EUROPEAN UNION – ANTI-DUMPING MEASURES ON BIODIESEL FROM ARGENTINA
Document: REPORT OF THE PANEL Addendum
Date: 29 March 2016
Document codes: WT/DS473/R/Add.1; WT/DS473/R.
Complainant: Argentina
Respondent: EU
Third parties: Australia, China, Malaysia, Norway, Russia, Saudi Arabia, Turkey, U.S., Colombia, Indonesia, Mexico
Dispute stage: Appellate Body
Agreements cited: Art. 2.2  Anti-dumpingArt. VI:1  GATT 1994Art. 2.2.1.1, 9.3, 2, 18.4  Anti-dumpingArt. XVI:4  Agreement Establishing the World Trade OrganizationArt. 2.1, 2.2.2(iii), 2.4  Anti-dumpingArt. VI:2  GATT 1994Art. 3.1, 3.4, 3.5, 1  Anti-dumpingArt. VI  GATT 1994

EUROPEAN UNION – ANTI-DUMPING MEASURES ON BIODIESEL
FROM ARGENTINA

REPORT OF THE PANEL
Addendum
This addendum contains Annexes A to D to the Report of the Panel to be found in document

LIST OF ANNEXES
ANNEX A
WORKING PROCEDURES OF THE PANEL
Contents Page
Annex A-1 Working Procedures of the Panel A-2
Annex A-2 Additional Working Procedures of the Panel Concerning Business Confidential
Information
A-7
ANNEX B
ARGUMENTS OF ARGENTINA
Contents Page
Annex B-1 Executive Summary of the Firs t Written Submission of Argentina B-2
Annex B-2 Executive Summary of the Second Written Submission of Argentina B-12
Annex B-3 Executive Summary of the Statement of Argentina at the First Meeting of the
Panel
B-23
Annex B-4 Executive Summary of the Statement of Argentina at the Second Meeting of
the Panel
B-29
Annex B-5 Executive Summary of the Response of Argentina to the European Union's
Request for a Preliminary Ruling
B-34
ANNEX C
ARGUMENTS OF THE EUROPEAN UNION
Contents Page
Annex C-1 Executive Summary of the First Written Submission of the European Union C-2
Annex C-2 Executive Summary of the Second Written Submission of the European Union C-11
Annex C-3 Executive Summary of the Stat ement of the European Union at the
First Meeting of the Panel
C-21
Annex C-4 Executive Summary of the Statement of the European Union at the
Second Meeting of the Panel
C-26
Annex C-5 Executive Summary of the European Un ion's Request for a Preliminary Ruling C-33
ANNEX D
ARGUMENTS OF THIRD PARTIES
Contents Page
Annex D-1 Executive Summary of Third-Party Arguments of Australia D-2
Annex D-2 Executive Summary of Third-Party Arguments of China D-5
Annex D-3 Executive Summary of Third-Party Arguments of Colombia D-10
Annex D-4 Executive Summary of Third-Party Arguments of Indonesia D-13
Annex D-5 Executive Summary of Thir d-Party Arguments of Mexico D-17
Annex D-6 Executive Summary of Third-Party Arguments of Norway D-21
Annex D-7 Executive Summary of Third-Party Arguments of the Russian Federation D-23
Annex D-8 Executive Summary of Third-Party Arguments of the Kingdom of Saudi Arabia D-26
Annex D-9 Executive Summary of Thir d-Party Arguments of Turkey D-30
Annex D-10 Executive Summary of Third-Party Arguments of the United States D-32

- A-1 -

ANNEX A
WORKING PROCEDURES OF THE PANEL
Contents Page
Annex A-1 Working Procedures of the Panel A-2
Annex A-2 Additional Working Procedures of the Panel Concerning Business Confidential
Information
A-7

- A-2 -

ANNEX A-1
WORKING PROCEDURES OF THE PANEL
Revised on 27 January 2015

1. In its proceedings, the Panel shall follow the relevant provisions of the Understanding on Rules
and Procedures Governing the Settlement of Disput es (DSU). In addition, the following Working
Procedures shall apply.
General

2. The deliberations of the Panel and the document s submitted to it shall be kept confidential.
Nothing in the DSU or in these Working Procedures shall preclude a party to the dispute (hereafter
"party") from disclosing statements of its own positions to the public. Members shall treat as
confidential information submitted to the Panel by another Member which the submitting Member
has designated as confidential. Where a party submits a confidential version of its written
submissions to the Panel, it shall also, upon request of a Member, provide a non-confidential
summary of the information contained in its submissions that could be disclosed to the public.
3. The parties and third parties shall treat business confidential information in accordance with the
procedures set forth in the Additional Working Procedures of the Panel Concerning Business
Confidential Information adopted by the Panel on 25 November 2014.
4. The Panel shall meet in closed session. The parties, and Members who have notified their
interest in the dispute to the Dispute Settlement Body in accordance with Article 10 of the DSU
(hereafter "third parties"), shall be present at the meetings only when invited by the Panel to
appear before it.
5. Each party and third party has the right to determine the composition of its own delegation
when meeting with the Panel. Each party and third party shall have the responsibility for all the
members of its own delegation and shall ensure that each member of its own delegation acts in
accordance with the DSU and these Working Procedures, particularly with regard to the
confidentiality of the proceedings and the submissions of the parties.
Submissions

6. Before the first substantive meeting of the Pa nel with the parties, each party shall submit a
written submission in which it presents the facts of the case and its arguments, in accordance with
the timetable adopted by the Panel. Each party shall also submit to the Panel, prior to the
second substantive meeting of the Panel, a written rebuttal, in accordance with the timetable
adopted by the Panel.
7. A party shall submit any request for a preliminary ruling at the earliest possible opportunity and
in any event, no later than in its first written submission to the Panel. If Argentina requests such a
ruling, the European Union shall submit its response to the request in its first written submission.
If the European Union requests such a ruling, Ar gentina shall submit its response to the request
prior to the first substantive meeting of the Panel, at a time to be determined by the Panel in light
of the request. Exceptions to this procedure shall be granted upon a showing of good cause.
8. Each party shall submit all factual evidence to the Panel no later than during the first
substantive meeting, except with respect to ev idence necessary for purposes of rebuttal and
answers to questions or comments on answers prov ided by the other party. Exceptions to this
procedure shall be granted upon a showing of good cause. Where such exception has been
granted, the Panel shall accord the other party a pe riod of time for comments, as appropriate, on
any new factual evidence submitted after the first substantive meeting.

- A-3 -

9. Where the original language of an exhibit is not a WTO working language, the submitting party
or third party shall simultaneously submit a translation of it into a WTO working language. The
Panel may grant reasonable extensions of time for the translation of such exhibit upon a showing
of good cause. Any objection as to the accuracy of a translation should be raised promptly in
writing, preferably no later than the next filing or meeting (whichever occurs earlier) following the
submission which contains the translation in qu estion. Any objection shall be accompanied by a
detailed explanation of the grounds of objection and an alternative translation.
10. To facilitate the maintenance of the record of the dispute and maximize the clarity of
submissions, each party and third party shall sequentially number its exhibits throughout the
course of the dispute. For example, exhibits submitted by Argentina could be numbered ARG-1,
ARG-2, etc. If the last exhibit in connection with the first submission was numbered ARG-5, the
first exhibit of the next submission thus would be numbered ARG-6.
Questions

11. The Panel may at any time pose questions to the parties and third parties, orally or in writing,
including in writing prior to each substantive meeting.
Substantive meetings

12. Each party shall provide to the Panel the list of members of its delegation in advance of each
meeting with the Panel and no later than 5.00 p.m. the previous working day.
13. The first substantive meeting of the Panel with the parties shall be conducted as follows:
a. The Panel shall invite Argentina to make an opening statement to present its case first.
Subsequently, the Panel shall invite the European Union to present its point of view.
Before each party takes the floor, it shall provide the Panel and other participants at the
meeting with a provisional written version of its statement. In the event that
interpretation is needed, each party shall provide additional copies for the interpreters,
through the Panel Secretary. Each party shall make available to the Panel and the other
party the final version of its opening statement as well as its closing statement, if any,
preferably at the end of the meeting, and in any event no later than 5.00 p.m. on the
first working day following the meeting.
b. After the conclusion of the statements, the Panel shall give each party the opportunity to
ask each other questions or make comments, through the Panel. Each party shall then
have an opportunity to answer these questions orally. Each party shall send in writing,
within a timeframe to be determined by the Panel, any questions to the other party to
which it wishes to receive a response in writing. Each party shall be invited to respond in
writing to the other party's written questions within a deadline to be determined by the
Panel.
c. The Panel may subsequently pose questions to the parties. Each party shall then have an
opportunity to answer these questions orally. The Panel shall send in writing, within a
timeframe to be determined by it, any questions to the parties to which it wishes to
receive a response in writing. Each party shall be invited to respond in writing to such
questions within a deadline to be determined by the Panel.
d. Once the questioning has concluded, the Panel shall afford each party an opportunity to
present a brief closing statement, with Argentina presenting its statement first.
14. The second substantive meeting of the Panel with the parties shall be conducted as follows:
a. The Panel shall ask the European Union if it wishes to avail itself of the right to present
its case first. If so, the Panel shall invite the European Union to present its opening
statement, followed by Argentina. If the Eu ropean Union chooses not to avail itself of
that right, the Panel shall invite Argentina to present its opening statement first. Before
each party takes the floor, it shall provide the Panel and other participants at the
meeting with a provisional written version of its statement. In the event that

- A-4 -

interpretation is needed, each party shall provide additional copies for the interpreters,
through the Panel Secretary. Each party shall make available to the Panel and the other
party the final version of its opening statement as well as its closing statement, if any,
preferably at the end of the meeting, and in any event no later than 5.00 p.m. of the
first working day following the meeting.
b. After the conclusion of the statements, the Panel shall give each party the opportunity to
ask each other questions or make comments, through the Panel. Each party shall then
have an opportunity to answer these questions orally. Each party shall send in writing,
within a timeframe to be determined by the Panel, any questions to the other party to
which it wishes to receive a response in writing. Each party shall be invited to respond in
writing to the other party's written questions within a deadline to be determined by the
Panel.
c. The Panel may subsequently pose questions to the parties. Each party shall then have an
opportunity to answer these questions orally. The Panel shall send in writing, within a
timeframe to be determined by it, any questions to the parties to which it wishes to
receive a response in writing. Each party shall be invited to respond in writing to such
questions within a deadline to be determined by the Panel.
d. Once the questioning has concluded, the Panel shall afford each party an opportunity to
present a brief closing statement, with the party that presented its opening statement
first, presenting its closing statement first.
Third parties

15. The Panel shall invite each third party to transmit to the Panel a written submission prior to
the first substantive meeting of the Panel with the parties, in accordance with the timetable
adopted by the Panel.
16. Each third party shall also be invited to present its views orally during a session of this first
substantive meeting set aside for that purpose. Each third party shall provide to the Panel the list
of members of its delegation in advance of this session and no later than 5.00 p.m. the previous
working day.
17. The third-party session shall be conducted as follows:
a. All third parties may be present during the entirety of this session.
b. The Panel shall first hear the arguments of the third parties in alphabetical order. Third
parties present at the third-party session and intending to present their views orally at
that session, shall provide the Panel, the parties and other third-parties with provisional
written versions of their statements before they take the floor. Third parties shall make
available to the Panel, the parties and other third parties the final versions of their
statements, preferably at the end of the session, and in any event no later than
5.00 p.m. of the first working day following the session.
c. After the third parties have made their statements, the parties may be given the
opportunity, through the Panel, to ask the third parties questions for clarification on any
matter raised in the third parties' submissions or statements. Each party shall send in
writing, within a timeframe to be determined by the Panel, any questions to a third party
to which it wishes to receive a response in writing.
d. The Panel may subsequently pose questions to the third parties. Each third party shall
then have an opportunity to answer these questions orally. The Panel shall send in
writing, within a timeframe to be determined by it, any questions to the third parties to
which it wishes to receive a response in writing. Each third party shall be invited to
respond in writing to such questions within a deadline to be determined by the Panel.

- A-5 -

Descriptive part

18. The description of the arguments of the parties and third parties in the descriptive part of the
Panel report shall consist of executive summaries provided by the parties and third parties, which
shall be annexed as addenda to the report. These executive summaries shall not in any way serve
as a substitute for the submissions of the parties and third parties in the Panel's examination of
the case.
19. Each party shall submit executive summaries of the facts and arguments as presented to the
Panel in its written submissions, other than in re sponses to questions, and its oral statements, in
accordance with the timetable adopted by the Panel. Each executive summary of a written
submission shall be limited to no more than 10 pages, and each executive summary submitted by
each party of opening and closing statements presented at a substantive meeting shall be limited
to no more than 5 pages each. The Panel will not summarize in the descriptive part of its report, or
annex to its report, the parties' responses to questions.
20. Each third party shall submit an executive summary of its arguments as presented in its
written submission and statement in accordance with the timetable adopted by the Panel. This
summary may also include a summary of response s to questions, where relevant. The executive
summary to be provided by each third party shall not exceed 6 pages.
21. The Panel reserves the right to request the parties and third parties to provide executive
summaries of facts and arguments presented by a party or a third party in any other submissions
to the Panel for which a deadline may not be specified in the timetable.
Interim review

22. Following issuance of the interim report, each party may submit a written request to review
precise aspects of the interim report and request a further meeting with the Panel, in accordance
with the timetable adopted by the Panel. The right to request such a meeting shall be exercised no
later than at the time the written request for review is submitted.
23. In the event that no further meeting with the Panel is requested, each party may submit
written comments on the other party's written request for review, in accordance with the timetable
adopted by the Panel. Such comments shall be limited to commenting on the other party's written
request for review.
24. The interim report, as well as the final report prior to its official circulation, shall be kept
strictly confidential and shall not be disclosed.
Service of documents

25. The following procedures regarding service of documents shall apply:
a. Each party and third party shall submit all documents to the Panel by filing them with
the DS Registry (office No. 2047).
b. Each party and third party shall file 4 paper copies of all documents it submits to the
Panel. However, when exhibits are provided on CD-ROMS/DVDs, 2 CD-ROMS/DVDs and
2 paper copies of those exhibits shall be filed. The DS Registrar shall stamp the
documents with the date and time of the filing. The paper version shall constitute the
official version for the purposes of the record of the dispute.
c. Each party and third party shall also provide an electronic copy of all documents it
submits to the Panel at the same time as the paper versions, preferably in Microsoft
Word format, either on a CD-ROM, a DVD or as an e-mail attachment. If the electronic
copy is provided by e-mail, it should be addressed to DSRegistry@wto.org, with a copy
to XXXX@wto.org, XXXX@wto.org and XXXX@wto.org. If a CD-ROM or DVD is provided,
it shall be filed with the DS Registry.

- A-6 -

d. Each party shall serve any document submitted to the Panel directly on the other party.
Each party shall, in addition, serve on all third parties its written submissions in advance
of the first substantive meeting with the Panel. Each third party shall serve any
document submitted to the Panel directly on the parties and all other third parties. Each
party and third party shall confirm, in writing, that copies have been served as required
at the time it provides each document to the Panel.
e. Each party and third party shall file its do cuments with the DS Registry and serve copies
on the other party (and third parties where appropriate) by 5.00 p.m. (Geneva time) on
the due dates established by the Panel. A party or third party may submit its documents
to another party or third party in electronic format only, subject to the recipient party or
third party's prior written approval and provided that the Panel Secretary is notified.
f. The Panel shall provide the parties with an electronic version of the descriptive part, the
interim report and the final report, as well as of other documents as appropriate. When
the Panel transmits to the parties or third parties both paper and electronic versions of a
document, the paper version shall constitute the official version for the purposes of the
record of the dispute.
26. The Panel reserves the right to modify these procedures as necessary, after consultation with
the parties.

- A-7 -

ANNEX A-2
ADDITIONAL WORKING PROCEDURES OF THE PANEL CONCERNING
BUSINESS CONFIDENTIAL INFORMATION
Adopted 25 November 2014

The following procedures apply to any business confidential information (BCI) submitted in the
course of the Panel proceedings in DS473.

1. For the purposes of these Panel proceedings, BCI is any information that has been designated
as such by the party submitting the information and that was previously treated as BCI by the
Commission of the European Union in the anti-dumping investigation at issue in this dispute.
However, these procedures do not apply to any information that is available in the public
domain. In addition, these procedures do not ap ply to any BCI if the person who provided the
information in the course of the aforementioned investigation agrees in writing to make the
information publicly available.

2. As required by Article 18.2 of the DSU, a party or third party having access to BCI submitted
in these Panel proceedings shall treat it as confidential and shall not disclose that information
other than to those persons authorized to receive it pursuant to these procedures. Any
information submitted as BCI under these procedures shall only be used for the purposes of
this dispute and for no other purpose. Each party and third party is responsible for ensuring
that its employees and/or outside advisors comply with these working procedures to protect
BCI. An outside advisor is not permitted access to BCI if that advisor is an officer or employee
of an enterprise engaged in the production, export, or import of the products that were the
subject of the investigation at issue in this dispute. All third party access to BCI shall be
subject to the terms of these working procedures.

3. No person may have access to BCI except a member of the Secretariat or the Panel, an
employee of a party or third party under the terms specified in these procedures, or an outside
advisor to a party or third party for the purposes of this dispute.

4. The party submitting BCI shall mark the cover and/or first page of the document containing
BCI, and each page of the document, to indicate the presence of such information. The specific
information in question shall be placed between double brackets, as follows: [[xx,xxx.xx]]. The
first page or cover of the document shall state "Contains business confidential information on
pages xxxxxx", and each page of the document sh all contain the notice "Contains Business
Confidential Information" at the top of the page.

5. Any BCI that is submitted in binary-encoded form shall be clearly marked with the statement
"Business Confidential Information" on a label of the storage medium, and clearly marked with
the statement "Business Confidential Information" in the binary-encoded files.

6. In the case of an oral statement containing BCI, the party or third party making such a
statement shall inform the Panel before making it that the statement will contain BCI, and the
Panel will ensure that only persons authorized to have access to BCI pursuant to these
procedures are in the room to hear that statement. The written versions of such oral
statements submitted to the Panel shall be marked as provided for in paragraph 4.

7. If a party or third party considers that information submitted by the other party or a third
party contains information which should have been designated as BCI and objects to such
submission without BCI designation, it shall forthwith bring this objection to the attention of
the Panel, the other party, and, where relevant, the third parties. The Panel shall deal with the
objection as appropriate. Similarly, if a party or third party considers that the other party or a
third party submitted information designated as BCI which should not be so designated, it shall
forthwith bring this objection to the attention of the Panel, the other party, and, where
relevant, the third parties, and the Panel shall deal with the objection as appropriate.

- A-8 -

8. Any person authorized to have access to BCI under the terms of these procedures shall store
all documents containing BCI in such a manner as to prevent unauthorized access to such
information.

9. The Panel will not disclose BCI, in its report or in any other way, to persons not authorized
under these procedures to have access to BCI. The Panel may, however, make statements of
conclusion drawn from such information. Before the Panel circulates its final report to the
Members, the Panel will give each party an opport unity to review the report to ensure that it
does not contain any information that the party has designated as BCI.

10. Submissions containing BCI will be included in the record forwarded to the Appellate Body in
the event of an appeal of the Panel's Report.

- B-1 -

ANNEX B
ARGUMENTS OF ARGENTINA
Contents Page
Annex B-1 Executive Summary of the Firs t Written Submission of Argentina B-2
Annex B-2 Executive Summary of the Second Written Submission of Argentina B-12
Annex B-3 Executive Summary of the Statement of Argentina at the First Meeting of the
Panel
B-23
Annex B-4 Executive Summary of the Statement of Argentina at the Second Meeting of
the Panel
B-29
Annex B-5 Executive Summary of the Response of Argentina to the European Union's
Request for a Preliminary Ruling
B-34

- B-2 -

ANNEX B-1
EXECUTIVE SUMMARY OF THE FIRST WRITTEN
SUBMISSION OF ARGENTINA
I. INTRODUCTION

1. Argentina has initiated this dispute with regard to two different measures: first, Article 2(5)
of Council Regulation (EC) No 1225/2009 (hereinafter, the Basic Regulation), that Argentina
challenges as being inconsistent "as such" with several provisions of the Anti-Dumping Agreement
(hereinafter, ADA), and the General Agreemen t on Tariffs and Trade 1994 (hereinafter,
GATT 1994), and second, the anti-dumping measures imposed by the European Union
(hereinafter, EU) on imports of biodiesel originating in Argentina
1, that Argentina submits that are
inconsistent with several obligations under the ADA and the GATT 1994.

II. "AS SUCH" CLAIMS IN RELATION TO ARTICLE 2(5) OF COUNCIL
REGULATION (EC) NO 1225/2009 OF 30 NOVEMBER 2009 ON PROTECTION
AGAINST DUMPED IMPORTS FROM COUNTRIES NOT MEMBERS OF THE
EUROPEAN COMMUNITY

A. Background, scope and content of Ar ticle 2(5) of the Basic Regulation

2. The original version of Article 2(5) of the Basic Regulation as adopted in 1994 to implement
the ADA did not contain the provision currently set out in its second paragraph, which Argentina
challenges in the present dispute. This paragr aph has been added by Council Regulation (EC)
No 1972/2002 of 5 November 2002. The historical overview of this provision shows that the
second paragraph of Article 2(5) has actually b een introduced to keep the possibility in the
calculation of normal value to disregard the "costs " of the producers when the authorities consider
that these costs are "abnormally or artificially low", because they do not reflect "market values" or
are "distorted".

3. According to Council Regulation (EC) 1972/2002 and the consistent practice of the EU
authorities Article 2(5), second paragraph, of the Basic Regulation refers to situations where the
prices of an input are "abnormally or artificially low" because they are set in a "regulated market"
or because of the existence of some alleged "distortion" on the domestic market. This
interpretation has been confirmed by the General Court of the EU. Article 2(5), second paragraph,
requires, in such a situation, that these costs "be adjusted or established on the basis of the costs
of other producers or exporters in the same country or, where such information is not available or
cannot be used, on any other reasonable basis, including information from other representative
markets." Such a rule is inconsistent with various provisions of the ADA and of the GATT 1994.

B. Article 2(5) of the Basic Regulation viol ates Article 2.2.1.1 of the ADA and, as a
result, Article 2.2 of the ADA and Article VI: 1(b)(ii) of the GATT 1994

4. Article 2.2.1.1 of the ADA, correctly interprete d in accordance with the principles of treaty
interpretation does not allow investigating authorities to reject or adjust costs of certain inputs
used in the production of the product under cons ideration because the prices of these inputs in
their domestic market are found to be "abnormally or artificially low", because they do not reflect
market values or because they are allegedly distorted.

 The ordinary meaning of Article 2.2.1.1 of the ADA

5. Article 2.2.1.1 establishes an obligation on the investigating authorities to calculate the costs
"on the basis of records kept by the exporter" when constructing normal value, provided that two

1 Commission Regulation (EU) No 490/2013 of 27 May 2013 imposing a provisional anti-dumping duty
on imports of biodiesel originating in Argentina and Indonesia, OJ 2013 L 141 and Council Implementing
Regulation (EU) No 1194/2013 of 19 November 2013 imposing a definitive anti-dumping duty and collecting
definitively the provisional duty imposed on imports of biodiesel originating in Argentina and Indonesia,
OJ 2013 L 315. (Definitive Regulation).

- B-3 -

conditions are fulfilled: (i) such records are in accordance with the generally accepted accounting
principles (GAAP) of the exporting country and (ii) such records reasonably reflect the costs
associated with the production and sale of the product under consideration.

6. There are only two exceptions to the above ob ligation to calculate costs on the basis of the
records kept by the exporters. It is only where th e records are inconsistent with GAAP or that they
do not reasonably reflect the costs associated with the production and sale of the product under
consideration that the authorities have the right not to use the data in the records. Whenever the
records are consistent with GAAP of the exporting country and they reasonably reflect the costs
associated with the production and sale of the product, the investigating authorities must calculate
the costs on the basis of the records kept by the exporter or producer.

7. The second condition included in Article 2.2.1.1, first sentence, does not authorize the
authorities to reject or adjust the data in the records because the prices are " abnormally or
artificially low", because they do not reflect " market values" or are " distorted". This interpretation
flows from the ordinary meaning of the words of Article 2.2.1.1, first sentence and from the
structure of that sentence. In providing that the records must reasonably reflect "the costs"
associated with the production and sale of the pr oduct under consideration, Article 2.2.1.1 of the
ADA expressly refers to the charges or expens e s w h i c h h a v e a c t u a l l y b e e n i n c u r r e d b y t h e
producer concerned for the production and sale of the product under consideration, regardless of
whether such costs are lower than international prices or of whether they are, in the authorities'
view, market-based.

8. Moreover, the word "reasonably" in Article 2.2.1.1 is attached to the verb "reflect" and not
to the word "costs". This sentence does not provide that the records must reflect "reasonable
costs" or "costs which are reasonable in light of prices on other markets". This analysis excludes
an interpretation that refers to whether the costs included in the records are in line with
international prices or prices on other markets. In other words, the sentence does not provide that
the records must reflect costs which are reasonable, but that they must reflect "costs associated
with the production and sale of the product under consideration" and in a reasonable way.

 The context of Article 2.2.1.1, first sentence, of the ADA

9. The second and third sentences of Article 2.2. 1.1 provide relevant context in construing the
obligation set out in the first sentence. The second sentence provides what the authorities have to
do if they use an alternative cost allocation methodology. This confirms that the second condition
in the first sentence refers to a cost allocation issue.

10. Article 2.2.2 of the ADA deals with "the amounts for administrative, selling and general costs
and for profits" which are also central elements for constructing normal value. It flows from this
rule that if the drafters of the ADA had intend ed to authorize the authorities to use, for the
purposes of the calculation of the cost of producti on, data other than those of the producers, they
would have explicitly provided so. Furthermore, the different ways set out in Article 2.2.2 to
determine SG&A and profit all relate to data in the country of origin. This supports the view that a
"reasonability" test under Article 2.2.1.1, first sentence, by reference to data outside the country
of origin is not relevant and contrary to the principles found in the context of the dumping
determination.

11. Article 2.2 of the ADA and Article VI:1(b)(ii) of the GATT 1994 expressly refer to "the cost of
production in the country of origin ". Since Article 2.2.1.1 of the ADA seeks to provide further
details "for the purposes of paragraph 2", it is cl ear that the interpretation of Article 2.2.1.1 must
be consistent with Article 2.2, to which Article 2.2.1.1 directly refers. The express indication in
Article 2.2 of the ADA (and Article VI:1 of the GATT 1994) that the cost of production is the one "in
the country of origin" does not allow to conclude that the "costs" referred to in Article 2.2.1.1
could be found to be "unreasonable" in view of benchmarks outside of the country of origin, such
as prices in other markets. Since the construction of the normal value must be based on the "cost
of production in the country of origin", it does not make any sense to reject costs on the ground
that they would not reflect international prices or prices in other markets.

12. An interpretation of the first sentence of Article 2.2.1.1 whereby the cost data could be
rejected because they are lower than prices in other markets is inconsistent with the requirement

- B-4 -

under Article 2.2 of the ADA that the constructed normal value be based on the "cost of production
in the country of origin".

 The object and purpose of the ADA

13. By providing that the records are not reasonable if the cost data reflect prices which are
lower than the prices on other markets, Article 2(5), second paragraph, undermines the
fundamental logic of "dumping" which is based on a comparison between the export price of the
product concerned and the price of the like product on the domestic market , as defined in
Article VI:1 of the GATT 1994 and 2.1 of the ADA.

 Case law

14. The interpretation according to which the first sentence of Article 2.2.1.1 of the ADA does
not allow investigating authorities to reject or adjust costs of certain inputs used in the production
of the product under consideration when the prices of these inputs in their domestic market are
found to be "abnormally or artificially low", because they do not reflect market values or because
they allegedly are distorted is confirmed by the Panel Reports in US – Softwood Lumber V
2, EC –
Salmon3, and Egypt – Steel Rebar.4

C. Article 2(5) of the Basic Regulation is inconsistent with Article 2.2 of the ADA and
Article VI: 1(b)(ii) of the GATT 1994

15. Article 2(5) of the Basic Regulation violates Article 2.2 of the ADA and Article VI:1(b)(ii) of
the GATT 1994 since those provisions expressly require that the margin of dumping must be
determined by comparison with the cost of production in the country of origin.

16. Article 2.2 expressly provides that when the margin of dumping is established by
comparison with a constructed normal value, the comparison shall be made with "the cost of
production in the country of origin". Article VI:1 (b)(ii) of the GATT 1994 similarly refers to "the
cost of production of the product in the country of origin." Since Article 2(5), second paragraph, of
the Basic Regulation provides that the costs shall be adjusted or established "on the basis of the
costs of other producers or exporters in the same country, or, where such information is not
available or cannot be used, on any other reasonable basis, including information from other
representative markets", it is inconsistent with Article 2.2 and Article VI:1(b)(ii) of the GATT 1994
which require to use the cost of production "in the country of origin".

D. The EU violates Article XVI:4 of the Marrakesh Agreement Establishing the WTO
and Article 18.4 of the ADA

17. Since Article 2(5), second paragraph, of the Basic Regulation violates Articles 2.2.1.1
and 2.2 of the ADA and Article VI:1 of the GATT 1994, it follows that the EU has not ensured the
conformity of its laws, regulations and administrative procedures with the provisions of the ADA
and of the GATT 1994 and, therefore, has also viol ated Article XVI:4 of the Marrakesh Agreement
Establishing the WTO and Article 18.4 of the ADA.

III. CLAIMS CONCERNING THE ANTI-DUMPING MEASURES IMPOSED BY THE
EUROPEAN UNION ON IMPORTS OF BIODIESEL ORIGINATING IN ARGENTINA

A. The EU acted inconsistently with Arti cles 2.2.1.1 and 2.2 of the ADA and with
Article VI:1(b)(ii) of the GATT 1994 in failin g to calculate the cost of production
on the basis of the records kept by the producers under investigation

18. Argentina submits that the EU acted inconsistently with the obligation laid down in the first
sentence of Article 2.2.1.1 of the ADA since it ca lculated the exporting producers' cost of soybean
on the basis of an average of the FOB reference price and not on the basis of cost of soybean

2 Panel Report, US – Softwood Lumber V, para. 7.321.
3 Panel Report, EC – Salmon (Norway), para. 7.483.
4 Panel Report, Egypt – Steel Rebar, para. 7.393.

- B-5 -

included in the accounting records of those producers. 5 If this Panel finds that Article 2(5) of the
Basic Regulation is as such inconsistent with Article 2.2.1.1 of the ADA, it follows that its
application in the anti-dumping investigation concerning imports of biodiesel originating in
Argentina necessarily produced a result that is also inconsistent with Article 2.2.1.1 of the ADA. In
any case, Argentina submits that the violation of these provisions is supported by five arguments.

19. First, Argentina submits that the finding th at the records of the Argentinean producers did
not reasonably reflect the costs of "the main raw material" is based on an improper establishment
of the facts. This finding ignores the fact that pr ices in Argentina are freely set and based on offer
and demand, as recognized by the EU itself in both the Definitive Regulation and in the parallel
anti-subsidy investigation.

20. Second, in finding that the costs of the main raw material were not reasonably reflected in
the records of the exporting producers, the EU ig nored the ordinary meaning of the terms of the
first sentence of Article 2.2.1.1 of the ADA. By referring to the term "costs", Article 2.2.1.1 refers
to the expenses actually incurred by the producer . Therefore, the fact that the cost of soybean
incurred and reported by the exporters was lower th an the international price did not allow the EU
to conclude that the records of the exporters do not reasonably reflect the costs of soybean
associated with the production and sale of biodiesel.

21. Third, the interpretation of the first sentence of Article 2.2.1.1 of the ADA at the basis of the
EU's refusal to base the cost of soybean on the records of the exporting producers cannot be
reconciled with the structure of that provision. In this sentence, "records" is the subject, "costs"
the object, "reflect" the verb and "reasonably" the adverb which qualifies the term "reflect". The
misplaced reading of "international prices" into the second condition of Article 2.2.1.1 of the ADA
leads to the result that for "records" to reflect "costs" according to the interpretation of the EU,
such records should have reflected costs that a producer actually never incurred, namely, in this
case, the FOB reference price of soybean.

22. Fourth, the refusal of the EU to base the co st of soybean on the records of the producers
under investigation is based on a reading of Article 2.2.1.1 of the ADA that is not supported by the
context of this provision. The second and third sentences of Article 2.2.1.1, dealing with cost
allocation issue, show that the "reasonably reflect" condition in the first sentence of Article 2.2.1.1
refers to the actual costs incurred by the producers instead of international prices. Furthermore,
Articles 2.2 of the ADA and VI:1(b)(ii) of the GATT 1994 expressly refer to the cost of production
in the country of origin . Given that Article 2.2.1.1 of the ADA is aimed at further specifying that
clause, Article 2.2.1.1 must be read in a manner th at is consistent therewith. Therefore, it does
not make any sense to reject costs on the grounds that they would not reflect "international
prices", since it implies a comparison with prices outside of the country of origin. Argentina also
reiterates the reference to Article 2.2.2 of the ADA in this respect.

23. Fifth, Argentina submits that, in finding th at the records of exporting producers "do not
reasonably reflect costs" because they do not reflect international prices despite the fact that they
reflect the costs actually paid by the exporting producer, and in replacing the costs reflected in
those records by international prices, the EU und ermines the object and purpose of the ADA which
is to counteract dumping that occurs when the export price is less than the comparable price, in
the domestic market and not on any other markets. The EU subverted the fundamental purpose of
the ADA and used the Agreement to address differe nces in price between the export price of the
product concerned and international prices, instead of comparable prices on the domestic market.

B. The EU acted inconsistently with Article 2.2 of the ADA and Article VI: 1(b)(ii) of
the GATT 1994 in failing to construct normal value of biodiesel on the basis of the
cost of production in Argentina

24. In replacing the cost of soybean reported in the records of the exporting producers by an
average of the FOB reference price, the EU failed to construct normal value on the basis of the cost
of production in the country of origin. Consequently, the EU acted inconsistently with Article 2.2 of
the ADA and Article VI:1(b)(ii) of the GATT 1994.

5 It is worth recalling that the Definitive Regulation confuses soybean and soybean oil as the direct input
in the production of biodiesel. It thus deliberately blurs the distinction between the product concerned
(biodiesel), the main input used in its production in Argentina (soybean oil), and indirect inputs used for the
production of the direct inputs (soybean).

- B-6 -

C. The EU acted inconsistently with Articl e 2.2.1.1 of the ADA by including costs not
associated with the production and sale of biodiesel in the calculation of the cost
of production

25. By using the average of the reference FOB price minus fobbing costs during the investigation
period (IP), the EU included in its calculation of the cost of production of biodiesel a cost which is
not associated with the cost of production and sale of biodiesel within the meaning of
Article 2.2.1.1 of the ADA. Since the producers under investigation did not pay the reference FOB
price minus fobbing costs for soybeans but, instead an amount representing the actual cost of
soybean included in their records, Argentina submits that, the price of soybean used by the EU to
calculate the cost of production is not a price that is associated with the production and sale of the
like product. Therefore, the EU acted inconsistently with Article 2.2.1.1 of the ADA.

26. As a result of the inconsistencies mentioned in (A) to (C) above, the dumping margin
determinations are inconsistent with Article 2.1 of the ADA and with Article VI:1 of the GATT 1994.

D. The EU acted inconsistently with Arti cles 2.2 and 2.2.2(iii) of the ADA because
the amounts for profits established by th e EU were not determined on the basis
of a reasonable method

27. When determining the reasonable amount for profits, the EU did not calculate the
reasonable amount for profits on the basis of the chapeau of Article 2.2.2 of the ADA or on
subparagraphs (i) or (ii) of that provision, choos ing instead to base it on "any other reasonable
method" pursuant to Article 2.2.2(iii) of the ADA. Argentina submits that the amount for profits
established by the EU of 15% is not based on a reasonable method within the meaning of
Article 2.2.2(iii) of the ADA and cannot be consider ed to be "reasonable" within the meaning of
Article 2.2 in fine of the ADA.

28. In both the Provisional and Definitive Regula tions, the EU failed to provide any explanation
of how it determined a profit margin of 15%. The 15% figure does not result from any "method"
within the meaning of Article 2.2.2(iii) of the ADA, let alone a reasonable one. Argentina fails to
see how a World Bank figure concerning the short to medium term lending rate can be understood
to be a relevant justification of the 15% profit margin determination. Moreover, Argentina
explained that it was unreasonable to consider that the Argentinean biodiesel industry is "young
and innovative", at a time when production had peaked and the market had matured significantly.

E. The EU acted inconsistently with Articl e 2.4 of the ADA in failing to make due
allowance for differences affecting price comparability, including differences in
taxation, and in precluding a fair comp arison between export price and normal
value

29. Argentina submits that the EU acted inconsiste ntly with Article 2.4 of the ADA in failing to
make a fair comparison between normal value and export prices within the meaning of that
provision, as a fair comparison would have required that due allowance be made for differences
affecting price comparability. This inconsistency arose as a result of a comparison of, on the one
hand, a constructed normal value that included an average of the reference FOB price of soybeans
(minus fobbing costs) with, on the other hand, an export price that incorporated the domestic
price of soybeans.

30. In the Definitive Regulation, the EU dedu cted the expenses incurred for exporting the
soybean from the reference FOB price. Therefore, the difference between the price of soybean
included in the constructed normal value and the do mestic price of soybean reflected in the export
price is approximately equal to the export tax on soybean. The EU itself acknowledged that its
methodology yielded a result which, from a numerical point of view, was similar to simply adding
the export tax to the cost of the raw material.

- B-7 -

F. The EU acted inconsistently with Article 9.3 of the ADA and Article VI: 2 of the
GATT 1994 in imposing and levying anti-dumping duties in excess of the margin
of dumping that should have been established in accordance with Article 2 of
the ADA

31. In order to have the dumping margin determin ation made in conformity with Article 2 of the
ADA, the EU should have based the cost of pr oduction on the records of the producers under
investigation and it should have ensured that the profit margin determination was based on a
reasonable method pursuant to Article 2.2.2(iii) of the ADA. Therefore, the EU has imposed and
levied anti-dumping duties in excess of the margin of dumping that it should have calculated in
conformity with Article 2 of the ADA. As a result, it acted inconsistently with Article 9.3 of the ADA
and VI:2 of the GATT 1994.

G. The EU acted inconsistently with Arti cles 3.1, 3.4 and 3.5 of the ADA in its
evaluation of the production capacity, th e utilization of capacity and the return
on investment of the EU industry

32. Argentina submits that the utilization of capacity was overstated and that a proper
evaluation would have revealed that capacity utilization was in fact significantly lower than the
figures reflected in the Definitive Regulation. Argentina claims that the EU failed to ensure that
injury arising out of the overcapacity of the dome stic industry was not attributed to the dumped
imports. This is the result of, among others, the EU's failure to properly evaluate the utilization of
capacity of its domestic industry.

33. Throughout the investigation, overcapacity was identified as a factor having an impact on
the state of the industry by the investigated companies as well as by the Government of
Argentina. In the course of the injury analysis conducted by the EU, the European Biodiesel Board
(hereinafter, EBB) submitted information that showed that capacity of the domestic industry grew
throughout the investigation period. In a submission dated 17 September 2013, the EBB suddenly
asserted that the figures concerning production capa city of the EU industry needed to be adjusted
to exclude the "idle" capacity. On 1 October 2013, the EU issued the Definitive Disclosure where it
accepted the resubmitted data and altered the findin gs on capacity and capacity utilization that it
had made in the Provisional Regulation. However, the Definitive Disclosure did not contain further
information on the methodology used by the EU to assess this information or further elaboration of
what was meant by "close scrutiny of this resubmitted data".

34. Argentina claims that the EU acted inconsistently with Articles 3.1 and 3.4 of the ADA first,
because the EU's definition of "utilization of capa city" is inconsistent with Article 3.4 of the ADA,
second, because its analysis of the production capacity and the utilization of capacity of the EU
industry was not based on positive evidence; third, because the injury determination did not
involve an objective examination; fourth, because the evaluation of the production capacity and of
the utilization of capacity is not adequate and that the EU therefore acted inconsistently with
Article 3.4 of the ADA and fifth, because the indicators "utilization of capacity" and "return on
investment" were not evaluated in a consistent manner.

 The EU's definition of utilization of capacity is inconsistent with Article 3.4 of
the ADA

35. Argentina notes that the terms "utilization of capacity" in Article 3.4 of the ADA contain no
reference to a concept such as "availability for use" or "idleness". Consequently, in the framework
of Article 3 of the ADA, the entirety of production capacity must be taken into account regardless
of whether it is allegedly "available for use" or not. It is undeniable that all of an industry's
production capacity, whether it is available for immediate use or not, generates costs. Failure to
take production capacity that is not ready for use or that is "idle" yields an inaccurate picture of
the state of the domestic industry. In adopting a definition whereby the evaluation of "utilization of
capacity" excludes so-called "idle" capacity, the EU acted inconsistently with Article 3.4 of the ADA.

- B-8 -

 The EU acted inconsistently with Article 3. 1 and 3.4 of the ADA in failing to base
its analysis of the production capacity and the utilization of capacity on positive
evidence

36. At a late stage in the proceedings, the EBB submitted a document requesting the exclusion
of supposedly idle capacity, a change in production capacity figures by EBB that amounted
to 26.53% of total production capacity in the EU or 5,898,000 tons during the IP.
6 This amounts to
almost three times the combined amounts of imports originating in Argentina and Indonesia during
the IP. Argentina submits that the evidence on which the evaluation of the utilization of capacity is
based is implausible first because the alleged "mistake" in EBB's submissions would have been
impossible to overlook, and second, because if the "mistake" had existed, major inconsistencies in
the data submitted by EBB concerning production capacity of non-EBB Members would have been
evident, especially in view of the fact that the entirety of the alleged "idle capacity" of the EU
industry was allocated to non-EBB Members, which are a minority sector of the EU industry.

37. In stark contrast to the multiplicity of pub licly available sources confirming the accuracy of
the data in the Complaint and the Provisional Regulation, the data provided by EBB in its
submission of 17 September 2013 appear to consist of mere assertions by EBB. The EU stated in
the Definitive Regulation that it cross-referenced EBB's submission to "publicly available data
concerning in particular idle capacity as well as capacity of producers that ceased operations due
to financial difficulties" but it does not state what these publicly available data are. The reliance on
undisclosed yet supposedly public sources further calls into question the reliability and
creditworthiness of the evidence on which evaluati on of the capacity of the Union industry was
based.

38. Argentina notes that (1) this "publicly available data" was not placed on the public file of the
investigation, (2) it is contradicted by all other publicly available sources that do appear on the
public file of the investigation and (3) the EU di d not clarify what the "cross-referencing" exercise
entailed. As a result, Argentina submits that the data on which the evaluation of production
capacity and capacity utilization is based, is not reliable.

39. Moreover, Article 3.4 of the ADA does not allo w for an exclusion of production capacity that
is "idle" from the evaluation of the utilization of capacity. As a result, the "idleness" of production
capacity is a fact that is neither relevant nor pertinent to the question of what constitutes
production capacity within the meaning of Article 3.4 of the ADA; it is production capacity
regardless of whether it is "idle" or "available for use." As a result, to the extent that the
assessment of production capacity and utilization of capacity is based on evidence concerning the
fact that part of the capacity is allegedly "not available for use", it is based on evidence that is
irrelevant and impertinent.

40. Therefore, the EU failed to base its injury determination on positive evidence and acted
inconsistently with Articles 3.1 and 3.4 of the ADA.

 The EU acted inconsistently with Articles 3.1 and 3.4 of the ADA in failing to
conduct an objective examination of the production capacity and the utilization of
capacity of its domestic industry

41. The unusual exclusion of production capacity that was "idle" had the effect of understating
the production capacity of the EU biodiesel indust ry by 5,898,000 tons during the IP or 26.53% of
total capacity. This understatement, in turn, overstates the utilization of capacity and thus negates
the significance of the overcapacity of the EU indu stry as a cause of injury that is different from
that of the allegedly dumped imports. Argentina submits that in weighing and balancing the
evidence before it, the EU did not act in an even-handed manner. Indeed, the exclusion of
production capacity that was "not available for use" was based on evidence that is not credible and
which at the same time favoured the interests of EBB in the investigation. As a result, the
examination was not "objective" within the mean ing of Article 3.1 of the ADA. The EU has
therefore acted inconsistently with Articles 3.1 and 3.4 of the ADA.

6 The magnitude of the figures involved speaks for itself. While EBB was perfectly able to detect,
examine and isolate the economic effect supposedly caused by imports less than 1,500,000 tons in a market
almost ten times bigger, it was unable to detect that the total EU production capacity had been overstated by
almost six million tons.

- B-9 -

 The EU acted inconsistently with Article 3.4 of the ADA in failing to adequately
evaluate the production capacity and utilization of capacity of the domestic
industry of the EU

42. When stating that production capacity remained "relatively stable" the EU failed to properly
evaluate production capacity at the provisional stage as it failed to properly analyze this factor by
"placing it in context in terms of the particular evolution of the data".
7 Argentina submits that the
EU equally failed to adequately evaluate the pr oduction capacity and utilization capacity of the
EU industry at the definitive stage. Consequently , the EU acted inconsistently with Article 3.4 of
the ADA.

 The EU acted inconsistently with Articl e 3.4 of the ADA in failing to evaluate
utilization of capacity and return on investment in a consistent manner

43. To the extent that the EU eliminated so-calle d "idle capacity" from the production capacity of
the EU industry, while basing the evaluation of the return on investment on the basis of all assets
employed in the production of biodiesel, it woul d appear that both factors were based on data
which lack consistency. Indeed, while the "return on investment" appears not to exclude "idle"
assets, the EU's evaluation of the utilization of capacity did. Thus, Argentina submits that the EU
failed to evaluate the return on investments and the utilization of capacity in a consistent manner.
Consequently, the EU acted inconsistently with Article 3.4 of the ADA.

H. The EU acted inconsistently with Articles 3.1 and 3.5 of the ADA in failing to
ensure that the injury caused by the ov ercapacity of the EU industry was not
attributed to the allegedly dumped imports

 Figures concerning production capacity and utilization of capacity are incorrect

44. The EU made a determination concerning prod uction capacity and utilization of capacity
based on a definition of utilization of capacity which is inconsistent with Article 3.4 of the ADA,
which was not based on positive evidence, which did not involve an objective examination and
which was not based on an adequate evaluation. The correct figures would have shown a much
higher production capacity of the EU industry and, consequently, a much lower utilization of
capacity.

 Errors in the assessment of the overcapacity in the Provisional Regulation

45. The EU appeared to assume, incorrectly, that the arguments of the interested parties
concerned only the low capacity utilization, instea d of referring to overcapacity. The EU industry
had expanded production capacity by 38% during the period 2008-2011, i.e. far beyond what the
market could absorb and despite the already extrem ely low rates of utilization of capacity in 2008.
Even a superficial consideration of these argument s on overcapacity would have shown that based
on the figures of the Provisional Regulation, unused capacity increased from 11,613,000 tons
in 2009 to 13,174,629 tons during the IP, an increase of 1,561,322 tons.

 The findings relating to fixed costs are incorrect

46. Argentina refers to the statement that fixed costs do not bear any relation to capacity
utilization rates, which is one of the reasons why the EU rejected the allegation that there was a
causal relationship between the overcapacity of th e EU industry and the injury it suffered. This
statement appears to be based on a misunderstanding. Indeed, the fact that fixed costs remain
constant at different capacity utilization rates is precisely the reason why the low capacity
utilization rates result in fixed costs being disproportionately high on a per unit basis.

47. In addition to the fact that, contrary to the statements of the EU, the weight of the fixed
costs in the total cost of production is impacted by the rate of capacity utilization, Argentina
disputes the notion that fixed costs were low and that, therefore, the low rates of capacity
utilization were not a "decisive" factor of injury, as stated in Recitals 164 and 166 of the Definitive
Regulation.


7 Panel Report, EC – Tube or Pipe Fittings, para. 7.314.

- B-10 -

 The findings that low capacity utilization rates are not a decisive factor cannot be
reconciled with the EU's statements th at the biodiesel industry is capital
intensive

48. The EU mentions repeatedly that the biodiesel industry is capital intensive. Capital-intensive
industries require large financial commitments to produce the first unit of any good and thus
require high capacity utilization to achieve economies of scale and achieve a return on investment.
Argentina submits that the finding that the very significant overcapacity of the EU industry was not
a decisive factor of injury cannot be reconciled with the statements throughout the Provisional and
Definitive Regulations that the biodiesel industry is capital-intensive.

I. The EU acted inconsistently with Articles 3.1 and 3.5 of the ADA in failing to
ensure that the alleged injury caused by the EU industry's long term commercial
strategy of importing the product under consideration was not attributed to the
allegedly dumped imports

49. The EU failed to properly assess the injury arising from the EU industry's strategy of
importing the product under consideration, thereby failing to separate and distinguish the injurious
effects of this commercial strategy from those of the allegedly dumped imports.

50. The EU itself recognized that imports made by the EU industry were one of the reasons for
the low capacity utilization rate. Therefore, the commercial strategy pursued by the EU industry,
which consisted of sourcing the product under consideration in Argentina through related entities,
was a cause of injury. The statement that the imports were temporarily made in self-defense is
contradicted by their sheer volume: over 60% of total imports by the EU's own recognition.

J. The EU acted inconsistently with Articles 3.1 and 3.5 of the ADA in failing to
ensure that the injury caused by the double-counting regimes was not attributed
to the allegedly dumped imports

51. The EU acted inconsistently with Articles 3.1 and 3.5 of the ADA as a result of the failure to
recognize that the double-counting regimes injure d the EU industry at the same time as the
allegedly dumped imports and/or of the failure to appropriately assess the injurious effects of
those regimes. In failing to examine the effects of the double-counting regimes in force in other EU
Member States besides France, the EU failed to appreciate the full extent of the injurious effects of
those regimes. The EU misplacedly insisted that double-counting only shifts demand, although it
also reduces demand. Finally, Argentina disputes the relevance of the contention that the double-
counting regime was in force only during a part of the IP in France.

K. The EU acted inconsistently with Articles 3.1 and 3.5 of the ADA in failing to
ensure that the injury caused by the lack of vertical integration and the access to
raw material of the EU industry was no t attributed to the allegedly dumped
imports

52. Argentina contends that the EU failed to comply with the non-attribution obligation in
relation to the lack of vertical integration and the lack of access to raw materials of the EU
industry. The EU did not undertake any steps to separate and distinguish the injurious effects
arising out of these factors from the injurious effe cts of the allegedly dumped imports. Therefore,
the EU acted inconsistently with Articles 3.1 and 3.5 of the ADA.

IV. CONCLUSION

53. Argentina respectfully requests that this Panel find that:

I.- Article 2(5) of the Basic Regulation is inconsistent as such , with the following
provisions of the ADA and the GATT 1994: (A) Articles 2.2.1.1 and 2.2 of the ADA and
Article VI:1(b)(ii) of the GATT 1994 by provid ing that the authorities shall reject or
adjust the cost data of the exporters as included in its records when those costs
reflect prices which are "abnormally or artificially low", because the costs do not
reflect market prices or because they are allegedly affected by a distortion; (B)
Article 2.2 of the ADA and Article VI:1(b)( ii) of the GATT 1994 by providing that the
costs shall be adjusted or established in certain cases "on any other reasonable basis,

- B-11 -

including information from other represen tative markets", even though neither
provision allows for an establishment of the costs on this basis. As a result, the EU
acted inconsistently with Article XVI:4 of the Marrakesh Agreement Establishing the
WTO and Article 18.4 of the ADA, and
II.- The anti-dumping measures imposed by the EU on imports of biodiesel originating
in Argentina are inconsistent with the following provisions of the ADA and the
GATT 1994: (A) Articles 2.2.1.1 and 2.2 of th e ADA and with Article VI:1(b)(ii) of the
GATT 1994 because the EU failed to calculate the cost of production on the basis of
the records kept by the producers under investigation; (B) Article 2.2 of the ADA and
Article VI:1(b)(ii) of the GATT 1994 because the EU failed to construct the normal
value of the exports of biodiesel on the basi s of the cost of production in the country
of origin; (C) Article 2.2.1.1 of the ADA be cause the EU included costs not associated
with the production and sale of biodiesel in the calculation of the cost of production;
(D) As a result of the inconsistencies mentioned in points (A) to (C) above, the
dumping margin determinations are inconsistent with Article 2.1 of the ADA and with
Article VI:1 of the GATT 1994; (E) Articles 2.2 and 2.2.2(iii) of the ADA because the
EU failed to base the profit margin as a component of the constructed normal value on
a reasonable method within the meaning of Article 2.2.2(iii) of the ADA; (F) Article 2.4
of the ADA because the EU failed to make due allowance for differences affecting price
comparability, including differences in taxation, thereby precluding a fair comparison
between the export price and normal value; (G) Article 9.3 of the ADA and VI:2 of the
GATT 1994 because the EU imposed and levied anti-dumping duties in excess of the
margin of dumping that should have been established in accordance with Article 2 of
the ADA; (H) Articles 3.1 and 3.4 of the ADA because the EU's injury determination is
not based on positive evidence and does not involve an objective examination of the
consequent impact of the allegedly dumped imports on domestic producers of the like
product in relation to capacity, utilization of production capacity and return on
investment of the EU industry; (I) Articles 3.1 and 3.5 of the ADA since the EU failed
to conduct an objective examination, based on positive evidence, of known factors
other than the allegedly dumped imports in its non-attribution analysis; hence, the EU
failed to ensure that the injury suffered by the domestic industry of the EU resulting
from other factors was not attributed to the allegedly dumped imports. Argentina
considers that the measures at issue should be withdrawn.
54. Argentina respectfully requests the Panel to make use of its discretion under the
second sentence of Article 19.1 of the DSU by suggesting ways in which the European Union
should implement the recommendations and rulings of the DSB to bring its measures into
conformity with the Anti-dumping Agreement and the GATT 1994.

- B-12 -

ANNEX B-2
EXECUTIVE SUMMARY OF THE SECOND WRITTEN
SUBMISSION OF ARGENTINA
A. INTRODUCTION

1. Argentina has demonstrated, and the European Union (hereinafter the "EU") has failed to
rebut, that, under Article 2(5) second subparagraph of the Basic Regulation, as reflected in the
consistent practice of the EU authorities and th e judgments of the General Court of the EU, when
the prices of inputs are found to be "abnormally low" or "artificially low" in comparison to prices in
other markets, as a result of an alleged "distortion", it is concluded that the costs are not
reasonably reflected in the records of the producer concerned and are thus adjusted or replaced by
data on any other reasonable basis, including information from other representative markets. This
measure is clearly inconsistent with Articles 2.2.1.1 and 2.2 of the Anti-Dumping Agreement
(hereinafter the "ADA").

2. Argentina has also demonstrated that several aspects of the anti-dumping measures
imposed by the EU on imports of biodiesel originating in Argentina are inconsistent with the
provisions of the ADA, including the dumping margin determinations and the injury and causality
determinations.

B. ARGENTINA'S CLAIMS AGAINST ARTICLE 2(5), SECOND SUBPARAGRAPH, OF THE
BASIC REGULATION

The measure at issue

3. Under its "as such" claims, Argentina is challenging one measure, namely Article 2(5),
second subparagraph, of the Basic Regulation and not "two separate measures"
1 a s t h e E U i s
claiming.

4. Regarding the scope of the measure , the EU errs when claiming that "the
second subparagraph of Article 2(5) of the Basic Regulation [only] describes what the authorities
can do after it has been determined that the record s do not "reasonably reflect" costs, pursuant to
the first subparagraph of Article 2(5) of the Basic Regulation".

5. This is, first of all, contrary to the text of Article 2(5), second subparagraph. Indeed,
Article 2(5), second subparagraph, does not only provide to the authorities the legal basis to use
information from other representative markets when information on the domestic market is not
available or cannot be used but, at the very same time, it also provides the legal basis for
disregarding the records of the producers in those situations.

6. The background, the consistent practice of the EU authorities and the judgements of the
General Court of the EU, confirm that Article 2(5) , second subparagraph, provides the legal basis
for rejecting the records of the producers/expo rters where prices are "artificially low" or
"abnormally low" as a result of an alleged "distortion".

7. Regarding the background, it must be noted that the first subparagraph of Article 2(5) was
introduced through Council Regulation No 3283/94 of 22 December 1994 which sought to
implement the EU's international obligations arising from the ADA adopted during the
Uruguay Round. In particular, by means of Article 2(5) of that regulation, it intended to implement
the particular obligations laid down by Article 2.2.1.1 of the ADA. The second subparagraph of
Article 2(5) was introduced by Regulation No 1972/2002 at the same time that Russia was granted
full Market Economy Status, to provide a legal basis for the authorities to reject the cost data
included in the records of the investigated party in case those costs reflect a price which is
"abnormally low" or "artificially low", in comparison to prices in other markets, because of a
"distortion" and to adjust or replace such costs by data which are not affected by such "distortion",
as clearly stated in Recital 4 of Regulation No 1972/2002.

1 EU's first written submission, para. 63.

- B-13 -

8. The scope of Article 2(5), second subpara graph, as described by Argentina has been
expressly confirmed by the General Court in the judgments referred to by Argentina.

In particular, in the second Acron case (Case T-118/10), the General Court expressly noted that
the assessment "whether the records reasonably reflect the costs " is made pursuant to the
second subparagraph of Article 2(5):2

The institutions were therefore fully entitled to conclude that one of the items in the
applicants' records could not be regarded as reasonable and that, consequently, that
item had to be adjusted by having recourse to other sources from markets which the
institutions regarded as more representati ve and, consequently, the price of gas had
to be adjusted.
3
9. Finally, the consistent practice of the EU authorities which has developed after the
introduction into the Basic Regulation of Article 2(5), second subparagraph, confirms the
foregoing. The Aluminium Foil case to which the EU refers is irrelevant since the determination was
based in that case on Article 18 of the Basic Regulation.

10. It is clear from the foregoing that Argentina does not confuse the scope of the
second subparagraph of Article 2(5) with the scope of the first subparagraph of Article 2(5), as
asserted by the EU.
4 Instead, it is the defendant that artificially creates a non-existent two-steps
approach between Article 2(5) first and second subp aragraphs, on the basis of the allegation that
the second subparagraph only describes "what the authorities are authorized to do in order to
calculate the costs, when the company records cannot be used". 5 The EU's position should not
prevail. That position is based on a simplistic reading of Article 2(5), first and
second subparagraphs, taken in isolation, and without consideration of their context. As
demonstrated above, the text of Article 2(5), se cond subparagraph, together with its background
makes evident that it is pursuant to that particular provision that the authorities determine that
records do not reasonably reflect the costs where the prices are "abnormally low" or "artificially
low", in comparison to prices in other markets, because of an alleged "distortion". This has been
expressly confirmed by the General Court, and is supported by the consistent practice of the
EU authorities which has developed after the introduction into the Basic Regulation of Article 2(5),
second subparagraph.

11. As to the precise meaning and content of the measure challenged , Argentina notes
that the "measure on its face" is only "the starting point" for an "as such" analysis. 6 As the
Appellate Body underlined, if "the meaning or content of the measure is not evident on its face,
further examination is required"7, as Argentina claims, so it is needed that the Panel "undertake a
holistic assessment of all relevant elements (…)" 8 "(…) submitted by a party that the alleged
inconsistency with the covered agreements arises from a particular manner in which a measure is
applied".
9

12. After reading the plain text of Article 2(5), second subparagraph, of the Basic Regulation, it
is clear that this provision imposes an obligation on the authorities. Indeed, where information of
the costs of other producers or exporters in the same country "is not available or cannot be used",
then the costs must be adjusted or established on "any other reasonable basis, including
information from other representative markets". The second part of that provision also directs the

2 Judgment of the General Court in Acron OAO v Council of the EU, Case T-118/10, para. 72
(Exhibit ARG-52).
3 Judgment of the General Court in Acron OAO and Dorogobuzh v Council of the EU, para. 46
(Exhibit ARG-23).
4 EU's opening statement at the first substantive meeting, para. 45.
5 EU's opening statement at the first substantive meeting, para. 50.
6 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 168.
7 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 168. See also
Appellate Body Report, US – Carbon Steel (India), para. 4.446 referring to Appellate Body Reports, US –
Countervailing and Anti-Dumping Measures (China), para. 4.101.
8 Appellate Body Report, US – Carbon Steel (India), para. 4.451 referring to Appellate Body Report,
US – Countervailing and Anti-Dumping Measures (China), para. 4.101.
9 Appellate Body Report, US – Carbon Steel (India), para. 4.454.

- B-14 -

authorities to reject the exporters' records for the same reason that they have to use information
from other representative markets.

13. Furthermore, Recital 4 of Regulation No 1972/2002 explains the meaning and content of
Article 2(5), second subparagraph. Recital 4 expl icitly acknowledges that, in situations where,
because of a particular market situation, sales do not permit a proper comparison, the records do
not reasonably reflect the costs associated with the production and sale of the product under
consideration. The use of the words "in particular" demonstrates that the finding that the records
do not reasonably reflect the costs is not limited to situations in which a particular market situation
has been found to exist. The next sentence in Re cital 4 establishes that this is to be the case
whenever the costs are "affected by a distortion". The EU itself has noted that Article 2(5),
second subparagraph, is used by the authorities in cases where, like in the case at hand, normal
value is constructed because of lack of sales in the ordinary course of trade. It cannot just argue
thereafter that Recital 4, which precisely seeks to explain the meaning and content of Article 2(5),
second subparagraph, is not relevant for the interpretation of that provision.

14. The fact that Recital 4 is relevant for the interpretation of Article 2(5), second subparagraph
in all circumstances is further supported by the fact that the General Court referred to Recital 4
even with regard to situations in which the normal value was constructed pursuant to a finding
that there was no or insufficient sales in the ordinary course of trade.
10

15. In conclusion, Regulation No 1972/2002, and in particular its Recital 4, are highly relevant
for the understanding of the content and meanin g of Article 2(5), second subparagraph. They
demonstrate that Article 2(5), second subparagraph, provides the legal basis for (a) rejecting the
cost data included in the records when they are affected by a "distortion", in particular, when they
reflect prices that are "artificially low" and (b) for adjusting or establishing the costs in such a case
on the basis of data from sources which are not affected by such distortions.

16. Argentina has also referred to the consistent practice of the EU authorities pursuant to
Article 2(5), second subparagraph, of the Basic Regulation as a relevant element for the
understanding of the meaning and conten t of Article 2(5), second subparagraph.
11 In all the cases
referred to by Argentina, the EU authorities have described the prices of the input concerned as
being "significantly lower" or "much lower" in comparison with prices in other markets, such as
prices in the EU. The prices have been described as being "abnormally low" and/or "artificially low"
prices. What is relevant is the consistency in the determinations made by the EU authorities, that
is, where the prices of the inputs have been found to be "artificially low" or "abnormally low"
because of an alleged distortion, the authorities have consistently concluded that the records did
not reasonably reflect the costs associated with the production and sale of the product under
consideration.

17. Finally, the judgements of the General Court are relevant for the understanding of the
meaning and content of Article 2(5), second subparagraph, since the General Court has confirmed
on the basis of Recital 4 of Council Regula tion No 1972/2002 that the key element in the
determination that the data were not "reasonable" is the existence of a "distortion".

18. In conclusion, when assessed in conjunction, these elements establish altogether that where
the prices of the inputs are found to be "artificially low" or "abnormally low" in comparison to
prices on other markets as a result of a "distortion", the records do not reasonably reflect the costs
associated with the production and sale of the product under consideration and the costs included
in the records are adjusted or replaced by information from other representative markets.

The Mandatory / Discretionary distinction

19. Argentina first notes that there is no provision in the ADA or any other Agreements which
establishes a mandatory/discretionary standard that the Panel would have to apply. In other
words, the Panel is required to examine whether the measure is consistent with the relevant WTO
obligations, not whether the measure is discretionary or mandatory. Thus, the
mandatory/discretionary distinction is not a test that panels are required to apply. At best, it could

10 Judgment of the General Court in Acron OAO and Dorogobuzh v Council of the EU, Case T-235/08,
para. 30 (Exhibit ARG-23).
11 See Argentina's first written submission, section 4.2.2.

- B-15 -

in certain cases be an "analytical tool", which, as established by the Appellate Body, should not be
applied "mechanistically", and the significance of which would vary from case to case.12

20. Argentina submits that the starting point of the analysis in an "as such" claim is the
provision with which the measure is claimed not to be consistent. Therefore, if the relevant
WTO provision prohibits a certain conduct, the mere fact that the measure being challenged
provides for such a conduct should lead to the conclusion that there is a violation. Thus, even if
Article 2(5), second subparagraph, only provided for the possibility - and did not require – that the
authorities reject the records in such situations, the mere possibility would render it inconsistent
with Article 2.2.1.1 of the ADA. The same reasoning applies to Argentina's claim under Article 2.2
of the ADA.

21. Second, and in any case, Argentina submits that Article 2(5), second subparagraph, is not
discretionary as alleged by the EU. The text of Article 2(5), second subparagraph, Regulation
No 1972/2002, the consistent practice of the EU authorities as well as the judgments of the
General Court show that the authorities do not have discretion with respect to situations in which
the prices are found to be "abnormally low" or "artificially low" because of an alleged "distortion".
In such cases, the authorities necessarily conclude that the records do not reasonably reflect the
costs and replace or adjust the costs on the basis of information from other representative
markets.

Article 2(5), second subparagraph, of the Basi c Regulation violates Article 2.2.1.1 of the
ADA and, as a result, Article 2.2 of the ADA and Article VI:1(b)(ii) of the GATT 1994

22. Regarding the interpretation of Article 2.2.1.1 of the ADA, Argentina notes in relation to
the text of that provision, that the structure of th e first sentence of Article 2.2.1.1 clearly excludes
any reasonableness test of the cost elements themselves. 13 This is supported by the fact that the
sentence uses the adverb "reasonably" which relates to the verb "reflect" and not the adjective
"reasonable" that would be used to describe the "costs". Thus, the test is not to determine
whether the cost elements are "reasonable" in relation to any type of outside benchmarks, but
whether the records of the producer/exporter inve stigated provide reasonable information of the
costs that are associated with the production and sale of the product under consideration for that
producer/exporter in the framework of that investigation.

The definition of the term "costs" as "charges or expenses" refers to a concrete amount by
opposition to a hypothetical value, such as an international price, while the term "associated" does
not in any away imply "a broad range of relations between the "costs" and the "production""
14 such
that it could "capture the costs that would normally be associated with the production and sale of
the goods". 15 The word "associated" simply means that the costs must "pertain" 16 to the
production and sale of the product under consideration.

23. Regarding the context, Argentina notes that the second and third sentences of
Article 2.2.1.1 confirm that the test under the first sentence is not about the reasonableness of the
costs in relation to outside benchmarks but ab out the relationship between the costs and the
production and sale of the product under investigation for each producer/exporter examined in the
anti-dumping investigation at issue. Article 2.2 which refers to the "cost of production in the
country of origin" means that Article 2.2.1.1 cannot imply a test whereby it is examined whether
the "costs" are reasonable in light of benchmarks outside of the country of origin. As to
Article 2.2.2 of the ADA, this provision which deals exclusively with the determination of the
"amounts for administrative, selling and general costs and for profits" confirms that if the drafters
had intended to authorize the authorities to use data other than those of the producers/exporters
for the calculation of the "cost of production", they would have explicitly provided for that
possibility in Article 2.2.1.1.

24. Finally, Argentina submits that "dumping" is about the "pricing behaviour" of the
exporters/producers concerned and that this app lies to both the "export price" and the "normal
value" as the Appellate Body itself noted is US – Zeroing (Japan). The European Union's view that

12 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 93.
13 Argentina's first written submission, para. 107.
14 EU's first written submission, para. 137.
15 EU's first written submission, para. 139.
16 Panel Report, Egypt – Steel Rebar, para. 7.393.

- B-16 -

the normal value is "the value that the products should have in normal circumstances" is
inconsistent with the proposition that the normal value relates to the pricing behaviour of the
exporter/producer investigated. Indeed, the dumping found in such circumstances would not result
from the pricing behaviour of the exporter/pro ducer concerned but from the difference between
the export price of the exporter/producer concerned and a hypothetical value, namely the one that
products should have in normal circumstances. This view departs from the definition of "dumping"
which is said to relate to the pricing behaviour of the specific exporter/producer investigated.

25. Regarding the object and purpose, Argentina notes that, by claiming that the authorities
should be authorized to address costs of inputs which are not "normal", the EU appears to seek to
address so-called "input dumping" which has been described as "situation where materials or
components that are used in manufacturing an exported product are purchased internationally or
domestically at dumped or below cost prices, whether or not the product itself is exported at
dumped prices".
17

26. This issue was discussed by the Ad-Hoc Grou p on the Implementation of the Anti-Dumping
Code of the Committee on Anti-Dumping Practices just before the Uruguay Round. There was,
however, no consensus on this issue. Furtherm ore, the Draft Recommendation prepared by the
Ad-Hoc Group confirms that no provision in the GATT or in the Anti-Dumping code authorized the
use of anti-dumping duties to address "input dumping". As Argentina explained in its response to
Panel's question No. 18, the negotiating histor y of Article 2.2.1.1 shows that there was no
intention amongst the Parties to introduce "the requirements that the costs reflected in the records
should be reasonable", as claimed by the defendant.
18 Furthermore, the issue of "input dumping"
was raised during the Uruguay Round negotiations but was not addressed in the ADA.

27. In conclusion, the analysis of the text and context of Article 2.2.1.1 as well as of the object
and purpose unambiguously demonstrates that this provision does not permit investigating
authorities to reject data included in the exporter/producer's records because such data reflect
"abnormally low" or "artificially low" prices because of a "distortion".

28. As to the claims, Argentina first submits that to the extent that the Panel confirms that
Article 2.2.1.1 prohibits the rejection of data in the records merely because those data are found
to be "abnormally low" or "artificially low" because of an alleged distortion, Article 2(5),
second subparagraph, must be found to be inconsis tent with Article 2.2.1.1 because that rejection
falls within the category of what is prohibited by Article 2.2.1.1. Second, and in any case,
Argentina submits that pursuant to Article 2(5), second subparagraph, the authorities are required
to conclude that the records do not reasonably reflect costs when prices are found to be
"abnormally low" or "artificially low" because of an alleged distortion, thereby violating
Article 2.2.1.1 of the ADA.

Article 2(5), second subparagraph, of the Ba sic Regulation violates Article 2.2 of the
ADA and Article VI:1(b)(ii) of the GATT 1994

29. Regarding the interpretation of Article 2.2 of the ADA, Arge ntina notes that the text of the
provision is clear and necessarily requires that the data/evidence used must be data/evidence in
the country of origin. Furthermore, even if evidence outside the country or origin could be used, it
would have to be demonstrated that the cost of production which is based on such data/evidence
constitutes the "cost of production in the country of origin".

30. As to the claims, Argentina submits that Article 2(5), second subparagraph, violates
Article 2.2 of the ADA and Article VI:1(b)(ii) of the GATT 1994 because it provides that, where the
costs of other producers or exporters in the same country are not available or cannot be used, the
costs shall be adjusted or established on any other reasonable basis, including information from
other representative markets while Article 2.2 prohibits the construction of normal value on a basis
other than "the cost of production in the country of origin". Furthermore, Argentina notes that the
authorities do not have the "broad discretion" as claimed by the EU. The text of Article 2(5),
second subparagraph, as confirmed by the prac tice, shows that where information from the

17 Draft Recommendation concerning treatment of the practice known as input dumping,
ADP/W/83/Rev.2.
18 EU's opening statement at the first meeting of the Panel, para. 40.

- B-17 -

domestic market is not available or cannot be used, the costs must be adjusted or replaced on any
other reasonable basis including information from other representative markets.

C. CLAIMS AGAINST THE ANTI-DUMPING MEASURES ON IMPORTS OF BIODIESEL
ORIGINATING IN ARGENTINA

As a preliminary matter, Argentina noted several factual inconsistencies in the EU's defense.

Claims pursuant to Articles 2.2 and 2.2.1. 1 of the ADA and Article VI:1(b)(ii) of the
GATT 1994 and consequential claim pursuant to Article 2.1 of the ADA and Article VI:1 of
the GATT 1994

31. In the biodiesel investigation, the EU first rejected the cost of soybean that was reported by
the producers under investigation and that was used to determine the cost of soybean oil, on the
basis that they were found to be artificially lower that the international prices due to the distortion
created by the Argentine export tax system. After the rejection of the reported costs of soybean,
the EU went on to replace those costs with the reference FOB prices of soybean.

32. Argentina has claimed that the EU authorities were not entitled to examine whether the
costs of soybeans "would pertain to the production and sale of biodiesel in normal circumstances,
i.e. in the absence of the distortion caused by Argentina's export tax on the raw materials".
19
Therefore, by rejecting the cost data of soybea ns as included in the records of the producers
because they were "artificially lower than the international prices due to the distortion created by
the Argentine export tax system"
20, the EU violated Article 2.2.1.1 of the ADA.

33. It is important to emphasise that the EU au thorities not only wrongfully tested whether the
costs reflected costs of soybeans that would normally be associated with the production and sale
of biodiesel in normal circumstances, but they also wrongfully carried out this test in comparison
with "international prices". As Argentina has underlined previously, comparison with benchmarks
outside the country of origin is clearly incompatible with the express requirement in Article 2.2 that
refers to the "cost of production in the country of origin".

34. The EU has explained that the international price of soybean - which has been used as
benchmark - is the price that would have pertained to the production and sale of biodiesel in the
absence of the export tax on soybean.
21 It has also stated that the difference between the
international price and the domestic price of soybean (which is the price that was reported by the
producers under investigation) is the export tax and other expenses incurred for exporting it.
22

35. Argentina submits that implicit in these statements is the consideration that, in fact, the
international price of soybean did not pertain to the production and sale of the biodiesel under
investigation in that investigation and in that case. Therefore, according to the EU's own findings in
the biodiesel investigation, the international price of soybean that was used as benchmark to
determine that the costs of soybeans were not reasonably reflected in the records
23 is not
associated with the production and sale of biodie sel within the meaning of the second proviso of
the first sentence of Article 2.2.1.1 of the ADA.

36. Given that the international price of soybean is not a cost of the Argentinean producers that
is associated with the production and sale of biodiesel in that investigation, the EU was not
allowed, under the second proviso of the first sentence of Article 2.2.1.1, to test the records of the
Argentinean producers against those costs.

37. Therefore, in rejecting the cost of soybean reported by the exporting producers when
constructing normal value on grounds that those costs "were found to be artificially lower than the
international prices", the EU acted inconsistently with Articles 2.2.1.1 and 2.2 of the ADA and with
Article VI:1(b)(ii) of the GATT 1994.

19 EU's first written submission, para. 236.
20 Definitive Regulation, Recital 38 (Exhibit ARG-22).
21 See, for instance, EU's first written submission para. 236.
22 Definitive Regulation, Recital 37 (Exhibit ARG-22).
23 Definitive Regulation, Recital 38 (Exhibit ARG-22).

- B-18 -

38. With regard to Article 2.2, Argentina subm its that the ADA provides that the costs of
production must be "the cost of production in th e country of origin". According to this, Argentina
has demonstrated that the EU violated this obligation since in calculating the cost of production of
the Argentinean exporters/producers, it did not use domestic prices of soybeans, but the reference
FOB prices of soybeans, net of fobbing costs.
24

39. The reference FOB price of soybean minus fobbing costs, on the basis of which the EU
calculated the cost of production, is not a "price to be paid for the act of producing" (i.e. cost of
production) in Argentina (the country of origin), as it comprises the export tax on soybeans and
because the domestic price of soybean is equivalent to the reference price minus fobbing costs and
minus export taxes. The reference FOB price is, at best, a proxy of the export price of soybean but
not a cost at which soybean is acquired domestically. It thus acted inconsistently with Article 2.2 of
the ADA and with Article VI:1(b)(ii) of the GATT 1994.

40. Finally, for the reasons expressed in its opening statement
25 and in its response to Panel
question No. 55, Argentina maintains its claims under Article 2.1 of the ADA and Article VI:1 of the
GATT 1994.

The EU acted inconsistently with Articles 2.2 and 2.2.2(iii) of the ADA because the
amounts for profits established by the EU were not determined on the basis of a
reasonable method

41. Argentina asserts that, contrary to what the EU pretends, the mere fact of establishing an
amount and then testing its reasonableness is insufficient to comply with the terms of
Article 2.2.2(iii) of the ADA. In order to fulfil the requirements of that provision, the selected
amount needs to be arrived at following a reasonable method. Given that the EU did not establish
the amount for profits pursuant to any method, let alone a reasonable one, it has violated
Articles 2.2.2(iii) and 2.2 of the ADA.

The EU acted inconsistently with Article 2.4 of the ADA in failing to make due allowance
for differences affecting price comparability, including differences in taxation, and in
precluding a fair comparison between export price and normal value

42. Argentina has shown that the manner in which the EU constructed normal value whereby it
disregarded the domestic price of soybean as a basi s to calculate the "oil share" (i.e. the value of
the bean corresponding to the oil) and substituting it with the "FOB reference price" of soybean as
a basis from which to calculate the "oil share" is inconsistent with Articles 2.2 and 2.2.1.1 of
the ADA. This WTO-inconsistent manner of substitu ting the cost of soybean resulted in a normal
value applied to the exporting producers that reflected the international price of soybean oil, as if
the exporting producers were located outside of the territory of Argentina.

43. In subsequently calculating the dumping marg in, the EU compared this "non-domestic" or
"international" normal value of biodiesel with an export price that was fully "domestic", i.e. without
the substitution or the adjustment of the cost of soybean out of which the "oil share" was
calculated. By proceeding in that way, the EU acted as if it were calculating dumping margins of
the finished product based on differences between the domestic price and the export price not of
the product under consideration, but of its primary input. Therefore, the EU generated an artificial
imbalance between the export price and the normal value.

44. As a consequence, Argentina has claimed that a difference exists between normal value and
export price
26 and that this difference affects price comparability. 27 It consequently claims that the
comparison between normal value and export pric e, absent an adjustment to account for this
difference, is not a fair comparison and consequently it is inconsistent with Article 2.4 of the ADA.

The EU acted inconsistently with Article 9.3 of the ADA and Article VI:2 of the GATT 1994
in imposing and levying anti-dumping duties in excess of the margin of dumping that
should have been established in accordance with Article 2 of the ADA

24 Argentina's first written submission, paras. 245-254.
25 Argentina's opening statement at the first meeting of the Panel, paras. 18-22.
26 Argentina's first written submission, paras. 298-299.
27 Argentina's first written submission, para. 300; Argentina's opening statement at the first meeting of
the Panel, para. 85.

- B-19 -

45. Argentina's claim is that the EU has imposed and levied anti-dumping duties in excess of the
margin of dumping that it should have calculated in conformity with Article 2 of the ADA and that,
consequently, it acted inconsistently with Ar ticle 9.3 of the ADA and Article VI:2 of the
GATT 1994.
28

46. The defense of the EU appears to suggest that the terms "margin of dumping" have a
meaning under Article 9.3 that is different from the meaning assigned to those terms under
Article 2 and that, therefore, the level of the duti es imposed or levied on the dumped imports may
be tested against a margin of dumping which is not the margin of dumping established in
conformity with Article 2 of the ADA. In line with the EU's contention, under Article 9.3, the
"margins of dumping" against which the duties are to be tested would be those that are found by
the investigating authority, regardless of their consis tency with Article 2. This line of thought runs
counter to Article 2.1 of the ADA, which defines dumping "for the purpose of this agreement" and
thus shows that the meaning is uniform throughout the agreement.
29 It is also inconsistent with
the text of Article 9.3, which explicitly states "as established under Article 2" and not "as
determined by the investigating authority".

The EU acted inconsistently with Articles 3.1 and 3.4 of the ADA in its evaluation of the
production capacity, the utilization of capaci ty and the return on investment of the
EU industry

47. Argentina first submits that the EU's definition of capacity and capacity utilization is
inconsistent with Article 3.4. Article 3.4 contains no basis for excluding capacity that is "idle" or
"not available for use" from the assessment of capacity utilization.30 Moreover, the EU not only has
not pointed to any textual or contextual basis that would support the exclusion of part of the
production capacity from the analysis of the utilization of capacity, but has not offered any
explanation of what this exactly means. Therefore, the EU acted inconsistently with Article 3.4 of
the ADA in excluding part of the production capacity, namely the "idle" capacity, from the
assessment of the utilization of capacity.

48. Second, Argentina submits that the EU's assessment of production capacity and
capacity utilization is not based on positive evidence . Argentina notes that the domestic
industry intended to exclude "idle" capacity from its production capacity from the beginning of the
investigation, as indicated by the statement that idle capacity had already been excluded from the
capacity figures of EBB members. 31 Against this background, the fact that the production capacity
figures for non-EBB members included both their idle capacity and that of EBB members appears
to have been a mistake. 32 The data, on which the evaluation of capacity utilization is based,
appear not to be reliable because they are cont radicted by a multiplicity of available public
sources, including EBB itself. 33 In view of the foregoing, it must be concluded that the EU's
evaluation of production capacity and capacity utilization was not based on positive evidence and
was therefore inconsistent with Articles 3.1 and 3.4 of the ADA.

49. Third, the EU did not conduct an objective ex amination of the domestic industry's
production capacity and utilization of capacity . The EU attempts to contradict Argentina's
claims by stating that it selected a sample of EU companies and subjected their data to detailed
examination and verification. 34 However, all the sampled prod ucers were EBB members, whose
production capacity figures excluded "idle capacity " from the beginning. Therefore, the verification
of those EBB companies does not guarantee the accuracy of the figures relating to non-EBB
members and to the industry as a whole, which concerns the figures that were adjusted.

28 Argentina's first written submission, para. 309.
29 See also, Appellate Body Report, US – Stainless Steel (Mexico), para. 96.
30 Argentina's first written submission, paras. 354-356.
31 Submission by EBB of 17 September 2013, section 1.1 (Exhibit ARG-47).
32 The fact that this is a mistake is also apparent from EBB's letter of 17 November 2013 which cautions
that "… any calculation of non-EBB member production ca pacity would (…) still include idle capacity from EBB
and non-EBB member and would lead to a false calculation". See Submission by EBB of 17 September 2013,
section 1.3, Exhibit ARG-47.
33 See Argentina's first written submission, para. 370.
34 EU's response to Panel question No. 62, para. 91.

- B-20 -

50. Fourth, the EU did not consistently evaluate the utilization of capacity and return on
investment. In its answer to Panel question No. 63(b) and in its opening statement 35, Argentina
has addressed the EU's argument that there were no sampled companies with so-called "idle"
capacity.36 As explained by Argentina, at least one of the sampled companies, Diester, appeared to
have what would fall within the EU's vague definiti on of "idle" capacity, that is, capacity that was
installed but which was not available for use. Therefore, Argentina maintains its claim that the EU
acted inconsistently with Article 3.4 of the ADA in failing to evaluate the return on investments and
the utilization of capacity in a consistent manner.

The EU acted inconsistently with Articles 3.1 and 3.5 of the ADA in failing to ensure that
the injury caused by certain factors was not attributed to the allegedly dumped imports

51. Regarding overcapacity, Argentina has demonstrated that the EU failed to make an
appropriate assessment of the injury caused to the EU industry by its overcapacity. The EU's
defense is entirely unconvincing for a number of reasons.

52. First of all, the EU confuses utilization of capa city as an injury indicator (under Article 3.4 of
the ADA) and the overcapacity of its domestic indu stry as a cause of injury (under Article 3.5 of
the ADA). Second, the confusion prevented the EU fr om ascertaining the impact of this cause of
injury on capacity utilization as an injury indicator, thus understating the controlling importance of
overcapacity as a source of injury. Third, th ere is a correlation between the increase in
overcapacity and the decrease in profitability whic h, together with the decline in market share are
the main injury indicators on which the EU has relied to come to the conclusion that the domestic
industry was materially injured.
37 Therefore, contrary to the EU's assertions, the overcapacity is
the cause of the declining profit and consequently, of the injury suffered by the domestic industry.
Fourth, the profit of 3.5% of the domestic indust ry in 2009 to which the EU refers was, in fact,
extremely low by the EU's own standards, namely a 15% injury elimination level set by the EU for
the period April 2007 to March 2008. 38 This level which is well below the injury elimination level
set by the EU itself disproves the EU's contention that the industry could be healthy with high
overcapacity. In any case, Argentina recalls that between 2009 and the IP overcapacity did not
remain constant but instead increased by 1,561,322MT. Fifth, even if no increase in imports would
have taken place at all during the IP, the overcapacity would still be enormous.

53. To summarize, the continued overcapacity an d its significant increase between 2009 and the
IP was the main factor injuring the domestic industry and not the imports originating in Argentina
and Indonesia. The above shows that the EU's deci sion to attribute controlling importance to the
allegedly dumped imports as a source of injury instead of to the overcapacity of the domestic
industry amounts to a failure to appropriately separate and distinguish the injurious effects of the
overcapacity from those of the allegedly dumped imports. Therefore, the EU acted inconsistently
with Articles 3.1 and 3.5 of the ADA.

54. Turning to the long-term commercial strategy of the EU industry , Argentina noted that
the EU's arguments are unconvincing for various reasons. First, the EU's statement that the
domestic industry was compelled to buy biodiesel from Argentina is not believable given that the
imports from Argentina and Indonesia were not a marginal phenomenon in comparison to total
imports. This argument also overlooks the fact that biodiesel production facilities in Argentina are
either directly affiliated to the domestic industry or related through common ownership.

55. Second, the EU has not provided evidence th at had the domestic industry not made those
imports, traders would have made those imports. Finally, the argument about the maintenance of
a customer base is unconvincing and contradicted by the fact that the EU itself added the imports
made by the Union industry to the market shar e of the allegedly dumped imports, instead of
adding it to the market share of the domestic industry.
39

56. In view of the above, Argentina submits that the EU acted inconsistently with Articles 3.1
and 3.5 of the ADA in failing to separate and di stinguish the injurious effects of the domestic

35 Argentina's opening statement at the first meeting of the Panel, paras. 100 and 101.
36 EU's first written submission, para. 318.
37 Provisional Regulation, Recital 118 (Exhibit ARG-30) and Definitive Regulation, Recitals 142 and 143
(Exhibit ARG-22).
38 See Exhibit EU-14, recitals 181 and 182.
39 Definitive Regulation, Recital 156 (Exhibit ARG-22).

- B-21 -

industry's own commercial strategy, in qualifying it as "self-defense" and in incorrectly attributing
its effects to the allegedly dumped imports.

57. With regard to double-counting, Argentina has claimed that the EU failed to appropriately
assess the injurious effects of the double-counting regimes and that it failed to separate and
distinguish its effects from those of the allegedly dumped imports. In responding to this claim, the
EU has stated that, double-counting shifts demand within the Union industry and does not
generate demand for imports and that Union producers of double-counting biodiesel experienced
negative performance, suggesting that the decline of non-double counting producers cannot be
attributed to the performance of the double-counting producers.
40

58. Argentina disagrees with these arguments for the following reasons. First of all, the fact that
the financial situation of the producers declined only after double-counting had been repealed in
France is irrelevant, as the effects of double-counting materialized during the IP. Consequently,
the injurious effects of that scheme should have , but were not distinguished and separated from
the injury caused by the allegedly dumped imports as mandated by Article 3.5 of the ADA. Second,
Argentina notes that the EU failed to examine double-counting regimes other than the French
regime
41, despite the fact that their existence was brought to the attention of the investigating
authority.

59. In view of the above, Argentina submits that the EU violated Articles 3.1 and 3.5 of the ADA
in failing to examine double-counting and to di stinguish and separate the injurious effects of
double-counting from those of the allegedly dumped imports.

60. Finally, Argentina has claimed that the EU's industry is at a disadvantage because of a lack
of vertical integration and la ck of access to raw materials . The disadvantage results from
the introduction of additional phase of transport into the production chain, which does not exist
when the raw materials are processed on site. The significance of this disadvantage cannot be
understated, especially in view of the fact that transport of the raw material is not only an
additional phase, but occupies a much larger volume of cargo space.

61. In consequence, in failing to separate and distinguish the effects of the lack of vertical
integration and the lack of access to raw materials from the injury caused by the allegedly dumped
imports, the EU acted inconsistently with Articles 3.1 and 3.5 of the ADA.

62. For the reasons set out in this submissi on and in previous submissions, Argentina
respectfully requests that this Panel find that:

I.- Article 2(5) of the Basic Regulation is inconsistent as such, with the following provisions of the
ADA and the GATT 1994: (A) Articles 2.2.1.1 and 2.2 of the ADA and Article VI:1(b)(ii) of the
GATT 1994 by providing that the authorities shall reject or adjust the cost data of the exporters as
included in its records when those costs reflect prices which are "abnormally or artificially low",
because the costs do not reflect market prices or because they are allegedly affected by a
distortion; (B) Article 2.2 of the ADA and Article VI:1(b)(ii) of the GATT 1994 by providing that the
costs shall be adjusted or established in certai n cases "on any other reasonable basis, including
information from other representative markets", even though neither provision allows for an
establishment of the costs on this basis. As a resu lt, the EU acted inconsistently with Article XVI:4
of the Marrakesh Agreement Establishing the WTO and Article 18.4 of the ADA, and

II.- The anti-dumping measures imposed by the EU on imports of biodiesel originating in Argentina
are inconsistent with the following provisions of the ADA and the GATT 1994: (A) Articles 2.2.1.1
and 2.2 of the ADA and with Article VI:1(b)(ii) of the GATT 1994 because the EU failed to calculate
the cost of production on the basis of the records kept by the producers under investigation;
(B) Article 2.2 of the ADA and Article VI:1(b)(ii) of the GATT 1994 because the EU failed to
construct the normal value of the exports of biodiese l on the basis of the cost of production in the
country of origin; (C) Article 2.2.1.1 of the ADA because the EU included costs not associated with
the production and sale of biodiesel in the calculat ion of the cost of production; (D) As a result of
the inconsistencies mentioned in points (A) to (C) above, the dumping margin determinations are
inconsistent with Article 2.1 of the ADA and with Article VI:1 of the GATT 1994; (E) Articles 2.2

40 EU's first written submission, para. 339 and EU's response to Panel question No. 79.
41 EU's response to Panel question No. 73.

- B-22 -

and 2.2.2(iii) of the ADA because the EU failed to base the profit margin as a component of the
constructed normal value on a reasonable method within the meaning of Article 2.2.2(iii) of
the ADA; (F) Article 2.4 of the ADA because the EU failed to make due allowance for differences
affecting price comparability, including differences in taxation, thereby precluding a fair
comparison between the export price and normal va lue; (G) Article 9.3 of the ADA and VI:2 of the
GATT 1994 because the EU imposed and levied an ti-dumping duties in excess of the margin
of dumping that should have been established in accordance with Article 2 of the ADA;
(H) Articles 3.1 and 3.4 of the ADA because the EU's injury determination is not based on positive
evidence and does not involve an objective examin ation of the consequent impact of the allegedly
dumped imports on domestic producers of the like product in relation to capacity, utilization of
production capacity and return on investment of the EU industry; (I) Articles 3.1 and 3.5 of the
ADA since the EU failed to conduct an objective examination, based on positive evidence, of known
factors other than the allegedly dumped imports in its non-attribution analysis; hence, the EU
failed to ensure that the injury suffered by the domestic industry of the EU resulting from other
factors was not attributed to the allegedly dumped imports. Argentina considers that the measures
at issue should be withdrawn.

63. Argentina respectfully requests the Panel to make use of its discretion under the
second sentence of Article 19.1 of the DSU by suggesting ways in which the European Union
should implement the recommendations and rulings of the DSB to bring its measures into
conformity with the Anti-dumping Agreement and the GATT 1994.

- B-23 -

ANNEX B-3
EXECUTIVE SUMMARY OF THE STATEMENT OF ARGENTINA
AT THE FIRST MEETING OF THE PANEL
1. Opening Remarks

1. Argentina asserts that we are not here because export taxes are the source of unfair
advantages for producers in countries where exports are taxed, as the narrative of the
EU suggests. We are here because of structural problems and lack of competitiveness in the
EU industry of biodiesel. These structural problems are unfortunate in light of the huge subsidies
granted to the biodiesel industry in Europe.

2. Argentina believes that the investigating authorities in the EU have a mandate to challenge
export taxes at any cost. And it is what they did, even knowing that Argentina and Indonesia
would bring a case before the WTO. However, export taxes are not only legal (there are no
disciplines for export taxes under WTO law) but also legitimate instruments broadly used by
developing countries and mainly for fiscal purposes.

2. Introduction

3. Despite being based on an intensely litigated agreement – the Anti-Dumping Agreement -
this dispute is still unique on at least two counts: a) The first aspect is the fact that while dumping
reflects the conduct of individual companies that export at prices below those in their own
domestic market, in the case at hand, the European Union has targeted a series of practices that
are very different from such price discrimination and are completely beyond the control of the
exporting producers b) the second distinctive feature of this case which is derived from the
first one, is the overt attempt by the European Union to expand the scope of application of the
Anti-Dumping Agreement. According to the European Union, dumping would no longer be confined
to the well-known practice of pricing the same product differently for different markets. Instead, it
would also encompass differences in costs at which producers in different countries obtain inputs.
Hence, as of the moment there is a difference in the price at which a producer can have access to
a given input, and provided that such difference is reflected in the price of the final product, then,
according to the European Union, that product is being dumped.

4. According to the above said, Argentina first challenges "as such" Article 2(5),
second subparagraph, of the Basic Regulation, which provides that where the costs of the inputs in
the records reflect prices that are found to be artificially or abnormally low in comparison with the
prices on other markets, the costs have to be adjusted or established on another basis, including
on the basis of information from other representative markets. This measure is manifestly
inconsistent with the provisions of the Anti-Dumping Agreement and, in particular, with its
Article 2 which precisely lays down the rules that must be followed for the determination of the
normal value. This measure is of significant concern to Argentina given that the investigating
authority endows itself with a margin of discretion that goes well beyond what is allowed under the
Anti-Dumping Agreement. The European Union is, in fact, trying to create a new category of
"dumping" which does not exist under the Anti-Dumping Agreement.

5. Argentina also challenges the anti-dumping measures imposed by the European Union on
imports of biodiesel from, Argentina. These measures are based on manifestly flawed
determinations of dumping since the European Union erroneously rejected the Argentinean
producers' cost data for soybean and replaced them by the average of the FOB reference price,
thereby finding dumping or artificially inflat ing the margins of dumping of the Argentinean
producers. Furthermore, these measures are also based on manifestly flawed determinations
relating to both injury and causality.

- B-24 -

3. Request for a Preliminary Ruling an d Preliminary Issues raised by the
European Union

6. In Argentina's view, to the extent that the European Union cannot demonstrate that
resolving these Article 6.2 claims would make any pr actical differences, these issues appear to be
moot and, in Argentina's view, the Panel therefore does not need to examine them any further.
1

7. The same comment applies to the European Union's claim about Argentina's alleged failure
to identify the "specific measures at issue" in which it argued that the references to the terms
"implementing measures and related instruments or practices" and to "related measures and
implementing measures" in Argentina's Panel Request were too vague.
2 Argentina noted that these
words were not on their face inconsistent with the requirement to identify the specific measures at
issue and that, in any case, this objection appeared to be premature and unnecessary.

8. The European Union first asserts that the Panel must reject Argentina's claims pursuant to
Article 2.1 of the Anti-Dumping Agreement an d VI:1 of the GATT 1994 because they are
definitional provisions that do not impose independent obligations
3 and is not applicable to
situations where there are no sales in the ordinary course of trade. 4 However, Argentina
remembers that in subparagraph 470 of its fi rst written submission has explained that the
European Union's violations of Article 2.1 of th e Anti-Dumping Agreement and Article VI:1 of the
GATT 1994 result from the numerous violations of Articles 2.2 and 2.2.1.1 of the Anti-
Dumping Agreement.

9. The European Union erroneously argues that Argentina claims that a violation of Article 2.2
automatically constitutes a failure to comply with Article 9.3. 5 This is not correct. Argentina is not
taking issue with the calculation of the normal value under its Article 9.3 claim. What Argentina
has submitted is that the European Union has imposed definitive anti-dumping duties which
exceed the margins of dumping as established under Article 2 of the Anti-Dumping Agreement.

4. Claims against Article 2(5), second subparagraph, of the Basic Regulation

10. Argentina is not challenging "two separate "measures""
6, as claimed by the
European Union, but only one measure, namely Article 2(5), second subparagraph.

4.1 Claim under Article 2.2.1.1 of the Anti-Dumping Agreement

11. Argentina claims first that Article 2(5), second subparagraph, violates Article 2.2.1.1. In
this sense, Argentina asserts that the introduction of the second subparagraph in Article 2(5) by
Regulation No 1972/2002 gave a specific meaning and content to the condition that the "costs
associated with the production and sale of th e product under investigation are not reasonably
reflected in the records of the party concerned". Under and pursuant to the new
second subparagraph of Article 2(5), the authorities have to conclude that the records do not
reasonably reflect costs associated with the production and sale of the product under consideration
where they find that the costs of the inputs reflect prices that are "abnormally or artificially low" in
comparison to prices on other markets.

12. Thus, it clearly flows from Regulation No 1972/2002 that, with the introduction of the
second subparagraph of Article 2(5), a condition has been imposed on the authorities which must
examine whether the costs of the inputs are not "abnormally or artificially low" in comparison to
prices on other markets. This is actually su pported by the wording of the second part of
Article 2(5), second subparagraph, which refers to the adjustment or establishment of costs on
any other reasonable basis including from other representative markets. The requirement to use
information from other representative markets is rendered necessary precisely because the data
on the domestic market are to be considered non-usable when they are found to be "artificially or
abnormally low" in comparison with prices on other markets.

1 Panel Report, US – Countervailing and Antidumping Measures from China, paras. 3.9 – 3.10.
2 European Union’s request for a preliminary ruling, paras. 8 – 9.
3 European Union’s first written submission, paras. 48 and 53.
4 European Union’s first written submission, para. 49.
5 European Union first written submission, para. 56.
6 European Union’s first written submission, para. 63.

- B-25 -

13. This is further supported by the consistent practice of the authorities, because it has been
found that there is an automatic link between, on the one hand, prices that are found to be
"abnormally or artificially low" in comparison to prices on other markets and, on the other hand,
the finding that the costs are not reasonably reflected in the records. There is no discretion, and
the practice confirms that.

14. Contrary to what European Union affirms, Argentina is not required to demonstrate that
the "abnormally or artificially low" prices of the inputs is the only reason justifying the conclusion
that the company records do not reasonably reflect the costs. Argentina is only required to
demonstrate that the measure at issue necessarily requires the authorities to conclude that the
records do not reasonably reflect the costs when the costs reflect prices that are found to be
abnormally or artificially low.

15. The European Union claims that under the second condition of Article 2.2.1.1, the
authorities can examine whether the records reflect costs that would normally be associated with
the production and sale of the goods in normal circumstances.
7

16. To defend its position, the European Union is thus obliged to distort the ordinary meaning
of the terms of Article 2.2.1.1, adding words that are not there, such as "would normally be" and
"in normal circumstances". As emphasized in Argentina's first written submission, such an
interpretation is not only contrary to the ordinary meaning of the words, but also to the structure
of the sentence and the context of this provision.

17. There is nothing in Article 2.2.1.1 or ot her provisions of the Anti-Dumping Agreement
suggesting that the cost data of producers can be disregarded because they are lower than what
they would be in other markets. Argentina underline d earlier, rejecting the costs of a producer on
the ground that there are not "normal" in comparison to the prices in another country is
fundamentally contrary to the concept of "dumping" in the Anti-Dumping Agreement.

4.2 Claim under Article 2.2 of the Anti-Dumping Agreement

18. Argentina asserts that the wording of Article 2(5) second subparagraph is clearly WTO
inconsistent: it "mandates" the authorities to adjust or establish the costs "where such information
is not available or cannot be used", "on any other reasonable basis, including information from
other representative markets".

19. Furthermore, the European Union errs when it argues that it would be necessary to
demonstrate that this provision requires "the investigating authority to use such information "in all
cases"."
8 However, as the Appellate Body noted in an earlier case, in order to succeed with an "as
such" claim, 9 Argentina is not required to demonstrate that in each and every case where
Article 2(5) second subparagraph will be used, it will end in a result which is inconsistent with WTO
rules. It is sufficient for Argentina to demonstrate that this rule will necessarily lead to violations of
WTO rules in certain specified circumstances.

20. The European Union's interpretation that "[t]he possibility of using "any other reasonable
method" in Article 2.2.2(iii) implies that Article 2.2, as a whole, does not impose an absolute
prohibition on the use of data on the cost of production from countries other the country of origin,
where the conditions of production and sale are not in the ordinary course of trade"10 is untenable.

7 European Union’s first written submission, paras. 133, 139 and 144.
8 European Union’s first written submission, para. 186.
9 Appellate Body Report, US – OCTG Sunset Reviews, para. 172.
10 European Union’s first written submission, para. 198.

- B-26 -

5. Claims regarding the Anti-Dumping Meas ures on imports of biodiesel originating
in Argentina

5.1 Claims under Articles 2.2 and 2.2.1.1 of the Anti-Dumping Agreement and
Article VI:1(b)(ii) of the GATT 1994

5.1.1 The European Union misinterprets Arti cle 2.2.1.1 of the Anti-Dumping Agreement

21. Argentina does not dispute that the costs against which the records must be tested are
those that are "associated with the production and sale of the product under consideration".
However, as Argentina has emphasized, the fact that the test refers to the "costs associated with
the production and sale of the product under consideration" means that the determination must
establish whether the costs in question effectively "pertain to the production and sale of the
product in question", irrespective of whether the costs are lower than international prices or prices
in other markets. In stating that it is entitled to consider "which costs would pertain to the
production and sale of biodiesel in normal circumstances", the European Union is adding words
which are not there, namely "would" and "in normal circumstances", and is thereby modifying the
scope and meaning of this provision.

22. In the biodiesel anti-dumping investigation, the European Union did not examine whether
the costs of soybeans in the producers' records reasonably related to the cost of producing and
selling biodiesel in Argentina. Rather, it examined those costs against a hypothetical benchmark
price and concluded that "the domestic prices of the main raw material used by the biodiesel
producers in Argentina were […] artificially lower than the international prices due to the distortion
created by the Argentine export tax system".
11

23. Furthermore, the panel report in EC – Salmon confirmed that "the test for determining
whether a cost can be used in the calculation of "cost of production" is whether it is "associated
with the production and sale" of the like product", the costs being those of the "investigated
party." The fact that the Panel in EC – Salmon defines the expression "cost of production" as "the
price to be paid for the act of producing" does not in any way mean that the word "costs" could be
understood as hypothetical prices.

5.1.2 The European Union acted inconsistently with Article 2.2.1.1 in using costs that are not
associated with the production and sale of biodiesel for the construction of normal value

24. Argentina has shown that for the exporting producers, the FOB reference price is not a
price that is associated with the production and sale of biodiesel. In fact, the reference FOB price is
a statistical tool which is calculated by averaging FOB prices of the previous day.

5.1.3 The European Union acted inconsistently wi th Article 2.2 of the Anti-Dumping Agreement
and Article VI:1(b)(ii) of the GATT 1994 in failing to construct normal value on the basis of
the cost of production in the country of origin

25. In calculating the cost of production, the Eu ropean Union did not use the domestic price of
soybeans, but the reference FOB price of soybeans , net of fobbing costs. By using the reference
FOB price of soybeans, the European Union failed to construct normal value on the basis of the
cost of production in the country of origin, thereby, acting inconsistently with Article 2.2 of the
Anti-Dumping Agreement and Article VI:1(b)(ii) of the GATT 1994.

5.2 Claim under Article 2.4 of the Anti-Dumping Agreement: failure to make a fair comparison

26. Argentina argues that the difference between normal value and export price results from
the use of the reference FOB price of soybean, which includes the export tax on soybeans in the
construction of the normal value while the export price does not include any export tax at all.
Consequently, it affects price comparability and also has a huge impact on the dumping margins.

11 Definitive Regulation, recital (38), Exhibit ARG-22.

- B-27 -

5.3 Claims under Articles 3.1, 3.4 and 3.5 of the Anti-Dumping Agreement in relation to
production capacity and utilization of capacity

5.3.1 The European Union's definition of production capacity and utilization of capacity is
inconsistent with Article 3.4 of the Anti-Dumping Agreement

27. At the outset, and as also noted by China
12, since Article 3.4 of the Anti-Dumping
Agreement contains no reference to availability for use or idleness when providing that the injury
assessment includes an evaluation of the utilization of capacity, the European Union's failure to
include idle capacity in its evaluation of the utilization of capacity is therefore inconsistent with
Article 3.4 of the Anti-Dumping Agreement. Argentina specifically notes that Article 3.4 of the Anti-
Dumping Agreement mandates that all relevant economic factors and indices having a bearing on
the state of the industry must be evaluated in th e context of an injury assessment. The exclusion
of capacity, which is a relevant economic factor, from the calculation of the utilization of capacity is
thus inconsistent with this provision.
13

5.3.2 The evaluation of production capacity and ut ilization of capacity is not based on positive
evidence

28. Argentina maintains that the analysis of production capacity and utilization of capacity is
not based on positive evidence, contrary to the requirements of Article 3.1 of the Anti-Dumping
Agreement, for two reasons: a) the attribution of the "idle" capacity of EBB members and non-EBB
members to the capacity of non-EBB Members is implausible due to the magnitude of the mistake,
which amounts to almost six million tons and b) the new evidence submitted by the
European Union in Exhibit EU-10 does not appear to directly relate to production capacity. Indeed,
it only points to the fact that plants have stopped producing or have commenced insolvency
proceedings. It does not demonstrate, however, that production capacity has ceased to exist.

5.3.3 The European Union's evaluation of production capacity and utilization of capacity does not
involve an objective assessment

29. Contrary to the general obligation assume d under WTO, the European Union favoured
evidence produced by one party but which is co ntradicted by publicly available and reliable
information over the evidence on the record until that point.

5.3.4 The inconsistent evaluation of utilization of capacity and return on investment

30. Argentina objects to the inconsistent evaluati on of both factors, since the so-called "idle"
capacity was excluded from the evaluation of capacity utilization while it was included in the
calculation of return on investment.
14

5.3.5 Causation: overcapacity was a source of injury

31. Argentina maintains that the improper eval uation of the production capacity of the
European Union industry under Article 3.4 of the Anti-Dumping Agreement prevented it from
properly assessing overcapacity as a source of inju ry pursuant to Article 3.5. Indeed, an objective
evaluation of production capacity and capacity utilization based on positive evidence would not
have allowed the European Union to find that capacity utilization was increasing.

32. Furthermore, it is illogical to assert that because the utilization rate was consistently low,
it could not be the cause of the decline in pr ofitability or of the poor performance of the
European Union industry, considering, especially in this case the gross level of the overcapacity.

33. To sum up, overcapacity was a factor known to the authorities, different from the dumped
imports and also a source of injury, the effects of which the European Union was obliged to
distinguish and separate from those caused by the allegedly dumped imports.

12 China’s third party submission, para. 151.
13 Argentina’s first written submission, para. 355.
14 Argentina’s first written submission, paras. 387-391.

- B-28 -

5.3.6 Causation: long-term commercial strategy of importing biodiesel originating in Argentina
as a source of injury

34. The facts show that rather than being forced to import biodiesel originating in Argentina,
imports by the EU producers appear to have been a deliberate commercial strategy on their side.
First of all, there is ample evidence on the record showing close relations, or even affiliation, to the
same corporate groups of European and Argentinean producers, and secondly, the facts on the
record show that 60% of total imports from Indonesia and Argentina during the IP were made by
the EU industry itself.15

35. In conclusion, Argentina submits that the European Union was under the obligation to
ensure that the injury resulting from the industry's long term commercial policy was not attributed
to the domestic industry. Its failure to do so is inconsistent with Articles 3.1 and 3.5 of the
Anti-Dumping Agreement.

15 Provisional Regulation, recitals 132 to 136, Exhibit ARG-30 and Definitive Regulation, recital 151,
Exhibit ARG-22.

- B-29 -

ANNEX B-4
EXECUTIVE SUMMARY OF THE STATEMENT OF ARGENTINA
AT THE SECOND MEETING OF THE PANEL
1. Preliminary Issues

1. Regarding Argentina's claim under Article 2.4 , Argentina has demonstrated that a
difference exists between normal value and export price 1,that this difference affects price
comparability2 and therefore that, absent an adjustment to account for this difference, the
comparison is not fair. In this regard, the EC – Tube or Pipe Fittings an the EU – Footwear (China)
cases referred to by the European Union 3 are not relevant and must be rejected. Therefore, the
European Union errs when arguing that Argentina's claim is outside the scope of Article 2.4.

2. Argentina's Claims against Article 2( 5), second subparagraph, of the Basic
Regulation

2.1 The scope, meaning and content of Ar ticle 2(5), second subparagraph, of the
Basic Regulation

2. Argentina argues that the European Union makes an effort to purport an over-simplistic
reading of Article 2(5), second subparagraph, in complete isolation from its context when stating
that it only "describes what the authorities are authorized to do in order to calculate the costs,
when the company records cannot be used".
4 The fact that the determination that the records do
not reasonably reflect the costs when they reflect prices that are "abnormally or artificially low" in
comparison to prices on other markets because of an alleged distortion is made pursuant to
Article 2(5), second subparagraph, of the Basic Regulation, does not only flow from the text of the
provision and its background.
5 It has been also expressly confirmed by the practice and the
General Court in the second Acron case.6

3. With regard to the meaning and content of Article 2(5), second subparagraph, the
European Union had argued that the text of Article 2(5), second subparagraph, did not include the
terms used by Argentina to describe the content and meaning of that measure. 7 Argentina has
emphasized that, pursuant to Article 11 of the DSU the Panel should undertake a holistic
assessment of all relevant elements, not only the te xt of the law, but also the consistent practice
and the judgments of the General Court.

4. The European Union has also raised a new argument, namely that Argentina did not
"establish the "scope, meaning and content" of the second subparagraph of Article 2(5) in
general".
8 According Argentina – Import Measures in which the Appellate Body found that "in every
WTO dispute, a complainant must establish that the measure it challenges is attributable to the
respondent, as well as the precise content of that challenged measure, to the extent that such
content is the object of the claims raised"9 this argument must be rejected.

5. On the other hand, the US – Carbon Steel (India) case 10 does not support the
European Union's position. Indeed, the statement quoted by the European Union that "it is not
clear why a number of instances of the application of the measure should in this case conclusively
establish the meaning of the measure at issue in general , which in this case is confined to [the

1 Argentina's first written submission, paras. 298-299; Argentina's second written submission,
para. 103.
2 Argentina's first written submission, para. 300, Argentina's opening statement at the first meeting of
3 European Union's second written submission, paras. 25-27.
4 European Union's opening statement, para. 50.
5 Argentina's second written submission, paras. 16-33.
6 Argentina's second written submission, paras. 34-41, 42.
7 European Union's first written submission, paras. 85-86.
8 European Union's second written submission, para. 50.
9 Appellate Body Report, Argentina – Import Measures, para. 5.104.
10 European Union's second written submission, paras. 51-52.

- B-30 -

defending party's legislation]"11, must be read in its context, since this statement 12 does not have
the meaning that the European Union pretends to read in it.

2.2 Argentina has made a prima facie case on its claims against Article 2(5),
second subparagraph, of the Basic Regulation

6. Argentina would like to emphasize that, in order to succeed with its "as such" claims, it is
not necessary to demonstrate that the challenged measures requires the authorities to apply it in a
manner inconsistent with the covered agreements " in all cases " as claimed by the
European Union.13

7. Argentina has explained why, in its view, the discretionary/mandatory distinction is not
relevant for the purposes of its claims and noted that, in any case, the measure at issue does not
afford to the authorities the alleged "broad discretion" claimed by the European Union.

8. Firstly, and regarding as the discretionary/man datory as an irrelevant distinction Argentina
has noted that, if the relevant WTO provision prohibits a certain conduct, the fact that the measure
being challenged provides for the possibility to adopt such a conduct, should lead to the conclusion
that there is a violation of the said WTO provision.
14 Since Article 2.2.1.1 does not permit
determinations that the records do not reasonably reflect costs in case of "artificially low" or
"abnormally low" prices in comparison to prices on other markets because of an alleged distortion,
and Article 2.2 does not permit the use of information other than information in the country of
origin, Article 2(5), second subparagraph, must be found to be inconsistent with this specific
provision as Argentina has argued.

9. Secondly, in order to make a prima facie case, Argentina has demonstrated that the
assertion that Article 2(5), second subparagraph, affords broad discretion to the authorities is
simply not true. It flows from the various elements presented by Argentina that the authorities do
not have the discretion alleged by the European Union. The use of the term "shall" indicates the
clear mandatory nature of the rule, and flies on the face of the assertion that second subparagraph
of Article 2(5) of the Basic Regulation is framed in "permissive terms".
15 Moreover, the absence of
discretion is supported by the consistent practice referred to by Argentina contrary to that of US –
Carbon Steel (India)16, and confirmed by the General Court.

10. In relation to Argentina's claims under Article 2.2, the cases referred to by the
European Union showing that the EU authorities sometimes make adjustments based on domestic
sources are totally irrelevant as well since Argentina is not taking issue with that type of
adjustment.

3. Argentina's claims under Article 2. 2.1.1 of the Anti-Dumping Agreement

3.1 Legal Interpretation of Article 2.2.1.1 of the Anti-Dumping Agreement

11. Argentina in the first place address an important preliminary issue, that is, the
European Union claims that what the Panel has to do is to examine Argentina's interpretation and
determine whether "this is indeed the proper interpretation of Article 2.2.1.1".
17 This is, however,
an erroneous description of the Panel's task. The Panel has to determine whether Argentina has
established that Article 2(5), second subparagraph, is inconsistent with Article 2.2.1.1. It is on the
basis of all evidence and legal argumentation that the Panel has to determine whether Argentina
has indeed demonstrated that Article 2(5), second subparagraph, is inconsistent with
Article 2.2.1.1 of the Anti-Dumping Agreement.

11 European Union's second written submission, para. 51.
12 See the Appellate Body Report, US – Carbon Steel (India), para. 4.480, first sentence.
13 European Union's second written submission, para. 38.
14 Argentina's opening statement at the first meeting of the Panel, para. 74; Argentina's second written
submission, paras. 95 – 96.
15 European Union's second written submission, para. 83.
16 Appellate Body Report, US – Carbon Steel (India), para. 4.480 in which the Appellate Body noted that
"the United States placed a number of cases on the Panel records where the "worst possible inference" was not
applied in instances of non-cooperation".
17 European Union's second written submission, para. 90.

- B-31 -

12. Argentina notes that, regarding the interpretati on of Article 2.2.1.1, the European Union, in
its second written submission, has focused on certain specific aspects such as the negotiating
history, the findings of the panel in US – Softwood Lumber V , among others, which do not appear
to be central to the interpretative exercise which must focus on the ordinary meaning of the terms,
their context and the object and purpose of the Agreement.

13. First, the findings in US – Softwood Lumber V . The European Union attempts, by selectively
quoting the Panel Report in that case, to create parallelisms between the situations in that case
and the measure we are discussing in the present case. The situations at issue in US – Softwood
Lumber V were, however, different from what we are discussing in this case.

14. Second, the reference to Note 2 Ad Article VI paragraphs 2 and 3 concerning the "multiple
currency practices." The European Union´s reference to this Note has simply nothing to do with
what we are discussing here. Therefore, this ar gument should be rejected. The definition of
"dumping" in Article VI is contained in paragraph 1. The Ad Note, however, specifically refers to
paragraphs 2 and 3. In fact, this Ad Note does not seek to change or have any influence on the
definition of "dumping" which is included in Article VI:1, but only to authorize the levy of
anti-dumping duties in the very specific circum stances identified therein. Lastly, Argentina's
interpretation is confirmed by the negotiating history. The negotiating history makes clear that the
drafters agreed that "only price dumping" as defined in Article VI would be allowed to justify the
defensive duties which were an exception to GATT rules. For all the aforesaid, the attempt of the
European Union to draw parallelisms between "mul tiple currency practices" and the characteristics
of Argentina's export tax on soya beans
18 is manifestly inappropriate and unsupported by the
proper interpretation of that provision.

15. Third, the definition of "cos t" as provided by the Panel in EC – Salmon (Norway) , Argentina
does not see much difference between a price that is "paid" and a price that is "incurred", since
the word "cost" refers to a concrete amount and not to a hypothetical value.

3.2 Argentina's claim under Article 2.2.1. 1 concerning anti-dumping measures on
imports of biodiesel from Argentina

16. In its second written submission, the European Union fails to rebut the claims raised by
Argentina. Instead, the European Union has focused on some factual issues which are manifestly
incorrect.

17. First, the European Union argues that the export tax on soybeans "constitutes a mechanism
for distorting the price of soya beans".
19 This is not so. Argentina has already explained. 20 Second,
the European Union continues to wrongly argue that the FOB reference price is the "price to be
paid" by the Argentinean producers for domestic purchases of soybeans in Argentina. 21 As
emphasized several times, the FOB reference price is not a price that is payable on domestic
transactions. Rather, it is a taxable basis for levying the corresponding export tax.

4. Claims under Article 2.2 of the Anti-Dumping Agreement

18. On the basis of the definition provided by the Panel in EC – Salmon (Norway) , the "cost of
production" means "the price to be paid for the act of producing". Therefore, the "cost of
production in the country of origin" refers to the price to be paid for the act of producing biodiesel
in the country of origin, that is, in Argentina.

19. The EU authorities have used - and this is not disputed - an average of the FOB reference
prices minus fobbing costs as the cost for soybeans when constructing normal value. The
European Union in fact acknowledges that it is not the price at which soybean is purchased
domestically, since it keeps on stating that the FOB reference prices reflect "the cost of soya beans
that Argentine producers of biodiesel would have to incur, in the absence of the export tax".
22

18 European Union's second written submission, para. 124.
19 European Union's second written submission, para. 127.
20 Argentina's first written submission, Section 5.2.4, paras. 209 and 210.
21 European Union's second written submission, para. 126.
22 European Union's second written submission, para. 142.

- B-32 -

20. By not using the "cost of production in the country of origin" the European Union violated
Article 2.2 of the Anti-Dumping Agreement.

5. Background and Economic Context of the Antidumping Investigation Concerning
Imports of Biodiesel.

21. The background to this dispute shows that the fi rst full year of production of biodiesel in the
European Union is 2005. By the end of 2007 EU's total consumption had slightly more than
doubled. Interestingly the capacity utilization figures determined by the Commission for the
sampled EU producers was 84%. There were imports from some countries but not from Argentina
which, at that time, had no biodiesel industry.

22. Between 2007 and 2009, Community consumption literally exploded according to the
Commission's own figures
23, but not as overwhelmingly as production capacity, which sky-rocketed
in the same period and thereby creating huge overcapacity.24

23. The European Union has argued that this di d not prevent the EU industry from still being
profitable in 2009, suggesting that excess capacity is not a cause of injury such as to break the
causal link. Interestingly enough however, the figures of profitability in the investigation
concerning imports from the United States, show that in 2005 when overcapacity was not
excessive yet, the profitability rate of the sampled producers was at 18.3% while by 2009,
coinciding with an overcapacity of the Union industry of more than 11 million tons, profitability had
dropped further by more than a third, to only 3.5%.

6. Claims under Article 3 of the Anti-Dumping Agreement

24. The European Union acted inconsistently with Articles 3.1 and 3.4 because its definition of
capacity and capacity utilization is inconsistent wi th Article 3.4 and its assessment of these factors
is neither based on positive evidence nor include an objective examination. Additionally to these
inconsistencies, the EU also failed to properly evaluate the effects of the enormous overcapacity on
the EU industry, thereby violating Articles 3.1 and 3.5 of the Anti-Dumping Agreement.

25. Article 3.4 does not contain any rule allowing the exclusion of capacity that would be "idle"
or "not immediately available for use". Argentina prefers to draw the Panel's attention to the fact
that in the proceeding on photovoltaic modules from China as well as in the US biodiesel case the
so-called "idle capacity" was not excluded from production capacity.
25

26. In relation to this point Argentina explained in previous submissions that the
European Union could simply not exclude part of the capacity from the assessment of the
production capacity and utilization of capacity on the grounds that it was "idle" without violating
Article 3.4 of the Anti-dumping Agreement.

27. The European Union's assessment of production capacity and the utilization of capacity is
not based on positive evidence and does involve an objective examination as Argentina has shown.
With respect to the "desk analysis and checking against publicly available sources", the
European Union has not yet been able to produce the alleged "publicly available data" that would
support these new figures and that they are contradi cted by all publicly available data on record
that appeared in the public file of the investigation. With respect to the verification of the data
Argentina would like to highlight that, although the European Union did select a sample of Union
producers and carried out a detailed examination of their data including on-the-spot verifications,
this was done before the imposition of provisional duties. In any event, that early examination and
verification actually confirmed the accuracy of th e production capacity figures that were reported
in the Provisional Regulation.

28. Finally, Argentina has demonstrated that the conclusions reached by the Commission as to
why the effects of overcapacity did not break the causal link between dumped imports and injury,
are not conclusions which could be reached by an unbiased and objective decision maker taking

23 Provisional Regulation, Table 1 (Exhibit ARG-30).
24 Provisional Regulation, Tables 1 and 4 (Exhibit ARG-30).
25 Council Regulation 193/2009, recitals 125 – 128 (Exhibit EU-13) and Council Regulation 599/2009,
recitals 148 – 152 (Exhibit EU-14).

- B-33 -

into account the facts that were before the investig ating authority, and in light of the explanations
given26 as explained in detail in Argentina's previous submissions.

29. The European Union thus failed to appropriately assess overcapacity and its effects on the
situation of the domestic industry, leading to an erroneous conclusion about the causality between
alleged dumped imports and the injury suffered by the EU industry.

30. Regarding the long-term commercial strategy of the European Union industry, the figures
are undisputed and are self-explanatory. As a matter of fact, if the three producers whose imports
reached 63%, 85% and 71% of their own production had not been excluded from the definition of
the "Union industry", the proportion of imports made by the European Union producers would have
exceeded the overall 60% ratio determined for the Union industry.

31. The sole justification given by the European Union to the massive imports from the countries
concerned was that if the domestic industry had not imported biodiesel from Argentina, "that role
would have been filled by independent traders" . However, the European Union fails to offer a
logical explanation as to why there was no increase in imports by such independent traders during
the IP. Surely if the European Union producers found an advantage in importing from Argentina –
so much so that they actually managed to increase their market share in the Union if their own
production is added to their imports, then one would also have expected independent traders to
equally find it attractive to import into the European Union. The European Union does not offer a
logical explanation that would explain in which way the European Union producers were hoping to
prevent independent traders from importing to the EU by doing it themselves.

26 Panel Report, EU – Footwear (China), para 7.484.

- B-34 -

ANNEX B-5
EXECUTIVE SUMMARY OF THE RESPONSE OF ARGENTINA TO THE
EUROPEAN UNION'S REQUEST FOR A PRELIMINARY RULING
1. Introduction

1. The request for a preliminary ruling filed by the European Union is based on arguments that
are formalistic in nature, that are based on a selective reading of fragments of Argentina's panel
and consultations requests out of context, or on arguments that are obscure or inaccurate.
Therefore, preliminary objections by the European Union should all be rejected by the Panel.
Argentina considers that (i) it has identified the specific measures at issue in its panel request,
(ii) that it has presented the problem clearly in its panel request and (iii) that its panel request
does not expand the scope of the dispute. Argentina will address each issue in turn.

2. Argentina has identified the specific measures at issue

2. The European Union takes issue with an alleged lack of clarity in the identification of the
"specific measures at issue." In particular, the European Union takes issue with the references to
"implementing measures and related instruments or practices" and to "related measures and
implementing measures" in Section 1 of Argentina's panel request.
1

2.1 The European Union's object ion is unclear and inaccurate

3. The objection raised by the European Union falls short of accuracy and clarity.

4. Indeed, first, in relation to paragraph 1(A) of Argentina's panel request, the European Union
notes that this paragraph refers to "any subsequent amendments, replacements, implementing
measures and related instruments or practices". At paragraph 8 of its request for preliminary
ruling, the European Union argues that the reference to " implementing measures and related
instrument or practices " is too vague. However, in paragraph 9, the European Union argues that
"Argentina's claims against "i mplementing measures and other related measures" in paragraph
1(A) and footnote 7 of its Panel Request fall outside the Panel's terms of reference; that reference
to "other related measures" is unclear since the panel request refers to "implementing measures
and related instruments or practices".

5. Second, in relation to paragraph 1(B), the European Union states that "[f]ootnote 3
mentions Commission Regulation 490/2013, while footnote 2 mentions Council Implementing
Regulation 1194/2013."
2 However, this is manifestly incorrect. In fact, footnote 3 refers to both
Commission Regulation (EU) No 490/2013 and Council Implementing Regulation (EU)
No 1194/2013, while footnote 5 refers to Council Regulation (EU) No 490/2013 and footnote 6
refers to Council Implementing Regulation (EU) No 1194/2013.

2.2 The European Union's objectio n should be rejected entirely

6. The European Union contends that, by refe rring to "implementing measures and related
instrument or practices" and "related measures and implementing measures" when describing the
measures at issue, Argentina's panel request fails to comply with the provisions of Article 6.2,
because it fails to "identify the specific measures at issue."
3 The requirements under Article 6.2 of
the DSU to identify the specific measures at i ssue and provide a brief summary of the legal basis
of the complaint sufficient to present the proble m clearly are central to the establishment of the
jurisdiction of the Panel.4

7. As emphasized by the Appellate Body "complia nce with the requirements of Article 6.2 must
be determined on the merits of each case, having considered the panel request as a whole, and in
the light of attendant circumstances."
5 The panel must therefore "scrutinize carefully the panel

1 European Union's request for preliminary ruling, section 2, paras. 3-9.
2 European Union's request for preliminary ruling, para. 6.
3 European Union's request for preliminary ruling, para. 7.
4 Appellate Body Report, US – Countervailing and Anti-Dumping Measures (China), para. 4.6.
5 Appellate Body Report, US – Carbon Steel, para. 127.

- B-35 -

request, read as a whole, and on the basis of the language used, in order to determine whether it
is "sufficiently precise" to comply with Article 6.2 of the DSU."6

8. The European Union's suggestion that there is something vague in the references to
"implementing measures and related instruments or practices" and to "related measures and
implementing measures" lacks merits.

9. First of all, Argentina notes that these types of references are not uncommon in panel
requests. As the Panel noted in Australia – Tobacco Plain Packaging (Indonesia) , the rulings in
previous disputes in which this type of referenc es has been challenged "suggest to us that a
reference to unnamed measures such as those discussed above is not per se inconsistent with the
specificity requirement in Article 6.2."
7 Argentina notes that the European Union fails to
substantiate why, in the present case, the references concerned would be inconsistent with the
specificity requirement in Article 6.2 of the DSU.

10. Argentina notes that "the obligation to identify the specific measure at issue does not oblige
the complainant to set forth the "precise content" of the measure in its panel request."
8 As the
Appellate Body emphasized, "although a measure cannot be identified without some indication of
its contents, the identification of a measure within the meaning of Article 6.2 needs be framed only
with sufficient particularity so as to indicate the nature of the measure and the gist of what is at
issue."
9

11. Section 1, point A) of Argentina's panel request, refers to "Article 2(5) of Council Regulation
(EC) No 1225/2009 of 30 November 2009 on protection against dumped imports from countries
not members of the European Community as well as any subsequent amendments, replacements,
implementing measures and related instruments or practices." Reading the sentence in its
entirety, it is clear that the words "implementing measures and related instruments or practices"
which are being challenged by the European Union necessarily refer to "Article 2(5) of Council
Regulation (EC) No 1225/2009." Therefore, only measures relating to, that is having a sufficiently
close nexus to, Article 2(5) of Council Regulation (EC) No 1225/2009 could fall within the scope of
the "implementing measures and related instruments or practices." Therefore, this is not a "vague"
reference as the European Union claims.

12. This is further supported by the narrative description of the substantive content and
operation of the measures at issue in Section 2, point A), the heading and first two paragraphs
which provide the following description:

Article 2(5) of Council Regulation (E C) No 1225/2009 of 30 November 2009
on protection against dumped imports from countries of the European
Community (the "Basic Regulation)
7
Article 2(5) of the Basic Regulation inter alia provides that if costs associated with the
production and sale of the product under investigation are not reasonably reflected in
the records of the party concerned, they shall be adjusted or established on the basis
of the costs of other producers or exporters in the same country or, where such
information is not available or cannot be used, on any other reasonable basis,
including information from other representative markets.
Pursuant to this provision, when the European Union considers that the costs of
manufacturing the product under consideration actually incurred by the producer
under investigation are artificially low or are otherwise distorted, it does not calculate
the costs on the basis of the records of the producer under investigation although
those records are in accordance with the generally accepted accounting principles of
the exporting countries and reasonably reflect the costs associated with the
production and sale of the product under consideration but adjusts those costs or

6 Appellate Body Report, EC – Fasteners, para.562, referring to Appellate Body Reports, US - Carbon
Steel, para.127; US – Oil Country Tubular Goods Sunset Reviews, paras.164 and 169, US – Continued Zeroing,
7 Preliminary Ruling of the Panel in Australia – Tobacco Plain Packaging (Indonesia), para. 5.14.
8 Panel Report, China – Raw Materials, Annex F-1, para. 8.
9 Appellate Body Report, US – Continued Zeroing, para. 169.

- B-36 -

establishes them on the basis of other data, including data pertaining to markets
other than those of the exporting country.
7 As well as any subsequent amendments, replacements, implementing measures and
related instruments or practices
13. Thus, the above constitutes the description of the substantive content and operation of the
challenged measures. It makes clear that the measures being challenged relate to Article 2(5) of
the Basic Regulation. Thus, the only way to read "implementing measures and related instruments
or practices" is in close connection to Article 2(5) of the Basic Regulation.

14. As to the reference to "related measures and implementing measures" in Section 1,
point B), these terms are placed at the end of point B) which identifies the primary measures
being challenged as "the anti-dumping measures imposed by the European Union on imports of
biodiesel originating in, inter alia, Argentina, as well as the underlying investigation.". Point B)
then precisely identifies the anti-dumping measures , b o t h i n f o o t n o t e 3 a s w e l l a s i n t h e n e x t
paragraphs of point B as covering (i) the provisional anti-dumping duties on imports of biodiesel
originating in, inter alia, Argentina, pursuant to Commission Regulation (EU) No 490/2013 of
27 May 2013 imposing a provisional anti-dumping duty on imports of biodiesel originating in
Argentina and Indonesia and (ii) the definitive measures imposed pursuant to Council
Implementing Regulation (EU) No 1194/2013 of 19 November 2013 imposing a definitive anti-
dumping duty and collecting definitively the prov isional duty imposed on imports of biodiesel
originating in Argentina and Indonesia. The last paragraph then concludes that the measures at
issue include the anti-dumping measures identified above "as well as any subsequent
amendments, replacements, related measures and im plementing measures." It is clear that only
measures relating to the anti-dumping measures imposed by the European Union on imports of
biodiesel originating in Argentina could fall within the scope of the terms "related measures and
implementing measures.

15. Argentina notes that the situation in the present case is similar to the one addressed by
panels in recent cases, namely India – Agricultural Products and Australia – Tobacco Plain
Packaging (Indonesia). In that case, the Panel rejected the objection that "the panel request is not
sufficiently precise to meet the requirements of Arti cle 6.2 simply by virtue of the inclusion of the
terms "related measures, or implementing measures."
10 In particular, the Panel emphasized that
the "primary measures" were not broadly defined, but rather limited in view of their context.11

16. The references which the European Union takes issues with were necessary to protect the
interests of Argentina as complaining party in order to avoid that a closely connected measure
adopted after the establishment of the panel could be claimed not to be within the panel's terms of
reference merely because not mentioned in the pa nel request. The Appellate Body has recognized
that this constitutes a legitimate objective and se rves the due process objective of preventing the
complaining party from having to "adjust its pleading throughout dispute settlement proceedings
in order to deal with a disputed measure as a "moving target"."
12 Hence, the aim of such
references is to address the potential situation arising if the European Union were to adopt
measures that are closely connected to, or change the legal nature of the existing measures during
the course of the Panel proceedings. This situation arose in EC – Chicken Cuts (Brazil) in which,
since the complainants' panel requests were not worded sufficiently broadly, they could not be
interpreted as containing the new measures.
13

17. In EC – IT Products, the Panel also noted that:

While we do not consider that the mere incantation of the phrase "any amendments or
extensions and any related or implementing measures" in a panel request will permit
Members to bring in measures that were clearly not contemplated in the Panel
request, it may be used to refer to measures not yet in force or concluded on the date
of the panel request, or measures that th e complainants were not yet aware of, such
as government procedures not yet published that have the same essential effect as

10 Preliminary Ruling of the Panel in India – Agricultural Products, para. 3.51.
11 Preliminary Ruling of the Panel in India – Agricultural Products, para. 3.48.
12 Appellate Body Report, Chile – Price Band System, para. 144.
13 Panel Report, EC – Chicken Cuts (Brazil), paras. 7.28-7.29.

- B-37 -

the measures that were specifically identified. This is to prevent the possibility that
the procedural requirements of WTO dispute settlement result in a situation where
measures could completely evade review.
14
18. In conclusion, Argentina requests the Panel to reject the European Union's objection that
"Argentina's claims against "implementing measures and other related measures" in
Paragraph 1(A) and footnote 7 of its Panel Request, as well as Argentina's claims against "related
measures and implementing measures" in Paragraph 1(B) of its Panel Request, fall outside the
Panel's terms of reference".
15 First of all, the European Union failed to substantiate its objection.
Second, this claim is premature and unnecessary. Third, when interpreted in their context, the
words challenged by the European Union cannot be found to be vague and therefore are not "on
their face" inconsistent with the requirement under Article 6.2 of the DSU to identify the specific
measures at issue.

3. Argentina's panel request provides a brief summary of the legal bases of the
complaint sufficient to present the problem clearly

19. The European Union argues that Argentina's panel request fails to meet the requirement to
"present the problem clearly" in two aspects: by failing to identify the "legal basis" of the
complaint and by failing to "plainly connect the challenged measures with the provisions of the
covered agreements claimed to have been infringed."
16

20. Argentina notes that the requirement to "pre sent the problem clearly" is not a standalone
requirement. Article 6.2 of the DSU contains two requirements: (i) the obligation to identify the
specific measure(s) at issue and (ii) the obligation to provide a brief summary of the legal basis of
the complaint sufficient to present the problem clearly.

3.1 The "inter alia" legal basis

21. The European Union first takes issues with the use of the word "inter alia" in
sub-section 2(A). It argues that because of the wo rds "inter alia", "[n]either the European Union,
nor the Panel has any idea of what claims or legal bases Argentina will finally present in this case:
the words " inter alia " make the list of claims in Argentina's panel request completely open-
ended."
17

22. Sub-section 2(a) of Argentina's panel request provides that:

A) Article 2(5) of Council Regulation (EC) No 1225/2009 of 30 November 2009 on
protection against dumped imports from countries not members of the
European Community (the "Basic Regulation")
[…]
Argentina considers that Article 2(5) of the Basic Regulation is inconsistent as such
with, inter alia, the following provisions of the Anti-Dumping Agreement, the
GATT 1994 and the Marrakesh Agreement Establishing the World Trade Organization
("Marrakesh Agreement"):
[…]
23. In the first place, Argentina notes that the scope of the European Union's objection is
unclear. Indeed, the European Union claims that "[t]his is inconsistent with Article 6.2 of the DSU
and places the relevant claims outside the Panel's terms of reference."
18 It is, however, unclear
which "relevant claims" would, according to the European Union, be placed outside the Panel's
terms of reference.

14 Panel Report, EC – IT Products, para. 7.140.
15 European Union's request for preliminary ruling, para. 9.
16 European Union's request for preliminary ruling, para. 10.
17 European Union's request for preliminary ruling, para. 12.
18 European Union's request for preliminary ruling, para. 13.

- B-38 -

24. To the extent that the European Union were to argue that all the claims made by Argentina
in Section 2, point A) would fall outside the Panel's terms of reference, this objection does not
make any sense.

25. In fact, the European Union is focusing on the words "inter alia" in the introductory
paragraph in isolation, without examining the context in which these words are used and in
particular the list of legal claims included thereafter. As is clear from the panel request, the
introductory paragraph in which the words "inter alia" are included is nothing else but the
introductory clause to a detailed description of the specific legal bases of the different "as such"
claims, as indicated by the colon that is written right after the parenthesis and before the list of
items 1 to 4.

26. Furthermore, the claims made by Argentina and which are listed under points 1 to 4 of
Section 2, point A) of Argentina's panel request, all precisely identify the provisions of the covered
agreements that Argentina claims are being violated. For each claim, Argentina provides an
explanation of the content of the claim so that the European Union knows the case it has to
answer.

3.2 Paragraph 2 (B) of Argentina's Panel Request

27. The European Union also takes issue with the following paragraph in Sub-section 2, B) of
Argentina's panel request:

Argentina considers that the anti-dumping measures imposed by the European Union
on imports of biodiesel originating in, inter alia, Argentina and the underlying
investigation are inconsistent with the following provisions of the Anti-Dumping
Agreement and of the GATT 1994:
6. Article 9.3 of the Anti-Dumping Agr eement and Article VI:2 of the GATT 1994
because the European Union imposed and levi ed anti-dumping duties in excess of the
margin of dumping that should have been es tablished in accordance with Article 2 of
the Anti-Dumping Agreement.
28. The European Union claims that "[t]his paragraph fails to meet the requirements of
Article 6.2 of the DSU"
19 for four reasons which must all be rejected.

29. First, the European Union claims that "Argentina's Panel Request fails to mention the specific
sub-paragraph of Article 9.3, with which th e challenged measures are supposed to be
inconsistent."20 There is, however, no such kind of general requirement "to refer to the specific
sub-paragraph of the WTO treaty provision that is supposed to be infringed by the challenged
measure".21 The Appellate Body Report to which the European Union refers, found that:

There may be situations where the simple li sting of the articles of the agreement or
agreements involved may, in the light of a ttendant circumstances, suffice to meet the
standard of clarity in the statement of the legal basis of the complaint22
30. Argentina's panel request indicates that the measures at issue are inconsistent with
Article 9.3 and Article VI:2 of the GATT 1994 "because the European Union imposed and levied
anti-dumping duties in excess of the margin of dumping that should have been established in
accordance with Article 2 of the Anti-Dumping Agreement." While Article 9.3 indeed includes a
chapeau and three sub-paragraphs, it is clear from the description of the claim (just quoted) that
Argentina is taking issue with the chapeau. This interpretation is in accordance with the Report of
the Appellate Body in Thailand – H-Beams which held that "a general reference to Article 3 of the
Anti-Dumping Agreement without identifying the relevant paragraphs, was sufficient to fulfill the

19 European Union's request for preliminary ruling, para. 15.
20 European Union's request for preliminary ruling, para. 16.
21 European Union's request for preliminary ruling, para. 16.
22 Appellate Body Report, Korea – Dairy, para. 124.

- B-39 -

requirements of Article 6.2 of the DSU, considerin g that the panel request "referred explicitly to
the specific language of Article 3."23

31. Second, the European Union argues that "Argentina fails to articulate the exact claims it
advances."
24 According to the European Union, it is not clear whether Argentina actually challenges
(a) the comparison between the an ti-dumping duty and the margin of dumping or (b) the method
of calculation of the margin of dumping itself.25

32. However, there is no ambiguity about the claim of Argentina. In fact, as is clear from the
structure of the panel request, Argentina first takes issue with the dumping margin determination
under points 1, 2, 3, 4 and 5 of its panel request which all refer to specific obligations under
Article 2 of the Anti-Dumping Agreement. Under point 6 of the panel request, as a next logical
step, Argentina then claims that the European Un ion violated Article 9.3 by imposing and levying
anti-dumping duties in excess of the margin of dumping to be established pursuant to Article 2 of
the Anti-Dumping Agreement.

33. Argentina further notes that its first written submission confirms the meaning of the words
used in the panel request.
26 I n d e ed , it is c le a r fr o m p a r a g r ap hs 3 0 7 t o 309 o f Ar g e n t in a ' s fir s t
written submission that Argentina's claim under Article 9.3 focuses on the imposition and levying
of anti-dumping duties in excess of the du mping margin, had the dumping margin been
determined in conformity with Article 2 of th e Anti-Dumping Agreement contrary to what the
European Union did in this case as demonstrated in its previous claims

34. The third and fourth reasons submitted by the European Union are inapposite since they are
based on the hypothetical assumption that "Argentina actually challenges the method of
determining the dumping margin."
27 As Argentina has explained above, it is clear from both the
wording of the panel request and the legal provision being challenged, namely Article 9.3, that
Argentina's claim focuses on the fact that the duties have been imposed and levied "in excess" of
the margin of dumping established in accordance with Article 2 of the Anti-Dumping Agreement.

4. The European Union's allegations concer ning the expansion of the scope of the
dispute

4.1 Arguments of the European Union

35. In section 4 of its request for a preliminary ruling, European Union alleges that Argentina
has expanded the scope of the dispute in its panel request either as a result of the inclusion of new
measures or as the result of the inclusion of new legal bases. The European Union notes that
consultations circumscribe panel requests and, that, as a result, a panel request cannot include
claims that were not included in the consultations request where these new claims expand the
scope of the dispute or have the effect of changing the essence of the complaint.
28

4.2 The applicable legal standard

36. Although Article 6.2 requires the complainan t to indicate in its panel request "whether
consultations were held", it does not require the measures and claims identified in the panel
request as basis for the complaint to be identical to those identified in the consultations request.
29

37. In Brazil – Aircraft , the Appellate Body emphasized that Articles 4 and 6 of the DSU do not
"require a precise and exact identity between the specific measures that were the subject of

23 Appellate Body Report, US – Countervailing and Anti-Dumping Measures (China), para. 4.24 referring
to Appellate Body Report, Thailand – H-Beams, para. 90.
24 European Union's request for preliminary ruling, para. 17.
25 European Union's request for preliminary ruling, para. 17.
26 Appellate Body Report, US – Countervailing and Anti-Dumping Measures (China), para. 4.9 referring
to Appellate Body Report, US – Carbon Steel, para. 127.
27 European Union's request for preliminary ruling, para. 19.
28 European Union's request for a preliminary ruling, para. 23, referring to Appellate Body Reports,
Mexico – Anti-Dumping Measures on Rice and US – Upland Cotton.
29 Preliminary Ruling of the Panel in Australia – Tobacco Plain Packaging (Dominican Republic),
para. 3.35.

- B-40 -

consultations and the specific measures identified in the request for the establishment of a
panel"30

38. In relation to the "legal basis" of the complaint in particular, the Appellate Body found in
Mexico – Anti-Dumping Measures on Rice that "[i]t does not follow from the use of the same term
[in Articles 4.4 and 6.2] […] that the claims made at the time of the panel request must be
identical to those indicated in the request for consultations."
31

39. It is important to underline that it is the panel request, not the consultations request, which
determines the panel's terms of reference pursuant to Article 7 of the DSU. Moreover, as panels
and the Appellate Body have consistently emphasized in past cases, the relevant provisions of the
DSU do not require a "precise and exact" identity between the measures and claims identified in
the request for consultations and those identified in the panel request.

40. Argentina will show why, taking into account the above legal standard, all the claims made
in the panel request fall within this Panel's terms of reference and neither expand the scope of the
dispute nor change the essence of the complaint.

4.3 The European Union's objection against the alleged inclusion of a new measure in
the panel request

41. The European Union claims that Argentina's panel request challenges for the first time
"related practices ", in addition to Article 2(5) of Council Regulation 1225/2009 since the terms
"related practices" were not included in Argentina's consultations request, thus expanding the
scope of the dispute and changes the essence of Argentina's complaint.
32

42. Argentina submits that this objection of the European Union was unnecessary and is clearly
moot. Argentina is not challenging the European Union's practice as a distinct measure. In other
words, Argentina is not challenging "" related practices ", in addition to Article 2(5) of Council
Regulation 1225/2009."
33 The measure being challenged is Article 2(5) of the Basic Regulation.
Argentina refers to the practice of the European Union only to illustrate the content and scope of
Article 2(5) of the Basic Regulation in view of its consistent application. 34 Accordingly, Argentina is
not challenging a "new measure" since it is not asking that this Panel rule on "related practices",
as shown in paragraph 468 of its first written submission.

4.4 The European Union's objections agains t the alleged inclusion of new legal bases
in the panel request

4.4.1 The allegedly new and unclear "as applie d" claim against Article 2(5) of the Basic
Regulation

43. The European Union argues that Argentina brings a new and unclear claim against
Article 2(5) of the Basic Regulation in a "not- numbered" paragraph. The European Union appears
to refer to the unnumbered paragraph between pa ragraphs 3 and 4 of section B of the panel
request.

44. This paragraph is not a "new claim" that Argentina is bringing, as this claim is not different
from the claims raised under points 1, 2 and 3. This paragraph merely emphasizes that the
European Union's violations of the provisions cited in points 1, 2 and 3 occurred as a result of the
application of Article 2(5) of the Basic Regulation in the imposition of the measures on imports of
biodiesel of Argentina. Argentina notes in this respect that the European Union itself points out
that Commission Regulation and the Council Impl ementing Regulation imposing the provisional
and definitive duties are based on Article 2(5) of the Basic Regulation.
35

30 Appellate Body Report, Brazil – Aircraft, para. 132.
31 Appellate Body Report, Mexico – Anti-Dumping Measures on Rice, para. 136.
32 European Union's request for a preliminary ruling, paras.27 and 29.
33 European Union's request for preliminary ruling, para. 27.
34 Argentina's first written submission, section 4.2.2.
35 European Union's request for a preliminary ruling, para. 38.

- B-41 -

4.4.2 The allegedly new claim against Articl e 2(5) of the Basic Regulation based on
Article 9.3 of the Anti-Dumping Agreement

45. The European Union argues that Argentina's claim under Article 9.3 of the Anti-Dumping
Agreement in section 2(A)(3) of the panel request falls outside of the Panel's terms of reference. It
bases its argument on the fact that the request for consultations did not make any reference to
Article 9.3 under section (b) and on the fact that section (b) of the consultations request did not
refer to an alleged excess of the anti-dumping duty compared to the margin of dumping. The
European Union thus considers that Argentina's claim under paragraph 2(A)(3) cannot be said to
reasonably have evolved from the consultations.
36 Again, this objection lacks merit.

46. Argentina strongly disagrees with the European Union's contention that Argentina's as such
claim under paragraph 2(A)(3) cannot reasonably be said to have evolved reasonably from the
consultations request. First, as the European Unio n itself points out in paragraph 38 of its request
for a preliminary ruling, Argentina raised a claim based on Article 9.3 in its as applied claims
concerning the provisional and definitive anti-dumping measures.
37 Therefore, the imposition of
anti-dumping duties in excess of the margin of dumping as a result of the application of
Article 2(5) of the Basic Regulation has been the object of consultations.

47. In any case, as shown by its first written submission, Argentina is not bringing an as such
claim against Article 2(5) of the Basic Regulation based on Article 9.3 of the Anti-Dumping
Agreement.
38 Indeed, Argentina considers that findings of inconsistency under Articles 2.2, 2.2.1.1
and 18.4 of the Anti-Dumping Agreement, Article VI:1(b)(ii) of the GATT 1994 and Article XVI:4 of
the Marrakesh Agreement Establishing the WTO with respect to Article 2(5) of the Basic Regulation
would be sufficient to secure an effective resolution of this dispute.

4.4.3 The allegedly new claims against Articl e 2(5) of the Basic Regulation based on
Article VI:1 of the GATT 1994

48. The European Union argues that the claims based on Article VI:1 of the GATT 1994 in
sections 2(A)1 and 2(A)2 of the panel request fall outside of the terms of reference of the Panel
because this provision was not mentioned in the request for consultations. At the outset, Argentina
notes that the claims it bring in this section are based Article VI:1(b)(ii) only.
39 Accordingly,
Argentina limits its arguments to this specific provision. The objection raised by the
European Union does not stand.

49. The European Union states that it cannot be argued that "adding new claims under
Article VI:1 of the GATT does not chan ge the "essence" of the complaint."
40 It bases this on the
allegation that if Article VI:1 of the GATT 1994 is identical to the provisions of the Anti-Dumping
Agreement that have already been cited, the addi tion of Article VI:1 wo uld be redundant and the
Panel would exercise judicial economy.41

50. This argument does not stand to reason. Noth ing prevents Argentina from adding provisions
that are identical in scope to an existing claim on which consultations were held.

51. Moreover, if the European Union intends to argue that Article VI:1(b)(ii) of the GATT 1994
and Article 2.2 of the Anti-Dumping Agreement are different in scope and that the "essence" of
both provisions is different, then this is direct ly contradicted by the text and context of both
provisions. The European Union has failed to poin t out what the difference in scope between both
provisions is.

52. Article VI:1 of the GATT 1994 had been cited in the context of sections a.1 and a.2 of the
consultations request in as applied claims that are similar to the as such claims at issue. Moreover,
as already pointed out by Argentina, the content of Article VI:1(b)(ii) of the GATT 1994 is identical
to Article 2.2 of the Anti-Dumping Agreement, which was cited in Argentina's consultations request
in the section concerning the as such claims.

36 European Union's request for a preliminary ruling, paras. 36-40.
37 See section (a)(6) of the Request for consultations by Argentina, WT/DS/473/1.
38 Argentina's first written submission, para. 468.
39 Argentina's first written submission, paras. 133, 141 and 468.
40 European Union's request for preliminary ruling, para. 43.
41 European Union's request for a preliminary ruling, para. 43.

- B-42 -

53. Argentina submits Article VI:1 of the GATT 1994 had been cited in the context of
sections a.1 and a.2 of the consultations request in as applied claims that are similar to the as
such claims at issue. Moreover, as already pointed out, the content of Article VI:1(b)(ii) of the
GATT 1994 is identical to Article 2.2 of the Anti-Dumping Agreement, which was cited in
Argentina's consultations request in the section concerning the as such claims. Argentina therefore
respectfully requests that the Panel reject the European Union's purely formalistic objection and
confirm that Argentina's claims under Article VI;1 of the GATT 1994 in relation to Section 2(A) are
within the Panel's terms of reference.

4.4.4 The allegedly new claims against Articl e 2(5) of the Basic Regulation based on
Articles 2.2 and 2.2.1.1 of the Anti-Dumping Agreement

54. The European Union argues that the paragrap h of the consultations request corresponding to
section 2(A)(2) of the panel request only includes a claim based on Article 2.2.1.1 of the
Anti-Dumping Agreement. It also argues that the corresponding claim in the consultations request
refers only to the obligation that costs be calculated on the basis of the records kept by the
exporters. The European Union thus argues that section 2(A)(2) of the panel request expands the
scope of the dispute because they introduce a new legal basis (i.e., Article 2.2 of the Anti-Dumping
Agreement) and because they introduce "a new type of complaint", that is, the use of costs not
associated with the production and sale of the product under consideration.
42

55. Argentina submits that the European Union carries out an unduly narrow reading when it
reads section 2(A)2 of the panel request with reference to section b.2 of the consultations request
only. The issue of the calculation of costs for the purpose of the construction of normal value is
also addressed in section b.1 of Argentina's request for consultations, which refers to Article 2.2 of
the Anti-Dumping Agreement. The assertion that Argentina added a provision in the panel request
is therefore incorrect.

56. Moreover, there is a clear and logical connection between Article 2.2.1.1 and Article 2.2 of
the Anti-Dumping Agreement. Indeed, Article 2.2.1.1 is a specific provision governing the
calculation of costs for the construction of normal value. Article 2.2 concerns, among other
matters, the construction of normal value and its components, including the cost of production.
Argentina submits that consultations on the calculation of costs for the construction of normal
value pursuant to Article 2.2.1.1 logically also cover the construction of normal value pursuant to
Article 2.2, when such costs are being included in the construction of normal value.

57. Argentina also opposes the European Union's claim that it would have introduced in its panel
request a "new type of complaint" when it refers to the use of costs not associated with the
production and sale of the product under consideration. First of all, Argentina submits that this
reference does not constitute a claim but an argument which is not required to be included in a
panel request. Indeed, the Appellate Body emphasized that "Article 6.2 requires that the claims –
not the arguments – be set out in a panel request in a way that is sufficient to present the problem
clearly."
43

58. Furthermore, even if it is part of the claim, the European Union's claim is premised on an
incorrect reading of Argentina's request for consultations. Indeed, the request for consultations
refers in relevant part to Article 2.2.1.1 of the Anti-Dumping Agreement "which requires that costs
normally be calculated on the basis of reco rds kept by the exporter or producer under
investigation." The request for consultations does not limit in any way Argentina's claim to certain
aspects or parts of Article 2.2.1.1, first sentence. By referring to Article 2.2.1.1 "which requires
that costs normally be calculated on the basis of records kept by the exporter or producer under
investigation", Argentina refers to the first sentence of Article 2.2.1.1. Therefore, the reference in
the panel request to the use of costs not associated with the production and sale of the product
under consideration cannot be said to be a "new claim".

59. In view of the above, the European Union's objections under section 4.2.4 of its request for
a preliminary ruling must fail.

42 European Union's request for a preliminary ruling, paras 45 and 46.
43 Appellate Body Report, EC – Selected Customs Matters, para. 153.

- B-43 -

4.4.5 The allegedly new claim against the anti-dumping measures imposed by the
European Union based on Article 2.1 of the Anti-Dumping Agreement

60. Finally, Argentina turns to the European Union' s objection against the inclusion of Article 2.1
of the Anti-Dumping Agreement in section 2(B)4 of the panel request.

61. Argentina notes that it is a well-established principle of law that the burden of proof rests
upon the party asserting the affirmative of a particular claim or defense. However, Argentina fails
to see any substantiation by the European Union of why the addition of Article 2.1 of the
Anti-Dumping Agreement results in an expansion of the scope of this dispute or why it cannot
reasonably be said that the inclusion of this provision evolved from the consultations. In this
respect, Argentina refers to paragraphs 51 to 53 of the European Union's request for a preliminary
ruling, which contains only mere assertions but no substantiation. Consequently, the
European Union's objection fails.

62. In any case, Argentina notes that it is not basing its claim concerning the profit
determination on Article 2.1 of the Anti-Dumping Agreement.
44 As already highlighted in
section 4.4.2 above, it would therefore appear not to be necessary for the panel to rule on this
issue.

5. Conclusion

63. In light of the above, Argentina submits th at the European Union's request for preliminary
ruling should be rejected entirely.

64. First, the objection made by the European Union about the references to "implementing
measures and related instruments or practices" and "related measures and implementing
measures" should be rejected: first, because the European Union failed to substantiate its
objection; second, since this claim is premature and unnecessary; and third, since these
references comply with the requirement under Ar ticle 6.2 of the DSU to identify the specific
measures at issue.

65. Second, Argentina provided a brief summary of the legal basis of the complaint sufficient to
present the problem clearly in relation to the "as such" claims in section 2(A), as well as in relation
to Argentina's claim under Article 9.3 of the Anti-Dumping Agreement in section 2(B)6.

66. Third, Argentina did not expand the scope of the dispute. Indeed, the "related practices" do
not constitute a "new measure" that cannot be said to have "evolved" from the consultations and
which, in any case, are not challenged by Argentina as a distinct measure. Furthermore, all the
claims listed in the panel request were either included in the consultations request or can
reasonably be said to have evolved from the claims listed in consultations request.

67. Accordingly, Argentina requests the Panel to find that the request for establishment of a
Panel submitted by Argentina fully complies with the requirements of Article 6.2 of the DSU and
that, consequently, all the measures and claims concerned fall within the Panel's terms of
reference.

- C-1 -

ANNEX C
ARGUMENTS OF THE EUROPEAN UNION
Contents Page
Annex C-1 Executive Summary of the First Written Submission of the European Union C-2
Annex C-2 Executive Summary of the Second Written Submission of the European Union C-11
Annex C-3 Executive Summary of the Stat ement of the European Union at the
First Meeting of the Panel
C-21
Annex C-4 Executive Summary of the Statement of the European Union at the
Second Meeting of the Panel
C-26
Annex C-5 Executive Summary of the European Un ion's Request for a Preliminary Ruling C-33

- C-2 -

ANNEX C-1
EXECUTIVE SUMMARY OF THE FIRST WRITTEN SUBMISSION
OF THE EUROPEAN UNION
1. I NTRODUCTION

1. The EU demonstrates that both Argentina's claims with respect to the Basic Regulation and
its claims with respect to the Provisional and the Definitive Regulations should be rejected as no
inconsistency with the Anti-Dumping Agreement has been proved.

2. T
ERMS OF REFERENCE

2.1. C LAIMS ABANDONED BY ARGENTINA

2. Argentina has abandoned the following claims mentioned in its Panel Request: (1) any claim
against "related practices"; (2) any claim under an " inter alia" legal basis; (3) the claim against
Article 2(5) of the Basic Regulation based on Ar ticle 9.3 of the Anti-dumping Agreement; (4) any
distinct " as applied " claim against Article 2(5) of the Basic Regulation; (5) the claim against
Article 2(5) of the Basic Regulation because the costs used are allegedly not "associated with the
production and sale of the product under consideration"; and (6) the claim against the "profit
determination" based on Article 2.1. The EU und erstands that, as Argentina has abandoned and
does not pursue these claims, it cannot establish a prima facie case on them and that the Panel
cannot make any findings on these claims.

2.2. O
THER ARGENTINE CLAIMS CHALLENGED BY THE EU

2.2.1. Argentina's failure to identi fy the "specific measure at issue"

3. First, Argentina appears to have abandoned the claim. Second, Argentina's assertions must
be rejected. The EU's Request for a Preliminary Ruling was timely and in full compliance with the
Panel's Working Procedures. "Objections to jurisdiction" of a Panel " must be raised as early as
possible". On the substance of its Request, the EU ha s noted the Appellate Body's consistent case
law, according to which references to "implementing measures and other related measures" do not
identify the specific measures at issue. Accepting that all "measures" that "implement", or are
"related" to Article 2(5) of the Basic Regulation fall within the Panel's Terms of Reference would
have the perverse effect of bringing within the jurisdiction of this Panel all provisional and
definitive Regulations of the EU based on Article 2(5).

4. The inclusion of the terms "implementing measures" and "related measures or instruments"
in Argentina's Panel Request (a) creates an open-ended list of challenged "measures", (b) confuses
the limits between the jurisdiction of this Panel and the jurisdiction of other panels, and (c) is not
necessary in order to protect any legitimate interest of the complaining party; such legitimate
interests are protected by other terms in the Pane l Request, which are not challenged by the EU.
Therefore, the challenged terms fail to meet the requirements of Article 6.2 of the DSU and fall
outside the Panel's terms of reference.

2.2.2. Argentina's other claims

2.2.2.1 The claim against the Provisional and the Definitive Regulations based on
Article 9.3 of the Anti-Dumping Agreement

5. The EU has argued that Argentina's Panel Request fails to articulate clearly the exact claim
that it advances, because it is not clear whether Argentina's challenge is directed against (a) the
comparison between the anti-dumping duty and the dumping margin, or (b) against the method of
calculation of the dumping margin itself. The question of whether the claim under Article 9.3 is
within the Panel's terms of reference is of limited value for the present dispute.

- C-3 -

2.2.2.2 The claims against Article 2(5) of the Basic Regulation based on
Article VI:1 of the GATT 1994

6. Argentina's Panel Request includes claims against Article 2(5) of the Basic Regulation based
on Article VI:1 of the GATT 1994, which were not included in Argentina's Request for
Consultations. However, Argentina's first written submission does not develop these claims. The
question of whether the claims against Article 2(5) based on Article VI:1 of the GATT 1994 are
within the Panel's terms of reference is of very limited value for the present dispute.

3. P
RELIMINARY ISSUES

3.1. T HE CLAIM UNDER ARTICLE 2.1 OF THE ANTI-DUMPING AGREEMENT

7. Given that Article 2.1 does not impose an y independent obligation on WTO Members, it
cannot serve as a legal basis for a distinct claim in WTO dispute settlement proceedings.
Furthermore, Article 2.1 does not cover the situations where there are no domestic sales "in the
ordinary course of trade". Therefore, the facts of this case fall outside the scope of Article 2.1 of
the Anti-Dumping Agreement.

3.2. T
HE CLAIMS UNDER ARTICLE VI:1 OF THE GATT 1994

8. Since Article VI:1 of the GATT 1994 does not impose any independent obligation on
WTO Members, it cannot serve as a legal basis for a distinct claim in WTO dispute settlement
proceedings. Therefore, Argentina cannot base any claim on Article VI:1 of the GATT 1994.

3.3. T
HE CLAIM UNDER ARTICLE 9:3 OF THE ANTI-DUMPING AGREEMENT

9. Article 9.3 of the Anti-Dumping Agreement addresses the comparison between (a) the
anti-dumping duties and (b) the dumping margins. It does not address the calculation of normal
value. As a result, the complaining party must show something more than a simple erroneous
c a l c u l a t i o n o f n o r m a l v a l u e . T h e E U ' s i n t e r p r e t a t i o n i s s u p p o r t e d b y t h e r e l e v a n t c a s e l a w . F o r
example, in EC – Salmon, the Panel found that, in determining the dumping margin, the defending
Member had acted inconsistently with a number of obligations imposed by Article 2 of the
Anti-dumping Agreement. However, the Panel rejected the complaining Member's claims under
Article 9.3 of the Anti-Dumping Agreement. Argentina's claim under Article 9.3 is conditioned upon
the success of Argentina's claims under Article 2 of the Anti-Dumping Agreement. In these
circumstances, Argentina's claims fall outside the scope of Article 9.3 of the Anti-Dumping
Agreement and must be rejected.

4. A
RGENTINA'S "AS SUCH" CLAIMS AGAINST THE SECOND SUBPARAGRAPH OF ARTICLE 2(5) OF THE
BASIC REGULATION

4.1. T HE "AS SUCH" CLAIM UNDER ARTICLE 2.2.1.1 OF THE ANTI-DUMPING AGREEMENT

4.1.1. The reasons for rejecting Argentina's claim

4.1.1.1 Argentina is challenging "as such" a "measure" which does not exist

4.1.1.1.1 The scope, meaning and content of the second subparagraph of
Article 2(5) of the Basic Regulation are clear on its face

10. Article 2(5) gives the anti-dumping authorities certain alternative options for establishing or
adjusting the "costs associated with the production and sale of the product under investigation"
when one of the provisos defined in the firs t subparagraph of Article 2(5) applies. The
second subparagraph of Article 2(5) of the Basic Regulation describes what the authorities can do
after it has been determined that the records do not "reasonably reflect" costs, pursuant to the
first subparagraph of Article 2(5) of the Basic Regulation.

11. Given that the scope, meaning and content of the second subparagraph of Article 2(5) are
clear "on its face", the consistency of the measure with the covered agreements must be assessed
on the basis of the text of the legal instrument "alone".

- C-4 -

4.1.1.1.2 Argentina distorts the scope, meaning and content of the
second subparagraph of Article 2(5) of the Basic Regulation

12. The "measure" invented by Argentina simply do es not exist. This conclusion is supported by
a number of considerations. First, the conditions that must be met in order to determine whether
the company records "reasonably reflect" costs are outside the scope of the second subparagraph
of Article 2(5) of the Basic Regulation. Second, the terms "reflect market values", "regulated
market", "abnormally low", or "artificially distorted", which Argentina uses to describe the
"measure" that it challenges, do not even exist in the text of the second subparagraph of
Article 2(5).

4.1.1.1.3 The "various elements examined" by Argentina do not give to the
second subparagraph of Article 2(5) the scope, meaning and content
asserted by Argentina

13. The first "element" identified by Argentina is the "historical perspective" of the
second subparagraph of Article 2(5) of the Basic Regulation. However, the introduction of the
second subparagraph of Article 2(5) in 2002 had no impact on the scope, the meaning or the
content of the terms "reasonably reflect costs" in Article 2(5), which already existed in the
first subparagraph of Article 2(5). The second "element" identified by Argentina is the "EU's
practice". Nevertheless, the examples presented by Argentina in its first written submission do not
suffice to establish a purported "practice" of the EU in the application of the second subparagraph
of Article 2(5). The third element presented by Argentina consists of four judgments of the
General Court of the EU. However, these judgments do not support Argentina's assertions since
none of these judgments provides that the determination of whether company records "reasonably
reflect costs" is made pursuant to the second subparagraph of Article 2(5).

4.1.1.2 Argentina has failed to establish that the purported "measure" that it
challenges is "as such" inconsistent with the covered agreements

14. Argentina has asserted that it presents th is "practice" only to illustrate the scope and
content of the purported "measure" that it challe nges. However, in order to achieve this result,
Argentina would need to establish (a) that the "practice" is not "distinct from the measure itself",
but, on the contrary, forms an "integral part of the measure itself" and is "necessarily applied in all
instances"; and (b) that this "practice" is "required" by the measure, which must be "mandatory"
and constitute a "binding requirement" to apply th e measure in the same way in all cases. In the
present case, Argentina has failed to establish any of these two requirements for either the first, or
the second subparagraph of Article 2(5).

15. With regard to the first requirement, the plai n text of the first subparagraph of Article 2(5)
confirms that the provision affords broad discretion to the authorities to determine whether the
records of a particular company "reasonably reflect costs", on the basis of their analysis of the
facts in each individual case. With regard to the second, the evidence confirms the discretionary
nature of Article 2(5). The use of the word " entitled" by the General Court confirms that, as a
matter of municipal EU law, Article 2(5) is discretionary: it allows the authorities to take certain
actions, but does not require them to do so in all cases.

4.1.1.3 Argentina advances an erroneous legal interpretation of Article 2.2.1.1 of
the Anti-Dumping Agreement

4.1.1.3.1 The text of Article 2.2.1.1 of the Anti-Dumping Agreement

16. First, Argentina's thesis is based on the a ssertion that the costs reflected in the company
records do not need to be "reasonable". Argentina is wrong. It is counterintuitive to assert that
Article 2.2.1.1 of the Anti-Dumping Agreement mandates the investigating authorities to base their
calculations on costs that are "unreasonable". In any event, the Panel Report in Egypt – Steel
Rebar actually contradicts Argentina's thesis. The fact that the Panel required the relevant item to
be "reasonably related to the cost of producing and selling rebar" shows that the word
"reasonably" is also attached to the word "costs" in Article 2.2.1.1.

17. Second, Argentina seeks to dissociate the term "costs" in Article 2.2.1.1 from the word
"prices". However, the Panel Report in EC – Salmon interpreted "costs of production" as "the price

- C-5 -

to be paid for the act of producing". This shows that the "cost of production" is linked to the prices
to be paid for the act of producing. If the panel considered that the required costs are the
expenses that have actually already been incurre d by the producer, it would have used the past
tense of the verb "be" in its Report. By using the terms "to be paid", this panel finding confirms
that the "reasonable costs" required by Article 2. 2.1.1 are not necessarily only the expenses that
have already been incurred by the producer.

18. Third, Argentina interprets the term "associat ed" in Article 2.2.1.1 as "actually incurred". It
is submitted that the word "associated" has a broader meaning which captures a broader range of
relations between the "costs" and the "production". Fourth, these terms "associated with the
production and sale" are broad enough to capture the costs that would normally be associated with
the production and sale of the goods. Fifth, Article 2.2.1.1 refers to the "costs associated with the
production". It is uncontroversial that the cost of production depends on the cost of the raw
material and other inputs used for the production and, hence to the prices of the raw material
normally used for the production. Sixth, the use of the word "reflect" reinforces the conclusion that
reasonableness in Article 2.2.1.1 is not limited only to the "expenses that have actually been
incurred by the producer".

4.1.1.3.2 The context of Article 2.2. 1.1 of the Anti-Dumping Agreement

19. Argentina's main thesis finds no support in the analysis of the context of the provision. First,
where the Anti-Dumping Agreement wishes to refer to the expenses actually incurred by the
producer, it expressly states so. Second, if Article 2.2.1.1 intended to have the records include
only the "expenses actually incurred", then Articl e 2.2.1.1 would have included only the condition
that records should be kept in accordance with the GAAP.

20. Third, Argentina is wrong when it asserts that the first sentence of Article 2.2.1.1 "refers to
a cost allocation issue" and that "the second sentence provides what authorities have to do if they
use an alternative cost allocation methodology". The first sentence of Article 2.2.1.1 uses the word
"calculated" and not the word "allocation". Moreover, the first sentence of Article 2.2.1.1 refers to
the records of the company as "data sources", while the second sentence refers to information that
is not found in the records of the company, but that has been provided by the investigated
companies in the course of the investigation. Finally, the second sentence of Article 2.2.1.1 allows
the authorities to take into consideration "all ava ilable evidence on the proper allocation of costs,
including that which is made available by respondents in the context of an anti-dumping
investigation". This implies that the second sentence allows authorities to take into consideration
cost information which is not found in the companies' records, but which has been provided later.

4.1.1.3.3 The object and purpose of the anti-dumping rules

21. Article VI:1 of the GATT 1994 shows that th e object and purpose of the WTO anti-dumping
rules is to prevent the industries of the export ing country from damaging the industries of the
importing country through the use of prices that are artificially low, because of some abnormal
condition (hence the reference to "normal" value). A cost of the raw materials used to produce the
dumped goods which is not "normal" and which causes the "normal value" of the goods not to be
"normal", falls squarely within the type of cond itions that the WTO anti-dumping rules aim to
address.

4.1.1.3.4 The case law of the WTO dispute settlement system

22. The Panel Report in Egypt – Steel Rebar confirms that the word "reasonably" is also linked
to the word "costs" and, therefore, Argentina is wrong when it asserts that the costs reflected in
the records do not need to be "reasonable". Likewise, the Panel Report in EC – Salmon establishes
that "costs of production" means "prices to be paid for the act of producing" and not "expenses
that have already been incurred by the produc er". Most importantly, the Reports of the
Appellate Body and the Panel in US – Softwood Lumber V clearly establish that Argentina's thesis
is wrong. The Panel found that Article 2.2.1.1 does not impose on the investigating authorities any
particular methodology in their assessing whether the records reasonably reflect costs. On appeal,
the Appellate Body did not take issue with this interpretation of Article 2.2.1.1.

- C-6 -

4.2. T HE "AS SUCH" CLAIM UNDER ARTICLE 2.2 OF THE ANTI-DUMPING AGREEMENT

4.2.1. The second subparagraph of Arti cle 2(5) of the Basic Regulation is
not "as such" inconsistent with the covered agreements

4.2.1.1 The meaning and content of the provision

23. This broad discretion of Article 2.2 is established, inter alia, by the provision which allows
investigating authorities to use "any other reasonable basis" in order to establish or adjust costs.
At the same time, this provision does not "mandate" the authorities to use information from other
representative markets. It only allows them to do so, if this is "reasonable".

24. Such discretion is also to be found in the second paragraph of Article 2(5). This is confirmed
by the authorities' practice in cases such as White phosphorus originating in Kazakhstan or
Okoumé plywood originating in China, which prove that the second subparagraph of Article 2(5)
does not oblige the EU to seek production cost information outside the country of origin in all
cases. This discretion is also confirmed by the judgments of the courts of the EU, where the use of
the words " may" and " entitled" shows that the second subparagraph of Article 2(5) allows the
investigating authorities a broad discretion in the choice of "reasonable sources of information".

4.2.1.2 The second subparagraph of Article 2(5) is not "as such" inconsistent with
the covered agreements

25. A fundamental characteristic of an "as such" challenge against a "measure" is that the
complaining party must establish that the measure is "necessarily inconsistent" with the covered
agreements. Irrespective of whether using "infor mation from other representative markets" is
consistent with Article 2.2 of the Anti-Dum ping Agreement, the second subparagraph of
Article 2(5) does not "require" the investigating authority to use such information "in all cases".

4.2.2. Argentina suggests an erroneou s interpretation of Article 2.2 of
the Anti-Dumping Agreement

26. Neither Article 2.2.1.1 nor any other part of the Anti-Dumping Agreement provides a rule
that explicitly deals with how costs should be determined when this proviso applies. Article 2(5) of
the Basic Regulation properly deals with this issue in a manner which is fully consistent with the
requirements of Article 2.2 of the Anti-Dumping Agreement.

27. First, the notion of "cost of production in the country of origin" is a legal one, but
establishing the cost of production in a particular case involves determinations of fact. Such
determinations are made with the aid of evidence. It cannot be excluded that evidence relating to
that determination might originate in other countries. Second, the possibility of using "any other
reasonable method" in Article 2.2.2(iii) implies that Article 2.2, as a whole, does not impose an
absolute prohibition on the use of data on the cost of production from countries other than the
country of origin, where the conditions of production and sale are not in the "ordinary course of
trade".

5. A
RGENTINA'S CLAIMS REGARDING THE ANTI-DUMPING MEASURES ON BIODIESEL

5.1. A RGENTINA'S CLAIM IN RELATION TO THE USE OF THE RECORDS OF THE INVESTIGATED COMPANIES

5.1.1. The application of a measure that is found to be "as such"
inconsistent with the covered agreements.

28. Argentina asserts that a finding that a provisio n is "as such" inconsistent with Article 2.2.1.1
of the Anti-Dumping Agreement would necessarily lead to a finding that the application of that
provision in a particular situation is also inconsistent with Article 2.2.1.1. Given that the second
subparagraph of Article 2(5) of the Basic Regulation is not "as such" inconsistent with
Article 2.2.1.1, the issue raised by Argentina is moot in the present case.

- C-7 -

5.1.2. The alleged "improper establishment of facts"

29. In regard to trade, the notion of "distort ion" implies an interference with the normal
operation of the market. The distortion identified in the Definitive Regulation is that caused by the
existence of an export tax on soya beans and oil. This tax had the consequence that the prices of
these products in the domestic market were lowere d, and that effect in its turn had consequences
for those companies that used these products.

30. The fact that, within the limits set by the state, market forces continue to operate, does not
diminish or cancel the distortive effect on trade of an export tax. Likewise, the fact that domestic
prices follow the trends in international prices is irrelevant in so far as the distortion accounts for
the difference between those prices.

31. As far as Argentina's assertions in relation to the "main raw material" for biodiesel are
concerned, the EU notes that it based its calculation of the biodiesel's cost of production and
normal value on the cost of soya bean already at the provisional stage and that the Argentine
companies under investigation had not expressed any concern or other comment, following
disclosure.

5.1.3. The interpretation of Arti cle 2.2.1.1 of the Anti-Dumping
Agreement

5.1.3.1 The text of Article 2.2.1.1 of the Anti-Dumping Agreement

32. Argentina repeats its main thesis that Article 2.2.1.1 allegedly refers to the "expenses
actually incurred by the producer". First, Article 2.2.1.1 does not include the words "expenses
actually incurred by the producer". Second, Article 2.2.1.1 uses the terms "costs associated with
the production and sale of the product". The word "associated" has a broader meaning than the
words "actually incurred" and captures a broader range of relations between the "costs" and the
"production".

33. Third, Argentina is wrong when it asserts that there is no relation between the word "costs"
and the notion of "prices", for purposes of Article 2.2.1.1. The Panel in EC – Salmon has confirmed
that the ordinary meaning of the terms "cost of production" may be considered to be the "prices to
be paid for the act of producing".

34. Fourth, the Panel Report in EC – Salmon confirms that the "cost of production" is linked to
the prices to be paid for the act of producing. By using the terms "to be paid", this Panel finding
confirms that the costs captured by Article 2.2.1. 1 are not the expenses that have actually been
incurred by the producer. Fifth, Article 2.2.1.1 uses the terms "costs associated to the production",
which the Panel in EC – Salmon has interpreted as the prices to be paid for the act of producing .
The provision does not include the terms "incurred by the producer". Sixth, in US – Softwood
Lumber V, both the Panel and Appellate Body accepted that an investigating authority is entitled to
find that the company records do not "reasonably reflect costs", where they do not reflect prices
charged at "arms-length" transactions.

5.1.3.2 The context of Article 2.2.1.1

35. Argentina asserts that Article 2.2.1.1 does not require the costs to be "reasonable", but that
it requires, instead, that "unreasonable" costs be "reasonably" reflected in the company records.
The EU has already shown that the Panel Report in Egypt – Steel Rebar , to which we refer,
contradicts Argentina's assertion.

36. Article 2.2.1.1 does not impose any obligations on companies in relation to their accounting
methods. It simply allows investigating authorities not to base their cost calculation on the
companies' records, where either of the two condit ions is not met. Argentina repeats the assertion
that Article 2.2.1.1 deals with a "cost allocation issue". The EU has already exposed the fallacy of
Argentina's assertion in the relevant section of this submission on the "as such" claim, to which we
refer.

37. Argentina also seeks to use as "context" the provisions of Article 2.2 of the Anti-Dumping
Agreement and of Article VI:1(b)(ii) of the GATT 1994. The EU has already dealt with Argentina's

- C-8 -

interpretation of Article 2.2 of the Anti-Dumping Agreement and the issue of "country of origin" in
the relevant section of this submission on the "as such" claim under Article 2.2 of the Anti-
Dumping Agreement and we refer to that section.

38. Article 2.2.2 conditions the use of the "actual data pertaining to production" costs on the
existence of ordinary course of trade . This supports the EU's thesis that it was not obliged to use
the "actual data pertaining to production and sales" of biodiesel as recorded in the investigated
companies' accounts, because the production and sale of biodiesel were not in the ordinary course
of trade. Moreover, where the amounts cannot be determined "on this basis", then Article 2.2.2(iii)
allows the investigating authorities to use " any other reasonable method ". It is noted that
Article 2.2.2(iii) does not impose any requirement that, in these circumstances, the data on the
cost of production must be those prevailing in the country of origin.

5.1.3.3 The object and purpose of the Anti-Dumping Agreement

39. Argentina asserts that the EU's interpretation "subverts the fundamental purpose of the
Anti-Dumping Agreement and uses the Agreement to address differences in price between the
export price of the product concerned and international prices, instead of comparable prices on the
domestic market". Argentina's assertion is wrong for a number of reasons.

40. First, the Definitive Regulation's dumping determination is not based on the difference
between the export price of biodiesel and the international price of biodiesel but on the comparison
between the export price of the Argentine biod iesel and the normal value of the Argentine
biodiesel. Second, the Definitive Regulation found that Argentine biodiesel was dumped into the EU
and, as a result of that dumping, the EU's industry suffered material injury. This is precisely the
object and purpose of the WTO anti-dumping rules, as expressed in Article VI:1 of the GATT 1994.

5.2. A
RGENTINA'S CLAIM IN RELATION TO "COUNTRY OF ORIGIN"

41. On the basis of the observations previously mentioned, the EU considers that Article 2.2 of
the Anti-Dumping Agreement and Article VI:1 of the GATT 1994 entitles the EU's investigating
authorities to use the data that they used in order to calculate the normal value of Argentine
biodiesel.

5.3. A
RGENTINA'S CLAIM IN RELATION TO THE USE OF COSTS ALLEGEDLY "NOT ASSOCIATED WITH THE
PRODUCTION AND SALE" OF BIODIESEL

42. The EU has already shown above that the term "associated" has a broader meaning than the
words "actually incurred", or "actually paid" and that the Panel Report in Egypt – Steel Rebar uses
the term "pertain to the production". Moreover, Article 2.2.1.1 mentions the costs associated with
the production, as opposed to the expenses incurred by the producer. As the Panel in EC – Salmon
has confirmed, the "costs of production" should be understood as the prices to be paid "for the act
of producing".

5.4. A
RTICLES 2.2 AND 2.2.2(III) OF THE ANTI-DUMPING AGREEMENT AND AMOUNTS FOR PROFITS

43. In setting the 15% margin of profit that the EU applied in constructing the normal value of
biodiesel for Argentinian exporters, the EU was ap plying Article 2(3), first subparagraph, of the
Basic Regulation, which follows the rule in Article 2.2 of the Anti-Dumping Agreement by specifying
that a constructed normal value "shall be calculated on the basis of the cost of production in the
country of origin plus a reasonable amount for selling, general and administrative costs and for
profits".

44. The EU submits that the method on the basis of which it determined the level of profits was
reasonable and that the resulting margin was itself reasonable for the reasons stated below.
Firstly, the figure is appropriate "on the basis of the reasonable amount of profit that a young and
innovative capital intensive industry of this type under normal conditions of competition in a free
and open market could achieve". Secondly, each situation must be assessed on its own merits
taking into account the specific circumstances of the case. Thirdly, the figure was not out of line
with that adopted in other investigations, for example that concerning biodiesel originating in the
United States. Fourthly, the short and medium term borrowing rate in Argentina was around 14%,
and it was reasonable to expect biodiesel producing companies to obtain a profit margin that

- C-9 -

exceeded this level. Fifthly, biodiesel companies enjoyed a level of profit higher than 15% during
the investigation period, albeit that they benefite d from distorted costs. Sixthly, comparison with
the target profit for the domestic industry in the absence of dumped imports is not relevant
because it has a different purpose than the construction of the normal value.

5.5. A
RTICLE 2.4 OF THE ANTI-DUMPING AGREEMENT AND ALLOWANCES FOR PRICE COMPARABILITY

45. The EU does not argue that a constructed price can never be the subject of adjustment in
order to secure a fair comparison. Furthermore, the whole of Argentina's case with regard to
Article 2.4 amounts to no more than an asse rtion that the method adopted by the EU for
constructing the normal value could not, without adjustment, result in a fair comparison. There is
no attempt to set the claim in a context, or to find guidance in the factors listed in Article 2.4 as
appropriate for consideration as justifying allowances for differences. Such neglect is not surprising
since none of them lends any support to the argument that Argentina presents.

5.5.1. Article 9.3 of the Anti-Dumping Agreement and Article VI:2 of the
GATT 1994 vis-à-vis the level of anti-dumping duties imposed

46. Argentina's claims under Article 9.3 of the Anti-Dumping Agreement and Article VI:2 of the
GATT 1994 are entirely consequential on the claims that the EU has answered in the preceding
paragraphs. Since Argentina has failed to establis h the earlier claims these consequential claims
must also fail.

5.6. A
RTICLES 3.1, 3.4, 3.5 OF THE ANTI-DUMPING AGREEMENT VIS -À-VIS PRODUCTION CAPACITY ,
UTILIZATION OF CAPACITY AND RETURN ON INVESTMENT

5.6.1. Legal arguments and claims

47. Argentina claims that the EU's treatment of "i dle" plant in the context of capacity does not
accord with the meaning of that word in the phrase "utilization of capacity" in Article 3.4 of the
Anti-Dumping Agreement.

48. There is no definition of "capacity" in the Agreement. In its Definitive Regulation the EU
excluded "idle" plant, that is to say plant that "was not in such a state that it would have been
available for use during the IP". Such plant woul d make no contribution to the "maximum amount
or number that can be … produced", and its exclusion therefore accords with the ordinary meaning
of the term "capacity".

49. The EU submits costs of relevant undertaking are taken into account when considering other
factors in the list in Article 3.4, notably the factor of "actual and potential decline in … profits".
"Utilization of capacity" is a factor distinct from costs and should be treated as such.

50. Whether the "idle" plants are included in the production capacity, or are excluded, the
implications regarding injury are the same. In the first case the low capacity utilization is an
indication of injury, in the second the closing or mothballing of plants is an indication of injury.

51. Argentina accuses the EU of not making available the "publicly available material" relating to
idle capacity. There is no such obligation in any of the provisions of the Agreement invoked by
Argentina in its Panel Request, and it is therefore outside of the Panel's terms of reference.

52. Argentina alleges that the presentation of data in the Definitive Regulation obstructed the
arguments that the exporters wished to make about the causes of the EU's injury. However, all the
data, concerning both "idle" and non-idle capacity were available to the exporters, and they were
in no way inhibited from presenting arguments to the effect that the idle plants were a cause of
injury. The factors listed in Article 3.4 are not exclusive.

53. Argentina also raises the issue of proper "eva luation" in regard to the issue of return on
investment which it alleges was based on a different dataset to that used for production capacity.
The EU has already shown that this issue is outside the terms of reference of the Panel.

54. Argentina argues that an assessment of "utilization of capacity" for the purposes of
Article 3.4 that is based on a definition of capacity that is inconsistent with that provision, and was

- C-10 -

not based on positive evidence, etc., in some way disqualifies that assessment from contributing
to a finding of causation vis-à-vis the utilization of capacity. However, Argentina cannot shortcut
the requirements of Article 3.5, which addresse s the issue of causation, by invoking similar
concepts in Article 3.4.

55. Argentina also alleges that the EU gave inadequate consideration to the issues of low
capacity utilization and overcapacity. The data show s that the EU industry installed more capacity
than there was demand in the EU, and possibly more capacity than EU demand plus export
demand. However, the data available for the Definitive Regulation showed that capacity utilization,
although low, was actually increasing and conseque ntly could not have been a cause of injury in
the sense of Article 3.5.

56. Argentina also alleges that the capital intensive nature of the biodiesel industry aggravates
its sensitivity to overcapacity as the cause of injury. However, this capital intensive nature is a
constant feature of the industry, whereas the injury to the EU industry has not been constant but
has developed over the period of investigation.

5.7. A
RTICLES 3.1 AND 3.5 OF THE ANTI-DUMPING AGREEMENT VIS -À-VIS LONG -TERM COMMERCIAL
STRATEGY

57. Argentina argues that the mere fact that imports by the EU industry from Argentina and
Indonesia aggravated the low capacity utilization rate invalidates the conclusion that these imports
did not break the causal link between the dumped imports and the injury to the EU industry. The
fact that the chain of causation was indirect does not mean that it did not exist. Consequently, this
was not an injury caused by an "other factor" wh ich, under Article 3.5, need to be separated and
distinguished.

5.8. A
RTICLES 3.1 AND 3.5 OF THE ANTI-DUMPING AGREEMENT VIS-À-VIS DOUBLE COUNTING

58. The evidence in question (Exhibit ARG-37, p. 35) concerned only one country, France, and
came from only one producer, Diester. The evidence presented by Argentina itself indicates that
the fall in production attributed to the French scheme in year 2011 was expected to be more than
cancelled in 2012. The Definitive Regulation no tes the financial performance of the sampled
EU producers, which included Diester, declined only after the ending of the scheme.

59. Argentina presents no evidence of detrimen tal consequences of double counting in other
EU Member States, and, as it explains in the Definitive Regulation, the EU could find none.

5.9. A RTICLES 3.1 AND 3.5 OF THE ANTI-DUMPING AGREEMENT VIS-À-VIS VERTICAL INTEGRATION, ETC.

60. Almost all of the features identified by Argentina are constant in their nature and effects and
therefore do not qualify as "causes" of injury within the meaning of Article 3.5. They cannot
therefore be responsible for the deterioration in the condition of the industry which the EU has
determined constitutes "injury" within the meaning of Article 3.4.

61. Even if consideration is given to these factors Argentina never explains why vertical
integration is a more efficient way of operating in this industry. Nor is it clear whether the
advantage is claimed because of common ownership (which in any case does not extend to
growers of beans) or geographic proximity.

6. C
ONCLUSION

62. Argentina has failed to make a prima facie case on any of its claims. The EU has shown that
all of the claims pursued and developed in Argent ina's first written submission are unfounded and
based on erroneous interpretations of the covere d agreements. The EU respectfully requests the
Panel to reject all of Argentina's claims.

- C-11 -

ANNEX C-2
EXECUTIVE SUMMARY OF THE SECOND WRITTEN
SUBMISSION OF THE EUROPEAN UNION
1. I NTRODUCTION

1. The European Union's second written submission focuses on the issues raised by Argentina
in its Opening Statement and in its Replies to the Panel's Questions during the first substantive
meeting with the Panel.

2. T
ERMS OF REFERENCE

2. During the First Hearing, Argentina confirmed that it has abandoned the claims challenged
by the EU as being outside the Panel's terms of reference. Argentina has also abandoned the
claims against "implementing measures and related instruments" and "related measures and
implementing measures". This confirms the co nsequences described in paragraph 13 of the
European Union's first written submission.

3. P
RELIMINARY ISSUES

3.1. T HE CLAIMS UNDER ARTICLE 2.1 OF THE ANTI-DUMPING AGREEMENT AND ARTICLE VI:1 OF THE GATT

3. Argentina accepts in essence that Article 2.1 of the Anti-Dumping Agreement (ADA) and
Article VI:1 of the GATT cannot serve as a legal basis for "distinct" claims in WTO dispute
settlement proceedings. Both parties agree on this point. However, Argentina asserts that its
claims under these two provisions are "consequential" and dependant on its claims under
Articles 2.2 and 2.2.1.1 of the ADA.

4. First, the EU considers that the reasoning of the Panel in EU – Footwear supports the
rejection of Argentina's corresponding claims in the present case. In that case the Panel argued
that "under China's approach all dumping related claims could be brought under Article 2.1 alone,
supported by the assertion that the obligations as serted are 'created' elsewhere". Importantly, the
Panel also rejected China's claims under Article VI:1 of the GATT, stating that its analysis on the
claims under Article 2.1 of the ADA also applied.

5. Second, Argentina's assertion that its claims under these two Articles are "consequential"
and dependant on other claims under different legal provisions essentially constitutes a request to
the Panel to exercise judicial economy on these claims. Since Argentina recognizes that these
claims do not aim at protecting some specific and distinct legal right or interest, the EU doubts
whether raising them is compatible with the Members' obligations under Article 3.10 of the DSU.

6. Third, there is nothing in Argentina's Panel Request that would indicate that Argentina was
making some claims as "distinct" and others as "consequential". Indeed, the references to
Article 2.1 of the ADA and Article VI:1 of the GATT seem to be on an equal footing with the
references to other Articles in Argentina's Panel Request.

7. The conclusion is that Argentina's new assertions on the "consequential" nature of its claims
under Article 2.1 of the ADA and Article VI:1 of th e GATT must be rejected for lack of proper legal
basis.

8. Moreover, in the present case both parties agree that there were no sales of biodiesel in
Argentina in the ordinary course of trade. However, in its response Argentina fails to discuss the
importance of the terms "in the ordinary course of trade" in Article 2.1 and the terms "when there
are no sales of the like product in the ordinary co urse of trade" in the first line of the chapeau of
Article 2.2. As a result, Argentina's statement fails to rebut the EU's objection that the facts of this
case fall outside the scope of Article 2.1.

- C-12 -

9. The conclusion is that Argentina's claims under Article 2.1 of the ADA and Article VI:1 of the
GATT are manifestly unfounded in law and must be summarily rejected by the Panel.

3.2. T
HE CLAIMS UNDER ARTICLE 2.4 AND ARTICLE 9.3 OF THE ANTI-DUMPING AGREEMENT

3.2.1. Argentina's claims fall outside the scope of these provisions

10. The EU argues that Article 2.4 does not appl y to the investigating authority's establishment
of normal value and supports its interpretation with the Panel Report in Egypt – Steel Rebar . In
that case, the Panel found that Article 2.4 "refers to the comparison of export price and normal
value; i.e., the calculation of the dumping margin" and has to do "not with the basis for and basic
establishment of the export price and normal value (which are addressed in detail in other
provisions), but with the nature of the comparison of export price and normal value".

11. In the case at hand, Argentina considers that investigating authorities have failed to
calculate properly the product's normal value, resulting in a comparison between the normal value
and the export price that was not "fair" (hence the alleged violation of Article 2.4) and a
calculation of the "wrong" dumping margin. According to Argentina, the "wrong" dumping duty
calculated was higher than the "correct" dumping margin (hence the alleged violation of
Article 9.3).

12. Therefore, Argentina is challenging the calculation of the normal value itself (which falls
within the scope of Article 2.2) and not the " nature of the comparison" between normal value and
export price, which is the subject matter of Arti cle 2.4, or the comparison of the anti-dumping
duties with the dumping margin, which is the su bject matter of Article 9.3. Argentina's claims
consequently fall outside the scope of these articles.

13. The EU draws further support for this view from the Panel Report in EC – Tube or pipe
fittings. In that case, Brazil argued that the EU had used some "wrong" data when constructing
normal value and, consequently, had calculated the "wrong" normal value in breach of Articles 2.2
and 2.2.2 of the ADA. Brazil also argued that the EU had "breached the requirement to make a fair
comparison between normal value and export price", in violation of Article 2.4. Given the similarity
of these claims with the present case, the EU re spectfully submits that the Panel should reject
Argentina's claims under Article 2.4.

14. In the specific circumstances of the present case, the rejection of Argentina's claims under
Article 2.4 necessarily leads to the rejection of Argentina's claims under Article 9.3 because
Argentina's case lies solely on the alleged "incorrect" calculation of the dumping margin.

3.2.2. Argentina has failed to make a prima facie case

15. First, Argentina should have shown that the definitive anti-dumping duties are higher than
the definitive dumping margins. Instead of that, Argentina compares the definitive anti-dumping
duties with the provisional dumping margins.

16. Second, in a Reply to a Panel's Question, Argentina reproduces an excerpt from the Panel
Report in EU – Footwear (China) which is not relevant for the present case, because it addressed a
very different situation and a very different claim. Indeed, China had only argued that Article 2.4
imposed obligations on the investigating authority when it was constructing normal value whereas
Argentina asserts that its Article 2.4 claim does not relate to the construction of normal value.

17. Moreover, Argentina refers to that excerpt ou t of context. The sentence in the Panel Report
immediately following Argentina's excerpt states that "these allowances can only be made after
the normal value and the export price have been established".

18. Third, the Panel Report in EU-Footwear (China) actually supports the EU's position in the
present case. That Panel Report confirms that Article 2.4 allows investigating authorities the
discretion to make any "due allowances" that they consider necessary and to follow any
"methodology" that they consider appropriate.

19. These Panel findings are in line with the Panel Report in EC – Tube or Pipe Fittings which
noted "the absence of any precise textual guidance in the Agreement concerning how adjustments

- C-13 -

are to be calculated", as well as the "absence of any textual prohibition on the use of any
particular methodology adopted by an investigating authority with a view to ensuring a fair
comparison".

20. In the present case, Argentina has failed to show that the EU's investigating authorities have
exercised their discretion in an arbitrary manner when comparing the normal value with the export
price and establishing the dumping margin. This is an additional reason for which Argentina's
claims under Article 2.4 must be rejected.

4. A
RGENTINA HAS FAILED TO MAKE A PRIMA FACIE CASE ON ITS "AS SUCH" CLAIMS

4.1. I NTRODUCTION

21. The EU has argued that, in order to make a prima facie case on its "as such" claim under
Article 2.2.1.1 and Article 2.2 of the ADA, Argentina had to establish inter alia (a) the "precise
content" of the measure that it challenges; and (b) that the challenged "measure" constitutes a
binding requirement that requires the investigating authorities to apply it in all cases in a manner
which is inconsistent with the covered agreements.

4.2. T
HE REQUIREMENT TO ESTABLISH THE "PRECISE CONTENT" OF THE WRITTEN "RULE OR NORM"

22. In its recent Report in Argentina-Import Measures , the Appellate Body found that when
bringing an "as such" challenge against a "rule or norm", the complaining party must clearly
establish, inter alia , the "precise content of the challenged measure, to the extent that such
content is the object of the claims raised".

23. In the present case, Argentina has confirmed that it challenges "as such" a written piece of
legislation, namely the second sub-paragraph of Article 2(5) of the Basic Regulation. However,
Argentina has failed to establish the "precise content" of that written piece of legislation.

24. First, the EU showed that Argentina has co nfused the scope of the first sub-paragraph of
Article 2(5) with the scope of the second sub-pa ragraph of Article 2(5) of the Basic Regulation.
This is confirmed by the evidence that Argentina it self has put on the record of the case such as
the judgment of the General Court in Acron. The judgments of the EU's courts clearly show that
the second subparagraph of Article 2(5) does not have the "precise content" asserted by
Argentina.

25. Moreover, the EU's authorities were already ma king the same determinations with respect to
company records on the basis of the first subparagraph of Article 2(5) at a time when the
second subparagraph of Article 2(5) did not even ex ist. A good example of this is the Regulation
concerning Aluminium foil originating in China and Russia which included the legal test found in the
first sentence of Article 2.2.1.1 of the ADA and the first subparagraph of Article 2(5) of the
Basic Regulation. Additionally, this regulation also included the term "reliable", used by the Panel
in US – Softwood Lumber V to describe the meaning of the terms "reasonably reflect costs" in
Article 2.2.1.1 of the ADA.

26. Second, Argentina itself has acknowledged that the "measure" it challenges is not found in
the text of the second subparagraph of Article 2(5) . Instead, it challenges the EU's application of
Article 2(5) of the Basic Regulation only in certain specific circumstances, namely where "the
prices of the inputs have been found to be artificially low or abnormally low because of an alleged
distortion". Therefore, Argentina has failed to establish the "precise content" of the second
subparagraph of Article 2(5) of the Basic Regulation.

27. In US – Carbon Steel (India) , India presented similar claims. However, the Appellate Body
rejected India's claims and found that "it is not clear why a number of instances of the application
of the measure should in this case conclusively establish the meaning of the measure at issue in
general, which in this case is confined to [the defending party's legislation]". In the present case
Argentina has also failed to establish the mean ing of the second subparagraph of Article 2(5) in
general. Consequently, this prevents Argentina from making a prima facie case on any of its "as
such" claims, including under both Article 2.2.1.1 and 2.2 of the ADA.

- C-14 -

28. Third, Argentina has offered a number of different and inconsistent descriptions of the
"content" of the measure that it is challenging both under Article 2.2.1.1 and under Article 2.2 of
the ADA. For example, in paragraph 25 of its Opening Statement, Argentina asserts that the
second subparagraph of Article 2(5) offers the authorities discretion and does not oblige them to
act in any specific way. In contrast, in paragraphs 54, 68, 70 and 72 of this statement, Argentina
asserts that "there is no discretion" and that the provision is mandatory.

29. The consequence is that Argentina fails to establish the "precise content" of the
second subparagraph of Article 2(5). In these circumstances, it is impossible for the Panel to
understand precisely what is the "matter" before it.

30. When the Panel prompted Argentina to show the source of these varying descriptions in the
text of the second subparagraph of Article 2(5), Argentina failed to do so. Indeed, its reliance on
Recital 4 of Regulation 1972/2002 is misplaced. This Recital cannot be used as a source of
interpretation of all the situations covered by Article 2(5) of the Basic Regulation because it refers
to "particular market situation" and makes no reference to situations where there are "no sales in
the ordinary course of trade", which is the situatio n of the present case. Also, the first sentence of
Recital 4 clearly shows that the determinations of whether the records "reasonably reflect costs"
were already being made under the first subparagraph of Article 2(5), which already existed at the
time of the introduction of Recital 4.

31. Lastly, the European Union has provided exampl es of investigations to demonstrate that the
second subparagraph of Article 2(5) does not oblige the investigating authorities to seek the cost-
information outside the country of origin in all cases. In its response, Argentina argues that these
examples are not relevant, because they do not "concern a situation in which the prices were
found to be abnormally low or artificially low because of a distortion". This response confirms that
Argentina does not challenge "as such" the second subparagraph of Article 2(5), but the purported
application of that provision in certain specific examples.

32. The conclusion is that Argentina has failed to establish the "precise content" of the
second subparagraph of Article 2(5) of the Basic Re gulation (or in the words of the Appellate Body
the "meaning" of the second subparagraph of Article 2(5) " in general ") for purposes of its "as
such" claims under either Article 2.2.1.1, or Article 2.2 of the ADA.

4.3. T
HE REQUIREMENT TO ESTABLISH THAT THE CHALLENGED MEASURE MANDATES CONDUCT THAT IS NECESSARILY
INCONSISTENT WITH THE COVERED AGREEMENTS

33. In US – Carbon Steel (India) , India had put forward two alternative claims. First, that the
covered agreement did not allow the defending party's investigating authorities to take certain
actions. Second, that although the measure at issue provided that a specific administrative action
may be taken (i.e. "an inference may be drawn"), it more accurately meant that in all cases the
defending party's investigating authorities necessarily took that action. In support of its claims,
India relied on the practice developed by the defending party's authorities but did not challenge
"as such" that practice.

34. In relation to India's first claim, the Appellate Body rejected it, noting that the measure was
framed in "permissive terms". In relation to Indi a's second claim, the Appellate Body found that
the challenged measure was "a discretionary measure rather than a binding requirement" to act in
a certain way. The Appellate Body also found that the "practice" identified by India was not
required by the measure, but was rather develo ped pursuant to the discretion afforded by the
measure. This meant that the "practice appeared to be distinct and separate from the measure at
issue" and was not necessarily applied in all instances.

35. In the present case, Argentina originally claimed that the second subparagraph of
Article 2(5) "establishes a rule which is mandatory". However, according to its Opening Statement
Argentina appears to have changed its claim. It now advances a new theory, pursuant to which
"even if" the second subparagraph of Article 2(5) is discretionary and not mandatory, "the fact
that the measure provides for the possibility" to act in a certain way "will necessarily be
inconsistent with Article 2.2.1.1" of the ADA. Ar gentina has not provided further explanation about
this new theory. Dealing with a similar situation in the case EC – Fasteners , the Appellate Body
found that belated modifications of the nature of the complaining party's claims give rise to due
process issues.

- C-15 -

36. In any event, this modification confirms th at Argentina has failed to establish the "precise
content" of the second subparagraph of Article 2(5) of the Basic Regulation and, in contrast, offers
two contradictory theories of that "content". Th e EU respectfully submits that the Panel should
reject the "as such" claims of Argentina in the present case, just like the Appellate Body rejected
India's "as such" claims in US – Carbon Steel (India).

37. Argentina's first theory is that "the use of the verb 'shall' in Article 2(5),
second subparagraph is evidence of the mandatory nature of the measure". Like India US –
Carbon Steel (India), Argentina relies on the EU's purported "practice" but does not make a claim
that the "practice" itself constitutes a WTO-inconsistent measure.

38. The Panel should apply the Appellate Body's legal test in US – Carbon Steel (India) , namely
to assess whether the second subparagraph of Article 2(5) of the Basic Regulation is "a
discretionary measure", or "a binding requirement" to act in the same way in all cases.

39. Moreover, the Panel should also take into consideration the General Court judgments put on
the record by Argentina and showing that, just like in US – Carbon Steel (India) , the exercise of
the investing authorities' discretion is subject to "rules and disciplines separate from" the
second subparagraph of Article 2(5), namely the general principles of the EU administrative law.

40. The Panel should conclude that Argentina has failed to show that the second subparagraph
of Article 2(5) "mandates" the investigating authorities to act inconsistently with Article 2.2.1.1, or
Article 2.2 of the ADA. Consequently, Argentina's "as such" claims must be rejected.

41. Argentina's new second theory is that the "mere fact that Article 2(5), second subparagraph,
provides for the possibility [to find that records do not reasonably reflect costs because they are
artificially low or abnormally low] would necessarily render the measure inconsistent with
Article 2.2.1.1. The same reasoning applies to Argentina's claim under Article 2.2".

42. If the Panel decides that it has the author ity to assess this new belated theory, then the
Panel should apply the legal test of US – Carbon Steel (India) , namely to "assess whether,
pursuant to the authorisation contained in the text of the measure, the investigating authority is
required to act inconsistently" with the covered agreements.

43. In addition, the Panel should also take into consideration the fact that there have been
examples where the authorities have used domestic sources from the country of origin (like in the
case of Okoume Plywood Originating in China ), or the accounts of the parent company (like in the
case of White Phosphorus Originating in Kazakhstan ) in order to establish the "reasonable" costs.
This evidence shows that the authorities' use of some "other reasonable basis" depends on the
particular circumstances of each case. This means that the second subparagraph of Article 2(5)
does not require the investigating authority to act inconsistently with the covered agreements.

44. The Panel shall conclude that Argentina's "as such" claims must be rejected.

5. A
RGENTINA SUGGESTS AN ERRONEOUS INTERPRETATION OF ARTICLE 2.2.1.1

5.1. A RGENTINA'S MAIN THESIS

45. Argentina's claim is premised on the theory that the terms "reasonably reflect the costs
associated with the production and sale of the pr oduct under consideration" in Article 2.2.1.1 of
the ADA mean that the records should include the expenses actually incurred by the company
under investigation. Argentina's theory is that the costs do not need to be "reasonable"
themselves, but that the records need to reflect "reasonably" the expenses actually incurred.

46. Argentina has confirmed its claims and the fact that the first sentence of Article 2.2.1.1
relates exclusively to a cost allocation issue, in its Replies to the Panel's Questions. Argentina also
provided a list of the types of situations that, in its view, would allow an investigating authority to
disregard the recorded costs; all of them relate to the allocation of costs that have actually been
incurred.

- C-16 -

47. It is important to note that contrary to the view of certain Third Parties, Argentina's claim
does not entertain the possibility of disregarding the recorded costs in situations where there have
been intra-group transactions on a non-arms' length basis.

48. Therefore, Argentina has confirmed that its claim is premised on a specific legal
interpretation of Article 2.2.1.1: (a) that the proviso on "reasonably reflect the costs" relates
exclusively to the records and not the costs, i.e. , that the costs themselves do not need to be
reasonable; (b) that the records meet the condition of the proviso where they report the costs that
have actually been incurred by the investigated company; (c) that the proviso of Article 2.2.1.1
relates exclusively to issues of proper allocation of the costs that have actually been incurred by
the investigated company; and (d) that investigating authorities can never disregard or adjust the
costs that have actually been incurred by the investigated company for other reasons, even where
these costs are distorted.

49. This means that, in order to make a prima facie case on its "as such" claim, Argentina must
establish that this is indeed the proper interpreta tion of Article 2.2.1.1. This also means that the
Panel is not required to assess whether the second subparagraph of Article 2(5) of the Basic
Regulation is consistent with some other interpretation of Article 2.2.1.1 of the ADA.

5.2. A
RGENTINA SUGGESTS AN ERRONEOUS INTERPRETATION OF ARTICLE 2.2.1.1 OF THE ANTI-DUMPING
AGREEMENT

50. First, the EU notes that the "legislative history" leading to the adoption of Article 2.2.1.1
actually contradicts: (a) Argentina's assertion that the proviso relates only to cost allocation
issues; and (b) Argentina's excessively restrictive interpretation of the terms "reasonably reflect
the costs". Therefore, Argentina fails to substantiate its interpretation of Article 2.2.1.1.

51. Second, Argentina's discussion of the Panel Report in US – Softwood Lumber V is not
convincing because Argentina focuses on a statement of the Panel which it reads out of context. A
more detailed analysis of the Panel's findings shows that they actually contradict Argentina's
claims in the present case. Indeed, the Panel's finding was that Article 2.2.1.1 does not mandate,
or require investigating authorities to reject the recorded costs. In contrast, the Panel did not find
that Article 2.2.1.1 does not allow investigating authorities to disregard the recorded costs, where
they consider that they are not "reasonable" because they do not reflect market values. Therefore,
the statement of the Panel, to which Argentina refers, has limited scope: the Panel finds that the
investigating authorities are not obliged to treat the recorded costs in a certain way; but the Panel
does not find that the authorities are not allowed to disregard the recorded costs as
"unreasonable", where these costs do not reflect market values.

52. Quite to the contrary, the analysis of the entire reasoning of the Panel confirms that
Article 2.2.1.1 allows authorities to disregard the recorded costs, where they do not reflect market
values. The Panel expressly acknowledged that the recorded costs would be "reasonable" for
purposes of Article 2.2.1.1, only if it could be shown that they corresponded to market prices.

53. In the case of Tembec, the investigating authority followed a methodology which used the
"market values" as "benchmark" and compared the values recorded in the books with market
values in order to determine whether the recorded values were "reasonable" for purposes of
Article 2.2.1.1. The Panel's treatment of this methodology it important for the present case
because it confirms that the notion of "reasonably" in the first sentence of Article 2.2.1.1 is not
limited only to the records, but also covers the recorded costs and values. It also confirms that
investigating authorities can use market prices as "benchmarks" in order to confirm the
"reasonableness" of the recorded costs and values. The same conclusions are drawn from the
Panel's assessment of the West Fraser investigation which accepted that "an arm's length test"
may be carried out in order to determine whether these costs are "reliable", and that the recorded
costs may be adjusted accordingly. The Panel's a pproach was confirmed by the Appellate Body on
appeal.

54. The conclusion is that the Panel Report in US – Softwood Lumber V directly contradicts the
main thesis of Argentina's challenge and leads to the rejection of Argentina's claims under
Article 2.2.1.1 of the ADA.

- C-17 -

55. Third, Argentina's argumentation is based on the theory that a dumping determination
cannot rest on "external factors unrelated to the exporter or producer". However, Article VI of the
GATT does not limit the notion of dumping only to situations that arise out of the exporters'
"voluntary" pricing behaviour. Quite to the contrary, the notion of dumping also covers situations
that are created by the action of governments and are, in that sense, "exogenous" or "external" to
the "intention" of the exporters.

56. This interpretation is supported by considering the Note 2 Ad Article 6 paragraphs 2 and 3
(i.e. "Multiple currency practices can in certain circumstances constitute a subsidy to exports […]
or can constitute a form of dumping […] which may be met by action under paragraph 2 [of the
Article VI of the GATT]. By "multiple currency pr actices" is meant practices by governments or
sanctioned by governments") , with due regard to the negotiating history of the Note and the
context in which it appears. Its purpose is filling out the definitions contained in those provisions.

57. This has two important implications. Firstly, the text of the GATT expressly provides that
government action can lead to a situation of dumping and that importing countries may impose
anti-dumping duties. The consequence is that Arge ntina's legal interpretation of Article 2.2.1.1
fails. Given that this erroneous legal interpretation of Article 2.2.1.1 is the basis for both (a) the
"as such" claim against the second subparagraph of Article 2(5) of the Basic Regulation; and (b)
the claim against the specific anti-dumping measure on biodiesel, Argentina cannot make a prima
facie case on either of these claims.

58. Secondly, the fact that the GATT expressly refers to multiple currency practices as a type of
government measure that may lead to a situatio n of dumping provides some insights on the
nature and market effects that such measures should have in order to fall within the scope of the
dumping provisions in Article VI and the ADA.

59. Multiple currency practices involve a government induced manipulation of the ordinary
operation of the market, which substantially affects and distorts pricing. These are precisely the
characteristics of Argentina's export tax on so ya beans. Argentina has expressly acknowledged
that (a) the export tax on soya beans is a measure of the Government of Argentina and (b) that
the effect of the export tax on soya beans is to reduce the domestic price of soya beans in
Argentina in comparison to the level that this domestic price would have in the absence of the
export tax. Consequently, Argentina's export tax falls squarely within the types of
government measures that may lead to dumping and that "may be met by action" under
Article VI:2 of the GATT.

60. Fourth, Argentina makes certain inconclusive statements in relation to the Panel Report in
EC – Salmon . Firstly, Argentina fails to address the Panel's choice of words, contradicting its
theory that Article 2.2.1.1 restricts the notion of "reasonably reflect costs" only to those that have
actually already been incurred by the investigated company.

61. Secondly, Argentina asserts that the price used by the EU's investigating authorities "is
clearly not the price to be paid by the Argentinean producers for domestic purchases of soybeans
in Argentina". This contradicts Argentina's previo us acknowledgements regarding the "price to be
paid" by the Argentinian producers for domestic purchases of soya beans, in the absence of the
government measure that distorts the price of soya beans.

62. It is noted that the information provided by Argentina in its Replies to the Panel's Questions
confirms that the export tax on soya beans indeed constitutes a mechanism for distorting the price
of soya beans. Argentina has also confirmed that the reason for which it determines this "reference
FOB price" is to "monitor possible pricing divergences in the local market. The effect of that
mechanism is to ensure that the resulting domestic price for soya beans is below the domestic
price that would have prevailed in the absence of the export tax.

63. Therefore, the way Argentina implements the export tax on soya beans constitutes, is in
essence, a mechanism of intervention on the domestic price of soya beans.

64. Fifth, Argentina makes some statements in relation to the terms "associated with the costs"
in Article 2.2.1.1 of the ADA, which are not conv incing. Indeed, Argentina qualifies the "reference
FOB price" as a "hypothetical benchmark price" an d asserts that the FOB reference price is "not a
'real' price in the sense that it is an average th at is used for the calculation of the export tax.

- C-18 -

Argentina thus contradicts its previous acknowledgement that in the absence of the export tax, the
domestic price of soya beans would have been th e "reference FOB price" less the transaction and
fobbing costs.

65. In the present case, the investigating authorities took as a basis the FOB reference price
(which the Government of Argentina itself had determined) and followed exactly the methodology
that Argentina itself acknowledges would lead to the calculation of the domestic soya bean prices
in the absence of the export tax.

66. The conclusion is that Argentina's interpretation of Article 2.2.1.1 of the ADA is erroneous.
Consequently, Argentina fails to make a prima facie case on the claims that it bases on
Article 2.2.1.1.

6. A
RGENTINA SUGGESTS AN ERRONEOUS INTERPRETATION OF ARTICLE 2.2 OF THE ANTI-DUMPING
AGREEMENT

67. First, Argentina's main assertion is that the distinction between costs and evidence
pertaining to the determination of costs suggested by the EU is "artificial" and has no basis in the
text or the context of Article 2.2. However, the ADA itself makes such a distinction, when it
contains a specific Article entitled "Evidence"(i.e., Article 6). Therefore, Argentina's assertion is
unfounded.

68. Second, Argentina advances various arguments on the interpretation of Article 2.2.2(iii) of
the ADA. Its main argument is that "the use of data other than that of the country of origin must
explicitly be provided for" and that Article 2. 2.2 of the ADA supposedly "does not provide for a
similar exception or authorisation for the determination of the cost of production". Argentina also
asserts that "Article 2.2.2 lays down the criteria for determining the reasonable amounts of SG&A
and for profits only and not for the cost of production". As well as "the fact that Article 2.2.2(iii)
refers to any other reasonable method for the de termination of SG&A and profits can certainly not
be applied to the determination of the cost of production".

69. Argentina's arguments are not convincing because the chapeau of Article 2.2.2 and
Article 2.2.1.1 use the same terms to refer to the same production and sales costs. There is no
reason for which the "any other reasonable method" of Article 2.2.2(iii) would relate only to the
production and sales costs of the chapeau of Arti cle 2.2.2, but not the same production and sales
costs mentioned in Article 2.2.1.1.

70. Third, despites questions from the Panel, Argentina has failed to explain how an
investigating authority could determine costs in a situation where there are no usable data from
the country of origin.

71. Consequently, Argentina has failed to substantiate its interpretation of Article 2.2 and has
failed to make a prima facie case on the claims that it bases on this provision.

7. A
RGENTINA HAS FAILED TO MAKE A PRIMA FACIE CASE ON ITS CLAIMS UNDER ARTICLE 2.2.1.1 AND
ARTICLE 2.2 OF THE ANTI-DUMPING AGREEMENT AGAINST THE ANTI-DUMPING MEASURE ON
BIODIESEL

72. Argentina has failed to show that the prices used by the EU's investigating authorities were
from "outside the country of origin". Argentina has simply asserted that "the EU did not use the
domestic price of soybeans" and that "the EU failed to construct normal value on the basis of the
cost of production in the country of origin".

73. The EU considers that, the prices used by the investigating authorities were from the
country of origin and reflected the cost of soya beans that Argentine producers of biodiesel would
have to incur, in the absence of the export tax.

74. Consequently, Argentina fails to make a prima facie case on its claims against the anti-
dumping measure on biodiesel under Article 2.2 of the ADA, irrespective of whether that provision
allows the use of evidence from outside the country of origin, or not.

- C-19 -

8. A RGENTINA HAS FAILED TO MAKE A PRIMA FACIE CASE ON ITS CLAIMS IN RELATION TO PROFITS

75. In its Replies to the Panel's Questions, Arge ntina appears to draw a distinction between the
"reasonable method" of Article 2.2.2(iii) and the figure of profits to be established. Argentina notes
that Article 2.2.2(iii) does not "use the terms 'any reasonable amount'" and, on that basis,
Argentina appears to assert that the profit figure does not need to be "reasonable", but that the
methodology must be "reasonable". This assertion that is clearly wrong. The chapeau of Article 2.2
refers to a "reasonable amount for administrative, selling and general expenses and for profits".

76. In any event, the methodology followed by th e investigating authorities in the present case
closely resembles the methodology followed by th e US authorities and approved by the Panel in
US – Softwood Lumber V , albeit in order to calculate a different cost item. This is clearly a
"method" for the calculation of the profits that is "reasonable".

77. In these circumstances, the EU submits that the Panel should reject Argentina's claim, just
as the Panel rejected Canada's "post hoc rationalisation" objections in US – Softwood Lumber V.

9. A
RTICLE 3 CLAIMS

78. Argentina persists in accusing the EU of having adopted the wrong definition of capacity. In
the provisional and definitive Regulations the EU described the state of the various EU biodiesel
producing facilities, and gave a clear explanation of the criterion it applied in assessing utilisation
of capacity. While rejecting the EU's explanation Argentina has quietly abandoned its own criterion
of capacity based on the notion of what a plant was "designed to produce". Instead, it proposes a
new criterion of "potential" for production. Its suggestion that the negotiating history contributes
to the interpretation of the text lacks all conviction, and trails off into platitude.

79. Argentina's only interest in the data on "capac ity utilisation" is to proceed to the further step
of identifying it as an "other factor" cause of injury. During the investigation the exporters
suggested that the injury was caused through over-expansion. However, the evidence obtained by
the EU and Argentina itself acknowledges that what it calls the "enormous overcapacity" is
"continuous" and "existed in 2009", i.e. throughout the period considered. To the contrary, the EU
believes that capacity utilisation is an indicator of the level of efficiency at which an industry is
operating.

80. Argentina again accuses the EU of failing to make an objective assessment in its evaluation
of production capacity and utilisation of capacity. The best answer that the EU can give is to ask
the Panel to examine the careful justification for its conclusions that was provided by the EU, in
particular in the Definitive Regulation at Recitals 130 to 133, and 161 to 171. These passages
speak for themselves.

81. On the issue of causation, Argentina's argument hypothesises the "total elimination of
imports originating in Argentina and Indonesia" as compared to the EU volume of production. The
EU does not see what would be learnt from such an exercise. Indeed, the aim of the causation
analysis, in situations where there are said to be "other factors", is to separate and distinguish the
various causes.

82. Argentina suggests that these imports and the anti-dumping proceedings are being
choreographed by multinational companies for ends of their own. It means that corporate groups
"might have decided that their interests were better served by activating trade defence
mechanisms in the European Union". Firms producing in the EU are, regardless of ownership, in
principle entitled to the remedies provided by the anti-dumping legislation if the conditions set out
there are satisfied. The idea that a firm might see an advantage in having its own goods subjected
to anti-dumping duties seems somewhat far-fe tched. Furthermore, the EU (consistent with
Article 4.1(i) of the ADA) has already excluded three producers from the definition of the
EU industry because the high level of their imports from Argentina.

83. The EU maintains that Argentina's claim that the EU, when examining injury in accordance
with Article 3.4 of the ADA, failed to properly consider the factor 'return on investment' is outside
the Panel's terms of reference because it was not mentioned in the Panel Request. The EU
supports its contention referring to the Appellate Body Report China – Raw Materials in which the

- C-20 -

claimants "failed to present the legal basis for their complaints with sufficient clarity to comply
with Article 6.2 of the DSU".

84. The importance of examining each of the fa ctors listed in Article 3.4 of the ADA has been
stressed by the Appellate Body in Thailand-H-Beams. There are fifteen of these factors. Clearly it
would not be sufficient for the panel request to merely state that they had not been properly
examined without indicating which factors in particular the failure lay.

85. Argentina's reference to the Appellate Body's report in the Wheat Gluten case on the issue of
"continuing" conditions has no bearing on the point that the EU has made. Rather it addresses the
timing of injury caused by various factors. The EU makes provision for such issues of timing to be
taken into account by tracking developments in the condition of the domestic industry, and the
potential causes of injury, over a "period considered" of three and a half years, ending in the
dumping "investigation period" of one year. It is just this approach that enables the EU to respect
the obligation to separate and distinguish the various factors that may be causing injury. In
particular, it permits the EU to distinguish those factors that are changing from those that are
constant.

10. C
ONCLUSION

86. Argentina has failed to make a prima facie case on any of its claims. The European Union
respectfully requests the Panel to reject all of Argentina's claims.

- C-21 -

ANNEX C-3
EXECUTIVE SUMMARY OF THE STATEMENT OF THE EUROPEAN UNION
AT THE FIRST MEETING OF THE PANEL
1. I NTRODUCTION

1. The opening statement of the EU will focu s on some of the issues raised by certain
Third Parties in their submissions.

2. T HIRD-PARTY SUBMISSIONS REVEAL BROADER CONSENSUS ON CERTAIN ISSUES

2. A number of Third Parties, in particular the United States, Australia and Turkey, have
expressed views that are very close to the legal interpretations and arguments put forward by the
EU in its First Written Submission. This is also partially the case for Third Parties that have
generally supported Argentina's claims like Chin a. The conclusion that the EU draws from the
submissions of the Third Parties is that there is broad consensus that, in principle and in certain
circumstances, Article 2.2.1.1 allows investigating authorities to disregard company records, where
the costs recorded are not reasonable. There is also broad consensus that, in principle and in
certain circumstances, Article 2.2 allows the authorities to use evidence from outside the country
of origin in order to calculate the cost of production in the country of origin.

3. However, there seems to be a disagreement on which are the "certain conditions" that must
be met, for these principles to apply. On that regard, the EU stresses that Article 2(5) of the Basic
Regulation does not allow "unfettered discretion" to its authorities, which are required to act
reasonably and are subject to judicial control. In any case, the EU argues that the present panel is
not required to come up with any exhaustive lists of conditions.

4. More importantly, the panel only needs to determine whether Argentina has made a prima
facie case on its claims. To do so, the Panel only needs to decide whether Argentina has met its
burden of showing (a) that the specific provisions of Article 2(5) of the Basic Regulation, which it
challenges "as such", fall within the category of what is not permissible under Article 2.2.1.1
and (b) that it is never permissible to use evidence from outside the country of origin in order to
calculate the costs of production. Since Article 2(5) of the Basic Regulation does not define the
terms "reasonably reflects costs" nor define the conditions that would allow the investigating
authorities to seek outside the country of origin the evidences for the costs, the EU does not see
how it is possible for Argentina to succeed in its "as such" claims.

3. B
ROADER LEGAL POINTS RAISED BY SOME THIRD PARTIES

5. The EU considers that some broader legal inte rpretations advanced by certain third parties,
which Argentina has not put forward, are outside the Panel's terms of reference, or fall outside the
scope of the present dispute. In any case, these interpretations are also legally erroneous, as
further explained.

4. E
XPORT TAXES OR DUTIES

6. Regarding the impact of export taxes and ex port duties on anti-dumping investigations,
some Third Parties have expressed the view that anti-dumping rules cannot be used to address the
distortive effects of export duties, asserting that Article XI:1 of the GATT allows the imposition of
export duties. This view is legally incorrect because there is nothing in the GATT that would
prevent an investigating authority from taking into consideration the distortive effects of export
duties and export taxes when constructing the normal value of the product under consideration.

7. More precisely, Article XI:1 does not allow anything, but only contains a prohibition. The
definition of quantitative restrictions does not include export duties and export taxes. But, this
does not mean that Article XI:1 authorises WTO Members to introduce export duties or export
taxes.

- C-22 -

8. The fact that export duties and export taxe s fall outside the scope of Article XI:1 of the
GATT does not mean that the effects of such export taxes and export duties fall outside the scope
of Article VI of the GATT. Using a similar reasoning to that of Appellate Body in the case
Argentina – Import Measures, the EU notes that Article XI:1 does not contain any "express
language identifying its relationship" with Article VI of the GATT. Moreover, there is no language in
Article XI:1 or Article VI of the GATT stating that the anti-dumping authorities of WTO Members
cannot take into account the distortive effects of export duties or export taxes in anti-dumping
investigations. Lastly, there is no specific obligation or language in Article XI:1 that could be said
to conflict with the provisions of Article VI of the GATT. The use of the forceful term "condemn" in
Article VI provides further support for the conclusi on that export duties and export taxes and their
distortive effects do not fall outside the scope of Article VI of the GATT and of anti-dumping
investigations.

9. The Panel's rejection of Argentina's claims in the present dispute will not have the effect of
indirectly declaring all export taxes or export duties as WTO-inconsistent because the investigation
will still be subject to the strict procedural re quirements of the Anti-Dumping Agreement and not
necessarily always lead to a finding of dumping.

10. The distortive effects of export taxes and export duties are well known and well
documented. They are the result of government inte rvention and of the protection afforded to the
exporting country's downstream industry.

5. T
HE NOTION OF DUMPING

11. It has been argued by certain third parties that the anti-dumping rules are "only concerned
with examining the private pricing behaviour of producers". As a consequence of this purported
"nature" of dumping, "the investigation authority cannot reject the costs recorded in the
producer/exporter's accounts on grounds exogenous to that producer/exporter", such as the "full
range of governmental policy interventions that are entirely outside the control of the
producer/exporter themselves". The EU believes that the panel should reject these erroneous
assertions for a number of reasons.

12. There is no textual basis in Article VI of the GATT or in the Anti-Dumping Agreement for
such a "subjective element" in the anti-dumping rules that would consider dumping as an
intentional "price discrimination". To the contrary , both Article VI:1 of the GATT and Article 2 of
the Anti-Dumping Agreement define dumping in objective terms: introduction of products "into the
commerce of another country at less than the normal value of the products".

13. Dumping is not defined by reference to the domestic prices in the exporting country but by
reference to the "normal value" of the products. Article VI:1 of the GATT lists certain types of
evidence that could be used as proxy to identify the "normal value". This article confirms that
dumping is not related to exporters' purported "intention" but only to the value that the products
should have in normal circumstances. Also, th e calculation of dumping would be deprived of
practical effects if "exogenous" costs elements beyond the exporters own control would be
excluded. Anti-dumping rules would thus be rendered ineffective.

14. Article VI:5 of the GATT acknowledges that ther e can be situations which could be subject of
both a countervailing duty and an anti-dumping duty. Therefore, the text of this article
acknowledges that government actions may be at the source of dumping and material injury. To
further support this conclusion, the EU relies on the Appellate Body report in the case
United States – Anti-dumping and Countervailing duties (China) in which it was established that
"exogenous factors", such as the actions of the government of the exporting country, may very
well be the source of dumping.

15. The reliance of certain Third Parties on the Appellate Body Reports in the zeroing cases is
misguided. Indeed, in this case the Appellate Body was not dealing with the construction of the
normal value, but only whether the investigating authority should look at individual transactions
separately, or whether it should look at the "aggregation of all export transactions". The
Appellate Body discussed the export price part of the comparison and not the normal value.

- C-23 -

6. T HE SITUATION UNDER THE ANTI-DUMPING CODE IN THE 1980S

16. Another Third Party referred to the situation that prevailed under the anti-dumping Code
and especially views and documents from 1982 and 1984. The EU considers that the passages
cited by Indonesia do not support its interpreta tion of Article 2.2.1.1 of the Anti-Dumping
Agreement since the Code was very different fr om the current version of the Anti-Dumping
Agreement and did not include any provision like Article 2.1.1.1.

17. In the alternative, should those statements still have some relevance today, they would
contradict Indonesia's and Argentina's interpretation of Article 2.2.1.1. Indeed, in its Article 1(4)
the anti-dumping Code did not provide that the costs should normally be calculated on the basis of
the records kept by the investigated companies, or that these records should reasonably reflect
the costs associated with the production and sale of the relevant goods. To remedy this omission,
WTO members have included the first sentence of Article 2.2.1.1 in the Anti-Dumping Agreement:
costs reflected in companies' records must be reasonable.

18. In any event, paragraph 5 of the draft reco mmendation on the implementation of the anti-
dumping Code, to which Indonesia refers, expres sly limits the scope of the recommendation to
situations where the inputs are purchased "in the ordinary course of trade". However,
Article 2.2.1.1 of the Anti-Dumping Agreement applies to situations where there are no sales in the
ordinary course of trade such as in the present dispute.

7. A
RGENTINA HAS FAILED TO MAKE A PRIMA FACIE CASE ON ITS "AS SUCH " CHALLENGE UNDER
ARTICLE 2.2.1.1 OF THE ANTI-DUMPING AGREEMENT

19. The EU considers Argentina's "as such" challenge against the second subparagraph of
Article 2(5) of the EU's Basic Regulation is a more relevant point for the Panel's analysis. In the
light of certain comments made by Third Parties in their submissions, the EU will submit the
following: first, Argentina's failure to establish, as a matter of fact, the content and scope of the
second subparagraph of Article 2(5); second, Argent ina's failure to articulate properly, let alone
establish, the "precise content" of the "norm or rule" that it purports to challenge "as such" and
third, Argentina's failure to establish that the "norm or rule" that it purports to challenge "as such"
is the type of measure that can be the subject of an "as such" challenge.

8. T
HE SCOPE OF THE SECOND SUBPARAGRAPH OF ARTICLE 2(5)

20. It is by now clear to all participants in these proceedings that Argentina's challenge against
the second subparagraph of Article 2(5) of the Basic Regulation under Article 2.2.1.1 of the
Anti-Dumping Agreement is factually wrong. In its First Written Submission, Argentina has simply
confused the scope of the second subparagraph of Article 2(5) with the scope of the first
subparagraph of Article 2(5). Any other theory advanced by China and Indonesia is factually
untenable. This is made clear by the text of the two subparagraphs of the Article 2(5) of the Basic
Regulation. It is also made clear by the fact that the EU had already made determinations similar
to the ones challenged by Argentina in the present case, on the basis solely of the first
subparagraph of Article 2(5), before the second su bparagraph of Article 2(5) was even introduced.
Indonesia even acknowledges this latter fact in footnote 27 of its Third Party Submission.

21. While the first subparagraph of Article 2(5) is repeating "verbatim the conditions on the
first sentence of Article 2.2.1.1 of the Anti-D umping Agreement", the second subparagraph does
not relate to Article 2.2.1.1, but simply fill s a gap, describing what actions authorities are
authorised to take in order to calculate the costs when the company records cannot be used. In
the Anti-Dumping Agreement, the closest provision to this second paragraph is
subparagraph (iii) of Article 2.2.2, which refers to "any reasonable method" and to "any
reasonable basis". This article was the inspiration for the drafting of the second subparagraph of
Article 2(5). Therefore, the EU concludes that Argentina has simply directed its "as such" challenge
under Article 2.2.1.1 of the Anti-Dumping Agr eement against the wrong provision of the Basic
Regulation.

- C-24 -

9. A RGENTINA HAS FAILED TO ESTABLISH THE "PRECISE CONTENT" OF THE "NORM OR RULE " THAT IT
CHALLENGES

22. The Appellate Body has confirmed that, in order to substantiate an "as such" claim, the
complaining party must first establish, inter alia, the "precise content" of the "rule or norm" that it
challenges. In the present case, Argentina has failed to articulate properly, let alone establish, the
"precise content" of the norm that it challenges "as such" under Article 2.2.1.1 of the Anti-
Dumping Agreement.

23. If Argentina is challenging "as such" Article 2(5) of the Basic Regulation "and more
specifically its second paragraph", this challenge must fail. Indeed, there is broader consensus that
this subparagraph allows EU authorities to act in a certain manner but does not oblige them, or
mandate them to do so. If Argentina does not challenge this provision, its position is inconsistent.
It challenges the "condition" that "refers in particul ar to situations where the prices are 'artificially
low' or 'affected by a distortion'", the purporte d "continuous and established practice" of the EU,
and Article 2(5) second paragraph of the Basic Regulation" which purportedly "refers to situations
where the prices of an input are 'abnormally or arti ficially low' because they are set in a 'regulated
market' or because of the existence of some alleged 'distortion' on the domestic market".

24. Since Argentina has already acknowledged that it does not challenge "as such" any
"practice" and consequently that any such challenge against a "practice" would be outside the
Panel's terms of reference, it could assumed that Argentina challenges a written "norm or rule", i.e
the second subparagraph of Article 2(5). Nonetheless, Argentina still does not offer
consistency even in the description of the content of that "norm or rule" it is "as such" challenging.
The EU understands that Argentina considers that the challenged "measure" is to be found beyond
the actual text of Article 2(5) of the Basic Regu lation. However, the EU submits that Argentina has
failed to articulate properly and to establish with the requisite evidence the "precise content" of its
claims.

10. A
RTICLE 2(5) OF THE BASIC REGULATION ALLOWS THE INVESTIGATING AUTHORITIES DISCRETION

25. The EU believes that it by now clear that Art 2(5) does not mandates the investigating
authorities to act in a particular manner and allows the authorities' discretion. In light of the recent
Appellate Body Report in US – Carbon Steel (India) , the discretionary nature of Article 2(5) of the
Basic Regulation is fatal to Argentina's "as such" claims against Article 2(5).

26. The EU finds problematic assertions like one made by China, which considers that in order to
challenge "as such" a "rule or norm", it is "not necessary to show that it 'mandates' a
WTO-inconsistent outcome in every case". First, China does not offer any textual basis. Second,
China's reference to the paragraph 172 of the Appellate Body Report in US – Oil Country Tubular
Goods Sunset Reviews contradicts its position. Indeed, this paragraph does not refer to the
"particular circumstances" asserted by China. Also China fails to explain how its assertion can be
compatible with the nature of an "as such" claim, which according to the Appellate Body is directed
against "laws and regulations". To the contrary, China's assertion transforms in essence every "as
applied" claim to an "as such" claim, by renaming the application of the law in a specific case to an
application in "particular", or "defined", or "at least certain" circumstances. Therefore, China's
assertions must be rejected.

11. T
HE MEANING OF THE TERM "ASSOCIATED" IN ARTICLE 2.2.1.1 OF THE ANTI-DUMPING
AGREEMENT

27. The EU in its First Written Submission no ted that the ordinary meaning of the term
"associated" is broader than the meaning of the words "actually incurred". It also noted that the
Panel Report in Egypt-Steel Rebar supports its understanding of the ordinary meaning of the term
"associated", because it uses the term "pertain", instead of the words "actually incurred".

28. Indonesia disagreed with EU interpretation an d noted that the chapeau of Article 2.2.2 of the
Anti-Dumping Agreement also uses the term "pertain" to "refer to the actual data" of the company
under investigation. The EU believes that its in terpretation is the preferable one for several
reasons.

- C-25 -

29. The ordinary meaning of the term "pertain" is "be appropriate" or "related". These terms are
broader than the words "actually incurred". Therefore that ordinary meaning does not limit
Article 2.2.1.1 to only those costs that have "actually been incurred" by the specific company
under investigation.

30. The EU's interpretation is confirmed by th e context in which these terms are used. Indeed,
Article 2.2.1.1, which is the subject of the pres ent analysis, does not use the words "actual data"
contained in the chapeau of Article 2.2.2 and referred by Indonesia, but the word "reasonably".

31. The chapeau of Article 2.2.2 of the Anti-Dumpi ng Agreement uses the term "pertaining to" in
the context of the "ordinary course of trade". In contrast, the words "ordinary course of trade" are
not found in Article 2.2.1.1 of the Anti-Dumping Ag reement. Therefore, the term "pertaining to" in
the chapeau of Article 2.2.2 is used in order to convey a different meaning form the term
"associated" in Article 2.2.1.1 of the Anti-Dumping Agreement.

32. The EU notes that the chapeau of Article 2. 2.2, in combination with subparagraph (iii) of
Article 2.2.2, provides that, in the absence of "ordinary course of trade", the investigating
authority may use "any other reasonable method".

12. I
SSUES RELATING TO ARGENTINA'S "AS APPLIED" CLAIMS

33. The EU disagrees with the argument made by China that it has used "an average of the FOB
reference prices" without making any "adjustment to this evidence". The EU's position was
acknowledged by Argentina.

34. The EU also disagrees with certain Third Parties taking the view that the prices used by the
investigating authority were not from the "country of origin" for a number of reasons: the
investigation revealed that the prices used were actually fixed by the government of Argentina, the
prices were applied in Argentina, paid in Argentina and ensured that Argentinian producers of soya
bean and soya bean oil received the same net price irrespective of the destination of their goods.
This is not a case of application of the proviso on "information from other representative markets",
but a case of application of the proviso on "any other reasonable basis", authorised by Article 2(5).

35. Consequently, Argentina's "as applied" clai m against the Definitive Regulation, based on
Article 2.2 of the Anti-Dumping Agreement, must fail. And this, irrespective of whether Article 2.2
allows investigating authorities to seek evidence from outside the country of origin in order to
calculate the costs of production in the country of origin.

- C-26 -

ANNEX C-4
EXECUTIVE SUMMARY OF THE STATEMENT OF THE EUROPEAN UNION
AT THE SECOND MEETING OF THE PANEL
1. I NTRODUCTION

1. The European Union's Opening Statement will address the points raised by Argentina in its
Second Written Submission.

2. T ERMS OF REFERENCE / PANEL'S FINDINGS

2. In relation to Argentina's "as such" claim, the only measure before the Panel is the second
subparagraph of Article 2(5) of the Basic Regulation, as well as any subsequent amendments or
replacements to that specific subparagraph. In relation to Argentina's "as applied" claims, the only
measures before the Panel are the Provisional Regulation and the Definitive Regulation, as well as
any subsequent amendments or replacements to these specific Regulations.

3. A
RGENTINA HAS FAILED TO MAKE A PRIMA FACIE CASE ON ITS "AS SUCH" CLAIMS

3.1. A RGENTINA HAS FAILED TO ESTABLISH THE PRECI SE CONTENT OF THE SECOND SUBPARAGRAPH OF ARTICLE 2(5)
OF THE BASIC REGULATION

3.1.1. Argentina misrepresents the sc ope of the second subparagraph of
Article 2(5) of the Basic Regulation

3.1.1.1 The text of the second subparagraph of Article 2(5) of the Basic Regulation

3. In paragraph 26 of its Second Written Subm ission, Argentina acknowledges that the first
subparagraph of Article 2(5) "implements the particular obligations laid down by Article 2.2.1.1 of
the Anti-Dumping Agreement" and "closely mirrors the wording of Article 2.2.1.1". Paradoxically,
Argentina continues to insist that it is the second subparagraph of Article 2(5) that provides the
legal basis for the decision not to rely on the records of the investigated companies.

4. In paragraphs 12 and 18 of its Second Wr itten Submission, Argentina draws a distinction
between what it calls the "first part of Article 2(5) second subparagraph [and] the second part of
that provision". Argentina also asserts that the options given to the investigating authorities under
"the second part of Article 2(5) second subparagraph" "imply" that they also constitute the
"reasons why information of the domestic market cannot be used". However, there is nothing in
the text of either the first or the second subparagraph of Article 2(5) that could support
Argentina's assertion.

3.1.1.2 The lack of similarity with the EC-Fasteners case

5. In paragraph 15 of its Second Written Submission, Argentina compares the present dispute
with the situation faced by the Panel in EC – Fasteners. In that case, the Appellate Body found that
in the absence of a specific provision, Article 9(5) of the Basic Regulation also concerned the
calculation of dumping margins.

6. In the present situation, the first subparagraph of Article 2(5) addresses precisely the
question of the conditions that must be met in order to base the cost calculation on the company
records.

3.1.1.3 Recital 4 of Regulation 1972/2002

7. Argentina has repeatedly referred to Recital 4 of Regulation 1972/2002, with which the
second subparagraph was added to Article 2(5). However, the text of that Recital does not support
Argentina's arguments.

- C-27 -

8. First, the text of Recital 4 shows that Article 2(5) had already been the legal basis for the
authorities' determination of whether the reco rds reasonably reflected costs, before the
introduction of the second subparagraph of Article 2(5). Second, in paragraph 69 of its
Second Written Submission, Argentina confuses the sales of the like product [governed by
Article 2(3)] with the "records that do not reasonably reflect the costs" associated with the
production and sale of the relevant product. Third, in paragraph 70 of its Second Written
Submission, Argentina asserts that Recital 4 "emphasises that the records must be found not to
reasonably reflect the costs". However, Recital 4 expr essly refers to guidance as to what has to be
done after it has already been determined that the records do not reasonably reflect the costs.
Fourth, Recital 4 does not have any impact on the interpretation of "reasonably reflect costs".

3.1.1.4 The alleged "background" of the second subparagraph of Article 2(5) of the Basic
Regulation

9. Argentina continues to insist that the "purpose" of the introduction of the
second subparagraph of Article 2(5) "was to provide a legal basis for the authorities to achieve
effects similar to those applied under NME treatment to Russia, although it was being granted
full MES".

10. In support of its assertions, Argentina refers to several comments of scholars listed in
paragraph 43 of its First Written Submission. However, at the time of the publications, all the
scholars referred to were actively involved in defending Russian companies in anti-dumping
investigations relating to the application of Article 2(5) of the Basic Regulation. In these
circumstances, it is doubtful whether their statements can be used as a source of interpretation of
Article 2(5).

3.1.1.5 The judgments of the General Court

11. Argentina has submitted as Exhibits certain judgments of the General Court which actually
contradict its description of the scope of the second subparagraph of Article 2(5).

12. The General Court's judgments in Cases T-235/ 08 and T-118/10 confirm three points. First,
that the first subparagraph of Article 2(5) is the legal basis that authorises the investigating
authorities to determine whether the records "reasonably reflect costs". Second, that the second
subparagraph of Article 2(5) only provides the alternative sources of data that the investigating
authorities may use when it has already been determined that the company records cannot be
used, pursuant to the first subparagraph of Article 2(5). Third, that the first and the
second subparagraphs of Article 2(5) authorise the investigating authorities to take certain actions,
but do not mandate them to do so.

3.1.1.6 Examples of application of the firs t subparagraph of Article 2(5) of the Basic
Regulation by the European Union's investigating authorities before 2002

13. Argentina insists that the EU's investigating authorities had never determined that company
records do not "reasonably reflect costs" before 2002.

14. First, the EU's investigating authorities routinely used the provision which today is the first
subparagraph of Article 2(5) in order to determine whether the company records "reasonably
reflect" the relevant costs between 1995 and 2002, at a period when the second subparagraph of
Article 2(5) did not exist. Example are the 2000 investigation on Urea and Ammonium Nitrate
originating in Algeria et al ., the 2001 investigation on certain Iron or steel ropes and cables
originating in the Czech Republic, Russia, Thailand, et al., the 1996 investigation on Polyester
textured filament yarn originating in Indonesia and Thailand , and the 2000 investigation on Tube
or pipe fittings originating in Brazil, the Czech Republic, et al.

15. Second, Argentina errs when it asserts that the investigations involving an application of
Article 18 of the Basic Regulation are not relevant for purposes of Article 2(5). Even where they
apply Article 18, the EU's investigating authorities still use the information supplied by the
companies to the extent possible. Examples are the 2000 investigation on Synthetic staple fibres
of polyester originating in Australia, Indonesia and Thailand and the investigation on Aluminium
foil originating in China and Russia.

- C-28 -

3.1.2. Other shortcomings of Argentina's "as such" claims

16. To sum up, Argentina purports to challenge "as such" the second subparagraph of
Article 2(5) of the Basic Regulation under Article 2.2.1.1 and Article 2.2 of the Anti-Dumping
Agreement. Argentina's challenge under Article 2. 2.1.1 of the Anti-Dumping Agreement must be
rejected for the simple reason that the scope of the second subparagraph of Article 2(5) has
nothing to do with the content of the first se ntence of Article 2.2.1.1 of the Anti-Dumping
Agreement.

3.1.2.1 The text of the second subparagraph of Article 2(5) of the Basic Regulation is clear

17. In its Second Written Submission, Argentina refers to the Appellate Body Report in US –
Corrosion Resistant Steel and acknowledges that when a measure is challenged "as such" the
starting point for the analysis "must be the measure on its face". Argentina also refers to the
Appellate Body Report in US – Hot Rolled Steel and acknowledges that "further examination is
required", only if the "meaning or content of the measure is not evident on its face".

18. The EU has explained the reasons for wh ich the scope, meaning and content of the
second subparagraph of Article 2(5) are clear and evident on the basis of the provision's text.
Argentina has actually acknowledged this fact in paragraph 50 of its Second Written Submission
when it took issue with the EU's "exclusive ly focusing on the terms of Article 2(5),
second subparagraph".

3.1.2.2 Argentina's description of the second subparagraph of Article 2(5) of the Basic
Regulation

19. The text of Argentina's Second Written Submis sion in essence confirms the EU's objection:
there is still no concise and uniform description of the meaning and content of the
second subparagraph of Article 2(5), despite the clarity of the provision's text.

20. Argentina has also failed to identify the "p recise content" of the second subparagraph of
Article 2(5). Therefore, Argentina cannot make a prima facie case on an "as such" claim against
the second subparagraph of Article 2(5) either under Article 2.2.1.1, or under Article 2.2 of
the ADA.

3.2. A
RGENTINA HAS FAILED TO SHOW THAT THE SECOND SUBPARAGRAPH OF ARTICLE 2(5) OF THE BASIC
REGULATION IS "AS SUCH" INCONSISTENT WITH THE COVERED AGREEMENTS

3.2.1. Argentina ignores the Appellate Body Report in US – Carbon Steel (India)

21. In its Second Written Submission, Argentina asserts that "there is no provision" in the
covered agreements which "establishes a mandatory/discretionary standard that the Panel would
have to apply". However, Arge ntina omits to mention that the Appellate Body has used the
"discretionary" nature of particular measures as a ground for rejecting "as such" claims against
them. The most recent example is the Appellate Body's Report in US – Carbon Steel (India).

22. In its Second Written Submission, Argentina states that providing for the possibility of "the
use of a basis other than the cost of production in the country of origin renders the measure
inconsistent with Article 2.2 of the ADA". However, Argentina is not consistent in its description of
the content of the second subparagraph of Articl e 2(5) and has failed to establish that this
provision mandates any particular conduct which is necessarily inconsistent with the covered
agreements.

3.2.2. Argentina's refusal of the discretion afforded to the investigating authorities
by the second subparagraph of Article 2(5) of the Basic Regulation

3.2.2.1 The text of the second subparagraph of Article 2(5) of the Basic Regulation

23. The text of the second subparagraph of Article 2(5) says nothing about the determination of
whether the company records can be used or not. Therefore, Argentina cannot assert that the text
of the second subparagraph of Article 2(5) "mandates" any conduct in relation to the
determination of whether company records reasonably reflect costs.

- C-29 -

24. Argentina's arguments are based on the use of the word "shall" in the text of the
second subparagraph of Article 2(5). However, the word "shall" in the text of the
second subparagraph of Article 2(5) addresses the obligation of the investigating authorities to
proceed with the construction of the normal valu e so that they can complete the anti-dumping
investigation. It does not relate to any single method that the investigating authorities may use in
order to establish or adjust the costs.

3.2.2.2 The alleged "practice" of the European Union's investigating authorities

25. In paragraphs 102 to 104 of its Second Written Submission, Argentina states that "in all
cases which involved a situation of 'abnormally low' or 'artificially low' prices caused by an alleged
'distortion', information on the domestic market could not be used and the authorities used
information from other representative markets".

26. As already noted, the investigations of th e EU's authorities do not support Argentina's
arguments on the purported "absence of discretio n" afforded by the second subparagraph of
Article 2(5).

3.2.2.3 The judgments of the General Court

27. In paragraph 105 of its Second Written Subm ission, Argentina states that the "use of the
word 'entitled'" in the judgments of the General Court "does not confirm that Article 2(5) is
discretionary". However, the ordinary meaning of the word "entitle" is "to grant someone a right".
The use of the word "entitled" means that the General Court considers that the second
subparagraph of Article 2(5) grants to the investigating authorities the right to act in a certain
way, without obliging them.

28. Moreover, Argentina omits to mention that the relevant paragraph of the General Court's
judgment, to which it refers, reads as follows: "The institutions were therefore fully entitled to
conclude that …". This makes clear that the General Court was actually examining whether the
investigating authorities had gone beyond the discretion that both the first and the
second subparagraphs of Article 2(5) affords them.

3.3. C
ONCLUSION

29. To sum up, Argentina has failed to make a prima facie case on its "as such" claims against
the second subparagraph of Article 2(5) under Article 2.2.1.1 and Article 2.2 of the ADA.

4. A
RGENTINA ADVANCES AN ERRONEOUS INTERPRETATION OF ARTICLE 2.2.1.1 OF THE ADA

4.1. T HE TEXT OF ARTICLE 2.2.1.1 OF THE ANTI-DUMPING AGREEMENT

30. Argentina reiterates that this provision requires the "records to reasonably reflect" the
relevant costs and that there is no "reasonablen ess test of the cost elements themselves". In
support of its assertions, Argentina inaccurately refers to paragraph 7.393 of the Panel Report in
Egypt – Steel Rebar . The real text contradicts Argentina's understanding and confirms the EU's
interpretation.

31. In paragraph 113 of its Second Written Submission, Argentina asserts "the term 'costs' as
'charges or expenses' refers to a concrete amount by opposition to a hypothetical value". However,
the use of these "hypothetical" amounts is allowed by Article 2.2 of the ADA in constructing the
normal value.

32. In paragraphs 115 to 117 Argentina states that the relevant costs "are necessarily the costs
of the specific exporter/producer" who is involved in the anti-dumping investigation. However, the
ADA allows the investigating authority to use costs from outside the specific company.

33. In paragraph 116 Argentina misrepresents the Panel's Report in Egypt – Steel Rebar . In
reality, the Panel's findings are the opposite of what is asserted by Argentina, showing that the
determination of whether company records "reasonably reflect costs" depends on the facts of each
case.

- C-30 -

34. In paragraph 117, Argentina misquotes paragraph 7.483 of the Panel Report in EC –
Salmon. The Panel does not "note" that the costs "necessarily refer to the costs actually incurred"
but referred to costs associated with the production and sale "of the like product".

4.2. T HE CONTEXT OF ARTICLE 2.2.1.1 OF THE ANTI-DUMPING AGREEMENT

35. In paragraph 119 of its Second Written Submission, Argentina asserts that the second and
third sentences of Article 2.2.1.1 "illustrate the types of issues that may arise under the
second condition of Article 2.2.1.1, first sent ence". However Argentina fails to take into
consideration the important textual differences between these sentences.

36. In paragraphs 122 to 126, Argentina asserts that "the costs associated with the production
and sale' do not need to be reasonable. This argument fails on the basis of the texts of the
chapeau of Article 2.2, Article 2.2.1.1 and Article 2.2.2(iii).

37. In paragraphs 127 to 133, Argentina seeks to build certain arguments on the purported
definition of dumping. However, in paragraph 127 Argentina omits to mention that the condition
for the application of Article 2.1 is the existence of domestic sales in the ordinary course of trade.
Also, in paragraphs 128 to 134, Argentina refers to the zeroing cases without mentioning that they
did not involve the construction of normal value.

4.3. T
HE OBJECT AND PURPOSE OF THE ANTI-DUMPING AGREEMENT

38. Argentina discusses two points: (a) the ad ho c group on the implementation of the anti-
dumping code of the Tokyo Round; and (b) the negotiating history of the Anti-Dumping Agreement
in the Uruguay Round. However, none of them supports Argentina's position.

39. In relation to the first point, the documents discussed by Argentina in paragraphs 142
to 144 of its Second Written Submission are irreleva nt for the present dispute. In relation to the
second point, the negotiating history of Article 2.2.1.1 actually supports the European Union's
interpretation.

5. A
RGENTINA ADVANCES AN ERRONEOUS INTERPRETATION OF ARTICLE 2.2 OF THE ADA

40. Argentina's Second Written Submission does not provide any convincing factual evidence or
legal arguments to support its excessively restrictive interpretation of the chapeau of Article 2.2 of
the Anti-Dumping Agreement. For example, in para graph 152, Argentina's argument is circular. In
paragraphs 153 and 156 Argentina contradicts itself with respect to paragraph 154.

6. F
ACTUAL ELEMENTS RELATING TO THE BIODIESEL INVESTIGATION

41. There are no "factual inconsistencies" in th e EU's submissions and statements in the present
dispute.

42. Indeed, in paragraph 169 of its Second Written Submission, Argentina actually confirms that
prices were "published by the government of Argentina". In paragraph 174, Argentina makes
reference to the use of the term "particular market situation" in the Definitive Regulation.
However, this notion is not relevant in the pres ent dispute. In this paragraph, Argentina also
makes reference to the "DET system" and the "export tax on soybean and soybean oil" whereas
there is no real difference between the two terms. In paragraph 172, Argentina asserts that there
is a contradiction regarding the levels of imports between the figures in the Regulations and those
presented in the Reply to the Panel's Question 78. However, there is non since Recital 133 of the
Provisional Regulation refers to imports by EU's "producers" rather than to the "industry".

7. P
ARAGRAPHS 175 TO 196 OF ARGENTINA'S SECOND WRITTEN SUBMISSION

43. In paragraphs 185 to 187, Argentina is relying on the wrong legal authority since the
relevant findings of the Panel in Egypt – Steel Rebar, do not relate to the issue of "benchmarking".
In paragraphs 188 and 189, Argentina contradicts its Reply to Question 43. In paragraphs 191 and
193 although the FOB reference prices "reflected" international prices, Argentine-determined FOB
reference prices cannot themselves be "international prices". Finally, in paragraph 192 Argentina's

- C-31 -

theory is incorrect because the third sentence of Article 2.2.1.1 expressly provides that costs can
be adjusted in certain circumstances.

8. A
RGENTINA'S OTHER CLAIMS

8.1. T
HE ISSUE OF PROFITS

44. Argentina has failed to make a prima facie case on its claims against the amount of profits
established by the investigating authorities. For example, in paragraph 145 Argentina appears to
assert that it is the methodology that needs to be "reasonable" and not the profit figure that needs
to be "reasonable'. However Article 2.2 of the ADA expressly refers to a "reasonable amount
for […] profits".

8.2. T
HE CLAIM UNDER ARTICLE 2.4 OF THE ANTI-DUMPING AGREEMENT

45. First, if Argentina refers to the concept of "differences affecting price comparability", in the
sense of Article 2.4 of the ADA, the EU confirms th at it denies that such differences exist in the
present case.

46. Second, Argentina has admitted during the First Hearing that it does not claim that the
investigating authorities should have added the value of the export tax to the export price of
biodiesel.

47. Third, Argentina reverses the order of the analysis by stating that the investigating
authorities could have acted consistently with Article 2.4, while acting inconsistently with
Article 2.2 of the ADA.

8.3. T
HE CLAIM UNDER ARTICLE 9.3 OF THE ANTI-DUMPING AGREEMENT

48. In paragraph 209, Argentina statement confirms that it is in reality challenging the
construction of normal value. Such a challenge may fall within the scope of Article 2, but falls
outside the scope of Article 9.3 of the Anti-Dumping Agreement.

49. In paragraph 213, Argentina states that the EU's interpretation could lead to a situation,
which is not the type of situations that Article 9.3 covers.

50. Finally, in paragraph 213, Argentina refers to paragraph 132 of the Appellate Body Report in
US – Zeroing (EC). However these findings have no relation to the construction of normal value, or
to a claim under Article 9.3 of the Anti-Dumping Agreement which is based on an allegedly
erroneous construction of normal value, similar to the claims put forward by Argentina in the
present case.

9. A
RTICLE 3 CLAIMS

51. In paragraph 216, Argentina continues to treat the issue of "utilisation of capacity" as a
stand-alone issue, divorced from its context.

52. Recital 131 of the Definitive Regulation sets out the findings of the investigation. Since
Argentina accepted the investigating authorities' provisional judgment on the matter, Argentina
should also accept the authorities' final judgment.

53. Argentina refers to the case of Diester. The verification of Diester took place before the
Provisional Regulation had been adopted and when the issue of "idle" plants had not emerged as a
serious factor.

54. As regards causation and the role of overcapacity, the investigating authorities had made
clear that the production figures presented in the Provisional Regulation could no longer be relied
upon.

55. Argentina argues that the EU was in effect a trader in biodiesel. This contradicts Argentina's
previous allegation that the industry vastly overextended its production capacity.

- C-32 -

56. Argentina wrongly accuses the investigating authorities of failing to examine double-
counting regimes other than the French regime.

57. The investigating authorities' findings did not dispute that other factors had contributed to
the situation of the EU industry. However, having analysed and distinguished those factors, they
found that they did not undermine the conclusion that the dumped imports were a cause of the
material injury that had been identified.

- C-33 -

ANNEX C-5
EXECUTIVE SUMMARY OF THE EUROPEAN UNION'S REQUEST
FOR A PRELIMINARY RULING

1. I NTRODUCTION

1. Article 6.2 of the Dispute Settlement Understanding (DSU) requires that a request for the
establishment of a panel (Panel Request) must, inter alia, (a) identify the specific measures at
issue; (b) provide a brief summary of the legal basis of the complaint sufficient to present the
problem clearly; and (c) indicate whether consul tations were held. Argentina's Panel Request in
the present case fails to meet these requirements . For this reason, the European Union requests
the Panel to issue a preliminary ruling, confirmi ng that the claims identified in the present
submission are outside the Panel's terms of reference.

2. The Panel's Working Procedures provide, in paragraph 7, that a party shall submit any
request for a preliminary ruling at the earliest po ssible opportunity and in any event no later than
in its first written submission to the Panel. The Working Procedures also provide that, if the
European Union requests such a ruling, Argentina sh all submit its response to the request prior to
the first substantive meeting of the Panel, at a time to be determined by the Panel. Therefore, the
European Union's request for a preliminary ruling is submitted timely and properly, in accordance
with the Panel's Working Procedures.

2. A
RGENTINA'S FAILURE TO IDENTIFY THE "SPECIFIC MEASURES AT ISSUE"

3. The need for precision in panel requests flows from the two essential purposes of the terms
of reference: (a) to define the scope of the disp ute and (b) to serve the due process objective of
notifying the parties and third parties of the nature of the complainants' case.
1 To meet this need
of precision, a Panel Request must specify the measures challenged with sufficient particularity, so
as to indicate the nature of the measure and the gist of what is at issue.2

4. Argentina's Panel Request contains a section entitled "1. The Measures at issue." This
section purports to "enumerate" the "measures" which Argentina is challenging. The section
contains two paragraphs.

5. Paragraph 1(A) of Argentina's Panel Request starts by mentioning Article 2(5) of Council
Regulation (EC) 1225/2009 and continues by referring to "any subsequent amendments,
replacements, implementing measures and related instruments or practices . " T h i s p h r a s e a l s o
appears in footnote 7 of Argentina's Panel Request, which compliments Argentina's definition of
what Argentina calls the "Basic Regulation."

6. Paragraph 1(B) of Argentina's Panel Request lists certain "anti-dumping measures imposed
by the European Union." Footnote 3 mentions Commission Regulation 490/2013, while footnote 2
mentions Council Implementing Regulation 1194/2013. Paragraph 1(B) concludes by asserting
that the "measures at issue" also include "any subsequent amendments, replacements, related
measures and implementing measures."

7. These elements in Argentina's Panel Request fail to comply with the provisions of Article 6.2
of the DSU, because they fail to "identify the specific measures at issue."

8. In particular, the references to " implementing measures and related instruments or
practices" and to " related measures and implementing measures " are too vague and do not allow
the identification of the specific instruments that the references aim to cover. The Appellate Body
has already found that references to " implementing measures and other related measures " do not

1 For example, Appellate Body Report, EC-Chicken Cuts, para. 155, where there are further references
to other Appellate Body Reports.
2 Appellate Body Report, US-Continued Zeroing, para. 169.

- C-34 -

"identify the specific measures at issue, as required in Article 6.2 of the DSU and, therefore, fall
outside the panels' terms of references.3

9. Consequently, Argentina's claims agains t "implementing measur es and other related
measures" in Paragraph 1(A) and footnote 7 of its Panel Request, as well as Argentina's claims
against "related measures and implementing measures" in Paragraph 1(B) of its Panel Request,
fall outside the Panel's terms of reference.

3. A
RGENTINA'S FAILURE TO "PRESENT THE PROBLEM CLEARLY"

10. The requirement to "present the problem clearly" aims at enabling the Panel, the defending
party and third parties to know which obligations are allegedly violated, as well as how the
challenged measures are allegedly inconsistent with these obligations. The general requirement to
"present the problem clearly" has two aspects. Fi rst, the panel request must identify the "legal
basis" of the complaint. In order to meet the re quisite standard of clarity, the panel request may
be required to specify particular sub-paragraphs of a treaty provision.
4 Second, the panel request
must "plainly connect the challenged measures with the provisions of the covered agreements
claimed to have been infringed."5 Argentina's Panel Request fails to meet both these requirements.

3.1. THE "INTER ALIA" LEGAL BASIS

11. Argentina's Panel Request has a Section "2", entitled "Legal Basis for Claims."
Sub-section 2(A) includes a paragraph that reads: "Argentina considers that [name of measure] is
inconsistent as such with, inter alia , the following provisions of the [names of covered
agreements]."

12. The use of the words " inter alia " indicates that the list of provisions of the covered
agreements expressly listed in Sub-section 2(A) of Argentina's Panel Request is not exhaustive.
Argentina retains for itself the possibility to add more, unspecified provisions of the covered
agreements, as "legal bases" for its claims after the circulation of the Panel Request. Neither the
European Union, nor the Panel has any idea of what claims or legal bases Argentina will finally
present in this case: the words " inter alia" make the list of claims in Argentina's Panel Request
completely open-ended.

13. Consequently, Argentina's Panel Request fails to identify properly the legal basis of the
complaint and fails to "present the problem clearly." This is inconsistent with Article 6.2 of the DSU
and places the relevant claims outside the Panel's terms of reference.

3.2. P
ARAGRAPH 2(B)6 OF ARGENTINA'S PANEL REQUEST

14. Sub-section 2(B) of the Panel Request purports to present Argentina's views on the
"anti-dumping measures imposed by the European Union on imports of biodiesel originating in,
inter alia, Argentina." The introduction of Sub-section 2( B) includes a footnote 8, which refers the
reader to footnote 3. Footnote 3 refers to Commission Regulation 490/2013 and to Council
Implementing Regulation 1194/2013.

15. Paragraph 2(B)6 of Argentina's Panel Request states that these two legal instruments are
inconsistent with Article 9.3 of the Anti-Dumping Agreement and Article VI:2 of the GATT, because
"the European Union imposed and levied anti-dumping duties in excess of the margin of dumping
that should have been established in accordance with Article 2 of the Anti-dumping Agreement."
This paragraph fails to meet the requirements of Article 6.2 of the DSU, for a number of reasons.

16. First, Paragraph 2(B)6 alleges that the challenged measures are inconsistent with
"Article 9.3 of the Anti-Dumping Agreement." However, Article 9.3 of the Anti-Dumping Agreement
is composed of a chapeau and three sub-paragraphs. Each of these deals with a different set of
conditions. Argentina's Panel Request fails to mention the specific sub-paragraph of Article 9.3,
with which the challenged measures are supposed to be inconsistent. This runs against Article 6.2
of the DSU, which requires Panel Requests to refer to the specific sub-paragraph of the WTO treaty

3 Appellate Body Report, EC-Selected Customs Matters, para. 152, footnote 369. See also, Panel
Report, China-Raw Materials, Annex F-1, para. 17.
4 For example, Appellate Body Report, Korea-Dairy, para. 124.
5 For example, Appellate Body Report, China-Raw Materials, para. 220.

- C-35 -

provision that is supposed to be infringed by the challenged measure, where there are such
sub-paragraphs containing different sets of obligations.6

17. Second, Argentina fails to articulate clearly the exact claim it advances. Paragraph 2(B)6
alleges that the European Union "imposed and levi ed anti-dumping duties in excess of the margin
of dumping that should have been established." From this wording it is not clear whether
Argentina actually challenges (a) the comparison between the anti-dumping duty and the margin
of dumping (e.g., that there was some numerical mistake in the text of the Regulation resulting in
the mentioned amount of the duty being higher than the mentioned amount of the dumping
margin); or (b) the method of calculation of the margin of dumping itself. In other words, it is not
clear whether Argentina's challenge should be understood as being directed against the
"in excess", or against the "should have been established."

18. In that context, it is noted that the calc ulation of the anti-dumping duty is discussed in
paragraphs 214 to 219 and in Article 1 of the Council Implementing Regulation. In contrast, the
calculation of the margin of dumping is discu ssed in paragraphs 59 to 65 of the Council
Implementing Regulation. Paragraph 2(B)6 of Arge ntina's Panel Request fails to explain plainly
which of these two different sections of the Counc il Implementing Regulation it challenges. The
result is that the European Union does not understand the scope of the challenge against which it
must defend itself and the Panel does not understand the scope of the challenge facing it.

19. Third, even if we assume arguendo that Argentina actually challenges the method of
determining the dumping margin, then again Paragraph 2(B)6 fails to comply with the
requirements of Article 6.2 of the DSU. The de termination of the dumping margin was based on
(a) the calculation of the "normal value"; (b) the calculation of the "export price"; (c) the
comparison between them; and (d) the analysis of certain requests presented by Argentinean
exporters. Both the Commission Regulation and th e Council Implementing Regulation discuss each
of these issues separately, in four different sections with four different titles.
7 Paragraph 2(B)6
fails to explain plainly which of these issues (a nd which of the corresponding sections of the
Regulations) it challenges. Again, the European Union and the Panel cannot understand the scope
of the challenge facing them.

20. Fourth, even if we further assume arguendo that Argentina actually challenges only the
fourth relevant section of the Regulations, i.e. , the one entitled "Dumping Margins", then again
Paragraph 2(B)6 fails to comply with the requirements of Article 6.2 of the DSU.

21. The relevant section 2.4 of the Council Implementing Regulation discusses two different and
distinct issues. First, in paragraphs 59 to 60, the Regulation discusses a request advanced by "all
cooperating Argentine exporting producers" in relation to the imposition of a "single duty for all
cooperating exporting producers." Second, in para graphs 61 to 64, the Regulation discusses a
completely different request submitted by anot her three companies. These companies requested
to "be included in the list of cooperating exporting producers." Their request was rejected because,
either they were not exporting themselves to the European Union, or because they were not
producing biodiesel during the investigation period. Paragraph 2(B)6 of the Panel Request does not
provide the faintest indication of which of these two issues Argentina is actually challenging. Again,
the European Union and the Panel cannot understand the scope of the challenge facing them.

22. Consequently, Paragraph 2(B)6 of Argentina's Panel Request falls outside the Panel's terms
of reference.

4. A
RGENTINA'S PANEL REQUEST EXPANDS THE SCOPE OF THE DISPUTE

23. Consultations requests constitute a prerequisite for panel requests and, as a result, they
"circumscribe the scope of panel requests."
8 The Appellate Body has held that a panel request
cannot include claims (either in relation to "challenged measures", or in relation to "legal bases"),
which were not included in the corresponding consultations request, where these "new" claims

6 Appellate Body Report, Korea-Dairy, para. 124.
7 The Commission Regulation in paras. 40 to 46; paras. 47 to 49; paras. 50 to 55 and paras. 56
to 59 respectively. The Council Implementing Regulation in paras. 35 to 48; paras. 49 to 54; paras. 55 to 58;
and paras. 59 to 65, respectively.
8 Appellate Body Report, Mexico – Anti Dumping Measures on Rice, para. 137. See also Panel

- C-36 -

"expand the scope of the dispute", 9 or have the effect of "changing the essence of the
complaint."10

24. In the present case, Argentina's Panel Reques t includes a great number of such new claims,
which expand the scope of the dispute and change the essence of the complaint set out in
Argentina's request for consultations (Consultations Request).

25. These new claims include the following: (1) a new claim against a new "measure", which
Argentina calls "practices" related to Article 2(5) of Council Regulation 1225/2009 (Panel Request
Paragraph 1(A) ); (2) an unclear "as applied" claim against Article 2(5) of Council
Regulation 1225/2009 (Panel Request Paragraph 2(B)3 ); (3) a new claim under Article 9.3 of
the Anti-dumping Agreement against Article 2(5) of Council Regulation 1225/2009 ( Panel
Request Paragraph 2(A)3 ); (4) a new claim under GATT Article VI:1 against Article 2(5) of
Council Regulation 1225/2009, alleging use of information other than that in the country of origin
(Panel Request Paragraph 2(A)1); (5) a new claim under GATT Article VI:1 against Article 2(5)
of Council Regulation 1225/2009, alleging not using the records kept by the producers and, further
alleging, using costs not associated with the production and sale of the product under
consideration (Panel Request Paragraph 2(A)2); (6) new claims under Articles 2.2 and 2.2.1.1
of the Anti-dumping Agreement against Article 2(5) of Council Regulation 1225/2009, alleging
using costs not associated with the production and sale of the product under consideration ( Panel
Request Paragraph 2(A)2 ); (7) a new claim under Article 2.1 of the Anti-dumping Agreement
against the Commission Regulation and the Council Implementing Regulation, alleging
"unreasonable" determination of the amounts of profits (Panel Request Paragraph 2(B)4).

26. The sheer number and breadth of these new claims suffices to illustrate that Argentina's
Panel Request seeks to expand the scope of the disp ute. The individual analysis of each of these
new claims further establishes that Argentina's Panel Request changes the "essence" of the
complaint.

4.1. N
EW "MEASURES" PRESENTED BY ARGENTINA FOR THE FIRST TIME IN THE PANEL REQUEST

27. Paragraph 1(A) of Argentina's Panel Request challenges for the first time " related practices",
in addition to Article 2(5) of Council Regulation 1225/2009. In contrast, Argentina's Consultations
Request did not include any such reference. Argentina's Consultations Request, in its Paragraph b.,
refers solely to Article 2(5) of Council Regu lation 1225/2009, i.e., a specific, written legal
provision. The claim against " related practices" is a new claim, which expands the scope of the
dispute and changes the essence of Argentina's complaint.

28. There are no facts that could support a finding that this new claim might "reasonably be said
to have evolved" from the consultations. Argentina was fully aware of the European Union's
interpretation and application of Article 2(5) of Council Regulation 1225/2009 already at the time
of its Consultations Request. This is evidenced, inter alia , by the fact that Argentina's
Consultations Request included claims against the Commission Regulation and the Council
Implementing Regulation, which were based on Article 2(5) of Council Regulation 1225/2009.
Therefore, Argentina's decision to add the new claim against " related practices " in its Panel
Request cannot be said to have "evolved" from the consultations.

29. It is also noted that the Consultations Request expressly stated that Argentina challenges
Article 2(5) of Council Regulation 1225/2009 "as such." The reference to an "as such" claim further
shows that Argentina was challenging a specific, written legal provision and not the application of
that legal provision. Argentina's attempt to add a claim on the application of Article 2(5) of Council
Regulation 1225/2009 changes the essence of the original complaint.

30. Consequently, the claim against "related practices" in Paragraph 1(A) of Argentina's Panel
Request expands the scope of the dispute and changes the essence of the complaint and,
therefore, falls outside the Panel's terms of reference.
11

9 Appellate Body Report, US-Upland Cotton, para. 293.
10 Appellate Body Report, Mexico – Anti Dumping Measures on Rice, paras. 137 and 138.
11 As mentioned above, this new claim is also too vague and imprecise and fails to identify properly the
specific measure at issue. Therefore, this new claim fails to comply with the requirements of Article 6.2 of the
DSU for a number of different reasons.

- C-37 -

4.2. N EW "LEGAL BASES" RAISED BY ARGENTINA FOR THE FIRST TIME IN THE PANEL REQUEST

4.2.1. The new and unclear " as applied " claim against Article 2(5) of
Council Regulation 1225/2009

31. Between Paragraph 2(B)3 and Paragraph 2(B)4 of the Panel Request, Argentina has inserted
a new, not-numbered paragraph which seems to introduces an " as applied " challenge against
Article 2(5) of Council Regulation 1225/2009. The role of this not-numbered paragraph is
ambiguous. The Consultations Request expressly stated in Paragraph b. that Argentina was
challenging Article 2(5) of Council Regulation 1225/2009 only " as such", without any reference to
an "as applied" claim. The Panel Request repeats the reference to the " as such" claim in the last
sub-paragraph of the chapeau of Paragraph 2(A).

32. On its face, it is not clear whether this not-numbered paragraph is intended to introduce an
"as applied " claim against Article 2(5) of Council Regulation 1225/2009. In any event, if we
assume arguendo that Argentina is introducing an "as applied" claim against Article 2(5) of Council
Regulation 1225/2009, then such claim is new and expands the scope of the original dispute, as
presented in Argentina's Consultations Request. In addition, it seems to be misplaced in section B,
which rather deals with the provisional and the definitive regulations.

33. There are no facts that could support a finding that this new claim might "reasonably be said
to have evolved" from the consultations. Argentina was fully aware of the European Union's
interpretation and application of Article 2(5) of Council Regulation 1225/2009 already at the time
of its Consultations Request. This is evidenced, inter alia , by the fact that Argentina's
Consultations Request included claims against the Commission Regulation and the Council
Implementing Regulation, which were based on Article 2(5) of Council Regulation 1225/2009.

34. Therefore, all the elements that would have allowed Argentina to include the " as applied"
challenge against Article 2(5) of Council Regulation 1225/2009 were at the disposal of Argentina
already at the time it submitted its Consultations Request. However, Argentina did not advance
these claims in its Consultations Request. Allowing Argentina to ignore the consequences of its
own decision and put forward a completely new list of claims in its Panel Request would dilute the
role of the Consultations Request.

35. Consequently, this claim of Argentina falls outside the Panel's terms of reference.

4.2.2. The new claim against Arti cle 2(5) of Council Regulation
1225/2009 based on Article 9.3 of the Anti-dumping Agreement

36. Paragraph 2(A)3 of Argentina's Panel Request introduces a new claim against Article 2(5) of
Council Regulation 1225/2009, based on Article 9.3 of the Anti-dumping Agreement. Argentina
claims for the first time that Article 2(5) of Council Regulation 1225/2009 is " as such" inconsistent
with Article 9.3 of the Anti-dumping Agreement, because, allegedly, the "amount of the anti-
dumping duty to be imposed exceeds the margin of dumping."

37. This claim did not exist in Argentina's Consultations Request. Paragraph b. of the
Consultations Request (which dealt with Article 2(5) of Council Regulation 1225/2009) did not
make any reference to Article 9.3 of the Anti-dum ping Agreement. Moreover, Paragraph b. of the
Consultation Request did not make any reference to an alleged "excess" of the anti-dumping duty,
if compared with the margin of dumping. Therefore, there is no doubt that the claim in
Paragraph 2(A)3 of the Panel Request is a new claim, which expands the scope of the dispute and
changes the essence of Argentina's original complaint.

38. There are no facts that could support a finding that this new claim might "reasonably be said
to have evolved" from the consultations. Argentina was fully aware of the European Union's
interpretation and application of Article 2(5) of Council Regulation 1225/2009 already at the time
of its Consultations Request. Argentina was also aware of all the facts that would have allowed
Argentina to allege that the anti-dumping duty was in excess of the dumping margin. This is
evidenced, inter alia , by the fact that Argentina's Consultations Request included claims under

- C-38 -

Article 9.3 of the Anti-dumping Agreement ag ainst the Commission Regulation and the Council
Implementing Regulation, which were based on Article 2(5) of Council Regulation 1225/2009.12

39. Therefore, all the elements that would have allowed Argentina to challenge Article 2(5) of
Council Regulation 1225/2009 under Article 9.3 of the Anti-dumping Agreement were at the
disposal of Argentina already at the time it submitted its Consultations Request. However,
Argentina did not advance these claims in its Consultations Request. Allowing Argentina to ignore
the consequences of its own decision and put forward a completely new list of claims in its Panel
Request would dilute the role of the Consultations Request.

40. Consequently, Argentina's new claim against Article 2(5) of Council Regulation 1225/2009,
alleging an inconsistency with Article 9.3 of the Anti-dumping Agreement, as well as that the anti-
dumping duty allegedly "exceeds" the dumping margin, falls outside the Panel's terms of
reference.

4.2.3. New claims against Article 2(5) of Council Regulation 1225/2009
based on Article VI:1 of the GATT 1994

41. Paragraph 2(A)1 and Paragraph 2(A)2 of Argentina's Panel Request include new claims
against Article 2(5) of Council Regulation 1225 /2009 that are based on Article VI:1 of the
GATT 1994. Argentina's Consultations Request did not include any claim based on Article VI:1 of
the GATT. It also did no t include any claims agai nst Article 2(5) of Council Regulation 1225/2009
based on the GATT 1994.
13 Therefore, these claims are new and they expand the original scope of
the dispute.

42. There are no facts that could support a finding that this new claim might "reasonably be said
to have evolved" from the consultations. Already at the time of its Consultations Request,
Argentina was fully aware that Article 2(5) of Council Regulation 1225/2009 is part of the
European Union's anti-dumping legislation. Ther efore, there was nothing preventing Argentina
from challenging Article 2(5) of Council Regulation 1225/2009 under Article VI:1 of the GATT,
which is part of the GATT Article dealing with anti-dumping. This is evidenced, inter alia, by the
fact that Argentina's Consultations Request alread y included claims against Article 2(5) of Council
Regulation 1225/2009 that were based on the Anti-dumping Agreement.

43. Moreover, Argentina cannot argue that adding new claims under Article VI:1 of the GATT
does not change the "essence" of the complaint, alleging that the original complaint was already
based on the Anti-dumping Agreement and further alleging that its scope is the same with the
scope of Article VI of the GATT. If Article VI:1 of the GATT and the provisions of the Anti-dumping
Agreement included in Argentina's Consultations Request had identical scope, then the addition of
a claim based on GATT Article VI:1 in the Panel Request would have been redundant and the Panel
would simply exercise judicial economy on it. Th e fact that Argentina chose to add the new GATT
Article VI:1 claim in its Panel Request shows that Argentina considers that the two sets of
provisions have different scope and that the "essenc e" of GATT Article VI:1 is different from the
"essence" of the provisions of the Anti-dumping Agreement included in the Consultations Request.
Therefore, by adding the GATT Article VI:1 claim in its Panel Request, Argentina confirms that it
changes the "essence" of its original complaint.

44. Consequently, Argentina's new claims under Ar ticle VI:1 of the GATT fall outside the Panel's
terms of reference.

4.2.4. New claims against Article 2(5) of Council Regulation 1225/2009
based on Articles 2.2 and 2.2.1.1 of the Anti-dumping Agreement

45. In Paragraph 2(A)2 of its Panel Request, Argentina alleges the violation of Articles 2.2
and 2.2.1.1 of the Anti-dumping Agreement "for two reasons." As "second reason", Argentina
asserts that Article 2.2 and 2.2.1.1 of the Anti-dumping Agreement "require that the costs used be
associated with the production and sale of the product under consideration."

12 See Paragraph a.6 of Argentina's Consultations Request.
13 The Consultations Request included claims against Article 2(5) of Council Regulation 1225/2009 only
based on the Anti-dumping Agreement and the Marrakesh Agreement; see Paragraph b. of Argentina's
Consultations Request.

- C-39 -

46. These are new claims against Article 2(5) of Council Regulation 1225/2009, which were not
included in Argentina's Consultations Request; the corresponding paragraph in Argentina's
Consultations Request appears to be Paragraph b.2, which (a) includes only a claim based on
Article 2.2.1.1 of the Anti-dumping Agreement and (b) refers to the calculation of costs "on the
basis of records kept by the exporter." The new claims in Argentina's Panel Request expand the
scope of the dispute and change the essence of the complaint because (a) they introduce a new
legal basis (i.e., Article 2.2 of the Anti-dumping Agreement); and (b) they introduce a new type of
complaint (i.e., the alleged use of costs not "associated with the production and sale of the product
under consideration").

47. There are no facts that could support a finding that these new claims might "reasonably be
said to have evolved" from the consultations. Argentina was fully aware of the European Union's
interpretation and application of Article 2(5) of Council Regulation 1225/2009 already at the time
of its Consultations Request. Argentina was also aware of all the facts that would have allowed
Argentina to articulate this claim in its Consultations Request. This is evidenced, inter alia, by the
fact that Argentina's Consultations Request included claims against the Commission Regulation and
the Council Implementing Regulation alleging a violation of Articles 2.2 and 2.2.1.1 of the
Anti-dumping Agreement and referring to the alleged inclusion of "costs not associated with the
production and sale of the product under consideration."
14

48. Therefore, Argentina could have made this claim against Article 2(5) of Council
Regulation 1225/2009 in its Consultations Request, but did not do so. Allowing Argentina to ignore
the consequences of its decision and put forward a completely new list of claims in its Panel
Request would dilute the role of the Consultations Request.

49. Consequently, Argentina's new claims against Article 2(5) of Council Regulation 1225/2009,
based on Article 2.2 and Article 2.2.1.1 of the Antidumping Agreement and alleging the use of
costs not associated with the production and sale of the product under consideration, are outside
the Panel's terms of reference.

4.2.5. The new claim against the Commission Regulation and the Council
Implementing Regulation based on Article 2.1 of the
Anti-dumping Agreement

50. In paragraph 2(B)4 of its Panel Request, Ar gentina alleges that the European Union acted
inconsistently with "Articles 2.1, 2.2 and 2.2.2( iii) of the Anti-dumping Agreement", because it
failed to determine the "amounts of profit" on the "basis of a reasonable method." The
corresponding paragraph in Argentina's Consultations Request is Paragraph a.5, where Argentina
alleges that the European Union failed to determine the "amounts of profit" in "accordance with
the rules established under" Articles 2.2 and 2.2.2 of the Anti-dumping Agreement.

51. These two paragraphs provide a good exampl e of the difference between (a) "refining the
contours" of a claim and (b) expanding the scope of the dispute. The Panel Request relies on
Article 2.2.2(iii) of the Anti-dumping Agreement, while the Consultations Request referred to
Article 2.2.2 in general. This development can probably "reasonably be said" to have "evolved
from the consultations." The same can be said for the description of the claim: the Panel Request
alleges a determination not "on the basis of a reasonable method", while the Consultations
Request mentioned more generally a determination not "in accordance with the rules established
under" Articles 2.2 and 2.2.2. The text of the Panel Request is a more precise version of the more
general text used in the Consultations Request.

52. In contrast, Argentina's addition of a new claim under Article 2.1 of the Anti-dumping
Agreement cannot "reasonably be said" to have "evolved from the consultations." Argentina was in
possession of all the elements that would have allowed it to advance a claim under Article 2.1 of
the Anti-dumping Agreement already at the time of the Consultations Request. The potential
"refining of the contours" of Argentina's claims, brought about by the consultations, was the
clarification of the precise sub-paragraph of Article 2.2.2 that would serve as legal basis for its
claim. Argentina went farther than that in its Panel Request: it added a new legal basis for its
claim.

14 Argentina's Consultations Request, Paragraph a.3.

- C-40 -

53. At the time of the Consultations Request, Argentina decided not to challenge the
European Union's determination of profits under Article 2.1 of the Anti-dumping Agreement,
although it could have done so. Article 6.2 of the DSU requires that Argentina be now held to the
consequences of that decision.

54. Consequently, Argentina's new claim under Article 2.1 of the Anti-dumping Agreement in
paragraph 2(B)4 of its Panel Request is outside the Panel's terms of reference.

5. C
ONCLUSION

55. The European Union requests the Panel to i ssue a preliminary ruling confirming that the
claims of Argentina's Panel Request that are di scussed in the present submission are outside the
Panel's terms of reference.

56. The European Union also requests that this pr eliminary ruling be issued before the date on
which the European Union's first written submission is due. This will allow the European Union to
identify the precise claims to which it will need to defend itself in its first written submission.

- D-1 -

ANNEX D
ARGUMENTS OF THIRD PARTIES
Contents Page
Annex D-1 Executive Summary of Third-party Arguments of Australia D-2
Annex D-2 Executive Summary of Third-party Arguments of China D-5
Annex D-3 Executive Summary of Third-party Arguments of Colombia D-10
Annex D-4 Executive Summary of Third-party Arguments of Indonesia D-13
Annex D-5 Executive Summary of Third-party Arguments of Mexico D-17
Annex D-6 Executive Summary of Third-party Arguments of Norway D-21
Annex D-7 Executive Summary of Third-party Arguments of the Russian Federation D-23
Annex D-8 Executive Summary of Third-party Arguments of the Kingdom of Saudi Arabia D-26
Annex D-9 Executive Summary of Third-party Arguments of Turkey D-30
Annex D-10 Executive Summary of Third-party Arguments of the United States D-32

- D-2 -

ANNEX D-1
EXECUTIVE SUMMARY OF THIRD-PARTY
ARGUMENTS OF AUSTRALIA
I. THE MEANING OF THE LANGUAGE "REC ORDS [THAT] REASONABLY REFLECT THE
COSTS ASSOCIATED WITH THE PRODUCTION AND SALE OF THE PRODUCT UNDER
CONSIDERATION" IN ARTICLE 2.2.1.1 OF THE ANTI-DUMPING AGREEMENT
1. A material issue in this matter is the interpretation of the language "records [that]
reasonably reflect the costs associated with the production and sale of the product under
consideration" in Article 2.2.1.1 of the Anti-Dumping Agreement. This language derives from the
first sentence of Article 2.2.1.1, which reads:

For the purpose of paragraph 2, costs shall normally be calculated on the basis of
records kept by the exporter or producer under investigation, provided that such
records are in accordance with the generally accepted accounting principles of the
exporting country and reasonably reflect the costs associated with the production and
sale of the product under consideration.
2. Two questions are of critical importance to this analysis: what it means for records to
reasonably reflect the costs associated with production and sale of the product under
consideration; and, whether records that accurately detail the actual expenses of the exporter or
producer automatically constitute records that must be used in the calculation of costs (provided
they also accord with generally accepted accounting principles (GAAP) – in this submission
Australia assumes that the GAAP proviso is met). Relevantly, the Panel in China – Broiler
Products (US)1 noted that:

… although Article 2.2.1.1 sets up a presumption that the books and records of the
respondent shall normally be used to calculate the cost of production for constructing
normal value, the investigating authority retains the right to decline to use such books
if it determines that they are either (i) inconsistent with [generally accepted
accounting principles - GAAP] or, (ii) do not reasonably reflect the costs associated
with the production and sale of the product under consideration.
3. Argentina argues that records that detail th e actual expenses of the exporter or producer
would reasonably reflect the costs associated with production and sale of the product under
consideration, and so must be used in the production cost calculation under Article 2.2.1.1. In
Australia's view, this may not always be the case. Rather, Article 2.2.1.1 permits investigating
authorities to look beyond the records to consider whether the costs reflected therein are
reasonably related to the cost of producing and selling the product. The reasonableness of costs of
inputs or raw materials would be relevant to this analysis.

4. In this respect, Australia recalls the Panel's approach to analysing the calculation of cost of
production in Egypt – Rebar (Turkey)
2, where the Panel considered that it must:

… reach a conclusion as to whether…there was evidence in the record that the short-
term interest income was "reasonably" related to the cost of producing and selling
r e b a r , a n d t h a t t h e I A t h u s s h o u l d h a v e i n c l u d e d i t i n t h e c o s t o f p r o d u c t i o n
calculation.
5. This supports a reading of Article 2.2.1.1 whereby any element that "reasonably" relates to
the cost associated with production and sale should be taken into account, including in relation to
inputs or raw materials, and might lead to the adjustment or replacement of certain costs. Indeed,
this appears to be the situation in US – Softwood Lumber, where the Panel did not take issue with

1 Report of the Panel, China – Broiler Products (US), para. 7.164.
2 Report of the Panel, Egypt – Rebar (Turkey), para. 7.393.

- D-3 -

respect to testing for arm's length prices. 3 In such cases, where the investigating authority has
established that the records do not reasonably reflect the costs, there is no obligation under
Article 2.2.1.1 to calculate costs using the records.
4

6. This interpretation is consistent with the or dinary meaning of Article 2.2.1.1 and is the only
sensible reading when considered in context, which is Article 2 on the determination of dumping.
First, Article 2.1 of the Anti-Dumping Agreement sets down the usual basis for the determination
of dumping: namely, the proper comparison between the normal value of the imported product in
the ordinary course of trade in the country of orig in or export, and the export price of the product
in the country of import. Such a comparison must be a fair comparison by virtue of Article 2.4 of
the Anti-Dumping Agreement.

7. Second, Article 2.2 of the Anti-Dumping Agreement provides for situations where there are
no sales in the ordinary course of trade, or where such sales do not permit a proper comparison
because of the low volume of sales or a particular market situation. Pursuant to Article 2.2, the
authorities in these circumstances are required to disregard these sales and use a comparable
price of the like product when exported to an appropriate third country, or to construct normal
value.

8. Given that the application of an anti-dumping methodology should be assessed on a case by
case basis, and the situations in which cost construction is required are determined by Article 2.2,
Article 2.2 is central to this analysis.

9. As such, in situations where costs are being constructed under Articles 2.2 and 2.2.1.1, a
holistic analysis of costs is warranted in order to arrive at a proper cost calculation that provides a
point of comparison that is closest to a "normal" value.
5 All costs that would be reasonably related
to the production of the goods, or at least those that are significant enough to affect the overall
production costs, are relevant to such an analysis.

10. To suggest that the meaning of the first sentence of Article 2.2.1.1 prevents or limits
investigating authorities from examining whether records reasonably reflect costs, having
established that there are no sales in the ordinary course of trade or that such sales do not permit
a proper comparison, would render this provision inutile. It would be circuitous in preventing
authorities to address not being able to make a proper comparison in determining the margin of
dumping.

II. THE OBJECT AND PURPOSE OF THE ANTI-DUMPING AGREEMENT
11. In Australia's view, such a reading of Arti cle 2.2.1.1 is not contrary to the object and
purpose of the Anti-Dumping Agreement, to the extent that one can be established.

12. The Panel in US – Zeroing (EC) observed with respect to the Anti-Dumping Agreement that
"specific objectives are difficult to discern with any facility or compelling force due to the lack of
anything that could properly be described as constituting a clear statement of the objectives of the
AD Agreement".
6

13. Nevertheless, to the extent that guidance can be drawn from Article VI.1 of the GATT 1994,
Australia notes that the practice condemned therein hinges on the introduction of a product into
the commerce of an importing country at "less than its normal value" – that is, at less than the
comparable price, "in the ordinary course of tr ade". While Article VI:1 establishes the point of
comparison within the ordinary course of trade, th is does not preclude other points of comparison
when normal value must be constructed because there are no sales within the ordinary course of
trade. In Australia's view, an interpretation of Article 2.2.1.1 that allowed an investigating
authority to consider, in a holistic way, the reasonableness of costs, and to adjust them if
appropriate, would not run counter to Article VI.1 of the Anti-Dumping Agreement.

3 Report of the Panel, US – Softwood Lumber V, para. 7.332.
4 Report of the Panel, US – Softwood Lumber V, para. 7.236.
5 Anti-Dumping Agreement, Article 2.1.
6 Report of the Panel, US – Zeroing (EC), footnote 292.

- D-4 -

III. THE MANDATORY/DISCRETIONARY DI STINCTION IN "AS SUCH" CLAIMS
14. In Australia's view, a Panel should be guided by the mandatory/discretionary distinction in
assessing whether a Member's legal instrument is inconsistent with its WTO obligations "as such".

15. The Appellate Body in US – 1916 Act found that the mandatory/discretionary distinction was
a threshold consideration in determining whether legislation could be challenged 'as such',
endorsing the approach of GATT panels that only legislation which mandated inconsistent action
could be challenged 'as such'.
7 This approach appears to have been recently followed by the
Appellate Body in US – Carbon Steel (India) , where it found that a US regulation was not
inconsistent 'as such' with Article 12.7 of the Agreement on Subsidies and Countervailing Measures
because the regulation did not require inconsistent conduct but was of a 'discretionary nature'. 8
While other rulings have left open the question of whether a discretionary measure could be
challenged 'as such' 9, in US – Corrosion Resistant Steel Sunset Review , the Appellate Body
maintained that the mandatory/discretionary na ture of a measure remained relevant to an
assessment of whether a measure was 'as such' inconsistent with a Member's obligations, even if it
did not have to be considered as a 'preliminary jurisdictional matter'. 10 As the Appellate Body held
in US – Section 211 , 'where discretionary authority is vested in the executive branch of a
WTO Member, it cannot be assumed that the WTO Member will fail to implement its obligations'.11

7 Appellate Body Report, US – 1916 Act, paras. 88-89.
8 Appellate Body Report, US – Carbon Steel (India), para. 4.483.
9 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, paras. 89, 93; Appellate Body
Report, United States – Countervailing Measures on Certain EC Products, footnote 334 to para. 159;
Appellate Body Report, US – Zeroing (EC), paras. 211, 214; Panel Report, US – Section 301 Trade Act,
paras. 7.53-7.54.
10 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 89. See also Panel
Report, US – Section 301 Trade Act, para. 7.53, where the panel stated that 'The question is then whether, on
the correct interpretation of the specific WTO obligation at issue, only mandatory or also discretionary national
laws are prohibited'.
11 Appellate Body Report, US – Section 211 Appropriations Act, para. 259.

- D-5 -

ANNEX D-2
EXECUTIVE SUMMARY OF THIRD-PARTY
ARGUMENTS OF CHINA
I. Introduction

1. The People's Republic of China ("China") intervenes in this case because of its systemic
interest in the correct interpretation of GA TT 1994 and the Anti-Dumping Agreement ("ADA").
Through its written submission, oral statement and responses to the Panel's questions, China has
discussed the request of the European Union ("EU") for a preliminary ruling ("PRR"), presented its
views on the interpretation of Articles 2.2.1.1 and 2.2 of the ADA, made observations on the
meaning of Article 2(5) of the EU Basic Regula tion and its consistency with Articles 2.2.1.1
and 2.2, and made observations on certain claims with respect to elements of the
EU determination in the Biodiesel investigation, including the EU approach to cost adjustments,
profit determination, price comparability, and injury and causation issues.

II. The Request for a Preliminary Ruling

2. First, as to the EU's objections in Section 2 of the PRR, China considers that the references
to "implementing measures and related instrument or practices" and "related measures and
implementing measures" in the Panel Request are not per se inconsistent with the specificity
requirement in Article 6.2. The Panel must cons ider the Panel Request as a whole, and, in
particular, to examine whether the measures that are implemented or related were precisely
identified in that Request. Second, as to the EU's objections in Section 3.2 of the PRR, China
submits that there is no mandatory requirement to refer to a specific sub-paragraph of a treaty
provision. A panel should examine whether a general reference to a treaty provision meets
Article 6.2 on a case-by-case basis, taking into account the extent to which such reference sheds
light on the nature of the obligation at issue. China also recalls that a "brief summary" of the legal
basis should be distinguished from arguments in support of a particular claim,
 which are not
required to be included in a panel request. Third, as to the EU's objection in Section 4.2.4 of the
PRR, China notes that both provisions concerned have been invoked to challenge Article 2(5) of
the Basic Regulation in both the request for cons ultations and the Panel Request. It thus appears
that Argentina has not added new legal basis in the Panel Request, but just clarified the connection
between the challenged measure and the legal basis. Finally, China considers that PRR is not the
only way to address preliminary issues. Parties may present views on many of these issues in their
submissions and/or statements and expect panels to make findings in final reports. Unnecessary
or premature requests should not be encouraged.

III. Interpretation of Articles 2.2.1.1 and 2.2 of the ADA

A. "Dumping" Reflects Pricing Behaviours of Individual Producers/Exporters

3. To properly interpret Articles 2.2.1.1 and 2.2, it is appropriate to begin with the foundational
concept of "dumping". Dumping is the result of th e "pricing behaviour of individual exporters or
foreign producers". Thus, anti-dumping measures ca n be applied only to remedy injury caused by
the pricing behaviour of an individual producer/exporter, which results in price discrimination
between the producer's home market and the export market.

4. In line with this foundational concept of dumping, an authority cannot reject the costs
recorded in the individual producer/exporte r's records on grounds exogenous to that
producer/exporter. Exogenous factors, such as the regulatory environment in which a producer
operates, or the way in which duties or taxes affect market conditions for goods or services
upstream to production of the product under consid eration are, by definition, entirely outside the
control of a producer/exporter. The market outcomes of government policy measures have nothing
to do with the commercial conduct of the producer/exporter. They cannot therefore be the grounds
to reject the accurately recorded costs. Othe rwise, anti-dumping proceedings cease to be a
remedy for the pricing behaviour of producers or exporters, and instead become a tool for
authorities to penalize imports for cost advantages that foreign producers may enjoy.

- D-6 -

B. Article 2.2.1.1 Does Not Permit Rejection of Recorded Costs on the Ground that
They Are "Artificially Lower" than Hypothetical Costs

5. Article 2.2.1.1 does not permit authorities to reject recorded costs on the ground that they
are lower than they would be if sourced in a market that, unlike the country of origin, remains
unaffected by governmental policy interventions that affect costs.

6. First, a "reasonably reflect" assessment must be focused on the costs associated with
production and sale of the product under consider ation by the specific producer/exporter, and not
the costs of a hypothetical producer or exporter.

7. This is made clear by the privileged status given to "records kept by the exporter or
producer under investigation" under Article 2.2.1.1. It is also reflected in the explicit reference to
the costs "associated with" the production and sale of "the product under consideration". To be
"associated with" the production of the product under consideration, the costs must be connected
with the product that is produced by the producer under investigation and exported to the
importing Member. A cost taken from a hypothetical market does not in any way pertain to the
production of the product by the investigated producer, and thus is not "associated with" the
production of the product under consideration.

8. Furthermore, the circumstances identifi ed in the second and third sentences of
Article 2.2.1.1, in which a producer's records migh t not be a reasonable reflection of the costs,
confirm that the determination of reasonableness does not extend to factors exogenous to the
producer/exporter. Specifically, the issues of "proper allocation" of costs, "amortization",
"depreciation" and "capital expenditure" all concern cost accounting choices made by the specific
producer/exporter and any related companies with which it shares costs.

9. Article 2.2.2 provides further context. It also reflects the producer/exporter-specific focus
when prescribing the basis for determination of administrative, selling and general (or "AS&G")
costs, which are other cost components to be used in constructing normal value.

10. Second, if a benchmark is used to assess wh ether records reasonably reflect costs, such a
benchmark must relate to costs in the country of origin and not costs in some hypothetical market
where the market and regulatory conditions of the country of origin do not exist. Since
Article 2.2.1.1 begins with the phrase "[f]or th e purpose of paragraph 2", the scope of the costs
considered under both Articles 2.2.1.1 and 2.2 is the same, i.e. "costs of production in the country
of origin". In addition, Article 2.2.2, another provision within "paragraph 2" of Article 2, also
requires that AS&G costs be determined on the basi s of costs in the country of origin. In short,
whether records reasonably reflect costs must be assessed within the boundaries of the country of
origin . It is impermissible , as a matter of law, to benchmark a producer or exporter's recorded
costs against an international market price or prices from other countries.

11. Third, the object and purpose of the ADA is to discipline the rules governing anti-dumping
investigations and measures, for which the foundation stone is the existence of dumping by
exporters or producers. A determination of the existence of dumping requires analysis of the
pricing behaviours of the individual producers/exporters. Government measures affecting the costs
of a producer or exporter may be relevant for the application of other covered agreements if they
are specific subsidies, or if they take the form of impermissible export restrictions. However, since
dumping is a producer/exporter-specific concept, it is not consistent with the object and purpose of
the ADA to seek to remove the impact of governmental policy interventions that are entirely
exogenous to the producer/exporter under consideration.

C. Article 2.2 Does Not Allow Use of Non-Country of Origin Costs

12. Article 2.2 is clear and explicit in requiring that the "cost of production" used to construct
normal value must be the cost "in the country of origin". The language of Article 2.2 is less flexible
than the language of Article 14(d) of the SCM Ag reement. Thus, while the use of out of country
benchmarks may sometimes be permissible under the SCM Agreement, a producer's costs under
the ADA are, quite simply, the "costs of production in the country of origin".

13. The EU does not take issue with the requirement that "costs" under Article 2.2 reflect the
"cost of production in the country of origin", bu t argues that the evidence required to establish

- D-7 -

such costs may originate in other countries. First, the issue regarding the appropriate source of
evidence only arises when the costs recorded by a specific producer or exporter need to be
adjusted. Since authorities are not permitted to disregard recorded costs on the ground that they
are "artificially low" because of governmental policy intervention, there is no need to refer to any
sources of evidence other than the producer's re cords themselves in these circumstances. Second,
in cases where cost records of a specific producer/exporter need to be adjusted because of issues
pertaining to that producer or exporter, an authority shall consider evidence from within the
country of origin, which might include evidence regarding costs from other producers/exporters of
the investigated product, or from a related sector or industry. Third, only in very exceptional cases
where there is a complete lack of evidence availa ble in the country of origin, might an authority
consider evidence of costs from third countries. In such a scenario, an authority could not simply
deem out-of-country evidence to reflect the cost of production in the country of origin. Rather,
such evidence could only be used as a starting point upon which to determine costs of production
in the country of origin. In other words, if third country evidence is used, the specific market
conditions in the country of origin must be factored in and the final costs of production must reflect
the costs in the country of origin. Relevant market conditions that should be considered by an
investigating authority include how policy or regulatory factors, including taxes and duties, impact
on the price and availability of inputs and other factors of production.

IV. "As Such" Claims in Relation to Article 2(5) of the Basic Regulation

14. At the outset, China recalls that in order for a rule or norm of general and prospective
application to be found to be, as such, WTO-inconsis tent, it is not necessary to show that a rule or
norm "mandates" a WTO-inconsistent outcome in every case. Rather, the complainant must
provide evidence demonstrating that the application of the challenged rule will necessarily be
inconsistent with that Member's WTO obligations in defined circumstances. China also recalls that
the Appellate Body has provided guidance on how to examine the meaning of municipal law,
requiring panels to undertake a holistic assessment of all relevant elements. China concurs with
Argentina that the meaning of Article 2(5), second sub-paragraph, should be examined in a way
taking into account elements other than the text, including: (i) its context and "logic", (ii) its
consistent application by the EU authority, and (iii) the judgment of EU courts on its meaning.

15. As an immediate context, the first sub-paragraph of Article 2(5) includes the same
"reasonably reflect" clause. There exists a spec ial logical link between the two sub-paragraphs,
i.e. the first sub-paragraph requires the authority to use the records of the parties concerned as
the basis to calculate costs if this condition, together with another condition, is fulfilled, while the
second sub-paragraph requires the authority not to use the records if the same condition is not
met. Thus, the EU's argument that the conditions that must be met in order to determine whether
the company records "reasonably reflect" costs are outside of the scope of the
second subparagraph fails by disregarding this special link.

16. The context that should be taken into account also covers Recitals 3 and 4 of Council
Regulation (EC) No 2972/2002, and Article 2(3), second sub-paragraph, of the Basic Regulation.
Recital 4 clarifies that the circumstances in which records do not reasonably reflect costs cover the
situations where "because of a particular market situation sales of the like product do not permit a
proper comparison". According to Article 2(3), second sub-paragraph, a particular market situation
may be deemed to exist when "prices are artificia lly low". Recital 3 of the Council Regulation (EC)
No 2972/2002 further clarifies that particular market situations cover "market impediments",
which may result in domestic prices being out of line with world-market prices or prices in other
representative markets. Reading these provisions together, Article 2(5), second sub-paragraph,
appears to require the investigating authority to reject the records of the parties concerned on the
ground that "prices are artificially low" or for reasons relating to the situation of the entire market
caused by governmental policy interventions, instead of a situation relating to or caused by
conducts of a specific producer/exporter.

17. The above reading is confirmed by the app lication of Article 2(5). The practice of the
EU authority indicates that it will disregard the costs correctly recorded by the specific
producer/exporter under investigation if it determines that such costs are "artificially" lower than
the "hypothetical" costs that would be borne in a theoretical market where the prices of relevant
inputs were not affected by governmental policy interventions. In the investigation concerning
imports of biodiesel from, inter alia , Argentina,
 the EU authority disregarded the actual cost of
soya beans as recorded by the companies concer ned on the ground that such cost (domestic

- D-8 -

prices of soya beans) was "artificially lower" than a "hypothetical" cost (international prices). It is
clearly indicated by the authority that this determination is not unique, but falls well "[with]in the
meaning of Article 2(5)". In Seamless Pipes and Tubes of Iron or Steel from Croatia, Romania,
Russia and Ukraine , the EU determined that the correctly accounted gas prices "could not
reasonably reflect the costs associated with the production and distribution of gas" because that
price "was much lower than the average expo r t p r i c e s f r o m R u s s i a t o b o t h W e s t e r n a n d
Eastern parts of Europe". The authority also indicated that it reached this determination "as
provided for in Article 2(5) of the basic Regulati on", which implies that the above practice appears
to be an automatic application of Article 2(5).

18. In summary, Article 2(5), second sub-para graph, appears necessarily to require the
EU authority to reject records of a producer/exporter under investigation that accurately account
for the costs incurred by that producer/exporter, for the sole reason that the recorded costs are
"artificially low" compared to the hypothetical costs that would be incurred in a market unaffected
by governmental policy interventions; and appear s to require, in the above situations, that the
costs be "adjusted or established" on the basis of information from "other representative markets",
when the costs of other producers/exporters in the same country are also "artificially low"
compared to the hypothetical costs and other "reasonable" bases are not available.

19. Therefore, Article 2(5), second sub-paragraph appears to be, as such, inconsistent with
Article 2.2.1.1 of the ADA, under which an authority is not entitled to reject the producer's
recorded costs simply because the costs incurred by the producer are lower than hypothetical
costs unaffected by circumstances such as governmental policy interventions. It also appears to
be, as such, inconsistent with Article 2.2 of the ADA, which requires that the costs of production
used to construct normal value must be those "in the country of origin".

V. Claims with Respect to the Anti-Dum ping Measures on Argentine Biodiesel

A. Claims with Respect to the Adjustment of Costs

20. As to Argentina's claims in relation to the EU's rejection of the producers/exporters' records,
China notes that the Definitive Determination clearly stated that the sole reason for the
EU authority to conclude that the costs of soya beans were not reasonably reflected in the records
and to disregard the actual costs as recorded was that the domestic prices of soya beans used by
biodiesel producers in Argentina were found to be artificially lower than international prices due to
the "distortion" created by the Argentine export tax system. The EU thus violates Article 2.2.1.1
because under this provision an authority is not permitted to depart from accurately accounted
costs, for the sole reason that such costs are "art ificially low" compared to the hypothetical costs
unaffected by governmental policy interventions.

21. As to Argentina's second claim with respect to the adjustment of costs, China notes that
the EU, having disregarded the recorded costs of soya beans, replaced this element of cost of
production with an average FOB reference price. By definition, a FOB export price is not a price
that is available to domestic Argentine producers, but a price available to buyers in the export
market. It is not reflective of the cost of soya beans "in the country of origin", but reflects market
conditions in markets outside of Argentina. Thus, even if the EU authority had no other evidence
regarding such costs in Argentina, and, instead, were justified in referencing evidence relating to
market conditions in export markets, it would have been necessary to adjust this "raw" evidence
to ensure that it elucidated, in a sufficiently prob ative way, the "costs of production in the country
of origin". By simply replacing the recorded co st of soya beans with an average FOB reference
price, without taking account of the significantly different conditions affecting the price for
exported soya beans, the EU acted inconsistently with Article 2.2.

22. Argentina also claims that the EU acted inconsistently with Article 2.2.1.1 by including, in its
calculation of the cost of production of biodiesel, a cost not associated with the cost of production
and sale of biodiesel. As explained by the panel in EC – Salmon (Norway), Article 2.2.1.1 requires
costs of production used for purposes of constructing normal value to be the "costs associated with
production and sale of the product under consider ation". Self-evidently, the price of soya beans
exported from Argentina is not a cost associated with production and sale of biodiesel in Argentina,
because exported soya beans are necessarily not available to producers of biodiesel in Argentina
and the Argentine producers did not pay that price minus fobbing costs for soybeans. By including

- D-9 -

a cost that was not associated with the cost of production and sale of biodiesel, the EU acted
inconsistently with Article 2.2.1.1.

B. Claims with Respect to the Determination of Profits

23. China anticipates that the Panel, as required under Article 17.6(i) of the ADA, will examine
whether the EU authority's establishment and evaluation of the relevant facts was unbiased and
objective. In addition, it appears that the authority failed to indicate the method it used to
determine the profit margin. At most, it just gave a general rationale, which does not describe a
"method". Finally, amounts of profit determined on the basis of a method under Article 2.2.2(iii)
are subject to further a reasonability test. An authority that adopts such a method is required to
explain why it considers the method adopted to be reasonable.

C. Claims with Respect to Fair Comparison

24. China recalls that an authority bears a general obligation to ensure fair comparison and no
differences that "affect price comparability" are precluded from being the object of an allowance.
These requirements apply generally to the calculation of a dumping margin, and specifically, the
construction of normal value does not preclude consideration of the making of various adjustments
as between that normal value and the export price with which it is to be compared.

25. There appears to be no disagreement between the parties with respect to the fact that the
normal value and the export price that are used by the EU incorporated different prices of soya
beans, i.e. the former includes an average of th e reference FOB prices (minus fobbing costs) while
the latter incorporates domestic prices. The different prices of soya beans, or the difference in the
cost of inputs, fall within the scope of "other differences" affecting price comparability. Therefore,
even assuming that the EU was entitled to disregard the domestic costs of soya beans and use
international prices for the construction of normal value, it should have made due allowance for
the above difference in order to ensure a fair comparison.

D. Claims in Relation to Injury and Causation

26. First, China wishes to draw the Panel's attention to some of the arguments and facts
submitted by Argentina, particularly paragraphs 368, 376, 377, 378 and 390 of its first written
submission. This material raises a question as to whether the EU based its determination on
"affirmative, objective, verifiable, and credible" evidence, and whether the EU conducted the
relevant examination in an unbiased manner, as required under Article 3.1 of the ADA.

27. Second, China notes that the terms "utilization of capacity" in Article 3.4 of the ADA contain
no reference to a concept such as "availability for use" or "idleness". There is no legal basis to
overlook such capacity in the injury determination.

28. Third, the key question for examining Argentina's Article 3.5 claims is whether the factors
"other than dumped imports" identified by Argentina were injuring the EU industry at the same
time as the dumped imports. To the extent that Argentina successfully establishes the facts of its
case, the EU authority failed to undertake a proper non-attribution analysis.

- D-10 -

ANNEX D-3
EXECUTIVE SUMMARY OF THIRD-PARTY
ARGUMENTS OF COLOMBIA
I. INTRODUCTION

1. Members of the Panel and distinguished delegates, Colombia has a systemic interest in the
application of several provisions of the WTO's Covered Agreements discussed by the parties to this
dispute, and while not taking a final position on the specific merits of this case, Colombia will
provide its views on some of the legal claims advanced by them.

1. "As such" Claim's legal standard

2. According to Argentina's first written submission, there is a continued and consistent
practice by the European Union, when applying Article 2(5) second paragraph of the EU Basic
Regulation. In this respect, when the prices of raw materials included in the records of the
producers, are considered to be "abnormally or arti ficially low", due to a regulated, or distorted,
market, the European Communities have been adjust ing these prices in accordance with the costs
of other producers in the same country, or any other reasonable basis, including information from
other representative markets. This continued practice, in Argentina's view, constitutes an "as
such" violation to certain articles of the Antidumping Agreement.

3. Whenever a Member presents an "as such" cl aim, it must establish, through arguments and
supporting evidence, at least that [1] the alleged measure - rule or norm- is attributable to the
responding Member; [2] its precise content; and indeed, [3] that it does have a general and
prospective application".
1 The AB further states that the "evidence [presented] may include proof
of the systematic application of the challenged measure. According to the AB in US – Carbon Steel,
"Such evidence, will typically be produced in the form of the text of the relevant legislation or legal
instruments, which may be supported, as appropriate, by evidence of the consistent application of
such laws, the pronouncements of domestic courts on the meaning of such laws, the opinion of
legal experts and the writings of recognized scholars". 2 Furthermore, when a complaining party
substantiates an "as such" challenge against laws, regulations, or other instruments of a Member
that have general and prospective application, a complainant may submit evidence of the
application of such legislation.3

4. Even though Colombia will not take a final position on the issue, it is of the opinion that in
the present case, the Panel has to take into account all evidence submitted by the Parties, in order
to determine if Article 2(5) is "as such" contrary to Article 2.2.1.1 of the ADA. Hence, Colombia
respectfully suggests the Panel to review this ma tter, bearing in mind the considerations above
mentioned.

2. Construction of the term "reasonably reflects the costs" in Article 2(5)'s
second paragraph

5. For the EU, the costs presented by the Argentinian producers of biodiesel, do not
"reasonably" reflect the cost of production, given that soybeans have an export tax in Argentina,
which makes the internal price lower than the international price. In the EU's view, since the
records presented by the producers do not reflect what the cost would "normally be" they do not
reasonably reflect the cost of production. Hence, the EU proceeds to calculate the biodiesel's
"normal costs of production" by using the soyb eans' international prices. On the other hand,
Argentina argues that Article 2.2.1.1 of the ADA's scope does not allow an investigating authority
to reject the records on the basis of input price distortions.

6. Argentina, in its first written submission, interprets the terms "costs" "reasonably" and
"reflect", to determine that the combined phrase "reasonably reflects the costs" refers to the
charges or expenses that have actually been incu rred in by the producer. The term "reasonably"

1 Appellate Body Report, US — Zeroing (EC) , para. 198.
2 Appellate Body Report on US – Carbon Steel, para. 157 (emphasis added); see also Panel Report on
Mexico – Rice, para. 6.26.
3 Panel Report EC — IT Products , para. 7.108.

- D-11 -

acts as an adverb to the verb reflect. Thus , since the word "reasonably", which means "at a
reasonable rate; to a reasonable extent", operates on the verb reflect and not on the noun "costs".
Therefore, it is reasonable to construe such provision, interpreting that it refers to "the way the
costs are reflected in the records", rather than to "the costs reflected in the records", as the
EU submits.

7. Taking into account the submissions of both parties, it is Colombia's opinion that the
interpretation based on the ordinary meaning of the term "reasonably reflects the costs" should be
more similar to the one presented by Argentina, inasmuch as the ordinary meaning of this term
refers to the actual cost of production a producer should reflect in its records, given the syntax of
the phrase. Additionally, Article 2.2.1.1 refers to a situation in which the Member that imposes an
antidumping measure is actually investigating the costs of production of producers of the exporting
Member. Even if the text of Article 2.2.1.1 does not explicitly provide that the costs are actually
the same that those charges incurred by the produc er, from the ordinary meaning of the terms, it
is not possible to draw that the "costs" have to be the ones "normally associated with the
production and sale of goods".
4

8. Furthermore, it is relevant to consider that one of the purposes of the Antidumping
Agreement is to provide a multilaterally agreed framework of rules governing actions against
injurious dumping practices. 5 In Colombia's opinion, the issue that raised the investigating
authority's concern i.e. products whose inputs have regulated markets, where the price of the
i n p u t i s a f f e c t e d b y a g o v e r n m e n t ' s m e a s u r e , d o e s n o t s e e m t o f a l l u n d e r t h e s c o p e o f t h e
Antidumping Agreement. Under this premise, th e antidumping measures imposed by the EU to
biodiesel from Argentina might be contrary to the object and purpose of the ADA. In any case, the
Panel should address this matter carefully when ruling on this issue.

9. Colombia recognizes that the object and purp ose of the WTO is to liberalize trade and to
eliminate distortions that provide unfair advantages to some goods over others. It also
acknowledges the EU's power to conduct investigations on products that are imported under unfair
conditions that favour them, causing damages to the national industry. However, Colombia is also
aware that the WTO provides Members with differ ent tools, under different Agreements, designed
to address different barriers to trade; thus Members should apply these tools accordingly.
Consequently, in Colombia's opinion, the Panel should take into account the availability of these
other tools, when determining if the EU acte d consistently when applying an antidumping
measure.

3. Is the interpretation of the scope of Article 3.4 of the ADA, presented by the
Parties, consistent with WTO law?

10. Article 3.4 of the ADA plays an important role in setting out how an investigating authority
must determine injury, listing the relevant economic factors that must be evaluated in the
determination of injury.
6 However, it is important to highlight that Article 3.4 explicitly establishes
that "this list is not exhaustive, nor can one or several of these factors necessarily give decisive
guidance".

11. Colombia considers that the standard set above, must guide the analysis of the Panel to
assess the impact of the dumped imported products in the domestic industry, regarding:
i) whether the exclusion of "idle" plants contributes to a satisfactory evaluation of the state of the
industry, and; ii) whether the October 1
st 2013 Definitive Disclosure's resubmitted data obeys to
the obligation, set forth in article 3.4 of the ADA, to carry out an "objective examination" on the
basis of "positive evidence".

12. Thus, Colombia considers that the Panel must take into account all relevant factors at issue
when evaluating the state of the industry in light of the last sentence of Article 3.4, rather than
relying its analysis solely on the breach of Article 3.4, in accordance to the "production capacity
and utilization capacity" factors.

4 EU’s First Written Submission. Para 139.
5 Panel Report, US — Zeroing (EC) , footnote 292.
6 Van den Bossche, Zdouc, The Law and Policy of the World Trade Organization, Cambridge University
Press, (2013), pag. 705.

- D-12 -

13. Colombia submits that the terms "objective ex amination" and "positive evidence" included in
Article 3.1 of the ADA serve as relevant context in the interpretation of the last sentence of
Article 3.4, due to the fact that "objective examination" puts an obligation on Investigating
Authorities to conduct an objective analysis, without favouring the interests of any interested
party, but always based on "positive evidence".

14. In light of the above mentioned arguments, the sentence "this list is not exhaustive, nor can
one or several of these factors necessarily give decisive guidance", when interpreted in accordance
with its ordinary meaning, in its context and in light of the object and purpose of the ADA, does
not allow the authorities to: i) base their decisions taking into account "one or several of these
factors as decisive guidance" and; ii) to base their decision on unclear economic factors or to
favour the interests of any interested party.

4. The Non Attribution Test obligations und er Article 3.5 of Antidumping Agreement

15. Colombia notes that if, as stated by Argentina, "… even in the total absence of imports, the
utilization of the EU's productive capacity would only have reached around 50% and the EU did not
rebut or contradict that information …", it is necessary to question what motivated the EU's
industry to increase its capacity of production , despite the allegedly dumped imports during the
investigation period. In that sense, Colombia considers that the Panel's analysis should take into
account the possibility that the EU misread the bi odiesel sector or had high expectations about
future changes in the prices conditions, which in the end never materialized.

16. The decision to expand the capacity of produc tion, despite the real level of production that a
market may absorb, results in an inadequate de cision and generates undesirable consequences,
such as reductions in the utilization of that capacity. When facing these particular conditions,
damage to the national industry becomes an expected result. This damage cannot be attributable
to imports.

5. CONCLUSION

17. Colombia considers that this case raises important questions on the application of certain
provisions of the ADA Agreement and the GATT of 1994. While not taking a final position on all
aspects of the merits of the case, Colombia requests the Panel to carefully review the scope of the
claims in light of the remarks made in this hearing.

18. Mr. Chairman, distinguished members of Pa nel, and representatives of the Parties and
Third Parties, with these comments Colombia hopes to contribute to the legal discussion of this
case and would like to thank this opportunity to express its views on the present dispute. Thank
you for your kind attention and we remain at your disposal to answer any questions.

- D-13 -

ANNEX D-4
EXECUTIVE SUMMARY OF THIRD-PARTY
ARGUMENTS OF INDONESIA
1. "AS SUCH" CLAIM CONCERNING ARTICLE 2(5) OF THE EUROPEAN UNION'S BASIC
ANTI-DUMPING REGULATION

1.1 Scope and content of Article 2(5) of the Basic Anti-Dumping Regulation

1. The construction of the contested measure in the present dispute has been supported by
Argentina with evidence beyond its text. In line with the approach prescribed by the
Appellate Body
1, the legislative background, administrative practice and domestic court rulings put
forward by Argentina should be reviewed by the Panel.

2. As regards the scope and content of the measure at issue, Indonesia sees the second
subparagraph of Article 2(5) as introducing a WTO-inconsistent condition or requirement - not
provided for in the Anti-Dumping Agreement or any WTO-covered Agreements - which has to be
met in order for the GAAP-consistent records of an exporter or producer which reflect the recorded
costs associated with the production and sales of the product under consideration in the country of
origin, to be used to calculate the cost of production. Failing the satisfaction of this condition, the
European Union determines that the records do not reasonably reflect the costs associated with
the production and sale of the product under consid eration, and adjusts the costs of production of
the investigated exporter or producer in a WTO-inconsistent manner.

3. The contested provision obliges the European Union investigating authority to use input
costs unaffected by "distortions" for establishing the cost of production, which is a requirement not
provided for in the WTO-covered Agreements. In this pursuit, it requires the investigating
authority to undertake the 'distortion test' and re place/adjust, in a WTO-inconsistent manner, the
actual-recorded input costs of exporters or producers in case those costs are found to be distorted
on the basis of out-of-country of origin prices of the inputs. These additional requirements have
been woven into the reasonable reflection of costs criterion. The above scope and content is
evident from the clear explanation in recital 4 of Council Regulation (EC) No. 1972/2002, as well
as a string of anti-dumping cases in which the contested provision was applied. In fact this practice
has been applied consistently where the European Union was presented with allegations by the
complainants or was aware of a causal factor that could lead to a distortion of input costs in the
investigated country.

4. Contrary to the European Union's claim of the discretionary nature of the provision
2, the use
of costs not affected by distortions is a norm set by the second subparagraph of Article 2(5) of the
Basic Anti-Dumping Regulation and is necessarily WTO-inconsistent. Indeed, this is supported by
the European Union's vehement justification of the WTO-consistency of the assessment of
reasonableness of costs per se and of the use of reasonable costs in constructing the normal
value
3, as well as the adjustment/rejection of raw material costs that are "not "normal"".4

1.2 Violation of Article 2.2.1.1 of the Anti-Dumping Agreement

5. If an investigating authority decides to construct the normal value, Article 2.2.1.1 comes
into play.

6. First, previous Panel reports
5 have established that the first sentence of Article 2.2.1.1 sets
out a rule and imposes a positive obligation on investigating authorities to calculate costs of

1 Appellate Body Report, US – Carbon Steel (India), paras. 4.446, 4.451, 4.454; Appellate Body Report,
US – Carbon Steel, para. 157; Appellate Body Report, US – Corrosion Resistant Steel Sunset Review,
para. 168.
2 European Union, first Written Submission, paras. 113-114, 119-124.
3 European Union, first Written Submission, paras. 131-133.
4 European Union, first Written Submission, para. 157.
5 Panel Report, China – Broiler Products, paras. 7.160, 7.161; Panel Report, EC – Salmon (Norway),
para. 7.483; Panel Report, US – Softwood Lumber V, paras. 7.237, 7.310, 7.316.

- D-14 -

production on the basis of the records kept by the exporter or producer under investigation 6,
provided that two cumulative conditions are met, namely that the records of the investigated
exporter or producer are consistent with the G AAP of the exporting country, and they reasonably
reflect the costs associated with the production and sale of the product under consideration.
Therefore, the second subparagraph of Article 2( 5) of the European Union's Basic Anti-Dumping
Regulation is WTO-inconsistent in so far as it imposes an additional condition to use undistorted
input costs.

7. Second, a literal reading of the first sentence of Article 2.2.1.1 indicates that both the
conditions apply to the records. The negotiating history of the provision supports such
interpretation. Moreover, the drafters while modi fying the various pre-Uruguay round texts of the
Anti-Dumping Agreement starting from the Carlisle I text, did not insert the word "costs" after the
conjunction "and" in the first sentence of Article 2.2.1.1 or indicate in any other manner that the
reasonable reflection criterion is related to the costs. Therefore, the interpretation of the
European Union that the word "reasonably" is attached to the word "costs" is untenable and is
based on reading words into the text of the provision that do not exist.
7

8. Third, the two conditions enumerated in the first sentence of Article 2.2.1.1 are aimed at
assessing the reliability of the records tout court and as indicated by the structure of
Article 2.2.1.1 were not meant to be mutually exclusive. The GAAP-consistency criterion is
concerned with the reliability of the records of th e investigated exporter/producer (or group) from
an overall accounting perspective and costs are a part of the whole set of financial accounting
data. If a company does not satisfy this condition, the investigating authority is not obliged to use
the records of the investigated exporter or pr oducer and it would not even test whether the
records reasonably reflect costs associated with the production of the product under consideration.
The next condition that records reasonably reflect the costs associated with the production and
sale of the product under consideration is not linked to the issue of reasonability of costs but to the
fact that from the perspective of product-specific costs involving allocations, the cost of production
of the product under consideration should be reasonably reflected in the records. This is indicated
by the specific reference to the words "product under consideration" in the context of the
reasonable reflection of costs criterion. In fact such an interpretation is also supported by the
second and third sentences of Article 2.2.1.1 whic h function within the ambit of the requirement
set forth by the first sentence that records reasonably reflect the costs associated with the
production of the product under consideration. Indeed, from a practical perspective, allocations
would be necessary or relevant only in the context of product-specific cost accounting,
since otherwise, the full/unallocated/aggregated company-wide costs would anyway exist in the
GAAP-consistent records pertaining to the whole company.

9. Fourth, Article 2.2.1.1 and Article 2.2 do not require an assessment of the reasonableness of
the costs of inputs recorded in the accounting re cords of the investigated exporter or producer per
se, nor do these articles mandate that costs of inputs should be "reasonable" in comparison to any
benchmark. This is attested by the fact that a reasonability condition is only specified with regard
to SG&A costs and profits in Article 2.2 of the Anti-Dumping Agreement. Moreover, the concept of
individual dumping margins as a means to address the individual pricing behaviour of exporters or
producers
8 would lose meaning if the reasonability of each exporter or producer's cost of
production were to be assessed on the basis of a standard cost of production or a standard cost for
inputs as done by the European Union in the Biodiesel investigation.

10. Fifth, the text of Article 2.2.1.1 read in light of footnote 6 and the last sentence of
Article 2.2.1 sets a parameter that the reasonable reflection of costs is to be assessed on the basis
of the actual costs incurred by an exporter or producer in the investigation period. The enquiry
under the first sentence of Article 2.2.1.1 does not allow the inclusion of costs that have not been
incurred (in the investigation period) by the investigated exporter or producer, and that cannot be
linked in any manner to the actual act of producti on by the exporter or producer concerned since
such costs would never be recorded in the exporter or producer's records at the company-wide
level or product-specific level. Moreover, it would be illogical to talk of allocation of costs that have
not been incurred but should have been incurred. Indeed, the reference to start-up costs in

6 Panel Report, US – Softwood Lumber V, para. 7.236.
7 European Union, First Written Submission, para. 133. The United States also seems to hold a similar
view as the European Union. United States, First Written Submission, paras. 18, 21.
8 Appellate Body Report, US – Zeroing (Japan), para. 111.

- D-15 -

footnote 6 and the recovery of costs in the last sentence of Article 2.2.19 leaves no room for doubt
that the costs concerned by these provisions are those that would have already been incurred by
the exporter or producer/group.

11. Last, investigating authorities need to assess individually in every case to the extent
individual exporters or producers are investigated , as to whether or not their records reasonably
reflect the costs associated with the production of the product under consideration by them.
However, the parameters that are to be applied as regards the assessment of the reasonable
reflection of the costs in the records cannot be determined by authorities on a case-by-case basis.
This is because the clear parameters as identified above have been set out in the covered
agreements in an unambiguous manner. Moreover, if investigating authorities were permitted to
determine the parameters on a case-by-case basis, it would induce legal uncertainty as regards
the application of Article 2.2.1.1 and could easily result in the same situation being treated
differently by different WTO Memb ers or different situations being treated in the same manner
which is contrary to the fundamental principle of non-discrimination that is a pillar of the
WTO Agreements.

1.3 Violation of Article 2.2 of the Anti-Dumping Agreement

12. In US – Softwood Lumber V, the Panel considered that Article 2.2 "concerns the
establishment of an appropriate proxy for the pric e of the like product in the ordinary course of
trade in the domestic market of the export ing country when that price cannot be used".
10 Thus,
the purpose of the constructed normal value is to create a "comparable price" for the like product
if it were sold on the domestic market of the country of origin in the ordinary course of trade to
comply with the definition of dumping within the meaning of Article 2.1 of the Anti-Dumping
Agreement and Article VI:1 of the GATT 1994. The de finition of dumping will lose meaning if the
normal value is constructed using out-of-country of origin input costs as it will not yield a
"comparable price" and a finding of dumping w ill in most cases be a foregone conclusion,
particularly where low cost countries are targeted.

13. If an investigating authority decides to constr uct the normal value on the basis of the cost of
production in the country of origin plus SG&A costs and profits, it does not have the discretion to
use third country prices or cost data for any purpose including for the sort of 'non-distortion test'
as done by the European Union or the calculation of the costs of production if it deems that these
are not reasonable/undistorted. The text and context of Article 2.2 do not permit any exceptions to
this rule. Thus, an investigating authority cannot directly or indirectly - by means of using
evidence as suggested by the European Union - adopt international prices or third country prices
to adjust the costs of an exporter or producer if it considers that the records of that investigated
party do not reflect "reasonable" costs associated with the production of the product under
consideration.

14. Moreover, if the European Union's interpretation and practice were to be upheld, legally it
implies that in each case that an investigating authority would resort to out-of-country of origin
input costs, it would be working on the basis of an assumption that an exporter or producer would
have different input costs if there were sales of the like product in the ordinary course of trade in
the domestic market. Such assumption cannot be justified on the basis of any provision in the
WTO-covered agreements and flies in the face of the requirement for an investigating authority to
base its determination on a proper establishment of facts. In fact the European Union itself admits
that it aimed at determining a cost of production in the country of origin in the Biodiesel case in
the absence of distortion and thus calculated a figure which was a "hypothetical one".
11

9 The final sentence of Article 2.2.1 states that sales below costs in the country of export may be
considered as not being in the ordinary course of trade and may be disregarded in determining the normal
value provided that they are made within an extended period of time, in substantial quantities and are at
"prices which do not provide for the recovery of all costs within a reasonable period of time". The reference to
"recovery of all costs" can only be intended when such costs have been incurred in the first place.
10 Panel Report, US – Softwood Lumber V, para. 7.278.
11 European Union, First Written Submission, para. 205.

- D-16 -

2. CLAIM UNDER ARTICLES 3.1 AND 3.4 OF THE ANTI-DUMPING AGREEMENT –
DEFINITION OF "UTILIZATION OF CAPACITY"

15. In the Shorter Oxford English Dictionary, the meaning of the term "capacity" is " ability to
receive, contain, hold, produce or carry".
12 This is the generic definition that should be considered.
According to this definition, the reference is to the ability to produce tout court regardless of the
fact that the ability to produce is immediate or is useable subject to some
investments/upgrading/overhauling etc. In any even t, as long as the production capacity remains
installed, it cannot be excluded that it can be put back into production.

16. Additionally, the term used in Article 3.4 of the Anti-Dumping Agreement is "utilization of
capacity" and not utilization of 'productive' capacity or 'useable' capacity or 'operative' capacity.
Therefore, the clear reference is to all capacity, including capacity that may not be used or be
useable at a particular point in time. If the drafters had intended that only the utilization of
'productive' or 'useable' or on-line 'operative' capacity be assessed, implying in other words the
exclusion of "idle capacity", this would have been specified in Article 3.4 through the use of any of
the terms noted above.

17. Indonesia also notes that there is no definition of "idle capacity" in the Anti-Dumping
Agreement. Thus, if the Panel were to agree with the European Union's theory, and consider that
"idle capacity" be excluded from the definition of the term "utilization of capacity", there would be
extreme ambiguity in the interpretation of this indicator. Per the Shorter Oxford English Dictionary,
the meaning of the word "idle" is " inactive, unoccupied, not moving or in operation ".
13 Thus the
term "idle capacity" can be interpreted very widely.

18. To summarize, the full installed capacity of the domestic industry should be considered for
the assessment of "utilization of capacity" and this was also supposedly the intention of the
drafters of the Anti-Dumping Agreement. A contra ry interpretation would make the assessment of
this injury indicator un-objective and discriminatory as authorities or complainants could apply
different definitions of "idle capacity" in different contexts.

12 Shorter Oxford English Dictionary, Sixth Edition, A. Stevenson (ed.) (Oxford University Press, 2007),
Vol. 1, p. 341.
13 Shorter Oxford English Dictionary, Sixth Edition, A. Stevenson (ed.) (Oxford University Press, 2007),
Vol. 1, p. 3487.

- D-17 -

ANNEX D-5
EXECUTIVE SUMMARY OF THIRD-PARTY
ARGUMENTS OF MEXICO1
MEXICO'S THIRD-PARTY SUBMISSION ON THE EUROPEAN UNION'S REQUEST FOR A
PRELIMINARY RULING

I. INTRODUCTION

1. Mexico thanks the Panel for this opportunity to submit comments regarding the preliminary
objections and the parties to the dispute for giving access to their respective submissions.

2. The foregoing is very important for third-party Members, as it enables them to gain a better
understanding of the dispute and, where appropri ate, to submit comments prompted by systemic
interest.

II. RELATED MEASURES AND IMPLEMENTING MEASURES

3. In its request for a preliminary ruling dated 24 November 2014, the European Union
observes that the references made by Argentina in its request for the establishment of a panel to
"implementing measures and related instruments or practices" and "related measures and
implementing measures" should be considered as falling outside the Panel's terms of reference,
since, in the opinion of the European Union, these terms do not comply with the provisions of
Article 6.2 of the Understanding on Rules and Pr ocedures Governing the Settlement of Disputes
(DSU) in that they fail to specifically identify the measures at issue.
2

4. Mexico does not share the European Union' s view. The phrase that includes related and
implementing measures is a common phrase that complainants usually include in panel requests –
precisely to avoid respondents from subsequently issuing a measure related to or deriving from
the original measure at issue that is also non-compliant and goes beyond the panel's terms of
reference. In previous disputes, complainants have incorporated this type of phrase and the panels
have considered within their terms of reference fu ture measures issued in relation to those being
challenged.
3

5. In this case, as regards "related measures and implementing measures", Argentina explains
that the terms "related measures and implementing measures" are at the end of Section 1, point
(B), which identifies the primary measures being challenged. It is therefore clear that only the
measures related to the imposition of anti-dumping measures (" medidas compensatorias") by the
European Union with respect to imports of biodiesel originating in Argentina could fall within the
scope of the terms "related measures and implementing measures".
4

6. Argentina further points out that the purpos e of including such terms is to prevent the
potential situation of the European Union issuing new measures related to those challenged by
Argentina that would fall outside the Panel's te rms of reference because they have not been
expressly and individually identified by the comp laining party. Consequently, the terms used by
Argentina are necessary to protect its interests as complaining party, in order to avoid that a
measure that is adopted after the establishment of the panel and is closely connected to the
measure at issue may be excluded from the panel's terms of reference.
5

1 Mexico indicated that its two submissions to the Panel (third-party submission on the European Union's
request for a preliminary ruling and response to Panel question No. 2) should serve as the executive summary
of its third-party arguments.
2 Request for a preliminary ruling by the European Union, paras. 8-9.
3 Appellate Body Report, China - Raw Materials, paras. 245 and 246. See also the Panel's ruling in
India - Agricultural Products (DS430), which specifically analyses the question of whether the "related
measures" and the "implementing measures" mentioned in the panel request are included within the Panel's
terms of reference, preliminary ruling by the Panel, India - Agricultural Products (DS430)
(document WT/DS430/5), paras. 3.40 and 3.51.
4 Response of Argentina to the request for a preliminary ruling by the European Union, para. 21.
5 Response of Argentina to the request for a preliminary ruling by the European Union, para. 29.

- D-18 -

7. Mexico considers that the Panel should recognize these measures as falling within its terms
of reference.

III. CLAIMS THAT EXPAND THE SCOPE OF THE DISPUTE

8. The European Union observes that Argentin a's request for the establishment of a panel
expands the scope of the dispute as presented in Argentina's request for consultations. According
to the European Union, the panel request includes a great number of new claims, which changes
the essence of the complaint raised in the consultations. The European Union requests that the
following claims be considered as falling outside the Panel's terms of reference:
6

a. The inclusion of " related practices " in the claim relating to Article 2(5) of
Council Regulation (EC) No. 1225/2009, in paragraph 1(A) of the panel request. The
European Union adds that the request for consultations expressly stated that what was
being challenged was the above provision " as such", which means that what is being
referred to is a specific, written legal provision and not the application of that provision.
7

b. It is not clear whether the insertion of a paragraph between paragraphs 2(B)3 and 2(B)4
of the panel request is intended to introduce an " as applied" claim against Article 2(5) of
Council Regulation (EC) No. 1225/2009.8

c. Argentina claims for the first time that Article 2(5) of Council Regulation (EC)
No. 1225/2009 is "as such" inconsistent with Article 9.3 of the Anti-Dumping Agreement,
because, allegedly, the amount of the anti-dumping duty (" cuota compensatoria") to be
imposed exceeds the margin of dumping.9

d. Paragraphs 2(A)1 and 2(A)2 of the panel request include new claims against Article 2(5)
of Council Regulation (EC) No. 1225/2009 that are based on Article VI:1 of the General
Agreement on Tariffs and Trade 1994 (GATT 1994). Argentina's request for consultations
did not include any claim based on Article VI:1.
10

e. A new claim is introduced in relation to the scope of Article 2(5) of Council Regulation
(EC) No. 1225/2009, based on Article 2.2 an d 2.2.1.1 of the Anti-Dumping Agreement
and referring to the inclusion as "costs not associated with the production and sale of the
product under consideration".11

f. Argentina's claim regarding the European Union's determination of profits under
Article 2.1 of the Anti-Dumping Agreement.12

9. Mexico recalls that the Appellate Body has noted that Articles 4 and 6 of the DSU do not
require a "precise and exact identity between th e specific measures that were the subject of
consultations and the specific measures identified in the request for the establishment of a panel,
provided that the 'essence' of the challenged measures had not changed".
13 In US - Upland Cotton,
the Appellate Body made clear that it did not intend to impose too rigid a standard for the "precise
and exact identity" between the scope of consulta tions and the request for the establishment of a
panel, as this would substitute the request for consultations for the request for the establishment
of a panel, which according to Article 7 of the DSU is that which governs the panel's terms of
reference.14

6 Request for a preliminary ruling by the European Union, paras. 23-26.
7 Request for a preliminary ruling by the European Union, paras. 27-30.
8 Request for a preliminary ruling by the European Union, paras. 31-35.
9 Request for a preliminary ruling by the European Union, paras. 36-40.
10 Request for a preliminary ruling by the European Union, paras. 41-44.
11 Request for a preliminary ruling by the European Union, paras. 45-49.
12 Request for a preliminary ruling by the European Union, paras. 50-54.
13 Appellate Body Report, Brazil - Aircraft, para. 131. In this case, the Appellate Body considered that
the measures at issue (export subsidies for regional aircraft) were the subject of consultations and were
referred to the DSB for consideration. The regulatory instruments that came into effect in 1997 and 1998
(following the consultations held on 18 June 1996) did not change the essence of the export subsidies at issue.
The Appellate Body accordingly concluded that the export subsidies for regional aircraft, including the
instruments that came into effect after consultations were held between Canada and Brazil, were properly
before the Panel (Appellate Body Report, Brazil - Aircraft, paras. 132 and 133).
14 Appellate Body Report, US - Upland Cotton, para. 293.

- D-19 -

10. In Mexico – Anti-Dumping Measures on Rice , the Appellate Body established that the same
standard concerning the degree of identity that must exist between the request for consultations
and the panel request applies with respect to the "legal basis" of the complaint. A complaining
party may learn of additional information during consultations that could warrant revising the list
of treaty provisions with which the measure is alleged to be inconsistent. Such a revision may lead
to a narrowing of the complaint, or to a reformulation of the complaint that takes into account new
information such that additional provisions of the covered agreements become relevant. The
claims set out in a panel request may thus be expected to be shaped by, and thereby constitute a
natural evolution of, the consultation process. It is not necessary that the provisions referred to in
the request for consultations be identical to those set out in the panel request, provided that the
addition of provisions (in the panel request) does not have the effect of changing the essence of
the complaint.
15

11. Argentina's conclusion in each particular case is that each of the assumptions contested by
the European Union concerns claims that evol ved out of those raised in the request for
consultations but that "some connection" exists between the two. 16 Hence, the Panel should look
at whether the allegedly "new claims" noted by th e European Union actually derive from claims
previously identified by Argentina in the request for consultations. In any event, the Panel should
consider an analysis such as that referred to by the Panel in India - Agricultural Products in order
to determine whether "some connection" exists:

[W]e recall the words of the Appellate Body in US - Carbon Steel that "compliance
with the requirements of Article 6.2 must be determined on the merits of each case,
having considered the panel request as a whole, and in the light of attendant
circumstances".17

15 Appellate Body Report, Mexico - Anti-Dumping Measures on Rice, para. 138. The Appellate Body
stated the following:
"In our view, the same logic applies with respect to the legal basis of the complaint. A
complaining party may learn of additional information during consultations - for example, a
better understanding of the operation of a challenged measure - that could warrant revising the
list of treaty provisions with which the measure is alleged to be inconsistent. Such a revision may
lead to a narrowing of the complaint, or to a reformulation of the complaint that takes into
account new information such that additional provisions of the covered agreements become
relevant. The claims set out in a panel request may thus be expected to be shaped by, and
thereby constitute a natural evolution of, the consultation process. Reading the DSU, as Mexico
does, to limit the legal basis set out in the panel request to what was indicated in the request for
consultations, would ignore an important rationale behind the requirement to hold consultations -
namely, the exchange of information necessary to refine the contours of the dispute, which are
subsequently set out in the panel request. In this light, we consider that it is not necessary that
the provisions referred to in the request for consultations be identical to those set out in the
panel request, provided that the 'legal basis' in the panel request may reasonably be said to have
evolved from the "legal basis" that formed the subject of consultations. In other words, the
addition of provisions must not have the effect of changing the essence of the complaint."
16 Response of Argentina to the request for a preliminary ruling by the European Union, para. 66.
17 Preliminary ruling by the Panel, India - Agricultural Products (DS430) (document WT/DS430/5),
para. 3.48.

- D-20 -

MEXICO'S THIRD-PARTY RESPONSE TO PANEL QUESTION NO. 2

CLAIMS UNDER ARTICLE 2.2.1.1 AND 2.2 OF THE ANTI-DUMPING AGREEMENT AND
ARTICLE VI:1(B)(II) OF THE GATT 1994

Interpretation of the provisions of the covered agreements invoked by Argentina
(…)

2. (to all third parties) What are the parameters or criteria under Article 2.2.1.1 or any other
provision of the covered agreements governing the manner in which an investigating authority
shall determine whether the records reasonably reflect the costs associated with the production
and sale of the product concerned? Or are the investigating authorities free to make this
determination on case-by-case basis?
Mexico's response:
Mexico sees nothing in Article 2.2.1.1 of the An ti-Dumping Agreement that would enable it to
conclude that there are any fixed parameters for making such a determination. Nor does it see any
contextual elements that would enable it to conclude that such parameters exist. Consequently,
Mexico considers that the investigating authorities have a measure of discretion to reach this
determination on a case-by-case basis.

- D-21 -

ANNEX D-6
EXECUTIVE SUMMARY OF THIRD-PARTY
ARGUMENTS OF NORWAY
1. Norway welcomes this opportunity to present its views on the issues raised in these panel
proceedings. We will not comment upon all the issues raised by the Parties. Rather, we will confine
ourselves to offer some views on the interpretation of the first sentence of Article 2.2.1.1 of the
Anti-Dumping Agreement.

2. As we know, the first sentence provides that:

[f]or the purposes of paragraph 2, costs sha ll normally be calculated on the basis of
records kept by the exporter or producer under investigation, provided that such
records are in accordance with the generally accepted accounting principles of the
exporting country and reasonably reflect the costs associated with the production and
sale of the product under consideration.
3. The parties disagree, amongst others, on whether Article 2.2.1.1 allows the "investigating
authorities to reject or adjust costs of certain inputs used in the production of the product under
consideration because the prices of these inputs in their domestic market are found to be
'abnormally or artificially low'".
1

4. A legal analysis of a WTO provision starts, of course, with an inquiry into the ordinary
meaning of the terms. Article 2.2.1.1 uses the word "shall", which indicates that it establishes an
obligation of some sort. In this case, the word "shall" is qualified by the terms "normally" and
"provided that". We understand "normally" in this context to point to the existence of conditions,
rather than to "alter the characterization of [the] obligation as constituting a 'rule'".
2

5. The obligation on the investigating authorities according to Article 2.2.1.1, is subject to
two cumulative conditions:

i) that the records kept by the exporter or producer are in accordance with the generally
accepted accounting principles (GAAP) of the exporting country; and

ii) that such records reasonably reflect the costs associated with the production and sale
of the product under consideration.

6. If these two conditions are fulfilled, the investigating authorities "shall normally" calculate
the costs on the basis of records kept by the exporter or producer under investigation.

7. In light of the ordinary meaning of the term s in Article 2.2.1.1, Norway notes that both
conditions seem to relate to the quality of the records as such. It is the records that must be in
accordance with the GAAP, and the records that must "reasonably reflect the costs associated with
the production and sale of the product under consideration". The European Union, however, argues
that the second condition should be interpreted to mean that the costs themselves need to be
reasonable. The European Union submits, amongst others, that "it would be counterintuitive to
assert that Article 2.2.1.1 […] mandates the invest igating authorities to base their calculations on
costs that are 'unreasonable'".
3

8. In our view, by asserting this, the European Union is reading into Article 2.2.1.1 words that
are simply not there. The structure of the first sentence of Article 2.2.1.1 does not suggest an
interpretation that the records must reflect costs that are reasonable – or not "abnormally or
artificially low". Rather, the structure and the ordinary meaning of the terms suggest that the
second condition only concerns whether the records in a reasonable way reflects the costs
associated with the production and sale of the product under consideration.

1 Argentina' First Written Submission, paras. 87 and 88. See also Argentina's First Written Submission
para. 195. European Union's First Written Submission, for instance, paras. 154 and 254.
2 See Appellate Body Report, United States – Clove Cigarettes, para. 273.
3 European Union's First Written Submission, para. 131.

- D-22 -

9. Accordingly, Norway is of the opinion that Article 2.2.1.1 does not allow investigation
authorities to disregard the records in situations where the authorities find that the costs reflected
in the records are "abnormally or artificially low", as long as the two explicitly mentioned
conditions are met.

10. This concludes Norway's statement. I thank you for your attention.

- D-23 -

ANNEX D-7
EXECUTIVE SUMMARY OF THIRD-PARTY ARGUMENTS
OF THE RUSSIAN FEDERATION
Introduction

1. The Russian Federation intervened in this case because of its systemic interest in the correct
and consistent interpretation and application of the covered agreements, in particular the
Anti-Dumping Agreement. The Russian Federation wo uld like to provide its views on: a) the input
cost adjustment practice used by the European Union in its anti-dumping investigations; b) the
legal interpretation of the words "reasonably reflect" in the first sentence of Article 2.2.1.1 of the
Anti-Dumping Agreement; c) Article 2.2 of the Anti-Dumping Agreement that requires construction
of normal value on the basis of costs in the count ry of origin of the product under consideration;
and d) the concept of "dumping" in the context of the Anti-Dumping Agreement.

A. The Input Cost Adjustment Practice Us ed by the European Union in Its Anti-
Dumping Investigations

2. The Russian Federation strongly condemns the practice of input cost adjustment and
considers it to be inconsistent with both the pr ovisions of the WTO agreements and the spirit of
the WTO in general.

3. This practice, based on Articles 2(3) and 2(5) of the Basic Regulation
1, is very similar to the
treatment of non-market economies that the European Union applied in its antidumping
procedures to imports from the Russian Federation when it had non-market economy status. As
Argentina concludes in section 4.1 of its First written submission, the amendments introduced to
the Basic Regulation in 2002 allow the investigatin g authorities of the European Union to continue
using non-market economy techniques with respect to countries that have been granted full
market economy status and even to countries that have always been recognized as market
economies and have been WTO members. Thus, the European Union has widely expanded the
application of the cost adjustment practice, and uses it for protectionist purposes. The present
case clearly demonstrates this.

4. It is worth noting that the General Court of the European Union has found that the non-
market economy techniques which, as it was mentioned, create the same consequences for the
exporters as the practice of input cost adjustment violate Article 2 of the Anti-Dumping
Agreement.
2

B. The Legal Interpretation of the Words "Rea sonably Reflect" in Article 2.2.1.1 of the
Anti-Dumping Agreement

5. Based on the ordinary meaning of th e words "reflect" and "reasonably", the
Russian Federation is of the position that the prop er reading of the phrase "reasonably reflect" in
the first sentence of Article 2.2.1.1 of the Anti-Dumping Agreement is that records reasonably
depict expenses incurred by the producer for the production and sale of the product under
consideration.

6. In Article 2.2.1.1, the word "reasonably" is attached to the verb "reflect" and not to the
word "costs". As Argentina correctly concluded, "this sentence does not provide that the records
must reflect 'reasonable costs' or 'costs which are reasonable in light of prices on other markets'.

1 Council Regulation (EC) No 1225/2009 of 30 November 2009 on protection against dumped
imports from countries not members of the European Community (codified version), OJ L 343, 22.12.2009,
p. 51 and corrigendum to Council Regulation (EC) No 1225/2009, OJ L 7, 12.1.2010, p. 22 as amended by
Regulation (EU) No 765/2012 of the European Parliament and of the Council of 13 June 2012
(OJ L 237, 3.9.2012, p. 1), Regulation (EU) No 1168/2012 of the European Parliament and of the Council
of 12 December 2012 (OJ L 344, 14.12.2012, p. 1) and Regulation (EU) No 37/2014 of the
European Parliament and of the Council of 15 January 2014 (OJ L 18, 21.1.2014, p. 1).
2 Case T-512/09, Rusal Armenal ZAO v Council of the European Union, Judgment of the General Court of
the European Union of 5 November 2013.

- D-24 -

Rather, the issue is only whether the records refl ect the costs associated with the production and
sale of the product under consideration in a reasonable manner".3

7. Moreover, the plain meaning of the term "cost" focuses on what is actually paid, rather than
on the value or reasonableness of what is paid. Taking into account that Article 2.2.1.1 of the Anti-
Dumping Agreement refers to GAAP, the term "cost" is used in an accounting sense. The focus of
the inquiry is on whether the costs are reasonably reflected in the records , and not whether the
costs per se were reasonable having regard to some extraneous economic considerations.

8. Article 2.2.1.1 of the Anti-Dumping Agr eement does not provide that investigating
authorities can reject or adjust the costs reasonably reflected in exporter's records on the basis
that prices for the product under consideration or its inputs are lower in comparison with
international prices or prices in other markets. If negotiators had agreed on the inclusion of such
an option, they would have explicitly described it in the text of this provision. However, the
drafters have neither mentioned it, nor set any criteria, or defined the circumstances in which
costs associated with the production and sale of the product concerned accurately reflected in the
records of the producer may be considered as not being "reasonable".

9. The interpretation advocated by the Euro pean Union when the prices of certain raw
materials are considered to be "abnormally or artificially low" in comparison with prices in third
countries or international prices not only erodes the comparative advantage of a Member, but is
discriminatory towards countries which enjoy comparative advantages in different areas. The
European Union's approach undermines the concept of comparative advantage, which is
recognized to be the basis for international trade. Countries should not be discriminated against
for having a comparative advantage, whether it is the cost of raw materials or labor etc.

10. It should be stressed that the Anti-Dumping Agreement does not envisage the use of
"international prices" in anti-dumping investigations. Prices for inputs are determined in national
markets depending on local market conditions and may vary considerably. With this in view, the
question arises as to in which market prices for inputs are supposed to be chosen as benchmarks
(to be considered "at the world level") for comparison with the costs actually incurred by the
producer/exporter under investigation in order to conclude that they are "reasonable" or not. Even
prices of commodities that are set at exchanges (for example, the London Metal Exchange) cannot
be viewed as international prices in the context of anti-dumping investigations. The use of abstract
"international prices" as a basis for determination of normal value or export price contradicts both
the letter and the spirit of the Anti-Dumping Agreement.

11. Thus, the European Union's interpretation of the term "reasonably reflect" is neither
supported by the text of Article 2.2.1.1 of the Anti-Dumping Agreement, nor does it reflect the
intention of the drafters.

C. Article 2.2 of the Anti-Dumping Agreement Requires Construction of Normal Value
on the Basis of Costs in the Country of Origin of the Product under Consideration

12. The Russian Federation considers that Articl e 2.2 of the Anti-Dumping Agreement, including
Article 2.2.1.1, expressly and unambiguously requires that the margin of dumping must be
determined by comparison with the cost of production in the country of origin . By providing the
possibility to determine the cost of production to construct normal value on "information from
other representative markets", Article 2(5) of the Basic Regulation is in sharp contrast with the
requirement of Article 2.2.1.1 of the Anti-Dumping Agreement.

13. Article 2.2 of the Anti-Dumping Agreement contains a chapeau and several paragraphs. The
chapeau provides a general rule, and paragraphs describe more specific rules related to the
construction of normal value. The connection between the chapeau and other paragraphs is
explicit, in particular through the numbering and the opening phrases "[f]or the purpose of
paragraph 2" that appear in Articles 2.2.1.1 an d 2.2.2. This fundamental structure and logic of
Article 2.2 as a whole indicates that interpretation of its paragraphs should remain within the
parameters of the chapeau and therefore the source of information for calculation of normal value
is the domestic market of the exporting country.

3 Argentina’s First Written Submission, para. 104.

- D-25 -

14. The support for this interpretation is found, in particular, in Article 2.2.2 of the Anti-Dumping
Agreement that describes several ways to determine "the amounts for administrative, selling and
general costs and for profits", all of which relate to data in the country of origin.

D. The Сoncept of "dumping" in the Сontext of the Anti-Dumping Agreement

15. The Panel should interpret provisions of the Anti-Dumping Agreement in their context,
including the definition of "dumping" reflected in Article 2.1 of the Anti-Dumping Agreement.
4

16. The Appellate Body has confirmed in several cases that the opening phrase of this Article –
"For the purpose of this Agreement" – means that th is definition of 'dumping' applies to the entire
Anti-Dumping Agreement, and is central to the interpretation of other provisions of the
Agreement.
5 They "relate to a product because it is the product that is introduced into the
commerce of another country at less than its normal value in that country".6

17. It follows from the interpretation of the Appellate body that: (1) the definition of "dumping"
in Article 2.1 of the Anti-Dumping Agreement must be applied in a coherent fashion, and cannot be
of variable content or application;
7 (2) the term "dumping" relates to a product, meaning the
product under consideration as a whole. Moreover, it is the exporter's pricing behaviour that may
result in dumping. Thus, the concept of "dumping " in the context of the Anti-Dumping Agreement
does not deal with the price of the product's inputs.

18. Finally, the Russian Federation supports Argentina's understanding that Article 2.2.1.1 refers
to the "costs" which are "associated with the production and sale of the product under
consideration". Argentina states, inter alia, that "it shows that this condition deals with the costs
relating to 'the product under consideration' and not with the costs of the inputs".
8

19. As Argentina, the Russian Federation is deeply concerned that the European Union's
erroneous interpretation of Articles 2.2 and 2.2. 1.1 of the Anti-Dumping Agreement, reflected in
the measure at issue, results in broadening the circumstances under which WTO Members may
apply anti-dumping duties and thus undermines the concept of "dumping" provided for in
Article 2.1 of the Anti-Dumping Agreement.

Conclusion

20. In sum, the legal analysis of Article 2.2 of the Anti-Dumping Agreement as a whole reveals
that Article 2.2, including Article 2.2.1.1, does not permit the use of the data of a third country for
the purpose of calculation of constructed normal va lue. The European Union's interpretation of the
term "reasonably reflect" is neither supported by the text of Article 2.2.1.1 of the Anti-Dumping
Agreement, nor does it reflect the intention of the drafters. The European Union's interpretation
broadens the circumstances under which the WTO Members may apply anti-dumping duties and
thus undermines the concept of "dumping" provided in Article 2.1 of the Anti-Dumping Agreement.
In its legal interpretation of Article 2.2.1.1, the Panel should examine the text of this provision in
the context of Articles 2.2, 2.2.2 and 2.1 of the Anti-Dumping Agreement.

4 Argentina's First Written Submission, paras. 125-126.
5 Appellate Body Reports, US – Softwood Lumber V, para. 93; US – Corrosion-Resistant Steel Sunset
Review, paras. 109 and 126; US – Zeroing (Japan), para. 109; US – Zeroing (Japan), para. 140.
6 Appellate Body Report, US – Zeroing (Japan), para. 109 (emphasis original).
7 Appellate Body Report, US – Continued Zeroing, para. 280.
8 Argentina's First Written Submission, para. 103 (emphasis added).

- D-26 -

ANNEX D-8
EXECUTIVE SUMMARY OF THIRD-PARTY ARGUMENTS
OF THE KINGDOM OF SAUDI ARABIA
I. INTRODUCTION

1. The Kingdom of Saudi Arabia focuses its co mments on a number of important systemic
issues that are central to the dispute relating to (A) the requirement to ba se the determination of
costs on the records of the investigated foreign exporter or producers, (B) the requirement to base
the normal value on the costs in the country of origin rather than on an out-of-country benchmark,
(C) the WTO consistency of export duties as a legitimate policy instrument and (D) the need for a
proper injury and causation analysis.

II. ANALYSIS

2. Saudi Arabia considers that the anti-dumping instrument requires Members to examine
private pricing behaviour of foreign producers in a given set of circumstances. It does not concern
the comparison of a foreign producer or exporter's export price against an undefined international
reference price or "normal" value that does not reflect the prices or conditions in the producer or
exporter's country of origin. There is no text ual basis in the Anti-Dumping Agreement for an
investigating authority to question the reasonableness of input costs simply because these may be
lower in the country of origin than in a third country or world market.

A. Recorded Cost Data Reasonably Associa ted With The Production And Sale Of The
Product Concerned Cannot Be Rejected Ba s e d O n A n A l l e g a t i o n T h a t T h e y A r e
"Artificially Low" or "Distorted"

3. Article 2.1 of the Anti-Dumping Agreement reflects the fundamental principle that a dumping
determination must be made on the basis of the "comparable price, in the ordinary course of
trade, for the like product when destined for consumption in the exporting country". Domestic
prices can only be disregarded when there are no sales of the like product in the ordinary course of
trade or when the sales do not permit a proper comparison because of the particular market
situation or the low volume of sales in the dome stic market of the exporting country. Article 2.2
dictates the alternative bases for determining the normal value in such situations and offers only
two options: either the comparable price of the lik e product when exported to an appropriate third
country, provided that this price is representative or "the cost of production in the country of origin
plus a reasonable amount for administrative, selling and general costs and for profits".
1 In terms of
"the cost of production in the country of origin ", Article 2.2.1.1 of the Anti-Dumping Agreement
imposes an obligation to calculate the costs on th e basis of the records kept by the exporter or
producer under investigation. The only conditions for using such records are that the records are
kept "in accordance with the generally accepted accounting principles of the exporting country"
and that the records "reasonably reflect the costs associated with the production and sale of the
product under consideration". If that is the case, the records of the producer under investigation
must be used.
2

4. Article 2.2.1.1, first sentence, thus reflects the producer-specific and country-specific nature
of the anti-dumping instrument which is only concerned with examining the private pricing
behaviour of producers based on their recorded costs actually incurred in association with the
production and sale of the product under considerat ion. The second part of the first sentence of
Article 2.2.1.1 provides the exceptional circumstances under which the general rule does not
apply. First, if the records are not kept in a ccordance with the generally accepted accounting
principles of the exporting country, there is no re quirement to use them. This is another reflection
of the country-specific nature of the anti-dumping instrument. Second, if the records in question
do not "reasonably reflect" the costs "associated with the production and sale of the product under
consideration," the recorded costs do not have to be used either. This condition goes to the
relationship between the recorded costs and the production and sale of the product under
consideration, and not of a different or larger group of products.

1 See Article 2.2 of the Anti-Dumping Agreement.
2 See Article 2.2.1.1 of the Anti-Dumping Agreement.

- D-27 -

5. The analysis may consider which costs are sufficiently associated with the production and
sale of the product under consideration. So, the "r easonableness" test in Article 2.2.1.1 does not
allow an investigating authority to question the general "reasonableness" of the costs recorded,
such as by comparing them to costs of producers in other countries or to an international
reference price. It merely concerns the association of the recorded costs with the product under
consideration as compared with other products of the exporter to which certain costs may also be
associated.

6. Saudi Arabia is of the view that the text of Article 2.2.1.1, when read in its ordinary meaning
and in the context of Articles 2.1 and 2.2 of the Anti-Dumping Agreement, confirms that an
investigating authority is not allowed to adjust, let alone reject, the cost data of foreign producers
and exporters merely because it considers those costs to be "artificially low" when compared to an
international benchmark or otherwise "distorted". In EC – Salmon (Norway), the panel noted that
"the test for determining whether a cost can be used in the calculation of 'cost of production' is
whether it is 'associated with the production and sale' of the like product".
3 Similarly, in US –
Softwood Lumber V , the panel noted that there is no textual basis in Article 2.2.1.1 to conclude
that for the "requirements of Article 2.2.1.1 to be met, it is necessary that the [costs] reflect the
market value of those [costs]," and that to accept the "argument that Article 2.2.1.1 requires an
investigating authority to ensure that the [cost] reasonably reflects the market value 'would
require us to read into the text words which are simply not there'".
4 This interpretation is also
supported by the object and purpose of the Anti-Dumping Agreement which, among others, is to
introduce disciplines on WTO Members when conducting anti-dumping investigations. It allows
Members to protect their producers from material injury caused by the private pricing behaviour of
foreign producers. It is not aimed at preventing Members from adopting WTO consistent measures
or undoing Members' comparative advantages by correcting the reported costs of production in
light of international reference prices and costs different from those actually incurred by the
producer that are reasonably associated with the product under consideration. Other multilateral
or unilateral instruments are available to address measures that are alleged to distort the market
environment and trade.

7. In sum, the exporter or producer's recorded costs are to be used when constructing the
normal value as long as the records are kept in accordance with the generally accepted accounting
principles of the exporting country and as long as the records reflect costs that are reasonably
associated with the production and sale of the pr oduct concerned. There is no legal basis in the
Anti-Dumping Agreement that would allow an investigating authority to question the
reasonableness of the level of the recorded costs or to examine these costs in the light of an
international reference price.

B. An Investigating Authority Is Not Perm itted To Construct Normal Value On The
Basis Of A Cost That Is Not The Cost In The Country Of Origin

8. Article 2.2 of the Anti-Dumping Agreement imposes an obligation to calculate the normal
value on the basis of the costs of production in the country of origin. Saudi Arabia considers that
the text of this provision when read in its context is clear and does not allow the imposition of an
artificial cost of production that reflects an inte rnational reference price. This provision reflects the
country-specific nature of an anti-dumping investigation that is limited to examining whether the
export price is lower than the normal value of the product concerned of the in the country of origin
from the exporter under investigation. The immediate context of Article 2.2 of the Anti-Dumping
Agreement confirms this reading that requires "normal value" to be constructed based on in-
country data. First, Article 2.2.1.1 requires the use of the recorded costs of the foreign exporter for
constructing normal value. Second, Article 2.2.2 co ncerning construction of administrative, selling
and general costs and profits provides that such amounts shall be linked to the country of origin.
Therefore, both elements of the constructed norm al value need to be based on information from
the country under investigation and cannot be established by way of reference to out-of-country
benchmarks such as international reference prices. Given that the producer's cost of production
will be the same whether it exports or sells domestically, the level of the costs compared to other
markets is simply irrelevant for purposes of the price discrimination question in a dumping
investigation.

3 Panel Report, EC – Salmon (Norway), para. 7.483.
4 Panel Report US – Softwood Lumber V, para. 7.321 and footnote 446.

- D-28 -

9. Finally, the obligation to consider and accept cost data of exporting producers is also
relevant for the comparison of the normal value an d the export price under Article 2.4, which sets
out the general obligation that any comparison has to be "fair" thus connoting "impartiality, even-
handedness, or lack of bias".
5 Article 2.4 thus requires that "due allowances" shall be made "for
differences which affect price comparability". This means that "allowances should not be made for
differences that do not affect price comparability". 6 Accordingly, no adjustments should be made
when there are no differences in terms of costs of production of the goods whether destined for
domestic or export sale. In addition, allowances for factors affecting price comparability should
reflect costs actually incurred by exporting producers. Adjustments that do not reflect actual costs
but are rather imposed to adjust the actual cost s in the light of some abstract and theoretical
"normal cost" benchmark are not appropriate under Article 2.4 and would skew the comparison
and violate the important obligation of making a "fair comparison".

10. In sum, the text of Article 2.2 of the Anti-D umping Agreement, when read in its context and
in the light of the object and purpose of the Anti-Dumping Agreement, is unequivocal and requires
that the costs used for constructing normal value are those of the country of origin. An
investigating authority is not to impose international reference prices of what they consider the
costs ought to be in the country of origin and cannot "adjust" costs to reflect such an international
reference price.

C. Export Duties Are Permitted Under GATT Article XI And Cannot Be Contravened By
Anti-Dumping Measures

11. Saudi Arabia recalls that it is clear from the text of the WTO Agreements, Article XI:1 of the
GATT 1994, and from the relevant WTO jurisprudence that Members are permitted to maintain
export duties. In China – Raw Materials, there was consensus among the panel, the
Appellate Body and the disputing parties that WTO Members have the right under the GATT 1994
to impose export duties.
7 In the past, proposals were made to ban or strictly discipline the use of
export duties. However, these proposals did not receive the support of the Membership. In the
context of accession negotiations, the question of limiting the use of ex port duties is also
frequently raised, and sometimes clear commitments have been made. Absent such commitments,
however, export duties remain a permitted policy instrument, just like import duties. Import
tariffs, export taxes, and other tariff and non-tariff related regulatory measure together constitute
the market environment in which the producer operates. In an anti-dumping investigation, they
are to be taken as a given. There is no basis for effectively seeking to prevent Members from
employing a WTO consistent instrument like expo rt duties through the imposition of dumping
duties. The only "adjustments" that can be made under Article 2.4 relate to the differences
affecting price comparability. Export duties do not affect this comparison. The anti-dumping
instrument shall not be used to prevent Govern ments from adopting WTO-consistent measures
(such as export taxes) or to undo Members' comp arative advantages, simply because it is more
difficult or impossible to do so under other instruments like the Agreement on Subsidies and
Countervailing Measures. The anti-dumping instrument permits Members to protect domestic
industries from the injurious effects of discriminatory pricing practices of foreign exporters and not
from differences in market environments.

D. The Requirement To Conduct An Objectiv e Examination Based On Positive Evidence
Of Injury And Causation

12. Saudi Arabia wishes to underline the importance of a proper injury analysis in preventing
abuse of the anti-dumping instrument. If there is no positive evidence of material injury resulting
from the dumped imports and if the authority has failed to separate and distinguish the injury
caused by other factors so as to make sure that it did not attribute such injury to the dumped
imports, there is no basis for the imposition of anti-dumping measures. The injury analysis in an
anti-dumping investigation is not a "tick-the-box exercise" where the authorities merely look at the
injury factors in Article 3 and make a simple non-attribution analysis. The investigating authorities
must engage in a critical and searching analysis of the facts on the record and conduct an

5Appellate Body Report, US – Softwood Lumber V (Article 21.5 – Canada), para. 138 (quoting the
relevant dictionary meaning of "fair" as "just, unbiased, equitable, impartial; legitimate, in accordance with the
rules or standards", and "offering an equal chance of success". (Shorter Oxford English Dictionary, 5th Ed.,
W. R. Trumble and A. Stevenson (eds.) (Oxford University Press, 2002), Vol. I, p. 915)).
6 Appellate Body Report, US – Zeroing (EC), para. 156.
7 Appellate Body Reports, China – Raw Materials, para. 293.

- D-29 -

unbiased and proper evaluation of the facts. It must make sure to address and analyze "all
relevant economic factors" and to engage with interested parties on the other factors that are
affecting the domestic industry at the same time. If the injury is caused by other factors, there is
no basis for imposing anti-dumping duties. It would not be permitted by the text of the Agreement
and it would not make sense to impose a trade restriction on foreign producers to address a
problem not caused by these producers. Consumers would pay the price for an unlawful and
ineffective measure. The causation analysis is thus a particularly important part of the
investigating authority's injury determination.

III. CONCLUSION

13. First, Saudi Arabia considers that a cost determination has to be made on the basis of the
producer's cost data as reflected in the records of the exporting producer, if such records are kept
in accordance with generally accepted accounting principles in the exporting country and have not
been demonstrated to be a manifestly inaccurate reflection of the costs borne by the producer in
question with respect to the production and sale of the product under consideration. The proviso in
Article 2.2.1.1 of the Anti-Dumping Agreement that recorded cost data "reasonably reflect costs"
does not permit the rejection of the producer's recorded costs simply because the investigation
authority considers those costs to be "artificially low". Second, Article 2.2 of the Anti-Dumping
Agreement imposes a clear obligation to base the normal value on the costs in the country of
origin rather than on an out-of-country benchmark such as an international reference price. This is
in line with the country-specific and producer-specific nature of the anti-dumping investigation.
Third, export duties are a legitimate policy instrument that is expressly permitted by Article XI:1 of
the GATT 1994. This must be taken into consideration when examining the disciplines imposed on
Members under the Anti-Dumping Agreement. Fourth, if there is no positive evidence of material
injury resulting from the dumped imports and if the authority has failed to separate and
distinguish the injury caused by other factors so as to make sure that it did not attribute such
injury to the dumped imports, there is no basis for the imposition of anti-dumping measures.

- D-30 -

ANNEX D-9
EXECUTIVE SUMMARY OF THIRD-PARTY
ARGUMENTS OF TURKEY
I. RECORDS KEPT BY PRODUCER/EXPORTERS UNDER ARTICLE 2.2.1.1 OF THE ADA

1. Article 2 is considered to be as one of the cornerstone articles of the ADA which sets
comprehensive and detailed rules concerning the components of dumping and how the dumping
margin should be calculated.

2. As dumping is determined through a fair co mparison between the normal value and export
price, the source and calculation methodology of these two sets of data is at the heart of an ADA-
consistent determination of the dumping margin.

3. At this point, Article 2.2.1.1 of the ADA elevat es itself to critical level which designates the
source of the primary element of the normal value, namely the costs of production and sales of the
product under consideration.

4. The Article reads as:

2.2.1.1 For the purpose of paragraph 2, costs shall normally be calculated on the basis
of records kept by the exporter or producer under investigation, provided that such
records are in accordance with the generally accepted accounting principles of the
exporting country and reasonably reflect the costs associated with the production and
sale of the product under consideration. (emphasis added)
5. As discussed in the rulings of EC – Salmon
1 and China – Broiler2, Article 2.2.1.1 necessitates
that, for the purpose of establishing normal value, the investigating authority is normally obliged
to use the records kept by the producer or export er if these records are in accordance with the
generally accepted accounting principles, and reasonably reflect the costs associated with the
production and sale of the product under consideration (POC). Turkey understands that the
drafters of the article presume that the reco rds found in the books of the company should
"normally" mirror costs associated with the produc tion and sales of POC. The word "normally", in
this context, indicates that the investigating authority has less room to maneuver if the conditions,
indicated in the second half of the sentence, are met. The article displays a comprehensible
mechanics and necessitates the investigating authority to provide reasoned and adequate
explanation to deviate from the "rule" and opt into work with the "derogation"
3 if it decides to do
so.

6. Confirmed by the latest rulings in the WTO case law, the investigating authority has the
discretion not to take legal path stipulated in the first part of the sentence and use alternative
sources if the records are either inconsistent with the generally accepted accounting principles
(GAAP) of the exporting country or do not reasonably reflect the costs associated with the
production and sale of the product under consideration. As pointed out in the case law the
conditions of GAAP-consistency and reasonableness do not overlap in every case and that GAAP-
consistency per se does not necessarily lead to the conclusion that the records reasonably reflect
costs of production and sales.
4 To our understanding even if the records of the producers or
exporters are in line with the GAAP, the invest igating authority may still examine whether the
records of the exporter or producer reasonably reflect the costs associated with the production and
sale POC.

7. The point to be clarified in Article 2.2.1.1 is the definition of the word " reasonably". The
ordinary meaning of " reasonably" encompasses, inter alia, "sufficiently", " legitimately", " justly",
"suitably" and "fairly".
5 In Turkey's view " reasonableness" is established if there is no implausible

3 Panel Report China – Broiler, paras. 7.161-164.
5 The Oxford English Dictionary, OED Online, Oxford University Press, accessed 9 January 2015,
<http://www.oed.com/view/Entry/159074

- D-31 -

discrepancy between records and costs associated with the production and sales of the POC and as
long as these costs and records reflect sufficiently reliable price levels. Under this legal
interpretation, Turkey underlines that every case involving the " reasonableness" test should be
handled on its own merits through the assessment of the peculiarities of the exporting country's
market.

8. In regard to the discussion concerning the contextual margin of the phrase "... [c]osts
associated with the production and sale of produc t under consideration", Turkey would like to note
that, Turkey does not share the approach that an expense can only be considered as a "cost", if
this expense is incurred by the producer/exporter.
6 Depending on the cost recording methodology
and characteristics of the production and sale of the POC, certain expenses may become subject to
realization at the end of the financial year. For coherency in their records, companies often set
benchmark figures reflecting actual realizations of last financial year. Any figure that is above or
below of this benchmark is recorded accordingly. Turkey understands that, disregarding expenses
that are not incurred may lead to an asymmetry in a comprehensive evaluation of the costs.

9. In connection with these discussions, Turkey would also like to briefly comment on the
second sentence of Article 2.2.1.1. In Turkey's view, this provision does not necessarily compel the
investigating authority to use cost allocation method of the producer/exporters. The sentence
reads as:

[A]uthorities shall consider all available evidence on the proper allocation of costs,
including that which is made available by the ex porter or producer in the course of
investigation provided that such allocations have been historically utilized by the
exporter or producer, in particular in relation to establishing appropriate amortization
and depreciation periods and allowances for capital expenditures and other
development costs. (emphasis added)
10. The word " including" indicates that the cost allocation methodology of producer or exporter
is one of the available evidences that the investig ating authority may resort. There is no indication
that the investigating authority has to start its evaluation by considering the cost allocation system
of producer or exporter. From a different point of view, the drafters of the article formulated a step
by step approach stipulating that the cost allocati on methods of producer or exporter can be used
if such allocations have been historically utilized by the producer or exporter particularly
concerning amortization, depreciation, capital expenditures and development costs. Therefore, the
rule does not require the investigating authority to use the cost allocation methodology of the
producer or exporter unless the mentioned conditions are met.

6 Argentina's first written submission, para. 102.

- D-32 -

ANNEX D-10
EXECUTIVE SUMMARY OF THIRD-PARTY
ARGUMENTS OF THE UNITED STATES
I. A RGENTINA'S CLAIMS REGARDING THE INTERPRETATION OF ARTICLE 2 OF THE AD AGREEMENT

A. "As Such" Inconsistency Requires Examination of Whether the Measure
Necessarily Requires WTO-Inconsistent Action or Precludes WTO-Consistent Action

1. The United States agrees that a complainant may allege that another Member's legislation or
regulation is inconsistent with a covered agreement "as such" or "independently from the
application of that legislation in specific instances". To prove an "as such" claim, the complainant
must demonstrate that the identified measure requires the responding party to act in a WTO-
inconsistent manner or precludes that party from acting in a WTO consistent manner. In this
context, the EU emphasizes the express discretion of the investigating authorities under
Article 2(5) of the Basic Regulation to adjust costs. In particular, the European Union observes
that: (i) text of paragraph one of Article 2(5) does not require that investigating authorities depart
from exporter or producer cost data, and (ii) the "rest of the evidence" ( e.g., judgments of the
General Court of the European Union and determinations in other investigations) does not
demonstrate that the investigating authorities are mandated to act in a particular manner.

2. The United States considers the Appellate Body's recent analysis in US – Carbon
Steel (India) informative. The Appellate Body report in US – Carbon Steel (India) reviewed
whether the text of the measure "reveals its discretionary nature," or identifies "elements
requiring an investigating authority to engage in conduct inconsistent with" the relevant
WTO agreement. The Appellate Body ultimately co ncluded that these materials did not "establish
conclusively that the measure requires an investigating authority to consistently" act contrary to
the relevant WTO obligation.

B. The Panel's Analysis of Article 2.2.1.1 of the AD Agreement Should Be Informed by
the Text and Context of the AD Agreement

3. Both Argentina's "as such" and "as applied" claims are dependent on the interpretation and
meaning of Article 2.2.1.1 of the AD Agreement. As explained below, the United States considers
that Article 2.2.1.1 requires an investigating authority to "normally" rely on producers' or
exporters' books and records, but, as permitted by the text of the provision, the authority may
look beyond these records in limited circumstances.

1. Investigating Authorities Shall Normally Calculate Costs on the Basis of Records
Kept by Producers or Exporters

4. As a preliminary matter, the United States considers that Article 2.2.1.1 requires an
investigating authority to normally calculate costs on the basis of records kept by an exporter's or
producer's books, provided that (i) the books and records are in accordance with the GAAP of the
exporting country, and (ii) reasonably reflect the costs associated with the production and sale of
the product under consideration. This view was adopted by panel in China – Broiler Products. Thus,
in situations where books and records are kept in accordance with GAAP and reasonably reflect the
costs associated with the production and sale of the product under consideration, the investigating
authority is normally obligated to use those records pursuant to Article 2.2.1.1.

5. The qualification to the obligation in Article 2.2.1.1 is reinforced by the use of the term
"normally," which is defined as "in the usual way" or "as a rule". Thus, the term "normally" in
conjunction with the two conditions ("provided th at") in Article 2.2.1.1 indicates that use of a
producer's or exporter's books or records is no t necessary in every case and the investigating
authority has the ability to consider other available evidence in limited instances. To that end, as
the China – Broiler Products panel report noted, if the investigating authority finds that the books
and records do not meet the stated conditions, the authority is "bound to explain why it departed
from the norm and declined to use a respondent's books and records".

- D-33 -

2. Article 2.2.1.1: "Costs"

6. With respect to the interpretation of the second condition, "reasonably reflect the costs
associated with the production and sale of the product under consideration," the parties attribute a
number of differing meanings to these terms. Argentina fails to explain how the use of "costs" over
an analogous term, like "prices," implies that "costs" must then refer exclusively to the "charges or
expenses that have been actually incurred by producer". Moreover, the panel in EC – Salmon
(Norway) did not find any meaningful distinction be tween "costs" and "prices" when it defined
"cost of production" as the "price to be paid for the act of producing". In the context of Article 2,
the United States considers the difference between "cost" and "price" to be a matter of
perspective, and not one of substance.

7. Argentina's argument that "costs" relates only to expenses "actually" incurred by producers
is undermined by adjacent text in Article 2. The drafters of the AD Agreement chose to utilize an
express limitation – to amounts actually incurred by the producer – elsewhere in Article 2. For
instance, Article 2.2.2(i) references "the actual amounts incurred and realized by the exporter or
producer in question." Further, Articles 2.2.2(i) and 2.2.2(ii) both pertain to the determination of
"general costs". According to Argentina, the term "costs" is inherently specific to expenses
"actually incurred by the producer". Argentina's interpretation would therefore render superfluous
the "actually incurred and realized" by the "exporter or producer" language utilized in
Articles 2.2.2(i) and 2.2.2(ii).

8. For these reasons, the United States does not consider the use of the term "costs" in the
context of Article 2.2.1.1 to be indicative of a limitation with respect to the "actual amount
incurred" as reflected by the producer's own books and records.

3. Article 2.2.1.1: "Reasonab ly" in Relation to "Costs"

9. In Argentina's view, Article 2.2.1.1 requires the use of an exporter's or producer's records
whenever that exporter or producer transposes, within reason, its actual expenses to its records.
Argentina's argument is contrary to the ordinary meaning of Article 2.2.1.1. The plain language
provides that the "costs" used for the calculatin g normal value shall "normally" be based on the
exporter's or producer's records, but that the costs need not be used if they do not reasonably
reflect the costs associated with the production and sale of the product under consideration. The
panel report in Egypt – Rebar supports this interpretation.

10. Argentina's argument also would seem to render redundant the first and second conditions
in Article 2.2.1.1. Specifically, the first condition of Article 2.2.1.1 permits costs to be rejected
based on books and records not in accordan ce with GAAP. However, under Argentina's
interpretation, the second condition would establish yet another requirement that producer records
faithfully reflect the costs incurred by producers. Although GAAP may serve as an indicia that costs
are reasonable, because accounting principles typically ensure costs are properly sourced and
recorded, this may not in all instances be sufficient. Further, the United States does not
understand Article 2.2.1.1 to solely refer to "cost allocation" issues. The first sentence of
Article 2.2.1.1 refers to costs "calculated", rather than "allocated". That "allocated" is explicitly
mentioned elsewhere in the text, but not in the fi rst sentence of 2.2.1.1, contradicts Argentina's
argument.

11. When read together with other terms in Articl e 2.2.1.1 – and in particular "reflect the costs
associated with" – the term "reasonably" can be understood to establish a substantive
reasonableness standard for the costs reflected in the producer's or exporter's records. The
United States notes that the language of Article 2.2.1.1 leaves open what costs may be
"unreasonable" such that the records do not reasonably reflect the costs associated with the
production and sale of the product. The panel reports in China – Broiler Products and US –
Softwood Lumber V do not provide further guidance on this issue. Further, in US – Softwood
Lumber V the panel found that Article 2.2.1.1 did not obligate the investigating authority to reject
unreasonable costs, or to use producer cost data , as reflected in their books and records, if
demonstrated to be unreasonable. In fact, the panel noted that "Article 2.2.1.1 does not require
that any particular methodology be used by an investigating authority to assess whether records
'reasonably reflect the costs associated with the production and sale of the product under
consideration'".

- D-34 -

12. As demonstrated by US - Softwood Lumber V , it is clear that, on an individual-respondent
basis, adjustments are permitted to account for "unreasonable" costs, the recordation of which
nonetheless complies with GAAP. For instance, in puts purchased from a related or affiliated
supplier that do not reasonably reflect a respondent's costs may require an adjustment to the cost
as recorded in the exporter or producer's books and records. This adjustment – to ensure that the
data reasonably reflect the costs associated with production or sale of the product – is typically
based on record evidence including sales to the first non-affiliated party, costs incurred by other
exporters or producers, or other evidence of the appropriate costs.

13. The United States further notes that the co ntext provided by the language of Article 2.2
supports the understanding that market conditions may lead to records reflecting "unreasonable"
costs. Article 2.2 provides that where there exis ts a "low volume of the sales in the domestic
market of the exporting country" or a "particular market situation," sales in the domestic market
do not permit a proper comparison. The text of Article 2.2 therefore contemplates circumstances
where some peculiarity, structure, distortion, or other occurrence of the domestic market makes a
direct comparison to home market prices impossible.

14. The United States understands Article 2.2.1.1 to permit investigating authorities to consider
whether a particular cost is unreasonable, and whether it may be adjusted, so long as the
investigating authority sufficiently explains its determination.

4. Article 2.2.1.1: "Associated with the Pr oduction and Sale of the Product Under
Consideration"

15. Finally, it is revealing that, rather than modify "reasonably reflects costs" with the phrases
"actually incurred" or "by the exporter or producer in question," Article 2.2.1.1 references costs
"associated with the production and sale of the product under consideration". The term "associated
with" suggests a more general connection between the relevant costs and the production or sale of
the product. Further, the use of the term "associ ated with" conveys a conception of costs more
general than just those borne by the specific respondent.

16. Prior panel reports support this view. For instance in Egypt – Rebar, the panel described the
analysis of "costs associated with the production and sale of the product under consideration" as
"hing[ing] on whether a particular cost element does or does not pertain, in that investigation, to
the production and sale of the product in question in that case". The second condition of the first
sentence of Article 2.2.1.1 is not simply a reform ulation of the requirement that records be GAAP
compliant. Specifically, the United States understands that Article 2.2.1.1 does not require the use
of a particular respondent's records where the costs documented in those records are determined
to be "unreasonable" or otherwise unrelated to the production of the product under review. While
the United States takes no position on the facts underlying this dispute, it does consider there to
be a range of reasons related to individual respondents, as well as larger market conditions, which
may render particular costs to be unreasonable. Pursuant to Article 2 of the AD Agreement, with
adequate supporting record evidence and explanation regarding its departure from the exporter or
producer's records, an investigating authority may address that cost when determining a
reasonable normal value.

C. Article 2.4 of the AD Agreement Addres ses Issues of Price Comparability and Not
the Proper Determination of Normal Value

17. Argentina argues that the EU did not establish the existence of a margin of dumping for the
respondents on the basis of a fair comparison between the export price and the normal value.
Argentina's claim under Article 2.4 is intended to address the "clear difference between normal
value and export price". The United States considers the issue of the calculation of a proper normal
value a matter for claims under Article 2.2.1.1, while issues related to the comparison between
normal value and export prices should be considered under Article 2.4.

18. It is clear that Article 2.4 obligates an investigating authority to make a "fair comparison"
between the export price and the normal value when determining the existence of dumping and
calculating a dumping margin. However, the text of Article 2.4 presupposes that the appropriate
normal value has been identified. The United States in this context agrees in principle with both
complainant and respondent, that the use of constructed normal value does not preclude the need
for due allowances or adjustments where necessary. However, the United States submits that the

- D-35 -

Panel should consider: first, whether there is a relevant difference between the constructed value
and the export value, and second, whether such a difference has an effect on "price
comparability".

E
XECUTIVE SUMMARY OF U.S. THIRD PARTY ORAL STATEMENT

I. D ISCUSSION OF EXAMINATION OF ARTICLE 2.2.1.1 OF THE AD AGREEMENT

A. Interpretive Approach to the "Rea sonably Reflects the Costs" Analysis

19. The United States would like to highlight its concerns with the interpretive approach to
Article 2.2.1.1's "reasonably reflect" clause sugges ted by Argentina and some of the third parties.
Nothing in the text of Article 2.2.1.1 limits th e various possible rationales or reasons why, in
exceptional circumstances and when warranted by record evidence, an investigating authority may
find that the costs set out in a producer's or exporter's records do not reasonably reflect the costs
associated with the production and sale of the product under consideration. Thus, the
United States understands that the proper way to apply the "reasonably reflect" clause – and
indeed the only way consistent with the text of the provision – is to examine, on a case-by-case
basis, the rationale provided by an administering authority when it makes a determination that the
costs set out in the records of the producer or exporter do not reasonably reflect the costs
associated with production and sale.

20. In contrast, Argentina and some of the third parties to this dispute are advocating the
position that Article 2.2.1.1 must be interpreted to include various proposed a priori limitations.
That is, regardless of any record evidence that may demonstrate that a producer's records do not
reflect costs associated with production and sale, and prior to any finding by an investigating
authority, Argentina suggests Article 2.2.1.1 im poses certain limitations on the investigating
authority's analysis. In the following paragraphs, the United States will examine some of these
proposed a priori limitations, and explain how they ca nnot be supported under the rules of
interpretation applicable to the WTO Agreement.

21. First, Argentina argues that the text of Arti cle 2.2.1.1 restricts the investigating authority's
"reasonably reflect" analysis to the books of the ex porter or producer directly involved in the anti-
dumping investigation. That is, the analysis is limited to expenses that have been "actually
incurred by the producer". This argument, however, has no basis in the text of Article 2.2.1.1. The
language "associated with" in the "reasonably reflects" clause similarly implies a less rigid
connection between the relevant costs and the parties to the investigation than suggested by
Argentina and several third parties.

22. Further, the AD Agreement also refutes th e proposed interpretation that a "reasonably
reflect" determination must be based only on information related to the specific producer or
exporter responding to the anti-dumping investigation. For instance, the GAAP of each
WTO Member is a factual matter, to be determined based on information that is necessarily
exogenous to a producer's or exporter's records.

23. In addition to the context provided by Article 2.2.1.1, other text in Article 2 is contrary to
Argentina's proposed interpretation. Given the express directions as to "actual data" in
Article 2.2.2 and its proximity to Article 2.2.1.1, it is difficult to conclude that the drafters intended
to include the a priori limitation in Article 2.2.1.1 that Argentina suggests. The United States also
notes that although, in this particular dispute, the exporting Member is arguing against the use of
the "reasonably reflect" clause, this may not be the case in every dispute. As was the case in US –
Softwood Lumber V , there may well be circumstances in which an exporter or producer would
argue against the use of its own books and records an d in favour of an alternative source of cost
information.

24. For all these reasons, a proposal to limit the information examined in a "reasonably reflect"
determination cannot be supported. Neither the text of Article 2.2.1.1, nor context provided by
other provisions of the AD Agreement, require an investigating authority to ignore any type of
potentially relevant evidence.

25. Second and more broadly, it has been sugge sted that "dumping" relates exclusively to the
behaviour of the exporter or producer, and it is a priori inappropriate to consider information not

- D-36 -

directly related to the exporter's or producer's conduct. However, Article 2.2 of the AD Agreement
refers to the existence of a "particular market situation" where sales in the domestic market do not
permit a proper comparison. That a factor external to a specific exporter or producer – the
particular market situation – governs normal value directly refutes the proposition that, as a
number of third parties contends, dumping relates ex clusively to the behaviour of the exporter or
producer. Additionally, recorded costs related to inputs purchased from related corporate
enterprises are regularly viewed as potentially unreasonable.

B. Relation to other WTO Agreements

26. It has been suggested in this dispute that because the issue of recorded costs that do not
"reasonably reflect" the cost of producing the product under investigation might also be
addressable under other covered agreements (such as the Agreement on Subsidies and
Countervailing Measures), the AD Agreement therefore does not permit departure from such
recorded costs when calculating normal value. However, the fact that one covered agreement
could, in theory, address a given practice does not mean that the other covered agreements
cannot do so as well. Indeed, the WTO Agreement contains many instances of overlapping
obligations. To the extent this argument is intended as a reference to the "double-counting" issue
addressed in US – Anti-Dumping and Countervailing Duties (China) , the reference in fact
undercuts the argument for an a priori limitation with respect to finding recorded costs to be
unreasonable.

C. Relevance of "Input Dumping" Discussions

27. Finally, the United States does not agree that certain pre-Uruguay Round discussions of
"input dumping" – a term never used in the AD Agreement – is in any way relevant to the factors
that may be examined in making a "reasonably reflect" determination under Article 2.2.1.1. "Input
dumping" pertains to the narrow issue of whether materials or components used in manufacturing
an exported product are purchased at dumped or below cost prices. Conversely, this dispute
centers on the broader issue of whether investigating authorities must a priori limit the factors
examined in deciding whether recorded costs reasonably reflect the associated cost of production
and sale of the product.