WORLD TRADE  
ORGANIZATION  TN/RL/GEN/32 
22 March 2005 
 
 (05-1203) 
Negotiating Group on Rules Original:   English 
  
 
PROPOSAL ON MANDATORY APPLICATION OF LESSER DUTY RULE  
 
Communication from India
 
  
 The following communication, dated 9 February 20 05, is being circulated at the request of the 
Delegation of India.   The submitting delegation has requested that th is paper, which was submitted to the Rules 
Negotiating Group as an informal document (JOB(05)/38), also be circulated as a formal document. 
 
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  1. The Anti-Dumping Agreement envisages that  the anti-dumping duty shall not exceed the 
margin of dumping as established under Article 2 of th e Agreement.  However, Article 9.1 leaves it to 
the discretion of the authorities of the importing Member whether or not to impose an anti-dumping duty in cases where all requirements for the impositio n have been fulfilled and whether the amount of 
anti-dumping duty to be imposed shall be the full dump ing margin or less.  Article 9.1 further states 
that the duty may be less than the margin if such lesser duty would be adequate to remove the injury 
to the domestic industry. 
 2. The “lesser duty rule” is in the nature of a best endeavour clause and no rules have been 
framed which could act as guidelines for the vari ous anti-dumping authorities who are desirous of 
applying this rule.  Despite the non-mandatory na ture of the clause, several users of anti-dumping 
follow the “lesser duty rule” as a part of their anti-dumping practice. 
 
3. Based on the premise that the non-application of the “lesser duty rule” tends to protect the injured domestic industry of the importing Member mo re than what is adequate, a large number of 
economists and trade analysts are of the opinion that  the “lesser duty rule” should be made mandatory 
under the Anti-Dumping Agreement.  This issue h as also been identified by many Members for 
improvement and clarification during the Rules negotiations.  
 4. India is of the view that there is a need to make the application of the “lesser duty rule” 
mandatory.  This, in turn, would require Members to agree on disciplines for determination of the 
injury margin.  India is further of the view th at the proposal on this issue contained in document 
TN/RL/W/119 dated 16 June 2003 has many usef ul elements for developing disciplines on 
determination of the injury margin.  Building on some of these elements, an initial framework for 
certain aspects of the disciplines on determination of  injury margin is proposed by India (Appendix). 
 5. Following are the main elements of India’s proposal:  TN/RL/GEN/32 
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 • Amend Article 9.1 of the Anti-Dumping Agreemen t to provide for mandatory application of 
the “lesser duty rule” by requiring that the an ti-dumping duty shall not exceed the margin of 
dumping or the injury margin, whichever is lower. 
 
• Injury margin shall be determined in accordan ce with the principles that could be set out in 
Annex III to the Anti-Dumping Agreement  
 
• Two broad options are proposed for determining the injury margin.  Under the first option, 
injury margin shall be the difference between the price of the like product produced by the 
domestic industry and the price of the dumped imports, for each exporter or producer under 
investigation.  Under the second option, injury  margin shall be the difference between the 
target price for the domestic industry and the pr ice of the dumped imports for each exporter or 
producer under investigation. 
 
• For determining the target price, four options are  proposed viz.  (i) the price of the 
domestically produced like product prior to bei ng affected by dumping;  (ii) the price of the 
product concerned, when exported by those expor ters or producers who are found not to have 
dumped the product concerned during the investig ation period;  (iii) the price of the like 
product, when exported during the investigation period from appropriate third countries;  and 
(iv) the cost of production method. 
 
• Depending on the option used, the target price is proposed to be determined for the period of 
investigation or a period that is compar able to the period of investigation.  
 
• A provision has been proposed in order to ensure  a fair comparison between the price of the 
domestically produced like product, or the desi gnated target price, as the case may be, and the 
price of the dumped imports.  
 
• The existence of injury margins is proposed to  be established on the basis of a comparison on 
a weighted average basis of all comparable transactions or by a comparison on a transaction-to-transaction basis.  The Authorities shall also ensure that all negative values are 
taken into account. 
 
6. India acknowledges that the framework on de termination of injury margin would need to 
contain additional provisions on certain aspect s not addressed by this proposal, including 
determination of injury margin for non-sampled, co-operating exporters.  India is also willing to 
explore the possibility whereby Members may provide for any particular order of preference for the various alternatives provided under the proposed Annex for the determination of the injury margin.  
Alternatively, Members may indicate at least one preferred alternative to be followed in all 
investigations with the option to resort to other alternatives only in the even t that the said preferred 
alternative is not considered to be appropri ate for reasons to be recorded in writing. 
 7. This document is intended to promote a discu ssion on disciplines on determination of injury 
margin. India reserves the right to offer additional thoughts on this matter.   
  TN/RL/GEN/32 
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Appendix 
 
Initial Framework for Certain Aspects of the Disciplines on 
Determination of the Injury Margin 
 
 Article 9.1 of the Anti-Dumping Agreement may be replaced by the following: 
 
 9.1  The decision whether or not to impose an anti-dumping duty in cases where all 
requirements for the imposition have been fu lfilled is a decision to be made by the 
authorities of the importing Member.  However, the amount of the anti-dumping duty shall not exceed the margin of dumping as established under Article 2 or the injury 
margin, whichever is low er. For purposes of this Agreement, the term “injury 
margin” shall be interpreted to mean the ma rgin calculated in accordance with the 
principles set out in Annex III to this Agreement.  
  
 
ANNEX III  
  
PRINCIPLES FOR DETERMINATION OF THE INJURY MARGIN  
  
1.  For the purpose of implementing the provisions of Article 9.1 of this Agreement, the “injury margin” shall be determined as:    1.1. the difference between the price of the like  product produced by the domestic industry and the 
price of the dumped imports
1, for each exporter or producer under investigation;  or,  
  1.2. the difference between the target price
2 for the domestic industry and the price of the dumped 
imports for each exporter or producer under inves tigation.  The target price for the purpose of 
this sub-paragraph shall mean:  
  
 (a)  the price of the domestically produced like product prior to being affected by 
dumping;  or, 
   (b)  the price
3 of the product concerned, when exported by those exporters or producers 
who are found not to have dumped the pr oduct concerned during the investigation 
period;  or,   
   (c)  the price
3 of the like product, when exported during the investigation period from 
appropriate third countries other than th e countries under investigation;  or,  
                                                      
1 For the purpose of this annex, the term “price of the dumped imports” shall be interpreted as meaning 
import prices at any level such as cost , insurance and freight, or  ex-customs area, or resale price to the importer, 
or delivered price to the customer, provided that the comparisons with the price of the like product under sub-
paragraph 1.1, or with the target price under sub-paragraph 1.2, for the purpose of arriving at the injury margin, are made only at a comparable level. 
2 The target price determined under sub-paragraph 1.2(d) shall never be higher than the weighted 
average for the domestic industry.  It may be less, for example, if there are substantial discrepancies  in costs of 
the producers constituting the domestic industry. 
3 For the purpose of this annex, the term “price” referred to in 1.2 (b) and 1.2 (c) shall be interpreted as 
meaning import prices at any level such as cost, insurance and freight (CIF), or ex-customs area, or resale price 
to the importers, or the delivered pri ce to the customers, provided that th e comparisons with the price of the 
dumped imports, for the purpose of arriving at the injury margin, are made only at comparable level. TN/RL/GEN/32 
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 (d)  the cost of production of the like product of the domestic industry, administrative, 
selling and general costs, a nd a reasonable profit margin.  
For the purpose of this sub-
paragraph, a reasonable profit margin may be determined on the basis of:   
  
  (i)  the profit margin normally earned by the domestic industry on representative 
domestic sales of the like product when  the price of such product was not 
affected by dumping keeping in view the principles set out in sub-paragraphs 2.1 and 2.2 of this Annex; or,  
  
  (ii)  the actual profit margin earned by the domestic industry in respect of sales 
made in the domestic market in the same general category of products during 
the investigation period; or,  
    (iii)  when profit margin cannot be dete rmined under (i) and (ii) above, or when 
either method is not considered to be appropriate, profit margin may be 
determined by any other reasonable me thod, including a reasonable return on 
investment, provided that an explana tion is given as to why the methods 
available in (i) and (ii) above are not appropriate.  
 2.  The authorities of the importing Member shall ensure that the determination of the injury 
margin under subparagraphs 1.1 and 1.2 of th is Annex conform to the following rules:  
  2.1. A fair comparison shall be made betw een the price of the domestically produced like 
product, or the designated target price, as the case may be, and the price of the 
dumped imports.  This comparison shall be ma de at the same level of trade, and in 
respect of sales made at as nearly as possi ble the same time.  Due adjustments shall 
be made in each case, on its merits, for differences which affect price comparability, 
including differences in conditions and term s of sale, taxation, levels of trade, 
quantities, physical characteristics, and any other differences which are also demonstrated to affect price comparability;  
  
 2.2. For the purpose of sub-paragraph 1.2(a), the authorities shall also ensure that such 
target price pertains to a period that is comparable to the investigation period.  The authorities shall also ensure that the duration of the two periods is comparable and as close to each other as possible.  
  
 2.3. For the purpose of sub-paragraphs 1.2(b)  and 1.2(c), the authorities shall also ensure 
that the volume of imports ta ken into account for arriving at the target price constitute 
a significant proportion of total imports of the product concerned from the countries under investigation, and that this price is representative. 
  2.4. For the purpose of sub-paragraph 1.2(d) , the costs shall be calculated on the basis of 
records kept by the domestic industry, provi ded that such records are in accordance 
with the generally accepted accounting principles of the importing Member and reflect the costs associated with the production and sale of the product under consideration only.  Such costs shall, to th e extent possible, pertain to the period of 
investigation only.  Authorities shall ensure  proper allocation of costs and that such 
allocations have been historically utilized by  the domestic industry, in particular in 
relation to establishing appropriate amor tization and depreciation periods and 
allowances for capital expenditures and othe r development costs.  Unless already 
reflected in the cost allocations under this  sub-paragraph, costs shall be adjusted 
appropriately for those non-recurring items of cost which benefit future and/or current  TN/RL/GEN/32 
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 production, or for circumstances in which co sts during the period of investigation are 
affected by start-up operations.  The 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 into account by the authorities during the investigation.  
 
 2.5 It is desirable to make comparisons for the purpose of this Annex as close to the point 
of consumption as is reasonably possible. 
 3.  Subject to the provisions governing fair compar ison in paragraph 2, the existence of injury 
margins shall normally be established on the basis of a comparison on a weighted average basis of all 
comparable transactions or by a comparison on a tran saction-to-transaction basis.  For the purposes of 
paragraph 2 and this paragr aph, the Authorities shall also ensure that all negative values are taken into 
account.  
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