WORLD TRADE  
ORGANIZATION  TN/RL/GEN/71 
14 October 2005 
 (05-4702) 
Negotiating Group on Rules Original:   English 
  
 
SUBMISSION ON CIRCUMVENTION 
 
Communication from the United States
 
  
 The following communication, dated 13 October 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)/ 243), also be circulated as a formal document. 
 
_______________ 
 
Introduction
 
 
 In prior submissions, the United States has pointed out that the lack of guidance on 
appropriate steps that Members may take to  address circumvention of anti-dumping and 
countervailing duty measures is a significant problem  in the Anti-Dumping Agreement (ADA) and the 
Agreement on Subsidies and Countervailing Measures (ASCM).1  The United States pointed out that 
Ministers recognized this omission in the Minist erial Decision on Anti-Circumvention, adopted by 
Members at Marrakesh and forming an integral part of the Final Act Embodying the Results of the 
Uruguay Round Multilateral Trade Negotiations.2  This Decision acknowledged the problem of 
circumvention and recognized the desirability of  applying "uniform rules in this area as soon as 
possible" to prevent the evasion of anti-dumping and countervailing measures through circumvention.
3 
  Notwithstanding the clearly expressed desire of Ministers for "uniform rules in this area as 
soon as possible", Members still have been una ble to reach consensus on what constitutes 
circumvention.  However, most users of trade re medy instruments clearly have some practice for 
addressing what they perceive to be circumvention.
4  Many Members using trade remedies recognize 
the need to address certain marginal modifications or alterations of the physical characteristics, 
production or shipment of merchandise otherwise s ubject to an anti-dumping or countervailing duty 
measure, where such modifications or alterati ons are done in a manner that undermines the purpose 
and effectiveness of remedies provided for unde r the WTO Agreements.  Nevertheless, a few 
Members have insisted on an irrebuttable presumption that any modification of the production or shipment that avoids the effects of a measure is legitimate, and can only be addressed, if at all, 
through an entirely new investigation and measure.  The United States disagrees.  
                                                     
 
 1 Circumvention , TN/RL/W/50 (4 February 2003) ; Circumvention, TN/RL/GEN/29 (8 February 2005).  
 2 See, Circumvention , TN/RL/GEN/29 (8 February 2005).  
 3 Decisions and Declarations relating to the Agr eement on Implementation of Article VI of the 
Agreement on Tariffs and Trade 1994.  Although the Mini sterial Decision relates specifically to anti-dumping, 
there is no reason to distinguish between circumvention of measures taken under either the ADA or the ASCM.  
 4 The United States has observed that, because there is no clear definition of "circumvention," some 
Members act against what they perceive to be circumven tion without labeling or reporting their actions as such.  TN/RL/GEN/71 
Page 2  
 
    
 Circumvention is a serious concern for Me mbers because it undermines the effectiveness of 
the trade remedy rules.  Anti-dumping and counterva iling duty measures are applied in order to offset 
injurious dumping or countervailable subsidized im ports.  However, if exporters are allowed to 
circumvent orders and avoid paying duties while continuing their unfair trade practices, such trade 
remedy measures are rendered meaningless.
5 
 
Circumvention  
 
 The United States believes the ADA and ASCM  should be clarified and improved in two 
regards:  (1) through explicit recognition of the two forms of circumvention traditionally recognized 
by Members using trade remedies;  and (2) throu gh adoption of uniform and transparent procedures 
for conducting anti-circumvention enquiries.   The fact that a number of Members currently act against circumvention under their laws, 
regulations or practices reflects a widespread, if not universal, understanding that Members may 
address circumvention under the current Agreements .  Such an understanding flows from the serious 
problems caused by circumvention.  In the view of the United States, it would be useful to make this authority as well as its parameters clear in the Agreements.  To accomplish this, Members should 
discuss whether the language below would be a ppropriate for inclusion in the ADA and ASCM. 
 
 Further, Members applying trade remedies ha ve commonly recognized two patterns of trade 
that they have considered to be circumvention.  The first involves marginal alterations to the covered 
product, and the second involves marginal alterations  in the patterns of its shipment and assembly. 
 
 The United States described the first form of  circumvention as involving minor alterations 
and later developed forms of the product covered by the measure.
6  The key is that the alteration of the 
original product be relatively minor, such th at the altered product has essentially the same 
characteristics and uses as the original product covere d by the measure.  For example, if an exporter 
adds an additional low value ingredient to a ch emical product which changes its classification, but 
does not change its essential nature from the point of view of customers, authorities may conclude that 
the altered product has circumvented the measure on th e original product.  While it is true that some 
small changes in a product may have a commercially  significant effect on its characteristics and uses, 
there is no reason to apply an irrebuttable presumption that any small change has such an effect.  The 
Agreements should make explicit the right of authorities to examine the facts and make a 
determination based upon those facts.  To acco mplish this, Members should discuss whether the 
language below might be appropria te for inclusion in the ADA and ASCM to address circumvention 
based on minor alterations or later developed forms. 
                                                      
 5 See, Circumvention , TN/RL/W/50, (4 February 2003).  
 6 See, Circumvention , TN/RL/GEN/29 (8 February 2005).  [9.6 - ADA] [19.5 - ASCM]   Notwithstanding any other provision of this Agreement or of 
Article VI of the GATT 1994, the authoriti es may impose [an anti-dumping duty] [a 
countervailing duty] with respect to a produc t that was not within the product under 
consideration in an investigation which resulted in imposition of a duty, if the authorities 
determine, pursuant to a review carried out in  accordance with this paragraph, that exports 
of the product are in circumvention of the [anti-dumping duty] [countervailing duty] originally imposed.   TN/RL/GEN/71 
 Page 3 
 
 
 
 The United States described the second form of circumvention as involving replacement of trade in a product with trade in its sub-components,  which are then assembled or finished either in a 
third country or in the country of import.  So l ong as the assembly or finishing operation is relatively 
minor, there is no reason to consider that moving th e locus of this operation should have any effect 
upon the anti-dumping or countervailing duty measure.   For example, if an exporter, rather than 
shipping a completed product, ships several sub-components not subject to the measure which can be easily and inexpensively reassembled after importation,  there is no reason this change in the location 
of the assembly step should have any legal effect upon the measure.  Again, as with the first form of 
circumvention, some assembly or finishing steps may be complex and their location of great 
commercial significance.  However, there is no reas on to apply an irrebuttable presumption that any 
change in the assembly or finishing location has such significance.
7  The Agreements should make 
explicit the right of authorities to examine the fact s and make a determination based upon those facts.  
Members should discuss whether it would be appropr iate to include the following text in the ADA 
and ASCM to address circumvention based on cha nges in marginal alterations in shipping and 
assembly: 
 
   
 
  
                                                     
 
 7 See, Circumvention , TN/RL/GEN/29 (8 February 2005).  [9.6.1 - ADA][19.6 - ASCM] Exports of a pr oduct that is not within the product under 
consideration are in circumvention of the [anti-dumping duty][countervailing duty] originally imposed if:  
(i)  subsequent to the filing of the applica tion, exports of the product under consideration 
have been supplanted, in whole or in part, by exports from the same country of another 
product that has the same general char acteristics and uses as the product under 
consideration; or  
[9.6.1 - ADA][19.6 - ASCM]  Exports of a product that is not within the product under 
consideration are in circumvention of th e [anti-dumping duty][countervailing duty] 
originally imposed if:  (i)[see above]; or  (ii) 
subsequent to the filing of the application, exports of the product under 
consideration have been supplanted, in whole or in part, by exports of parts or unfinished 
forms of the product under consideration, wh ere only a minor or insignificant process of 
finishing or assembly is necessary to convert th e parts or unfinished forms into the product 
under consideration.  TN/RL/GEN/71 
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 Procedures for Circumvention Enquiries
 
 
 Further, the United States has frequently stated that, although many Members today conduct 
anti-circumvention enquiries, the ADA does not pr ovide any guidance to those Members in the 
conduct of such enquiries, nor does it provide any pro cedural protections for parties involved in such 
enquiries.  For example, it has been observed that the ADA does not require that parties be notified of 
the initiation of an anti-circumvention enquiry in volving their exports.  Members should consider 
provisions to ensure that parties have full notice of such an enquiry, an d a full opportunity for a 
defence of their interests.  For this reason, we  suggest that Members discuss including the language 
below in the ADA and ASCM. 
 
Conclusion  
 
 The United States looks forward to discussing with other Members these suggestions for 
clarification and improvement of the current Agreements.  
__________ 
  
 
 [9.6.2 - ADA][19.7 - ASCM]  The prov isions of [Article 6 of the ADA ][Article 12 of the 
ASCM] regarding evidence and procedure shall apply to any review to determine whether exports of a product that was not within the product under consideration are in circumvention 
of the [anti-dumping duty][countervailing duty]  originally imposed.