 9.1 frames the issue of a lesser duty in terms of what would be adequate to 
"remove the injury to the domestic industry,"
6 and the proposals purport to deal with the question of 
removing offsetting injury, there is very little consid eration of injury, or the removal of it, in the 
actual proposals.  The mechanisms the sponsors propo se to offset injury would largely supplant the 
anti-dumping remedy the ADA currently provides w ith an "underselling" or cost-based remedy.  
While, in some investigations, the margin of u nderselling (i.e., the degree to which the dumped 
imports sell for a lower price than the domestic li ke product) may be lower than the margin of 
dumping, the proponents have not explained why anti-dumping duties should be assessed on the basis 
of the underselling margin, apart from the possibility that it might result in a lesser duty than the 
dumping margin.  Similarly, the proponents have not explained why it is appropriate to calculate an 
"injury margin" based on a constructed estimate of the sales price the industry should have obtained 
during the period of investigation; we note that Artic le 3 does not require authorities to consider such 
data in their injury analysis.  
  The Friends and India propose various imperfect  surrogates to remove the injury to the 
domestic industry.  Each of these surrogates, howev er, evinces consideration of only one particular 
manifestation of injury.  For example, while pri ce effects are an important element that authorities 
must consider in making a determination of injury  under Articles 3.1 and 3.2 of the ADA, Article 3 
sets forth many other required elements relating to import volume and the impact of dumped imports 
on the domestic industry that investigating authoriti es must also evaluate in determining whether 
dumped imports materially injure, or threaten to materially injure, a domestic industry.   
  In making injury determinations, Members’ au thorities are required to consider each of the 
impact factors listed in Article 3.4 of the ADA.  These factors are not all measurable in the same 
manner.  Some, such as sales, profits, wages, and i nvestments, are measured in units of currency.  
Others, such as output and inventories, are measured in units of output.  Employment is measured in units of labour.  Still other factors, such as capac ity utilization, market share, productivity, and the 
magnitude of the margin of dumping, are expressed as ratios.  Due to the disparate nature of these 
factors, the United States believes the calculation of  a single "injury margin" that adequately reflects 
"any known" or "all" factors c ontributing to injury would, to say the least, present considerable 
difficulty.  Clearly, using the "export-market price" or a "target price," as proposed, as the sole basis for calculating an "injury margin" does not comport with current requirements under the ADA for evaluating and finding injury.  
                                                                                                                                                                    
 
the basis for those assertions. See Fourth Set of Questions from the United States on Papers submitted to the 
Rules Negotiating Group , TN/RL/W/103, (6 May 2003), at 4. 
6 Article 9.1 of the ADA states that, "{i}t is desi rable that the imposition {of an anti-dumping duty} be 
permissive in the territory of all Members, and that the duty be less than the margin if such lesser duty would be 
adequate to remove the injury to the domestic industry."  TN/RL/GEN/58 
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 It is also important to note that, depending on the facts before it, and the pertinent conditions 
of competition in the industry it is investigating,  an authority may find different factors, or 
combinations of such factors, in particular investig ations as particularly indicative of injury.  In some 
investigations, injury may be manifested principall y in losses of market share and/or output declines; 
in others, it may be manifested through losses in em ployment; in others, it may be manifested by 
declines in revenues and/or poor operating performan ce.  Because authorities are required to examine 
all factors in making an injury determination, no  single factor can serve as a reliable surrogate for 
injury in every individual investigation.  Yet th e Friends’ and India’s proposals essentially rely on a 
single factor, such as underselling or deviation from a "target price," in ascertaining "injury margins."7  
 
 An additional difficulty is that the proposals fail to take into account the fact that authorities’ 
determinations may be based on the threat of material  injury, rather than current material injury, by 
reason of dumped imports.  If the industry is not cu rrently injured, how can an authority determine 
what duty is adequate to "remove the injury"?   Even assuming that in such circumstances the 
authority would be required to calculate the duty ad equate to remove the threat of injury, such a 
calculation is even more problematic than one pert aining to current material injury.  For current 
injury, an investigating authority at least has historical data on such factors as import volumes, prices, 
and market share, and domestic industry output,  sales revenues, and financial performance.  No 
comparable data set exists for the period of the immine nt future that is particularly pertinent to threat 
analysis. 
 
 Further, statements to the contrary notwithst anding, the proposals are not actually aimed at 
removing injury, and do not contemplate any analysis of  whether injury would, in fact, be removed by 
application of the lesser duty.  Rather, they are aimed at estimating a level of duties that may be 
sufficient to remove injury.  However, if the methodology does not provide an accurate basis for 
assessing the injury, it will likely also  fail to determine accurately wh at level of duty will remove the 
injury.  The proposals appear to contemplate that th e lesser duty to be applied will be whatever duty is 
calculated under the applicable methodology, without any opportunity for the injured domestic industry, or other parties, to show that the methodology does not accurately determine what is necessary to remove the injury in that partic ular case.  Also, neither proposal contains any 
consideration of the extent to which duties may be  absorbed and, thus, even under the logic of the 
proposals themselves, application of their proposed  methodologies would not necessarily result in the 
removal of injury.      The manner in which the proposals suggest the lesser duty could be calculated raises further 
difficulties.  Typically, under Article 2 of the ADA, dumping margins are computed on the basis of 
data in both the home and export markets pert aining to individual producers or exporters under 
investigation.  The Friends and India contemplat e that Members would determine the level of duty 
necessary to remove injury by measuring only the price differentials within the export market, a 
market in which pricing practices likely reflect the effects of injurious dumping.
8   
  The United States questions the logic of an an alysis that permits anti-dumping duties to be 
calculated solely by reference to cost structures or  prices in the export market, the latter of which are 
likely suppressed or depressed by the dumped imports.  The proposals would essentially require the authority to ignore the conditions in the exporte r’s home market, and w ould apparently permit 
dumped imports that have been found to be materi ally injuring or threatening to injure a domestic 
                                                     
 
7 Thus, the terms "injury margin" (as used by India and the Friends) and "non-injurious price" (as used 
in the Friends’ most recent submission, TN/RL/GEN/43), are misnomers, since they do not reflect an injury 
analysis consistent with Article 3.   
8 Both proposals offer several methods for computing such differentials, some of which are based on 
actual prices, and others based on prices imputed from cost structures. TN/RL/GEN/58 
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 industry to continue to be dumped, as long as a be nchmark price is charged in the export market 
computed irrespective of normal value.  Thus, th e principal beneficiaries of these proposals would 
likely be the producers or exporters determined to have the highest dumping margins.  Furthermore, 
such continued dumping even after the imposition of a measure also may serve to inhibit exporters of fairly traded merchandise from being able fu lly to compete in the export market.   
 
 Additionally, each of the methods included in the proposals for implementing a mandatory 
"lesser duty rule" requires investigating authorities to ma ke a series of intricate calculations.  How the 
authority is to make these calculations would undoubt edly be an issue hotly disputed by the parties 
participating in an investigation.  The Friends acknowledge that the calculation of a lesser duty may 
be more difficult than the calculation of a dumping margin.   It would make anti-dumping 
investigations considerably more complicated, a nd would likely require a significant lengthening of 
the duration of anti-dumping proceedings.  Such an outcome would run counter to the objectives expressed by many Members regarding minimizing costs and burdens, and the time required for 
antidumping investigations where possible.   
 
 Moreover, the United States is concerned that  if the proposed lesser duty methodologies were 
adopted, parties may have an incentive not to coope rate in dumping investiga tions, which could make 
it considerably more difficult for investigating authorities to make accurate dumping determinations.  
Under the proposals, parties might provide only the export price information necessary to calculate the "lesser duty" while refusing to provide any no rmal value information necessary to calculate 
dumping.  We would be interested to learn how Members who currently apply a lesser duty rule 
address a situation in which an ex porting party refuses to provide any information other than the 
export prices necessary to calculate the lesser duty.   Finally, the complex new obligations in th ese proposals would invite even more frequent 
WTO dispute settlement proceedings with respect to anti-dumping measures than under the existing 
AD Agreement.  Among the features of these proposals that could lead to disputes are the choice of 
methodologies that authorities would apply, the numerous calculations to be made under these 
methodologies, and the proposed applicability of various other provisions of the AD Agreement 
(many of which have already been the subject of numerous WTO dispute settlement proceedings).   
Members need to ensure that any changes to the AD Agreement will lead to greater clarity in the 
Agreement, rather than more frequent disputes. 
  
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