KOREA – ANTI-DUMPING DUTIES ON IMPORTS OF CERTAIN PAPER FROM INDONESIA
Document: Recourse to Article 21.5 of the DSU by Indonesia Request for Consultations
Date: 31 October 2006
Document codes: WT/DS312/8
Complainant: Indonesia
Respondent: South Korea
Third parties: Canada, China, EU, Japan, U.S., Taiwan
Dispute stage: Panel
Agreements cited: Art. 5.4, 2.6, 3.1, 4.1, 5.2, 5.3, 5.7, 12.1.1, 6.5, 6.7, Annex I, Annex II, 6.8, 12.2, 2.1, 2.2, 2.4, 5.8, 9.3, 3.2, 3.4, 3.5, 3.7, 6.1, 6.4, 6.9  Anti-dumpingArt. VI:1, VI:2(a), VI:2(b), VI:6  GATT 1994

KOREA – ANTI-DUMPING DUTIES ON IMPORTS
OF CERTAIN PAPER FROM INDONESIA

Recourse to Article 21.5 of the DSU by Indonesia

Request for Consultations

 The following communication, dated 26 October 2006, from the delegation of Indonesia to
the delegation of Korea and to the Chairman of the Dispute Settlement Body, is circulated pursuant to
Article 21.5 of the DSU.

 My authorities have instructed me to request the Republic of Korea ("Korea") to enter into
consultations pursuant to Article 21.5 of the U nderstanding on Rules and Procedures Governing the
Settlement of Disputes ("DSU") and paragraph I of the Understandi ng between the Republic of Korea
and the Republic of Indonesia of 17 August 20 06 regarding the measures taken by Korea to
implement the recommendations and rulings of the Dispute Settlement Body ("DSB") in (WT/DS312).

 On 28 November 2005, the DSB adopted its recommendations and rulings in the dispute
Korea - Anti-Dumping Duties on Imports of Certain Paper from Indonesia (WT/DS312). A t t h e
meeting held on 20 December 2005, Korea informed the DSB that it intended to fully implement its
recommendations and rulings. The parties agreed unde r Article 21.3(b) of the DSU that Korea had
until 28 July 2006 to implement the recommendations and rulings in this dispute.

 On 27 July 2006, the Korean Trade Commission ("KTC") published its Implementation
Report (Public Notice No. 2006-105 of the Korean Ministry of Finance and Economy) (the
"Redetermination") in the Korean Gazette. Th is Implementation Report leaves the anti-dumping
measure and rate of duties intact.

 At the DSB meeting held on 1 September 2006, Korea stated that with this Implementation
Report it had fully complied with the recommendations and rulings of the DSB. Indonesia disagrees.
In particular, Indonesia is concerned that the fo llowing aspects of the measures taken to comply by
Korea fail to implement properly the rulings of the DSB in this matter:

A. Reseller Selling Expenses

 The Panel found that in calculating normal values based on constructed value for the
Indonesian exporters at issue, th e KTC acted inconsistently with the Anti-Dumping Agreement by
including substantial interest expenses in its calculation of selling expenses incurred by a related
reseller of the like product. Indonesia then ex plained that a correct calculation of these selling
expenses would result in de minimis margins for the exporters involve d. In the Redetermination,

however, the KTC left unchanged the amount of inter est expenses it included in the reseller's selling
expenses. Indonesia is concerned that the Redetermin ation fails to properly implement this aspect of
the DSB's recommendations and rulings for the following reasons:

1. By attributing interest expenses of such na ture and magnitude to the reseller, by using
expenses incurred by a production company, a nd by ignoring verified evidence that the
reseller would not have incurred such interest expenses in the resale of the like product, the
KTC failed properly to identify a "reasonable amount for administrative, selling and general
costs" to be included in the constructed value w ithin the meaning of Article 2.2, and failed to
rely on "actual data pertaining to production and sales in the ordinary course of trade of the
like product by the exporter or producer under investigation" within the meaning of
Article 2.2.2. By thus failing to properly determ ine the constructed value, the KTC failed to
make a fair comparison between normal value and export price within the meaning of
Article 2.4 of the Anti-Dumping Agreement.

2. By attributing interest expenses of such na ture and magnitude to the reseller, by using
expenses incurred by a production company, an d by ignoring verified evidence that a
company with the same selling functions affiliate d to another producer incurred zero interest
expenses, the KTC failed to comply with its obligation to utilise the "best information
available" and failed to exercise "special circ umspection" in its use of information secondary
sources as required by Article 6.8 read with A nnex II, including paragraphs 3 and 7 thereof,
of the Anti-Dumping Agreement.

3. By relying on new, irrelevant, unreliable a nd unverifiable information regarding the reseller
and regarding selling expenses incurred by compan ies in other industries and in Korea, the
KTC failed to comply with its obligation to u tilise the "best information available" and failed
to exercise "special circumspection" in its u se of secondary sources as required by Article 6.8
read with Annex II, including paragraphs 3 and 7 thereof, of the Anti-Dumping Agreement.

4. By treating the reseller as a manufacturing co mpany and disregarding its previous findings
and verified evidence, the KTC failed to comp ly with its obligation to reach an unbiased,
objective and proper determination of dumping under Articles 2.1, 2.2, and 2.4, as well as its
obligations under Article 6.8 read with Annex II of the Antidumping Agreement.

5. By excluding evidence supplied during th e implementation process by the Indonesian
exporters while accepting other new evidence onto the record, the KTC failed to comply with
its obligations under Articles 2, 2.2, 2.2.2, 6.1, 6.2, 6.6, 6.8, 17.6(i) and Annex II of the
Anti-Dumping Agreement to make a proper determ ination of the normal value and to provide
the Indonesian exporters with required opportun ities to submit evidence and to defend their
interests.

B. Best Information Available for One Exporter

 In determining dumping margins based on best in formation available for one exporter that did
not participate in the KTC's investigation, the Pane l found that the KTC had failed to exercise special
circumspection within the meaning of Article 6.8 and paragraph 7 of Annex II of the Anti-Dumping
Agreement. In the Redeterminati on, however, the KTC continued to use the same dumping margins
for this exporter without properly considering ve rified evidence from other sources regarding those
margins.

6. By continuing to rely on information supplie d by the Applicant to calculate the normal value
for this exporter despite the fact that (i) these data are contradicted by the KTC's own
calculations and (ii) these data are inconsistent with other verified information regarding

prices in the Indonesian market, the KTC failed to comply with its obligations under
Article 6.8 read with Annex II of the AD Agreement.

C. Injury and causal link determinations

 The Panel found that the KTC's analysis of inju ry did not meet the requirements of Article 3.4
of the AD Agreement because the KTC failed to evaluate the relevance of injury factors which did not
show negative trends in its determination. In its Redetermination the KTC altered its injury and causal
link determinations. Indonesia is c oncerned that the KTC's injury a nd causal link analysis cannot be
reconciled with the requirements of the Anti-Dumping Agreement for the following reasons:

7. The KTC's injury and causal link determina tions are based exclusively on information
obtained from a subset of the Korean domestic industry (the companies that supported the
petition and responded to questionnaires) rather than the entire domestic industry. As a result,
figures for the market share of imports and domestic goods, domestic prices, economic factors
and indices having a bearing on the state of the industry are partial and inaccurate.
Consequently, the KTC's determinations are in consistent with its obligation to base its
determinations on "positive evid ence" and "conduct an objective examination" of injury and
casual link as set out in Articles 3.1, 3.2,3.4 and 3.5 of the Anti-Dumping Agreement.

8. In its injury and causal link determinations, the KTC appears to have failed to analyse how
imports which were priced above or almost e qual to the price of domestic goods could have
caused a loss in the volume of sales and hence reductions in market share, reduced capacity
utilization and increased inventories in a pri ce sensitive market. The KTC also appears to
have failed to analyse properly the effect of th e losses in the export market and the effect of
non-dumped imports on the purported injury suffe red by the domestic industry. This appears
to be inconsistent with Articles 3.1, 3.2, 3.4 and 3.5 of the Anti-Dumping Agreement.

D. Failure to Disclose Injury Determinations

 During the implementation phase, the KTC provided the Indonesian exporters with disclosure
regarding the manner in which it intended to impl ement the DSB's rulings with respect to the
determination of dumping. However, the KTC faile d to provide the Indonesian exporters with any
disclosure regarding the manner in which it intended to implement the DSB's rulings with respect to
the determination of injury or with any opportunity to comment on issues relating to the determination
of injury.

9. By failing to provide a draft of its injury re -determination to the Indonesian exporters or to
allow these exporters to provide their views, the KTC failed to comply with its obligations under
Articles 6.1,6.2,6.4,6.5 and 6.9 of the Anti-Dumping Agreement.

 Indonesia reserves the right to raise additiona l issues regarding the KTC's Redetermination
during consultations.

 We look forward to receiving your reply to th is request and to fixing a mutually convenient
date for consultations.