WORLD TRADE  
ORGANIZATION  TN/RL/GEN/99 
3 March 2006 
 (06-0935) 
Negotiating Group on Rules Original:   English 
  
 
PROPOSALS ON THE MANDATORY APPLICATION 
OF THE LESSER DUTY RULE 
 
Paper from Brazil;  Hong Kong, China;  India;  and Japan
 
 
 
 The following communication, dated 2 March 2006, is being circulated at the request of the 
Delegations of Brazil;  Hong Kong, China;  India;  and Japan.   The submitting delegation has requested that th is paper, which was submitted to the Rules 
Negotiation Group as an informal document (JOB(06)/39), also be circulated as a formal document. 
 
_______________ 
 
  This paper aims at providing further clarification on some of the important issues concerning 
the mandatory application of the lesser duty rule (LDR), taking into account the useful discussions at 
the Rules Group meetings.     Part I of this paper provides further expl anation on the principle of how a mandatory 
application of the LDR shall be done.  Part II provides a revised legal draft relating to the basic 
structure
1 of the mandatory application of the lesser duty rule based on earlier proposals submitted by 
India (TN/RL/GEN/32) and the FANs (TN/RL/GEN/43).2 
 
I. EXPLANATION  
 
1. Necessary details of the amendment 
  
 We believe the AD Agreement should at least pr ovide several core disciplines with regard to 
the establishment and maintenance of the lesser duty, in order to ensure orderly application of the 
mandatory application of the lesser duty rule.  These core disciplines should include principles and methodologies for calculating the injury margin, pro cedural requirements, and guidance regarding the 
extent to which the LDR applies in reviews. 
 
2.  Establishment of the Non-Injurious Price 
 
 The main principle of the mandatory application of the lesser duty rule is that the amount of 
the anti-dumping duty shall not exceed the lesser of th e margin of dumping or the injury margin, in 
which the injury margin is defined as the differe nce between the import prices of the dumped product 
                                                     
 
1 We reserve the right to propose additional legal draft proposals relating to other aspects of the 
application of the LDR in the context of the AD Agreement. 
2 We also take note of the comments submitted by the United States (TN/RL/GEN/58), South Africa 
(TN/RL/GEN/60), Jamaica (TN/RL/W/188) and Brazil (TN/RL/W/189) that helped promote discussions of this 
issue. TN/RL/GEN/99 
Page 2  
 
  exported from the exporting Member to the impor ting Member (“the import price”) and the non-
injurious price (“the NIP”).   The NIP is the price at which the domestic industry of the like product in the importing Member should be able to compete with expor ters or foreign producers of the product under 
investigation.  The authorities have to establish the non-injurious price (NIP) on the basis of an 
appropriate methodology.  However, this does not m ean that the authorities must select the best one 
out of the methodologies for their application of the LDR in general or in any specific case.  Nor does it mean that the AD Agreement sets forth any hierarchy or preferences among the methodologies.  Since each of the four methodologies is designed to  establish the NIP in an appropriate way, the 
authorities may use any of the four methodologies in  any specific case, unless the use of a particular 
methodology is not appropriate for measuring the duty level necessary to eliminate the injury.   
  It is therefore not necessary for the authorities to test out more than one methodology in a particular case in order to compare which one is more appropriate than othe rs or which one is the 
most appropriate.  The authorities have to disclo se a methodology in accordance with paragraph 6 of 
Annex III.  When the authorities receive comments from the interested parties that the use of a 
methodology is not appropriate, the authorities have  to provide a reasoned e xplanation supported by 
objective evidence that the use of a methodology is a ppropriate in that particular case, but this does 
not mean that the authorities have to explain why they have not used other methodologies or why the chosen methodology is more appropriate than the other methodologies.  Thus, it is perfectly 
permissible that the authorities themselves indicate one or more of the four as preferred 
methodologies which they intend to use in investigations, and then use one from among those preferred methodologies in specific cases, retaining the option of resorting to others among the four 
alternatives only in the event that such preferred methodologies are not considered to be appropriate 
(and in such case the reasons would be disclosed  in writing).  The requirements of a reasoned 
explanation and supporting evidence would also requi re the authorities to disclose how they calculate 
the NIP and the injury margin.  
3.  Fair comparison in the ca lculation of the injury margin 
 
 A fair comparison must be made between the NIP and the import price.  However, we do not 
mean to imply that “a fair comparison” between the NIP and the import price is exactly the same as “a 
fair comparison between the export price and the norma l value” under Article 2.4.  The elements of a 
“fair” comparison in determining the injury margin may differ from the elements of a fair comparison 
in determining dumping.  This is because the objec tives of the two comparisons are different.  The 
NIP is not derived from the exporter/producer’s pric es or costs.  Rather, the NIP will be calculated 
using the data (price and/or cost) of other parties.  In addition, the comparison will not be made at the 
exporter/producer’s ex-factory level.  Rather, th e level of the comparison will depend on the method 
the authorities choose for calculating the NIP.  A st rict comparison between the import price and the 
NIP may often be difficult, especially when it is di fficult for the authorities to obtain sufficient data 
and evidence to conduct such compar ison at the same level of strictness as in a determination of 
dumping.  The authorities therefore have to have so me flexibility regarding the method that they use 
to ensure fair comparison is made. 
 
4. Applicability to reviews 
 
(1) Article 9 reviews 
 
 The principle that the amount of the anti-dumping duty shall not exceed the lesser of the margin of dumping or the injury margin shall be applied in all anti-dumpi ng proceedings including the 
duty assessment phase.  However, this  does not mean that the authorities are required to re-calculate 
the NIP in the duty assessment procedures based on the latest data, although the authorities are not  TN/RL/GEN/99 
 Page 3 
 
 
  prohibited from choosing to do so.  Nor are the auth orities required to re-calculate the injury margin 
by comparing the NIP with the actual import price,  while the authorities may choose to do so.  At 
minimum, the authorities must compare the newly-a ssessed actual margin of dumping with the injury 
margin (which will be the injury margin calculated in  the original investigati on in case neither the NIP 
nor the injury margin is re-calcula ted in the duty assessment procedure). 
 
 The application of the LDR in the new shipper reviews would be similar to that in the duty 
assessment procedures.    (2)  Article 11 reviews 
 
 The authorities may modify the dumping margin , the injury margin, the NIP, etc., as 
appropriate, through reviews under Article 11.2.  These modifications may in turn lead to a 
modification of the duty level.  The LDR applies in such proceedings as well as in the original 
investigation.  However, this does not mean the au thorities are required to re-examine all factors in 
every case.  The scope of the re-determination unde r Article 11.2 reviews depends on a demonstration 
of “the need for a review” in each case. The author ities are not necessarily required to re-calculate the 
NIP in Article 11.2 reviews. In case the request incl udes a modification of the margin of dumping, the 
authorities is required to compare the newly-calcula ted margin of dumping with the injury margin 
(which will be the injury margin calculated in th e most recent proceeding, including the original 
investigation, in case neither the NIP nor the in jury margin is re-calculated in the review).
3 
 
 The authorities do not have to re-calculate th e NIP in sunset review proceedings because the 
required determination is only to dete rmine whether “the expiry of the duty would be likely to lead to 
continuation or recurrence of dumping and injury.”  This does not, however, prevent interested parties 
from requesting reviews under Article 11.2 when they  believe the duty level of the extended measure 
should reflect changes in the NIP that occurred after the original imposition of the duty. 
 
II. PROPOSALS  
 
1. Proposal 1: Amendment to Article 9 of the ADA 
 
Article 9  
Imposition and Collection of Anti-Dumping Duties  
 
9.1 The decision whether or not to impose an anti-dumping duty in cases where all requirements for the imposition have been fulfilled, and the decision whether the amount of the anti
-dumping duty 
to be imposed shall be  the full margin of dumping  or less, are decisions  is to be made by the 
authorities of the importing Member.  It While it  is desirable that the imposition be permissive in the 
territory of all Members, any and that the  duty imposed shall be less than the margin of dumping  less 
than the margin  if such lesser duty would be  is adequate to remove th e injury caused by the dumped 
imports to the domestic industry, but in no event the duty may exceed the full margin of dumping.  
The provisions of Annex III shall be observed in dete rmining the level of the lesser duty adequate to 
remove the injury to the domestic industry . 
 
[No changes to Article 9.2.] 
 
                                                      
3 In a prospective normal value system, in case th e request for the Article 11.2 review includes a 
modification of the normal value, the authority must  at the minimum compare the newly-calculated normal 
value with the NIP (which will be  the NIP calculated in the most recent proceeding where the NIP was 
calculated, including the original investigation). TN/RL/GEN/99 
Page 4  
 
  9.3 The amount of the anti-dumping duty shall not exceed the lesser of the 
margin of dumping as 
established under Article 2 or the inju ry margin as established under Annex III . 
 
[No changes to subparagraphs of Article 9.3] 
 9.4 When the authorities have limited their ex amination in accordance with the second sentence 
of paragraph 10 of Article 6, any anti-dumping dut y applied to imports from exporters or producers 
not included in the examination shall not exceed:  
(i) the 
weighted-average of the margins of dumping or margins of injury established 
and applied to determine the level of anti-dumping duty with respect to the selected 
exporters or producers or 
(ii) where the liability for payment of anti- dumping duties is calculated on the basis of 
a prospective normal value, the difference between:  the weighted average normal 
value of the selected exporters or producers and the export prices  of exporters or 
producers not individually examined,  
(a) weighted average of the lesser of th e normal value of the selected exporters 
or producers or the NIP as established under Annex III, and  
(b) the export prices (import price as the case may be) in relation to the exporters 
or producers that were not individually examined,   
 
provided that the authorities shall disregard fo r the purpose of this paragraph any zero and de minimis  
margins and margins established under the circumstances referred to in paragraph 8 of Article 6.  The 
authorities shall apply individual duties or normal va lues to imports from any exporter or producer not 
included in the examination who has provided th e necessary information during the course of the 
investigation, as provided for in subparagraph 10.2 of Article 6. 
 
2. Proposal 2: Addition of Annex III to the ADA 
 
ANNEX III 
PROCEDURES AND SUBSTANTIVE RULES FOR APPLICATION  
OF THE LESSER DUTY RULE PROVIDED FOR IN PARAGRAPH 1 OF ARTICLE 9 
 
1. [ Lesser duty by comparison of the dum ping margin with the injury margin ]  The amount of 
the lesser duty that is adequate to remove the in jury caused by the dumped imports to the domestic 
industry in accordance with paragraph 1 of Article 9 shall be determined by comparison between the 
margin of dumping as established under Article 2 a nd the margin of injury as established under this 
Annex.  
 2. [ Definitions ]  For the purpose of this Agreement, the injury margin is defined as the 
difference between the import prices of the dumpe d product exported from the exporting Member to 
the importing Member (“the import price”) and the non-injurious price (“the NIP”) 
4.   
 
3. [ Establishment of the NIP ] The authorities shall use one of the following methodologies5 
to calculate the NIP:6 
                                                      
4 We are willing to have further discussion on a possible general definition of the NIP in the AD 
Agreement.  
5 [New footnote]  The authorities shall collect relevant data to establish the NIP for a sufficient period 
of time comparable to the period of investigation for the dumping determination (normally twelve months). 
6 [New footnote]  Members may indicate one or more of thes e as preferred alternative(s) that they 
intend to use in all investigations, with the option to resort to others among these alternatives only in the event  TN/RL/GEN/99 
 Page 5 
 
 
   
(a) the current price7 of the like products produced by domestic producers (“domestic 
like products”); or  (b) the price of the domestic like product during a period prior to being affected by 
dumping;
8 or 
 (c) the price of non-dumped imports of the product under investigation or the like products, provided that such price is re presentative and the volume of the non-dumped 
imports is not insignificant; or 
 
(d) the constructed price based on per unit co st of production plus a reasonable amount 
for selling, general and administrative costs a nd for profits of the domestic producers of the 
domestic like product.
9 
 
4. [ Determination of the injury margin ] A fair comparison shall be made between the NIP 
and the import price.  The comparison shall be made at the same level of trade.  Due allowance shall 
be made in each case, on its merits, for differenc es which affect price comparability so far as the 
evidence shows such differences.  5. [ Prohibition of zeroing ] In calculating the injury margin  based on multiple types of dumped 
imports, injury margin resulted from individual type, bo th positive and negative, must be aggregated.   
 6. [ Disclosure and opportunity to comment ] Before the final determination, the 
authorities shall disclose the methodology, calcula tion and evidence supporting the calculation they 
use to determine the injury margin and provide inte rested parties the opportunity to comment thereon, 
due regard being paid to the requirement fo r the protection of confidential information. 
    
* Additional provisions will be proposed separately with regard to the application of the lesser 
duty rule in the proceedings pursuant to Articles 9 and 11.  
__________ 
 
 
                                                                                                                                                                    
 
that the said preferred alternative is not considered to  be appropriate, for reasons to be disclosed in writing 
pursuant to paragraph 6 of this Annex. 
7 [New footnote]  For the purpose of paragraph 3, the term  “price” shall be interpreted as meaning 
import prices at any level of trade such as cost, insurance and freight (CIF), or ex customs area, or resale price to 
the importers, or the delivered price to the customers, pr ovided that the comparison for the purpose of arriving at 
the injury margin, are made at only the same level of trade. 
8 [New footnote]  The authorities shall choose a period that is comparable to the period of investigation. 
9 We are willing to further discuss whether there should be any rules that govern the selection and the 
handling of data to be used in this calculation methodology, including the selection and allocation of cost data 
and determination of a reasonable amount for profits.