Japan Machinery Center for Trade and Investment
401, Kikaishikou Building
3-5-8 Shibakoen,
Minato-ku,Tokyo105-0011
JAPANTelephone: +81-3-3431-9507
Facsimile: +81-3-3436-6455

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November 23, 2007

The Honorable David Spooner
Assistant Secretary for Import Administration
The U.S. Department of Commerce
Central Record Unit, Room 1870
14th Street and Constitution Avenue, NW
Washington, DC 20230

Dear Mr. Assistant Secretary:
On behalf of the Board of Directors of the Japan Machinery Center for Trade and Investment(JMC) and its 282 member corporations, I write to express our views on a methodology todetermine the existence of targeted dumping. We sincerely request that the Department ofCommerce (the “Department”) consider the following points when developing its
methodology.
JMC is a non-profit organization that represents Japan’s major electronics and machinery
manufacturers, trading companies and engineering companies. JMC’s activities emphasize
multilateral trade and investment rules, bilateral free trade agreements, environmental protection
regulations, national industrial policies, trade related security measures, and trade insurance.
The Japanese machinery sector accounted for over 80 percent ($119.3 billion) of total Japanese
exports in 2006 to the United States.
Before presenting our specific comments on the methodology for targeted dumping, JMC
would like to emphasize that the methodology the Department adopts should be objective andtransparent, and should be consistent with the sustainable development of international trade.
The Department is a leader in setting rules in the multilateral trade community. Other countries
that use antidumping measures are closely watching the Department’s rule-making process on
this issue. The Department’s rules will establish important precedent for the international traderemedy regimes of other countries. Accordingly, the Department’s new methodology fortargeted dumping may affect not only the U.S. industries requesting remedial actions against
imports and their U.S. importers, but also U.S. exporters.

Japan Machinery Center for Trade and Investment

In light of the importance of this rule-making process from the viewpoint of not only the U.S.
antidumping procedures but also the international trade remedy system, JMC believes that theDepartment should incorporate the following points in the methodology to determine targeted
dumping:•Targeted dumping may be found only where an exporter “targets” its pricing tospecific purchasers, regions, or periods of time. Price differences among purchasers,regions or periods of time may occur for various reasons. For example, the price of agood is normally lower during a period in which the supply to the market exceeds
demand. A seller follows changes in price to meet the market price set by othercompetitors, including U.S. domestic producers. A distributor will give discounts tocustomers who purchase a larger volume of the product. A producer may sell current
products at a lower price when the producer will introduce new products in the near
future. These pricing practices differentiate purchasers, regions or the period of time.
They all are, however, ordinary business practices. These sellers are not “targeting”
their pricing practices to certain purchasers, regions or periods of time. Nevertheless,incidental pricing variations might occur in these situations. Such ordinary businesspractices should not support a finding of “targeted dumping.” The Department’s
adopted methodology should not recognize such ordinary commercial practices as
instances in which “targeted dumping” may occur.

•Targeted dumping should be found only in exceptional cases. As discussed above,pricing variations are not “targeted” where an exporter sells its product in a mannerconsistent with ordinary business practices. This means that mere differences in priceamong purchasers, regions, or periods of time alone do not provide a sufficient basis tofind targeted dumping. Targeted dumping may be occurring only when the pricedifferences cannot be explained by the ordinary business practice in the market.
Considering such various common pricing practices in the market place, JMC is of theview that “targeted dumping” situations exist only in very exceptional cases.
o The existing language in the Department’s regulations further clarifies
that targeted dumping may be found only in exceptional cases. Section
351.414(f)(1)(ii) of the Department’s regulations, 19 C.F.R. § 351.414(f)(1)(ii),provides explicitly that targeted dumping may be found only where thedifference between pricing to targets and non-targets “cannot” be taken intoaccount using the average-to-average method or the transaction-to-transaction
method. Section 351.414(c)(1) states that the average-to-average method is“normally”
appliedtoantidumping
investigations,andthetransaction-to-transaction method applies only to “unusual situations.” Targeted2

Japan Machinery Center for Trade and Investment

dumping, to which the average-to-transaction method applies, can be found only
where the situation is not “normal” and is even beyond “unusual.” Thus, resort
to a targeted dumping method should be applied only where the pricing patternclearly demonstrates such a situation.
o The scope of targeted dumping should be interpreted consistently withinternational antidumping rules, which require that the targeted dumping
methodology be applied only in exceptional cases. The language of Section
351.414(f)(1)(i) — “a pattern of export prices … differ[s] significantly amongpurchasers, regions, or periods of time” — follows almost verbatim the second
sentence of Article 2.4.2 of the WTO Anti-dumping Agreement. As the global
leader in development of international trade rules, particularly with respect totrade remedies, the Department should apply its own regulations consistently
with WTO standards. In this connection, the WTO Appellate Body has statedthat targeted dumping using the average-to-transaction method is “an exception
to the two normal methodologies,” 1 i.e., the average-to-average andtransaction-to-transaction methods.
The Appellate Body’s assessment
reinforces our earlier point that targeted dumping applies only to exceptional
cases.

1•

A “pattern” of “targeted” dumping should be found only in exceptional cases, inwhich the pricing pattern cannot be explained from ordinary business practices.
The pattern of the price difference supporting a finding of “targeted” dumping must be
understood in the context of the above discussion, i.e., the pricing pattern indicatingtargeted dumping is a pattern that is not normal, nor is the pricing pattern even simplyunusual; it must be exceptional. At a minimum, where the pricing pattern can beexplained in the context of ordinary business practices, “targeted” dumping does notexist. In other words, only a pattern that cannot be explained from the viewpoint of theordinary business practice could possibly support a finding of targeted dumping.

•In order to apply the targeted dumping methodology, the Department should findthat the pricing pattern is “significant”, i.e., the pattern of differential pricing must
be extensive, having a major effect on the market. In addition to the requirement thatthe differential pricing pattern is not normal, and is beyond unusual situations, andcannot be explained from ordinary business practices, the targeted dumping pattern

Appellate Body Report, United States – Measures Relating to Zeroing and Sunset Reviews, WT/DS322/AB/R,

para. 118, adopted by the WTO Dispute Settlement Body on 23 January 2007.

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Japan Machinery Center for Trade and Investment

must be “significant.” A mere finding of a differential pricing pattern is not sufficient toapply the targeted dumping methodology.
The word “significant” should be interpreted consistently with the WTO rules. Ininterpreting the meaning of WTO terminology, it is well established that the interpretermust first look into the ordinary meaning of the language. The ordinary meaning of“significant” is “extensive”2 or “having or likely to have a major effect.”3 As such, theinvestigating authority may apply a targeted dumping methodology only where thepricing pattern shows that the targeted dumping is extensive and has a major effect on
the market. Without a finding of an extensive scope or major effect on the market, thetargeted dumping methodology may not be applied.
•The Department should adopt a “standard” and “statistical technique” to identify
differential pricing practices that is not in ordinary business, is extensive and has amajor effect on the market. As discussed above, the targeted dumping methodology
may be applied only to situations where the differential pricing pattern is cannot beexplained from the ordinary business practice, is extensive and has a major effect on themarket. The standard that the Department adopts, therefore, should be the one thatidentifies these patterns. Any statistical technique that the Department adopts shouldassist the Department in evaluating whether the pricing pattern is one that cannot befound in ordinary business practice, and that is extensive and has a major effect on themarket.

•The application of the average-to-transaction method should be limited to theuniverse of differential pricing targets.
Because the application of theaverage-to-transaction method is intended to unmask targeted dumping, there is no
reason to apply the average-to-transaction method to non-targets. In this connection, theWTO Appellate Body has suggested:
The emphasis in the second sentence of Article 2.4.2 is on a"pattern", namely a "pattern of export prices which differs
significantly among different purchasers, regions or time periods."
The prices of transactions that fall within this pattern must be foundto differ significantly from other export prices. We therefore readthe phrase "individual export transactions" in that sentence as

2Concise Oxford English Dictionary, tenth edition, revised, p. 1335.

3American Heritage Dictionary of the English Language, at

http://education.yahoo.com/reference/dictionary/entry/significant;_ylt=ApIbdioIK82FBEq6TXgbNPSsgMMF

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Japan Machinery Center for Trade and Investment

referring to the transactions that fall within the relevant pricing
pattern. This universe of export transactions would necessarily bemore limited than the universe of export transactions to which thesymmetrical comparison methodologies in the first sentence ofArticle 2.4.2 would apply.4
As suggested by the WTO Appellate Body, non-targets are outside of the scope oftargeted dumping, and therefore outside of the application of the targeted dumping
methodology. For non-targets, therefore, the average-to-average method must apply.
The average-to-transaction method should apply only to targets. Moreover, the targeted
dumping methodology should not in any way undermine the WTO Appellate Body’s
express proscription of “zeroing” for calculation of margins of dumping.
•Finally, in applying the targeted dumping methodology, the Department mustfully explain its reasons to apply the methodology in both preliminary and finaldeterminations. This requirement also arises from the second sentence of Article 2.4.2of the WTO Anti-dumping Agreement, and is adopted in Section 351.414(f)(1)(ii) of theDepartment’s regulations. Such explanation must include fact findings showing how
the pattern of differential pricing cannot be viewed as an ordinary business practice ofexporters. Such determinations must also include explanations that the price pattern isextensive and has a major effect on the market. Furthermore, the Department should
provide sufficient opportunity to responding parties to present rebuttal evidence andargument. The Department should issue its preliminary determinations only after
providing such opportunity and considering the respondents’ evidence and argument.
Without preserving the due process right of responding parties and without examining
all relevant evidence and arguments, the Department cannot provide sufficient
explanation of reasons, nor can it reach an objective determination in a transparentmanner.

JMC appreciates the Department’s consideration of our comments and respectfully requests thatthe Department incorporate the above comments into its methodology for determining targeteddumping. We would be happy to answer any questions that the Department may have.

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Appellate Body Report, United States – Measures Relating to Zeroing and Sunset Reviews, WT/DS322/AB/R,

para. 135, adopted by the WTO Dispute Settlement Body on 23 January 2007.

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Japan Machinery Center for Trade and Investment

Sincerely yours,Haruhiko Kuramochi
Exective Manageing DirectorJapanese Machinery Center forTrade and Investment (JMC)
See attached member list

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