WORLD TRADE  
ORGANIZATION   
G/ADP/AHG/W/190 
13 September 2011 
 (11-4401) 
Committee on Anti-Dumping Practices 
Working Group on Implementation Original:   English 
 
 
 
ARTICLE 2.3 – CONSTRUCTED EXPORT PRICE 
 
Paper by South Africa 
 
 
 The following communication, dated 9 September 2011, is being circulated at the request of the Delegation of South Africa.  
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  Further to the decision of the Committee on Anti-Dumping Practices of 21 October 2009 to refer the topic " Article 3.2 – Constr ucted export price " to the Working Group on Implementation, 
South Africa is pleased to submit the following paper describing when its Investigating Authority, the 
International Trade Administration Commission of South Africa (ITAC), considers the export price 
unreliable and how it constructs the export price.   
 
1. Article 2.3 of the Anti-Dumping Agreement 
 Article 2.3 of the Anti-Dumping Agreement provides:  
  
"In cases where there is no export price or wh ere it appears to the authorities concerned that 
the export price is unreliable b ecause of association or a co mpensatory arrangement between 
the exporter and the importer or a third party, the export price may be constructed on the 
basis of the price at which the imported products  are first resold to an independent buyer, or 
if the products are not resold to an independent  buyer, or not resold in the condition as 
imported, on such reasonable basis as the authorities may determine."   
 
2. The South African legislative framework 
 Section 32 of the International Trade Administration Act, (Act No. 71 of 2002) (ITA Act) 
provides as follows:   "(2)  For the purpose of considering an app lication alleging the dumping or subsidised 
export of goods into the Common Customs Area- 
 
(a) "export price", subject to subsections (3 ) and (5), means the price actually paid or 
payable for goods sold for export, net of all taxes, discounts and rebates actually granted and 
directly related to that sale; 
  (5)  The Commission must, despite the definiti on of "export price" set out in subsection 
(2), when evaluating an application concerni ng dumping that meets the criteria set out in 
subsection (6), determine the export price for the goods in question on the basis of the price G/ADP/AHG/W/190 
Page 2  
 
  at which the imported goods are first resold to an independent buyer, if applicable, or on any 
reasonable basis. 
  (6)  Subsection (5) applies to any investigation of dumping if, in respect of the goods 
concerned- 
 
 (a)  there is no export price as contemplated in the definition of dumping;   (b)  there appears to be an association or compensatory arrangement in respect of the 
export price between the exporter or foreign manufacturer concerned and the importer or the 
third party concerned; or 
  (c)  the export price actually paid or pa yable is unreliable for any other reason." 
 
 Section 10 of the Anti-Dumping Regulations  (ADR) of ITAC expands on these provisions 
and provides as follows:   
  "Constructed export price  
 10.1 Where – 
 (a)  there is no export price at the time of importation; or 
 (b)  the exporter or the foreign producer and the importer are related; or 
 (c)  the invoiced export price appears to be unreliable for any other reason; 
  the export price may be constructed from the first point of resale to an independent buyer. 
 
 10.2 In constructing such export price the Commission shall deduct – 
 (a)  all costs between the exporter and the importer; and  (b)  a reasonable profit.   
10.3 The reasonable profit contemplated in subsection 2(b) may be determined by calculating – 
 (a)  the total cost of the producer/exporter; 
(b)  the total cost of the importer, including a ll costs from the ex-factory export point of the 
producer/exporter; and 
 (c)  the total profit realised by both the producer/exporter and the importer;  
 and by allocating the profit in the same ratio as the costs incurred by the two parties. The 
reasonable profit allocated shall not be less than zero.   10.4 In the event that   (a)  the imported product is not resold;  (b)  is not resold in the same condition imported; or  
(c)  where information on the resale price is  not available, the export price may be 
constructed on any reasonable basis."  
 ADR Part A defines "related parties" as follows:  
 
 ''Related parties' are parties deemed to  be related for purposes of an anti-dumping 
investigation, and sales may be considered not to be at arm's length, if - 
 
 (a)  one directly or indirectly owns, controls  or holds five per cent or more of the equity 
shares of the other;  G/ADP/AHG/W/190 
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   (b)  one has the power to directly or indirectly nominate or appoint a director to the 
management of the other; 
 (c)  one is an officer or director of the business of the other;  (d)  they are legally recognised partners in business;  (e)  one is employed by the other; 
 (f)  they are both directly or indirectly controlled by a third person; 
 (g)  together they directly or indirectly control a third person;  (h)  they appear to be related by virtue of their conduct;   
(i)  they are blood relatives or are related by  marriage, common-law partnership or adoption; 
or 
 (j)  if their relationship is otherwise of such a nature that trade between them  cannot be 
regarded to be at arm's length." 
 3. The practice of ITAC in constructing the export price 
 An export price will be constructed in two s ituations:  when the export price is unreliable  for 
whatever reason and when there is no export  price, in accordance with Artic le 2.3 of the Agreement.  
 
3.1 Calculation of export price: unreliability  
 There are several circumstances which can give rise to an unreliable export price. Should it be 
found, for example, that the exporter in the country u nder investigation is related to the importer in the 
Southern African Customs Union (SACU), or if a co mpensatory agreement exists between the parties, 
the basis of the export price will be the price at wh ich the subject product is resold by the importer to 
the first unrelated party in the SACU. This price w ill then be constructed backwards by subtracting all 
relevant costs and profits to arrive at an ex-factor y price in the country of origin. Essentially, this is 
the difference between the exporter's ex-factory prices and the first independent resale price. 
 
 The relevant costs to be subtracted in a constructed export price situation are therefore 
twofold:   
(1)  Costs incurred in the SACU and  
 (2) Costs incurred in getting the product to the SACU.  
 
 Specifically, costs to be deducted will include a ll costs generated in the SACU area such as 
commissions received, packaging costs, selling, general and administrative costs, freight and 
insurance costs and all harbour costs such  as clearing costs and customs duties.  
  Costs in the second category include sea freight  and insurance and any harbour and freight, 
insurance and handling charges in the country of origin.  
  For a profit deduction, the Commission requires a re-calculation of the importer's profit to ensure that a reasonable amount is deducted and that the actual or declared profit is not understated. 
The stated or declared profits (after verification) of both the exporter and the importer are totalled, and 
this total profit is apportioned based on the ratio of SACU expenses as a percentage of the total 
manufacturing and selling expenses. This profit is then  deducted with the other expenses to arrive at 
an ex-factory export price in the country of origin.   Should it be found that the subject product is not resold after importation, for example, if it is used as an input in manufacturing, the export price must be constructed, us ing the actual export price 
as a basis, plus a reasonable amount for profit. This price must then also be worked back to an ex-
factory level for purposes of determination of the dumping margin. G/ADP/AHG/W/190 
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  3.2 Calculation of export price when there are no exports to SACU (Sunset Reviews)  
 In the Commission's Exporter Sunset Review Questionnaire , exporters are requested to submit 
details of all their exports to third countries if th ey did not export the subject product to SACU during 
the period of investigation, in order to enable th e Commission to determine whether the expiry of the 
duty would likely lead to the recurrence or continuation of dumping. 
 
 When determining the export price based on exports to third countries, the Commission uses 
the export price of the subject product to an appropriate third country. The country selected is evaluated based on the following criteria:  
(a) the similarity of the like product used to establish the normal value and the product exported 
from the country of origin to the third country in  terms of the criteria used by the Commission 
in its like product analysis; 
(b) the similarity in the level of development of – 
 (i) the domestic industry in SACU and the third country producing the like product, 
including but not limited to, the existence and number of domestic producers of the like 
product; and 
 (ii) the domestic market in SACU and the third country in respect of the like product, 
including but not limited to, the volume of pro duction, consumption, exports and imports of 
the like product; 
 
(c) the similarity in the volume of domestic sales of the like product in the country of origin and 
exports from the country of origin to the third country; and 
(d) whether sales in the domestic market of the country of origin and in the third country are at 
the same level of trade.  
 ITAC is typically faced with this situation in  a sunset review because of the "unique" aspects 
of the SACU market, i.e. it is a relatively sma ll market, situated quite some distance from major 
exporting countries and therefore imports often cease after the imposition of a duty.   
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