WORLD TRADE  
ORGANIZATION  TN/RL/GEN/43 
13 May 2005 
 (05-1969) 
Negotiating Group on Rules Original:   English 
  
 
FURTHER SUBMISSION OF PROPOSALS ON 
THE MANDATORY APPLICATION OF THE LESSER DUTY RULE 
 
Paper from Brazil;  Chile;  Costa Rica;  Hong Kong, Chin a;  Israel;  Japan;  Korea, Rep. of;  Norway; 
Singapore;  Switzerland;  the Separate Customs Te rritory of Taiwan, Penghu, Kinmen, and Matsu;  
and Thailand  
 
  The following communication, dated 12 May 2005, is being circulated at the request of the Delegations of Brazil;  Chile;  Costa Rica;  Hong K ong, China;  Israel;  Japan;  Korea, Rep. of;  
Norway; Singapore;  Switzerland;  the Separate Customs Territory of Taiwan, Penghu, Kinmen, and 
Matsu;  and Thailand.   The submitting delegations have requested th at this paper, which was submitted to the 
Rules Negotiating Group as an informal document (JOB (05)/79), also be circulated as a formal 
document. 
 
_______________ 
 
 
I. SCOPE OF THE PROPOSAL 
 The “lesser duty rule” incorpor ates the principle that an AD duty be less than the margin of 
dumping to the extent that such lesser duty would be  adequate to remove the injury from the dumped 
imports to the domestic industry.  The objective of th e rule is not to arbitrarily reduce the amount of 
an AD duty, but to ensure that any AD duty is set  at a level adequate to permit the domestic like 
product to compete with products subject to antidum ping measures without being injured.  If we refer 
to an adequate level of AD duties to prevent injury  to the domestic industry as “the injury margin”
1, 
the lesser duty rule would require that the amount of  an AD duty not exceed the injury margin, to the 
extent that the injury margin does not exceed the dumping margin. 
  There are two parts to the amendments which we  contemplate.  First, we would incorporate 
the lesser duty rule as a mandatory requirement in Ar ticle 9.1 of the Agreement and propose that it 
apply mutatis mutandis  to Articles 8.1, 9.3 and 9.4.  Second, we would propose a new Annex, 
Annex IV, to the Agreement to provi de the details of how the lesser dut y rule is to be applied and its 
relationship to reviews under Article 9 and Article 11. 
  We note that the FANs have proposed in TN/RL/W/118 to clarify that price undertaking 
offers shall be accepted if they offset injury caused by  dumping. The FANs will address this issue, 
which is related to the application of the lesser dut y rule, separately in the context of proposals related 
to price undertakings in the course of the negotiation. 
                                                     
 
1 The use of the term “injury margin” does not imply that a quantification of injury is required in the 
context of the application of the lesser duty rule or in  the determination of injury pursuant to Article 3. TN/RL/GEN/43 
Page 2  
 
  This paper is a further elaboration of the our proposal in TN/RL/W/119, JOB(04)/40 & Rev.1 
and TN/RL/GEN/1. Our proposals described belo w have also benefited from the proposals and 
comments of other Members
2, particularly India’s (TN/RL/W/170), as well as discussions with other 
Members about their experience in the application of the lesser duty rule.  II. PROPOSALS WITH EXPLANATIONS 
A. M
ANDATORY APPLICATION OF  THE LESSER DUTY RULE  
Proposal 1: 
 
 Clarify that application of the lesser duty rule be mandatory by amending Article 9.1 by deleting the 
phrase “, and the decision whether the amount of the anti-dumping duty to be imposed shall be the full margin 
of dumping or less,” from the first sentence, and by su bstituting the following sentence for the last sentence in 
that provision:   
 
“While it is desirable the imposition be permissive in the territory of all Members, any duty 
imposed shall be less than the margin of dumping to the extent that such lesser duty is 
adequate to remove the injury to the domestic industry. The provisions of Annex IV shall be 
followed in determining the level of the lesser duty adequate to remove the injury to the 
domestic industry.” 
Proposal 2: 
 
 Amend the chapeau of Article 9.3 by adding “the lesser of the injury margin as established under 
Annex IV or” between the words “excee d” and “the” in the first sentence. 
 
Proposal 3: 
 
 Amend Article 9.4(i) by adding “the lesser of the weighted average injury margin as established under 
Annex IV or” at the beginning of the subparagraph. 
 
 
Explanation: 
 
 Article VI of the GATT does not condemn dumping as such, but only dumping that causes (or threatens to cause) ma terial injury to the domestic industry. Article VI also speaks of offsetting or 
preventing the effects of dumping, indicating that the primary objective of AD duties is not to deter 
dumped imports but to eliminate the injurious effect s of them.  Article 11.1 of ADA, by stipulating 
that “the anti-dumping duty shall remain in force only as long as and to the extent necessary  to 
counteract dumping which is causing injury” [emphasis added], indicates that the objective of AD measures is to achieve a situation where compet ition between products under investigation and 
domestic like products does not cause injury to the domestic producers through the effects of 
dumping. 
  Therefore, it is evident that a mandatory l esser duty rule would be consistent with the 
objectives of eliminating the injurious effects of dumping both under the GATT and the ADA. The fact that Articles 7.4, 8.1 and 9.1 not only refer to but regard as desirable measures lower than the 
margin of dumping to the extent adequate to eliminate injury, is also a manifestation that lesser duty is 
in line with the objectives of AD measures.   
 
                                                     
 
2 We note that a number of Members other than the FANs have addressed various aspects of the lesser 
duty rule (eg. India (TN/RL/W/170), the European  Communities (TN/RL/W/13), Canada (TN/RL/W/47), 
Australia (TN/RL/W/86)).  TN/RL/GEN/43 
 Page 3 
 
 
 B. CALCULATION OF THE INJURY MARGIN  
Proposal 4-1 (Injury Margin) 
 
ANNEX IV 
 
PROCEDURES AND SUBSTANTIVE RULES FOR APPLICATION OF THE LESSER DUTY RULE 
PROVIDED FOR IN PARAGRAPH 1 OF ARTICLE 9 
 
1. The injury margin is defined as the difference between the price of the dumped imports (“the import 
price”) and the non-injurious price (“ the NIP”) of the domestic products like the products und er investigation 
(“domestic like products”). 
 
(Contd.)  
 
Explanation: 
 
 In applying the lesser duty rule it is necessary to identify the price level, as defined as the 
NIP, at which the domestic like product can compet e with subject imports w ithout being injured after 
the imposition of the antidumping duty.  Since th e subject imports and the domestic like products 
compete in a single market, the NIP should be one and specific to the product and industry producing 
the domestic like products.  By applying the same NIP to the price of the dumped imports, the injury 
margin for each will reflect, and therefore elimin ate, the price disadvantage of the domestic like 
products relative to the dumped im ports.  Because antidumping duties are applied on the declared 
value for customs of the imported products, the inju ry margin should be expressed as a percentage of 
the declared value.  
Proposal 4-2 (Calculation of the NIP) 
 
2. The authorities shall choose one of the methodologies listed below to calculate the NIP that is 
appropriate with regard to the specific situations of the case: 
 
 (a) The NIP is calculated as the current price of the domestic like product. 
 
 (b) The NIP is calculated as the price of the domestic like product during a period prior to being 
 affected by dumping, provided that such period is, except for the absence of the effect of dumping, 
 comparable to the dumping investigation period taking into account rele vant market factors. 
 
 (c) The NIP is calculated as the price of non-dumped imports of the product under investigation 
 or the like products, provided that such price is representative and the volume of the non-dumped 
 imports is not negligible for the importing market.  The non-dumped imports shall be selected from all 
 sources including like products imported from foreign producers in a country or countries not subject to 
 antidumping investigations or measures or products  under investigation which have been found not to 
 be dumped. 
 
 (d) The NIP is calculated as per unit cost of  production plus a reason able amount for selling, 
 general and administrative costs and for profits of the domestic producers of the domestic like product. 
 
(Contd.)  
 
Explanation: 
 (1) Principles Applicable to the Calcul ation of the NIP and the Injury Margin
 
  The overriding principle of any calculation methodology is to establish a NIP which permits competition between subject imports and the dom estic like products at the price which are not TN/RL/GEN/43 
Page 4  
 
 injurious to the domestic industry, while a voiding the imposition of excessive AD duties. The 
calculation of the NIP may be done in more than one  way, based on the consideration of all available 
evidence. The methodologies used to determine th e NIP depend on data available to authorities and 
on the circumstances of particular investigations . Thus, the authorities should be granted sufficient 
options so that they can select an appropriate methodology of calculation under the specific 
circumstances of each investigation.
3   
 (2) Calculation Methodologies
 
 (a) Current Price Undercutting Method 
 
 Under this method, the NIP is established on the basis of current price of the domestic like products. This method generally should be used when  the prices of the domestic like products at the 
time of the investigation have not been affected by  dumping. Under such circumstances, by raising the 
import price to the level of domestic prices, the dom estic industry should be able to compete at that 
price level without being injured.  
 (b) Prior Period Price Undercutting Method   Under this method, the NIP is established on the basis of price of the domestic like products during a period prior to being affected by dumping. The authorities should examine whether such a 
period to be used is comparable to the period of dumping investigation, except for the difference 
caused by dumping. In determining whether th e prior period is comparable to the dumping 
investigation period, authorities must take into account  relevant market factors. Since the price of the 
dumped imports will be raised in the domestic mark et of the importing country to a price level which 
is equal to that of a situation not affected by dumping, the domestic industry should be able to 
compete without being injured.  
 (c) Non-Dumped Import Method   Under this method, the NIP is established on the basis of the price of the non-dumped import 
of the products under investigation, provided that  the price is representative. The term “non-dumped 
import” includes subject import that has been found  not to be dumped and import of like products 
from third countries outside the scope of the investig ation that is not subject  to antidumping measures. 
Since the domestic like products have  to compete with imports that are not dumped, an duty to raise 
the price of the dumped imports to a price level equi valent to that of non-dumped imports shall be 
sufficient to remove the injury of the domestic i ndustry.  However, if the data is taken from non-
dumped imports that are sold in the domestic mark et of the importing country only for a commercially 
meaningless volume, the price of such non-dumped imports will not serve as a valid basis for a price level at which the domestic like product should be able  to compete.  Therefore, the volume of the non-
dumped imports shall be at least not negligible for the importing market.  (d) Representative Cost Plus Profit Method 
 
 Under this method, the NIP is established on th e basis of per unit cost of production plus a 
reasonable amount for selling, general and administra tive costs and for profits of the domestic like 
product.
4   The domestic industry should be able to comp ete with imports at a price level that covers 
its necessary costs and expenses and a reasonable amount of profit. 
                                                      
3 The FANs are willing to discuss any additional me thodologies other than sh own in (a) through (d) 
above. 
4 The FANs are willing to further discuss any rules that should govern the selection and the handling of 
data to be used in this calculation methodology. Such rules will include, but not limited to, the selection of cost  TN/RL/GEN/43 
 Page 5 
 
 
 Proposal 4-3 (Fair comparison)  
 
3. A fair comparison shall be made between the NIP a nd 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 differences which affect 
price comparability, including differences in conditions and terms of sale, taxation, levels of trade, quantities, 
physical characteristics, and any other differences whic h are also demonstrated to affect price comparability.5   
 
(Contd.)  
 
Explanation: 
  A fair comparison shall be the basic princi ple in the calculation of the injury margin.
6 
  One of the important aspects to ensure a fair comparison is that the comparison is done at the same level of trade.  For example, the compar ison between the NIP based on the prices of the 
domestic like products at the ex-factor y level and the price of the subject  imports at the level of trade 
where the product is landed at the importing port would be seen as the comparison at the same level of 
trade, since the comparison is made at the level of trade where the domestic like products and the subject imports enter the domestic market of the importing country. Another way to make the 
comparison could be at a level of trade which is closer to the point of consumption.
7 There could also 
be other ways. This proposal does not prescribe an y specific level of trade where the comparison 
should be made, as long as the comparison is done at the same level of trade.  
 
 With regards to the scope of data to be used  in calculating the NIP, the calculation of the NIP 
will, in many cases, be able to take into account th e relevant data of all the domestic producers of the 
importing country in methodologies (a), (b) and (d) and base the NIP on the weighted average of all of them. However, there could be cases where the numbe r of the domestic producers is so large as to 
make a determination of the NIP based on the weighted  average of all of them impracticable and thus 
the authorities limit their examination to a certain number of domestic producers.    Similarly, when the product under investig ation and the domestic like product involves 
multiple models, a fair comparison requires that an  appropriate matching betw een models is done in 
the comparison between the import price and the NIP.  However, it is a commonly shared view that 
model matching between all models is  inherently more difficult in the calculation of the injury margin 
than in the dumping margin calculation. Although the authorities should pursue every opportunity to 
match multiple models to the extent possible, the au thorities might have to exercise some flexibility to 
overcome such inherent difficulties.  
 However, even in such cases, the authorities still ha ve to ensure that a fair comparison is done 
in calculation of the injury margin.
8  
                                                                                                                                                                     
data with regard to the records kept by the domestic pr oducers, proper allocation of costs (including adjustments 
made for start-up operations), and the basis to determine a reasonable amount for profits. 
5 In addition to the proposed text, the ADA should also include a provision which ensures that all 
negative values as results of price comparison are taken into account in order to ensure the elimination of any 
type of zeroing. (See also paragraph 3 of the Annex III to the Proposal by India, JOB(05)/38 (22 March 2005). The FANs will submit a proposed text with that effect in the course of this negotiation. 
6 See also paragraph 2.1 of the Annex III to the Proposal by India, JOB(05)/38 (22 March 2005). 
7 Proposal by India (JOB(05)/38) proposes that “it is desirable to make comparisons … as close to the 
point of consumption as is reasonably possible. 
8 The FANs are aware of various ways that authoritie s are currently using to overcome the difficulty of 
determining the NIP in cases of large number of domestic producers and the difficulty of pursuing a model matching of all models. The FANs are willing to discuss further what additional disciplines would be useful in 
ensuring a fair comparison in such cases. TN/RL/GEN/43 
Page 6  
 
 Proposal 4-4 (Pro cedural requirements) 
 
4. Before the final determination in any investig ation, the authorities shal l indicate which methodology 
they are intending to use to determine the injury margin and provide interested parties the opportunity to 
comment on whether such methodology is appropriate.  Authorities shall provide a reasoned explanation 
supporting their use of an appropriate methodology and the evidence in support of their choice.    
 
(Contd.)  
 
Explanation: 
 
 Although the ADA would not establish any hierarchy for choosing among the methodologies 
stipulated in Proposal 4-2, the selection of a method ology shall be consistent to the objective of the 
lesser duty rule stipulated in Article 9.1.  The au thorities shall disclose which method they intend to 
use in the investigation to all interested parties a nd provide such parties with an adequate opportunity 
to comment on the proposed methodology, in order to  enhance the predictability and transparency and 
to ensure that an appropriate methodology is used in  light of the circumstances of the investigation.  
Authorities shall also provide an explanation of the reasons supporting their use of a particular 
methodology in the appropriate publications as well as in the final determination.  
 
Proposal 4-5 (Evidence / data collection) 
 
5. The disciplines of evidence under Article 6 apply mutatis mutandis  to the determination of the injury 
margin.  For the sake of the accuracy of the NIP, 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). 
 
(Contd.)  
 
Explanation: 
 
 Disciplines of evidence under Article 6 applicab le to all determinations in an antidumping 
investigation shall apply, with appropriate adjustment s if necessary, to the dete rmination of the injury 
margin.  For example, paragraph 7 of Article 6 applies mutatis mutandis  to the verification of the 
domestic industry: the authorities may carry out th e investigations on information submitted by the 
domestic industry by consent.     For the sake of the accuracy of the NIP, the authorities shall colle ct relevant data to establish 
the NIP for a sufficient period of time comparable to the period of dumping investigation (normally 
twelve months) and as close to each other as possible.
9  The data that will be used in calculating the 
injury margin normally should be provided in th e course of the investigation of the margins of 
dumping and injury or in other proceedings relate d to the calculation of the AD duty level.  Due 
elaboration of the petition forms and the questi onnaires would further reduce potential additional 
burdens.   
 
Proposal 4-6 (Application of the lesser duty  rule to reviews under Article 9 and 11)  
 
6. The lesser duty rule shall be applied to reviews under Articles 9 and 11.   
 
 
                                                      
9 See also paragraph 2.2 of the Annex III to the Proposal by India, JOB(05)/38 (22 March 2005).  TN/RL/GEN/43 
 Page 7 
 
 
 Explanation: 
 
 The basic principle of the lesser duty rule is  that any duty imposed shall be less than the 
margin of dumping to the extent that such lesser dut y is adequate to remove the injury to the domestic 
industry. This basic principle shall be equally applicable in any reviews where the authorities 
determine the level of duty to be imposed.  
  In cases where the authorities recalculate or assess the dumping margin, they shall also 
recalculate or assess the injury margin and compare the dumping margin to the injury margin at the 
time of the review proceedings.   
 
 In Article 9.3 reviews, the authorities recalculate the dumping margin based on the actual import price which is different from the import price used in the original investigation. Since the 
injury margin is defined as the difference between th e import price and the NIP, an Article 9.3 review 
that is based on a new import price will inevitably al so require a recalculation of the injury margin 
based on such new import price. Since the NIP is est ablished at the time of the final determination as 
an estimated price level to be achieved after the imposition of the measure, the authorities do not 
necessarily have to recalculate the NIP itself in the course of duty assessment. The same applies to 
Article 9.5 reviews.   The Article 11.2 reviews, which examine the need for the continued imposition of the AD 
duty, also involve the reassessment of the level of AD duty sufficient to remove the injury to the 
domestic industry under the new circumstances.  An Article 11.2 reviews would also provide 
interested parties an opportunity for requesting a reass essment of the level of the NIP itself. A request 
for a review of the NIP by the majority of the respondents with comprehensive data would normally 
be more convincing than the request by only one respondent.
10 As the NIP represents the price level to 
be achieved in the importing market, the same NIP would apply to the subsequent reviews requested, 
if any, by different respondents.    
__________ 
 
 
                                                     
 
10 Special or expedited procedures by Members to respond to the rapid change of the NIP, other than 
ordinary Article 11.2 review procedures, might also be useful.