WORLD TRADE  
ORGANIZATION  G/ADP/AHG/W/172 
21 September 2005 
 (05-4163) 
Committee on Anti-Dumping Practices 
Working Group on Implementation Original:   English 
 
 
ARTICLE 2.2 - EXPORT PRICES TO THIRD COUNTRIES  
OR CONSTRUCTED NORMAL VALUE 
 
Paper by Pakistan  
 
 
 The following communication, dated 17 September 2005, is being circulated at the request of the Delegation of Pakistan.  
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  This paper is based on the experience of th e National Tariff Commission (the “Commission”), 
which has been notified as an investigating authorit y in context of Article 16.5 of Agreement on 
Implementation of Article VI of GATT 1994 (“ADA”)  1. Applicable Legislation
   
 
1.1 The Government of Pakistan has given effect to the provisions of Article 2.2 of the Agreement on Implementation of Article VI of GATT,  1994 (“ADA”) in its domestic legislation i.e. 
Anti-Dumping Duties Ordinance 2000 (the “Ordinance”) . Sections 6 and 7 of the Ordinance provide 
as follows: 
 
Section 6 of the Ordinance: “Normal value based on export price to a third country 
or on constructed value. – (1) When there are no sales of a like product in the ordinary 
course of trade in domestic market of an ex porting country, or when such sales do not 
permit a proper comparison because of any par ticular market situation or low volume 
of the sales in the domestic market of the exporting country, the Commission shall 
establish normal value of an investigated product on the basis of either  – 
 “(a) a comparable price of the like produc t when exported to an appropriate third 
country provided that this price is representative; or 
 
“(b)  the cost of production in the ex porting country plus a reasonable amount for 
administrative, selling and general costs and for profits.  
 “(2)  Sales of a like product destined for consumption in domestic market of an 
exporting country or sales to an appropriate third country may be considered to be a 
sufficient quantity for the determination of normal value if such sales constitute five per 
cent or more of the sales of an investigated product to Pakistan:  “Provided that the Commission shall apply a lower ratio if, on the basis of evidence submitted by interested parties or otherwise av ailable to it, it is satisfied that sales at 
such lower ratio are nonetheless of suffic ient magnitude to provide for a proper 
comparison.” G/ADP/AHG/W/172 
Page 2  
 
  
Section 7 of the Ordinance:  “Circumstances in which certain sales may be 
disregarded in determining normal value. – (1)  The Commission may treat sales of a 
like product in domestic market of an exporting country or sales to a third country at 
prices below per unit, fixed and variable, cost  of production plus administrative, selling 
and other costs as not being in the ordinary course of trade by reason of price and may 
disregard such sales in determining norma l value only if the Commission determines 
that such sales were made  – 
 “(a)  within an extended period of time whic h shall normally be a period of one year 
and in no case less than a period of six months; 
 “(b)  in substantial quantities; and  “(c)  at prices which do not provide for the recovery of all costs within a reasonable 
period of time. 
 “(2)  For the purposes of sub-clause (b) of sub-section (1), sales below per unit cost 
shall be deemed to be in substantia l quantities if the Commission establishes that – 
 “(a)  a weighted average selling price of  transactions under consideration for the 
determination of normal value is below a weighted average cost; or 
 “(b) the volume of sales below per unit co st represents twenty per cent or more of 
the volume sold in transactions under consideration for the determination of 
normal value. 
 
“(3)  If prices which are below per unit cost at the time of sale are above the 
weighted average cost for the period of investigation, the Commission shall consider 
such prices as providing for recovery of costs within a reasonable period of time. ” 
 1.2 Section 8 of the Ordinance provides guidelines for calculation of costs as follows: 
 
“Calculation of costs for the purposes of sections 6 and 7. – (1) For the purposes of 
sections 6 and 7, the Commission shall normally  calculate costs on the basis of records 
kept by an exporter or a producer under investiga tion provided that such records are in 
accordance with the generally accepted a ccounting principles of an exporting country 
and reasonably reflect the costs associated w ith the production and sale of a like product. 
 
“(2)  For the purposes of sections 6 and 7,  the amounts for administrative, selling and 
general costs and for profits shall be based on actual data pertaining to production and 
sales in the ordinary course of trade of a like product for consumption in an exporting 
country by any exporter or producer under investigation: 
 
“Provided that where the Commission is satisfied that such amounts cannot be determined on the basis set out in sub-secti on (2), the amounts may be determined on the 
basis of  – 
 
“(a)  the actual amounts incurred and realised by an exporter or a producer in 
question in respect of production and sales in domestic market of an exporting country of the same general category of products; 
  G/ADP/AHG/W/172 
 Page 3 
 
 
 “(b)  the weighted average of the actual amounts incurred and realised by other 
exporters or producers subject to investigatio n in respect of production and sales 
of a like product in domestic ma rket of an exporting country; or 
 “(c)  any other reasonable method provided that the amount for profit  so established 
shall not exceed the profit normally rea lised by other exporters or producers on 
sales of products of the same general category in domestic market of an exporting country of a like product. 
 
“(3)  The Commission shall consider all available evidence on the proper allocation 
of costs, including such information as is  made available by any exporter or producer 
of a like product in the course of an investiga tion provided that such allocations have 
been historically utilised by the export er or producer, in relation to establishing 
appropriate amortisation and depreciati on periods and allowances for capital 
expenditures and other development costs, as the case may be. 
 
“(4)  Unless already reflected in the cost allocations under this section, the 
Commission shall adjust costs appropriatel y for those non-recurring items of cost 
which benefit either future or current produc tion or both, or, for circumstances in 
which costs during the period of investigati on are affected by start-up operations. Such 
adjustment made for start-up operations shall reflect the costs at the end of the start-up 
period or, if that period extends beyond the period of investigation, the most recent 
costs which can reasonably be taken in to account by the Commission during the 
investigation.” 
 
2. Choosing between Alternative Methods for Determination of Margin of Dumping
 
 2.1 The Ordinance in keeping with Article 2. 2 of ADA sets out two alternative methods for 
determination of margin of dumpi ng in situations where the domestic  sales of the exporter/foreign 
producer under investigation do not permit a prope r comparison. The two alternatives set out in 
Section 6 of the Ordinance, which deals with such cases, are:  
(i) The margin of dumping shall be determin ed by comparison with a comparable price 
of the like product when exported to an appropriate third country, provided that this price is representative; or 
 (ii) the margin of dumping shall be determined  by comparison with the cost of production 
in the country of origin plus a reasonable amount for administrative, selling and 
general costs and for profits.  
 2.2 The first of the two methods, on examina tion, raises additional considerations, i.e: 
 (i) The choice of criterion for determ ining the appropriate third country; 
 
(ii) how to establish that the product exported to third country was like product; and   (iii) how to determine that the sales transact ions to third country are representative. 
 
2.3 In light of the above considerations, and th e fact that the second method arguably brings the 
determination of margin of dumping more nearly in  line with the exporting country’s relevant costs 
and prices for the like product, the second method, on balance, offers a preferable approach.  
 G/ADP/AHG/W/172 
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 3. Procedure for Construction of Normal Value
 
 
3.1 Following the provisions of the Ordinance and Article 2.2 of ADA, the Commission resorts to construction of normal value in  the following situations: 
 
(i) No relevant information has been provi ded by the exporter/foreign producer under 
investigation. 
 (ii) Analysis of the information provide d by the exporter/foreign producer under 
investigation shows that sales of the like product in its domestic market are not in 
ordinary course of trade for any of the reasons set out in Article 2.2.1 of ADA. 
 3.2 The procedure followed by the Commission for construction of the normal value in situations 
set out in paragraph 4.1 above is as follows:  
(i) Where the exporter/foreign producer under investigation has not provided 
information regarding cost of production,  administrative costs, selling and general 
costs, financial charges, profits, and dom estic sales price of the like product, the 
Commission relies upon the information pr ovided by other exporter(s)/foreign 
producer(s), from the same country who are also subject to investigation, in the manner set out in Article 2.2.2 (ii) of the ADA. 
 
(ii) Where information on cost of production,  administrative costs, selling and general 
costs, financial charges and profits has not been provided by any exporter/foreign producer under investigation from the sa me exporting country, the Commission has 
regard to the information provided by the a pplicant (domestic industry) on its cost of 
production, administrative costs, selling a nd general costs, financial charges and 
profits, making adjustments as may be appr opriate in constructing normal value. 
 
 (iii) Where the information provided by th e exporter/foreign producer under investigation 
in respect of its domestic sales reveals that the same are not in the ordinary course of trade (for reasons set out in Article 2.2.1 of the ADA), the Commission constructs the 
normal value on the basis of information provided by the same exporter/foreign 
producer on its cost of production, administ rative costs, selling and general costs, 
financial charges and profits. The Commiss ion has regard to Articles 2.2.1.1 and 
2.2.2. of the ADA as appropriate in making the calculations. 
 
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