WORLD TRADE  
ORGANIZATION  TN/RL/W/200 
3 March 2006 
 
 (06-0934) 
Negotiating Group on Rules Original:   English 
  
 
CIRCUMVENTION 
 
Paper from Brazil
 
  
 The following communication, dated 2 March 2006, is being circulated at the request of the 
Delegation of Brazil.  
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I. INTRODUCTION 
 
1. Brazil welcomes the discussion at the Negotiating Group on Rules (NGR) meeting in October 
2005 on the US contribution on Circumvention (TN/RL/GEN/71).  Brazil wishes to express its concerns with regard to how the concept of origin
 is to be treated in any possible future disciplines on 
circumvention.  More specifically, distinction sha ll be made between the concept of origin for the 
purpose of the Agreement on Implementation of Artic le VI of the General Agreement on Tariffs and 
Trade 1994 (ADA) and for the Agreement on Rules of Origin (ARO). 
 
II. ORIGIN OF GOODS  
 
2. Article 1.1 of the ARO provides that: 
 
Article 1 
Rules of Origin 
 “1.  For the purposes of Parts I to IV of this Agreement, rules of 
origin  shall be defined as those laws , regulations and administrative 
determinations of genera l application applied by any Member to determine  the 
country of origin of goods  provided such rules of origin are not related to 
contractual or autonomous trade regimes leading to the granting of tariff 
preferences going beyond the applicati on of paragraph 1 of Article I of 
GATT 1994.” (emphasis added) 
3. The word “goods” is consistently used throughou t the ARO.  Hence, the concept of origin 
under the ARO refers to the origin of goods . Part IV of the ARO provides for the harmonization of 
rules of origin of goods, so as to enable Members, in using the Harmonized Rules of Origin (HRO), to 
find precisely the same origin for any good. 
 4. In concrete terms, HRO will enable Members to come to the same answer  when confronted to 
the question: which is the country of origin of  a t-shirt?  If it is agreed that the fabric
 represents the 
“substantial transformation” in a t-shirt or that it represents the most significant “addition of value” of 
a t-shirt, then any Member will r each the conclusion that country 1  is the country of origin of the 
t-shirt (the good t-shirt).  If it is agreed that manufacturing  a white t-shirt represents the “substantial TN/RL/W/200 
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  transformation” in a t-shirt or that it represents th e most significant “addition of value” of a t-shirt, 
then any Member will reach the conclusion that country 2
 is the country of origin of the t-shirt.  
Finally, if it is agreed that dying  t-shirts represents the “substantial transformation” in a t-shirt or that 
it represents the most significant “addition of value” of a t-shirt, then any Member will reach the 
conclusion that country 3  is the country of origin of the t-shirt. 
 
5. For anti-dumping investigating authorities, th e decision of which of the three activities 
described above is the most relevant for the purpose of defining the origin the good “t-shirt”  is not 
important. 
 
III. ORIGIN OF DUMPED IMPORTS  
 
6. Article 2.1 of the ADA provides that: 
 
Article 2 
Determination of Dumping 
 
“2.1.  For the purpose of this Agreement, a product  is to be considered 
as being dumped , i.e. introduced into the commerce of another country  at 
less than its normal value, if the export price of the product exported from 
one country  to another is less than the comparable price, in the ordinary 
course of trade, for the like product wh en destined for consumption in the 
exporting country.” (emphasis added) 
 7. For the purpose of the ADA, a good (a word not found in the ADA) or a product only become 
relevant to the extent that this product is introduced  into the commerce of another country at less than 
its normal value.  It means that only dumped products
 or dumped imports  are relevant for anti-
dumping investigations.  Since injury has to be  caused by dumped imports and the dumping margin 
has to be calculated having the exporting country as the reference, the concept of origin under the 
ADA can only refer to the origin of dumped imports .  
 8. Keeping the same example, investigating author ities will have to investigate whether t-shirts 
imported  from country 2 , for instance, are causing injury to the domestic industry.  Country 2, the 
exporting country, is the origin of the alleged dumped imports. 
 
IV. CIRCUMVENTION 
 9. It is not the purpose of this paper to discuss a ll possible cases of circumvention or to elaborate 
on how to investigate claims of circumvention.  Th e aim is rather to focus on one specific situation 
and discuss whether rules of origin, in the sense of  the ARO, are useful to address the problem of 
circumvention or not.  10. Suppose that, subsequently to the imposition of a duty in the example of paragraph 8, imports 
from country 2 stop and there is corresponding increase of imports from the same country 3 
mentioned in paragraph 4.  The task before th e anti-dumping investigating authorities would be to 
determine whether imports from country 3 are circumventing the duty imposed on imports from 
country 2.  In other words, investigating aut horities will have to determine whether the dumped 
t-shirts still have country 2 as their origin or whet her country 3 is the country of origin of those t-
shirts.  If the answer is that the origin of the dumped t-shirts is still country 2, the duty may be 
extended to imports of dumped t- shirts imported from country 3. 
 11. The key question, for the purpose of this paper, is how to determine if country 2 is still the 
origin of the dumped t-shirts or whether the origin  of the dumped t-shirts shifted to country 3.   TN/RL/W/200 
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  12. The natural answer is to verify whether th e dumped t-shirt has been subject to any 
manufacturing process in country 3.  If the answer is yes, investigating authorities will have to analyse 
the nature of the manufacturing process that the dumped t-shirt has been subject in country 3:  if there 
is no “substantial transformation” or  not enough “value adde d”, authorities may conclude the origin of 
the dumped t-shirts is still country 2.  One exampl e of how to assess the “substantial transformation” 
or the “value added” is item (v) of Artic le 12.1 of the Dunkel Draft for anti-dumping. 
 13. It seems clear, therefore, that the concepts of  “substantial transforma tion” and “value added”
 
are important to any discipline on circumvention. 
 
V. RULES OF ORIGIN AND CIRCUMVENTION 
 
14. The importance of concepts like “substantia l transformation” and “value added” for 
circumvention disciplines does not mean, however, that rules of origin, in the sense of the ARO, are 
relevant for circumvention. 
 
15. If, based on anti-circumvention disciplines, an ti-dumping investigating authorities find that 
the manufacturing process in country 3 does not resu lt in enough value added so as to make country 3 
the origin of the dumped t-shirts, then anti-dumping investigating authorities may be able to conclude 
that country 2  is still the origin of the dumped t-shirts  and, as a result, the duty may be extended to 
imports of dumped t-shirts from country 3. 
 
16. Based on the rules of origin, as defined in the ARO, custom valuation authorities may decide 
however that country 1  is the origin of the product “t-shirt” . 
 17. There seems to be no conceptual or theoretical reason to tie the concept of origin in the ADA 
to the one in the ARO.  Although using the same c oncepts of “substantial transformation” and “value 
added”, anti-dumping investigating authorities and cu stom valuation authorities will look at the same 
t-shirt and ask themselves different questions regarding the origin of that t-shirt.  The answers, of 
course, may differ.  
VI. CONCLUSION 
 
18. Any future multilateral disciplines on circumven tion shall explicitly recognize that rules of 
origin, in the sense of the ARO, do not apply in anti-circumvention.  
 19. Since there is no reason to presume that the c ountry of origin of the product and the country 
of origin of the dumped imports are the same, clar ity with regard to the relationship between anti-
circumvention disciplines and the HRO is essential for any future discipline on anti-circumvention. 
Any ambiguity on this regard may generate mi sunderstandings and cast doubts on the predictability 
and transparency on possible future  disciplines on anti-circumvention. 
 
 
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