RESTRICTED
WORLD TRADE G/ADP/Q1/USA/5
G/SCM/Q1/USA/5
ORGANIZATION 21April 1998
(98-1591)
Original: English Committee onAnti-Dumping Practices
Committee onSubsidies andCountervailing Measures
NOTIFICATION OFLAWS AND REGULATIONS UNDER
ARTICLES 18.5AND 32.6OFTHE AGREEMENTS
Questions from JAPAN
totheUNITED STATES1
Thefollowing communication, dated 15April 1998, hasbeenreceived from thePermanent
Mission ofJapan.
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1. General -Reserved Sections
TheUSDepartment ofCommerce regulations notified asG/ADP/N/1/USA/1/Suppl.2-
G/SCM/N/1/USA/1/Suppl.2(hereinafter"theregulations")containseveralpartsidentifiedas"Reserved",
namely items 351.304, 351.305, 351.306 (regarding business proprietary treatment) andSubpart E.
1.1 Please explain when theUSintends toclarify these "Reserved" parts ortoissue
regulations under them?
1.2 Please clarify theproposed subject matter andintentions forSubpart E.
1.3 Please clarify whether the"Reserved" matters relating tobusiness propriety information
constitute tobegoverned bytheprior regulations covering these matters.
2. Affiliated Parties -351.102(b)
Theregulationsprovideaverybroaddefinitionof"affiliated"parties,particularlyindetermining
whether parties areaffiliated based upon "control". Itappears thattheSecretary hasdiscretion to
conclude thatoneparty exercises control overtheother based onvague orminimal contacts or
relationship between them, suchas"franchise orjointventure agreements", "debt financing", and"close
supplier relationships".
2.1 What doesitmean bya"close" supplier relationship? What factors willtheSecretary
usetodistinguish a"close" supplier relationship fromanyother supplier relationship?
2.2 Under whatcircumstances would theSecretary conclude thatparties exercise control
overoneanother based on"debt financing" or"franchise orjointventure" agreements?
What factors willtheSecretary consider inmaking thisdetermination?
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2.3 Theregulations alsoindicate thatthislistoffactors isnotexclusive. What "other"
undefined factors might theSecretary consider indetermining "control" byoneparty
overanother?
2.4 Howwould theUSdistinguish between asituation where apartyhaslimited "direction"
overanother party andonewhere itexercises "control"?
3. Unions -351.203(e)(5)
3.1 WhydoestheSecretary intend toinclude unions andother workers inconducting a
pollofthe"industry" when unions andworkers arenot"producers" within themeaning
oftheterm"industry" asdefined atArticle 4.1(i) oftheA-DAgreement?
3.2 IftheSecretary nevertheless insists onincluding unions inanindustry poll,howwill
theSecretary resolve aconflict withmanagement orsilence from management?
3.3 Section 351.203(e)(3) indicates thataconflict between union andmanagement nullifies
theposition ofmanagement. Ifthatisthecaseforresponses toapolling, whyshould
theposition oftheunion nullify theposition ofmanagement, particularly inlightof
theindustry definition asdiscussed above?
4. Commercial Quantities -351.222(d)(1)
Theregulations make noattempt todefine theterm"commercial quantities" forpurposes of
determining whether torevoke anA-Dorder ortoterminate aninvestigation. Given thatthedefinition
ofthistermislikely tovarydepending onthetypeofmerchandise involved, itappears thattheSecretary
willseektodefine thistermonacase-by-case basis. Please explain what factors might beusedto
make suchadetermination.
5. Revocation orTermination based onAbsence ofDumping -351.222(b)(1)(i)
5.1 Indeciding whether torevoke anA-Dorder ortoterminate aninvestigation based
onabsence ofdumping, please clarify whatismeant by"itisnotlikely" thatcovered
exporters andproducers willsellthesubject merchandise inthefuture atlessthan
normal value?
5.2 Inresponding tothequestion above, please specify indetail thecriteria orfactors that
willbeconsidered bytheSecretary inmaking thisdetermination, aswellasthe
conditions necessary forsuchafinding.
6. Scope Rulings, Importing Country Circumvention, TheThird Country Circumvention, Minor
Alternations ofMerchandise, Later-Developed Merchandise -351.225
TheA-DAgreement doesnotinclude anyprovision authorizing anti-circumvention measures.
Indeed, suchaprovision wasconsidered during thenegotiations, butultimately rejected. Nevertheless,
theregulations contain provisions on"scope rulings" which appear toprovide foranti-circumvention
measures andwhich provide foranti-circumvention measures. Indeed, theintroduction states thatscope
issues mayariseinthesituations where "changes toanimported product ortheplacewhere theimported
product isassembled constitute circumvention".G/ADP/Q1/USA/5
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InlightofthefactthattheA-DAgreement doesnotauthorize anti-circumvention measures,
andthattheA-DAgreement contemplates thatthescope ofanA-Dorder maynotbeexpanded without
newinjury anddumping investigations, please explain thejustification forthisnewregulation.
7. Questionnaire Time Limits -351.301(c)(2)
Please clarify whythestated timelimitforresponding toindividual sections ofaquestionnaire
maybelessthan30days, despite thefactthatArticle 6.1.1 oftheA-DAgreement states thatexporters
orforeign producers "shall begiven atleast30days" forreplying toquestionnaires?
8. Secondary Information -351.308(d)
Section 351.308(a) and(c)statethattheSecretary maydraw anadverse inference inselecting
from "facts available" andthatthisadverse inference maybedrawn from "secondary" information,
suchasthepetition, orafinaldetermination inaninvestigation orreview. Section 351.308(d) further
indicates thattheSecretary should seektocorroborate "secondary" information usedbytheDepartment
as"facts available". Nevertheless, theregulations donotrequire thatsecondary information always
becorroborated, nordotheyspecify when itisappropriate toresort tosuch"secondary" information
asopposed to"[a]ny other information" thatmaybeplaced ontherecord orotherwise available.
8.1 Please clarify under what circumstances theSecretary willrelyon"secondary
information", suchaspetition, prior review, asopposed to"anyother information"
ontherecord?
8.2 Given therequirements ofitem7ofAnnex IIoftheA-DAgreement thatinformation
froma"secondary" source should beusedonlywith"special circumspection", please
address whether theSecretary should firstseektouse"other information" andresort
totheuseof"secondary" information onlyasafinalmeans ofobtaining information?
8.3 Inthose instances where theSecretary doesresort touseof"secondary" information,
andwhere theSecretary isunable tocorroborate suchinformation, please explain why
itwould everbeappropriate todraw anadverse inference from uncorroborated
information?
9. "Tolling" Operations -351.401(h)
Theregulations donotdefine whattypes ofactivities might qualify as"'tolling 'operations".
Please clarify thedefinition ofthem andwhether there areanylimits onthetypes ofmanufacturing,
processing, orfinishing activities thatmight qualify as"'tolling 'operations".
10. Start-up Costs -351.407(d)(4)
Article 2.2.1.1 oftheA-DAgreement requires thatcostsbeadjusted for"non-recurring items"
orother circumstances affected by"start-up operations". Theregulations define verynarrowly those
situations toqualify forthis"start-up" adjustment. Moreover, theregulations failtotakeintoaccount
thefactthat,insome circumstances, certain marketing andsalesexpenses associated with"start-up"
operations (such asadvertising orresearch anddevelopment costs) should qualify as"start-up" costs
forpurposes ofthisadjustment.G/ADP/Q1/USA/5
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10.1 Please explain whytheSecretary willnever consider certain salesexpenses commonly
associatedwithstart-upoperationssuchasresearchanddevelopmentcostsoradvertising
costs as"start-up" costs forpurposes ofthisadjustment?
10.2 Intheevent theSecretary adheres toitsposition thatsuchexpenses maynever be
included inthe"start-up" adjustment, please explain howsuchexpenses should be
accounted forinananti-dumping proceeding?
11. Average-to-Average Method -351.414(c)(2)
Section 351.414(c)(2) indicates thattheUSwillusethe"average-to-average" method for
calculating dumping margins inaninvestigation andthe"average-to-transaction" method inareview.
11.1 Please clarify whytheUSintends tousethe"average-to-transaction" methodology
tocalculate dumping margins inreviews, particularly inlightofArticles 2and9.3
oftheA-DAgreement which require theuseof"average-to-average" or"transaction-to-
transaction" comparisons inallproceedings.
11.2 Thisprovision states thattheSecretary "normally" willusethe"average-to-transaction"
methodology. Please explain under whatcircumstances theUSwilldeviate fromthis
methodology?
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