CHINA – DEFINITIVE ANTI-DUMPING DUTIES ON X-RAY SECURITY INSPECTION EQUIPMENT FROM THE EUROPEAN UNION
Document: Report of the Panel Addendum
Date: 26 February 2013
Document codes: WT/DS425/R/Add.1; WT/DS425/R.
Complainant: EU
Respondent: China
Third parties: Japan, U.S., Thailand, Norway, India, Chile
Dispute stage: Panel
Agreements cited: Art. 6.2, 6.4, 6.5.1, 6.9, 12.2.2, 3.1, 3.2, 3.4, 3.5  Anti-dumping

CHINA – DEFINITIVE ANTI-DUMPING DUTIES
ON X-RAY SECURITY INSPECTION EQUIPMENT
FROM THE EUROPEAN UNION

Report of the Panel

Addendum

 This addendum contains Annexes A to G to the Report of the Panel to be found in document

ANNEX A

EXECUTIVE SUMMARIES OF THE FIRST WRITTEN
SUBMISSIONS OF THE PARTIES

Contents Page
Annex A-1 Executive Summary of the First Written Submission of
the European Union A-2
Annex A-2 Executive Summary of the First Written Submission of China A-10

ANNEX A-1

EXECUTIVE SUMMARY OF THE FIRST WRITTEN
SUBMISSION OF THE EUROPEAN UNION

I. INTRODUCTION AND GENERAL FACTUAL BACKGROUND

1. The present dispute concerns the definitive anti-dumping measure imposed by the Ministry of
Commerce of the People's Republic of China ("MO FCOM") on imports of X-ray security inspection
equipment originating in the European Union pursuant to Notice (2011) No 1 of 23 January 2011.

2. Low-energy scanners are primarily used in secu rity checks at transportation infrastructures,
such as airports, railway stations and subways, as well as in the protection of public premises. Low-
energy scanners for the aviation sector have to me et particularly demanding security requirements.
For that reason, in that sector "competition tak es place not only on price but also on quality, track
record, user friendliness and service". As a result, the aviation sector is generally regarded as a high-
end segment commanding higher prices, as compared to the other sectors of the market. The Chinese
market for low-energy scanners is supplied by several domestic producers as well as by imports,
mainly from the European Union and the United Stat es. The Petition was filed by Nuctech. No other
Chinese producer supported the Petition or cooperated in the investigation. As a result, the injury
determination is based on data pertaining to Nu ctech. Unlike the other Chinese producers, Nuctech
has historically focused on high-energy scanners , although it has developed a line of low-energy
scanners in recent years. During the POI (2006-2008) Nuchtec's domestic sales of low-energy
scanners were concentrated in the low-end and interm ediate sectors. Nuctech was a newcomer to the
aviation sector and deliberately pursued an aggressi ve business strategy aimed at rapidly gaining
market share. Smiths was the only EU producer w ho exported the subject products to China during
the POI. Smiths did not export any high-energy scanners to China, but only and exclusively low-
energy scanners. Unlike Nuctech, Smiths' sales were concentrated in the high-end aviation sector.

3. In the course of the investigation leading to the imposition of the measure at issue the Chinese
authorities disregarded some of the most fundamental procedural guarantees provided in the ADA.
As a result, the EU exporter was deprived of a fair opportunity to defend adequately its interests. In
addition, the measure at issue is based on a manifestly flawed determination of material injury. While
the European Union has not submitted any claim w ith regard to the substantive aspects of the
determination of dumping made by the Chinese authorities, this does not mean that the
European Union agrees with that determination. Rather, due to the failure of the Chinese authorities to
comply with even the most basic transpar ency requirements imposed by the ADA, the
European Union has been unable to understa nd how the Chinese authorities reached that
determination.

II. LEGAL CLAIMS

1. Claim under Articles 6.5.1, 6.4 and 6.2 ADA

4. The European Union submits that, contrary to its obligations under Article 6.5.1 ADA, China
failed to require a statement of reasons explaini ng the exceptional circumstances why summarisation
was not possible in its injury analysis, in particular with respect to the statement by the Chinese Public
Security Bureau of the Civil Aviation Administra tion. Furthermore, in certain instances where
summaries of confidential information were provi ded, China, contrary to its obligations under
Article 6.5.1 ADA, failed to ensure that they we re in sufficient detail to enable a reasonable
understanding of the substance of the informati on submitted. This was the case with respect to

product models in the Petition, Exhibits 8, 9, 10, 11 and 14 attached to the Petition and certain
responses and attachments of the Petitioner in the non-confidential version of its Questionnaire
Response.

5. Article 6.5.1 ADA imposes an obligation on the investigating authority to request and
scrutinise the statements provided by parties seeking confidential treatment for information submitted.
The aim of this obligation is to determine whethe r exceptional circumstances have been established,
and whether the reasons provided adequately e xplain why under the circumstances summarisation is
not possible. In the investigation at issue, how ever, China accepted as adequate non-confidential
summaries which did not provide sufficient detail to permit a reasonable understanding. Furthermore,
it waived the obligation to provide a non-confiden tial summary without having requested - let alone
having reviewed - the statement of exceptional circumstances that would justify what makes
summarisation impossible.

6. In so doing, China also failed to provide a time ly and full opportunity for all interested parties
to see all the information that was relevant to defend their interests and used by MOFCOM in the anti-
dumping investigation, and conse quently seriously compromised the ability of the respondents to
respond to the petitioner's allegations and adequately defend their interest s, contrary to its obligations
under Articles 6.4 and 6.2 ADA.

7. Article 6.4 lays down a fundamental due process right, i.e., the right for interested parties to
have access to and to see all non-confidential eviden ce or information that is in the investigating
authorities' files. The European Union submits that even if interested parties do not have access to
confidential information, they must still be granted access to the non-confidential summary thereof.

8. Depriving interested parties of the right to access non-confidential summaries by failing to
comply with its obligations under Article 6.5.1 restricts the opportunity of interested parties to defend
their interests, a right that is due to interested parties pursuant to Article 6.2 ADA.

2. Claim under Articles 6.9, 6.4 and 6.2 ADA

9. The European Union submits that China did not fully disclose all the essential facts which
form the basis for the determination of the dum ping margin of the European Union's cooperating
producer and the essential facts which form the basi s for the determination of the residual duty,
contrary to its obligations under Article 6.9 ADA. China also failed to disclose all the essential facts
that form the basis for the determination of injury , including the analysis of the effects of dumped
imports on prices.

10. In addition, China also failed to provide a time ly opportunity for all interested parties to see
all information that was relevant to defend their inte rests, and that was used by the authority in the
anti-dumping investigation, as required by Article 6. 4 ADA. Consequently, China also deprived the
interested parties of their full opportunity to defend their interests, a right due under the first sentence
of Article 6.2 ADA.

11. First, MOFCOM did not disclose the underlying data and the methodology followed by them
in order to establish the existence of price underc utting in the Injury Disclosure, nor the underlying
data or the methodology followed in order to consider the existence of price depression. MOFCOM
asserted the existence and extent of price undercuttin g and price depression in its Final Determination
and considered it as a factor in its injury determinat ion. As these are facts that form the basis for the
decision whether to apply definitive measures, they constitute "essential facts" within the meaning of
Article 6.9 ADA and must be disclosed in sufficient time for the parties to defend their interests. This
was not done in this case. As the case invol ves such heterogeneous products, knowing the
methodology was of utmost importance for Smiths' defe nce. It was therefore especially important to

know, how the import and domestic pr ices were being compared and if MOFCOM ensured that those
prices were comparable.

12. Second, MOFCOM did not fully disclose all the essential facts with respect to the export
price and the adjustments made thereto. The dump ing disclosure is drafted in very general terms
which for the most part make the verification of the correctness of the facts and assertions included
impossible. With respect to the export price, MOFCOM did not disclose the underlying facts and
criteria on the basis of which the adjustments to th e export price were made, like the specific amounts
of adjustments items, including specific data on the adjusted proportions of expenses incurred by the
affiliated distributor.

13. Third, MOFCOM failed to provide to Smiths the actual dumping calculations that it
performed for Smiths. The disclosure provides information about the methodology used to calculate
the dumping margin and includes a reference to th e data used; however, MOFCOM did not explain
how the figures were calculated on the basis of th e information provided by Smiths and the reasons
for the discrepancy between the figures. The Europ ean Union submits that the calculations employed
by an investigating authority to determine dumping margins, and the data underlying the authority's
calculations, constitute "essential facts" within the meaning of Article 6.9. Those calculations are
both material to the authority's decision and important for the determination. It is clear that without
those calculations a decision on the definitive measure could not be taken.

14. Fourth, MOFCOM failed to disclose the ess ential facts under consideration regarding its
calculation of the "all others" dumping rate. MOFCOM failed to disclose the facts forming the basis
for its decision to apply the facts available in the first place. Furthermore, MOFCOM did not disclose
the facts that lead it to conclude that 78.1% is an appropriate residual rate, especially considering that
the dumping margin for the cooperating company was significantly lower (i.e. 33.5%). The Dumping
Disclosure also provides no explanation as to why MOFCOM could not have publicly summarised the
information used or at least identified the calculation methodology it employed.

3. Claim under Article 12.2.2 ADA

15. The European Union submits that China vi olated Article 12.2.2 ADA because neither in its
public notice of the imposition of definitive measure s, nor in a separate report, MOFCOM set forth
sufficiently detailed explanations for the definitiv e determinations on dumping and injury, together
with references to the matters of fact and law a nd reasons which led to arguments being accepted or
rejected.

16. The European Union makes claims with respect to two "categories" of information that China
failed to include in the final public notice or sepa rate report: (i) the reasons for the acceptance or
rejection of relevant arguments or claims by Smiths; and (ii) certain relevant information on the
matters of fact and law which have led to the imposition of final measures.

17. First, concerning the normal value determin ation, Smiths submitted in its Comments on the
Preliminary Determination various reasons, which could show that the sales to the affiliated
companies were not affected by the affiliation rela tionship, represented a fair market price and were
made in the normal course of trade. Although MO FCOM refers in passing to the comments made by
Smiths in the context of the final disclosure, it do es not provide actual facts or reasoning which would
address or rebut Smiths's arguments and evidence, thereby leaving the issue open until the Final
Determination. The European Union submits that MOFCOM's Final Determination does not
adequately address the submissions by Smiths.

18. Second, concerning the injury analysis, MOFCOM 's price effects analysis is based on several
assertions about the alleged effects of the price of imported subject products on the price of domestic

like products. MOFCOM's conclusion that the impor ts under investigation caused significant price
effects is an essential component of its affirmative injury determination, which in turn is a prerequisite
to China's imposition of definitive measures. Howeve r, neither in the Preliminary Determination, nor
in the Injury Disclosure, nor in the Final Determ ination did the investigating authority explain the
methodology used in order to calculate the alleged price undercutting or price depression. The
European Union submits that the ADA requires that authorities provide more than cursory assertions
to justify their decisions to impose definitive antidumping measures.

19. Third, MOFCOM also failed to satisfy its obligation under Article 12.2.2 ADA to provide
"the reasons for the acceptance or rejection of the relevant arguments or evidence by the exporters and
importers". Smiths questioned the credibility of the data submitted by the Petitioner on which the
investigating authority based itself in order to find injury of domestic industr y. In addition, Smiths
also made a number of pertinent arguments concerning MOFCOM's injury analysis in view of China's
obligations under Articles 3.4 ADA. However, nowhere in the Inju ry Disclosure Document or the
Final Determination did MOFCOM identify the facts underlying its conclusions.

20. Fourth, MOFCOM's Injury Disclosure did not address the elements raised by Smiths and the
reasons for the rejection of Smiths's arguments. Smiths addressed the establishment of the causal link
between the injury to the domestic industry and th e dumped imports in its Injury Brief and in its
Comments on the Injury Disclosure. In partic ular, Smiths listed several factors which the
investigating authority should take into account in assessing the existence of the causal link.

21. Fifth, In the Preliminary Determination, MOFCOM preliminarily arrived at a dumping
margin of 48.2 % for Smiths and a residual duty of 71.8 %. MOFCOM provided some narrative
explanation in the Preliminary Determination regard ing the dumping margins. It did not, however,
release the calculations it performed. The Final Discl osure, prior to the Final Determination, also did
not include the calculations performed by MOFCOM. In the Final Determination, without releasing or
making available the calculations upon which it ba sed its decision, MOFCOM determined a final
dumping margin of 33.5 % for Smiths and imposed a residual duty of 71.8 %. The European Union
submits that where calculations, and the data unde rlying those calculations, have not been made
available at the stage of disclosure within the meaning of Article 6.9 ADA, not only revisions or
modifications of the calculations, and the data unde rlying them, but the calculations in their entirety
constitute relevant information, which has lead to the imposition of the final measures and would
consequently have to be set out and explained in the public notice or through a separate report.
MOFCOM's failure during the investigation to make available the calculations and data it used to
calculate the margins for the cooperating producer and all other producers respectively was therefore
inconsistent with Article 12.2.2 ADA.

4. Claim under Articles 3.1 and 3.2 ADA

22. The Final determination of injury rests upon th e findings that dumped imports had "an evident
undercutting and depressing effect on the price of th e domestic like products". The European Union
submits that MOFCOM's findings of price undercu tting and price depression and, consequently, its
determination of injury is not based on an "objec tive examination" of "positive evidence", contrary to
the obligation imposed upon the investigating authorities by Articles 3.1 and 3.2 ADA. Instead, the
methodology used by the Chinese authorities in order to consider the existence of price undercutting
and price depression was manifestly inaccurate and biased against the EU exporter.

23. Throughout the investigation, Smiths explained repeatedly and at length that low-energy
scanners and high-energy scanners have very differe nt physical characteristics, end uses and prices
and do not compete with each other. In spite of this, MOFCOM concluded in its Preliminary
Determination that the characteristics and functions of high-energy scanners and low-energy scanners
are "almost the same" and that all the differences invoked by Smiths resulted, in essence, from mere

differences "in packaging". MOFCOM also failed to take into account the important differences
among the various types of products falling within the category of low-energy scanners, which are
reflected in substantial price differences.

24. In their initial submissions to MOFCOM, neith er Nuctech nor Smiths had made any reference
to the existence of price undercutting. MOFCOM nonetheless concluded in the Final Determination
that in 2006 and 2007 undercutti ng was "large" and "serious", whereas in 2008 the prices of imported
products were "slightly higher" than the prices of domestic products, while still "at a low level".
These findings were reached by following a manif estly inadequate methodology involving the use of
weighted average unit values for all the products under investigation, which failed to take into account
the differences between the different types of scanners.

25. Likewise, MOFCOM's finding of price de pression was the result of applying a flawed
methodology involving the use of weighted av erage unit values for all the products under
investigation. MOFCOM disregarded the opini on of Nuctech, which had stressed in various
occasions that "because the prices of different types of Subject Products vary significantly, the change
in the average price cannot show a trend in prices" . Furthermore, the levels of price depression
mentioned by MOFCOM in the Final Determinat ion are about three times higher than those
calculated by Nuctech on the basis of its own price data for its two most representative models of low-
energy scanners.

26. In essence, in view of the manifest differences among the pr oducts covered by the
investigation, and in particular between low- energy and high-energy scanners, it was clearly
inadequate for the Chinese authorities to examin e the existence of price undercutting and price
depression without taking into account those differe nces. Regarding price undercutting and price
depression, the glaring discrepancy between, on the one hand, the informed views of the two main
interested parties with a direct knowledge of the ma rket and, on the other hand, the results yielded by
MOFCOM's chosen methodology should have al erted any objective and unbiased investigating
authority, had it still been necessary, to the fact that the methodology was grossly inaccurate and
unreliable.

5. Claims under Articles 3.1 and 3.4 ADA

27. The European Union submits that China vi olated Articles 3.1 and 3.4 ADA since MOFCOM
failed to make an objective examination, on the basis of positive evidence, of the effect of the dumped
imports on prices in the domestic market for like pr oducts and the consequent impact of these imports
on domestic producers of such products, including the factors listed in Article 3.4.

28. First, MOFCOM failed to base its evaluation on positive evidence. There are discrepancies
between the information submitted by the domestic industry (defined as Nuctech) and the data
reflected in MOFCOM's Final Determination which called into question the reliability of such data.

29. Second, MOFCOM failed to examine all rele vant factors listed in Article 3.4 ADA. In
particular, MOFCOM did not refer explicitly or impl icitly, and thus failed to evaluate, the magnitude
of the margin of dumping. As a consequence, MO FCOM failed to make a proper evaluation of the
state of the domestic industry.

30. Third, MOFCOM failed to take into account the differences between high-energy and low-
energy scanners when examining various injury fact ors. MOFCOM's use of weighted average values
in the injury factors was manifestly inadequate for considering the existence of material injury in the
present case.

31. Fourth, MOFCOM failed to make a proper evalua tion of all injury factors in context and thus
failed to reach a reasoned and ade quate conclusion with respect to the impact of dumped imports on
the Chinese industry. In particular, in view of an overwhelming majority of factors showing a
positive movement in the state of the domestic industry, MOFCOM should have provided a
compelling explanation of whether and how such positive movements were outweighed by any other
factors and indices which might be moving in a negative direction during the POI. Instead,
MOFCOM merely referred to the positive factors in passing and then focused on some (allegedly)
negative factors to conclude the existence of mate rial injury, without examining how positive factors
were outweighed by other negative factors. Moreove r, MOFCOM failed to examine all factors in the
proper context, making contradictory observations in a not-even-handed manner. Finally, MOFCOM
failed to take into account all facts and arguments on the record relating to the state of the domestic
industry. Consequently, MOFCOM failed to reach a reasoned and adequate conclusion with respect
to the impact of dumped imports on the Chinese industry.

32. In essence, MOFCOM ignored the actual stat e of the domestic industry (defined as the
Petitioner, Nuctech). MOFCOM found material injury based on some (arguably) negative factors and
a doubtful overall evaluation of not even all the rele vant economic factors in this case. The evidence
on the record showed that Nuctech had recently ma de huge investments in order to enter the low-
energy scanner market. Its start-up situation together with its aggressive pricing strategy led Nuctech
to incur some losses between 2006 and 2008, although Nuctech already (or almost) achieved break-
even in 2008, despite the constant reduction of the domestic sales prices. Nuctech's strategy proved
successful in obtaining significant increases in sal es volume, sales revenue and market share.
Moreover, at the same time, Nuctech was emba rking on expanding its business abroad, which
generated some additional losses. Likewise, such an expansion led to an increase in inventory since,
the bigger the market, the bigger the need to have products in stock to quickly supply them to
customers. Thus, Nuctech reflected a state of an industry that was entering into a new product
market, following an aggressive business strategy, also in an international context, and that was about
to or already achieving profits towards the end of the POI. Nuctech also reflected a state of an
industry that was visibly growing, with increasing output, increasing sales volume and revenue,
increasing market share and high productivity.

33. Rather than acknowledging this situation, MOFCOM found that Nuctech was in a state of
suffering material injury. And it did so by re lying on questionable figures, making contradictory
statements, evaluating economic factors in a not-e ven-handed manner, ignoring the overall context of
all the relevant economic factors having a beari ng on the state of the domestic industry and thus
failing to provide reasoned and adequate explanations on its material injury finding.

6. Claims under Articles 3.1 and 3.5 ADA

34. The European Union submits that Chin a violated Articles 3.1 and 3.5 ADA because
MOFCOM failed to make an objective determination, on the basis of all relevant evidence before the
authorities, that the dumped imports were, through the effects of dumping, causing injury.

35. First, MOFCOM failed to properly examine the causal relationship between dumped imports
and the material injury found. In particular, MOFCOM's consideration of the volume of dumped
imports as "large" or "great" was improper when examined in context. Moreover, by evaluating
evidence (specifically, i.a., domestic sales prices ) relating to both high-energy and low-energy
scanners in its causation assessment, MOFCOM attri buted to the dumped imports (consisting only of
low-energy scanners) effects that could not have been caused by them. Further, MOFCOM's reliance
on the low price of domestic sales was misguided in view of the uncontested fact that in 2008 the
price of EU imports was higher than the domestic sales price. MOFCOM also failed to provide a
reasoned and adequate explanation in the present case, where there was no correlation between the
dumped imports and the negative effects observed on the domestic industry.

36. Second, MOFCOM also failed to conduct a proper non-attribution analysis. MOFCOM
provided a "check-list" of other factors, most of th em irrelevant to the case, and failed to evaluate the
other possible known causal factors raised by inter ested parties. MOFCOM also failed to make an
objective assessment of the relevant other known fact ors actually examined since there was evidence
on the record manifestly contrary to its findings.

37. Third, due to the inconsiste ncies with Articles 3.1, 3.2 and 3.4 mentioned in the previous
Sections of this submission, the European Un ion equally considers that MOFCOM's causation
determination is also inconsistent with Article 3.5 ADA.

38. In essence, MOFCOM attributed all the negative effects observed under Articles 3.2 (price
undercutting/price depression) and 3.4 (material inju ry) to the dumped imports, concluding that none
of the other known factors were the source of injury . In other words, MOFCOM found that the large
volume of dumped imports caused serious effects on the production and operations of domestic X-
Ray security inspection equipment, sharp reductions in sales price, huge losses of pre-tax profit, a
negative rate of return, largely increased invent ory overhang, a 25.08% reduction (despite an initial
increase) in workforce from the beginning to the end of the POI, and failure to recover huge
investment.

39. The European Union considers that MOFCOM artif icially attributed the material injury to the
dumped imports. The EU imports were not "large" or "great" in volume but modest when seen in the
context of domestic consumption and the much hi gher increase in domestic sales volume. Moreover,
since in 2008 the price of EU imports was higher than the domestic sale price, the European Union
fails to understand how MOFCOM's conclusion that the EU imports caused all the price-related
effects can meet the standard of providing a reasone d and adequate explanation. Put simply, if there
was no undercutting and there was nothing (other th an Nuctech's own aggressive pricing strategy)
preventing the domestic industry from increasing its prices and thus obtaining higher sales revenue
and profits and a return on investment, the European Union considers that MOFCOM's attribution of
the material injury to the EU imports is inconsis tent with Articles 3.1 and 3.5 ADA. Such violation
becomes more flagrant when MOFCOM disregarde d the actual causes for any negative condition of
the domestic industry, as stood out from the record.

III. CONCLUSIONS AND RELIEF REQUESTED

40. The European Union requests the Panel to find th at the measure at issue is inconsistent with
the following provisions of the ADA:

(A) Articles 6.5.1, 6.4 and 6.2 ADA because the Chin ese authorities: (i) failed to ensure with
respect to certain confidential information s ubmitted by the petitioner in the petition and its
annexes, and the investigation questionnaire and its annexes, that non-confidential summaries
of confidential information were sufficiently detailed to enable a reasonable understanding of
the substance of the information submitted; a nd (ii) failed to require a statement of reasons
explaining exceptional circumstances why summari sation was not possible with respect to a
statement by the Chinese Public Security Bureau of the Civil Aviation Administration.

(B) Articles 6.9, 6.4 and 6.2 ADA because the Chinese authorities: (i) failed to provide interested
parties with information about the essential facts under consideration for the determination of
injury; (ii) failed to provide interested parties with information about the essential facts under
consideration for the determination of normal va lue and export price; (iii) failed to provide
interested parties with information about the essential facts under consideration for the
calculation of the dumping margin for the coope rating producer; and (iv) failed to provide
interested parties with information about the essential facts under consideration for the
calculation of the residual duty.

(C) Articles 12.2.2 ADA because: (i) neither in the public notice of the imposition of definitive
measures, nor in a separate report, the Chin ese authorities set forth sufficiently detailed
explanations for the methodology used in the establishment of the normal value; together with
references to the matters of fact and law a nd reasons which led to arguments being accepted
or rejected; (ii) neither in the public notice of the imposition of definitive measures, nor in a
separate report, the Chinese authorities set forth sufficiently detailed expl anations for all the
considerations relevant to the injury determina tion; together with references to the matters of
fact and law and reasons which led to arguments being accepted or rejected; and (iii) neither
in the public notice of the imposition of defin itive measures, nor in a separate report, the
Chinese authorities made available the calculations and data used to calculate the margins for
Smiths, as well as the calculations and underlyi ng data on which it relied to determine the
residual duty.

(D) Articles 3.1 and 3.2 ADA, because the Chin ese authorities failed to make an objective
examination on the basis of positive evidence of the price effects of dumped imports.

(E) Articles 3.1 and 3.4 ADA, since the Chinese author ities: (i) failed to base its evaluation of the
relevant factors and indices having a bearing on the state of the domestic industry on positive
evidence and thus failed to make an objective examination of the impact of dumped imports
on the Chinese industry; (ii) failed to examine all relevant factors listed in 3.4 ADA, in
particular, the magnitude of the margin of dumping; and (iii) failed to make a proper
evaluation of all injury factors in context a nd thus failed to reach a reasoned and adequate
conclusion with respect to the state of the Chinese industry.

(F) Articles 3.1 and 3.5 ADA, since the Chinese aut horities: (i) failed to properly examine the
causal relationship between dumpe d imports and injury; and (ii) failed to examine the
relevance of other known factors in its non-attribution analysis.

41. The European Union respectfully request s the Panel to recommend that the Dispute
Settlement Body request China to bring the contested measures into conformity with its obligations
under the ADA.

ANNEX A-2

EXECUTIVE SUMMARY OF THE FIRST
WRITTEN SUBMISSION OF CHINA

1. INTRODUCTION

1. In this proceeding, the European Union challenges several aspects of the anti-dumping
measures imposed by the People's Republic of China ("China") on imports of x-ray security
inspection equipment from the European Union. Specifically, the Europ ean Union has raised
three claims relating to alleged violations of proce dural obligations and three other claims relating to
the injury and causality analysis. China will examin e the European Union's claims in the order they
were presented in the European Union's First Written Submission.

2. As a preliminary remark, China notes that throughout its First Written Submission, the
European Union refers to MOFCOM's analysis of "price depression". MOFCOM's analysis refers,
however, to "price suppression" and not "price de pression". The misunderstanding seems to flow
from an erroneous translation from the original Ch inese versions of MOFCOM's determinations and
findings.

2. CLAIM 1: CLAIM UNDER ARTICLES 6.5.1, 6.4 AND 6.2 OF THE AD
AGREEMENT

3. The European Union claims that China failed to ensure that interested parties provided non-
confidential summaries of confidential information and that where summaries were provided, China
failed to ensure that they were in sufficient detail to enable a reasonable understanding of the
substance of the information submitted, contrary to China's obligations under Article 6.5.1, and
consequently also Articles 6.4 and 6.2.

4. More precisely, in the first place, the Europ ean Union claims that MOFCOM failed to ensure
that summaries provided with respect to product mode ls in the Petition, Exhibits 8, 9, 10 and 11
attached to the Petition and certain responses and attachments of Nuctech's Questionnaire Response,
were in sufficient detail to enable a reasonable understanding of the substa nce of the information
submitted. China submits that all of these claims should be rejected.

5. As regards the product models in the Petition, the identification of the models as the "main
models of the Subject Product" is sufficient to permit a reasonable understanding that the data
provided with respect to the normal value and export price were those of the subject product. As to
Exhibits 8, 9, 10 and 11 to the Petition, they clear ly indicate on which issues evidence is provided.
Furthermore, their content is adequately summarised in the body of the Petition itself.

6. The quarterly indices provided in the non-c onfidential version of E xhibits 14, 16, 17, 18
and 19 of Nuctech's Injury Questionnaire Response are also adequate, and in any event, annual trends
regarding various injury factors are provided in other Attachments to Nuctech's Questionnaire
Response. Finally, with regard to certain r esponses and Attachments to Nuctech's non-confidential
injury Questionnaire Response, the European Union merely identifies the information for which there
would not be an adequate summary without however substantiating its claim. China therefore submits
that the European Unio n has failed to make a prima facie case. In any case, the confidential
information was adequately summarized and this is supported by the fact that Smiths commented
extensively on the injury determination and did not complain about an alleged lack of adequate non-
confidential summary of this information.

7. In the second place, the European Union claims that MOFCOM failed to require a statement
of reasons explaining the exceptional circumstances why summarisation was not possible with respect
to the statement made by the Chinese Public Secur ity Bureau of the Civil Aviation Administration.
China submits that the Bureau explained to MO FCOM the inherently sensitive character of the
information contained in the document submitted in confidence and that any summary of such
information risks disclosing elements of this information and could compromise the safety of air
transport. MOFCOM rightly held that the safety of public air transport overrules any concerns
regarding the need for non-confidential summaries of commercial information and therefore treated
these concerns as an exceptional circumstance. MO FCOM was therefore satisfied that these public
security concerns constituted exceptional circumstances and amounted also to a meaningful
justification why a summary was not possible.

8. Thus, the European Union has failed to demons trate that China violated Article 6.5.1. The
claimed violations of Articles 6.4 and 6.2 ar e purely consequential to the claim concerning
Article 6.5.1 and should therefore be rejected as well. In any case, the European Union's claims under
Articles 6.4 and 6.2 have to be rejected since th e European Union fails to demonstrate a separate
violation of Articles 6.4 and 6.2 of the AD Agreement.

3. CLAIM 2: CLAIM UNDER ARTICLES 6.9, 6.4 AND 6.2 OF THE AD AGREEMENT

9. The European Union claims that China violat ed Article 6.9 since China did not fully disclose
the essential facts which form the basis for the determination of the dumping margin of the
European Union's cooperating producer and the essential facts which form the basis for the
determination of the residual duty as well as th e essential facts that form the basis for the
determination of injury, including the analysis of the effects of dumped imports on prices, and that
China, consequently also violated Articles 6.4 and 6.2.

10. The European Union first argues that Chin a violated article 6.9 because MOFCOM did not
disclose the underlying data and the methodology foll owed by MOFCOM in its price analysis. China
submits that this claim must be rejected for the following reasons. Regarding the methodology, China
submits that the methodology followed by MOFCOM to consider the existence of price undercutting
and/or price suppression does not constitute an essentia l fact which forms the basis for the decision
whether to apply definitive measure s within the meaning of Article 6.9 and therefore that MOFCOM
was not required to disclose it pursuant to that provision. As to the underlying data, there is no duty
to precisely identify in the disclosure document the source or evidence on which the essential facts are
based. MOFCOM fully complied with its obligati on under Article 6.9 with respect to its price
analysis. Indeed, as for price suppression, MOFCOM adequately disclosed the trends in the domestic
prices over the POI. As for its price undercutting analysis, MOFCOM disclosed the trends in the
prices of the Subject Product and in the domestic prices and explained on that basis how undercutting
is found. Article 6.9 does not require an inves tigating authority to disclose the actual figures
concerning domestic prices. The non-disclosure of the actual price data was furthermore justified by
the fact that such domestic prices constitute "confidential" information.

11. The European Union's second claim under Article 6.9 is that MOFCOM did not disclose the
underlying facts and criteria on the basis of which the adjustments to the export price were made.
Such a claim is, however, directly contradicted by the documents in the file. Indeed, MOFCOM
provided explanations in its Disclosure Documents (Preliminary and Final) as to which adjustments
were made, the reasons for making such adjustment s as well as the level of such adjustments. In
addition, MOFCOM explained the allocation met hod. It is also clear from these Disclosure
Documents that the data used were taken from the company's own Questionnaire Responses. The
Disclosure Documents even precisely identify which data were used at which stage.

12. The third claim made by the European Uni on under Article 6.9 concerns MOFCOM's alleged
failure to provide to Smiths the actual dumping calculation of its dumping margin. That claim should
equally be rejected. Indeed, MO FCOM fully complied with the requirements of Article 6.9 since in
its Preliminary and Final Dumping Disclosures, MO FCOM provided to Smiths the explanations as to
how the comparison between normal value and export pr ice has been carried out, it identified the data
which were used to calculate the normal value and export price and provided in a table the figures of
normal value and export price for each model of the Subject Product.

13. The fourth claim under Article 6.9 relates to MOFCOM's alleged fa ilure to disclose the
essential facts regarding its calculation of the "all ot hers" dumping rate. That claim must also be
rejected. Indeed, in its Disclosure Documents, MO FCOM explained that it used "facts available" for
the EU companies which did not respond to the pe tition or questionnaire, in accordance with China's
Anti-Dumping Regulation. Furthermore, MOFCOM explained that the residual duty was calculated
on the basis of "the sales data of products of re levant models reported by the respondent Company",
thus disclosing the essential facts concerning the calculation of the "all others" dumping rate.

14. Thus, the European Union has failed to demonstrate a violation of Article 6.9. The
European Union's claims under Articles 6.4 and 6.2 are purely consequential to its claims under
Article 6.9, and should therefore be rejected as we ll. In any case, the European Union's claims under
Articles 6.4 and 6.2 have to be rejected since th e European Union fails to demonstrate a separate
violation of Articles 6.4 and 6.2 of the AD Agreement.

4. CLAIM 3: CLAIM UNDER ARTICLE 12.2.2 OF THE AD AGREEMENT

15. The European Union claims that China violat ed Article 12.2.2 because neither in its public
notice of the imposition of definitive measures, nor in a separate report, MOFCOM set forth
sufficiently detailed explanations for the definitiv e determinations on dumping and injury, together
with references to the matters of fact and law a nd reasons which led to arguments being accepted or
rejected. More precisely, the European Union ma kes four different claims which should all be
rejected.

16. First, the European Union claims that MOFCOM failed to provide reasons for the rejection of
relevant arguments or claims made by Smiths whic h could show that the sales to the affiliated
companies were not affected by the affiliation rela tionship, represented a fair market price and were
made in the normal course of trade. This claim must be rejected since the Final Determination
contains the reasons for MOFCOM's rejection of the arguments raised by Smiths, namely the fact that
MOFCOM's verification established that the pric ing and sales processes as well as the actual sales
prices of Smiths Heimann to affiliated distributors in the EU during the POI were clearly affected by
the affiliation relationship and that Smiths did not have sufficient evidence to prove that the price
differences were merely the result of sales expens es which it saved. The European Union's argument
is in fact based on its substan tive disagreement with MOFCOM's determination, and not a lack of
understanding as to information or lack of clar ity of MOFCOM's reasons for rejecting Smiths'
arguments.

17. Second, the European Union claims that MOFC OM failed to include all relevant information
on facts and law concerning its price analysis in the injury determination, and that MOFCOM failed to
provide reasons for the rejection of relevant ar guments or claims made by Smiths on the injury
determination during the investigation. As to MO FCOM's alleged failure to include all relevant
information on facts and law, China submits that the methodology used by MOFCOM for its price
undercutting or price suppression analysis is neither a "matter of fact" nor is it "relevant" and
MOFCOM therefore had no duty of disclosure with regard to it. The information provided by
MOFCOM concerning price undercutting and price suppression in its Final Determination provides
sufficient background and reasons for its injury dete rmination and as such, it is therefore consistent

with Article 12.2.2 of the AD Agreement. As to the European Union's claim that MOFCOM's Final
Determination did not contain the reasons for the re jection of the relevant arguments made by Smiths
concerning the credibility of data submitted by Nuct ech, China submits in the first place that such
arguments cannot be regarded as "relevant" w ithin the meaning of Article 12.2.2 of the
AD Agreement. In any case, those arguments we re fully addressed by MOFCOM in its Final
Determination. As to the other arguments th at would have been made by Smiths concerning
MOFCOM's injury analysis, since the European Union does not even identify them, China is not in a
position to rebut it. The European Union has thus failed to make a prima facie case.

18. Third, the European Union claims that MOFC OM failed to provide reasons for the rejection
of Smiths' arguments concerning the causal link. China notes that once again this claim is not
properly substantiated since the European Union do es not precisely identify the arguments regarding
the existence of the causal link that would have been raised by Smiths during the investigation and for
which MOFCOM would not have provided reasons fo r their rejection in the Final Determination. A
fortiori, the European Union fails to demonstrate why these arguments would be "relevant". The
European Union's claim should therefore be rejected.

19. Fourth, the European Union claims that Chin a acted inconsistently with Article 12.2.2 since
its Final Determination did not make available th e calculations it performed and the underlying data
concerning Smiths' dumping margin and the residual duty. This claim is to be rejected. First, the
calculations and underlying data of the dumpi ng margin determination undoubtedly contain
confidential information which falls out of the scope of Article 12.2.2. Second, it is clear that neither
the calculation nor the underlying data of Smiths' dumping margin and the residual duty constitute
relevant information on matters of fact and law or reasons which ha ve led to the imposition of final
measures within the meaning of Article 12.2.2.

20. For all the reasons set out above, China s ubmits that the European Union's claim under
Article 12.2.2 should be rejected.

5. CLAIM 4: CLAIM UNDER ARTICLES 3.1 AND 3.2 OF THE AD AGREEMENT

21. The European Union claims that China violated Articles 3.1 and 3.2 of the AD Agreement
since MOFCOM used in its price undercutting and price suppression analysis a methodology which
involved the comparison of weighted average unit va lues for the entire range of products covered by
the investigation. According to the European Uni on, this methodology was manifestly inaccurate and
biased against the EU exporter and is not therefor e based on an "objective examination" of "positive
evidence". The European Union claims that MOFC OM should have taken in to account in its price
analysis the differences between so-called "low-ene rgy" and "high-energy" scanners and even also
among various types of low-energy scanners.

22. As a preliminary remark, China notes that th e alleged differences between "low-energy" and
"high-energy" scanners were only raised by Smiths in the context of the product scope determination
and that Smiths never claimed during the investiga tion that the price analysis should be carried out
separately for "low-energy" and "high-energy" scanners.

23. As to the requirements pursuant to Articles 3.1 and 3.2, China notes that Articles 3.1 and 3.2
do not set out any specific methodology that the i nvestigating authorities must follow in order to
examine the effects of the dumped imports on prices in the domestic market and also that previous
panels rejected the view that the methodological obligations included in Article 2 for the dumping
margin determination apply to the price undercutting analysis of Article 3.2.

24. China submits that the European Union fails to demonstrate that the price analysis made by
MOFCOM was not objective in the sense that MOFC OM would not have ensured an even-handed
treatment of the information and data on the record of the investigation.

25. First, by claiming that there were differen ces affecting the price comparability between "low-
energy" and "high-energy" scanners and between the various models within each category, the
European Union seeks to transpose the obligations arising in the context of the dumping margin
determination into the price analysis. The methodol ogical obligations of Article 2.4 cannot, however,
simply be transposed in the context of the price analysis.

26. Second, it is not sufficient to allege that the investigating authority could have used a different
methodology that would have produced a different result that the methodology effectively used is
biased. In the present case, MOFCOM compared th e prices of products which had been found as
being "like". It was therefore reasonable for MOFC OM to assess the effects of the prices of the
dumped imports by using the weighted average methodology. Although MOFCOM was aware that
prices may differ from model to model or even from transaction to transaction – this is indeed a
common feature of all anti-dumping investigations - it concluded that these price differences were not
of a nature to overturn the conclusion that the price undercutting was "significant". Furthermore,
Smiths did not even claim during the investigatio n that MOFCOM should have made adjustments
when making the price comparison. There was thus no reason for MOFCOM to consider that the use
of averages was unreasonable.

27. The European Union claims that the methodol ogy was biased against the EU exporter because
of the considerable differences between "low-energy" and "high-energy" scanners as reflected in their
price differences. However, the European Un ion does not provide detailed evidence as to the
allegedly substantial differences in prices. Furthe rmore, the fact that there are price differences
between products included in the average is not an indi cation of bias. In addition, even the fact that a
specific methodology would increase, in certain circ umstances, the likelihood of a price undercutting
finding does not render the methodology inconsistent with Articles 3.1 and 3.2 of the AD Agreement.

28. In light of the foregoing, China submits that it did not violate Articles 3.1 and 3.2 in its price
analysis by using an average-to-average comparison method.

29. Regarding price undercutting, China notes that, contrary to what the European Union alleges,
Nuctech claimed that there was price undercutting. China also notes that the example provided by the
European Union is purely hypothetical and, in any case, irrelevant. Indeed, MOFCOM did not need to
quantify precisely the price difference. It was sufficien t for it to be able to consider that the available
price evidence showed the existence of significan t price undercutting. Regarding price suppression,
China again notes that the example provided by the European Union is purely hypothetical. Actually,
the average unit value for the product under cons ideration in the example may go down or up
depending on the transactions or the models included. In order to prove its point, the European Union
would need to demonstrate that MOFCOM had intentionally selected certain models or transactions in
order to achieve a certain result.

30. For all these reasons, the European Uni on's claim under Articles 3.1 and 3.2 should be
rejected.

6. CLAIM 5: CLAIM UNDER ARTICLES 3.1 AND 3.4 OF THE AD AGREEMENT

31. The European Union claims that contrary to its obligations under Articles 3.1 and 3.4, China
failed to make an objective examination, on the basis of positive evidence, of the effect of the dumped
imports on prices in the domestic market for like pr oducts and the consequent impact of these imports

on domestic producers of such products, including the factors listed in Article 3.4. In particular, the
European Union presents four sets of claims. All of these claims are to be rejected.

32. First, the European Union claims that MO FCOM failed to base its evaluation of certain
factors, namely cash flow, investment and return on investment, on positive evidence. That claim
should be rejected. Indeed, the alleged existen ce of discrepancies between MOFCOM's findings as
reflected in its Final Determination and the fi gures reported by Nuctech in its Petition and its
Questionnaire Response cannot by itself demonstrat e that the "evidence" on which MOFCOM based
itself is not positive. Actually, MOFCOM carried out on-site verifications and adjusted the figures
provided by Nuctech in its Questionnaire Respon se for the three factors referred to by the
European Union after the on-site verification.

33. Second, the European Union claims that MO FCOM failed to examine all factors listed in
Article 3.4. China submits that, contrary to wh at the European Union argues, MOFCOM examined
all relevant factors as listed in Article 3.4 of the AD Agreement, including the magnitude of the
dumping margin which MOFCOM found to exceed the " de minimis" threshold of Article 5.8 of the
AD Agreement as set out clearly in the Final Determination.

34. The European Union's third claim that MOFC OM failed to make an objective examination of
the state of the domestic industry because it failed to take into account the differences between high-
energy and low-energy scanners when examining various injury factors is to be rejected as well. Such
a claim must fail on a factual basis since MOFCOM investigated the issue of alleged differences
between "low-energy" and "high-energy" scanners a nd concluded that they were almost the same.
Such a claim must also fail on a legal basis since the analysis of the impact of the dumped imports on
the domestic industry pursuant to Article 3.4 must fo cus on the totality of the domestic industry. An
investigating authority cannot focus on only one segment or sector of the industry. Thus, while
investigating authorities may examine certain parts or segments of the market, they are not required to
do so. The European Union's claim should therefore be rejected.

35. Fourth, the European Union claims that MO FCOM failed to make a proper evaluation of all
injury factors in context for three reasons which should all be rejected.

36. First, the European Union's argument that most injury factors examined by MOFCOM were
positive is factually incorrect as MOFCOM's analys is reveals a negative assessment of a significant
number of factors. Furthermore, MOFCOM provi ded a detailed and reasonable explanation of how
the negative factors supported an affirmative inju ry determination and why the presence of several
factors that showed positive trends could not overturn this conclusion.

37. Second, the European Union's argument that MOFCOM made contradictory observations in a
not-even-handed manner is misplace d and not supported by the elements as reflected in MOFCOM's
Final Determination. Furthermore, contrary to the European Union's allegation, MOFCOM
considered how the factors relate to each other and to the wider economic context and thus properly
examined all relevant injury factors in their context.

38. Third, the European Union's argument that MO FCOM failed to take into account all facts and
arguments on the record relating to the state of th e domestic industry, in particular the start-up
situation of Nuctech and Nuctech's aggressive pric ing policy, should equally be rejected. These
elements are not factors that may have a bearing on the state of the domestic industry within the
meaning of Article 3.4. In any case, the European Union has failed to demonstrate that those factors
were relevant in assessing the impact of the dumpe d imports on the state of the domestic industry.
Regarding the alleged start-up situation of Nuct ech, the element provided by Smiths during the
investigation appear to contradict each other, are not in line with the arguments put forward by the
European Union and is unsubstan tiated by any evidence. Regarding Nuctech's alleged aggressive

pricing policy, not only are the arguments unconvi ncing but also the allegations made by Smiths
during the investigation on that issue and to whic h the European Union refers are unsubstantiated.
Obviously, investigation authorities are not under an obligation to discuss every argument put forward
by the interested parties, in particular not if an argument is unsubstantiated or contradicted by data
collected and verified by the investigation authority.

39. For all these reasons, the European Uni on's claim under Articles 3.1 and 3.4 should be
rejected.

7. CLAIM 6: CLAIM UNDER ARTICLES 3.1 AND 3.5 OF THE AD AGREEMENT

40. The European Union claims that MOFCOM's determination of the causal link between the
dumped imports and the material injury found is inconsistent with Articles 3.1 and 3.5 of the
AD Agreement for three reasons. They should all be dismissed.

41. First, the European Union claims that MOFCOM failed to properly examine the causal
relationship between dumped imports and the injury in three aspects which should all be rejected.
Regarding the volume of the dumped imports, MOFCOM correctly analysed the trends in the volume
of dumped imports over the POI a nd appropriately concluded that the volume of dumped imports was
"large" or "great". Furthermore, Article 3 of the AD Agreement does not require investigating
authorities to necessarily consider the increase of the dumped imports in relation to domestic
consumption and/or domestic sales volume. As to the import prices, there is no requirement to
distinguish between segments or sectors and thus MOFCOM correctly carried out its injury and
causation analysis with respect to th e "like product" as identified by it. Finally, the European Union
erroneously claims that there was no temporal corre lation between the movement in the prices of the
dumped imports and the domestic prices. MOFCOM clearly indicated the temporal correlation
between, on the one hand, the rapidly growing imports of the Subject product at very low prices over
the POI and on the other hand the domestic prices whic h sharply declined over the POI. Furthermore,
what is relevant is the overall trends in imports and the overall trends in serious injury factors.
MOFCOM determined the existence of a tempor al correlation between the rapid and significant
increase in the volume of the dumped imports as well as the low level of their prices and the injured
stated of the domestic industry as reflected in numerous factors.

42. Second, the European Union claims that MOFCOM's evaluation of factors other than the
dumped imports as possible causes of injury was inc onsistent with Articles 3.1 and 3.5 since, in
particular, MOFCOM ignored other known factors ra ised by Smiths and since MOFCOM failed to
consider several arguments made by Smiths in this context. Both arguments should be rejected. As to
the other known factors raised by Smiths to whic h the European Union refers, namely the global
economic crisis, Nuctech's aggressive business expansion, fair competition, Nuctech's start-up
situation and Nuctech's aggressive pricing policy, Ch ina submits that either they were examined by
MOFCOM during the investigation or there was no n eed to examine them because they rested on a
factual assumption that had already been rejected by MOFCOM. As to the arguments that would
have been made by Smiths during the investigati on, China notes that they have been properly
examined by MOFCOM.

43. Third, the European Union claims that Chin a violated Article 3.5 as a consequence of the
inconsistencies with Articles 3.1, 3.2 and 3.4. Since there are no inconsistencies with Articles 3.1, 3.2
and 3.4, this purely consequential claim under Article 3.5 should therefore be dismissed as well.

8. CONCLUSION

44. China requests the Panel to reject all of th e European Union's claims and arguments, finding
instead that, with respect to each of them, China acted consistently with all its obligations under the
AD Agreement and the GATT 1994.

ANNEX B

EXECUTIVE SUMMARIES OF THE THIRD PARTIES
WRITTEN SUBMISSIONS

Contents Page
Annex B-1 Executive Summary of the Third Party Written Submission of
Japan B-2
Annex B2 Executive Summary of the Third Party Written Submission of
Norway B-7
Annex B-3 Executive Summary of the Third Party Written Submission of
the United States B-13

ANNEX B-1

EXECUTIVE SUMMARY OF THE THIRD PARTY
WRITTEN SUBMISSION OF JAPAN

A. Disclosure of Essential Facts before the Final Determination under Article 6.9 of the
AD Agreement

1. An Investigating Authority's Obligation to Disclose the Essential Facts before the Final
Determination

1. The EU alleges that China did not fully discl ose all of the essential facts which would form
the basis of the final determination, contrary to its obligation under Article 6.9 of the AD Agreement.
The EU argues that China's disclosure of the essentia l facts was insufficient with respect to dumping
margins, the residual duty (in the EU's term, or the "all-others" rate in China's term), and the effects of
dumped imports on the prices of the domestic like products.
1

2. The first sentence of Article 6.9 of the AD Agreement provides that "the authorities shall,
before a final determination is made, inform all interested parties of the essential facts under
consideration which form the basis for the decisi on whether to apply definitive measure". In the
context of Article 12.8 of the SCM Agreement, the panel in Mexico – Olive Oil described the essential
facts that must be disclosed to be "the specific f acts that underlie the investigating authority's final
findings and conclusions in respect of the thre e essential elements – subsidization, injury and
causation".
2 The same rationale applies to the essentia l facts for the decision of whether to apply
definitive antidumping measures because th e provision of Article 6.9 of the AD Agreement is
substantively identical to the provision of Article 12.8 of the SCM Agreement . In the case of an
antidumping investigation, the authorities are requi red to disclose specific facts that underlie the
investigating authority's final findings and conclusions in respect to the existence of dumping, injury ,
and causation.

3. The second sentence of Article 6.9 of the AD Agreement clarifies the depth o f the essential
facts that the authorities must positively inform interested parties. As the panel in EC - Salmon
(Norway) correctly analyzed, the disclosure must "provi de the interested parties with the necessary
information to enable them to comment on the completeness and correctness of the facts being
considered by the investigating authority, provide additional information or correct perceived errors,
and comment on or make arguments as to the proper interpretation of those facts".
3

2. Disclosure of Information on Price Effects in Connection with the Injury Determination

4. In its EU FWS, the EU alleges that MOFO CM did not disclose facts that would support the
analysis of "the existence and extent of price undercutting and price depression". 4 According to
the EU, MOFCOM stated in the final determinat ion its analysis that the price undercutting was
"large" and "serious" in 2006 and 2007, and "sligh tly higher" than the prices of the domestic like
products in 2008. MOFCOM also found that "the prices of domestic like products declined by a large
margin with a 72.68% decrease in 2008 compared to 2006". 5 According to the EU, however,

1 The First Written Submission by the European Union, submitt ed on 13 April 2012 (the "EU FWS"),
para. 83.
2 Panel Report, Mexico – Olive Oil, para. 7.110. (WT/DS341/R)
3 Panel Report, EC – Salmon (Norway), para. 7.805.
4 EU FWS, para. 107.
5 EU FWS, para. 106, quoting Final Determination, p. 23 (Exhibit EU-2).

MOFCOM failed to disclose "the methodology used in determining the existence of the alleged price
undercutting and price depression", even though such methodology constitutes an essential fact within
the meaning of Article 6.9 ADA and must be disclosed.6

5. Article 3.5 of the AD Agreement provides that causation must be demonstrated through the
effects of dumping as set forth in paragraphs 2 and 4. Article 3.2 obliges authorities to consider
whether the price effect of the dumped imports is to undercut, depress or suppress the price of the
domestic like product to a significant degree. Accordi ngly, the findings upon analysis of the raw data
on prices of dumped imports and the domestic like product by the investigating authorities on the
price effects are "specific facts that underlie the investigating authority's final findings and
conclusions in respect of … causation".
7

6. Indeed, the disclosure of these facts would be indispensable for exporters/producers and the
exporting Member to defend their interests effe ctively with respect to the completeness and
correctness of the authorities' analysis of the pri ce effect of imports on the price of the domestic like
product. Accordingly, such information is "necessary information to enable [interested parties] to
comment on the completeness and correctness of th e facts being considered by the investigating
authority".
8 Such information, therefore, is a type of fact that Article 6.9 of the AD Agreement
envisages as requiring disclosure by the authorities to the interested parties.

7. Japan notes that the confidential nature of certain facts would not allow the authorities to
disclose the same to all interested parties. The confidentiality requirement, however, would not
release the authority completely from its obligation to disclose the essential facts under Article 6.9.

3. Findings on Normal Value, Ex port Price, and Dumping Margins

8. The EU alleges that the pr ice adjustments that were made and the normal value and export
price calculations are facts that were essential to th e determination of the normal value, export price,
and the dumping margin on which China relied in order to impose anti-dumping measures".
9 I n
particular, the EU argues that "MOFCOM did not explain how the figures were calculated on the
basis of the information provided by Smiths an d the reasons for the discrepancy between the
figures."10

9. The Appellate Body has clarified that the existence of dumping must be determined on an
exporter/producer-specific basis in accordance with the margin of dumping calculated on that basis. 11
The calculated individual margin is, therefore, one of the "final findings" found by the authority to
reach the conclusion on the existence of dumping. Accordingly, specific facts underlying the final
findings must be disclosed to all interested parties in accordance with Article 6.9 of the
AD Agreement.

6 EU FWS, para. 107.
7 Panel Report, Mexico – Olive Oil, para. 7.110.
8 Panel Report, EC – Salmon (Norway), para. 7.805.
9 EU FWS, para. 109.
10 EU FWS, para. 114.
11 See Appellate Body Report, US – Zeroing (Japan) , para. 111 ("the Anti-Dumping Agreement
prescribes that dumping determinations be made in respect of each exporter or foreign producer examined. …
Margins of dumping are established accordingly for each exporter or foreign producer on the basis of a
comparison between normal value and export prices.").

10. Japan recalls the panel's analysis in Argentina – Poultry Anti-Dumping Duties , it stated that
"the normal value and export price data ultimately u sed in the final determination are essential facts
which form the basis for the decision whether to apply definitive measures".12

11. Japan notes that the requirements related to confidentiality would not be a sufficient reason
for the authorities vis-à-vis the exporter or producer not to disclose its dumping margin calculation.
Information which an interested party submitted to the authority is not confidential vis-à-vis the
submitter.

B. The Sufficiency of the Description in the Notice Final Determination under
Article 12.2.2 of the AD Agreement

1. The Investigating Authority's Obligation to Provide a Sufficiently-Detailed Explanation
in Its Public Notice of the Final Determination

12. In its FWS, the EU argues that China provided insufficient explanation on dumping and
injury in its public notice or separate report of the final determination.
13

13. Article 12.2 of the AD Agreement requires the issuance of a public notice or separate report of
the final determination, setting forth "in sufficient detail the findings and conclusion reached on all
issues of fact and law considered materi al by the investigating authorities".
14 In this context, the
panel in EC – Tube or Pipe Fittings explained that "a 'material' issue [is] an issue that has arisen in the
course of the investigation that must necessarily be resolved in order for th e investigating authorities
to be able to reach their determination". 15 Recently, the panel in EU – Footwear (China) agreed with
the view of the panel in EC – Tube or Pipe Fittings.16 Accordingly, authorities are required to provide
a sufficiently-detailed explanation in the public no tice of the final determination on both factual and
legal issues, without exception, which the authoriti es had to resolve in order to reach their final
determination either affirmative or negative.

14. Article 12.2.2 of the AD Agreement requires that the public notice of such final determination
must contain "all relevant informa tion on the matters of fact and la w and reasons" as well as "the
reasons for the acceptance or rejection of relevant arguments" made by exporters or by interested
Members. These rules, however, must be under stood in the context of the general rules in
Article 12.2 that the authorities are required to set forth explanations on "all issues of fact and law
considered material by the investigating authorities". The panel in EU – Footwear (China) clarified
this requirement, stating:

In our view, the notions of "material" a nd "relevant" in Article 12.2.2 must be
judged primarily from the perspective of the actual final determination of
which notice is being given, and not th e entirety of the investigative process.
Other provisions of the AD Agreement, notably Articles 6.1.2, 6.2, 6.4, and 6.9
address the obligations of the investigating authority to make information available
to parties, disclose information, and prov ide opportunities for parties to defend their
interests. In our view, Article 12.2.2 does not replicate these provisions, but
rather, requires the investigating authority to explain its final determination,

12 Panel Report, Argentina – Poultry Anti-Dumping Duties, para. 7.223 (emphasis in original).
13 EU FWS, para. 128.
14 Emphasis added.
15 Panel Report, EC – Tube or Pipe Fittings, para. 7.424.
16 Panel Report, EU – Footwear (China), para. 7.844.

providing sufficient background and reasons for that determination, such that
its reasons for concluding as it did can be discerned and are understood.17

15. As clarified by the panel in EU – Footwear (China) , the question of whether an issue is
"relevant" and "material" must be reviewed from the perspective of the authorities' actual final
determination. If the issue is relevant to, and ma terial in the authorities' final determination, the
authorities must provide sufficient background and r easons for their conclusion of the issue in the
public notice or a separate report of the final dete rmination for readers of the notice to discern and
understand the reasons.

16. The requirement of the authorities' explanation "in sufficient detail" in the public notice of the
final determination must also be understood in the light of the restrictions imposed by the
requirements for the protection of confidential inform ation. Accordingly, the authorities' explanation
would not be found inconsistent with Article 12.2.2 due to an insufficiency of the explanation to the
extent that such insufficiency is justified by the observance of th e confidentiality requirement for the
underlying information.

2. The Alleged Failure to Explain the Reason s for the Rejection of Sales to Affiliated
Distributors from the Normal Value Calculation

17. In its FWS, the EU argues that MOFCOM di d not explain the reasons for the rejection of
relevant arguments presented by Smith Heimann, an EU producer, related to MOFCOM's exclusion
of Smith's sales to its affiliated distributors in the EU from the normal value calculation. According to
the EU, MOFCOM stated merely that "the sal es prices of Smiths Heimann through affiliated
distributors in the EU during the POI were clearly affected by the affiliation relationship, and that
Smiths Heimann did not have sufficient evidence to pr ove that the price differences were merely sales
expenses which it saved".
18 The EU alleges that such an e xplanation is insufficient and thus
inconsistent with Article 12.2.2.

18. With respect to the determination of dumpi ng, Article 12.2.2 requires that the public notice
contain information for "the margins of dumping est ablished and a full explanation of the reasons for
the methodology used in the establishment and comparison of the export price and the normal value
under Article 2".
19 The authorities have the obligation to ensu re that the basis of the normal value is
those transactions "in the ordinary course of trade", as set forth in Article 2.1. Whether certain sales
are in the ordinary course of trade or not is, theref ore, a "relevant" question of fact for the authorities
to establish the normal value to reach to the final determination of dumping.

19. The issue of the exclusion of sales to an affiliated distributor from the normal value
calculation would be particularly relevant to the actual final determination of dumping in question.
MOFCOM found that the prices of sales to affiliated distributors were lower than the prices of other
sales to non-affiliated companies.
20 Accordingly, the decision to exclude these sales would increase
the normal value, resulting in a higher dumping margin and the higher AD duty. Such a decision
would be material for MOFCOM's actual final dete rmination of dumping. Therefore, MOFCOM was
obliged to provide the reasons for the acceptance or rejection of the interested party's argument on the
inclusion of affiliated party transactions in the final determination.

17 Panel Report, EU – Footwear (China), para. 7.844 (emphasis added).
18 EU FWS, para. 145, quoting the Final Determination, p. 17.
19 Article 12.2.1(iii) of the AD Agreement (incorporated by reference into Article 12.2.2).
20 EU FWS, para. 145, quoting MOFCOM's final determination, p. 17. The EU did not raise any
objection to this fact-finding.

3. The Alleged Insufficient Explanation on the Injury Determination

20. The EU alleges that MOFCOM failed to "expl ain the methodology used in order to calculate
the alleged price undercutting or price depression".
21 The EU also alleges that MOFCOM failed to
provide reasons for the rejection of Smith's ques tion on the credibility of the data submitted by the
petitioner.22 The EU further argues that MOFCOM did not provide any reasons for the rejection of
Smith's arguments related to several other factor s which would also have caused injury to the
domestic industry.23

21. The overarching provision of Article 3.1 requires authorities to make an objective
examination of positive evidence. Article 3.2 of the AD Agreement sets forth that "the authorities
shall consider whether there has been a significant pr ice undercutting". Article 3.5 sets forth that "the
authorities shall also examine all known factors ot her than the dumped imports …, and the injuries
caused by these other factors must not be attribut ed to the dumped imports". Article 12.2.2 then
provides that "the notice or report shall contain th e information described in subparagraph 2.1", which
includes "consideration relevant to the injury determ ination as set out in Article 3". As such, issues
raised by the EU would all be relevant to the final determination.

22. Furthermore, the factual issue of the pri ce undercutting would be material to the final
determination. As discussed above, the factual fi ndings of the price undercutting are essential facts
for the final determination. The factual issue ess ential to the final determination would also be
material to the actual final determination. Anal ysis on causation between other factors and the injury
to the domestic industry would also be material to the final determination. Article 3.5 explicitly
requires the authorities "to separate and distinguish th e injurious effects of different causal factors".
24
Without such analysis, "the investigating authorities would have no rational basis to conclude that the
dumped imports are indeed causing the injury which, under the Anti-Dumping Agreement, justifies the
imposition of anti-dumping duties". 25 Accordingly, these issues would be material to the final
determination, and thus should be explained in the public notice or a separate report of the final
determination.

21 EU FWS, para. 148.
22 EU FWS, para. 150.
23 EU FWS, paras. 154, 155, and 312-314.
24 Appellate Body Report, US – Hot-Rolled Steel, para. 223.
25 Ibid.

Table of cases cited in this submission

Short Title Full Case Title and Citation
Argentina – Ceramic Tiles
Panel Report, Argentina – Definitive Anti-Dumping Measures on Imports of Ceramic
Floor Tiles from Italy , WT/DS189/R, adopted 5 November 2001, DSR 2001:XII,
6241
Argentina – Poultry Panel Report, Argentina – Definitive Anti-Dumping Duties on Poultry from Brazil ,
WT/DS241/R, adopted 19 May 2003
EC – Fasteners
Appellate Body Report, European Communities – Definitive Anti-Dumpin g
Measures on Certain Iron or Steel Fasteners from China, WT/DS397/AB/R, adopted
28 July 2011
EC – Salmon Panel Report, European Communities – Anti-Dumping Measure on Farmed Salmon
from Norway, WT/DS337/R, adopted 15 January 2008
EC – Tube or Pipe Fittings
Appellate Body Report, European Communities – Anti-Dumping Duties on Malleable
Cast Iron Tube or Pipe Fittings from Brazil , WT/DS219/AB/R, adopte d
18 August 2003, DSR 2003:VI, 2613
Guatemala – Cement II Panel Report, Guatemala – Definitive Anti-Dumping Measures on Grey Portlan d
Cement from Mexico, WT/DS156/R, adopted 17 November 2000, DSR 2000:XI, 5295
Mexico – Olive Oil Panel Report, Mexico – Definitive Countervailing Measures on Olive Oil from th e
European Communities, WT/DS431/R, adopted 21 October 2008, DSR 2008:IX, 3179
Mexico – Steel Pipes and Tubes Panel Report, Mexico – Anti-Dumping Duties on Steel Pipes and Tubes from
Guatemala, WT/DS331/R, adopted 24 July 2007, DSR2007:IV, 1207
US – Oil Country Tubular
Goods Sunset Reviews
(Article 21.5 – Argentina)
Panel Report, United States – Sunset Reviews of Anti-Dumping Measures on Oi l
Country Tubular Goods from Argentina – Recourse to Article 21.5 of the DSU b y
Argentina, WT/DS268/RW, adopted 11 May 2007, as modified by Appellate Bod y
Report WT/DS268/AB/RW, DSR 2007:IX-X, 3609

I. INTRODUCTION

1. As a third party to this dispute, Norway would in the following like to address certain
interpretative issues, discussed in the First Written Submissions of the EU and China.

II. ARTICLE 6.5.1

A. What constitutes an adequate summary in accordance with Article 6.5.1

2. The EU claims that several of the non-confidential versions of documents submitted
contained inadequate summaries, ther eby violating Article 6.5.1 of the Anti-Dumping Agreement ,
specifying that, in at least th ree cases, the replies to question 32, 33 and 38 of Nuctech's non-
confidential Questionnaire Response, the confidential passages were simply marked "confidential".
1

3. Article 6.5.1 feeds into the important minimum standard of due process rights of an anti-
dumping investigation, and is aimed at making it possibl e for interested parties to defend their interest
and to make "rebuttal" arguments, even towards information in confidential submissions. As the
wording indicates ("thereof"), it is the confidential in formation that is to be summarised. In Norway's
view, the disclosure of a document with the confiden tial parts simply deleted, whether this deletion is
marked "confidential" or not, would thus not fulf il the requirement of summarising the confidential
information. There may of course be some exceptions to this, inter alia if the original document itself
summarises the deleted confidential sec tions in question. The panel in Mexico – Olive Oil supports
this interpretation, and indicates that the circum stances where such a document would be sufficient
are not likely to be abundant.

4. If the content of the information is of such a nature that summarisation is not possible,
Article 6.5.1 requires that a statement of the reasons explaining the exceptional circumstances why
this is so needs to be provided.

B. Whether Article 6.5.1 requires that the stat ement of reasons why summarisation is not
possible be made public

5. The EU claims that China failed to require a statement of reasons explaining why
summarisation was not possible in its injury analysis, in particular with respect to the statement by the
Chinese Public Security Bureau of the Civil Aviation Administration.
2 China, on the other hand,
argues that, as long as the interested party provid es a statement explaining why summarisation is not
possible and the investigating authority assesses this statement, Article 6.5.1 does not confer an
obligation to make such a statement public in the non-confidential file.3

6. Norway disagrees with Chinas argument. In EC – Fasteners, the Appellate Body confirmed
the Panel's finding that the investigating author ity must scrutinise the statement provided, as
otherwise, "the potential for abuse under Article 6.5.1 would be unchecked unless and until the matter
were reviewed by a panel". 4 For the same reasons, Norway holds that it is not sufficient that the
investigating authority scrutinises the statement; this must also be made public. In Norway's view, the
mere structure of Article 6.5.1 indicates that the st atement needs to be public. Norway reiterates the
serious effects anti-dumping investigations may have , and the corresponding need to ensure that the
investigation follows certain rules of procedural justice and fairness. When information is kept

1 EU's First Written Submission, para. 75.
2 EU's First Written Submission, para. 78.
3 China's First Written Submission, para. 104.
4 Appellate Body Report, EC – Fasteners, para. 544.

confidential, it is thus of great importance to ensu re that this is done for the right reasons. If the
investigating authority is not required to make public statements containing the reasons why
summarisation of confidential information is not possible, the potential for abuse would be significant.

III. ARTICLE 6.9

7. The EU claims that China is in breach of Ar ticle 6.9, as the investigating authority did not
disclose the essential facts which fo rmed the basis for the determina tion of i) the dumping margin of
the EU's cooperating producer, ii) the residual duty and iii) injury.
5

8. Panels have held that the requirement to disclose essential facts cannot be complied with
simply by providing access to all information in the file. 6 Rather, the investigating authority must
actively identify the facts on which it will rely in making its determination, for instance by "disclosing
a specially prepared document summarizing the essential facts under consideration".7

9. The core of the duty of disclosure under Article 6.9 relates to "essential facts". The panel in
Argentina – Poultry distinguished "facts" from "reasons". The duty of disclosure thus relates to
evidence. As to what evidence the investigating author ity has an obligation to disclose, the panel in
EC -Salmon specified that "they are the facts necessary to the process of analysis and decision making
by the investigating authority, not only those that support decision ultimately reached".8

10. Article 6.9 is meant to place interested parties in a position where they can properly
understand, verify, and challenge the facts that are lik ely to lead the investigating authority to impose
definitive measures. Absent disclosure of the essential facts, interested parties are left guessing at the
factual basis in the record for the authority's factual and legal determ inations. In that event, they
cannot make effective comments on the factual basis for the authority's intended decision.

IV. ARTICLE 6.4

11. The EU claims that China faile d to provide a timely opportunity for all interested parties to
see all information that was relevant to defend their in terests, and that was used by the authority in the
anti-dumping investigation, thereby violating Article 6.4 of the Anti-Dumping Agreement.9

12. Article 6.4 of the Anti-Dumping Agreement confers on interested parties a right of access to
evidence in the non-confidential record of the inves tigation. The Appellate Body has ruled that the
relevance of information must be assessed from the perspective of the interested parties. 10 The
essence of due process is that interested parties must be in a position to defend their interests in light
of the views of other parties and the information before the authority. If one interested party has taken
the time to put a document on the record, that part y clearly considers it to be relevant and the
authority should not deny another interested party the opportunity to comment upon it.

13. The Appellate Body has also held that the phrase "used by the authorities" in Article 6.4
refers to information that the authority must evaluate in making its determinations.
11 A n a ut h o r i t y

5 EU's First Written Submission, para. 83.
6 Panel report, Guatemala – Cement II, para. 8.230.
7 Panel report, Argentina – Ceramic Tiles, para. 6.125.
9 EU's First Written Submission, paras. 43 and 84.
10 Appellate Body Report, EC – Tube or Pipe Fitting , para. 145.
11 Appellate Body Report, EC – Tube or Pipe Fittings , para. 145. Information submitted regarding
injury factors listed in Article 3.4 was information that must "be used by the authorities" in making its
determination.

must evaluate all of the information submitted to it that relates to its determinations, and cannot ignore
any of it.

14. The duty to allow interested parties to "see" relevant information is subject to limitations in
the case of confidential information, which the au thorities cannot disclose. Article 6.5.1 provides
certain mechanisms to ensure due process rights are taken care of in these cases. China argues that, as
the scope of Articles 6.4 and 6.5.1 are different, th ere may exist confidential information for which a
non-confidential summary must be provided which is not used by the authorities and therefore does
not fall within the scope of Article 6.4.
12

15. As the non-confidential summary of the confidential information must be included in the
record, and the investigating authority therefore must evaluate it, as with all information submitted to
it, Norway holds that all such summaries must be disclosed according to Article 6.4. The
investigating authorities have an obligation to scr utinise the non-confidential summaries provided, in
order to ensure that they fulfil the requirement of Article 6.5.1. The Appellate Body has confirmed
such an obligation. 13 Hence, non-confidential summaries mu st always be evaluated by the
investigating authorities, and therefore are always "u sed by the authorities", as set out in Article 6.4.
The duty of disclosure as prescribed by Article 6.4 therefore clearly applies to non-confidential
summaries of confidential information.

V. ARTICLE 6.2

16. The EU claims that, by violating Articles 6.5.1 and 6.9 of the Anti-Dumping Agreement ,
China also deprived the interested parties of their full opportunity to defend their interests, contrary to
Article 6.2 of the Anti-Dumping Agreement.
14 Furthermore, the EU argues that the obligation set out
in Article 6.2 is so broad that a finding of viola tion of Article 6.4 necessarily entails a violation of
Article. 6.2 in the present case.15

17. The effective exercise of the rights under Artic le 6.2 requires that interested parties have
access to information submitted by the other interested parties, as well as to information obtained by
the authority during the investigation. Absent access to this information, an interested party cannot
formulate an "opposing view", make "rebuttal ar guments", or generally make effective comments on
the evidence in the record and on the authority's determinations.

18. On these grounds, there is a mutually depende nt relationship between Article 6.2 and several
of the other procedural rules contained in the Anti-Dumping Agreement. Articles 6.4, 6.5.1 and 6.9
serve, among others, the purpose of enabling interested parties to defend their interests as set forth in
Article 6.2.

19. For its part, Article 6.2 requires that inter ested parties be given full opportunity for the
defence of their interests throughout the anti-dumping investigation . In other words, whenever an
interested party is not given full opportunity to defend its interests, during an anti-dumping
investigation, the obligation in Article 6.2 is infri nged. As a result, it is Norway's view that any
violation of the obligation under Articles 6.5.1, 6.4 and 6.9 entails a violation of Article 6.2.

12 China's First Written Submission, para.113.
13 Appellate Body Report, EC – Fasteners, para. 544.
14 EU's First Written Submission, paras. 43 and 84.
15 EU's First Written Submission, para. 66.

VI. CONCLUSION

20. Norway respectfully requests the Panel to take account of the considerations set out above in
interpreting the relevant provisions of the Anti-Dumping Agreement.

ANNEX B-3

EXECUTIVE SUMMARY OF THE THIRD PARTY WRITTEN
SUBMISSION OF THE UNITED STATES

I. Procedural and Transparency Require ments of Article 6 of the AD Agreement

1. The EU alleges that China failed to ensu re that confidential information provided by
interested parties was summarized according to Artic le 6.5.1 of the AD Agreement. The EU further
argues that, in so doing, China also failed to provide a timely opportunity for interested parties to see
information relevant to their defense and a full oppor tunity to defend their interests in contravention
of Articles 6.4 and 6.2 of the AD Agreement. A ba sic tenet of the AD Agreement, as reflected in
Article 6, is that the parties to an investigation must be given a full and fair opportunity to see relevant
information and to defend their interests. Thus, Ar ticle 6.2 sets forth requirements inherent in a "full
opportunity for the defense" of all interested parties' interests. This includes the opportunity to meet
adverse parties, present opposing views, offer rebutta l arguments, and the right to present information
orally.

2. Article 6.4 complements Article 6.2, by cr eating the obligation for authorities to provide
"timely opportunities" for interested parties to see relevant information and to prepare presentations
on the basis of this information. Both Articles 6. 2 and 6.4 recognize that, in fulfilling the obligations
of these Articles, authorities may need to protect co nfidential information. Those Articles therefore
allow for a limited exception to the disclosure requirements for confidential information.

3. Indeed, in anti-dumping investigations, the submission of confidential information is a
necessary and frequent occurrence. Article 6.5 thus requires that investigating authorities ensure the
confidential treatment of such information. At the same time, Article 6.5.1 balances the need to
protect such information against the disclosure requ irements of other Article 6 provisions. Thus,
Article 6.5.1 provides that an investigating aut hority, if it accepts confidential information, must
provide or otherwise assure that confidential information is summarized in sufficient detail to permit a
reasonable understanding of the substance of the information.

4. As the Appellate Body explained in EC – Fasteners (China) (para 542), "Articles 6.5
and 6.5.1 accommodate the concerns of confidentiality, transparency, and due process by protecting
information that is by nature confidential or is submitted on a confiden tial basis and upon "good
cause" shown, but establishing an alternative met hod for communicating its content so as to satisfy
the right of other parties to the investigation to obtain a reasonable understanding of the substance of
the confidential information, and to defend their in terests". Where the investigating authority accepts
confidential information without providing or ot herwise assuring timely adequate non-confidential
summaries, significant prejudice to the ability of companies and Members to defend their interests
could occur.

II. Article 6.9 of the AD Agreement

5. The EU alleges that China violated Article 6.9 of the AD Agreement by failing to disclose
certain of the essential facts forming the basis for the determination of the dumping margin, including
data and calculations which form the basis for th e determination of normal value and export prices
and the determination of the dumping margin. Artic le 6.9 requires the investigating authority to
disclose to interested parties the "essential facts" forming the basis of the investigating authority's
decision to apply anti-dumping duties. The obligation imposed on the investigating authority by
Article 6.9 pertains to the disclosure of "facts", as opposed to the disclosure of the "reasoning" of the

investigating authority. A "fact" is "[a] thing know n for certain to have occurred or to be true; a
datum of experience" and "[e]vents or circumstanc es as distinct from their legal interpretation." The
use of the adjective "essential", which modifies "facts", indicates that this obligation does not
encompass "any and all" facts, but only the "essentia l facts". The ordinary meaning of "essential"
includes "of or pertaining to a thing's essence" and "absolutely indispensable or necessary".

6. Moreover, the obligation to disclose "essential facts" encompasses those essential facts "under
consideration which form the basis for the decision whether to apply definitive measures". The term
"consideration" has been defined, inter alia, as "the action of taking into account". Thus, for purposes
of the dumping determination, the essential facts under Article 6.9 are the "indispensable and
necessary" facts considered by the investigating au thority in determining whether definitive measures
are warranted, i.e., whether dumping has occurred and, if so, the magnitude of such dumping.

7. In order to determine whether definitive measu res are warranted, an investigating authority
must compare a respondent's normal value to its expo rt price. An affirmative dumping determination
is made only if the normal value exceeds the export price, and the margin of dumping is based on the
extent to which it does so. This comparison, however, represents merely the final stages of a dumping
determination. The investigating authority must first calculate the normal value and the export price.

8. The calculations relied on by an investigati ng authority to determine the normal value and
export prices, as well as the data underlying those calculations, constitute "essential facts" forming the
basis of the investigating authority's imposition of fi nal measures within the meaning of Article 6.9.
The calculations and data are facts that are "absol utely indispensable" to the determination of the
existence and magnitude of dumping. Without such information, no affirmative determination could
be made and no definitive duties could be imposed.

9. Article 6.9 requires that investigating author ities inform interested parties of essential facts
under consideration prior to making a final de termination of dumping. As Article 6.9
expressly provides, the aim of the requirement is to permit "parties to defend their interests". The
Panel in EC – Salmon (para 7.805) stated that "the purpose of disclosure under Article 6.9 is to
provide the interested parties with the necessary information to enable them to comment on the
completeness and correctness of the facts being cons idered by the investigating authority, provide
additional information or correct perceived errors, and comment on or make arguments as to the
proper interpretation of those facts."

10. If interested parties are not provided access to facts used by the investigating authority on a
timely basis, they cannot defend their interests. If, for example, an interested party is not provided the
calculations used by the investigating authorit y to address dumping, or the data underlying those
calculations, the interested party can not review the investigating author ity's calculations to determine
whether they contain errors, or whether the inves tigating authority actually did what it purported to
do. Unless an interested party is provided with these essential facts, it cannot adequately defend its
interests.

11. Thus, to the extent that the underlying reco rd reveals that China's investigating authority
failed to make available the underlying data and cal culations it performed to determine the existence
and margin of dumping, including the calculation of the normal value and export price for the
respondents, it would have failed to meet its obligations under Article 6.9 of the AD Agreement.

III. Article 12.2.2 of the AD Agreement

12. The EU alleges that China violated Article 12.2.2 of the AD Agreement because it failed to
set forth sufficiently detailed explanations for definitive determinations on dumping and injury,
including references to matters of fact and law whic h led to the acceptance or rejection of arguments.

Article 12.2.2 requires that investigating authorities provide reasons for the acceptance or rejection of
claims by exporters or importers, either through public notice or a separate report.

13. Authorities are required to provide more than cursory assertions to justify decisions to impose
definitive antidumping duty measures. The calculations employed by an investigating authority to
determine dumping margins, and the data underlying the calculations, constitute "relevant information
on matters of fact and law and reas ons which have led to the imposition of final measures" within the
meaning of Article 12.2.2. Calculations are th e mathematical basis for arriving at the dumping
margins, and therefore, they are highly "relevant" to the decision to apply definitive measures. They
are "matters of fact" because they consist of sales and cost data and mathematical uses of these data.
Further, they lead to the imposition of definitive m easures, because if they result in an affirmative
dumping margin, then an investigating authority may apply definitive measures.

14. The requirements of Article 12.2.2 avoid opac ity in decision making. Consequently, where
the record reveals that an inves tigating authority provided only cursory assertions to justify a decision
to impose definitive antidumping duty measures, th at investigating authority will have acted
inconsistently with its obligations under this provision.

IV. Article 3.2 of the AD Agreement

15. The EU contends that China's findings on price effects, specifically price undercutting and
price depression, are inconsistent with Articles 3.1 and 3.2 of the AD Agreement. Article 3.2 provides
that, with respect to the effects of dumped imports on prices, authorities must examine whether there
has been significant price undercutting or whether the effect of the imports has been significantly to
depress subject import prices or prevent price increa ses, while Article 3.1 requires an investigating
authority to base its determination of injury on positive evidence and to objectively examine the effect
of dumped imports on prices.

16. Article 3.1 imposes two requirements on author ities that make injury determinations. The
first is that the determination be based on "positiv e evidence". The Appellate Body has referenced
with approval a description of "positive evidence" as "evidence that is relevant and pertinent with
respect to the issue being decided, and that has th e characteristics of being inherently reliable and
trustworthy". The second requirement is that th e injury determination involve an "objective
examination" of the volume of the dumped imports, their price effects, and their impact on the
domestic industry. The Appellate Body has stated that , to be "objective", an injury analysis must be
"based on data which provides an accurate and unbiased picture of what it is that one is examining"
and be conducted "without favouring the interests of any interested party, or group of interested
parties, in the investigation". Furthermore, th e requirement that the examination be "objective"
mandates that "the ‘examination' process must conform to the dictates of the basic principles of good
faith and fundamental fairness".

17. Article 3.2 of the AD Agreement describes further the examination that authorities must
conduct to determine the price effects of dumped imports. As the Panel in EC – Pipe Fittings
emphasized, Article 3.2 does not require an authority to use any particular type of price undercutting
analysis. There is no single correct methodology for examining price comparisons in conducting such
an analysis. Nor is a finding of price undercutting a prerequisite to finding price depression. Rather,
Article 3.2 states that authorities are to examine whether there has been significant price undercutting
by the dumped imports or whether the effect of the imports has been significantly to depress subject
import prices or prevent price increases that woul d have otherwise occurred. The use of the
disjunctive indicates that authorities can find significant undercutting without finding significant price
depression or suppression, or that they can find significant price depression or suppression without
finding significant undercutting.

18. Accordingly, authorities are required to consid er whether there is price undercutting, as well
as whether there is price depression or price suppression, but are not required to make any particular
findings about any of these inquiries. To the extent an authority relies on findings of any type of price
effects, however, Article 3.1 requires that those findings be supported by positive evidence.

19. Furthermore, the analytical methodology an au thority uses in its price effects analysis must
conform with the "objective examination" standard specified in Article 3.1 of the AD Agreement.
This requirement pertains both to comparisons of prices between domestically produced and imported
products to examine price undercutting, and compar isons of prices of domestically produced products
over time to examine price depression. To satisfy the objective examination standard, the authority
must compare equivalent products sold at the same level of trade.

20. In this respect, the United States shares the EU's concern that use of average unit values
(AUVs) in making pricing comparisons may fail to yield objective price comparisons in certain
circumstances. Generally, AUVs provide a poor b asis for pricing comparisons when the domestic
like product and/or imports under investigation ar e not homogenous products but instead reflect a
range of products with different characteristics a nd end-use applications. In such circumstances,
differences in AUVs between domestically produced and imported products, or changes over time in
AUVs of domestically produced products, may re flect differences in product mix rather than
differences in pricing and thus would not provide an objective measure of price differences.

V. Article 3.4 of the AD Agreement

21. The EU claims that China's analysis of the imports under investigation violates Articles 3.1
and 3.4 of the AD Agreement. Article 3.4 requires investigating authorities to evaluate the factors
enumerated in that provision, although it does not in struct in what manner an investigation authority
must undertake that evaluation.

22. Article 3.4 specifies an authority's obligati on to ascertain the impact of dumped imports on
the domestic industry. In addition to requiring an analysis of "all relevant economic factors and
indices having a bearing on the state of the industry", the article enumerates certain specific factors
which an authority must include in its analysis.

23. The Appellate Body in EC – Pipe Fittings (para. 156) found that it is mandatory for an
authority to evaluate each of the factors set out in Article 3.4. The Appellate Body has also indicated,
however, that Article 3.4 does not address the manne r in which an authority's analysis of each
individual factor must be set out in the documents providing the explanation for its determination.
Instead, whether an authority has satisfied its obliga tion to perform the requisite examination is to be
ascertained under the particular facts and circumstances of each case.

VI. Causal Link Claims under Articles 3.1 and 3.5 of the AD Agreement

24. The EU makes several claims that China's causation analysis violates Articles 3.1 and 3.5 of
the AD Agreement. Articles 3.1 and 3.5 require an investigating authority to examine the causal
relationship between dumped imports and injury, and to examine any known factors, other than the
dumped imports, which are causing injury to the domestic industry.

25. Article 3.5 specifies an authority's obligati on to ascertain that dumped imports are causing
injury. Additionally, an authority's factual findings under Article 3.5 must comply with the "positive
evidence" and "objective examination" requirements articulated in Article 3.1.

26. The first sentence of Article 3.5 sets out th e general requirement for a demonstration that
dumped imports are causing injury under the AD Agre ement, and – importantly – contains an explicit

link back to Articles 3.2 (volume and price effects) and 3.4 (impact on domestic industries). If the
volume or price effects findings are found to be in consistent with Articles 3.1 and 3.2 and/or the
impact findings are found to be inconsistent with Articles 3.1 and 3.4, an Article 3.5 causal link
analysis relying on such findings would also fail. That is, if an authority relies on a price effects
finding to support its impact and injury determin ations, its decision must be supported by positive
evidence on these counts. In such ci rcumstances, a failure to demonstrate significant price effects or
significant impact constitutes a failure to demons trate that dumped imports are causing injury, as
required by the first sentence of Article 3.5.

27. The second and third sentences of Article 3.5 re quire an authority to examine "all relevant
evidence" before it, both to ascertain whether there was a causal link between the dumped imports and
the injury experienced by the domestic industry a nd to examine whether factors other than the
dumped imports were also causing injury.

28. The third sentence provides that, before re aching the conclusion that the dumped imports
were a cause of any difficulties experienced by th e domestic industry, an authority must examine
other known factors which are injuring the domestic industry. As the Appellate Body found in US –
Hot-Rolled Steel (paras. 223-24), if a factor other than dumped imports is a cause of injury, the
third sentence of Article 3.5 requires the authority to engage in a non-attribution analysis to ensure
that the effects of that other factor are not attri buted to the dumped imports. The Appellate Body has
further stated that the AD Agre ement does not specify the particular methods and approaches an
authority may use to conduct a non-attribution analysis.

29. Under Article 3.5, the premise of a non-attribu tion analysis is that there is at least one known
factor other than the dumped imports that is inju ring the domestic industry. If there are no other
known factors other than the dumped imports that are injuring the domestic industry, Article 3.5
would neither require nor contemplate that an authority will conduct a non-attribution analysis.
Indeed, in such a circumstance, the authority can appropriately attribute all injury to the dumped
imports.

ANNEX C

ORAL STATEMENTS OR EXECUTIVE SUMMARIES THEREOF OF
THE PARTIES AT THE FIRST SUBSTANTIVE MEETING

Contents Page
Annex C-1 Executive Summary of the Opening Statement of the
European Union at the First Meeting of the Panel C-2
Annex C-2 Executive Summary of the Opening Statement of China at the First
Meeting of the Panel C-8
Annex C-3 Closing Statement of China at the First Meeting of the Panel C-13

ANNEX C-1

EXECUTIVE SUMMARY OF THE OPENING STATEMENT OF
THE EUROPEAN UNION AT THE FIRST
MEETING OF THE PANEL

I. INTRODUCTION

1. The antidumping duties at issue before this Pa nel were imposed following an investigation in
which the Chinese authorities disregarded some of the most fundamental procedural guarantees
provided in the Anti-dumping Agreement (ADA) and this despite the fact that the EU exporter fully
cooperated with the Chinese authorities. The duties are based on manifestly flawed determinations
relating to injury and causality which could not have been reached by an objective and unbiased
authority. A particularly striking example of this is MOFCOM's complete failure to take into account
the existence of large and manifest differences between product types when considering the price
effects of imports.

2. This dispute is concerned with what a ppears to be recurrent features in MOFCOM's
investigations and raise important systemic issu es. If the way in which MOFCOM conducted this
investigation and reached its findings were to be condoned, safeguards and disciplines set out in the
Anti-Dumping Agreement would be substantially weakened.

II. CLAIMS UNDER ARTICLES 6.5.1, 6.4 AND 6.2 ADA

3. The European Union submits that the inves tigation conducted by China has failed to comply
with the requirements laid out in Articles 6.5.1, 6.4 and 6.2 ADA. Under Article 6.5.1 ADA, when an
interested party claims that certain inform ation must be treated as confidential, the investigating
authority must require the party to provide adequate non-confidential summaries of the confidential
information. In exceptional circumstances only, where an interested party cannot adequately
summarise the confidential information, an explanation of why the inform ation was not susceptible to
summarisation must be provided.

4. China alleges in its first written submission th at summaries were in fact adequate. However,
China attempts to distort the EU's arguments in an effort to divert attention from the real issue.

5. Article 6.5 and 6.5.1 ADA aim to strike a ba lance between the often conflicting interests of
ensuring due process and transpar ency on the one hand and ensuring confidentiality of sensitive
information on the other. The obligation on the party submitting the information in confidence to
provide a non-confidential summary or a statemen t explaining why summarisation is not possible,
coupled with an obligation on the investigating authority to scrutinise such statements, are only part of
guarantees against the abusive use of the right to confidential treatment. The other important
safeguard lies in the role of the other interested pa rties, who in their turn scrutinise the adequacy of
non-confidential summaries or reasons why summaries could not be provided. Keeping statements
about summarisation confidential would do away with those guarantees and create a significant
potential for abuse, thus affecting the delicate balance established by Article 6.5 between the
protection of confidential information and transparency.

III. CLAIMS UNDER ARTICLES 6.9, 6.4 AND 6.2 ADA

6. MOFCOM's Injury Disclosure and Dumping Disclosure did not include all the essential
facts under consideration forming the basis for the final determination, violating inter alia Article 6.9

ADA. Article 6.9 ADA imposes an obligation on inves tigating authorities to inform interested parties
of the essential facts with the aim of informing th em which information the investigating authority
will rely upon in deciding whether to apply a de finitive measure and thereby allowing interested
parties an opportunity to verify the completene ss and accurateness of those facts and submit any
comments to the investigating authorities.

7. The obligation under Article 6.9 applies to facts as opposed to the reasoning of the
investigating authorities, and more specifically to "essential facts". Furthermore, Article 6.9 makes it
clear that the disclosure obligation relates to the essen tial facts "that form the basis of the authorities'
decisions whether to apply definitive measures". Purs uant to Article 6.9, investigating authorities are
under an obligation to disclose to interested parties the body of facts that are important to the analysis
and decision making of the investigating authority for deci ding whether to apply definitive measures
and at what level.

8. The EU submits that MOFCOM failed to disclose the methodology it employed to consider
price undercutting and price suppression. If one were to follow China's reasoning, the essential facts
within the meaning of Article 6.9 in the context of an Article 3.2 assessment of price effects of
dumped imports, would – in the interest of administrative efficiency – be reduced to unverifiable
assertions. Contrary to China's position, a methodology is not reasoning , but rather a tool. To have
an analysis, the methodology must first be applied to the raw data. The EU further submits that
MOFCOM failed to disclose the underlying data for the price analysis. While we recognize that the
confidential nature of certain facts would not allo w the authorities to disclose all the underlying data,
confidentiality does not appear on the record, as the reason for lack of disclosure. In any event, China
could have provided a meaningful summary describing the approach chosen.

9. The calculations relied upon by an investigating author ity to determine the normal value and
export prices, as well as the data underlying those calculations , constitute "essential facts" forming
the basis of the investigating authority's impos ition of final measures within the meaning of
Article 6.9. The calculations and underlying data are facts that are "essential" to the determination of
the existence and level of dumping. Without this information, no affirmative determination could be
made and no definitive duties could be imposed.

IV. CLAIMS UNDER ARTICLES 12.2.2 ADA

10. Regarding Article 12.2.2 ADA, the EU makes cl aims with respect to two "categories" of
information that China failed to include in the final public notice or separate report: (i) the reasons for
the acceptance or rejection of relevant arguments or claims by Smiths; and (ii) certain relevant
information on the matters of fact and law which have led to the imposition of final measures.

11. First, Article 12.2.2 requires that the public notice contain "all relevant information on matters
of fact and law" as well as the "reasons which have led to the imposition of final measures". The EU
recognises that there is a degree of subjectivity and discretion on the part of the investigating
authorities implied in the language of Article 12.2.2, when it comes to determining what is "relevant".
But it notes that the ADA also imposes certain objectiv e requirements that would require reflection in
the published report of the investigation. Th e second sentence of Article 12.2.2 reduces the
"discretion" of the investigating authority on what constitutes "relevant information", when it comes
to dealing with the information d escribed in Article 12.2.1 and the reasons for acceptance or rejection
of relevant arguments or claims, and the basis for certain decisions.

12. Secondly, the EU is bringing claims against Ch ina with respect to the lack of disclosure of
calculations of the individual dumping margin and its underlying data for the cooperating producer
and the calculation of the residual duty rate under both Article 6.9 and Article 12.2.2. The ADA
requires the investigating authority to disclose to the interested parties the essential facts under

consideration before the final de termination is made. "Essential facts" within the meaning of
Article 6.9 ADA include calculations and the data underlying those calculations.

13. Furthermore, as our first written submission explains, the calculations employed by an
investigating authority to determine dumping marg ins, and the data underlying the authority's
calculations, constitute "relevant information on matters of fact and law and reasons which have led to
the imposition of final measures" within the meani ng of Article 12.2.2. This is so because the
calculations themselves are the mathematical basis for arriving at the dumping margins imposed by an
investigating authority. Therefore, they are "relev ant" to the decision to apply definitive measures.
Lastly, they lead to the imposition of definitive measures, because only when they result in an
affirmative dumping margin could an investigating authority apply definitive measures.

V. CLAIMS UNDER ARTICLES 3.1 AND 3.2 ADA

14. MOFCOM's determination of injury is b ased upon two findings with regard to the price
effects of the dumped imports: first, that ther e was "large" and "serious" price undercutting; and
second, that Nuctech's prices fell by as much as 72.68% during the POI. China has acknowledged
that MOFCOM reached these two findings by a pplying a methodology involving a comparison of
weighted average unit values for the entire range of scanners covered by the investigation. This
methodology was inadequate because it failed to take into account the considerable differences among
the various types of scanners covered by the investig ation, and in particular between high-energy and
low-energy scanners. For this reason, the EU clai ms that MOFCOM's assessment of the price effects
of the imports and, consequen tly, its determination of injury is not based on an "objective
examination" of "positive evidence", contrary to the requirements imposed by Articles 3.1 and 3.2
ADA.

15. Articles 3.1 and 3.2 ADA do not set out any specific methodology in order to examine the
effects of the dumped imports. But, as emphasised by the Appellate Body, this does not mean that the
investigating authorities enjoy unfettered discreti on. The EU does not seek to impose any specific
methodology. Nor does the EU challenge as such the methodology applied by MOFCOM. The
comparison of average unit values can be an appropriate methodology where the product under
investigation is sufficiently homogeneous. On the other hand, it is inadequate where the subject
product includes very different product types with wide ly diverging prices. In those circumstances,
the observed differences between average unit valu es may reflect differences between the mix of
product types, rather than genuine price undercutting or price depression.

16. In the present case, the Chinese authorities cho se to make a very broad definition of the
subject product covering two distinct categories of scanners: low-energy scanners and high-energy
scanners. Whereas low-energy scanners are used for screening relatively small objects, such as
parcels or baggage, high-energy scanners serve to scan much larger objects, such as containers, trucks
and rail carriages. The differences in physical characteristics and uses between these two categories
of scanners are manifest and considerable and translat e into very large price differentials. In addition,
there are also important differences among the scanne rs falling within each of those two categories.
All those differences were obvious from the record of the investigation and could not have been
ignored by MOFCOM. Given these differences, th e averaging methodology used by MOFCOM was
plainly inadequate to make a meaningful, let alone accurate, assessment of the price effects of dumped
imports. The EU does not have access to the sales data of Nuctech which would be necessary in order
to quantify precisely the distortions introduced by MOFCOM's methodology. Nevertheless, the EU
has illustrated by means of two numerical examples how even small differences, or variations over
time, in the mix of product types can have a very large impact on the outcome of MOFCOM's
methodology. China does have access to this data but it has not even attempted to rebut the EU
arguments on that point.

17. China appears to contend that MOFCOM's me thodology is consistent with Articles 3.1 and
3.2 ADA because it is "reasonable", and this essentially for two reasons. In the first place , because
MOFCOM had determined previously that the im ported subject product and the inspection equipment
produced in China were "like", within the meaning of Article 2.6 ADA. This argument, however, is
misguided because it confuses two separate and distin ct issues under the ADA. Previous panels have
clarified that there is no requirement under the ADA that each product type covered by an
investigation must be "like" any other covered pr oduct type. Therefore, MOFCOM's finding that the
subject product was "like" the equipment made in China does not imply that the various product types
covered by the investigation are "like" each other. Certainly, the EU would not agree that all types of
scanners are "like".

18. In the second place , China argues that the averaging methodology used by MOFCOM was
"unbiased" because, in different circumstances, the same methodology might work to the exporter's
advantage. However, the mere fact that a met hodology is "unbiased", in the limited sense given by
China to that term, is not sufficient to make it compliant with Articles 3.1 and 3.2 ADA. A
methodology may be "unbiased", in the sense postulate d by China, and still wholly inapt to yield
meaningful results. Furthermore, MOFCOM's choi ce of methodology was "biased" even by China's
own standard. High-energy scanners do not comp ete with low-energy scanners. Since there were no
imports of high-energy scanners, there was no re asonable ground for including Nuctech's sales of
high-energy scanners in the calculation of Nuctech 's average unit values. At the same time,
MOFCOM was well aware that doing so would make more likely a finding of price undercutting and
magnify the reduction of the domestic industry's prices.

19. Finally, China makes much of the fact that Smiths did not make a similar claim during the
investigation. But this argument is irrelevant b ecause it is well-established that the complaining party
is not confined to the arguments made by the exporte r during the anti-dumping investigation. It is also
disingenuous because MOFCOM never disclosed duri ng the investigation the methodologies that it
used for assessing the price effects of imports. Moreover, Smiths did request repeatedly that
MOFCOM exclude high-energy products from the investigation on the grounds that they were not
comparable to low-energy scanners. Had MOFCOM granted Smiths' request, it would have been
unnecessary to take into account the differences between the two categories of products at the stage of
considering the price effects of imports.

VI. CLAIMS UNDER ARTICLES 3.1 AND 3.4 ADA

20. The EU maintains that MOFCOM's determina tion that the domestic industry, i.e., the single
company Nuctech, was in a state of material injury is blatantly wrong. In violation of Articles 3.1 and
3.4 of the ADA, it is unfounded on the actual fact s and lacking the most basic requirements of
providing a compelling explanation of all factors in context and a reasoned a nd adequate explanation
of positive evidence. The evidence on the record showed a state of an industry that was visibly
growing, with production capacity, capacity utilisa tion and output increasing, even well above the
increasing levels of domestic consumption. MOFCOM ignored all the positive factors in this case
and decided to focus primarily on the downward tr end of domestic sales pric es to support its finding
of material injury. Moreover, MOFCOM ignored key facts provided by Smiths showing the actual
state of the domestic industry.

21. First, MOFCOM ignored the actual facts and twisted the reality to make a finding of material
injury. It did so by relying on questionable figures, making contradictory statements, evaluating
economic factors in a not-even-handed manner, i gnoring the overall context of all the relevant
economic factors having a bearing on the state of the domestic industry, and failing to provide a
compelling, reasoned and adequate explanations on its material injury finding.

22. Second, MOFCOM failed to base its evaluation on positive evidence . The reality still is that
we do not know how MOFCOM came up with its fi gures. The explanation provided by China in
these panel proceedings, in particular that some e xport data generating substa ntial profits were taken
out of the information provided by Nuctech, is in apposite. Indeed, China makes such a statement
without any evidence and in blatant contradiction with the information that was on the record showing
that one of the reasons for Nuctech's losses was precisely its losses in the export market. Similarly,
China appears to avoid engaging in factual issues such as what was the percentage of Nuctech's
scanner business within the totality of its products. Based on Smiths' estimate, the EU alleges that
scanners amounted to around 90% of Nuctech's prod ucts during the POI. China does not provide any
evidence in this respect. The EU considers that China is in a be tter position to provide the necessary
data for the Panel to make an objective assessment of this matter. Thus, the Panel, in accordance with
its duties under Article 11 of the DSU, should make u se of its authority pursuant to Article 13 of the
DSU and put the relevant question to China.

23. Third, MOFCOM failed to provide a compelling, reasoned and adequate explanation of its
material injury determination even on the basis of MOFCOM's own factual determination. In its first
written submission China attempts to rewrite MOFCOM's Final Dete rmination by selectively quoting
certain sentences in an effort to make ex-post sense of its reasoning. The structure chosen by
MOFCOM already denotes the lack of a compelling explanation in this case. Positive factors were
not put in context but merely disregarded. More over, China does not contest the fact that MOFCOM
did not even refer to some important positive f actors, such as productivity. Likewise, MOFCOM
ignored the fact that Nuctech's capacity, output, and domestic sales were increasing well in excess of
the growth in demand. Again, these show a fa ilure by MOFCOM to provide a very compelling
explanation in this case.

24. Similarly, China fails to provide adequate support to its findings that Nuctech was in a state of
material injury. In a situation where the market was expanding, the fact that domestic sales prices
constantly decreased indicated that Nuctech sacrifi ced potential profits in order to increase its sales
and gain more market share. Indeed, otherwise, Nu ctech could have increased its prices (and profits)
at least up to the (higher) level of the import pric es. Even on the basis of the facts as found by
MOFCOM, Nuctech's state was indicating an industry that was taking advantage of its high
productivity and economies of scale to reduce its sales prices, even below the prices of imports. In
the EU's view, this cannot support a finding of material injury that is reasoned and adequate.

25. Fourth, MOFCOM's disregard of all facts and arguments on the record relating to the state of
the domestic industry . Indeed, Smiths brought to MOFCOM's attention some factors which were
relevant to understand the state of Nuctech during the POI. In particular, Smiths referred to the start-
up situation of Nuctech with respect to the low- energy scanner market and its aggressive pricing
policy. Smiths also referred to Nuctech's business expansion to foreign markets. In its first written
submission, China attempts to explain why those facts were not addressed by MOFCOM. However,
those ex-post explanations are irrelevant. The truth of th e matter is that none of those factors were
referred to, summarised or addressed in MOFCOM's determination. In the EU's view, they were
relevant factors that MOFCOM should have consid ered for its finding of material injury to be
reasoned and adequate.

VII. CLAIMS UNDER ARTICLES 3.1 AND 3.5 ADA

26. Finally, contrary to what is required by Articles 3.1 and 3.5 ADA, MOFCOM failed to
conduct a proper causation analysis. MOFCOM attributed all the negative effects observed under
Articles 3.2 (price undercutting/price depression) and 3.4 (material injury) to the dumped imports,
concluding that none of the other known factors were the source of injury. MOFCOM explicitly found
that none of the other known factors examined could be a cause of the effects found. Further,

MOFCOM did not examine any of the other known factor s alleged by the interested parties that were
causing the effects found.

27. With respect to the attribution analysis , MOFCOM considered that the "large" or "great"
volume of dumped imports together with their low pr ices were the cause of all negative effects found.
Article 3.5 states that the demonstration of causation shall be based on "an examination of all relevant
evidence before the authorities". In this respect, the evidence on the record indicated that the volume
of EU imports was not so "large" or "great" when seen in the context of domestic consumption and
domestic sales volume. Domestic sales volume wa s booming in comparison to the volume of EU
imports. This is a relevant fact that MOFCOM ignored when making its conclusion as to the "large"
or "great" volume of EU imports. Moreover, a nd more importantly, MOFCOM did not examine the
nature of those imports in its attribution analysis. By attributing all the effects found with respect to
both high-energy and low-energy scanners to imports exclusively relating to low-energy scanners,
MOFCOM failed to carry out an appropriate attribution analysis in this case.

28. Second, with respect to the prices of EU im ports, MOFCOM also ignored the fact that import
prices were constantly increasing throughout the POI and were even above domestic sales prices
in 2008. In that context, the fact that EU impor ts were dumped (allegedly), as China asserts, is beside
the point. Indeed, the dumped level of imports is i rrelevant in this context. What matters is the
undercutting, which did not exist in this case, and certainly did not take place in 2008. In particular,
MOFCOM failed to explain how import prices consis tently going up and reaching a level even above
domestic sales prices could be the only cause of domestic sale prices consistently declining by an
amount significantly more substantial.

29. In sum, the EU considers that MOFCOM's attr ibution analysis runs short of the requirements
under Articles 3.1 and 3.5 ADA.

30. The same should be concluded with respect to the non-attribution analysis . MOFCOM
disregarded the actual causes for any negative conditi on of the domestic industry, as stood out from
the record. In particular, there is no consideration of factors such as the impact of the global crisis
in 2008, the start-up situation of Nuctech, Nuctech 's aggressive pricing policy, Nuctech's aggressive
business expansion, and the fair competition between Nu ctech and other producers. There is not even
a reference to these arguments in MOFCOM's Fina l Determination. To say now in these panel
proceedings for the very first time that MOFCOM decided to reject and no t even address explicitly
any of the causation arguments raised by Smiths amounts to ex-post rationalisation which should be
rejected.

31. Therefore, the EU requests the Panel to find that MOFCOM's non-attribution determination,
as well as MOFCOM's causation determination in gene ral, are inconsistent with Articles 3.1 and 3.5
ADA.

ANNEX C-2

EXECUTIVE SUMMARY OF THE OPENING STATEMENT OF CHINA
AT THE FIRST MEETING OF THE PANEL

1. Introduction

1. As a preliminary remark, China would like to express its concerns with respect to the various
claims that the European Union has failed to prop erly substantiate in its First Written Submission,
making it impossible for China to effectively rebut th em. It is, however, for the European Union to
present claims that are understandable and supported by the necessary arguments and evidence. Only
then can China be in a position to properly defend itself and the Panel in a position to rule on these
claims. China considers that to the extent the Eu ropean Union has failed to properly substantiate its
claims, it has failed to make a prima facie case with respect to these cl aims and such claims should
accordingly be rejected by the Panel.

2. In this Oral Statement, China will briefl y summarise the main points and highlight certain
essential issues on which, in China's view, the discussions should focus.

2. The European Union's claim under Articl es 6.5.1, 6.4 and 6.2 of the AD Agreement

3. The European Union's first claim concerns Article 6.5.1 and Articles 6.4 and 6.2 of the
AD Agreement.

4. The European Union alleges that China violat ed Article 6.5.1 since it would have failed to
ensure adequate non-confidential summaries or to require a statement of reasons explaining
exceptional circumstances why summarization was not possible.

5. As a preliminary remark, China notes that no claim has been made by the European Union
pursuant to Article 6.5. It is thus not disputed that the information concerned has been properly
treated as "confidential" and that the only issue for th e Panel is to determine whether there has been a
violation of Article 6.5.1.

6. The European Union's claim that no ade quate non-confidential summary was provided by
Nuctech for various items contained in the Petitio n and in its Questionnaire Response is without
merit. Indeed, for the different items identified by the European Union, an adequate non-confidential
summary, that is a non-confidential summary which is in sufficient detail to permit a reasonable
understanding of the substance of the informatio n submitted in confidence, has been provided.
Furthermore, China notes that Smiths and the Euro pean Union extensively commented on the injury
determination, thereby invalidating the European Unio n's allegation that the lack of an adequate non-
confidential summary hampered Smiths' rights of defence.

7. The European Union's claim that MOFCOM allegedly failed to request that the Chinese
Public Security Bureau of the Civil Aviation Administration provide a statement of reasons explaining
the exceptional circumstances why su mmarization was not possible should equally be rejected. The
non-confidential version of the statement explai ns the exceptional circumstance why summarization
was not possible, namely "the nature of the info rmation" submitted in confidence, which concerned
the "use of X-ray security inspection equipment in the civil aviation system". The Chinese Public
Security Bureau of the Civil Aviation Administra tion further explained to MOFCOM the inherently
highly sensitive character of the information cont ained in the document submitted in confidence
which relates to the number and types of security sy stems used in Chinese airports and in the aviation

sector which, for obvious public security reasons, cannot be summarised without risking disclosing
the highly sensitive information. Thus, MOFCOM scr utinised this explanation to determine whether
it established exceptional circumstances and appropria tely explained why in these circumstances, no
summary was possible.

8. The European Union claims that, consequently, China also violated Articles 6.4 and 6.2. For
China, the due process and transpar ency obligations laid down in those provisions are of fundamental
importance and must strictly be complied with during anti-dumping investigations. In the
investigation at issue, contrary to the European Union's allegations, China fully complied with these
obligations.

9. Finally, the European Union fails to substan tiate its claims under Articles 6.4 and 6.2 which it
presents as purely consequential claims to the Article 6.5.1 claim. Since the European Union fails to
do so, these claims should be rejected.

3. The European Union's claim under Articl es 6.9, 6.4 and 6.2 of the AD Agreement

10. The European Union argues that China violat ed Article 6.9 and consequently Articles 6.4
and 6.2 since it failed to disclose the essential facts which form the basis for the determination of the
dumping margins and the determination of injury, including the analysis of price effects.

11. Regarding the first claim under Article 6.9, China submits that neither the methodology used
for the price undercutting/price suppression anal ysis nor the underlying evidence from which
MOFCOM derived the factual basis on which it made its price analysis come within the scope of
Article 6.9. The European Union apparently igno res that Article 6.9 is limited in scope and only
applies to the essential facts under consideration wh ich form the basis for the decision whether to
apply definitive measures.

12. The European Union's second claim regarding the failure to disclose the underlying facts and
criteria on the basis of which the adjustments to the export price were made, should also be rejected.
Indeed, the Final Dumping Disclosure adequately and fully disclosed all the essential facts concerning
the export price adjustments. This is even clearer when the Final Dumping Disclosure is read together
with the Preliminary Dumping Disclosure which the European Union intentionally ignores in its First
Written Submission.

13. The European Union's further argument on the fa ilure to disclose the essential facts relating to
Smiths' dumping margin and to the residual duty must equally be rejected. Again, the European
Union deliberately fails to mention the Preliminary Dumping Disclosures that were sent to Smiths and
to the European Union and that contain essentia l facts concerning the determination of Smiths'
dumping margin and of the residual duty. Since MOFCOM identified the data which were used,
explained how the calculations had been made on the basis of such data and disclosed the final figures
of normal value, export price and the dumping marg in, the requirement of Article 6.9 has been
complied with.

14. With respect to the alleged violations of Ar ticles 6.4 and 6.2, China emphasises again that a
violation of Article 6.9 – quod non – would not necessarily entail a violation of Article 6.4 and/or 6.2.
The European Union has failed to substantiate its claims.

4. The European Union's claim under Article 12.2.2 of the AD Agreement

15. The European Union claims that China violated Article 12.2.2 of the AD Agreement
primarily because it did not provide the reasons whic h led to arguments being accepted or rejected in
connection with the determination of normal value, injury and cau sation. Regarding the argument

raised by Smiths on its relationship with its affilia ted companies in the context of the normal value
determination, this issue has been fully addressed by MOFCOM and the reasons for rejecting Smiths'
argument are set out in its Final Determination. Si milarly, Smiths' arguments on the credibility of the
data submitted by Nuctech were also examin ed in MOFCOM's Final Determination. The
European Union fails to precisely identify in its First Written Submission the other arguments that
Smiths would allegedly have raised in connection with MOFCOM's injury and causation analysis.
Moreover, the European Union fails to establish th at those arguments were "relevant" within the
meaning of Article 12.2.2.

16. Second, the European Union also claims th at the Final Determination does not contain all
relevant information on the matters of fact and la w and reasons which have led to the imposition of
final measures in connection with the injury dete rmination and the calculations of Smiths' dumping
margin and the residual duty.

17. As to MOFCOM's alleged failure to explain in its Final Determination the methodology used
in the price undercutting and price suppression analysis, that claim should be rejected since it does not
come within the scope of Article 12.2.2 as it is neither a "matter of fact" nor is it "relevant" within the
meaning of Article 12.2.2. Furthermore, the calc ulations of Smiths' dumping margin and of the
residual duty and the data underlying those calcu lations do not come within the scope of
Article 12.2.2. As acknowledged by the Eu ropean Union, these calculations and - a fortiori - their
underlying data contain confidential information, th e disclosure of which is necessarily inconsistent
with Article 6.5 of the AD Agreement. The Euro pean Union nevertheless claims that China should
have made available to Smiths the calculations it used to determine its individual dumping margin.
Article 12 does not contain obligations concerning the content of a disclosure to specific interested
parties but concerns instead the content of the public notice to be published at the end of the
investigation. Such notice is by definition public and cannot contain confidential information. For
that sole reason, the European Un ion's claim must be rejected. In any case, the calculations of the
dumping margin and their underlying data do not cons titute "relevant informati on on matters of fact
and law and reasons whic h have led to the imposition of final measures" within the meaning of
Article 12.2.2 of the AD Agreement.

5. The European Union's claim under Articles 3.2 and 3.1 of the AD Agreement

18. The European Union claims that MOFCOM's anal ysis of the price effects is inconsistent with
Articles 3.2 and 3.1 of the AD Agreement since it failed to make a price undercutting and/or price
suppression analysis distinguishing between so-calle d "low-energy" and "high-energy" scanners and
even among the different models of "low-energy" scanners. It claims that MOFCOM should have
made its price analysis on a m odel-by-model basis. Article 3.2, however, does not require the
investigating authority to use any particular met hodology for its price analysis. The investigating
authority enjoys discretion with respect to the methodology it will follow. Furthermore, Article 3
does not contain any requirement to make adjust ments similar to those normally made for the
dumping margin pursuant to Article 2.4. This ma kes sense since, pursuant to Article 3.2, the
investigating authority is not even required to ma ke any quantitative findings or determinations on the
price effects but merely needs to "consider" the price effects.

19. The European Union fails to demonstrate th at MOFCOM's price analysis was not objective
because MOFCOM would not have ensured an even-h anded treatment of the information and data on
the record of the investigation. MOFCOM defined the product under c onsideration. After
examination of the domestic product, it concluded th at they were "like". It was thus reasonable for
MOFCOM to assess the effects of the dumped impor ts on prices by using the weighted average unit
methodology. During the investigation, Smiths never claimed that the price analysis should be made
separately for "high-energy" and "low-energy" scanners nor requested certain adjustments to be made.
In any case, there is no clear-cut criterion to differentiate "high-energy" from "low-energy" apparatus.

20. The fact that there are price differences be tween products which all constitute the like product
does not render the use of the weighted average me thodology unreasonable. In fact, in most anti-
dumping cases, there are price differences due to differ ences in, e.g. model types, the date of sale or
the type of customers. Following the European Union's logic would lead to a prohibition of the use of
the weighted average methodology in nearly all an ti-dumping cases. Actually, the use of averages
may in certain cases be favourable to the e xporter while negative on other occasions. The
European Union fails to demonstr ate that MOFCOM did not ensure an even-handed treatment of the
information and data in that MOFCOM would ha ve intentionally selected certain models or
transactions to achieve a certain result in its analysis. MOFCOM applied the weighted average
methodology in an even-handed and objective manner. Therefore, the Europe an Union's claim that
China acted in violation of Articles 3.1 and 3.2 should be rejected.

6. The European Union's claim under Articles 3.4 and 3.1 of the AD Agreement

21. China submits that the four European Uni on's claims under Articles 3.4 and 3.1 concerning
MOFCOM's injury analysis should be rejected.

22. First, regarding the claim that MOFCOM fa iled to base its evaluation on positive evidence
because of alleged discrepancies between the data in MOFCOM's Final Determination and the
information submitted by Nuctech or available from ot her sources, China submits that the mere fact
that there may be discrepancies between those data does not demonstrate that the "evidence" on which
MOFCOM based itself is not "positive". Actually , the figures and data in a Questionnaire Response
are checked by the investigating authority, in par ticular through on-site verifications. Following such
verifications, MOFCOM adjusted Nuctech's data and, for instance, excluded the data relating to the
exports of the like product as well as to other produc ts. As to the discrepancies with certain figures
from other sources, MOFCOM explained that those data included informati on on other products as
well.

23. Second, the claim regarding China's failure to examine all factors listed in Article 3.4 and, in
particular, the magnitude of the margin of dumping should equally be rejected. As set out clearly in
the Final Determination, MOFCOM evaluated the ma gnitude of the margin of dumping in the Final
Determination and found that it exceeded the " de minimis " threshold of Article 5.8 of the
AD Agreement.

24. Third, the European Union ar gues that China failed to make an objective examination of the
state of the domestic industry because it disregarded the differences between "low-energy" and "high-
energy" scanners. This claim is baseless in both fact and law. There is no requirement in Article 3
that the investigating authority carries out a separat e analysis for alleged different categories of the
"like product". On the contrary, the obligation to make an objective examinat ion of the state of the
domestic industry pursuant to Articles 3.1 and 3.4 means that the domestic industry has to be
investigated "as a whole" and that an investigating authority cannot focus only on one segment or
sector of the domestic industry. Moreover, no clear cut difference between separate segments exists
in this case.

25. Fourth, the European Union assertion that MOFC OM failed to make a proper evaluation of all
injury factors in context is groundless. The Eur opean Union first argues that MOFCOM failed to
provide a compelling explanation of whether and ho w the overwhelming majority of positive factors
were outweighed by any other negativ e factors. The European Union's presentation of the facts is not
correct. It is not so that most injury factors were positive or showed a positive trend. In fact, the Final
Determination shows that a significant number of factors were negative. Furthermore, MOFCOM
provided a reasoned and reasonable explanation as to how and why the facts and elements on the
record support its finding of injury, including an explanation why the allegedly positive factors were
insufficient to change this overall conclusion. The European Union is simply requesting the Panel to

re-examine the facts on the record and to dete rmine whether it would have reached the same
conclusion on injury as MOFCOM did. This, however , is not the role of the Panel as is clear from
Article 17.6 of the AD Agreement and Article 11 of the DSU.

26. The claim that MOFCOM made contradictory observations in a not even-handed manner is
entirely misplaced and contradicted by the evidence in MOFCOM's Final Determination. Moreover,
it flows from the Final Determination that MOFCOM analysed not only each factor individually but
considered also how the factors relate to each other and to the wider economic context.

27. Finally, the European Union's claim that MO FCOM failed to take into account all facts and
arguments on the record relating to the state of th e domestic industry should equally be rejected. The
European Union has not submitted any evidence rega rding Nuctech's alleged start-up situation and
alleged aggressive pricing policy. In any event, these are not factors having a bearing on the state of
the domestic industry within the meaning of Article 3.4. Those factors were rightly considered
irrelevant in assessing the impact of the dumped imports on the state of the domestic industry.

7. The European Union's claim under Articles 3.1 and 3.5 of the AD Agreement

28. The European Union argues that China violated Articles 3.5 and 3.1 since it failed to properly
examine the causal relationship between the dumped im ports and the material injury found and failed
to conduct a proper non-attribution analysis.

29. Regarding the causal relationship between the dumped imports and the material injury found,
the European Union fails to point to any flaw s in MOFCOM's reasonable and reasoned findings.
Indeed, MOFCOM carried out an adequate analysis of the volume of the dumped imports and of their
effects on domestic prices. Furthermore, as evidenced by the Final Determination, MOFCOM
established the existence of a temporal correlation between, on the one hand, the rapid and significant
increase in the volume of the dumped imports as well as the low level of their prices and, on the other
hand, the injured state of the domestic industry as reflected in numerous factors such as declining
prices, losses, negative investment and rate of return, increasing stocks, etc.

30. With respect to the non-attribution require ment, the European Union's allegation that
MOFCOM ignored other known factors raised by Sm iths and failed to consider several arguments
made by Smiths is equally unsubstantiated. It is clear from Article 3.5 that the non-attribution
requirement only applies to factors other than dumped imports which are known to the investigating
authority and are injuring the domestic industry at the same time as the dumped imports. The
European Union simply fails to demonstrate this with respect to the five alleged other known factors.
In any case, theses five factors were either examined by MOFCOM or did not need to be because they
rested on a factual assumption that had already been rejected by MOFCOM.

ANNEX C-3

CLOSING STATEMENT OF CHINA AT THE FIRST
MEETING OF THE PANEL

1. Mr. Chairman, Distinguished Members of the Panel, China would like to thank you for all
your efforts.

2. In this Closing Statement, we would like to correct some of the misleading statements made
by the European Union. This is important for the proper assessment of the matter before you. We
would like to refer you to our First Written Submis sion, which contains more detailed evidence to
rebut the EU's groundless allegations. We want, however, to emphasise the following points.

3. First, China is aggrieved by the very seri ous allegations made by the European Union that
China would have acted in a biased manner and would have disregarded "some of the most
fundamental procedural guarantees provided in the Anti-Dumping Agreement."
1 China cannot accept
these insinuations. Throughout the proceedings, Chin a respected all due process guarantees. As you
know, China is one of the main targets of trade defence investigations. China has therefore a systemic
interest in safeguarding the procedural rights of pa rties involved in such investigations. China would
like to reiterate its strong commitment to the princi ples of transparency and procedural fairness in
carrying out anti-dumping investigations. China's inv estigating authority has always paid the utmost
attention to safeguarding the rights of all parties in anti-dumping investigations.

4. Moreover, China would also like to point out that the accusations made by the
European Union as to alleged "serious" violations of due process obligations frequently concern
practices routinely followed by the EU's own i nvestigating authority and are even directly
recommended in the EU's investigative guidelines.

5. Second, the European Union's repeated claims concerning the allegedly blatant violations of
due process obligations by China is insufficient to mask the lack of factual evidence supporting these
serious allegations. As an example, throughout th e investigation, China gave ample opportunity to
Smiths to correct and complete its deficient submi ssions. China also made considerable efforts to
inform the parties with all the essential facts which formed the basis of its determinations. Finally
throughout the investigation, Smiths has ampl e opportunities to consult all non-confidential
information.

6. Third, the European Union' s statement that this case would have been initiated by MOFCOM
in retaliation for the anti-dumping measures imposed by the European Union on similar products is
pure speculation. In fact, the petition was subm itted to MOFCOM several months before the
European Union imposed any anti-du mping measures. The European Union also appears to forget
that the present anti-dumping investigation has not been initiated ex officio by MOFCOM but on the
basis of a duly substantiated claim by the petitioner. As in the EU, China's investigating authority is
under the obligation to accept petitions that contain sufficient prima facie evidence.

7. Fourth, the European Union on several occasions has accused China of making " ex post
facto" explanations. However, as explained in our First Written Submission, the explanations were
either provided or there was no need to provide such explanation since the arguments raised by
Smiths were manifestly irrelevant or lacking sup porting evidence. Just one example. During the
investigation, Smiths argued that Nuctech was in a start-up phase. The notion of a start-up phase is

1 EU Opening Statement, para. 2.

found in the AD Agreement in the context of the determination of the normal value and is a well
defined concept. Smiths, however, has not subm itted any evidence whatsoever that Nuctech would
have found itself in a start-up phase. The statements made by Smiths were moreover completely
contradictory. First, Smiths argued that Nuctech would have recently started a production of so-called
low-energy scanners. Then, Smiths explained that Nuctech would have been producing low-energy
scanners but would not have been present in the aviation sector. Later on, Smiths also argued that
Nuctech was present in the aviation sector but was tryi ng to get additional market share. Again, no
evidence of any of the foregoing statements has been given by Smiths. It is clear that one cannot
expect that an investigating authority would take this kind of unsubstantiated and conflicting claims
more seriously than the evidence obtained from the company's own records.

8. Fifth, the European Union also seems to consid er that there is a clear and manifest distinction
between the so-called categories of "high-energy" and "low-energy" scanners. There is, however, no
clear-cut criterion for differentiating categories of scanners. In fact, it seems that this categorisation is
self-serving and has been invented by Smiths for the purposes of this case. Indeed, in a previous case
by the European Union, Smiths argued that the cut- off level was an energy level of 250 KeV instead
of above 300KeV, as in the present case. Furtherm ore, no clear-cutting categorisation of scanners can
be made on the basis of sizes, prices, uses or technol ogies. Contrary to what Smiths alleges, there are
no distinct categories of scanners and the various types of scanners form a single continuum.
Producers, such as Smiths generally offer a full range of products meeting the varied needs of their
costumers.

9. Finally, we are surprised that the Europ ean Union argues that no injury can occur when
import prices are increasing or are even higher th an the domestic prices. The European Union
conveniently overlooks its many dete rminations in which it concluded to the existence of material
injury in similar circumstances. Indeed, the fact that import prices are increasing and are higher than
the domestic prices does not prevent such prices from depressing or suppressing the prices of the
domestic industry. This is particularly the case wher e the prices relate to imports which are rapidly
increasing and capturing additional market share.

10. Mr Chairman, Distinguished Members of the Pa nel, this concludes our closing statement.
Thank you.

ANNEX D

ORAL STATEMENTS OF THE THIRD PARTIES AT
THE FIRST SUBSTANTIVE MEETING

Contents Page
Annex D-1 Third Party Oral Statement of Chile at the First Meeting of the
Panel D-2
Annex D-2 Third Party Oral Statement of Japan at the First Meeting of the
Panel D-4
Annex D-3 Third Party Oral Statement of Norway at the First Meeting of the
Panel D-7

ANNEX D-1

THIRD PARTY ORAL STATEMENT OF CHILE AT THE
FIRST MEETING OF THE PANEL*

1. Mr Chairman, distinguished members of the Pane l, the delegation of Chile, as a third party to
this dispute, is grateful for the opportunity to present its views on certain systemic aspects of this case.

2. Chile notes that this dispute involves matters that have a considerable bearing on the proper
application and interpretation of the Anti-Dumping Agreement, particularly as regards the provisions
governing transparency and those that guarantee the right of parties to a full opportunity to defend
their interests, a prerequisite for any anti-dumping investigation.

3. To begin with, Chile would like to stress the importance of the obligation contained in
Article 6.5.1 of the Anti-dumping Agreement for interested parties to furnish non-confidential
summaries and for those summaries to be in su fficient detail. As stated by the Panel in Argentina –
Ceramic Tiles
1, this obligation is important in that th e purpose of ensuring access to these summaries
is to enable the interested parties to defend thei r interests in the framework of an investigation,
thereby guaranteeing their right to due process.

4. As regards the allegation by the European Un ion that the reasons why summarization of the
confidential information was not possible, Chile, like Norway in its third party submission, takes the
view that the Panel must rule on whether the oblig ation contained in the said provision implies that
these reasons must be made public for those involved in the investigation. We agree that the only
useful interpretation of the provision would be that the interested parties should have access to these
reasons, which they can only obtain if the information is effectively placed at their disposal by being
made public.

5. Moreover, in cases where it is not possible to summarize the confidential information, it is the
investigating authority's obligation, even if the provision does not expressly say so, to require the
interested party to indicate the reasons and grounds why such summarization is not possible.
2 I n
Chile's view, this obligation cannot be fulfilled merely by describing the nature of the information or
assets protected by confidentiality - to accept this w ould be tantamount to circumventing or failing to
apply the provision in question.

6. Secondly, Chile would like to refer to th e obligation contained in Article 6.9 of the
AD Agreement to inform all interested parties, be fore a final determination is made, of the essential
facts under consideration which form the basis for the decision whether to apply definitive measures.

7. The purpose of this obligation is clearly to di sclose to the interested parties the information
that the investigating authority will be considering as a basis for its final decision, so that the parties
can be in a position to comment on or seek to correct th at information. It is important to stress that
the investigating authority's obligation does not extend to, or cover, all of the information it has had
before it during the investigation, but only the re levant information that it will be taking into
consideration when reaching its fina l decision and which relates to th e facts, and not to the reasoning
used.

* This Oral Statement was originally made in Spanish.
1 Report of the Panel in Argentina – Ceramic Tiles, paragraph 6.39.
2 See the Report of the Panel in Guatemala – Cement II, paragraph 8.123.

8. Moreover, the panel needs to analyse a nd take account of the manner in which the
investigating authority claims to have disclosed the information and the alleged timing of that
disclosure. Compliance has to be analysed in the light of the purpose of the obligation, since it is
essential that the timing of the disclosure and the manner in which it is done must be such as to enable
the interested parties to defend their interests. To accept any inferior standard would be to deprive the
provision in question of all effectiveness.

9. Without wishing to evaluate the substance of the dispute or to question the procedures by
which the challenged definitive measures were impo sed, Chile considers that for these provisions to
be applied correctly, all of the in terested parties must be guaranteed access to the information they
need to better defend their interests and to be able to influence the final decision. Consequently, we
would ask the Panel to conduct its examination in the light of that objective.

10. Finally, leaving aside the question of whethe r the investigating authority failed to conduct an
objective examination on the basis of positive evidence w ith respect to the determination of injury as
required by Article 3.1 of the Anti-Dumping Agreement, Chile would like to suggest that the Panel, in
making its assessment of the effect of the dumped imports on prices in the domestic market for like
products, consider the conditions of competition between those products. The analysis of those
conditions of competition must be based, inter alia, on the physical characteristics of the products,
including technical and quality specifications, and on the characteristics of their markets, including
their end-use, substitutability, price level and forms of distribution.

 Once again, many thanks for this opportunity.

ANNEX D-2

THIRD PARTY ORAL STATEMENT OF JAPAN AT THE
FIRST MEETING OF THE PANEL

I. INTRODUCTION

1. Mr. Chair, and distinguished Members of the Panel, on behalf of the Government of Japan, I
thank you for your attention to this dispute involving important systemic issues in the AD Agreement.
Among issues raised by the EU, Japan would like to address with respect to the injury determination
the disclosure of essential facts and the public notice of the final determination, taking into account
arguments of parties.

II. DISCUSSION

A. The Disclosure of Essential Facts under Article 6.9 of the AD Agreement

2. The EU alleges that China did not fully di sclose essential facts related to the investigating
authority's analysis of the effects of dumped imports on the prices of the domestic like products.
1
China disagrees with this allegation.2

3. Article 6.9 of the AD Agreement sets forth a specific procedural rule to ensure the
transparency of AD investigations and the observa nce of the due process rights of the interested
parties. This Article requires the investigating authority to identify and disclose those facts that would
be essential for the authority's final determination. At the same time, this disclosure must be in
sufficient detail to enable the interested parties to make an effective defense of their interest.

4. With respect to the scope of the essential facts, a dispute panel explained in the context of the
SCM Agreement that a specific fact would be essential if it "underlie[s] the inv estigating authority's
final findings and conclusions in respect of the th ree essential elements – subs idization, injury and
causation".
3 In the case of an antidumping investigation, the essential elements are dumping, injury,
and causation.

5. Article 3.5 requires the authority to demons trate the causation between dumped imports and
the injury to the domestic industry "through the e ffects of dumping, as set forth in paragraphs 2
and 4". This provision explicitly necessitates an analysis of the effects of dumped imports in
accordance with Article 3.2 in order for the authorit y to reach the causation determination. Facts, on
which the authority based its analysis of the effect s under Article 3.2, are therefore essential to the
causation determination, and thus must be disclosed to interested parties under Article 6.9.

6. China argues that Article 3.2 does not set fo rth any methodologies to analyze the effects of
dumped imports, and thus the authority has cons iderable discretion to decide an appropriate
methodology.
4 This does not mean, however, that the authority's discretion is unlimited. "The
general requirements of objective examination and positive evidence of Article 3.1 limit an
investigating authority's discretion in th e conduct of a price undercutting analysis". 5 This discretion

1 First Written Submission by the European Union (the "EU FWS"), para. 83.
2 First Written Submission of the People’s Republic of China (the "China FWS"), paras. 132-163.
3 Panel Report, Mexico – Olive Oil, para. 7.110.
4 China FWS, para. 145.
5 Panel Report, EC – Fasteners (China), para. 7.328.

must be exercised "in an unbiased manner, without fa vouring the interests of any interested party, or
group of interested parties, in the investigation".6

7. These requirements inform the authority's obligation to disclose the essential facts under
Article 6.9. The second sentence of Article 6.9 requ ires the authority to disclose to the interested
parties the information that enables them to co mment on the completeness and correctness of the
facts, provide additional information or correct pe rceived errors, and comment on or make arguments
as to the proper interpretation of those facts.
7 Facts, which the authority fo und to make its analysis of
the effects of dumped import, must also be disclosed in such detail so as to allow the interested parties
to make such examination and arguments in light of the authority's obligation of an objective
examination in an unbiased manner without favouring the interests of any interested party.

B. The Sufficiency of the Public Notice under Articles 12.2 and 12.2.2

8. The EU alleges that MOFCOM failed to explain the methodology used for analysis of the
price undercutting or price depression in the public notice.8 China disagrees.9

9. Article 12.2 sets forth the investigating aut hority's general obligati on for public notices of
preliminary and final determinati ons. The investigating authority must explain in the notice "the
findings and conclusions reached on all issues of fact and law considered material by the investigating
authority". Such explanation must be given irresp ective of whether interested parties presented any
arguments to the authority.

10. The panel in EC – Tube or Pipe Fittings analyzed this general obligation that "a "material"
issue [is] an issue … that must n ecessarily be resolved in order for the investigating authorities to be
able to reach their determination".
10 The panel in EU – Footwear (China) further stated that the
materiality of issues "must be judged primarily from the perspective of the actual final determination
of which notice is being given". 11 These panels clarified that an issue must be explained in the public
notice when it is judged as material to the actual fina l determination upon an objective analysis of the
final determination, and not based on the subjective consideration by the authority.

11. As discussed earlier, the facts on which th e authorities analyzed the effects of dumped
imports to determine causation are "essential" facts. As the Appellate Body pointed out, "[t]he
'essential facts' under Article 6.9, which form the b asis for a final determination, are those that are
material for the authority's decision".
12 The factual issue on the analysis accordingly thus must be
explained in the public notice.

12. The EU also alleges that MOFCOM did not state the reasons for the rejection of certain
arguments by an exporter in the public notice.
13 China rejected these allegations.14

13. Article 12.2.2 sets forth rules applicable onl y to the public notice of an affirmative final
determination imposing a definitive duty. The auth ority must explain the "reasons for accepting or
rejecting relevant arguments" by the exporters. The ordinary meaning of "relevant" means "closely

6 Appellate Body Report, US – Hot-Rolled Steel, para. 193.
7 See Panel Report, EC – Salmon (Norway), para. 7.805.
8 EU FWS, para. 148.
9 China FWS, paras. 233-242.
10 Panel Report, EC – Tube or Pipe Fittings, para. 7.424, as quoted in China FWS, para. 212.
11 Panel Report, EU – Footwear (China), para. 7.844.
12 Appellate Body Report, EC – Fasteners (China), para. 483.
13 EU FWS, paras. 150, 154, 155, and 312-314.
14 China FWS, paras. 243-250.

connected or appropriate to the matter in hand".
15 In the context of Article 12.2.2, an argument would
be "relevant" if the argument is closely connected to "matters of facts and law and reasons which have
led to the imposition of final measures". The scope of these matters of facts and law should also be
understood in the context of the authority's general obligation to explain issues of material fact and
law, not every single issue, in the public notice. As the panel in EU – Footwear (China) stated, "the
notions of 'material' and 'relevant' in Article 12.2. 2 must be judged primarily from the perspective of
the actual final determination of which notice is being given".
16 In the context of Articles 12.2
and 12.2.2, therefore, an argument by an exporter is "relevant" and thus the authorities must explain
the reasons for the acceptance or rejection when th e argument is closely conn ected to an issue of
material fact or law from the perspective of the actual final determination.

III. CONCLUSION

14. As stated in the third party submission, Japan does not take any particular position on the
factual aspects of this dispute. Japan respectfully requests the Panel to examine carefully the facts
presented by the parties to this dispute in light of Japan's comments above and in the third party
submission to ensure the fair and objective application of the provisions of the AD Agreement. Japan
would be pleased to respond any questions that the Panel may have.

15 Concise Oxford dictionary, tenth edition, revised, p. 1209.
16 Panel Report, EU – Footwear (China), para. 7.844. (emphasis given)

ANNEX D-3

THIRD PARTY ORAL STATEMENT OF NORWAY AT THE
FIRST MEETING OF THE PANEL

Mr. Chairman, Members of the Panel,

1. Norway welcomes this opportunity to present its views on the issues raised in these panel
proceedings.

2. In its written statement, Norway addressed a nu mber of interpretative issues raised by the EU
and China. Norway focused on the non-confidentia l summarisation of confidential information, the
disclosure of essential facts forming the basis of certain determinations, the disclosure of all non-
confidential information relevant for interested par ties to defend their interests and the provision of
full opportunity for the defence of interested parties' rights. With regard to these issues, I shall refer
you to the arguments in our written submission.

3. Today, Norway would like to address one additional issue raised by the EU and China in their
written submissions; the standard of review. More precisely, the EU's claim that China violated
Article 12.2.2 of the Anti-Dumping Agreement because the investigating authority failed to provide an
adequate explanation for some of its determinations, as well as referenc es to the matters of fact and
law and reasons which led to argumen ts being accepted or rejected.
1 Norway will not address the
issue of whether China has fulfilled the obligations set out in Article 12.2.2 in this case, but will
highlight certain arguments that may be of importa nce to the Panel when interpreting the relevant
Article.

4. Under the provisions of Article 12.2 and Article 12.2.2 of the Anti-Dumping Agreement, the
investigating authority is given a comprehensive ob ligation to provide a transparent statement of the
reasons for the imposition of definitive anti-dumping duties. Thus, the authority must set forth the
relevant facts in the record, and must explain "in sufficient detail", as set out in Article 12.2, the
factual and legal determin ations made on the basis of the evid ence in the record that led to the
imposition of duties.

5. Articles 12.2 and 12.2.2 therefore serve the same function as similar provisions in other
covered agreements relating to trade reme dy measures, namely, Article 3.1 of the Agreement on
Safeguards and Articles 22.3 and 22.5 of the Agreement on Subsidies and Countervailing Measures .
The Appellate Body and panels have consistently ruled that these provisions require the investigating
authorities to provide a reasoned and adequate explanation, among others, of how the evidence in the
record supports the authority's determination.
2 The authority's explanation must demonstrate in a
"clear and unambiguous" manner that the substan tive conditions for imposition of trade remedy
measures have been satisfied. 3 The authority must provide "sufficient background and reasons for
that determination, such that its reasons for concluding as it did can be discerned and are
understood".4

1 The EU's First Written Submission, para. 128.
2 Appellate Body Report, US – Softwood Lumber VI (Article 21.5 – Canada), para. 99.
3 Appellate Body Report, US – Line Pipe, para 217.

6. Furthermore, the Appellate Body has emphasised that "the evidentiary path that led to the
inferences and overall conclusions of the investigat ing authority must be clearly discernible in the
reasoning and explanations found in its report".
5

7. In sum, the investigating authority must provi de an explanation that does not leave the reader
guessing why the authority made its determinations. If an authority fails to explain itself adequately,
it cannot demonstrate that it has respected the substantive requirements of the Anti-Dumping
Agreement governing those determinations.

8. In conclusion, Norway submits that the Appe llate Body – with regard to the standard of
review – has stated that a panel must examine whether the authority has provided a "reasoned and
adequate explanation" of "how individual pieces of evidence can be reasonably relied on in support of
particular inferences, and how the evidence in the record supports its factual findings".
6

Mr. Chairman, distinguished Members of the Panel,

9. This concludes Norway's statement today. Thank you for your attention.

5 Appellate Body Report, US – Softwood Lumber (Article 21.5 – Canada), para. 97.
6 Appellate Body Report, US – Softwood Lumber (Article 21.5 – Canada), para. 99.

ANNEX E

EXECUTIVE SUMMARIES OF THE SECOND WRITTEN
SUBMISSIONS OF THE PARTIES

Contents Page
Annex-E-1 Executive Summary of the Second Written Submission of
the European Union E-2
Annex E-2 Executive Summary of the Second Written Submission of China E-11

ANNEX E-1

EXECUTIVE SUMMARY OF THE SECOND WRITTEN SUBMISSION
OF THE EUROPEAN UNION

1. Claim under Articles 6.5.1, 6.4 and 6.2 ADA

1.1 Introduction

 China breached its obligations under Article 6. 5.1 ADA by failing to ensure that interested
parties provided non-confidential summaries of conf idential information or a statement of reasons
explaining why summarization is impossible. Wh ere summaries were provided, China failed to
ensure that they were in suffici ent detail to enable a reasonable unde rstanding of the substance of the
information submitted. This also constitutes a viol ation of Article 6.4 to the extent it amounts to a
failure to provide a timely opportunity to interest ed parties to see and comment upon the information
that the authority used in the antidumping investig ation and that is relevant for the presentation of
their case. Where interested par ties are denied an opportunity to see all relevant information in the
record, including adequate non-confidential summaries or statements justifying the impossibility of
summarisation, they are denied the right to an opportunity to fully defend their interests, as required
by Article 6.2 ADA.

1.2. MOFCOM failed to ensure ad equate non-confidential summaries

 China violated Article 6.5.1, because MOFCOM did not ensure that all information submitted
in confidence was accompanied by an adequate non-confidential summary . There is no explanation
from the domestic interested parties on the record as to why the information would have been
impossible to summarise. Information subject to the European Union's claims was relevant, not
confidential and used by the authorities in the anti-dum ping investigation. While it is correct that the
text of Article 6.5.1 does not prescribe a specific fo rmat, it is clear that it requires that the summary
enables a reasonable understanding with the aim of enabling rebuttal.

1.3. MOFCOM failed to require a non-confiden tial summary or a statement of reasons why
summarisation of the statement by the Aviation Administration was not possible

 China violated Article 6.5.1 ADA due to MO FCOM's failure to require a non-confidential
summary or a statement of reasons explaining th e exceptional circumstances why summarization was
not possible with respect to the statement made by the Aviation Administration. China's argument
that the statement of exceptional circumstances ne eds only be made available to MOFCOM is based
on a misguided interpretation of Article 6.5.1 and th erefore be should be rejected. China's attempt to
invoke security concerns for the lack of summarization is ex post rationalization which contradicts the
facts on the record.

2. Claim under Articles 6.9, 6.4 and 6.2 ADA

2.1. Introduction

 Contrary to its obligations under the ADA Chin a failed to disclose the underlying data and the
methodology for price undercutting and price depr ession/suppression. China also failed to fully
disclose all essential facts which form the basis for the determination of the dumping margin for the
cooperating producer and the essential facts which form the basis for the determination of the residual
duty.

2.2. MOFCOM failed to disclose the underlying data and the methodology for price undercutting
and price depression/suppression

 MOFCOM failed to disclose the underlying data and methodologies it followed in
determining the existence of (i) price undercutti ng and (ii) price depression/suppression. Because the
underlying data and the methodologies for pr ice undercutting and price depression/suppression
constitute "essential facts", which form the basis for the decision whether to apply definitive measures
within the meaning of Article 6.9 ADA, China act ed inconsistently with Article 6.9 ADA by not
disclosing them prior to the final determination.

2.3. MOFCOM failed to disclose the calcu lation of the individual dumping margin

 The calculations relied upon by an investigati ng authority to determine the normal value and
export prices, as well as the data underlying those calculations, constitute "essential facts" forming the
basis of the investigating authority's imposition of fi nal measures within the meaning of Article 6.9.
The calculations and underlying data are facts that are "essential" to the determination of the existence
and level of dumping. Without this information, no affirmative dete rmination could be made and no
definitive duties could be imposed. China's ar gument that Smiths was provided with sufficient
information to replicate the calculations should be rejected. MOFCOM's disc losure at best allowed
Smiths's to guess or approximate the calculations, wh ich is not sufficient to meet the requirements of
Article 6.9.

2.4. MOFCOM failed to disclose the essential f acts under consideration regarding its calculation
of the "all others" dumping rate

 As confirmed by China's attempt to prove an ex post explanation of how the "all others" duty
rate was determined, MOFCOM failed to identify in its preliminary and final disclosures to the
European Commission the essential facts under consid eration regarding its calculation of the "all
others" duty rate and in so doing violated Articles 6. 9, 6.4 and 6.2. Interested parties can only assess
whether the investigating authority acts in a reas onable, objective and impa rtial manner, and hence
take an informed decision inter alia about the need for challenging it under Article 6.8 ADA, if they
have access to the essential facts under consideration whic h form the basis for the decision to resort to
a determination based on available facts. The Euro pean Union submits that this was not the case in
this investigation, which constitutes a failure to comply with Article 6.9 ADA.

3. Claim under Article 12.2.2 ADA

3.1. Introduction

 Neither in its public notice of the imposition of definitive measures, nor in a separate report,
did MOFCOM set forth sufficiently detailed explanati ons together with references to the matters of
fact and law and reasons which led to arguments being accepted or rejected with respect to the
determinations of normal value and injury, the est ablishment of causal link and the establishment of
the residual duty rate and the dumping margin for the cooperating producer.

3.2. Normal value determination

 MOFCOM did not provide any reasons in its public notice, which would address arguments
and evidence presented by Smiths in the course of the investigation concerning the normal value
determination. MOFCOM concl uded without any explanation that "the sales prices of Smiths
Heimann through affiliated distributors in the EU during the POI were clearly affected by the
affiliation relationship, and that Smiths Heimann did not have sufficient evidence" to prove otherwise.

3.3. Injury determination

 The ADA requires that authorities provide more than cursory assertions to justify their
decisions to impose definitive antidumping measures. China acted in violation of Article 12.2.2 ADA
because its final determination did not contain suff icient information regarding the price effects
analysis, but was instead limited to MOFCOM's c onclusions in that regard. MOFCOM furthermore
ignored the arguments, duly supported by evidence, raised by Smiths in relation to the factors as to the
state of domestic industry. MOFCOM should have provided a reasoned and ad equate explanation to
address all the arguments and evidence on the record about Nuctech's start-up situation, Nuctech's
aggressive pricing strategy and Nuctech's business expansion.

3.4. Establishment of the causal link

 Smiths listed several factors which MOFCOM should have considered in assessing the
existence of the causal link. The arguments rai sed by Smiths concerning factors for causation were
relevant, but have nonetheless not been addres sed adequately by MOFCOM in its Final
Determination.

3.5. Determination of the dumping margin for Smiths and the residual duty

 MOFCOM did not make available the calculati ons it performed for Smiths, which themselves
are the mathematical basis for arriving at the dumpi ng margins imposed by an investigating authority.
The requirement to pay due regard to the protection of confidential information can be respected by
including the information in separate reports. MO FCOM also failed to publish the rationale for its
decision to resort to facts available in calcula ting the residual duty, as well as the methodology it
applied in establishing the residual duty rate and data it relied upon.

4. Claim under Articles 3.1 and 3.2 ADA

4.1 The requirements imposed by Articles 3.1 and 3.2 ADA

 Nothing in previous panel reports supports the proposition that the investigating authority is
under no requirement to take into account the diffe rences between various types or models of the
product under investigation when examining th e effects of the dumped imports pursuant to
Articles 3.1 and 3.2 ADA. While Articles 3.1 and 3.2 ADA do not prescribe any specific
methodology, they require that, whatever methodolog y is chosen, the investigating authority must
ensure that a determination of injury is made on th e basis of "positive evidence" of the effects of the
dumped imports and involves an "objective examina tion" of such evidence. Second, it is also
uncontroversial that, as observed by the panel in EC – Pipe Fittings , the requirements imposed by
Article 2.4 ADA cannot be "transposed wholesale". But this does not imply that the investigating
authority may disregard all differences among prod uct types or models under Articles 3.1 and 3.2
ADA. The panel in EC – Pipe Fittings recognised expressly that it may be necessary to take into
account such differences when conducting a price undercutting analysis to the extent that they have "a
perceived importance to customers". Similarly, while the panel in EC – Fasteners noted that the
requirements of Article 2.4 ADA with respect to "due allowance" for differences affecting price
comparability were not applicable in the context of Articles 3.1 and 3.2 ADA, that panel did not imply
that any such differences are irrelevant under Artic les 3.1 and 3.2 ADA. Rather, the point made by
that panel, was that such differences could be ta ken into account by means other than making "due
allowance" in the sense of Article 2.4 ADA. For example, by defining product categories.

 MOFCOM did make a very precise "quantifica tion" of both the level of price undercutting
and the extent to which Nuctech's prices declined , which in turn provided the basis for MOFCOM's
finding of price depression/suppression. China cannot base its determination of injury on certain

quantitative findings with regard to the price e ffects of dumped imports and then, when the
consistency of those findings with Articles 3.1 a nd 3.2 ADA is challenged, argue that under the ADA
a finding of injury need not ha ve been based on those findings, bu t might instead had been based on
different considerations. MOFCOM 's Final Determination did not re ly on those other considerations,
but on the quantitative findings at issue, which mu st therefore be fully consistent with the
requirements imposed by Article 3.1 ADA.

 The report issued by the panel in China – GOES has confirmed that, when examining the
price effects of dumped imports, the investigating authority is required by Articles 3.1 and 3.2 ADA
to ensure that the prices used for the comparison ar e properly comparable. On that basis, that panel
concluded that the Chinese authorities had acted in consistently with Articles 3.1 and 3.2 ADA by
relying on the comparison of average unit values ( AUV) in order to establish the existence of price
undercutting without taking into account inter alia that "the relevant AUVs included products of
different grades, without any attempt by MOFC OM to adjust for diff erences in physical
characteristics".

4.2 MOFCOM did not conduct its analysis "in an objective and unbiased manner"

 A finding of "likeness" under Article 2.6 ADA does not render the differences between the
various types of scanners irrelevant under Articles 3.1 and 3.2

 Previous panels have clarified that there is no requirement under the ADA that each type or
model covered by an investigation must be "like" any other covered type or model. Therefore,
MOFCOM's finding that the subject product was "like" the equipment made in China neither implies
nor requires that each of the various product types c overed by the investigation is "like" any other
type. For that reason, a finding of "likeness" under Article 2.6 ADA does not exempt the investigating
authority from taking into account the relevant di fferences between product types when assessing the
price effects of dumped imports under Articles 3.1 and 3.2 ADA.

 In any event, it is manifest that the various ty pes of scanners covered by the investigation are
not "like" each other within the meaning of Article 2.6 ADA. The differences are particularly striking
between high-energy and low-energy scanners. In response to the detailed argumentation and
evidence submitted by Smiths, MOFCOM limited itsel f to provide a rather concise response. In
essence, MOFCOM gave three reasons for considering that low-energy scanners are fully comparable
to high-energy scanners. None of them stands even the most cursory examination.

China has provided no evidence of the existence of the pretended "single continuum". While
one might quibble about whether the dividing line should be drawn at precisely 300 KeV or at a
somewhat higher level, there is a wide and easily recognisable "gap" between high-energy and low-
energy scanners. The energy level of the scanners used for screening large objects, such as cargo
containers, trucks or railway carriages is always much higher than that of the scanners used for
screening baggage, parcels or other small objects. A nd this difference is always reflected in very
large price differentials. The distinction between high-energy and low-energy scanners is well-known
in the industry. Nuctech itself u ses the terms "high-energy". The ex istence of a distinct and large
"gap" becomes evident when comparing the images and technical specifications of the models shown
in Attachment 2 to Nuctech's Questionnaire res ponse, which Nuchtech described as its "major
products".

 In their own investigation, the EU author ities covered high-energy scanners, as well as some
low-energy scanners (those above 250 KeV). In doing so, they were exercising the discretion
accorded to the investigating authority under the A DA for defining the product under consideration.
This does not mean, however, that the EU authorities placed a "dividing line" at the level of 250 KeV
for the purposes of examining the price effects of the dumped imports. Unlike MOFCOM, the EU

investigating authorities did use a methodology for examining those effects which was adequate to
take fully into account all the relevant differences between the various types of scanners covered by
the investigation.

 Even assuming that, as alleged by China, th e dividing line between high-energy and low-
energy scanners was not "hard and clear", this could never be a valid justification for disregarding all
the differences among the various ty pes of scanners covered by the investigation. If as China appears
to be arguing now, MOFCOM had been of the view that the level of energy was, of itself, an
insufficient criterion for segmenting the product under consideration, then MOFCOM would have
been required, in order to comply with Article s 3.1 and 3.2 ADA, to take into account any other
relevant criteria, rather than taking the shortcut of disregarding completely all differences in physical
characteristics and uses affecting price comparability.

 The mere fact that a methodology is "unbiased", in the very limited sense given by China to
that term, is not sufficient to make it compliant with Articles 3.1 and 3.2 ADA. A methodology may
be "unbiased", in the sense postulated by China, and s till wholly inapt to yield meaningful results. In
any event, MOFCOM's choice of methodology was "b iased" even by China's own narrow standard.
High-energy scanners do not compete with low-energy scanners. Since there were no imports of
high-energy scanners, there was no reasonable ground for including Nuctech's sales of high-energy
scanners in the calculation of Nuchtec's average un it values. At the same time, MOFCOM was well
aware that doing so would make more likely a finding of price undercutting and price
depression/suppression.

 China dismisses the numerical examples pr ovided by the European Union for being
hypothetical. But the European Union cannot quantify the impact of the methodology applied by
MOFCOM because China has not di sclosed the necessary information. The purpose of the examples
was to demonstrate how even small differences or variations in the product mix can have a
considerable impact on the outcome of the me thodology applied by MOFCOM. The hypothetical
counter-examples offered by China would fail to rebut this. While criticising the EU examples, China
has failed to provide any evidence in order to show that, in practice, the use of the methodology at
issue had no adverse impact for Smiths.

 It is well-established that the complaining part y is not confined to the arguments made by the
exporter during the anti-dumping investigation. Moreover, MOFCOM never disclosed during the
investigation the averaging methodology that it u sed for assessing the prices effects of imports. To
the contrary, in one of the questionnaires addressed to Smiths, MOFCOM had explained that Smiths'
export prices would be compared by MOFCOM to th e prices for comparable models made in China
and requested Smiths to identify which domestic mode ls it considered to be comparable to its own
models. Furthermore, Smiths di d request repeatedly that MOFCOM exclude high-energy products
from the investigation on the grounds that they we re not comparable to low-energy scanners. Had
MOFCOM granted Smiths' request, it would have been unnecessary to take into account the
differences between the two categories of scanners at the stage of considering the price effects of
imports.

 This is the very first time that China has advan ced any suggestion to the effect that the use of
the methodology at issue was a response to Smiths' lack of cooperation. Moreover, contrary to
China's contention, the relevant issue is not whether the methodology applied by MOFCOM was the
"most reasonable" in view of the information supplie d by Smiths, but rather whether the use of that
methodology was "reasonable" at all. If the defici encies of the information supplied by Smiths had
made it impossible for MOFCOM to use any methodology which was compliant with the
requirements of Articles 3.1 and 3.2 ADA, MOFCOM should have given appropriate notice to Smiths
and, if necessary, resorted to "facts availabl e" in accordance with Article 6.8 ADA. MOFCOM,
however, did none of this.

 At any rate, it is incorrect, as a matter of fact, that MOFCOM had no option but to use the
averaging methodology at issue. In the first place, MOFCOM's findings of price
depression/suppression were based exclusively on pr ice data provided by Nuctech. Second, the
export price data for 2008 provided by Smiths as part of its response to MOFCOM's dumping
questionnaire would have been sufficient to allow MOFCOM to calculate unit average export prices
for all the models exported by Smiths to China. Indeed, MOFCOM, did calculate such unit prices per
model as part of the dumping margin calculation. Third, while it is true that Smiths did not supply the
annual average unit export prices on a model basis for 2006 and 2007, it did provide to MOFCOM the
annual average unit prices for all its export sales to China of the product under consideration made
during each of those two years. MOFCOM was well aware that Smiths did not export any high-energy
scanners to China and, therefore, that the annua l average unit prices for 2006 and 2007 reported by
Smiths did not include any such exports. In view of this, MOFCOM could, at a minimum, have
excluded high-energy scanners from the calculation of Nuctech's average unit prices for the same
years which were used in the price undercutting comparison.

5. Claims under Articles 3.1 and 3.4 ADA

5.1. MOFCOM failed to base its evaluation on positive evidence

 The European Union disagrees w ith China's characterisation of the scope of the EU's claim.
The European Union has not only contested the da ta reflected in MOFCOM's Final Determination
with respect to cash flow, investments and return of investment. There is more indicia on the record
questioning the reliability of the data employed by MOFCOM with respect to other injury factors,
profits and employment. China's explanation of the figures reflected in MOFCOM's Final
Determination is that they are the result of the verifications made to the information provided by
Nuctech. This cannot be it. Nowhere in its determ inations did MOFCOM alert interested parties to
those discrepancies or stated that some of the da ta collected was "modified" pursuant to the on-site
verification. Simply, there is no evidence of the fact China asserts in these proceedings.

5.2. MOFCOM failed to examine all factors listed in Article 3.4 ADA

 China did not examine the magnitude of the margin of dumping in the present case explicitly
or implicitly, contrary to the rep eated case-law in this respect and that equally applies in the present
case.

5.3. MOFCOM failed to take into account the di fferences between different types of the product
concerned when evaluating various injury factors

 There are considerable differences in physical characteristics and uses between high-energy
and low-energy scanners which also lead to differen ces in prices and cost of production. They do not
compete with each other and thus belong to distin ct markets. Thus, MOFCOM's finding that both
categories were "almost the same" is factually incorrect. Moreover, the European Union does not
argue that MOFCOM was required to carry out a separate examination of all factors having a bearing
on the state of the domestic industry per segment or sector. Rather, the European Union focuses its
argument primarily on injury factors relating to prices and costs. Further, the European Union
maintains that, in a situation like the present case, where the products made by the domestic industry
are so different, the combination of price and cost data relating to all categories (e.g., high-energy and
low-energy scanners) would lead to data which is not representative of the state of the domestic
industry as a whole. By combining information wi th respect to different product categories in the
context of the present investigation, MOFCOM failed to make an objective examination of the actual
state of the domestic industry.

5.4. MOFCOM failed to make a proper evaluati on of the overall development and interaction
among injury factors taken together

 MOFCOM wrongly characterised certain factor s as "negative", when seeing as "trends" and
in the specific context of the market and other factors. Moreover, MOFCOM failed to provide a
compelling explanation of whether and how the ove rwhelming majority of positive movements were
outweighed by any other factors and indices which mi ght be moving in a negative direction. China
does not dispute that the majority of factors showed a positive state of the domestic industry.
However, China argues that it put the positive factor s in context by stating that capacity, output, sales
volume and market share should be viewed in light of the context of the market, namely a fast
growing market. But this is not the examination th at is required in a situation where there is an
overwhelming majority of positive movements. The very compelling explanation is required in order
to show whether and how those positive factors we re outweighed by any other factors and indices
which might be moving in a negative direction. MOFCOM's Final Determination does not contain
such a balanced consideration. Indeed, a si mple opposition of factors (positive and negative)
separated by "however" does not amount to "a thor ough and persuasive explanation as to whether and
how such positive movements were outweighed by any other factors and indices which might be
moving in a negative direction during the IP". Moreover, it is quite telling that China does not dispute
the fact that MOFCOM did not refer and thus fa iled to examine some positive factors which were
relevant, such as productivity and wages. The failure to examine those positive factors again indicates
that MOFCOM failed to put all positive factors in the relevant context of the investigation at issue.

 In addition, when evaluating some injury f actors, MOFCOM made contradictory observations
in a not even-handed manner. Statements such as "severe" depression of sales revenue growth,
"serious" losses throughout the period, the rate of return being "negative throughout the period",
"consistent" net cash outflow, "diminished" inv estment and financing capacity, and the observed
reduction in employment, were partial or unfounded, in contradiction with the information and data as
previously found by MOFCOM.

 In the present case, the European Union main tains that MOFCOM failed to evaluate the
relevant data through placing it in context in terms of the particular evolution of the data pertaining to
each factor individually, as well as in relation to other factors examined. More concretely, MOFCOM
failed to address how and why domestic sales prices were decreasing, even in 2008 (by 46.7%), when
the import prices of the Subject Products c onsistently increased throughout the period
(including 2008, by 14%) and were higher than tho se of the domestic products in 2008. When import
prices were higher than domestic sales prices, the fact that domestic sales prices constantly decreased
indicates that domestic producers sacrificed potential pr ofits in order to increase their sales and gain
more market share. Indeed, otherwise, domestic producers could have increased their prices (and
profits) at least up to the (higher) level of the import prices. Further, MOFCOM ignored the fact that
Nuctech was growing well in excess of the growth in demand. In a situation where Nuctech was
expanding faster than domestic demand, in orde r to sell its products domestically Nuctech had to
reduce its domestic sales prices. Moreover, and impor tantly, in the face of positive trends in so many
injury factors, MOFCOM should have confirme d the basis for its own statement about the
"expectations" of the domestic indus try, and more so when such e xpectations were fundamental to
support its conclusion that the industry was depressed . Those "expectations" were key and relevant
context to support MOFCOM's injury determination. The European Union notes that China has failed
to address this issue in its submissions.

 Moreover, China failed to take into account a ll facts and arguments on the record relating to
the state of the industry . The three factors raised by Smith s (i.e., Nuctech's start-up situation,
Nuctech's aggressive pricing policy, and Nuctech's business expansion) were factors or indices having
a bearing on the state of the domestic industry within the meaning of Article 3.4 ADA. MOFCOM
failed to considered the three factors raised by Smiths having a bearing on the state of the domestic

industry. In view of the importance given to effects such as domestic sales prices, losses and
inventories, the European Union considers that MOFCOM should have provided a reasoned and
adequate explanation to address all the evidence on the record about Nuctech's start-up situation,
Nuctech's aggressive pricing strategy and Nuctech's business expansion.

5.5. Conclusion

 The European Union requests the Panel to find that MOFCOM's determination of injury is
inconsistent with China's obligations under Articles 3.1 and 3.4 ADA.

6. Claims under Articles 3.1 and 3.5 ADA

6.1. MOFCOM failed to properly examine the ca usal relationship between dumped imports and
injury

 The European Union maintains that MOFCOM 's characterisation of the volume of EU
imports as "large" or "great" was improper, partia l and non-even handed. Indeed, the import volume
of the Subject Products increased in absolute term s and in comparison with domestic consumption.
However, the increase of EU imports was much lower than the skyrocket trend showed with respect to
the domestic like products. The fact that domestic sales volume was booming in comparison to the
volume of EU imports, when put in relation with domestic consumption, was relevant evidence before
MOFCOM when making its determination about the "significance" of the volume of EU imports in
this case.

 MOFCOM's assessment of the prices of EU imports was also improper. The European Union
maintains that by attributing all the effects found with respect to domestic industry making both high-
energy and low-energy scanners to imports excl usively relating to low-energy scanners, MOFCOM
failed to carry out an appropriate attribution analysis in this case. The effects found with respect to an
industry that produces two different categories of pr oducts with wide price differences, such as cars
and buses, cannot be attributed to imports of car s or imports of buses exclusively. Since those
products do not compete with each other, the attri bution of the effects found with respect to both
categories in cases where only one category was imported is inconsistent with Article 3.5 ADA.

 MOFCOM also failed to provide a very compelling explanation in a case where there was no
correlation between import prices going up by almo st 10% and domestic sale prices going down by
73% during the POI. Quite telling as well, there was no correlation between EU import prices going
up in 2008 by 14%, even above domestic sales prices, when domestic sales prices went down by more
than 50% in the same year. MOFCOM failed to explain how import prices consistently going up and
reaching a level even above domestic sales prices c ould be the only cause of domestic sale prices
consistently declining by an amount significantly more substantial. This is the point we are making
and not, as China stated in its first written submi ssion, whether there should be a correlation in the
sense of overall coincidence between overall trends in imports and overall trends in injury factors.

 In its response to Question 49, China explains that Nuctech was "forced" to maintain its prices
at low levels in order to be able to compete with Smiths, who was able to capture additional market
share during the POI. Otherwise, according to Ch ina, Nuctech would have lost even more sales to
Smiths. But this story does not match with MO FCOM's findings. MOFCOM found that Nuctech had
increased its market share every year, beyond any in crease in the market share of EU imports in
relative terms. It also found that Nuctech had incr eased its sales volume and sales revenue every year
by more than 50%. In a context where EU im port prices were constantly increasing, the
European Union still wonders how MOFCOM's finding that such prices "forced" the domestic sales
prices to maintain their downward trend during the POI can stand the compelling, reasoned and
adequate explanation that is re quired from investigating authorities under Article 3.5 ADA. In a

market that was expanding (i.e., domestic consump tion was growing), the EU imports grew but the
domestic sales and output grew even more than th e growth of the EU impor ts. The downward trend
of domestic sales prices was not the consequence of the EU imports prices, but of Nuctech's
aggressive pricing policy and the fact that Nuct ech was expanding well in excess of the growth in
domestic demand. In any event, it cannot be said th at Nuctech was forced to maintain its prices low
in a situation where the EU import prices were above. Simply put, Nuctech decided to maintain its
low price policy also in 2008 in order to capture more market share in the years including and
preceding the Olympic games and other important events taking place in China.

 Consequently, with respect to the import pri ces, MOFCOM erroneously attributed the effects
observed on the domestic industry to EU imports, in particular by failing to distinguish between high-
energy and low-energy scanners, by relying on findings of price undercutting and price
depression/price suppression that were unreliable, a nd in any event by failing to provide a reasoned
and adequate explanation of how the increasing price of EU imports could force domestic sales prices
to go down.

6.2. MOFCOM failed to examine the relevance of other known factors

 MOFCOM made a pro-forma examination of other known factors. Interested parties (in
particular Smiths) raised other known factors in the course of the investigation, in particular the global
crisis in 2008, Nuctech's start-up situation, Nuctech 's aggressive pricing policy, Nuctech's aggressive
business expansion and the fair competition between Nuctech and other producers. MOFCOM's Final
Determination did not mention any of those factors, limiting its analysis to the pro-forma list of other
factors (most of them irrelevant to the present case) contained in the Anti-Dumping Questionnaire
addressed to Nuctech.

 The other factors raised by Smiths were "other known factors" under Article 3.5 ADA and
MOFCOM failed to examine the other known factors ra ised by Smiths. There is no explicit reference
as to why MOFCOM rejected the factual basis of the allegations made by Smiths. Even if there are,
those references were not supported by the evid ence on the record (as found by MOFCOM) or
directly contradicted the evidence brought by Sm iths without any referen ce to what evidence
MOFCOM relied upon to make its findings. MOFCOM remained silent on these factors and failed to
make an objective examination of the other kn own factors raised by Smiths in the present
investigation.

 Finally, MOFCOM failed to properly consider the arguments and evidence raised by Smiths
in connection with the other known factors that MOFCOM explicitly examined, in particular
Nuctech's export performance (i.e., that exports were the cause, not the cure, of Nuctech's financial
difficulties) and the product quality and technology factors.

6.3. Conclusion

 Based on the above, the European Union reite rates its views that MOFCOM's causation and
non-attribution analysis is inconsistent with Articles 3.1 and 3.5 ADA.

ANNEX E-2

EXECUTIVE SUMMARY OF THE SECOND WRITTEN
SUBMISSION OF CHINA

1. CLAIM 1: CLAIM UNDER ARTICLES 6.5.1, 6.4 AND 6.2 OF THE
AD AGREEMENT

1. The European Union claims that China vi olated Article 6.5.1 since MOFCOM failed to
ensure adequate non-confidential summaries with respect to product models referred to in the Petition,
Exhibits 8, 9, 10, 11 and 14 attached to the Petition and certain responses and attachments of
Nuctech's Questionnaire Response, and since MOFCOM failed to require the provision of a statement
of reasons explaining the exceptional circumstances why summarization was not possible with respect
to a statement of the Chinese Public Security Bur eau of the Civil Aviation Administration. China
submits that all these claims should be rejected.

2. As regards the product models in the Petiti on, described as "main models of the Subject
Product", China submits that Smiths was perfectly able to identify to which product type the chosen
models corresponded. In any case, taking into acc ount the context, the identification of the two
models as the "main models of the Subject Product" was sufficient to permit a reasonable
understanding that the data provided for normal valu e and export price were those of the subject
product. Finally, no further information could have been given without carrying the risk of disclosing
price information to other parties and making it po ssible for Smiths to identi fy the entity that had
supplied the information. As to Exhibits 8, 9, 10 and 11 to the Petition, China maintains that their
content is adequately summarised. Similarly, E xhibit 14 to the Petition clearly indicates its content
and is thus adequately summarised.

3. The non-confidential summaries of Attachments 14, 16, 17, 18 and 19 of Nuctech's Injury
Questionnaire Response are adequate since they corr ectly reflect the substance of the information
provided in confidence which was itself provided on a quarterly basis and since, in any case, annual
trends concerning the factors concerned were pr ovided in other attachments of the Questionnaire
Response. Moreover, Smiths was fully able to proper ly defend its interests during the investigation.
Similarly, the non-confidential summaries of the responses and attachments to Nuctech's Injury
Questionnaire Response which the European Union cl aims as being inadequate are sufficient to
permit a reasonable understanding of the information submitted in confidence. Furthermore, since
Smiths and the European Commission did not comp lain about the alleged insufficiency but
commented extensively on the injury determination, Smiths' rights of defense were not hampered.

4. Regarding the statement by the Chinese Pub lic Security Bureau of the Civil Aviation
Administration, MOFCOM duly scrutinised the st atement consisting of the written declaration
incorporated in the statement placed by MOFCOM in the Public Reading Room as well as further oral
explanation as regards the highly sensitive nature of the information concerning airport security to
MOFCOM during the hearing of domestic end-user s. MOFCOM was under an obligation to do so
before the document could have been placed in th e Public Reading Room. The fact that MOFCOM
itself placed the document in the Public Reading Room demonstrates that MOFCOM scrutinized and
accepted the explanation.

5. Thus, China fully complied with its obligati ons under Article 6.5.1 of the AD Agreement.
The claimed violations of Articles 6.4 and 6.2 wh ich are purely consequential to the Article 6.5.1
claims should therefore be rejected as well.

6. Even if a violation of Article 6.5.1 was found by the Panel with respect to Article 6.5.1, the
European Union's claims under Articles 6.4 and 6.2 have to be rejected since the European Union fails
to demonstrate a violation of Article s 6.4 and 6.2 of the AD Agreement. With respect to Article 6.4,
the European Union has not established that its cl aim meets the requirements under Article 6.4 of the
AD Agreement: the European Union has not identif ied which information in terested parties should
have been given the opportunity to see; if an adequate non-confidential summary was not in the file, it
was impossible and thus not "practicable" for MOFCOM to give to interested parties the opportunity
to see it; the European Union has failed to demons trate that the information was "relevant" and
"used" by MOFCOM and not confidential. Moreover, the European Union has failed to demonstrate
that interested parties requested to see each of the pieces of information concerned.

7. Regarding the claim under Article 6.2 of the AD Agreement, there is no automatic violation
of Article 6.2 in case of a violation of Article 6.5.1. Since the European Union has failed to
demonstrate why the fact that no adequate non-confidential summary was provided for each identified
item deprived Smiths of the full opportunity to defend its interests, its claim should be rejected.

2. CLAIM 2: CLAIM UNDER ARTICLES 6.9, 6.4 AND 6.2 OF THE AD AGREEMENT

8. The European Union claims that China violat ed Article 6.9 since China did not fully disclose
the essential facts which form the basis of its in jury determination and dumping determination and
that China, consequently, also violated Articles 6.4 and 6.2 of the AD Agreement. The
European Union makes four claims which should all be rejected.

9. The European Union first argues that Chin a violated Article 6.9 because MOFCOM did not
disclose the underlying data and methodology rega rding the price undercutting and price depression
analysis. This claim should be rejected. First, China submits that the methodology is similar to
reasoning. The methodology is the way facts are processed and is thus not a "fact". Moreover, the
methodology is certainly not an essential fact which forms the basis for the de cision whether to apply
definitive measures, taking into account the context of the injury determination. Regarding the
underlying evidence or underlying data, China su bmits that MOFCOM was under no obligation to
disclose the actual domestic prices underlying its pric e analysis. In particular, the non-disclosure was
required by the fact that there was only one do mestic producer and that such domestic prices
constituted confidential information. MOFCOM expressly explained that reason in its Final
Determination and provided a meaningful summary in the form of trends in the domestic prices in its
Preliminary Determination.

10. The second claim is that China did not disclo se essential facts regarding the normal value and
export price determinations. The European Union has confirmed that it will not make any argument
regarding the normal value determination. Regarding the export price determination, China notes that
MOFCOM fully disclosed to Smiths which adjust ments were made, the reasons for making such
adjustments as well as the level of such adjustme nts in the Preliminary Dumping Disclosure and the
Final Dumping Disclosure.

11. The third claim made by the European Uni on under Article 6.9 concerns MOFCOM's alleged
failure to provide to Smiths the dumping margin calculation. China submits that MOFCOM fully
explained to Smiths how the comparison between th e normal value and the export price was made in
the Preliminary and Final Dumping Disclosure to Smiths, which precisely identify the formula and
describe the methodology. Regarding the actual calculations made by MOFCOM for the normal
value and the export price, China submits that such calculations do not constitute "essential facts". In
any case, MOFCOM precisely identified the elements of the calculations in such a way that, even in
the absence of the calculation sheets, it was easy for Smiths to make the calculations themselves.

12. The fourth claim under Article 6.9 relates to MOFCOM's alleged fa ilure to disclose the
essential facts regarding the calculation of the residua l duty. China maintains that in its Disclosure
Documents, MOFCOM adequately informed the EU delegation of all the essential facts that formed
the basis for the determination of the residual duty. In particular, MOFCOM explained the basis for
the use of "facts available" and that it used "the sal es data of products of relevant models reported by
the respondent Company".

13. In conclusion, the European Union has failed to demonstrate a violation of Article 6.9. Since
the European Union's claims under Articles 6.4 and 6.2 are purely consequential to its claims under
Article 6.9, they should therefore be rejected as we ll. In any case, the Eur opean Union's claims under
Articles 6.4 and 6.2 have to be rejected since the European Union fails to demonstrate a violation of
Articles 6.4 and 6.2. Regarding Article 6.4, China submits that Articles 6.4 and 6.9 have different
scopes and, in particular, while Article 6.9 re quires an active disclosure by the investigating
authorities, Article 6.4 does not. Therefore, it is clear that a violation of Article 6.9 does not
automatically demonstrate that Article 6.4 has also been violated. The European Union fails to
establish the elements of its claim under Article 6.4 a nd, in particular, that Smiths requested to see the
information concerned. Regarding the claim under Article 6.2, China maintains that there is no
automatic violation of Article 6.2 in case there is a violation of Article 6.9. Since the European Union
did not demonstrate why the lack of disclosure of certain essential facts by MOFCOM deprived
Smiths of the fully opportunity to defend its interests, it has failed to make a prima facie case of
violation of Article 6.2 of the AD Agreement.

3. CLAIM 3: CLAIM UNDER ARTICLE 12.2.2 OF THE AD AGREEMENT

14. The European Union claims that China violat ed Article 12.2.2 because neither in its public
notice of the imposition of definitive measures, nor in a separate report, MOFCOM set forth
sufficiently detailed explanations for the definitiv e determinations on dumping and injury, together
with references to the matters of fact and law a nd reasons which led to arguments being accepted or
rejected. The European Union makes four different claims which should all be rejected.

15. The European Union first claims that MOFCOM failed to provide reasons for the rejection of
relevant arguments or claims concerning the norma l value determination. This claim should be
rejected since the Final Determination contains the reasons for the rejection of the arguments raised
by Smiths during the investigation with respect to th e relationship with its affiliated distributors. The
explanations of MOFCOM were amply sufficient in view of Smiths own express recognition that its
prices and sales process to affiliated distributors were clearly affected by the relationship.

16. Second, the European Union claims that MOFCOM failed to explain the methodology used
for the price undercutting and price suppression and to provide reasons for the rejection of arguments
or claims made with respect to the injury determ ination. As to the methodology used for the price
analysis, China submits that such methodology is not a "matter of fact" and is not "relevant" within
the meaning of Article 12.2.2 of the AD Agreemen t. Not any information relating to the injury
determination constitutes "relevant information on the matters of fact and law and reasons which have
led to the imposition of final measures". In particular , in light of Article 12.2.1 (iv), since there is no
obligation to use a calculation methodology to consid er what have been the effects of the import
prices on domestic prices in Article 3, there is no basis for an obliga tion to disclose such a
methodology. Furthermore, the explanation of the methodology is not necessary to discern and
understand the reasons for concluding that anti-dum ping measures must be imposed and is thus not
required pursuant to Article 12.2.2. As to MOFCOM 's alleged failure to provide the reasons for the
rejection of Smiths' arguments concerning the inju ry analysis, China notes, with respect to the
arguments concerning the credibility of Nuctech's da ta, that they cannot be regarded as "relevant"
within the meaning of Article 12.2.2 and that, in any case, they were fully addressed in the Final
Determination. As to the other arguments, China co nsiders that despite the European Union's reply to

Panel's Question 14, it is still not in a position to understand which specific arguments of Smiths the
European Union refers to and therefore, since th e European Union has failed to properly identify the
facts of its claim, its claim should be rejected.

17. The third claim concerns MOFCOM's alleged fa ilure to provide reasons for the rejection of
Smiths' arguments concerning the causal link. The European Union has failed to identify the precise
arguments that Smiths would have raised and wh ich MOFCOM allegedly failed to address. The
European Union has thus not substantiated its claim, which should therefore be rejected. In any case,
the Final Notice must only contain the reasons for the acceptance or rejection of relevant arguments or
claims. It is for the European Union to establish th at the arguments raised by Smiths were "relevant".
Since it failed to do it, its claim should be rejected.

18. The fourth claim of the European Union is th at China acted inconsistently with Article 12.2.2
by failing to make available the calculations it perfo rmed for Smiths and its underlying data and the
calculations and underlying data for the residual dut y. China submits that the dumping calculations
and their underlying data do not constitute "relev ant information on matters of fact and law and
reasons which have led to the imposition of the fina l measures". Indeed, Article 12.2.1 only requires
the final notice to contain the margins of dumping established and a full explanation of the reasons for
the methodology used, but not the calculations and the underlying data. Furthermore, such
calculations are not necessary to understand the reas ons why the investigating authority imposes anti-
dumping measures. Finally, the dumping calcul ations and their underl ying data constitute
confidential information that can not be included in the Public Notice or in a Separate Report within
the meaning of Article 12.2.2 of the AD Agreement.

19. For all the reasons set out above, China s ubmits that the European Union's claims under
Article 12.2.2 should be rejected.

4. THE DISTINCTION BETWEEN SO-CALLED "LOW-ENERGY" AND "HIGH-
ENERGY" SCANNERS IS ARTIFICIAL AND IRRELEVANT

20. The European Union bases several claims on th e argument that MOFCOM failed to take into
account the existence of two alleged categories of sca nners, i.e. "low-energy" scanners (scanners with
an energy of or below 300 KeV) and "high-energy" scanners (scanners with an energy level
exceeding 300 KeV). The European Union claims th at there are clear-cut differences between these
two "categories" of scanners in terms of physi cal characteristics, uses, technological features,
manufacturing processes and prices. As China explai ns, this is not so. In fact, there are many
examples of scanners with an energy level of or below 300 KeV which have the characteristics that
Smiths described as belonging to the scanners with an energy level above 300 KeV and vice-versa.
This demonstrates the artificial nature of this distinction.

21. As to the differences in physical characteristi cs, China provides examples showing that: there
are no striking physical differences between "low-e nergy" and "high-energy" scanners; scanners of a
certain energy level do not have a standard weight; it is not correct that "high-energy" scanners are
many times larger and heavier than low-energy scanne rs, that the products are completely different in
construction and that the installation of "high-en ergy" scanners is a construction project requiring
several days or weeks by an experienced crew; it is not correct that "low-energy" scanners necessarily
contain a conveyor system supporting a load of onl y 50 Kg to 2 tonnes and that if a "high-energy"
scanner contains a conveyor, it is installed apart from the rest of the system.

22. Regarding the uses of scanners, there is no particular use which would be specific for
scanners below 300 Kev and scanners above 300 KeV. Furthermore, the European Union incorrectly
alleges that "low-energy" scanners would be used for screening "small parcels" while "high-energy"
scanners would be used for screening larger objects.

23. Furthermore, the alleged differences in t echnological features, mechanical features and
manufacturing process again are factually incorrect. Fi nally, with respect to prices, China shows that
the European Union incorrectly states that the pri ce of scanners with an energy level above 300 KeV
is necessarily higher than the price of scanners with an energy level of or below 300 KeV. In fact, the
price of a scanner depends on several factors, including its physical characteristics, uses,
configuration, quality, etc.

24. In sum, China demonstrates that the fact th at a scanner has an energy level below or above
300 KeV does not imply that it has certain physical ch aracteristics, specific uses or prices. In fact,
each producer offers a range of models of scanners, which vary in terms of their use, their physical
characteristics, their prices, etc. It is not possi ble to identify two clearly different categories of
scanners on the basis of their energy level.

5. CLAIM 4: CLAIM UNDER ARTICLES 3.1 AND 3.2 OF THE AD AGREEMENT

25. The European Union claims that China violated Articles 3.1 and 3.2 of the AD Agreement
since MOFCOM used in its price undercutting and price suppression analysis a methodology which
involved the comparison of weighted average unit va lues for the entire range of products covered by
the investigation. According to the European Un ion, this methodology was manifestly inadequate
because it failed to take into account the existen ce of considerable differences among the products
covered by the investigation, and in particular between "high-energy" and "low-energy" scanners.
China submits that these claims should be rejected.

26. First, to the extent that the European Union' s claim is merely based on the argument that since
there were physical differences between diffe rent types of products which affected price
comparability, such differences should have been taken into account, it must fail.

27. Second, the European Union does not demonstrate that MOFCOM's price analysis was not
"objective" in that MOFCOM did not ensure an ev en handed treatment of the information and data on
the record of the investigation. In particul ar, China notes that MOFCOM did not in any way
manipulate data or figures. MOFCOM applied th e same methodology for the Subject Product and the
Like Product including in the weighted average un it all data relating to a ll models falling in the
Subject Product and in the Like Product. Thus MOFCOM ensured an even-handed treatment of the
information and data on the record. Moreover, th e use of the weighted average unit methodology was
reasonable and unbiased. Since Smiths never requested that certain adjustments had to be made with
respect to the price analysis carried out by MO FCOM, there was no reason for MOFCOM to consider
that the use of averages was unreasonable. Furtherm ore, the claim is based on a factually erroneous
premise, namely that there are considerable di fferences between "low-ene rgy" and "high-energy"
scanners and that there are very large price differences between both types of scanners. Given that
there are no clear-cut price differences between scanne rs of an energy level of or below 300 KeV and
scanners of an energy level above 300 KeV, ther e can be no bias even if the imported scanners
consisted only of scanners of an energy level of or below 300 KeV while domestic scanners consisted
of scanners of an energy level below and above 300 KeV. Finally, the use of the weighted average
unit methodology was the most reasonable methodology av ailable in view of the deficient and limited
information and data provided by Smiths.

28. For all the reasons set out above, China s ubmits that the European Union's claims under
Articles 3.1 and 3.2 should be rejected.

6. CLAIM 5: CLAIM UNDER ARTICLES 3.1 AND 3.4 OF THE AD AGREEMENT

29. The European Union claims that China violated Articles 3.1 and 3.4 of the AD Agreement
because it failed to make an objective examination, on the basis of positive evidence, of the effect of

the dumped imports on prices in the domestic market for like products and the consequent impact of
these imports on domestic producers of such products, including the factors listed in Article 3.4. The
European Union makes four sets of claims with r espect to the injury determination which should all
be rejected.

30. First, the European Union claims that MO FCOM failed to base its evaluation on "positive
evidence" since the trends provided by MOFCOM in its findings about certain injury factors do not
coincide with the trends provided by Nuctech. Ch ina explains that the findings made by MOFCOM
regarding the various injury factors were based on the figures and data provided by Nuctech as
adjusted where necessary after ca reful examination and scrutiny a nd thus were based on "positive
evidence". These data were available to all parties since they have been reported and examined by
MOFCOM in the Preliminary Determination, Injury Disclosure and the Final Determination.
Furthermore, MOFCOM expressly indicated in its Preliminary Determination that supplementary
evidence and material had been provided by Nuctech after verification.

31. The European Union's second claim concerns MOFCOM's alleged failure to examine the
magnitude of the margin of dumping. MOFCOM, how ever, examined that factor and found margins
that exceeded the " de minimis" threshold of Article 5.8 of the AD Agreement as set out clearly in the
Final Determination.

32. The European Union's third claim that MOFC OM failed to make an objective examination of
the state of the domestic industry because it failed to take into account the differences between "high-
energy" and "low-energy" scanners when evaluating vari ous injury factors is to be rejected as well.
The claim lacks any factual basis since there are no clear-cut and/or considerable differences in
physical characteristics, uses or prices between "hi gh-energy" and "low-energy" scanners. This claim
also lacks any legal basis since the analysis of the impact of the dumped imports on the domestic
industry pursuant to Article 3.4 must focus on the domestic industry as a whole. There is no
requirement for the investigating authority to carry out a separate analysis for allegedly different
categories of the like product.

33. Fourth, the European Union claims that MO FCOM failed to make a proper evaluation of all
injury factors in context for three reasons which should all be rejected. China makes the following
two observations.

34. First, MOFCOM provided a reasoned and reas onable explanation as to how and why the facts
and elements on the record support its finding of in jury. MOFCOM's analysis shows that it properly
examined all the factors in context. Agains t the background of a ra pidly expanding demand and
growing market with logical positively evolving capacity, output, sales and market share, MOFCOM
explained how the factors showing a negative tre nd supported a finding of injury. MOFCOM found
that while the price of the EU imports increased by 9%, from 2006 to 2008, the import prices
significantly undercut the domestic prices in 2006 and 2007 and that, even if in 2008 the import price
was slightly above the domestic price, it remained at a low level and prevented Nuctech from reaching
profitability. It also found that the sales impor ts increased by 88% and captured additional market
share in a rapidly expanding market. Thus, Nuctech was forces to keep low prices in order to remain
competitive.

35. Second, the European Union's argument that MOFCOM failed to take into account all facts
and arguments on the record relating to the state of the domestic industry, in particular the alleged
start-up situation and aggressive pricing policy of Nuctech, should equally be rejected. China
maintains that these elements do not constitute fact ors or indices having a bearing on the state of the
domestic industry within the meaning of Article 3.4. In any case, they were not relevant in assessing
the impact of the dumped imports on the state of the domestic industry.

36. Regarding the alleged start-up situation of Nuctech, the elements provided by Smiths during
the investigation appear to contradict each other, are not in line with the arguments put forward by the
European Union and are unsubstantiated by any eviden ce. A detailed analysis of Smiths' allegations
concerning the alleged start-up situation of Nuct ech shows that these allegations are either not
supported by any evidence or the evidence referred to does not in any way demonstrate that Nuctech
was in a start-up situation. In fact, China s ubmitted evidence showing that Nuctech was producing
scanners of an energy level below 300 KeV well before 2006. Finally, the very fact that Nuctech
made investments does not demonstrate that it was in a start-up situation.

37. Regarding Nuctech's alleged aggressive prici ng policy, the allegations made by Smiths during
the investigation on that issue and to which the Eu ropean Union refers are unsubstantiated. Moreover
the argument is unconvincing.

38. Obviously, not every factor raised by an in terested party needs to be examined by the
investigating authority but only those that constitu te "relevant economic factors and indices having a
bearing on the state of the industry". In the ab sence of any evidence showing that these elements
constitute such "relevant economic factors", MOFCOM was not required to examine them in its injury
analysis.

39. For all these reasons, the European Uni on's claim under Articles 3.1 and 3.4 should be
rejected.

7. CLAIM 6: CLAIM UNDER ARTICLES 3.1 AND 3.5 OF THE AD AGREEMENT

40. The European Union claims that MOFCOM's determination of the causal link between the
dumped imports and the material injury found is inconsistent with Articles 3.1 and 3.5 of the
AD Agreement for two main reasons which should both be rejected.

41. First, the European Union claims that MOFCOM failed to properly examine the causal
relationship between dumped imports and the material injury found in three aspects.

42. Regarding the volume of dumped imports, the European Union claims that the evidence on
the record indicated that the import volume was not so "large" or "great" when seen in the context of
domestic consumption and domestic sales volume. Ch ina submits that Article 3.2 only requires the
investigating authority to consider whether there has been a significant increase in dumped imports in
absolute terms or relative to prod uction or relative to consumption. No additional obligation can be
added. Furthermore, MOFCOM took into consider ation the volume of imports in the context of
domestic consumption and the domestic sales volume. Finally, the European Union fails to explain
why the fact that the domestic sales volume is increasing would have a bearing on the causal link
between the dumped imports and the material injury found.

43. Regarding the alleged distinction between "low-energy" and "high-energy" scanners, China
submits that there is no obligation in Article 3.5 to carry out separate injury/causation analysis for
"low-energy" and "high-energy" sca nners. Furthermore, in any case, since the factual premise on
which the European Union bases its claim is inco rrect, it is not even necessary to examine whether
Article 3.5 contains such an obligation.

44. With respect to MOFCOM's analysis of the import prices, China notes that the negative effect
of the import prices on the domestic prices may take the form of price undercutting or price
depression or price suppression. In this case, MO FCOM found price undercu tting in 2006 and 2007
and, while there was no undercutti ng in 2008, price suppression was found. China also notes that the
relevant point is not the trend followed by the import prices and the domestic prices separately but the
interaction between both, including the level of the pr ices. Furthermore, China maintains that what is

relevant is the "overall trends in imports" and the "overall trends in serious injury factors".
MOFCOM's analysis shows that the downward pressure is the result of Smiths' low prices combined
with the rapid increase in the volume of imports and market share.

45. Second, the European Union claims th at MOFCOM's non-attribution analysis was
inconsistent with Articles 3.1 and 3.5 since, in particular, MOFCOM ignored other known factors
raised by Smiths and several arguments made by Sm iths in this context. This claim should be
rejected. As to the other known factors raised by Sm iths to which the European Union refers, namely
the global economic crisis, Nuctech's aggressive business expansion, fair competition, Nuctech's start-
up situation and Nuctech's aggressive pricing policy, China submits that to the extent these factors
were presented by Smiths without appropriate ev idence, they cannot be regarded as constituting
another known factor within the meaning of Artic le 3.5. In any case, these factors were either
examined by MOFCOM during the investigation or there was no need to exam ine them because they
rested on a factual assumption that had already been rejected by MOFCOM.

46. The European Union's claims under Articl es 3.1 and 3.5 should therefore be rejected.

8. CONCLUSION

47. China requests the Panel to reject all of th e European Union's claims and arguments, finding
instead that, with respect to each of them, China acted consistently with all its obligations under the
AD Agreement and the GATT 1994.

ANNEX F

ORAL STATEMENTS OR EXECUTIVE SUMMARIES THEREOF, OF
THE PARTIES AT THE SECOND SUBSTANTIVE MEETING

Contents Page
Annex F-1 Executive Summary of the Op ening Statement of China at the
Second Meeting of the Panel
F-2
Annex F-2 Executive Summary of the Op ening Statement of the European
Union at the Second Meeting of the Panel
F-11
Annex F-3 Closing Statement of the European Union at the Second Meeting of
the Panel (BCI redacted)
F-19
Annex F-4 Closing Statement of China at the Second Meeting of the Panel F-22

ANNEX F-1

EXECUTIVE SUMMARY OF THE OPENING STATEMENT OF
CHINA AT THE SECOND MEETING OF THE PANEL

I. THE EUROPEAN UNION'S CLAIM UNDER ARTICLES 6.5.1, 6.4 AND 6.2 OF THE
AD AGREEMENT

1. The European Union claims that China vi olated Article 6.5.1 since MOFCOM failed to
ensure adequate non-confidential summaries of vari ous elements of the Petition and of Nuctech's
Questionnaire Response or to require a statement of reasons explaining exceptional circumstances
why summarization was not possible.

2. First, with regard to the non-confidential su mmaries of the product models in the Petition, the
European Union distorts China's argument when st ating that China has alleged that the summaries
were adequate because greater detail would have di sclosed confidential information. China did not
make such an argument. China submitted that the description as "main models" was adequate since it
gave sufficient detail to understand the informati on submitted in confidence. The fact that the
provision of further detail would have led to the disclosure of confidential information is only an
additional observation.

3. Second, with respect to Exhibits 8, 9, 10, 11 and 14 to the Petition, contrary to what the
European Union argues, the obligation under Article 6.5.1 of the AD Agreement does not require the
disclosure of the "type of evidence". Indeed, Article 6.5.1 only requires that the summary be in
sufficient detail to permit a reas onable understanding of the "substa nce" of the information which
refers to the content as opposed to the form. Moreover, the European Union's allegation that the result
of China's reasoning is that it would be the responsibi lity of the interested parties to piece together the
information into a summary is groundless since Ch ina has demonstrated where precisely in the
Petition the summaries could be found in the corresponding sections of the body of the Petition.

4. Third, the argument that the quarterly indexes in Attachments 14, 16, 17, 18 and 19 of
Nuctech's Questionnaire Response are insufficient summaries since MOFCOM based itself on annual
trends in the investigation should be rejected. How data were processed by MOFCOM is not relevant
in order to assess whether a non-confidential summary is meaningful. Furthermore, the fact that both
Smiths and the European Union commented extensiv ely on MOFCOM's findings of injury and never
complained about a lack of appropriate summary of data in Nuctech's Questionnaire Response shows
that Smiths was fully able to properly defend its interests during the investigation.

5. Fourth, the European Union's arguments c oncerning certain responses and attachments of
Nuctech's Questionnaire Response should equally be re jected. Where the confidential information is a
reply to a yes/no question, it is obvious that a summary cannot be provided without disclosing the
confidential information and therefore a statement of reason is not required. As to the reply to the
other questions, the non-confidential version cons titutes an adequate summary of the information
submitted in confidence.

6. Fifth, regarding the Statement of the Chin ese Public Security Bureau of Civil Aviation
Administration, contrary to what the European Un ion alleges, China pointed out that the record
included a statement of reason which was supplemen ted orally. Furthermore, the European Union
erroneously claims that there would be a cont radiction between the argument invoked about the
inherently sensitive character of the information and the request included in the public file. Indeed, the
second sentence of the request included in the public file which contains the statement of reason why

summarization was not possible invokes the "nature of the information". It refers to the highly
sensitive character of the information relating to air transport safety as this flows from the name of the
entity itself. There is therefore no contradiction. Finally, the European Union manifestly ignores the
fundamental differences regarding safety between railway and air transport sectors when it claims that
the fact that the railway administrations did not inv oke safety or the risk of material adverse effects
demonstrate that these reasons could not objectively justify why it was impossible to summarize the
information concerned.

7. The European Union's claims under Articles 6. 4 and 6.2 should be rejected as well. China
refers to the detailed arguments presented in its earlier submissions.

II. THE EUROPEAN UNION'S CLAIM UNDER ARTICLES 6.9, 6.4 AND 6.2 OF THE
AD AGREEMENT

8. The European Union's claims under Article 6. 9, 6.4 and 6.2 of the AD Agreement should all
be rejected.

9. China will start with the European Union' s claim that MOFCOM failed to disclose the
methodology and underlying data for price undercutting and price suppression.

10. First, with respect to the methodology used by MOFCOM for the price undercutting and price
suppression analysis, the European Union claims that this methodology is a "fact" since it is not "legal
reasoning" and that there can be no other category than "facts" and "reasoning". This is manifestly
wrong since "reasoning" is not limited to "legal reasoni ng" and since there is no indication that there
can only be two categories. The methodology used by MOFCOM is similar to "reasoning" and
reflects the way facts were being processed or orga nised and thus does not constitute a "fact". The
Panel's findings in EC – Salmon, contrary to what the European Union argues, do not support the
view that the methodology used by MOFCOM should be regarded as an e ssential fact. The words
"essential" or "necessary" refer to issues for whic h a determination is mandatory under the AD
Agreement and Article 3.2 does not refer to any "methodology" or type of comparison that would
need to be undertaken.

11. Second, regarding the underlying data, contra ry to what the European Union argues, China
did not state that the essential facts are limited to conclusions that the inve stigating authority has
reached. Furthermore, China notes that the European Union's claim is rather vague and unclear as it
never clarified which underlying data MOFCOM failed to disclose. To the extent that the underlying
data which, according to the European Union, s hould have been disclosed are Nuctech's domestic
prices, such disclosure was not possible for reasons of confidentiality. MOFCOM, however, disclosed
domestic price information in the form of tre nds. The entirely new argument that MOFCOM should
have disclosed prices ranges to show that domestic and imported prices were comparable is misplaced
in the context of an Article 6.9 claim and instead re lates to the form in which certain data could have
been summarized within the meaning of Article 6.5.1 of the AD Agreement.

12. The claim concerning the alleged lack of di sclosure of the calculation of Smiths' dumping
margin should equally be dismisse d. As a preliminary remark, China notes that the European Union
has extended the scope of its claim. Indeed, the Eu ropean Union has now started to claim a lack of
disclosure of data on transactions and adjustments us ed in the calculation of normal value and export
price while, in its Reply to Question 11 from the Panel, the European Union had stated that it will not
make arguments with respect to a lack of disclos ure regarding the normal value determination. This
aspect of the claim should therefore be rejected by the Panel. In any case, since the European Union
did not submit any argument concerning this claim, it has failed to make a prima facie case.

13. Assuming that the data on transactions and adjustments used to calculate the normal value
and export price are "essential facts", MOFCOM met its disclos ure obligation since it precisely
identified the data used for the determination of th e normal value and the export price, the nature and
level of the adjustments, it explained the methodol ogy followed to make the comparison between the
normal value and export price and provided a table which reported th e data of normal value, export
price, quantity, CIF price and dumping margin fo r each model of the Subject product. The disclosure
was made in MOFCOM's customary disclosure method, i.e. a narrative disclosure, which is consistent
with Article 6.9 that does not prescribe a specific form for the disclosure.

14. The claim regarding the deficient disclosur e concerning the calculation of the "all others"
dumping rate should also be dismissed. While Chin a already addressed all arguments put forward by
the European Union, the latter did not reply to any of China's arguments but merely claimed they were
"misguided". China has shown that MOFCOM disclo sed all the essential facts in relation to the all
others duty rate.

15. As to the consequential claims under Articles 6.4 and 6.2, the European Union has failed to
demonstrate precisely how a violation of Article 6. 9 also amounts to a violation of Article 6.4 and
Article 6.2 for each item specifically. With respect to its Article 6.4 claim, the European Union even
fails to precisely identify the "information" fo r which MOFCOM should have provided to the
interested parties timely opportunities to see and a fortiori that such information was not confidential.

III. THE EUROPEAN UNION'S CLAIM UNDER ARTICLE 12.2.2 OF THE AD
AGREEMENT

16. The European Union's claims under Article 12.2.2 of the AD Agreement should also be
rejected in their entirety.

17. China will not comment on the first claim re lating to the absence of reasons in the public
notice which led to arguments being accepted or re jected concerning the normal value determination
since no new argument has been developed by the European Union.

18. As to the second claim which relates to the injury determination, China notes that, with
respect to the methodology used, not every question or issue which arises during an investigation
must necessarily be regarded as having led to the imposition of the anti-dumping duty within the
meaning of Article 12.2.2. The information provided in the Final Determination concerning the price
analysis is detailed, precise and complete and provides sufficient background and reasons to
understand MOFCOM's injury determ ination. As to the arguments in relation to the injury
determination that would have been made by Smith s during the investigation, China notes that it is
still not in a position to understand which specific ar guments of Smiths the European Union refers to
and cannot therefore comment on this claim. China can only make two general comments. First, not
all arguments of an interested party can automatical ly be regarded as "relev ant" merely because they
were raised in the context of the injury determination. Second, arguments concerning a factor which is
not a factor having a bearing on the state of the industry within the meaning of Article 3.4 can
certainly not be regarded as "relevant" within the meaning of Article 12.2.2 of the AD Agreement.

19. The European Union's third claim relates to sev eral comments raised by Smiths with regard to
the determination of the causal link. This claim should be rejected since these comments were not
properly identified and the claim remains unsubstantiate d. On substance, the European Union fails to
demonstrate that the arguments were relevant. In any case, since Smiths did not substantiate its
comments by relevant evidence, there was no obliga tion for MOFCOM to examine them in the Final
Determination.

20. The last claim concerning the calculation of Smiths' dumping margin and the determination of
the residual duty should also be rejected. The Eur opean Union makes a new line of arguments with
respect to the determination of the residual duty, namely that MOFCOM failed to publish the rationale
for its decision to resort to facts available in calculating the residual duty. The Final Determination
contains, however, MOFCOM's explan ation of its decision to resort to facts available in calculating
the residual duty. As to the calculations and th e underlying data, MOFCOM was under no obligation
to include them in its Final Determination.

IV. THE EUROPEAN UNION'S CLAIM UNDER ARTICLES 3.1 AND 3.2 OF THE AD
AGREEMENT

21. China will address several issues with respect to the European Union's claim under Articles
3.1 and 3.2.

22. First, China notes that the European Union h as changed the focus of its claim. The European
Union's claim in its First Written Submission mainly focused on the existen ce of differences between
"high-energy" and "low-energy" scanners. The Eur opean Union claimed that the use of weighted
average unit values was inadequate due to consider able differences between "high-energy" and "low-
energy" scanners. China pointed out that the distin ction between scanners on the basis of the energy-
level is purely artificial. China noted that there are no clear-cut differenc es between the two product
categories in terms of their physical characteristics, uses, technological features, manufacturing
processes and prices. Thus, to the extent that the European Union's claim is based on this factually
incorrect premise it must necessarily fail.

23. The European Union now seems to acknowle dge that there is no clear-cut dividing line
between scanners with an energy level of or be low 300 KeV and scanners with an energy level above
300 KeV. It has therefore decided to focus its cl aim on the existence of differences between product
types in general. It claims that MOFCOM should have taken these differences into account in its price
effects analysis.

24. The European Union fails, however, to precisel y identify which differences should have been
taken into account in the price effects analysis. A re ference to differences in physical characteristics,
uses and prices in the abstract is not sufficient to properly substantiate a claim. Without precisely
identifying the differences, the European Union di d not and cannot establish that MOFCOM failed to
make an objective examination in the sense that it favoured the interests of certain interested parties in
its injury analysis.

25. Second, the European Union claims that Ch ina violated Article 3.1 since the use of the
average unit value methodology was "inadequate" du e to the "highly heterogeneous" nature of the
product. The requirement under Article 3.1 is, however , whether the investigating authority has made
an "objective examination" based on "positive eviden ce" and not whether the use of a methodology is
adequate.

26. MOFCOM ensured an even-handed treatment of the information and data on the record since
it did not manipulate or select in any way the data a nd information used in the price effects analysis.
The European Union's claim that since there were no imports of "high-energy" scanners and that
MOFCOM was allegedly aware that including su ch scanners would make a finding of price
undercutting and price depression/suppression more likely, MOFCOM intentionally selected to
include certain models to achieve a certain result, is incorrect. It is based on the artificial distinction
between "low-energy" and "high-energy" scanne rs and on the erroneous assumption that "high-
energy" scanners are always more expensive than "low-energy" scanners. Moreover, the European
Union did not provide evidence of the absence of imports of "high-energy scanners" over the entire
POI, thereby failing to substantiate its claim concer ning price undercutting findings. Finally, contrary

to what the European Union claims, the product mix does not and cannot affect findings on price
suppression.

27. Furthermore, the European Union does not show that MOFCOM's use of the average unit
value methodology favoured the interests of the domestic industry. Indeed, the use of such a
methodology cannot be found non-objective or biased merely because the product under investigation
included different types or models.

28. Third, contrary to the European Union's allegation, the differences between the dumping
margin determination pursuant to Ar ticle 2.4 and the price effects analysis pursuant to Article 3.2 of
the AD Agreement are important to properly interpre t the obligations of Articles 3.2 and 3.1 of the
AD Agreement and to not unduly impose obligations on WTO Members that do not flow from this
provision.

29. Fourth, the European Union's argument th at MOFCOM price effects examination was not
objective is merely based on a hypothetical situati on which in any case would not affect MOFCOM's
findings regarding "price suppression". In the present case, MOFCOM found price suppression, which
is characterized by the relationship between the co sts of production and the prices. For a given year,
both the costs of production and the prices are base d on data relating to the same set of products.
Thus, the use of weighted average unit values cannot magnify the effects of price suppression or show
price suppression while there is none, as claimed by th e European Union. Indeed, the fact that the
product mix varies or may vary over the POI cannot impact the assessment of price suppression since
it depends on whether the prices of a certain product mix have or have not been able to match
increases in the costs or to follow decreases in the costs for the same product mix.

30. Regarding China's argument that Smiths did not claim during the investigation that
MOFCOM should have taken the di fferences in products types into account in its price effects
analysis, the European Union unconvincingly attempts to justify this failure by stating that the
dumping questionnaire for Smiths suggested that MOFCOM intended to make a model-to-model
comparison. This argument is unconvincing. The Eu ropean Union's additional argument that Smiths'
request to exclude high-energy products from the scope of the investigation should have alerted
MOFCOM to the importance of the differences betw een "low-energy" and "high-energy" scanners for
the price analysis is equally irrelevant. Knowi ng that MOFCOM decided not to exclude the latter
from the scope of the investigation, Smiths should have made comments on this point in the price
effects context. Moreover, Smiths never claimed dur ing the investigation that there were important
and serious differences among diffe rent types of products and a fortiori that such differences should
have been taken into account by MOFCOM for the price effects analysis.

31. The European Union disputes China's argumen t that the use of the weighted average unit
methodology was the most reasonable methodology av ailable in view of the deficient and limited
information and data provided by Smiths. According to the European Union, the issue is whether the
use of the methodology was reasonable at all. China submits that an "objective examination" depends
on the specific circumstances of the case, including the information and data that were available to the
investigation authority. In this case, the methodol ogy based on weighted average data per year was
objective since weighted average figures per year were the only available data.

32. In conclusion, China reiterates that MOFCOM 's consideration of the price effects of the
dumped imports on the domestic prices was fully c onsistent with China's obligations pursuant to
Articles 3.1 and 3.2 of the AD Agreement.

V. THE EUROPEAN UNION'S CLAIM UNDER ARTICLES 3.1 AND 3.4 OF THE AD
AGREEMENT

33. China will now address the European Uni on's claims under Articles 3.1 and 3.4.

34. In the first place, the European Union has cl aimed that MOFCOM failed to base its evaluation
on positive evidence because of alleged discrepan cies between the data in MOFCOM's Final
Determination and the informa tion submitted by Nuctech or available from other sources. The
European Union has extended its claim to the injury factors sales revenue and profit. The alleged
discrepancies between Nuctech's Questionnaire Response and MOFCOM's findings in the Final
Determination regarding these two factors can be explained by the adjustments made after
verification, in particular, the exclusion of data relating to exports of the domestic like product and
sales of products other than the like product.

35. Further, regarding the alleged discrepan cies between figures concerning gross profit and
employment in certain publicly available informatio n, China has already explained that the issue has
been expressly addressed by MOFCOM in its Final Determination and that the reports concerned
cover not only the sales of the Like Products but also the sales of other products. The European Union
seeks to challenge this explanation by stating that scanners amounted to around 90% of Nuctech's
products during the POI. As the European Union, however, acknowledges, this estimate of 90% is
entirely unsubstantiated and, as China demonstrated, is in fact contradicted by the data on the record
as verified by MOFCOM.

36. Regarding the alleged discrepancies, China has explained that MOFCOM's findings regarding
various injury factors were based on the figur es and data provided by Nuctech which, after
verification, had been amended and thus are based on "positive evidence" . The European Union
disputes this by claiming that interested parties have not been informed that some of the data collected
were modified pursuant to on-site verification and th is claims that there is no evidence of what China
asserts in these proceedings. First, contrary to th e European Union's allegations, MOFCOM expressly
stated that Nuctech provided supplementary evid ence and materials after verification. Second,
MOFCOM did not disregard the figures on the record since it based its determinations on the
amended data and figures provided by Nuctech after on-site verification. Third, the European Union is
confusing two different issues, namely, whether inter ested parties have been informed of which data
have been used and whether the decision is based on "positive evidence". Contrary to the European
Union's claim, data will not become "positive ev idence" after the investigating authorities have
informed the interested parties of the fact that th e data used were data which have been modified
pursuant to verification.

37. The second claim raised by the European Union under Articles 3.1 and 3.4 that MOFCOM
did not examine all factors listed in Article 3.4 should be rejected since MOFCOM examined the
magnitude of the margin of dumping and found margins that exceeded the " de minimis" threshold of
Article 5.8 of the AD Agreement.

38. The European Union's third claim that China failed to make an objective examination of the
state of the domestic industry because MOFCOM fa iled to distinguish between "low-energy" and
"high-energy" scanners is based on the incorrect factual premise that there are considerable
differences in physical characteristics and uses be tween high-energy and low-energy scanners which
also lead to differences in prices and cost of production. Furthermore, the claim that MOFCOM
should have made a separate examination for "low -energy" and "high-energy" scanners regarding the
injury factors relating to prices or costs must fa il since there is no requirement in the AD Agreement
to examine the domestic industry per sector or segment of the market, whether for all injury factors or
for only some of them. Moreover, the European Uni on fails to demonstrate on which basis the injury
analysis fails to be objective. While claiming that the use of weighted average data for the entire range

of scanners did not lead to data representative of th e actual state of such industry, it fails to provide
any evidence on what then would have been the actual state of the domestic industry and why the
methodology used made it more likely to find injury.

39. The fourth claim raised by the European Union relates to MOFCOM's failure to make a
proper evaluation of the overall development and interaction among injury factors taken together.

40. The European Union's first argument was that MOFCOM did not provide a compelling
explanation of whether and how the overwhelming ma jority of positive factors were outweighed by
any other negative factor. China submitted that the European Union incorrectly considered that the
only negative factors were the domestic sales pric es and inventories and re ferred to the Panel's
findings in EC – Fasteners which, contrary to what the European Union argues, are applicable in the
present case.

41. The European Union's second argument that MO FCOM made contradictory observations in a
not even-handed manner should equally be rejected . Indeed, the fact that the European Union
disagrees with the qualifications used by MOFC OM in its injury anal ysis does not cause the
evaluation of the factors concerned to be biased.

42. As to the argument that MOFCOM failed to examine all factors in their proper context, the
European Union seeks to impose an additional obligation on the investigating authorities which in fact
relates to the causality issue. The claim that MOFCOM should have addressed the relationship
between the domestic prices and import prices and the fact that Nuctech was growing well in excess
of growth in demand relate to the causality determination.

43. Regarding the last argument raised by the Eu ropean Union that MOFCOM failed to take into
account in its injury analysis Nuctech's alleged st art-up situation, aggressive pricing strategy and
business expansion, China considers that these three factors are not "factors having a bearing on the
state of the industry" within the meaning of Article 3.4 of the AD Agreement but rather factors which
may have caused certain effects on the state of the industry.

44. The European Union erroneously claims that the explanations provided by China with respect
to these three factors are ex-post explanations. In fact, these factors are unsubstantiated allegations
and MOFCOM was therefore not required to examine th em. Not every factor raised by an interested
party needs to be examined by the investigating authority, but only those that constitute "relevant
economic factors and indices having a bearing on the state of the industry."

45. With respect to the alleged start-up situa tion of Nuctech, China noted the contradictions
between Smiths' submissions and the European Un ion's arguments, which the European Union has
failed to rebut. Moreover, the allege d evidence referred to by the Eur opean Union consists in either
unsubstantiated allegations made by Smiths or the evidence referred to does not in any way
demonstrate that Nuctech was in a start-up situation during the POI. In order to avoid this obvious
lack of evidence, the European Union claims that th e start-up situation of Nuctech is demonstrated by
the high productivity levels, reduction in losses and increasing rates of return. The European Union is,
however, confusing causes with consequences. While various indicators may describe the state of a
domestic industry, it can not be concluded that an industry is in a start-up situation merely because
certain indicators are present. In contrast, there is clear evidence on the record showing that Nuctech
was not in a start-up situation but was producing and selling low-energy scanners already years before
the POI.

46. As evidence of Nuctech's aggressive pricing po licy, the European Union refers to the decrease
in prices and the fact that import prices increased during the POI and were above domestic sales
prices in 2008. These data do not, however, show in any way that the state of the domestic industry

resulted from an aggressive pricing policy. The Eu ropean Union confuses the effect, namely the
decrease in the domestic prices, with a possible cause, i.e. an alleged aggressive pricing policy. In
fact, the only piece of evidence is a Report which was not even attached as an exhibit and not
produced in these proceedings.

47. As to Nuctech's aggressive business expansion, the only evidence referred to by the European
Union are excerpts of Tsinghua Tongfang Annual Report. As explained by MOFCOM during the
investigation, this document does not constitute relevant evidence in regard of the domestic sales of
the domestic like product.

48. Therefore, MOFCOM was entitled and even requi red to ignore all these allegations since they
were not properly substantiated by verifiable evidence and therefore di d not constitute "positive
evidence" within the meaning of Article 3.1 of the AD Agreement.

VI. THE EUROPEAN UNION'S CLAIM UNDER ARTICLES 3.1 AND 3.5 OF THE AD
AGREEMENT

49. In this last part, China will address the Eur opean Union's claim under Articles 3.1 and 3.5 of
the AD Agreement.

50. The European Union does not develop an y real new arguments in its Second Written
Submission regarding the causal relationship betwee n the dumped imports and the material injury.
China will therefore limit itself to three comment s concerning MOFCOM's assessment of the price
effects of the dumped imports.

51. First, contrary to the European Union's a llegations, China expressly addressed the argument
raised by the European Union that MOFCOM attribut ed to the EU imports effects that could not have
been caused by them. Indeed, China's position is that the injury and causation analysis must be carried
out with respect to the domestic industry as a whole and that there is no requirement to distinguish
between segments or sectors. In any case, since the European Union's claim is based on the erroneous
factual premise of a distinction between "low-energ y" and "high-energy" scanners, this claim must be
rejected.

52. Second, the European Union's argument re lating to a lack of correlation between import
prices going up and domestic sales prices doing down must fail since it ignores that what matters are
not only the trends in the prices but also their level as well as the volume of the dumped imports.

53. Third, when disputing China's explanation that Nuctech was "forced" to maintain its prices at
low level, the European Union manifestly ignores the other essential factors referred to by MOFCOM
in its findings, i.e. the very low prices and at dumped levels of the im ports, the significant price
undercutting in 2006 and 2007 and the substantial increase in absolute and relative terms of the
imports.

54. As to the non-attribution analysis, MOFCOM was not under an obligation to examine any of
the five factors referred to by the European Union since no relevant evidence was provided. In any
case, these factors were either examined by MOFC OM during the investigation or there was no need
to examine them because they rested on a factua l assumption that had already been rejected by
MOFCOM.

55. First, concerning the global economic crisis, Smiths provided evidence that was not relevant
since it referred to a period of time after the end of the POI. In any case, MOFCOM's finding of the
domestic industry's good export performance directly addressed and invalidated Smiths' claim.

56. Second, there was no evidence at all that woul d somehow show that Nuctech was in a start-up
phase. Thus, there was no obligation for MOFCOM to even examine this issue as a possible other
known factor that might have caused injury to the domestic industry.

57. Third, Smiths' allegation re garding Nuctech's aggressive pric ing policy was not substantiated
but based on a Study which was not even provided to MOFCOM and only pur portedly concerned an
alleged pricing strategy concerni ng so-called "high-energy" scanners on the export markets, therefore
hardly transposable to domestic market sales of the like product. The fact that domestic sales prices
decreased by more than 70% dur ing the POI does not constitute evidence showing that Nuctech was
pursuing an aggressive pricing policy.

58. Fourth, Smiths' arguments pertaining to fair competition remained unsubstantiated and in the
absence of evidence, there was thus no obligation for MOFCOM to examine this issue. In any case,
MOFCOM had already dismissed the factual premise of Smiths' claim when noting that there was no
evidence showing that the Subject Product is superi or to domestic Like Products with respect to
quality and service.

59. Fifth, Smiths' argument regarding Nuctech's aggressive business expansion was not supported
by evidence since the Reports referred to are documents which are not relevant since they contain data
concerning export sales and other products. The Eur opean Union's explanation that the aggressive
business expansion is demonstrated by the fact that the domestic industry was growing well in excess
of the growth in demand is inapposite. The fact that domestic sales volume and market share
increased more than the increase in consumption do not demonstrate that this was the result of an
aggressive business expansion.

60. Regarding the European Union's claim that MOFCOM failed to address Smiths' argument that
exports were the cause, not the cure, of Nuctech's financial difficulties, China notes that the argument
was unsubstantiated since the evidence submitted was irrelevant. By contrast, Nuctech provided to
MOFCOM data and figures on the basis of whic h MOFCOM could assess the export performance of
Nuctech in relation to the domestic like product.

61. The European Union's claim that MOFCOM i gnored Smiths' arguments about the differences
in product quality and technology factors should be dismissed since MOFCOM examined Smiths'
arguments at length in the Final Determination. MOFCOM thus carried out a proper non-attribution
analysis and, in particular, properly addressed Sm iths' arguments concerning the export performance
and product quality and technology effects, in co mpliance with the requirements under Articles 3.1
and 3.5 of the AD Agreement.

ANNEX F-2

EXECUTIVE SUMMARY OF THE OPENING STATEMENT OF THE
EUROPEAN UNION AT THE SECOND MEETING OF THE PANEL

[[Business Confidential Information "BCI" redacted]]

I. CLAIMS UNDER ARTICLES 6.5.1, 6.4 AND 6.2 ADA

A. SUMMARIES FOR PRODUCT MODELS ARE INADEQUATE AND THE PANEL SHOULD REJECT
CHINA'S ATTEMPT AT EX POST RATIONALISATION

1. The EU challenges the adequacy of summarisation of the product models referred to in the
dumping section of the Petition. The summaries provided by the Petitioner are neither clear, nor
meaningful and China's attempt to provide an ex post rationalisation only further exposes how
inadequate the summarisation really was. Even in following China's "hardly disputable" explanation
of what "main product" stands for, the summary provided in the Petition does not make sense. The
normal value and export price for the 4 "main" mo dels sold in significan t quantities on the Chinese
market do not fall within but are considerably lowe r than the price range of [60,000-100,000] for the
normal value and of [50,000-90,000] for the export price of "[Model 1] and [Model 2]" provided by
the Petitioner. Indeed, based on the normal value and export price established by MOFCOM for the
purpose of the final disclosure only 2 models fall (roughly) within the price ranges provided by the
Petitioner. Yet, those two have been sold in only very small quantities.

B. NON-CONFIDENTIAL SUMMARIES MUST BE SUFFICIENTLY CLEARLY IDENTIFIED

2. The alleged summaries of evidence included in Exhibits 8, 9, 10, 11 and 14 attached to the
Petition lack the level of detail necessary to enable interested parties to understand the information
summarised therein and comment upon it. Even if we accept arguendo China's position that the
summary is contained in the body of the Petition, MOFCOM should have ensured that this was clearly
cross-referenced. Similarly, what China now s ubmits constituted the "ade quate" non-confidential
summary of Attachments 14, 16, 17, 18 and 19 to the Petitioner's Questionnaire, has not been
identified as such by Nuctech.

3. The EU notes that panel in China – GOES recently confirmed that respondents may not be
left guessing whether and where the confidential in formation has been summarised and whether the
alleged summary, like in this case, is based on the same data source as the redacted information and
thus represents the "non-confidential" summary. Th e Panel should therefore confirm that while the
form of a non-confidential summary is not prescribed by Article 6.5.1, the non-confidential summary
of confidential information must be sufficiently clearly identified.

C. THE EFFORTS OF INTERESTED PARTIES TO DE FEND THEIR INTERESTS DO NOT CURE A BREACH
OF ARTICLE 6.5.1

4. China appears to have suggested on a number of occasions that in determining the adequacy
of non-confidential summaries the Pane l should take into account the fact that Smiths and/or the EU
commented on aspects of the injury determinati on and did allegedly not complain about the
inadequacy of summarisation. This reasoning is without basis
1 and should be rejected by the Panel.

Moreover, it is clear from the record that even where complaints had been made they fell on deaf ears,
as MOFCOM failed to request adequate summaries as a result. The efforts of Smiths and the EU to
defend their interests and submit comments despite th e patchy information they were presented with
do not cure the breach of Article 6.5.1.

D. CHINA FAILS TO PRODUCE EVIDENCE THAT TH E AVIATION AUTHORITY STATED REASONS WHY
SUMMARISATION IS NOT POSSIBLE AND THAT THIS STATEMENT WAS DULY SCRUTINISED BY
MOFCOM

5. The EU asks the Panel to be wary of Ch ina's attempt to water down the Article 6.5.1
disciplines. As explained in our submissions, China misinterprets Article 6.5.1 and in an effort to
justify its obvious breach even provides factual statem ents that contradict the facts on the record. The
Appellate Body provided useful guidance in EC – Fasteners on the importance of maintaining the
delicate balance struck in Article 6.5. and 6.5.1 and made it clear that stated reasons why
summarisation is not possible are subject to the investigating authority's as well as the panel's
scrutiny
2. China alleges that a statement was made and scrutinised, but even where prompted to do so
by the Panel, appears to be unable to produce act ual evidence of the statement or its scrutiny by
MOFCOM.

E. CLAIM UNDER ARTICLES 6.4 AND 6.2

6. China raises two new arguments regarding th e Article 6.4 claim; namely, that the EU (i)
failed to identify the information to which access sh ould have been given; and (ii) failed to provide
reasoning with respect to the condition that the au thorities are only required to provide information
under Article 6.4 "whenever practicable". China's argu ment that the information was not sufficiently
identified should be rejected. As China itself con cedes, the EU provided a general description which
was then further elaborated in the sections dealing with the specific summaries or statements. In light
of the fact that the information was unduly withhe ld from the EU (and/or Smiths), providing a more
specific description would not be possible. Second, China's attempt to argument its failure to make
available all the relevant information by submitting th at it was "not practicable" to do so, should also
be rejected. When the information is not available as a result of a violation of an ADA obligation, this
very violation cannot serve as a shield for the authority from a finding of violation under Article 6.4.

II. CLAIMS UNDER ARTICLES 6.9, 6.4 AND 6.2 ADA

A. METHODOLOGIES AND UNDERLYING DATA RELIED UPON FOR MOFCOM 'S PRICE ANALYSIS
CONSTITUTE ESSENTIAL FACTS

7. In paragraphs 88 and 89 of its second written submission, China tr ies to deal with one of the
inconsistencies in its position that a "methodology" conceptually cannot constitute an essential fact.
The inconsistency streaming from the fact that China considers the methodology for the calculation of
the dumping margin as an essential fact and has even referred in the course of these proceedings to its
disclosure as evidence of its compliance with its oblig ations under Article 6.9. China relies on the fact
that the choice of methodologies is prescribed in th e context of Article 2.4, whereas the authority has
discretion under Article 3.2, to conclude that a methodology relied upon in the context of price
analysis needs not be disclosed. In doing so Ch ina entirely ignores the obligation under Article 3.1
ADA. If one were to accept China's position, inter ested parties would be deprived of the right to
comment on the completeness and accurateness of the evidence relied upon, as well as on the
objectiveness of the price analysis by the investigating authority.

2 Appellate Body Report, EC - Fasteners, para. 544 (footnotes omitted, emphasis added).

B. SCOPE OF THE CLAIMS CONCERNING NORMAL VALUE AND EXPORT PRICE DETERMINATIONS
AND CALCULATIONS OF THE INDIVIDUAL DUMPING MARGIN

8. In view of China's attempt to distort the EU's submission, it is important to clarify that the EU
requests this Panel to make findings with respect to China's lacking disclosure of data and criteria on
the basis of which MOFCOM made adjustment to the export price, as well as for failing to disclose
individual dumping calculations.

C. CALCULATIONS OF THE NORMAL VALUE AND EXPORT PRICE AND DATA UNDERLYING THOSE
CALCULATIONS CONSTITUTE "ESSENTIAL FACTS" WITHIN THE MEANING OF ARTICLE 6.9

9. China appears to suggest that the disclosur e of the calculations was not necessary for Smiths
since sufficient information was disclosed for Smit hs to be in a position to reverse-engineer the
calculations. The EU disagrees (and so did Smiths). Th e purpose of disclosure is to place interested
parties in a position where they can properly unders tand, verify, and challenge the facts that are likely
to lead the investigating author ity to impose definitiv e measures. If the calculations performed to
determine the existence and margin of dumping, a nd the data underpinning these calculations, are not
disclosed, interested parties ca nnot assess whether the final determ ination has been reached in a
correct manner. This is not a matter of convenien ce for the interested part ies, as China seems to
imply, but is indeed essential for the legitimacy of the process – to ensure th at the investigation has
been carried out in accordance with the relevant substantive obligations, but also as a safeguard
mechanism for the correctness of the actual numbers and data relied upon.

D. MOFCOM FAILED TO DISCLOSE ESSENT IAL FACTS CONCERNING THE RESIDUAL DUTY
DETERMINATION

10. When the authorities decide to apply facts av ailable in the calculation of the dumping margin,
they are required to disclose such facts available. In addition, as the panel in China – GOES
concluded upon reviewing a factual s ituation similar to this case, "in order to allow […] an interested
party, to defend its interests, it was vital that MO FCOM disclose the factual basis for its use of best
information available."3 China failed to do so in this case.

E. CLAIM UNDER ARTICLES 6.4 AND 6.2

11. Differences in the nature and scope of the obligations under Article 6.9 on the one hand and
Articles 6.4 and 6.2 on the other are not such as to make it conceptually impossible for the obligations
to apply to the same factual circumstances and hen ce - as we submit was the case in this dispute - be
infringed at the same time.

III. CLAIMS UNDER ARTICLES 12.2.2 ADA

12. China argues in paragraph 149 of its second wr itten submission that the explanations for the
rejection of relevant arguments made by Smith s concerning the normal value determination were
adequate in view of what it describes as Smiths "own express recognition". In doing so China is
changing the facts and reasoning MOFCOM relied upon in the final determination from "Smiths
Heimann did not have sufficient evidence" to wh at would now seem to be a decision based on an
explicit recognition by Smiths. The EU recalls that the investigating authority must provide an
explanation in the notice pursuant to Article 12.2. 2 that does not leave the reader guessing why the
authority made its determinations.

13. The EU further submits that the China violated Article 12.2.2, because the Final
Determination does not include the investigating au thority's explanation of the methodology used for
price undercutting or price depression nor any inform ation on the underlying facts. In paragraph 156
of its second written submission China argues that the obligation under Article 12.2.2 should be
interpreted in conjunction with Article 12.2.1 and concludes that "[t]here is, however, no obligation to
use a calculation methodology to consider what have been the effects of the import prices on domestic
prices. Accordingly, there is no basis for an obliga tion to make such disclosure or explanation." The
EU clarified in the context of its parallel claim under Article 6.9 that the term methodology is used as
shorthand for tool or method used by an authority to process facts and reach a preliminary conclusion
with respect to those facts. A methodology woul d therefore not necessarily be one that relies on
calculations. While the investigating authority "enjoys a certain discretion" in adopting a methodology
for examining the price effects of the dumped imports
4; it does not enjoy unfettered discretion 5. In
exercising its discretion the authority must comply with the obligations under Article 3.1 ADA and
this should be apparent from the public notice.

14. China submits that calculations and underlyi ng data fall outside the scope of Article 12.2.2
because they contain confidential in formation. The EU submits that the mere fact that information
which is relevant within the meaning of Article 12.2.2 also constitutes confidential information, does
not release the investigating authority from its oblig ation to make this information available. While
the obligation to make relevant information available is qualified by the requirement to pay due regard
to the protection of confidential information, this requirement can be respected by including the
information in separate reports and keep the separat e report, or the information on matters of fact
contained therein, confidential to the extent necessary. If the only approach for reconciling
confidentiality with the obligation to make a pub lic notice, was leaving out anything that is
confidential, these notices would soon cease to have an y useful purpose. As explained in response to
the Panel's question 16, the EU believes that it woul d be untenable to argue that Article 12.2.2 only
has as its objective informing the public in general. The public notice serves an important role also in
making possible the exercise of the concerned companies' right of defence. This is why it is generally
accepted that confidential information is not simp ly omitted from a public notice, but is instead
presented in a non-confidential format or – in the ca se of individual margin calculations – disclosed
only to the company concerned.

IV. CLAIM UNDER ARTICLES 3.1 AND 3.2 ADA

15. China's second written submission makes a much belated and failed a ttempt to demonstrate
the existence of the alleged single continuum of scanners.

16. China relies on a very limited and fragmentary selection of evidence. Furthermore, to a large
extent, the selected evidence pertains to producers of scanners other than Nuctech and falls outside the
POI. China's reluctance to disclose evidence on the record strongly suggests that such evidence would
contradict China's new found argument. China should not be allowed to make up its case ex-post by
substituting a piecemeal and unrepresentative choice of evidence to the eviden ce on the record of the
investigation.

17. China invokes as evidence of the alleged continuum the existence of a few models of scanners
of 320 KeV, as well as of one single instance of a scanner of 450 KeV (the model CX-450P DV of the
manufacturer L.3com). However, none of these models was manufactured by either Nuctech or
Smiths. Furthermore, all of them appear to be relatively recent models, which were not marketed
during the POI. Even more tellingly, China has been unable to find even a single example of a scanner
between 450 KeV and 1000 KeV. At most, the evidence invoked by China would warrant to draw the

4 Appellate Body Report, Mexico – Rice AD measures, para. 204.
5 Appellate Body Report, EC – Bed Linen, para. 113; Panel Report, EC – Fasteners, para. 7.325.

line between low-energy and high-energy scanners at 450 KeV, rather than at 300 KeV. But this
would have been ultimately inconsequential, give n that neither Smiths nor Nuctech sold any low-
energy scanner above 300 KeV in China during the POI. On the other hand, China's failure to
establish the existence of any scanners between 450 KeV and 1000 KeV confirms that, contrary to
China's allegations, there is a distinct and wide gap between low-energy and high-energy scanners.

18. The European Union draws once again the Panel's attention to Nuctech's Questionnaire
response, where Nuctech identified as its "major prod ucts" the ten models shown in Attachment 2 to
that response. Those models include five models of the CX series of low-energy scanners (the models
CX6550B, CX100100T, CX150180S, CX6040BI, CX100100TI) and five models of high-energy
scanners (the models AC6000, MB1215HL, MT1213LH, RF, FS3000 and PB2028TD). The
brochures for all those models included in Exhibit CHN – 10 confirm that, whereas none of the CX
models was above 300KeV, all the high-energy models were between 2.5 MeV and 9 MeV.

19. China also argues that some of the physical characteristics which Smiths had attributed to
low-energy scanners are shared by some high-ener gy scanners. However, many of the arguments
submitted by China in this regard (for exampl e, those concerning appearance and size) rely
exclusively on the technical features of just one single model: the 450 KeV model of L.3com. In other
instances, the examples cited by China fail to a ddress Smiths' arguments. For example, Smith had
noted that high-energy scanners "often occupy a de signated building" and that, for this reason, their
installation may require several days' or even week s' work. It is correct that some high-energy
scanners are mobile or semi-mobile. But it remains true that, whereas many static high-energy
scanners require a designated building, low-energy sc anners never do so and can always be installed
very easily and quickly. Similarly, Smiths had pointed out that high-energy scanners do not
"generally" include a conveyor belt. Therefore, th e fact that, exceptionally, a few models of high-
energy scanners include a conveyor belt (only 1 of 5 Nuctech's "major products" does so) does not
render Smith's observation inaccurate.

20. As regards differences in uses, China alleg es that, according to the statements included in
their brochures, some models of low-energy scanners can be used to inspect 'large' objects, such as air
cargo containers. But, in the first place, Smiths ha d never contested that some low-energy scanners
can be used to inspect some, relatively small, ai r cargo containers. Moreover, descriptive terms such
as 'large' or 'small' lack in themselves sufficient pr ecision. They are relative terms, which can have a
very different meaning. Nuctech's smallest hi gh energy model included in Exhibit CHN-10 (the
AC6000) can inspect objects of up to 2.44 m x 3.18 m, whereas Nuctech's FS scanners can inspect
objects of up to 3.75 m x 5.2 m. None of Nuctech's low-energy "major products" can inspect objects
even approaching such dimensions. China further argues that the model ZBV of Nuctech and AS&E
(225 KeV) "can be used to insp ect articles such as containers and vehicles". But China omits to
mention the crucial fact that this model uses a very different and novel technology, with very specific
uses: so-called 'backscattering' imaging.

21. China also contends that the price of low- energy scanners may in some cases be higher than
the price of high energy scanners. Yet all the eviden ce which China has been able to gather in support
of this contention consists exclusively of just one single sale of each of the two categories. It is
obvious that the price for a single transaction may be abnormally low for a variety of reasons.
Moreover, those two transactions took place in 20 11. In addition, the models concerned are not
among the "major products" of Nuctech and do not appear to be sufficiently representative. In
particular, it should be noted that the low-energy model (the [[BCI]]) appears to use 'backscattering'
technology. In order to establish whether the pri ces for low-energy scanners may indeed be as high as
those for high-energy scanners, as alleged now by China, it would have been both possible and
necessary to produce far more robust evidence.

22. China has criticised the EU for not substan tiating its claim that the prices for high-energy
models are much higher than for low-energy models . However, the EU is merely restating arguments
and evidence submitted by Smiths during the underlying investigation. Such arguments and evidence
were not contested during the investigation by Nuctech. Furthermore, the Final Determination
contains no finding or reasoning sugg esting that MOFCOM was of the view that the prices of the two
categories were similar. China also argues that "w hat would count is the difference between prices on
the Chinese domestic market". However, that type of evidence was not available to Smiths, and
consequently to the EU. On the other hand, the reco rd of the investigation should contain information
supplied by Nuctech on the prices charged by that company on the domestic market during the POI
for both low-energy and high-energy models. China should explain why it has chosen not to disclose
it, instead of the very limited and unrepresentative price evidence made available in its second written
submission.

23. The European Union considers that, for the above reasons, China has failed to establish the
existence of the alleged continuum. In any event, the existence of the alleged continuum could never
be a valid justification for disregarding all th e differences among the various types of scanners
covered by the investigation. If MOFCOM had been of the view that the level of energy was, of itself,
an insufficient criterion for segmenting the product u nder consideration because the energy level is
not a reliable proxy for other relevant differences, then MOFCOM would have been required, in order
to comply with Articles 3.1 and 3.2 ADA, to take into account any other relevant criteria.

24. China complains, again, that the European Union is raising new ar guments that Smiths did
not make during the underlying investigation and that Smiths failed to provide requested information,
which would have been necessary in order to appl y a different methodology. China's argument is
factually wrong for the reasons explained in our sec ond written submission. In addition, it is legally
mistaken. First, nothing in the ADA precludes th e European Union from asserting arguments under
Articles 3.1 and 3.2 that MOFCOM's findings were not based on positive evidence or reflect an
objective examination. Certain provisions in the ADA contain language limiting an investigating
authority's responsibilities to those of addressing arguments or information presented to it. For
example, Article 3.5 or Article 12.2.2 ADA. In contrast, Article 3.1 ADA contains no similar
limitation. The Appellate Body has characterised the obligations of Article 3.1 as "absolute."
Moreover, According to the Appellate Body, those obligations "provide for no exceptions, and they
include no qualifications. They must be met by ever y investigating authority in every determination".
In view of this, the respondent's failure to rais e an argument can never be an excuse for applying a
methodology which is not based on an obj ective examination of positive evidence.
6 Nor can the lack
of information justify the application by the inv estigating authority of a methodology which is not
"based on an objective examination of positive evidence".7

V. CLAIM UNDER ARTICLES 3.1 AND 3.4 ADA

25. We will now address some of the comments ma de by China in its Second Written Submission
regarding our claims under Articles 3.1 and 3.4 ADA. First, China maintains that "positive evidence"
merely requires investigating authorities to "inform" interested parties of the data used for the purpose
of making a determination. In other words, accord ing to China, an inv estigating authority may
disregard the data in the public file and use other information, even in blatant contradiction with the
information available to interested parties. Th e EU disagrees. Not because the information on the
basis of which a determination is made is disclosed to interested parties, a determination can be said
to be based on "positive evidence". Likewise, not si mply because such inform ation is confidential, a
determination can be said to be based on "positive evidence". "Positive evidence" means that the data
has to be verifiable and credible, which is not the case here. It is not even the case that the information

6 Panel Report, Mexico – Steel Pipes, para. 7.259.

was confidential, as Nuctech provided some inform ation, as contained in the public record, in
contradiction with the data used by MOFCOM in its determination. And indeed Smiths alerted
MOFCOM of some contradictions during the investig ation. The truth of the matter is that China has
failed to explain the contradictions between the info rmation in the public record and the data used by
MOFCOM in its determination. Therefore, the EU submits that MOFCOM failed to base its
examination of various injury factors on the positi ve evidence, as required by Articles 3.1 and 3.4
ADA.

26. Second, China's ex-post explanation that Nuctech was forced to keep its prices low in order to
remain competitive is unattainable. The uncontested reality is that Nuctech was growing well in
excess of the growth in demand. MOFCOM itself found that Nuctech had increased its market share
every year, and that Nuctech had increased its sales volume and sales revenue every year by more
than 50%. In a market situation where EU import pr ices were constantly increasing, it is hard to see
how domestic prices going down, and at a level even below the EU import prices, could be considered
relevant to support a finding of a state of a domestic industry as suffering material injury. Rather, it
appears that Nuctech decided to maintain its low pr ice policy also in 2008 in order to capture more
market share in the years including and precedi ng the Olympic games and other important events
taking place in China.

27. Moreover, a situation where a domestic indus try is taking advantage of economies of scale,
having high productivity levels and growing well in excess of domestic demand cannot be described
as an industry suffering material injury. Rather, this situation fits better with a description of an
industry that is expanding in an aggressive ma nner and growing even above domestic demand.
Consequently, the EU claims that MOFCOM's de termination in the present case does not meet the
standard of a compelling, reasoned and adequate e xplanation when all relevant factors are examined
in their proper context.

28. Third, the EU considers that the eviden ce on the record as well as MOFCOM's own findings
with respect to Nuctech's state indicated that Nuct ech was in an economic stage similar to a start-up
company. Indeed, high productivity levels, dramatic reduction in losses, increasing rates of return, etc.
all fit with a company in a start-up situation, as o pposed to an industry su ffering material injury.
However, MOFCOM failed to examine this factor, as well as other relevant factors (such as Nuctech's
aggressive pricing strategy and Nuctech's business expansion) that were relevant for the determination
of the state of the domestic industry. By failing to examine this evidence, MOFCOM failed to make
an objective assessment of the impact of dumpe d imports on the Chinese industry as required by
Articles 3.1 and 3.4 ADA.

VI. CLAIM UNDER ARTICLES 3.1 AND 3.5 ADA

29. Finally, a few words on our claims under Articles 3.1 and 3.5 ADA. First, China wrongly
attempts to escape its obligations under Article 3.5 ADA by arguing that MOFCOM was not obliged
under that provision to examine all the relevant ev idence indicating that the volume of EU imports
was not "large" or "great" when compared to the sk yrocket trend showed with respect to the domestic
like products. In the EU's view, the characterisation of the volume of EU imports as "large" or "great"
squarely falls under the scope of Article 3.5 ADA, as part of the causation analysis, which is different
to the examination carried out under Article 3.2 A DA or, for that matter, Article 3.4 ADA. And in
fact, in this case, it is worth noting that MOFCOM itself qualified the EU imports as "large" or "great"
as part of its causation analysis.

30. Second, China maintains that the low priced EU imports still prevented domestic sales prices
from increasing, even in 2008, to a profitable leve l. However, China fails to explain how can it
reasonably be found that the alleged low price of the EU imports was the only cause of the observed
trend regarding domestic sales prices. To recall, Nuctech maintained the sa me strategy in 2008 by

reducing its prices by more than 50% when the EU import prices went up by 14% and were above the
domestic sales prices. In the EU's view, this fa ct should have alerted MOFCOM that there was
something else (other than the alleged dumped imports) which was causing the observed sales price
decrease. And more so in view of the specific allegation supported by evidence brought by Smiths
during the investigation about, inter alia, Nuctech's aggressive pricing policy.

31. Third, the EU has also explained in detail, contrary to what China asserts, that MOFCOM
failed to consider other factors raised by inter ested parties which were causing the same effects
observed and thus injuring the domestic industry at the same time as the alleged dumped imports.

32. In sum, the EU reiterates its views that MOFCOM's causation and non-attribution analyses
are inconsistent with Articles 3.1 and 3.5 ADA.

ANNEX F-3

CLOSING STATEMENT OF THE EUROPEAN UNION AT THE
SECOND MEETING OF THE PANEL

[[Business Confidential Information "BCI" redacted]]

1. The European Union is bringing a number of claims against China in this dispute on account
of the lack of transparency in the anti-dumping investigation at issue. Many of those procedural
claims have been brought in parallel with claims concerning breaches of substantive obligations.
Discussions in that context have been particularly helpful in giving at least an insight at just how
difficult it is for an interested party in the course of an investigation to have a full opportunity to
defend its interests when crucial information is with held from it. Indeed many of the questions as to
how MOFCOM reached certain conclusions in the c ontext of the injury determination should have
already been answered by MOFCOM in its disclosure documents and/or public notice.

2. In one of its earlier interventions. China has d eclared itself "aggrieved" by the allegations of
procedural breaches and "strongly committed to th e principles of transparency and procedural
fairness".
1 Yet, this principled position did not get refl ected in the interpretations advanced by China
for the procedural provisions at issue.

3. Can it really be that "essential facts" which form the basis for a decision to apply duties and
"information that is relevant" to the presentation of ones case are interpreted so narrowly that the
parties would only be given access to the investig ating authority's conclusions on a given issue
without knowing how and on what basi s it was reached? And even if arguendo information, such as
methods employed in the context of price analysis , were not subject to disclosure to the company,
because they constitute reasoning (or something alik e it, as China submitted), can they also fall
outside the scope of Article 12.2.2, which requires disclosure of "relevant information on facts, law
and reasons"? The European Union has explained that this can certainly not be the case. Transparency
standards cannot be reduced, as China suggests, to a level where exercising ones right of defence and
even checking compliance with substantive obligations becomes difficult or impossible.

4. Similarly, according to China, calculations which constitute the mathematical basis for the
dumping margin are neither essential facts under Artic le 6.9, nor relevant information within the
meaning of Article 6.4 and are, again according to China, entirely outside the scope of Article 12.2.2
due to their confidential nature. All this despite th e fact that the summary ta bles that China identifies
as facts disclosed in comp liance with its obligations under the ADA differ considerably between the
stage of preliminary determination and final disclosur e and also despite the fact that Smiths explicitly
noted that it was unable to reproduce MOFCOM's cal culations itself based on the table and on the
narratives provided by MOFCOM in the context of fi nal disclosure. If the calculations performed to
determine the existence and margin of dumping, a nd the data underpinning these calculations, are not
disclosed, interested parties ca nnot assess whether the final determ ination has been reached in a
correct manner. We stress again that disclosure of th e calculations is not a matter of convenience, as
China seems to imply, but is indeed essential for th e legitimacy of the investigation process – to show
that it was carried out in accordance with the substantive obligations, but also as a safeguard
mechanism against unintended errors. The latter is not a theoretical problem, as the fact that a WTO
dispute had already been brought concerning a calcu lation error by an investigating authority in
establishing the dumping margin.

1 China's closing statement at the first meeting of the Panel with the Parties, para. 3.

5. Transparency is not an administrative formality , but is indeed the cornerstone of the system.
We therefore call on the Panel to enforce the ADA transparency disciplines strictly.

6. China has acknowledged that the product unde r investigation was highly heterogeneous and
covered scanners with very different physical charac teristics, uses and prices. Yet, when making its
injury determination, MOFCOM totally disregar ded those differences. In the course of these
proceedings, China has advanced different, and somewhat incoherent, grounds for justifying
MOFCOM's decision to ignore those differences. None of them is credible, let alone convincing. All
of them have the distinct flavour of hastily improvised ex-post rationalizations.

7. At the first hearing, we were told that there was no clear distinction between high and low-
energy scanners but instead a single continuum. As we have shown, however, China has failed to
prove the existence of that alleged continuum. Indeed, China's evidence ra ther confirms the opposite.
Moreover, the existence of the alleged continuum would not be a reason for disregarding all the
differences in physical characteristics. If the ener gy level is not an adequate proxy for other
differences affecting comparability, it was MOFCOM 's duty to identify, if necessary on its own
initiative, the proper criteria for ensuring price comparability.

8. China also contends that MOFCOM was for ced to disregard the differences in physical
characteristics affecting price comparability becau se Smiths failed to cooperate by not providing
certain requested information. However, we have shown that the information provided by Smiths, and
by Nuctech, would have allowed MOFCOM to ap ply other methodologies. Moreover, it must be
stressed once again that MOFCOM did not resort to facts available. It did not even consider it
necessary to send a deficiency letter to Smiths. There is simply no trace on the record of the
investigation that MOFCOM's choice of methodolog y was related in any manner to the quality of
Smiths´ response.

9. China's most recent argument is that the inju ry determination was based on a finding of price
suppression and that in order to make such findi ng it is not necessary to take into account the
differences between physical characteristics. Howeve r, MOFCOM's final determination does include
and relies upon findings of both price undercutting and a sharp decline in the prices of the domestic
industry (and it matters little whether China calls this price depression or something else). Without
those two findings, MOFCOM's Final Determina tion would simply collapse. Moreover, China
misunderstands the notion of price suppression. Chin a appears to consider that there is price
suppression whenever the domestic industry incurs an overall loss. But Article 3.2 requires more than
that. It has to be shown that the effect of the du mped imports is to prevent price increases that would
otherwise have taken place. Yet, in the present cas e, the prices of the domestic industry would have
declined in any event to reflect a substantial re duction in costs of production. Moreover, imports of
low energy scanners cannot have the effect of preventing increases in the prices of high energy
scanners because they did not even compete with them.

10. With respect to China's comments on our claims under Articles 3.1, 3.4 and 3.5 ADA, we
have the following brief observations.

11. First, in our submissions, the EU has shown how it had arrived at its estimate that scanners
amounted to around 90% of Nuctech's products during the POI: i.e., on the basis of various statements
contained in documents directly relating to Nuctech 's business, in addition to Smiths' best market
knowledge. In its oral statement, China has disclosed the figures provided by Nuctech which, quite
tellingly, are very close to such estimate with respec t to two out of the three years of the POI. In any
event, China has proven our point: in a situation wh ere the majority of products made by Nuctech
were scanners (i.e., [[BCI]] when averaging the three years of the POI), the EU fails to understand on
what basis MOFCOM could obviate the discrepanci es between the public information available to
interested parties about Nuctech and the data used in its determinations.

12. Second, the EU maintains its claim that MO FCOM failed to examine the magnitude of the
margin of dumping as required under Article 3. 4 ADA. China's defense on this issue cannot be
considered seriously.

13. Third, and importantly, China has faile d to address several big holes in MOFCOM's
determination. In particular, China still blames the EU imports for the low domestic sales prices,
ignoring that the market share of domestic produ cers was well above the EU imports and, quite
significantly, ignoring also that domestic produc tion increased well above the growth in demand
during the POI. When all relevant factors are seen in a proper context, the EU fails to see how
MOFCOM's determination of the state of the domes tic industry as suffering material injury can be
upheld. Moreover, China has still failed to address the basis for MOFCOM's counterfactual about
Nuctech. In other words, China has not explained the basis of the alleged "expected" e.g. profits or
growth MOFCOM found Nuctech should have reached during the POI.

14. Fourth, China contests the characterisation of several factors raised by Smiths as falling under
Articles 3.4 or 3.5 ADA. However, China's arguments are circular.

15. A careful reading of China's opening oral st atement shows that China already assumes that
those factors are causality factors (e.g., para. 89, wh en using the term "resulted"). We leave the Panel
to be the judge of that. In any event, be it as 3.4 or 3.5 factors, the truth of the matter is that
MOFCOM failed to consider them properly in its determinations, as required by those provisions.

16. Fifth, the EU strongly maintains its views that by attributing to the EU imports of low-energy
scanners the price effects found (i.e., price underc utting/price depression) on the domestic industry
producing both high-energy and low-energy scanners, MOFCOM failed to comply with its obligations
under Articles 3.1 and 3.5 ADA. China has merely re peated its position about the erroneous factual
premise of our claim, thereby conceding the legal question behind our claim.

17. Finally, the EU observes that China has attempted in its oral statement to provide
justifications to MOFCOM's lack of examinati on of several other known factors. Those ex-post
explanations are good examples of how MOFCOM could have tried to address them during the
investigation. However, MOFCOM decided to blat antly ignore them. The explanations now provided
by China reinforces the EU's claim that MOFCOM failed to examine those factors as required by
Article 3.5 ADA, thereby undermining once more MOFCOM's injury analysis in this case.

18. We thank the Panel once more for the work they have done and will done in the present case
and look forward to answer any remaining questions you may have in writing in the course of the
following weeks.

ANNEX F-4

CLOSING STATEMENT OF CHINA AT THE
SECOND MEETING OF THE PANEL

1. Mr. Chairman, Distinguished Members of the Panel, China would like to thank the Panel and
the Secretariat for the hard work it has done so far and will still need to be doing in order to resolve
this dispute, especially for the questions that th e Secretariat came up with and the Panel addressed to
the parties during the Second Substantive Meeting w ith the parties. China would like to make the
following brief comments.

2. First, as China repeated in its written subm issions and oral statements, there is no such
distinction between so-called "high-energy" and "low -energy" scanners. There is no scientific basis in
this regard. There is no dividing line to be draw n between so-called "high-energy" and "low-energy"
scanners. It is clear that China provided sufficient evidences that there are no decisive criteria to make
such a distinction. As shown in China's subm issions, neither prices, functions, uses, sizes,
visualisation techniques nor energy-level could be appropriate criteria to distinguish the scanners
under investigation. Even the EU admits that the energy level criterion may be a moving target in
order to distinguish the scanners under this dispute. MOFCOM would have liked to but failed to find
criteria that could allow for a distinction of a product that is of a single continuum.

3. Second, we think that the question of a co mpetitive relationship is dealt with when the
investigating authority defines the product scope. There is no legal basis to examine it under Article
3.2 of the AD Agreement after the product defi nition was decided. Even Smiths did not raise
objections in the framework of the Article 3.2 dete rmination. Even if MOFCOM would have liked to
make such a comparison, it was not possible since th e data were not available in a detailed manner to
undertake a model-by-model or smaller group comp arison. Smith did not provide information per
models for the years 2006 and 2007. Thus, since the data were not known to MOFCOM during the
investigation, it could not, even if it wanted, undertake such a comparison.

4. It is also clear that there is no requirement to follow a specific methodology under Article 3.2
of the AD Agreement. Given the facts and data that are available before MOFCOM, we believe China
has made an "objective examination" based on "positive evidence" in accordance with Art. 3.2.

5. Another important fact I would like to address is the EU's attempt to raise the threshold for
the procedural requirements under Article 6.5.1 and 6.9 of the AD Agreement. For instance, what is
required in a Petition is prima facie evidence for the initiation of an i nvestigation. This information is
submitted by the petitioner, a private party with only a limited ability to obtain the information. Thus,
the obligation for the petitioner under Article 6 is different from the obligation imposed on the
investigating authority.

6. Another important comment I would like to ma ke is that China itself is the victim of anti-
dumping investigations by many WTO members, including the European Union. In fact, half of the
anti-dumping measures by all WTO members were imposed on Chinese products.

7. In many cases, China has consultations with the European Commission regarding issues of
transparency, especially with respect to Article 6.5.1, and Chinese exporters face even a worse
situation in EU investigations and if this decision will raise the transparency standard, China will be
happy if the EU will apply this higher standard with respect to investigations concerning Chinese
exporters as well.

8. The Chinese anti-dumping investigation author ity understands and complies with the rules.
The Bureau investigates importers but at the sa me time defends Chinese exporters. We therefore
understand the rules and the need for transparency and we respect and abide by them in our
investigations.

9. We hope the Panel renders a neutral and objective decision, within the boundaries of the
provisions. The decision should not impose more obligations on the Members as the provisions
foresee. If all Members will respect the decision, Ch ina would be benefiting from the decision. We
would be happy if other Members do not apply a d ouble standard and will comply with the Panel's
findings in an honest manner.

Thank you.

ANNEX G

REQUEST FOR THE ESTABLISHMENT OF A PANEL

Contents Page
Annex G-1 Request for the Establishment of a Panel by the European Union G-2

ANNEX G-1

REQUEST FOR THE ESTABLISHMENT OF A PANEL
BY THE EUROPEAN UNION

9 December 2011

 (11-6394)
 Original: English

Request for the Establishment of a Panel by the European Union

 The following communication, dated 8 Decemb er 2011, from the delegation of the European
Union to the Chairperson of the Dispute Settlement Bo dy, is circulated pursuant to Article 6.2 of the
DSU.

On 25 July 2011 the European Union ("EU") reque sted consultations with the Government of
the Peoples' Republic of China ("China" ) pursuant to Article XXIII:1 of the General Agreement on
Tariffs and Trade 1994 ("GATT 1994"), Article 17.3 of the Agreement on Implementation of Article
VI of the GATT 1994 (" Anti-Dumping Agreement") and Article 4 of the Understanding on Rules and
Procedures Governing the Settlement of Disputes ("DSU") with respect to the imposition of definitive
anti-dumping duties on x-ray security inspection equi pment from the European Union, pursuant to
Ministry of Commerce of the People's Republic of China, Notice No. 1(2011), including its annex.
The European Union held consultations with China on 19 September and 18 October 2011.
Those consultations unfortunately did not resolve the dispute.
The EU considers the measure at issue to be in consistent with China's obligations under the
following provisions of the Anti-Dumping Agreement:
1. Articles 6.2, 6.4 and 6.5.1 of the Anti-Dumping Agreement because China failed to ensure that
interested parties provided non-confidential su mmaries of confidential information or, where
provided, that the summaries were in sufficient de tail to enable a reasonable understanding of the
substance of the information submitted with regard to (i) the existence of dumping, including the
establishment and comparison of the normal value a nd the export price; and (ii) the existence of
injury, including the effects of dumped imports on prices, the state of the domestic industry and the
causal relationship between the dumped imports and the injury allegedly suffered by the domestic

industry. In doing so, China failed to provide a timely and full opportunity for all interested parties to
see all information that is not confiden tial as defined by Article 6.5 of the Anti-Dumping Agreement
and that was relevant to defend their interests, a nd that was used by the authority in the anti-dumping
investigation, and to prepare presentations on the b asis of this information for the defence of their
interests.
2. Articles 6.2, 6.4 and 6.9 of the Anti-Dumping Agreement because China failed to provide
interested parties with information about the essential facts under consideration which would form the
basis for the decision to impose definitive anti-dumpi ng measures. In particular, China did not fully
disclose the essential facts, which fo rm the basis for the determination of the dumping margin of the
EU cooperating producer, including the calculation of the normal value and the adjustments made to
the export price, and the determination of the resi dual duty. China also failed to disclose the essential
facts that formed the basis for th e determination of injury, includi ng the analysis of the effects of
dumped imports on prices, the state of the domestic industry and the causal relationship between the
dumped imports and the injury suffered by the domes tic industry. In doing so, China failed to provide
a timely and full opportunity for all interested parties to see all information that was relevant to defend
their interests, and that was used by the authorit y in the anti-dumping investigation, and to prepare
presentations on the basis of this information for the defence of their interests.
3. Article 12.2.2 of the Anti-Dumping Agreement because neither in its public notice of the
imposition of definitive measures, nor in a separat e report, China set forth sufficiently detailed
explanations for the definitive determinations on dumping and injury, together with references to the
matters of fact and law which led to arguments being accepted or rejected. Specifically, China failed
to provide: a) a full explanation of the reasons for the methodology used in the establishment and
comparison of the export price and normal value (Article 12.2.1(iii) of the Anti-Dumping Agreement);
b) all the considerations relevant to the inju ry determination as set out in Article 3 of the Antidumping
Agreement (Article 12.2.1(iv) of the Anti-Dumping Agreement); and c) the main reasons leading to the
determination (Article 12.2.1(v) of the Anti-Dumping Agreement).
4. Articles 3.1 and 3.2 of the Anti-Dumping Agreement , because China failed to make an
objective examination, on the basis of positive evidence, of the effect of the dumped imports on prices
in the domestic market for like products. Specifica lly, it appears from the very limited information
disclosed by the Chinese authorities that the finding that EU imports had the effect of undercutting
and suppressing and/or depressing the price of dom estic products is not based on an objective
examination of positive evidence because it failed to take into account the differences between
various types of products covered by the investigation.
5. Articles 3.1 and 3.4 of the Anti-Dumping Agreement because China failed to make an
objective examination, on the basis of positive evidence, of the effect of the dumped imports on prices
in the domestic market for like products and the consequent impact of these imports on domestic
producers of such products, including the factors lis ted in Article 3.4, as the overwhelming majority
of injury indicators were positive or showed positive trends.
6. Articles 3.1 and 3.5 of the Anti-Dumping Agreement because China failed to make an
objective determination, on the basis of all releva nt evidence before the authorities that the dumped
imports were, through the effects of dumping, causi ng injury. The causality determination is flawed
because it is based on findings of price undercuttin g and price suppression and/or depression by EU
imports which are themselves not based on an object ive examination of positive evidence. Moreover,
China did not consider all known relevant factors other than dumped imports having a bearing on the
state of the industry and/or affecting the domestic prices.

Accordingly the European Uni on respectfully requests that, pursuant to Article 6 of the DSU
and Article 17.4 of the Anti-Dumping Agreement, the Dispute Settlement Body establish a panel to
examine this matter, with the standard terms of reference as set out in Article 7.1 of the DSU.
The European Union asks that this request be placed on the agenda for the meeting of the
Dispute Settlement Body to be held on 19 December 2011.