RESTRICTEDWORLD TRADE
ORGANIZATIONG/ADP/Q1/BRA/9
G/SCM/Q1/BRA/9
7 July 1998
(98-2679)
Committee on Anti-Dumping Practices
Committee on Subsidies and Countervailing MeasuresOriginal:  English
NOTIFICATION OF LAWS AND REGULATIONS UNDER
ARTICLES 18.5 AND 32.6 OF THE AGREEMENTS
Replies of BRAZIL1
to Questions Posed by MEXICO2
The following communication, dated 1 July 1998, has been received from the Permanent
Mission of Brazil.
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Q.1. According to Chapter II, Article 4, "the practice of dumping is considered to be the
introduction of a product into the domestic market, including under the method of drawback, at
an export price that is below the normal va lue". How are imports under the drawback method
analysed?
A.1. The analysis of imports made under the drawb ack mechanism is identical to the analysis of
imports subject to regular import duties.  The mention of "imports under the method of drawback"
was made to make clear that all types of imports are subject to the same procedures in A-D
investigations.
Q.2. In Chapter II, section I, Article 5.3 it is st ated that a lower percentage is allowed "when
it shall be demonstrated that domestic sales at this percentage do occur in sufficient quantity to
permit adequate comparison".  How is "sufficient quantity" defined?
A.2. The language of Article 5.3 of the Anti-Dump ing Decree follows that of footnote 2 of the
A-D Agreement, which does not define the expression "sufficient quantity".  The acceptance of a
percentage lower than 5 per cent of the product's sales to Brazil will depend on several factors as, for
example, the characteristics of the internal market of the product under investigation.
Q.3. Chapter 2, section I, Article 6 envisages the existence of "special market conditions".  In
what circumstances, according to the Brazilian investigating authority, do "special market
conditions" exist?
A.3. The language of Article 6 of the AD Decree follows that of Article 2.2 of the A-D Agreement
which does not define the expression "special market conditions".
Q.4. Chapter 2, section I, Article 6 mentions as options for determining the normal value the
price charged in exporting operations to a thir d country and the cost of production in the
country of origin plus a reasonable amount for administrative costs and a margin of profit.
                                                     
1 G/ADP/N/1/BRA/2/ and G/SCM/N/1/BRA/2
2 G/ADP/Q1/BRA/8-G/SCM/Q1/BRA/8G/ADP/Q1/BRA/9
G/SCM/Q1/BRA/9
Page 2
Does the Brazilian investigating authority have an order of preference for using one or other of
these options?  If not, which criterion should be used?
A.4. No, there is no order of preference.  The decision on which option will be adopted will be
based on the information available and will depend on the conditions of the production and the
conditions of the market in the third country.
Q.5. Chapter 2, section I, Article 6.4 states that "transactions among parties who are
considered associated or who have agreed a co mpensatory arrangement among themselves may
be considered as not being in the ordinary course of trade and not be taken into account in
determining normal value, unless it is proven that the related prices and costs are comparableto those of operations among parties that are not so related".  What are the criteria for
considering enterprises to be associated or as  having a compensatory arrangement?  How does
the investigating authority make  sure that the prices and costs are comparable to operations
among parties that are not related?
A.5. It is the understanding of the Brazilian authorities that the concepts of "related parties" and
"compensatory arrangements" encompass any kind of relationship between parties which implies a
dependency or a significant influence of one party upon the other, be it expressed in a legal document
or not.  Consequently, this relationship would be of such nature that negotiations between the two
parties are not conducted in the same way as if they were independent (non-related).
For the purpose of determining if parties are related, it is necessary to examine if one party
influences the activities of the other in such a way and to such a degree that the second one would not
take decisions autonomously.  Besides the legal aspect of the relationship between the parties, one of
the main elements to be examined is the nature of this relationship.
For the purpose of verifying the comparability of prices and costs, the authorities will
compare the transactions between related parties with transactions between unrelated parties and will
evaluate if the prices and costs observed in transactions between related parties were influenced by
this relationship.
Q.6. Chapter 2, section II, Article 8 refers to the possibility of constructing the export price.
What is the methodology used to construct the export price and in what circumstances can an
export price be considered reliable despite th e existence of an association or compensatory
arrangement between the exporter and the importer or a third party?
A.6. The export price will be constructed on the basis of the price at which the imported products
are first resold to an independent buyer.  That is, costs and profit related to resale as well as taxes and
freights are deducted from the price of the first resale.
For the purpose of verifying the reliability of the export price, authorities will evaluate,
among other factors, conditions of transactions between related parties in comparison to conditions ofexports to independent firms as well as the cost of production in the exporting country.
Q.7. With respect to Chapter 2, section III, Ar ticle 9.1, what is the definition of the term
"differences in levels of trade"?
A.7. The concept "differences in levels of trade" refers to differences in the stage of selling (e.g. ex
works, f.o.b., c.i.f.).G/ADP/Q1/BRA/9
G/SCM/Q1/BRA/9
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Q.8. Chapter 2, section III, Article 10 refers to  the situation in which the product is merely
transshipped through the exporting country.  How does the investigating authority define goods
being transshipped (in transit)?
A.8. Brazilian authorities consider that the product is merely transhipped through the exporting
country when the exporting country is different from the country of origin and there is no
transformation of the product under investigation in the exporting country.
Q.9. With respect to Chapter 2, section IV, Article 12.II concerning the determination of the
margin of dumping on a transaction-to-transaction basis, how are the transactions to be
compared selected?  Are customers, date s or some other criterion considered?
A.9. Generally, Brazilian authorities compare the weighed average normal value and the weighed
average of the prices of all comparable export transactions.  Nevertheless, in the case of a comparison
on a transaction-to-transaction basis, sales to the internal market would be selected considering their
comparability to sales of the product under investigation.  That is, the authorities will select salesmade at the same time – or as near as possible – of each export transaction of the product under
investigation, preferably directed to the same kind of clients, involving similar volumes, etc.
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