EUROPEAN COMMUNITIES — ANTI-DUMPING DUTIES ON IMPORTS OF COTTON-TYPE BED LINEN FROM INDIA
Document: Report of the Panel
Date: 30 October 2000
Document codes: WT/DS141/R
Complainant: India
Respondent: EU
Third parties: Egypt, Japan, South Korea, U.S.
Dispute stage: Consultation
Agreements cited: Art. VI, I  GATT 1994Art. 2, 3, 4, 5, 15, 12  Anti-dumping

EUROPEAN COMMUNITIES — ANTI-DUMPING DUTIES
ON IMPORTS OF COTTON-TYPE BED LINEN FROM INDIA
Report of the Panel
The report of the Panel on European Communities – Anti-Dumping Duties on Imports of
Cotton-Type Bed Linen from India is being circulated to all Members, pursuant to the DSU. The
report is being circulated as an unrestricted document from 30 October 2000 pursuant to the
Procedures for the Circulation and Derestricti on of WTO Documents (WT/ L/160/Rev.1). Members
are reminded that, in accordance with the DSU, only parties to the dispute may appeal a panel report.
An appeal shall be limited to issues of law covered in the Panel Report and legal interpretations
developed by the Panel. There shall be no ex parte communications with the Panel or Appellate Body
concerning matters under consideration by the Panel or Appellate Body.
Note by the Secretariat: This Panel Report shall be adopted by the Dispute Settlement Body (D SB) within 60 days after the
date of its circulation unless a party to the dispute decides to appeal or the DSB decides by consensus not to adopt the report .
If the Panel Report is appealed to the Appellate Body, it sh all not be considered for adoption by the DSB until after the
completion of the appeal. Information on the current status of the Panel Report is available from the WTO Secretariat.

I INTRODUCTION
1.1 On 3 August 1998, India requested consultations with the European Communities pursuant to
Article 4 of the Understanding on Rules and Proc edures Governing the Settlement of Disputes
("DSU"), Article XXIII of the General Agreem ent on Tariffs and Trade 1994 ("GATT 1994") and
Article 17 of the Agreement on Implementation of Article VI of GATT 1994 ("AD Agreement")
regarding Commission Regulation No. 2398/97 of 28 November 1997, imposing final anti-dumping
duties on imports of cotton-type bed linen from India. 1 On 17 August 1998, Pakistan requested to be
joined in the consultations requested by India. 2 India and the European Communities held
consultations in Geneva on 18 September 1998 and 15 April 1999, but failed to reach a mutually
satisfactory resolution of the matter.
1.2 On 7 September 1999, pursuant to Article XXIII:2 of GATT 1994, Article 6 of the DSU and
Article 17 of the AD Agreement, India requested the establishment of a panel to examine the matter.3
1.3 At its meeting on 27 October 1999, the Dispute Settlement Body ("DSB") established a Panel
in accordance with India's request. 4 At that meeting, the parties to the dispute also agreed that the
Panel should have standard terms of reference. The terms of reference are, therefore, the following:
"To examine, in the light of the relevant provisions of the covered agreements cited
by India in document WT/DS141/3, the matter referred to the DSB by India in
document WT/DS141/3, and to make such findings as will assist the DSB in making
the recommendations or in giving the rulings provided for in those agreements".
1.4 On 12 January 2000, India requested the Director-General to determine the composition of the
Panel, pursuant to paragraph 7 of Article 8 of the DSU. This paragraph provides:
"If there is no agreement on the panelists within 20 days after the date of the
establishment of a panel, at the request of either party, the Director-General, in
consultation with the Chairman of the DSB and the Chairman of the relevant Council
or Committee, shall determine the composition of the panel by appointing the
panelists whom the Director-General considers most appropriate in accordance with
any relevant special or additional rules or procedures of the covered agreement or
covered agreements which are at issue in the dispute, after consulting with the parties
to the dispute. The Chairman of the DSB shall inform the Members of the
composition of the panel thus formed no later than 10 days after the date the
Chairman receives such a request."
1.5 The Director-General composed the Panel as follows:
Chairman: Dr. Dariusz Rosati
Members: Ms Marta Lemme
Mr. Paul O'Connor
1.6 Egypt, Japan and the United States reserved their rights to participate in the panel proceedings
as third parties.

1 WT/DS141/1.
2 WT/DS141/2.
3 WT/DS141/3.
4 WT/DS141/4.

1.7 The Panel met with the parties on 10-11 May 2000 and on 6 June 2000. It met with the third
parties on 11 May 2000.
II FACTUAL ASPECTS
2.1 This dispute concerns the imposition of definitive anti-dumping duties by the European
Communities on cotton-type bed linen from India.
2.2 On 30 July 1996, the Committee of the Cotton and Allied Textile Industries of the European
Communities ("Eurocoton") – the EC federation of national producers' associations of cotton textile
products – filed an application with the European Communities for the imposition of anti-dumping
duties on cotton-type bed linen from, inter alia, India.5
2.3 On 13 September 1996, the European Communities published notice of the initiation of an
anti-dumping investigation regarding imports of cotton-type bed linen originating in, inter alia, India.6
2.4 The European Communities established 1 July 1995 to 30 June 1996 as the investigation
period, and the investigation of dumping covered this period. The examination of injury covered the
period from 1992 up to the end of the investigation period.
2.5 In view of the large number of Indian producers and exporters, the European Communities
conducted its analysis of dumping based on a sample of Indian exporters. The European
Communities also established a reserve sample, to be used in the event companies in the main sample
subsequently refused to cooperate.
2.6 The European Communities established normal value based on constructed value for all
investigated Indian producers. One company, Bombay Dyeing, was found to have representative
domestic sales of cotton-type bed linen taken as a whole. Five types comparable to those exported to
the European Communities were sold in representative quantities on the domestic market. Those five
types were found not to be sold in the ordinary co urse of trade. Therefore, constructed values were
calculated for all the types sold by Bombay Dyeing. For the other investigated Indian producers, the
information for SG&A and profit used in the constructed normal value was that of Bombay Dyeing.
Export price was established by reference to the prices actually paid or payable in the EC market. The
weighted average constructed normal value by type was compared with weighted average export price
by type for the investigated Indian producers, and a dumping margin was calculated for each such
producer.
2.7 The complaint listed companies that produced be d linen in the European Communities. The
European Communities excluded certain complainant companies. The 35 remaining companies were
found to represent a major proportion of total Community production of bed linen in the investigation
period and were, therefore, deemed to make up the Community industry.
2.8 Due to the number of companies in the Co mmunity industry, the European Communities
established a sample. This sample comprised 17 of the 35 companies in the Community industry,
representing 20.7% of total Community production and 61.6% of the production of the Community
industry. The European Communities found that the Community industry suffered declining and
inadequate profitability and price depression and, accordingly, reached the conclusion that the
Community industry had suffered material injury. The European Communities found a direct causal
link between the increased volume and the price effects of the dumped imports and the material injury

5 Exhibit India-6. The other countries whose exporters of cotton-type bed linen were subject to the
application for investigation and imposition of anti-dumping duties were Egypt and Pakistan.
6 Exhibit India-7.

suffered by the Community industry, demonstrated, according to the European Communities, by the
existence of heavy undercutting resulting in a significant increase in the market share of the dumped
imports and corresponding negative consequences on volumes and prices of sales of Community
producers.
2.9 The European Communities published notice of its preliminary affirmative determination of
dumping, injury and causal link on 12 June 1997. 7 Provisional anti-dumping duties were imposed
with effect from 14 June 1997.
2.10 The European Communities continued its inve stigation, received comments from interested
parties, and provided an opportunity to be heard. Parties were informed of the essential facts and
considerations on the basis of which it was intended to recommend the imposition of definitive anti-
dumping duties, and the definitive collection, at the level of these duties, of amounts secured by
provisional duties, on 3 October 1997. 8 An opportunity for further representations was subsequently
provided.
2.11 Notice of the final affirmative determination was published on 28 November 1997. Injury
margins were determined to be above the level of dumping margins in all cases, and therefore
definitive anti-dumping duties in the amount of the dumping margins determined, ranging from 2.6%
to 24.7%, depending on the exporter in question, were imposed on imports of cotton-type bed linen
originating in India.
9 Certain handloom products were exempted from the application of the definitive
duties, provided a certificate of handloom origin in the required form was provided. Provisional
duties were not definitively collected.
III PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS
A. INDIA
3.1 India requests that the Panel find that, by imposing final anti-dumping duties on imports of
cotton-type bed-linen from India, the European Communities violated Articles 2.2, 2.2.2, 2.4.2, 3.1,
3.4, 3.5, 6, 6.10, 6.11, 5.3, 5.4, 15, and 12.2.1 and 12.2.2. India makes 31 separate claims with respect
to these asserted violations, as follows:
• Claim 1: Inconsistency with Article 2.2.2, by resorting to the option laid down in
Article 2.2.2(ii) and by misapplying that option;
• Claim 4: Inconsistency with Article 2.2, by applying the profit amount determined for
Bombay Dyeing in calculating constructed value for other producers, even though that
amount was clearly not "reasonable";
• Claim 7: Inconsistency with Article 2. 4.2, by zeroing negative dumping amounts in
calculating dumping margins;
• Claim 8: Inconsistency with Article 3.1, by assuming that all imports of the product
concerned during the investigation period were dumped;
• Claim 11: Inconsistency with Article 3.4, by failing to consider all injury factors mentioned in
that provision for the determination of the state of the domestic industry;

7 Commission Regulation No. 1069/97, Exhibit India-8 ("Provisional Regulation").
8 Exhibit India-33.
9 Council Regulation No. 2398/97, Exhibit India-9 ("Definitive Regulation").

• Claim 14: Inconsistency with Article 6, insofar as the European Communities would argue
that it did in fact consider all factors in Article 3.4, by failing to disclose or make public
findings thereon, which violates the rights of defence contained in Article 6.
• Claim 15: Inconsistency with Article 3.4, by relying in the injury determination on companies
outside the domestic industry, by not consistently basing the injury determination on the
chosen sample and by relying on different "levels" of industry for different injury indices;
• Claim 16: Inconsistency with Articles 6.10 and 6.11, by selecting a sample of the domestic
industry that was not representative;
• Claim 19: Inconsistency with Article 3.4, by taking account of injury allegedly caused by
imports before the investigation period, which imports were not determined to be dumped;
• Claim 20: Inconsistency with Article 3.5, by taking account of injury allegedly caused by
imports before the investigation period, which imports were not determined to be dumped;
• Claim 23: Inconsistency with Article 5.3, by failing to examine the allegations in the
complaint and by failing to take into account information available at the time of initiation
pointing to lack of material injury caused by dumped imports;
• Claim 26: Inconsistency with Article 5.4, by failing to properly examine the
representativeness of the complainant and/or by failing to make a proper determination on
representativeness as required by that provision;
• Claim 29: Inconsistency with Article 15, by failing to explore possibilities of constructive
remedies before imposing anti-dumping duties;
3.2 India's claims 2, 5, 9, 12, 17, 21, 24, 27, and 30 assert inconsistency with Article 12.2.1 by
failing properly to explain, in the Provisional Regulation, the European Communities' reasoning
regarding matters raised in claims 1, 4, 8, 11, 16, 20, 23, 26, and 29, respectively.
3.3 India's claims 3, 6, 10, 13, 18, 22, 25, 28, and 31 asse rt inconsistency with Article 12.2.2 by
failing properly to explain, in the Definitive Regulation, the European Communities' reasoning
regarding matters raised in claims 1, 4, 8, 11, 16, 20, 23, 26, and 29, respectively.
3.4 India argues that, in so doing, the European Communities has nullified and impaired benefits
accruing to India under the WTO Agreement.
3.5 India further requests that the Panel recommend that the European Communities bring its
measures into conformity with its WTO obligations and that the European Communities immediately
repeal the Regulation imposing definitive anti-dumping duties and refund anti-dumping duties paid
thus far.
3.6 India also requests that the Panel issue the following preliminary ruling:
1. With respect to certain documentary evidence provided by the European
Communities in Exhibit EC-4, India notes that this document was never made
available to it, or otherwise referred to, at any stage prior to this point in time. India
indicates that standing has been a central issue throughout the anti-dumping
investigation leading to the imposition of anti-dumping duties on cotton-type bed
linen from India, despite which the European Communities has never before

produced Exhibit EC-4. India, therefore, requests that the exact status of Exhibit EC-
4 be established.
B. EUROPEAN COMMUNITIES
3.7 The European Communities requests the Panel to reject the requests for recommendations
made by India.
3.8 In its first submission, the European Communities requests that the Panel issue the following
preliminary rulings:
1. The European Communities objects to the inclusion in India's first written submission
of claims that were not mentioned in its Panel request. These include claims that the
European Communities has acted inconsistently with the following provisions of the
AD Agreement: Article 1; Article 3.4, as regards the allegation that the European
Communities assumed that imports before the period of investigation were dumped
(claim 19); Article 3.6 (claim 8); Articles 6.2, 6.4 and 6.9 (claim 14); and
Articles 6.10 and 6.11 (claim 16).
2. The European Communities submits that India's claims concerning alleged defects in
the Provisional Regulation are beyond the Panel's jurisdiction because (i) Article 17.4
defines the circumstances in which a provisional measure may be referred to the DSB
and India has not contended that the Provisional Regulation fulfils the requirements of
that provision and (ii) India's claims regarding the Provisional Regulation are moot as
the Regulation expired in November 1997 and no anti-dumping duties were collected
under it. The European Communities requests that the Panel exclude these claims
from the scope of these proceedings (claims 2, 5, 8 (in part), 9, 11 (in part), 12, 15 (in
part), 17, 19 (in part), 21, 24, 27, 29 (in part) and 30).
3. The European Communities requests the Panel to rule that the verbatim reports of the
consultations submitted as evidence by India are inadmissible and will be
disregarded.
4. The European Communities requests the Panel to rule that the document submitted by
India as Exhibit India-49 is not part of these proceedings, because it is apparently a
dumping calculation made by the EC authorities in the course of another
investigation. The European Communities condemns the breach of confidentiality
and indicates that it is not prepared to comment on the substance of the document.
3.9 In addition to its request for a preliminary ruling regarding the Panel's terms of reference, the
European Communities also argued that claim 29 is largely outside the Panel's terms of reference
because the Panel request referred to EC behaviour before the Provisional Regulation.
IV ARGUMENTS OF THE PARTIES
4.1 With the agreement of the parties, the Panel has decided that, in lieu of the traditional
descriptive part of the Panel report setting forth th e arguments of the parties, the parties' submissions
will be annexed in full to the Panel report. Accordingly, the parties' first and second written
submissions and oral statements, along with their written responses to questions, are attached at
Annex 1 (India) and Annex 2 (the European Communities). The written submissions, oral statements
and responses to questions of the third parties are attached at Annex 3.

V INTERIM REVIEW
5.1 On 31 July 2000, the Panel provided its interim report to the parties. The parties submitted
their comments on the interim report on 7 August 2000. Neither party requested that the Panel hold
an interim review meeting, and as a consequence no meeting was held.
5.2 Having reviewed the parties' comments, the Panel corrected a typographical error in the
heading of section VI.C.1, and made a stylistic change to use the designation "European
Communities". In addition, we made the following clarifying changes: (i) to the heading of
section VI.C.1, to more accurately reflect the legal basis of the claim in question; (ii) to the third
sentence of paragraph 6.215, to reflect the nature of inconsistencies in certain photocopied documents
submitted to the Panel; and (iii) to footnote 90, to reflect the basis of the European Communities'
decision not to apply a lesser duty. We did not make a requested change to the last sentence of
paragraph 6.215, as the timing of the EC's offe r to inspect documents is already set out in
paragraph 6.207, and need not be repeated.
VI FINDINGS
A. REQUESTS FOR PRELIMINARY RULINGS
6.1 In its first written submission, the European Communities requested preliminary rulings with
respect to (i) the scope of the claims before us, (ii) certain evidence concerning the consultations
presented by India in its first submission, and (iii) certain evidence from a different anti-dumping
investigation presented by India in its first submission. India subsequently made a preliminary
request with respect to certain evidence presented by the European Communities in its first
submission. The parties provided written responses to each others' requests for preliminary rulings
prior to our first meeting, and further arguments were made at that meeting. At the close of the first
meeting, we ruled orally on the European Communities' request to dismiss India's claims under
Article 6 of the AD Agreement, and transmitted a written version of our oral ruling to the parties. We
also ruled on the status of an unsolicited amicus curiae submission,
10 and set forth our position
regarding certain of the requests for preliminary rulings on which we did not rule. The discussion
below sets forth our rulings, with additional clarification, on requests for preliminary rulings disposed
of at the first meeting, and disposes of the remaining requests for preliminary rulings in this dispute.
1. EC request
(a) Scope of the claims before the Panel
(i) Parties' arguments
6.2 With regard to the scope of the claims before the Panel, the EC requests, on two bases, a
ruling that certain of India's claims are not properly before the Panel.
6.3 First, the European Communities argues that certain of the claims pursued by India in its first
written submission were not mentioned in the request for establishment, either because there is no
reference to the provision of the AD Agreement allegedly violated or the measure to which the claim
is addressed is not before the Panel, or because the basis for the claim is different in the request from
that presented in the first submission, and thus is not clearly identified in the request. The European

10 On Tuesday, 9 May 2000, the day before our first meeting with the parties, the Panel received an
unsolicited amicus curiae brief in support of the complaint by India in this dispute, submitted on behalf of the
Foreign Trade Association by Dr. Konrad Neundörfer. We made copies available to the parties for comment.
No party made any substantive comments regarding that submission. We did not find it necessary to take the
submission into account in reaching our decision in this dispute.

Communities asserts that the following were not mentioned in the Panel request and are therefore not
within the scope of the Panel's terms of reference:
claims that the European Communities act ed inconsistently with the following
provisions of the Anti-dumping Agreement:
Article 1 (Para. 7.3 of India's first submission);
Article 3.4, as regards the allegation that the European Communities assumed
that imports before the Investigation Period were dumped (Claim 19);
Article 3.6 (Claim 8);
Article 6.2, 6.4 and 6.9 (Claim 14); and
Article 6.10 and 6.11 (Claim 16).
India’s contention (paras. 3.106 to 3.107 of India's first submission) that the EC
Basic Regulation (Exhibit India-1) is inconsistent with Article 2.2.2 of the Anti-
dumping Agreement.
6.4 With regard to these claims, the European Communities argues that it is well established in
the WTO that a complainant Member may not introduce a claim during the course of panel
proceedings that is not mentioned or referred to in the terms of reference. In this case, the terms of
reference are standard terms of reference, referring to the Panel the "matter" set forth in India's request
for establishment. The European Communities assert s that the request for establishment in this case
does not contain, explicitly or by reference, any mention of the claims set forth above. Regarding
Article 1, Article 3.6, and Article 6, the releva nt provisions of the AD Agreement are not even
mentioned in the request. Regarding Article 3.4, a different claim is set out in the request for
establishment than is pursued in India's first submission. Regarding the alleged inconsistency of the
EC legislation with Article 2.2.2 of the AD Agreement, the European Communities asserts that the
measure at issue in this dispute is the European Communities' final anti-dumping duties, and not the
EC Regulation. In addition, the European Communities contends that it has been prejudiced by
India's failure to clearly state which of the multiple obligations set forth in the asserted provisions of
the AD Agreement have allegedly been violated.
6.5 With regard to Article 1 of the AD Agreement, India acknowledges in its written response
that it made no separate claims under that provision. In India's view, Article 1 is a general provision,
and a finding of violation of Article 1 of the AD Agreement "automatically follows" from the
inconsistencies with the other Articles. India considers that Article 1 of the AD Agreement need not
be mentioned separately since the European Communities' rights of defense were not prejudiced.
6.6 With regard to Article 3.6 of the AD Agreement, India asserts that, since it included all of
Article 3 of the AD Agreement in its request for establishment, Article 3.6 of that Agreement is within
the terms of reference. However, India states that, in a spirit of co-operation, it does not seek a ruling
on Article 3.6.
6.7 With regard to the claims under Article 6 of the AD Agreement, India objects to the request
that they be dismissed. India maintains that it was clear throughout the dispute settlement process,
including the request for consultations, the discussions, and the written questions during the
consultations, that India was concerned with the European Communities' actions as regards Article 6
of the AD Agreement. Thus, India maintains, the European Communities could not have been
surprised by the claims in this regard (claims 14 and 16), and had not been prejudiced in its ability to

defend itself. India also clarifies that claim 14 forms part of an argument in support of claim 13
(alleging inconsistency with Article 12.2.2 of the AD Agreement), which claim was explicitly
mentioned in the request for establishment.
6.8 With regard to claim 19, insofar as it concerns Article 3.4 of the AD Agreement, India asserts
that this claim was clearly identified in paragraph 13 of the request for establishment, which mentions
Articles 3 and 3.4. India asserts that the reference to Article 3 of the AD Agreement includes
Article 3.5. Moreover, India maintains that the European Communities had not been prejudiced in its
rights of defence, citing in this regard the European Communities first submission, paragraphs 343-
350.
6.9 Second, the European Communities argues that India's claims asserting violations in
connection with the Provisional Regulation are beyond the Panel's jurisdiction.
11 In this regard, the
European Communities argues that India failed to comply with the requirements of Article 17.4 of the
AD Agreement to bring a provisional measure before the Panel, because it did not contend or present
evidence that the provisional measure had a significant impact. In addition, the European
Communities argues that the Provisional Regulation is moot, that no duties were ever collected under
that regulation, and the measure is no longer in force. Consequently, the European Communities
argues, there is no meaningful remedy that India can obtain with respect to that regulation - there is no
measure to bring into conformity with the AD Agreement, and no measure to withdraw. The
European Communities argues that in these circumst ances, the Panel should decline to make a ruling
on claims relating to the Provisional Regulation.
6.10 India argues that it was clear that the final anti-dumping measure was the measure at issue,
but that this did not limit the nature of the arguments and claims that could be made. India refers to
EC law and practice which provide that aspects of the Provisional Regulation are adopted by
reference in the Definitive Regulation, and asserts that this automatically entails that aspects of the
Provisional Regulation can be challenged in the context of the final anti-dumping measures.
However, India clarified that, it being understood that this view was correct, it did not seek a ruling on
its claims 2, 5, 9, 12, 17, 21, 24, 27, and 30.
6.11 Egypt, as third party, submits that the European Communities' argument that the Panel cannot
entertain claims relating to the Provisional Regulation is unfounded and should be rejected by the
Panel. Egypt posits that it is clear that, had India and the other countries affected by the measure not
thought that the measure was imposed in breach of the provisions of Article 7.1 of the AD Agreement,
they would not have found it necessary to participate in these panel proceedings. It also follows, for
Egypt, that if the measure had not had any significant impact, India and other affected countries
would not have made a complaint. The very fact that they cooperated in the investigation and
provided evidence to refute the allegations means, according to Egypt, that they were concerned about
the significant impact the imposition of anti-dumping duties would have on their bed linen industries.
(ii) Findings
6.12 At the end of the first meeting, we granted the European Communities' request to dismiss
claims under Article 6 of the AD Agreement, that is , India's claims 14 and 16, having concluded that
those claims were not within our terms of reference. Our reasons for this decision are set forth below.

11 India's claims 2, 5, 9, 12, 17, 21, 24, 27, and 30 generally assert inconsistency on the part of the
European Communities with Article 12.2.1 by failing properly to explain, in the Provisional Regulation, the
legal and evidentiary basis for and analysis underlying elements of the European Communities' decision which
are challenged by India.

6.13 Article 6.2 of the Understanding on Rules and Procedures Governing the Settlement of
Disputes (hereinafter "DSU") provides that the request for the establishment of a panel "shall provide a
brief summary of the legal basis of the complaint sufficient to present the problem clearly". In
considering what must be in a request for establis hment in order to comply with this provision, the
Appellate Body has observed that:
"Identification of the treaty provisions claimed to have been violated by the
respondent is always necessary both for purposes of defining the terms of reference
of a panel and for informing the respondent and the third parties of the claims made
by the complainant; such identification is a minimum prerequisite if the legal basis
of the complaint is to be presented at all." 12
The Appellate Body went on to note that there might be situations where a "mere listing" of treaty
Articles would not satisfy the standard of Article 6.2 of the DSU.
13 In this case, we are not faced with
the question of whether a "mere listing" of the treaty Articles allegedly violated is sufficient to
"present the problem clearly" as required by Article 6.2 of the DSU – rather, it is a case in which the
treaty Articles alleged to be violated are not even listed in the request for establishment - "Article 6"
of the AD Agreement does on appear on the face of the document at all. In this circumstance, we
consider that the legal basis of a complaint with respect to that Article has not been presented at all.
6.14 India acknowledged, at our first meeting, that Article 6 of the AD Agreement did not appear
on the face of its request for establishment, characterizing this as an inadvertent omission. India
argued, however, that its claims under that Article should nonetheless be allowed, asserting that the
European Communities sustained no prejudice to its ability to defend its interests as a result of the
omission of Article 6 of the AD Agreement from the request for establishment. In support of this
contention, India points out that its claims with respect to Article 6 were clearly set out in its first
submission, and that Article 6 of the AD Agreement was mentioned in the request for consultations
and was actually discussed during the consultations.
6.15 In our view, a failure to state a claim in even the most minimal sense, by listing the treaty
Articles alleged to be violated, cannot be cured by reference to subsequent submissions. In this
regard, we note the statement of the Appellate Body in EC-Bananas:
"Article 6.2 of the DSU requires that the claims, but not the arguments, must all be
specified sufficiently in the request for the establishment of a panel in order to allow
the defending party and any third parties to know the legal basis of the complaint. If
a claim is not specified in the request for the establishment of a panel, then a faulty
request cannot be subsequently "cured" by a complaining party's argumentation in its
first written submission to the panel or in any other submission or statement made
later in the panel proceeding".
14
Thus, the fact that India may have fully elucidated its position with respect to alleged violations of
Article 6 of the AD Agreement in its first written submission to the Panel avails it nothing as a legal
matter. Failure to even mention in the request fo r establishment the treaty Article alleged to have
been violated in our view constitutes failure to state a claim at all.

12 Korea - Definitive Safeguard Measure on Imports of Certain Dairy Products ("Korea - Dairy
Safeguard"), Appellate Body Report, WT/DS98/AB/R, adopted 12 January 2000, para. 124 (emphasis added).
13 Id.
14 European Communities - Regime for the Importation, Sale and Distribution of Bananas ("EC -
Bananas"), Appellate Body Report, WT/DS27/AB/R, adopted 25 September 1997, para. 143.

6.16 In the absence of any reference in the request for establishment to the treaty Article alleged to
have been violated, the question of possible prejudice as a result of failure to state a claim with
sufficient clarity simply does not arise. Moreover, we are of the view that the argument that there was
no prejudice to the European Communities because Article 6 of the AD Agreement was mentioned in
the request for consultations, and may even have been discussed during the consultations is, in this
case, irrelevant. Consultations are part of the process of clarifying the matter in dispute between the
parties. It is perfectly understandable, and indeed desirable, that issues discussed during consultations
do not subsequently become claims in dispute. Thus, the absence of a subject that was discussed in
the consultations from the request from establishment indicates that the complaining Member does not
intend to pursue that matter further. Whether inadvertent or not, as a result of the omission of
Article 6 from the request for establishment the defending Member, the European Communities, and
third countries had no notice that India intended to pursue claims under Article 6 of the
AD Agreement in this case, and were entitled to rely on the conclusion that it would not do so.
Consequently, India would be estopped in any event from raising such claims.
6.17 We conclude that India failed to set forth claims under Article 6 of the AD Agreement in its
request for establishment of a panel in this dispute. Therefore, those putative claims, that is, India's
claims 14 and 16 as set forth in its first written submission, are beyond the scope of our terms of
reference. As we noted in issuing our ruling at the end of the first meeting, this does not, of course
preclude India from presenting arguments referring to the provisions of Article 6 of the
AD Agreement. However, we make no findings on India's claims 14 and 16.
6.18 With respect to the European Communities' request concerning India's claims regarding
Article 1 of the Anti-Dumping Agreement, India's claims regarding Article 3.6 of the Anti-Dumping
Agreement, and India's claims challenging the Provisional Regulation under Article 12.2.1, that is,
claims 2, 5, 9, 12, 17, 21, 24, 27, and 30, we took note at our first meeting of the statements of India
in its written response, and the statements of the parties at the first meeting. In light of those
statements, we did not consider it necessary to rule on these aspects of the European Communities'
request. We noted at that time, and we reiterate here, our view that India has withdrawn these claims.
Again, of course, this does not preclude India from presenting arguments referring to the provisions of
these articles. However, as with India's claims 14 and 16, we make no findings on these claims.
6.19 We did not, at out first meeting, resolve the European Communities' assertion that India's
claim 19 under Article 3.4 as set out in its first submission is not the same as the claim under
Article 3.4 set out in the request for establishment. We turn to that question now.
6.20 India's request for establishment sets forth, as a provision allegedly violated, "Article 3,
especially, but not exclusively Articles 3.1, 3.2, 3.4 , and 3.5". With respect to India's claim number
19 under Article 3.4, the European Communities acknowledges that Article 3.4 appears on the face of
the request for establishment, but argues that the facts and circumstances described as constituting a
violation of Article 3.4 in the request for establishment are entirely different from those presented in
support of the claim in India's first written submission. Therefore, the European Communities asserts
that India failed to clearly identify this aspect of its claim under Article 3.4, thus preventing the
European Communities from properly preparing its defense and denying third parties their right to be
alerted to the issues that are the subject of this dispute.
6.21 The request for establishment contains the following statements in connection with Article 3.4
of the AD Agreement:
"14. The European Communities has chosen a sample from the domestic industry,
but did not consistently base its injury determination on this sample, In addition, the
European Communities has explicitly determined that the domestic industry consists
of 35 companies, but relied in its injury determination on companies outside this

group in order to determine injury. In both cases, separately, the European
Communities acted inconsistently with Article 3.4. The European Communities'
failure to explain its determination properly is inconsistent with Article 12.2.
15. The European Communities failed to consider all injury factors mentioned in
Article 3.4 of the ADA for its determination on the state of the domestic industry,
including productivity, return on investments, utilisation of capacity, the magnitude
of the margin of dumping, cash flow, invent ories, wages, growth, ability to raise
capital or investments. The European Communities thus acted inconsistently with
Article 3.4. As far as the European Communities would argue that it did in fact
consider all factors in Article 3.4, it failed to disclose or make public its findings
thereon and thus acted inconsistently with Article 12.2.
16. The European Communities failed to make an unbiased and objective
analysis of the development of market share of the domestic industry and
insufficiently explained its position, as required by Article 3.4 of the ADA. As far as
the European Communities would argue that it did in fact make such analysis, it has
insufficiently explained it, and thus acted inconsistently with Article 12.2."
15
6.22 The European Communities argues that India's Claim 19, as set forth and argued in India's
first submission, relates to a different question than that specified in the request for establishment - the
question of whether the European Communities incl uded in its examination of injury the impact of
imports that were not dumped. In the European Communities' view, this claim cannot reasonably be
identified from the request for establishment as a claim under Article 3.4. Therefore, the European
Communities argues, India's request for establishment does not present the problem addressed in
claim 19 as set out in the first written submission clearly and is thus not within the Panel's terms of
reference. The European Communities raises no objections with respect to the other Indian claims
under Article 3.4 (Claims 11 and 15).
6.23 We note that in paragraph 13 of the request for establishment, India does seem to have made a
claim about the consideration of all imports as dumped under Article 3.5 of the AD Agreement:
"13. Contrary to the wording of Article 3 and especially Article 3.5 of the ADA,
the European Communities automatically and without any further explanation
assumed that all imports of the product concerned during the years immediately
preceding the investigation period were dumped. Consequently, the causality finding
between imports from India and the alleged injury caused to the domestic industry is
tainted and inconsistent with Article 3.5. The European Communities' failure to
explain this determination properly is inconsistent with Article 12.2."
16
India has identified and argued this claim as claim 20 in the first written submission, and the
European Communities has no objection to this claim.
6.24 However, it is not clear from the face of the request for establishment that India made any
claim with respect to the consideration of all imports as dumped under Article 3.4 of the AD
Agreement, as opposed to Article 3.5 of that Agreem ent. Therefore, we must look more closely into
the matter to determine whether India's request for establishment provides "a brief summary of the
legal basis of the complaint sufficient to present the problem clearly" in this regard, and therefore

15 WT/DS141/3.
16 Id.

satisfies the standard set out in Article 6.2 of the DSU. 17 We note that it is important that a panel
request be sufficiently precise for two reasons: first, it often forms the basis for the terms of reference
of the panel pursuant to Article 7 of the DSU; and, second, it informs the defending party and
potential third parties of the legal basis of the complaint.18
6.25 As noted above, Article 6.2 of the DSU provides, in relevant part:
"The request for the establishment of a panel shall be made in writing. It shall
indicate whether consultations were held, identify the specific measures at issue and
provide a brief summary of the legal basis of the complaint sufficient to present the
problem clearly . . . "
We recall that the Appellate Body addressed this requirement recently, in Korea – Dairy Safeguard.19
The Appellate Body's analysis in that case offers guidance as to how a panel should address the issue
of whether a request for establishment provides "a brief summary of the legal basis of the complaint
sufficient to present the problem clearly" in accordance with Article 6.2 of the DSU. First, the issue is
to be resolved on a case-by-case basis. Second, the panel must examine the request for the
establishment of the panel very carefully to ensure its compliance with both the letter and the spirit of
Article 6.2 of the DSU. Third, the panel should take into account the nature of the particular
provision at issue – i.e. , where the Articles listed establish not one single, distinct obligation, but
rather multiple obligations, the mere listing of treaty Articles may not satisfy the standard of
Article 6.2. Fourth, the panel should take into account whether the ability of the respondent to defend
itself was prejudiced, given the actual course of the panel proceedings, by the fact that the panel
request simply listed the provisions claimed to have been violated. It seems that even if the panel
request is insufficient on its face, an allegation that the requirements of Article 6.2 of the DSU are not
met will not prevail where no prejudice is established.
6.26 In essence, the Appellate Body seems to set a two-stage test to determine the sufficiency of a
panel request under Article 6.2 of the DSU: first, examination of the text of the request for
establishment itself, in light of the nature of the legal provisions in question; second, an assessment of
whether the respondent has been prejudiced by the formulation of claims in the request for
establishment, given the actual course of the panel proceedings.
6.27 Applying this "two step" approach to the facts of this case, we first consider the text of the
request for establishment itself, to determine the extent to which Article 3.4 is addressed. In this case,
Article 3.4 is explicitly listed in the request for establishment. However, we recall that a "mere
listing" may not necessarily be sufficient for the purposes of Article 6.2 DSU. In this case, the
explanation regarding Article 3.4 in the request for establishment does not refer to or relate in any
way to the argument in the first submission concerning the consideration of all imports as dumped in
the injury analysis under Article 3.4. This raises an implication that the request for establishment was
not, in fact, sufficiently clear on this aspect of India's claims under Article 3.4.

17 The special or additional rules applicable to anti-dumping disputes have not been raised by the
European Communities in this context. The Panel in Mexico - HFCS concluded that Article 17.4 of the
AD Agreement, which describes the matters that may be referred for dispute settlement, "does not…set out any
further or additional requirements with respect to the degree of specificity with which claims must be set forth in
a request for establishment challenging a final anti-dumping measure.", and noted in this regard that Article 17.4
does not refer to "claims". Mexico - Anti-Dumping Investigation of High-Fructose Corn Syrup (HFCS) from the
United States ("Mexico - HFCS") , Panel Report, WT/DS132/R, adopted 24 February 2000, para. 7.14 and note
531.
18 EC - Bananas , para. 142; Brazil - Measures Affecting Dessicated Coconut , Appellate Body Report,
WT/DS22/AB/R, adopted 20 March 1997, p. 22.
19 Korea - Dairy Safeguard, Appellate Body Report, para. 6.

6.28 We therefore turn next to the question whether the European Communities, or any of the third
parties, has been prejudiced by this lack of sufficient clarity, "given the actual course of the panel
proceedings". It is clear that the European Communities was able to respond to the Indian arguments
in this regard. Moreover, while it is possible that potential third parties were not alerted to the fact
that India intended to pursue the issue of consideration of all imports as dumped under Article 3.4 of
the AD Agreement, it was clear from the face of the request for establishment that India was pursuing
this issue under Article 3.5 of that Agreement. Moreover, all three third parties did address the issue
of whether the European Communities acted inconsistently with the AD Agreement in considering all
imports as dumped. In our view, this suggests a lack of prejudice to third parties' interests in this
dispute. While it is not clear whether potential third parties understood the claim to be asserted under
Article 3.4 or Article 3.5, the substance of the issue was clearly apparent to them, and was addressed
by those Members that participated as third parties. The specific provision of the AD Agreement
alleged to have been violated is, in our view, of less importance than the question whether the
particular practice, consideration of all imports as dumped, is permitted by the AD Agreement or not,
and that question has clearly been addressed by all parties and third parties in this dispute, and was
clearly put before us by the request for establishment.
6.29 Thus, we conclude that, in the particular circumstances of this case, the lack of sufficient
clarity in the request for establishment concerning India's claim 19 that challenges the consideration
of all imports as dumped in the injury analysis under Article 3.4 was not prejudicial to either the
European Communities or third parties. We therefore deny the European Communities' request to
dismiss this aspect of claim 19. Of course, this is without prejudice to our substantive decision on this
claim, which is addressed further below.
(b) Evidence regarding the substance of the consultations
(i) Parties' arguments
6.30 The European Communities also objects to the inclusion by India in its submission of reports
of the consultations between the parties prior to the establishment of the Panel. The European
Communities argues that these were drafted by India, without the European Communities'
endorsement, are inaccurate and intrinsically unreliable, and are not evidence that can properly be
submitted to the Panel.
6.31 In its response on this point, India stressed the "absolute accuracy of the verbatim reports" it
had prepared and on which it relied in its first submission. India acknowledged that it was unusual to
present such reports, but maintained that it was oblig ed to do so as these reports bore witness to the
European Communities' lack of respect for the basic objective of the consultation process, to seek an
amicable solution
(ii) Findings
6.32 At the outset, we note that India appears to acknowledge that there is nothing new or
substantive in the reports of the substance of the consultations that is not otherwise before the Panel.
India states that it is relying on the reports of the consultations as bearing "witness to the lack of
respect on the part of the European Communities for the basic objective of the consultation process,
which is to seek an amicable solution." This latter assertion is without relevance to either the issues in
dispute (which do not relate to the adequacy of the consultations) or the question whether the
evidence regarding the consultations should be considered by the Panel. Thus, it seems that the
evidence concerning the consultations is at best unnecessary, and may be irrelevant. That said,
however, merely because the evidence is unnecessary or irrelevant does not require us to exclude it.

6.33 A panel is obligated by Article 11 of the DSU to conduct "an objective assessment of the
matter before it". The Panel in Australia-Automotive Leather observed that:
"Any evidentiary rulings we make must, therefore, be consistent with this obligation.
In our view, a decision to limit the facts and arguments that the United States may
present during the course of this proceeding to those set forth in the request for
consultations would make it difficult, if not impossible, for us to fulfill our obligation
to conduct an "objective assessment" of the matter before us."
20
Similarly in this case, we consider that it is not necessary to limit the facts and arguments India may
present, even if we might consider those facts or arguments to be irrelevant or not probative on the
issues before us. In our view, there is a significant and substantive difference between questions
concerning the admissibility of evidence, and the weight to be accorded evidence in making our
decisions. That is, we may choose to allow parties to present evidence, but subsequently not consider
that evidence, because it is not relevant or necessary to our determinations or is not probative on the
issues before it. In our view, there is little to be gained by expending our time and effort in ruling on
points of "admissibility" of evidence vel non.
6.34 In addition, we note that, under Article 13.2 of the DSU, Panels have a general right to seek
information "from any relevant source". In this c ontext, we consider that, as a general rule, panels
have wide latitude in admitting evidence in WTO dispute settlement. The DSU contains no rule that
might restrict the forms of evidence that panels may consider. Moreover, international tribunals are
generally free to admit and evaluate evidence of every kind, and to ascribe to it the weight that they
see fit. As one legal scholar has noted:
"The inherent flexibility of the international procedure, and its tendency to be free
from technical rules of evidence applied in municipal law, provide the "evidence"
with a wider scope in international proceedings . . . . Generally speaking,
international tribunals have not committed themselves to the restrictive rules of
evidence in municipal law. They have found it justified to receive every kind and
form of evidence, and have attached to them the probative value they deserve under
the circumstances of a given case".
21
It has clearly been held in the WTO that information obtained in consultations may be presented in
subsequent panel proceedings.
22
6.35 There is nothing to be accomplished by limiting the evidence in this dispute by granting the
European Communities' request, and we therefore deny it. Moreover, we note that we have not relied
on the evidence concerning the consultations in maki ng our decisions in this dispute. We therefore
consider that the accuracy of India's representations as to what happened in the consultations is not
relevant to our decision and we reach no conclusions in that regard.

20 Australia - Subsidies Provided to Producers and Exporters of Automotive Leather, Panel Report,
21 Kazazi, Mojtaba, Burden of Proof and Related Issues – A Study of Evidence Before International
Tribunals, Malanczuk, Peter, ed., Kluwer Law International, The Hague, pp. 180, 184.
22 Korea - Taxes on Alcoholic Beverages, Panel Report, WT/DS75/R–WT/DS84/R, adopted
17 February 1999, para. 10.23 (issue not raised on appeal). This is unlike the situation before many
international tribunals, which often refuse to admit evidence obtained during settlement negotiations between
the parties to a dispute. The circumstances of such settlement negotiations are clearly different from WTO
dispute settlement consultations, which are, as the Appellate Body has noted, part of the means by which facts
are clarified before a panel proceeding.

(c) Evidence containing confidential information from a different investigation
(i) Parties' arguments
6.36 Finally, the European Communities notes that India's Exhibit 49 to its first submission
appears to contain a dumping calculation from a different anti-dumping investigation than the one at
issue in this dispute. The European Communities asserts that if this is true, the submission of this
evidence constitutes a breach of confidentiality obligations in that other case, and the European
Communities is not prepared to comment on th e substance of the document. The European
Communities does not argue that the information in the Exhibit is untrue or irrelevant. Rather, the
European Communities argues that India has, or may have, violated an obligation of confidentiality
regarding the contents of Exhibit 49. The European Communities requests the Panel to rule that the
document is not part of these proceedings.
6.37 India stated that it was entitled to present the information in question in support of its
arguments, that the Panel's working procedures required that all information submitted be kept
confidential, and that there was no breach of confidentiality, citing in this regard India's Exhibit 81,
setting forth the explicit written consent of the producer whose information is at issue to its
submission in this dispute settlement proceeding.
6.38 The United States, as third party, agrees with the European Communities that if India's
Exhibit 49 is in fact a confidential document from another anti-dumping investigation, unless it is
demonstrated that the parties whose confidential information is contained in that document consented
to the release of that information, the submission of the document to this panel represents a deplorable
breach of confidentiality which should not be encouraged by the Panel. However, the United States
does not suggest any specific ruling in this regard.
(ii) Findings
6.39 The issue we must decide is whether certain confidential information which was before the
European Communities in an anti-dumping investigation unrelated to the anti-dumping measure in
dispute before us can be considered by this Panel. We note the view of the European Communities
that the submission of this information constitutes a breach of confidentiality. Although the European
Communities does not specifically so state, presumably the concern is with the alleged unauthorised
disclosure of confidential information in violation of the last sentence of Article 6.5 of the
AD Agreement. We recall, however, that there is no claim before us that India has violated
Article 6.5 of the Agreement. Our task is limited to addressing those issues which are necessary to
resolve the European Communities' assertion that this information is inadmissible.
6.40 We consider that an issue of the admissibility of evidence might be presented if we had
reason to believe that the party to whom the confidential information belonged objected to its
disclosure and consideration in this dispute. However, in this case the party to whom the information
belongs and whose interests are protected by confidential treatment has waived its rights and stated its
consent to our consideration of the information in question.
23 Under these circumstances, we can
perceive no useful purpose to be served by excluding the information. That the document consenting
to the submission of the information in this proceeding is dated after the date that the information was
first submitted to us does not, in our view, change that conclusion. We note that, in any event, the
evidence in question purports to demonstrate that the European Communities' practice concerning
zeroing is not consistently applied by the European Communities in all cases. Since the issue before
us is whether the European Communities' practice as applied in this case is consistent with its
obligations under the AD Agreement, we do not consider it necessary to decide whether the European

23 Exhibit India-81.

Communities applies that practice consistently.24 If zeroing is prohibited, the European Communities
has violated its obligations under the AD Agreement in this case. If zeroing is allowed, then it has
not. Whether it has zeroed in some other anti-dumping investigation will not affect our conclusions
on this point. We therefore deny the European Communities' request to rule that Exhibit 49 is not
admissible in this proceeding.
2. India request
(a) Parties' arguments
6.41 India submitted a letter objecting to Exhibit 4 to the European Communities' first submission,
and requesting a preliminary ruling concerning the exact status of the document in question. While
not stated explicitly, it appears that India considers that this document was created post hoc for the
purposes of this dispute, and that it should not be considered by the Panel.
6.42 The European Communities asserted that the document was a recapitulative table of the
declarations of support for the application received prior to initiation, and did not constitute new
evidence. On the contrary, the European Co mmunities maintained that the exhibit simply
systematised evidence that had always been available to India, and cited in this regard to India's
Exhibit 59, which the European Communities asserted contained some of the same evidence.
(b) Findings
6.43 Article 17.5(ii) of the AD Agreement provides that a panel shall consider a dispute under the
AD Agreement "based upon: . . . the facts made available in conformity with appropriate domestic
procedures to the authorities of the importing Member". It does not require, however, that a panel
consider those facts exclusively in the format in which they were originally available to the
investigating authority. Indeed, the very purpose of the submissions of the parties to the Panel is to
marshal the relevant facts in an organized and comprehensible fashion in support of their arguments
and to elucidate the parties' positions. Based on our review of the information that was before the
European Communities at the time it made its decision, in particular that presented by India in its
Exhibits, the parties' extensive argument regardin g this evidence, and our findings with respect to
India's claim under Article 5.4, we conclude that the Exhibit in question does not contain new
evidence. Thus, we conclude that the form of the document, (i.e., a new document) does not preclude
us from considering its substance, which comprises facts made available to the investigating authority
during the investigation. There is in our view no basis for excluding the document from consideration
in this proceeding, and we therefore deny India's request.
B. BURDEN OF PROOF AND STANDARD OF REVIEW
6.44 In reviewing the European Communities' final measure imposing anti-dumping duties, which
is the measure at issue in this dispute, we keep in mind the applicable principles concerning the
burden of proof, and the standard of review in disputes involving anti-dumping proceedings. In WTO
dispute settlement proceedings, the burden of proof with respect to a particular claim or defense rests
with the party that asserts such claim or defence.
25 The burden of proof is "a procedural concept
which speaks to the fair and orderly management and disposition of a dispute".26 In the context of the
present dispute, which is concerned with the assessment of the WTO consistency of a definitive anti-

24 India has made no claims concerning alleged inconsistent application of EC law.
25 United States – Measure Affecting Imports of Woven Wool Shirts and Blouses from India , Appellate
Body Report, WT/DS33/AB/R, adopted 23 May 1997, p. 14.
26 Canada - Measures Affecting the Export of Civilian Aircraft, Appellate Body Report,
WT/DS70/AB/R, adopted 20 August 1999, para. 198.

dumping measure imposed by the European Communities, India is obliged to present a prima facie
case of violation of the relevant Articles of the AD Agreement. In this regard, the Appellate Body has
stated that ". . . a prima facie case is one which, in the absence of effective refutation by the
defending party, requires a panel, as a matter of law, to rule in favour of the complaining party
presenting the prima facie case".27 Thus, where India presents a prima facie case in respect of a claim,
it is for the European Communities to provide an "effective refutation" of India's evidence and
arguments, by submitting its own evidence and arguments in support of the assertion that the
European Communities complied with its obligatio ns under the AD Agreement. Assuming evidence
and arguments are presented on both sides, it is then our task to weigh and assess that evidence and
those arguments in order to determine whether India has established that the European Communities
acted inconsistently with its obligations under the AD Agreement.
6.45 Article 17.6 of the AD Agreement sets out a special standard of review for disputes arising
under that Agreement. With regard to factual issues, Article 17.6(i) provides:
"(i) in its assessment of the facts of the matter, the panel shall determine whether
the authorities' establishment of the facts was proper and whether their evaluation of
those facts was unbiased and objective. If the establishment of the facts was proper and
the evaluation was unbiased and objective, even though the panel might have reached a
different conclusion, the evaluation shall not be overturned;"
Assuming that we conclude that the establishment of the facts with regard to a particular claim in this
case was proper, we then may consider whether, based on the evidence before the EC investigating
authorities at the time of the determination, an unbiased and objective investigating authority
evaluating that evidence could have reached the conclusions that the EC investigating authorities
reached on the matter in question.
28
6.46 With respect to questions of the interpretation of the AD Agreement, Article 17.6(ii) provides:
"(ii) the panel shall interpret the relevant provisions of the Agreement in accordance
with customary rules of interpretation of public international law. Where the panel
finds that a relevant provision of the Agre ement admits of more than one permissible
interpretation, the panel shall find the authorities' measure to be in conformity with the
Agreement if it rests upon one of those permissible interpretations."
Thus, in considering those aspects of the European Communities' determination which stand or fall
depending on the interpretation of the AD Agreement itself rather than or in addition to the analysis of
facts, we first interpret the provisions the AD Agreement. As the Appellate Body has repeatedly
stated, Panels are to consider the interpretation of the WTO Agreements, including the
AD Agreement, in accordance with the principles set out in the Vienna Convention on the Law of
Treaties (Vienna Convention). Thus, we look to the ordinary meaning of the provision in question, in
its context, and in light of its object and purpose. Finally, we may consider the preparatory work (the
negotiating history) of the provision, should this be necessary or appropriate in light of the
conclusions we reach based on the text of the provision. We then evaluate whether the European

27 European Communities – Measures C oncerning Meat and Meat Products ("EC – Hormones" ),
Appellate Body Report, WT/DS26/AB/R–WT/DS48/AB/R, adopted 13 February 1998, para. 104.
28 We note that this is the same standard as that applied by the Panel in Mexico - HFCS , which, in
considering whether the Mexican investigating authorities had acted consistently with Article 5.3 in determining
that there was sufficient evidence to justify inititaion, stated: "Our approach in this dispute will … be to examine
whether the evidence before SECOFI at the time it initiated the investigation was such that an unbiased and
objective investigating authority evaluating that evidence could properly have determined that sufficient
evidence of dumping, injury and causal link existed to justify initiation." Mexico - HFCS, Panel Report,
para. 7.95.

Communities' interpretation is one that is "per missible" in light of the customary rules of
interpretation of international law. If so, we allow that interpretation to stand, and unless there is error
in the subsequent analysis of the facts under that legal interpretation under the standard of review
under Article 17.6(i), the challenged action is upheld.
6.47 Finally, we note that, as a general matter, the object of a panel's review of a final anti-
dumping measure focuses on the final determination of the investigating authority, in this case, the
European Communities' Definitive Regulation (Exhibit India-9). However, it is clear to us, and the
European Communities has confirmed, that in EC practice the Definitive Regulation does not stand
alone as the final determination. Rather, the European Communities reaches many of its conclusions
in the preliminary phase of the investigative process, and announces those decisions in the Provisional
Regulation (Exhibit India-8). Unless there is a change in the substance of such decisions during the
final phase of the investigative process, these decisions are often simply confirmed in the Definitive
Regulation, without repeating the underlying analysis and facts in detail, although there may be
additional facts or explanation given. Thus, to the extent we seek to understand the European
Communities' analysis and explanation concerning any given element of its final determination in
order to evaluate India's claims, we consider it appropriate to look to both the Provisional Regulation
and the Definitive Regulation to inform ourselves as to the substance of the challenged decision.
C. CLAIMS UNDER ARTICLE 2
6.48 The European Communities, in its investigation, relied on constructed normal value, i.e., it
established the normal value on the basis of the cost of production plus a reasonable amount for
administrative, selling and general costs (hereinafter "SG&A") and for profits. India does not
challenge this decision on the part of the EC authorities. India does, however, challenge aspects of
the European Communities' methodology for calculating the constructed normal value. In addition,
India argues that the “zeroing” methodology the European Communities applied in comparing normal
value and export price to calculate the dumping marg ins is inconsistent with the requirements of the
AD Agreement.
1. Claim under Article 2.2.2 – determination of amount for profit (claim number 1)
(a) Article 2.2.2 - order of options
(i) Parties' arguments
6.49 Articles 2.2.2(i)-(iii) set forth three separate bases for deriving the amount of SG&A expenses
and profit to be used in a constructed value calculation. India argues that the European Communities
applied Article 2.2.2(ii), which was not available to the European Communities, instead of
Article 2.2.2(i), which was available, and that this action violates the spirit and structure of
Articles 2.2.2 and 2.2. India contends that the text of the AD Agreement reveals a gradually declining
scale in the order of options as far as the relation with the producer is concerned. The first alternative,
set out in the chapeau of Article 2.2.2, is the “actual dumping situation” and the fourth option
(Article 2.2.2(iii)) is the “most alternative” me thod. Recourse to the options provided for in
Articles 2.2.2(ii) and (iii) would normally deprive an exporter not only of the possibility of verifying
the calculation of his own dumping margin, at least in the EC system, but also of the possibility of
preventing dumping, because he would never know whether he is dumping in the first place.
Therefore, India argues, those provisions are ranked such that their use is less available than
Articles 2.2.2 and 2.2.2(i). It is India’s position th at, on the basis of the wording of Article 2.2.2, as
well as the concept of dumping, Article 2.2.2 establishes a preference for the use of producer-specific
data.

6.50 India points out that the EC legislation – Articl e 2(6) of Regulation 384/96 – in fact lists the
options for determining the amounts for SG&A and for profit identified in Article 2.2 of the
AD Agreement in a different order than they appear in the Agreement. This would appear to suggest,
according to India, that the European Communities implicitly does not consider the order of options to
be relevant. The European Communities did not even consider which option would be most
reasonable, but simply applied Article 2(6)(a). India believes that, in fact, Article 2(6)(c) could have
been applied, pointing to the situation of at least one company which had domestic sales of other
products in the same general category in the domestic market. In India’s view, the European
Communities apparently considers the order in which options are set out in Article 2(6) of its
Regulation as mandatory. Further, India notes that case law from the European Court of Justice
confirms that the order of the Regulation is of a mandatory nature and recent EC literature on the
subject confirms that the order set out in the Regula tion is followed in practice. India considers that
the de facto order of preference established by the European Communities is inconsistent with the
order of preference established by the AD Agreement as applied in the bed linen proceeding.
29
6.51 The European Communities disagrees with India’s interpretation finding a priority of
Article 2.2.2(i) over Article 2.2.2(ii). The European Communities maintains that the ordinary
meaning of the text of Article 2.2.2 does not indicate any priority between the three options. The
three sub-paragraphs contain no wording indicating that one is to be applied in preference to another,
nor is any preference inherent in the nature of the three options, or at least of the first two.
Consequently, following from the correct interpretation of Article 2.2.2, Members have complete
discretion to choose between the options. Moreover, the European Communities contends that, while
the particular exporter or producer is no doubt an important element in the calculation of normal
value, so is the particular product. In fact, from an economic point of view, the commonality of
products is more important than that of producer, because market forces operate most strongly
between products of the same kind. Thus option (ii) is at least as economically realistic as option (i).
6.52 The European Communities notes that India draws attention to certain disadvantages for the
exporter/producer of using option (ii) or (iii). The implication of this argument, to the European
Communities, is that the drafters would have sought to avoid such disadvantages. Protecting the
interests of the exporter/producer is arguably one of the purposes implicit in the AD Agreement, but
others are equally plausible. For instance, compared to option (ii), the use of option (i) would involve
much greater investigative effort, with consequent inconvenience and delays for all concerned. In
contrast, the data relevant to option (ii) would already be in the hands of the investigating authorities.
The European Communities believes that it would be more in accordance with the object and purpose
of the AD Agreement to conclude that the text leaves Members free to decide whether to give priority
to option (i) or option (ii).
30
6.53 The United States, as third party to the dispute, submits that the text of Article 2.2.2 is not
hierarchical with respect to alternative methods fo r computing SG&A and profit. Dumping is both a
producer-specific and product-specific determination; therefore, the chapeau of Article 2.2.2
expresses a clear preference for the use of actual data of the producer or exporter under investigation,
for sales of the like product in the ordinary course of trade. When the method of the chapeau of
Article 2.2.2 cannot be applied, any of the three alternatives that follow may be applied instead.
Notably, it is permissible to infer both from the presence of an explicit hierarchy between the chapeau
and the three alternatives that follow, and from the absence of such a hierarchy among the three

29 India has not made a claim regarding the Regulation itself, only its application in this case.
30 In this regard, the European Communities notes that India addresses the drafting of Article 2(6) of
the European Communities’ Basic Regulation, in particular , the fact that options (i) and (ii) are set out in the
opposite order as that in the AD Agreement. As noted above, India has not made a claim regarding the
Regulation itself, and we make no ruling on its consistency with the AD Agreement.

alternatives, that the drafters of the Agreement intended no such hierarchy to exist among
Articles 2.2.2(i), (ii) and (iii).
(ii) Findings
6.54 We first consider India’s argument that the order of methodological options for calculating a
reasonable amount for profit set out in Article 2.2.2 reflects a preference for one option over another,
notably the option set out in paragraph (i) over that in paragraph (ii).
6.55 Article 2.1 of the AD Agreement articulates the general requirement for price comparison to
determine the existence of dumping. It stipulates:
“For the purpose of this Agreement, a product is to be considered as being dumped,
i.e., introduced into the commerce of another country at less than its normal value, if
the export price of the product exported from one country to another is less than the
comparable price, in the ordinary course of trade, for the like product when destined
for consumption in the exporting country.”
6.56 Article 2.2 provides:
“When there are no sales of the like product in the ordinary course of trade in the
domestic market of the exporting country or when, because of the particular market
situation or the low volume of the sales in the domestic market of the exporting
country
2, such sales do not permit a proper comparison, the margin of dumping shall
be determined by comparison with a comparable price of the like product when
exported to an appropriate third country, provided that this price is representative, or
with the cost of production in the country of origin plus a reasonable amount for
administrative, selling and general costs and for profits.
2Sales of the like product destined for consumption in the domestic market of the
exporting country shall normally be considered a sufficient quantity for the
determination of the normal value if such sales constitute 5 per cent or more of the
sales of the product under consideration to the importing Member, provided that a
lower ratio should be acceptable where the evidence demonstrates that domestic sales
at such lower ratio are nonetheless of sufficient magnitude to provide for a proper
comparison.”
6.57 Thus, Article 2.2 of the AD Agreement provides that, in certain circumstances, the margin of
dumping can be determined using a constructed normal value, comprising “the cost of production in
the country of origin plus a reasonable amount for administrative, selling and general costs and for
profits”. Article 2.2.2 then sets forth how investigating authorities shall arrive at the amounts for
SG&A and for profits to be used in the calculation of this constructed normal value. It states:
“For the purpose of paragraph 2, the amounts for administrative, selling and general
costs and for profits shall be based on actual data pertaining to production and sales in
the ordinary course of trade of the like product by the exporter or producer under
investigation. When such amounts cannot be determined on this basis, the amounts
may be determined on the basis of:

(i) the actual amounts incurred and realised by the exporter or producer in
question in respect of production and sales in the domestic market of the
country of origin of the same general category of products;
(ii) the weighted average of the actual amounts incurred and realised by other
exporters or producers subject to investigation in respect of production and
sales of the like product in the domestic market of the country of origin;
(iii) any other reasonable method, provided that the amount for profit so
established shall not exceed the profit normally realised by other exporters or
producers on sales of products of the same general category in the domestic
market of the country of origin.”
6.58 The chapeau and paragraphs (i) and (ii) of Article 2.2.2 thus outline specific methods
available to the investigating authorities to arrive at the amounts for SG&A and for profits to be used
in the calculation of constructed normal value, and paragraph (iii) allows for the use of any other
reasonable method. The chapeau of Article 2.2.2 requires the use of the profit margin from like
product sales in the ordinary course of trade in the home market in calculating constructed normal
value. When the amount cannot be determined on this basis, a Member may resort to an approach set
out in paragraphs (i)-(iii).
6.59 Looking first at the text of Article 2.2.2, we see nothing that would indicate that there is a
hierarchy among the methodological options listed in subparagraphs (i) to (iii). Of course, they are
listed in a sequence, but this is an inherent characteristic of any list, and does not in and of itself entail
any preference of one option over others. Moreover, we note that where the drafters intended an order
of preference, the text clearly specifies it. Thus, Article 2.2.2 provides "When such amounts cannot
be determined on this basis . . . ", an investigat ing authority may turn to subparagraphs (i) to (iii).
There is no similar language regarding the subparts themselves. Had the drafters wished to indicate a
hierarchy among the three options, surely they would have done so in a manner that made that
hierarchy explicit. Certainly, we would have expected something more than simply a numbered
listing. Thus, in context, it seems clear to us that the mere order in which the options appear in
Article 2.2.2 has no preferential significance.
6.60 India’s argument, that subparagraph (i) must be considered first, and that option (ii) can only
be applied if option (i) cannot be applied, rests on implicit conclusions about the relative desirability
of the three options in Article 2.2.2, and asks us to conclude that option (i) is, in all circumstances,
preferable to option (ii). Paragraphs (i)-(iii) provide three alternative methods for calculating the
profit amount, which, in our view, are intended to constitute close approximations of the general rule
set out in the chapeau of Article 2.2.2. These approximations differ from the chapeau rule in that they
relax, respectively, the reference to the like product, the reference to the exporter concerned, or both
references, spelled out in that rule.
31 Thus, Article 2.2.2(i) allows the calculation of the profit amount
on the basis of data for the exporter concerned, corresponding to a general category of products ,
including the like product. In turn, Article 2.2.2(ii) permits the calculation of the profit rate on the
basis of the weighted average profit rate for other investigated exporters , corresponding to the like
product itself. Finally, Article 2.2.2(iii) allows the use of any other method, as long as the resulting

31 There is a question as to whether the methods outlined in Articles 2.2.2(i)-(iii) also relax the
“ordinary course of trade” requirement present in Article 2.2.2. In fact, this is one of the questions at issue in
this dispute (See section VI.C.1.(c)).

rate is not higher than the weighted average profit rate realised by other investigated exporters in
respect of sales in the same general category of products.32
6.61 In our view, there is no basis on which to judge which of these three options is “better”.
Certainly, there were differing views during the negotiations as to how this issue was to be resolved,33
and there is no specific language in the Agreement to suggest that the drafters considered one option
preferable to the others. Given, as explained above, that each of the three options is in some sense
"imperfect" in comparison with the chapeau methodology, there is, in our opinion, no meaningful way
to judge which option is less imperfect – or of greater authority – than another and, thus, no obvious
basis for a hierarchy. And it is, in our view, for the drafters of an Agreement to set out a hierarchy or
order of preference among admittedly imperfect approximations of a preferred result, and not for a
panel to impose such a choice where it is not apparent from the text.
6.62 We therefore conclude that the order in which the three options are set out in Articles 2.2.2(i)-
(iii) is without any hierarchical significance and that Members have complete discretion as to which
of the three methodologies they use in their investigations. We thus find that the European
Communities was not required by the AD Agreement to resort to option (i) before it could resort to
option (ii) and it did not act inconsistently with Article 2.2.2 by using the latter option.
(b) Article 2.2.2(ii) – data from “other exporters or producers”
(i) Parties' arguments
6.63 India next claims that the European Communities misapplied Article 2.2.2(ii) of the
AD Agreement by relying on data of one other producer as the amount for profits. India argues that
the calculation method provided for in Article 2.2.2(ii) was not available to the European
Communities, because the conditions for its applic ation had not been met, pointing to the words
“other exporters or producers” in that provision. India argues that the production and sales amounts
of other exporter s or producer s are to be averaged, and that the production and sales amount of a
single "other" exporter or producer cannot be used under Article 2.2.2(ii). In this regard, India adds
that all definitions of the word “average” entail that the group set of which the average is to be
calculated should consist of more than one unit. An average, by its very nature, cannot be inferred
from a single variable. The fact that Article 2.2.2(ii) uses the words “weighted average”, i.e., an
average that attributes statistical weight to each of the parameters being summarised into a single
value, only stresses the fact that more than one factor needs to be taken into account. India asserts
that "amounts" in Article 2.2.2(ii) refers to “the amounts for administrative, selling and general costs
and for profits”. It is, therefore, clearly the amounts for “administrative, selling and general costs and
for profits” from “other producers or exporters” for which a “weighted average” needs to be
established. However, the European Communities applied just one amount from one producer as the
data to be used pursuant to Article 2.2.2(ii).
6.64 India considers that the logic underlying the European Communities' action perverts the text
of Article 2.2.2(ii). The calculation of the constructed normal values for companies without domestic
sales is coloured by factors unique to the single producer whose SG&A and profit amounts were used,
thereby artificially finding dumping for all producers, where, in reality, none exists for most. It is
precisely to avoid such extreme results, in India's view, that the Agreement requires that the weighted
average of data for at least two exporters or producers be used. This rationale can be inferred from
the principal rule of the chapeau of Article 2.2, namely that the amount for SG&A and profit be

32 In fact, in order to come up with a benchmark, this method requires calculation of the weighted
average profit rate for other investigated exporters, corresponding to the same general category of products.
33 See Stewart, Terence P., ed., The GATT Uruguay Round: A Negotiating History (1986-1992),
Kluwer Law International, The Hague, pp. 171-190.

“reasonable”. India submits that Bombay Dyeing is a wholly atypical company in India, and the
SG&A and profit from one peculiar and extraordinary company cannot be considered "reasonable".
India submits that another company did have sufficient representative domestic sales, was included in
the sample selection, and its data should have been taken into account by the European Communities.
6.65 The European Communities disputes India's interp retation of Article 2.2.2(ii). The European
Communities emphasises that the approach required by Article 31 of the Vienna Convention relies on
the ordinary meaning of the words of the treaty in their context and in light of the treaty’s object and
purpose. The European Communities notes that India alleges that the word “average” requires
consideration of more than one parameter. The European Communities does not agree that provisions
containing the word “average” (or the words “weighted average”) become inapplicable if the
circumstances are such that the class of data that is to be "averaged" contains only one item.
Article 2.4.2, for instance, uses the notion of “a weighted average normal value with a weighted
average of prices of all comparable export transactions”. There is no reason, for the European
Communities, to think that the formula could not be applied if either side of the comparison contained
only one sale. The European Communities further asserts that this interpretation of Article 2.2.2
entails focusing on the use of the word “amounts” rather than amount. The European Communities
submits that the use of this word is more complex. Since the first sentence of the chapeau of
Article 2.2.2 refers to an individual “exporter or pr oducer”, it would be surprising, in the opinion of
the European Communities, if there were more than one amount for “administrative, selling and
general costs” and one amount for “profits”. Therefore, the word “amounts” most plausibly reflects
the fact that there would be two amounts (one of each type) for each exporter or producer.
6.66 Regarding the use of the word “amounts” in Article 2.2.2(ii), the European Communities
comments that the word is in the plural in two senses, first, as explained above with respect to
Article 2.2.2, and, second, because in many cases th ere would be more than one other exporter or
producer, as is also envisaged by the reference to “other exporters or producers”. The European
Communities submits, however, that, both in ordinary speech and in carefully drafted legal texts, a
plural phrase is often used with the intention of including the case where there is only one such person
or thing. Articles 4.1 and 17.4 of the AD Agreement use similar language. In the European
Communities' view, it would be absurd to prevent the operation of such provisions merely because
there was only one other producer or exporter. Nor does India explain why the normal usage of the
phrase should not apply in this case. The European Communities adds that it is the phrase “other
exporters or producers” in Article 2.2.2(ii) that is the central element, and the mention of “average”
adds nothing to the use of the plural in the phrase “exporters or producers”.
6.67 Finally, the European Communities submits that, when the words “other exporters or
producers” are considered in light of the object and purpose of the AD Agreement, it becomes clear
that the evident purpose of this part of the agreement is to secure data that are independent of the
company in question, but are nevertheless limited to the sales of like products. There is no intrinsic
reason why the use of data from a single firm could not achieve this goal.
6.68 The United States, as third party, argues that Article 2.2.2(ii) does not require a minimum
number of companies to be used in calculating SG&A and profit amounts, and it neither forbids an
investigating authority from using a single company for purposes of this calculation, nor requires it to
use more than one company. The use of plural forms in this provision, without more, is not
determinative of the issue.
(ii) Findings
6.69 Having concluded that the three options in Articles 2.2.2(i)-(iii) are not set out in preferential
order, and that the European Communities theref ore was entitled to resort to the methodology in
Article 2.2.2(ii) the next issue before us is whether, as India argues, the European Communities was

precluded from applying the option set out in Article 2.2.2(ii) because that provision may not be
applied in the situation where the data concerning amounts for profit and SG&A are available for only
one other exporter or producer, as was the situation in this case. Otherwise put, is the existence of
data for more than one other exporter or producer a necessary prerequisite for application of the
approach set out in paragraph (ii)?
6.70 We first consider the language of Article 2.2.2(ii). India's argument has two principal
elements – the use of the plural in the text of Article 2.2.2(ii), and the phrase "weighted average".
With respect to the first element, the European Communities argues that a phrase in the plural form is
often used, in general and in the AD Agreement, with the intention of including the case where there
is only one such person or thing. We agree. The phrase "other exporters or producers" as a general
matter, admits of an understanding where the plural form includes the singular case – the case where
there is only one other producer or exporter. In both common speech and legal texts, it is accepted
that the ordinary meaning of the plural form may include the singular case. Moreover, the focus of
the options set out in Article 2.2.2 on the use of actual data suggests to us that such an understanding
is permissible. The question we must consider is whether that is the meaning to be given to the phrase
as used in Article 2.2.2(ii). As discussed above, Article 2.2.2(i) maintains the focus on the producer
being investigated, but allows consideration of da ta concerning a broader range of products, while
Article 2.2.2(ii) maintains the focus on the like product, but allows consideration of other producers or
exporters. The third option, Article 2.2.2(iii) allows any other reasonable method, subject to a cap on
the results. In this context, we do not consider that the reference to other producers or exporters in the
plural necessarily must be understood to preclude re sort to option (ii) in the case where there is only
one other producer or exporter of the like product.
6.71 With respect to the second element, India argues that because a weighted average must be
based on more than one data point, there must be more than one “other” producers' or exporters' data
under consideration. However, we do not consider that the phrases “weighted average” and “other
producers and exporters” constitute two separate requirements. Rather, we are of the opinion that the
concept of weighted averaging is relevant only when there is information from more than one
other producer or exporter available to be considered. In our view, the obligation to consider a
weighted average of the information of other producers or exporters eliminates the possibility of a
result-oriented or otherwise biased or discriminatory choice among available data. However, when
the data available is from only one source, such a possibility does not arise. The interpretation argued
by India would limit the analytical options available to investigating authorities for determination of
the profit rate and SG&A in a constructed normal value in a manner we cannot see as mandated by the
text.
6.72 In this regard, we consider informative other provisions which use the plural form, but are
applicable in the singular case. For instance, Article 4.1 of the AD Agreement defines the domestic
industry in terms of "domestic producers" in the plural. Yet we consider it indisputable that a single
domestic producer may constitute the domestic industry under the AD Agreement, and that the
provisions concerning domestic industry under Article 4 continue to apply in such a factual situation.
Similarly, we note that Article 9.4(i) provides that the dumping duty applied to imports from
producers/exporters not examined as part of a sample shall not exceed "the weighted average margin
of dumping established with respect to the selected exporters or producers". We consider that this
provision does not become inoperative if there is only one selected exporter or producer – rather, the
dumping margin for that exporter or producer may be applied. In our view, these considerations lend
support to an understanding of Article 2.2.2(ii) pursuant to which Members may apply the
methodology in that provision even in a case where data is available for only one "other" exporter or
producer. Thus, we conclude, based on our understanding of the text of the provision, that a Member
is not precluded from employing the methodology set out in Article 2.2.2(ii) in a case where there is
only one other producer or exporter.

6.73 We also consider that the negotiating history of Article 2.2.2 confirms our view that
Article 2.2.2(ii) is not limited to the case where there is more than one "other" producer or exporter.
There was no provision in the Tokyo Round Anti-Dumping Code corresponding to Article 2.2.2(ii).
In the absence of guidance in this regard, it was the practice of some Members, notably the United
States, to calculate profit and SG&A amounts in a constructed value on the basis of benchmarks
established without reference to specific relevant information developed in the course of the
investigation. This practice was strongly objected to by other Parties to the Tokyo Round Anti-
Dumping Code, and was the subject of negotiations in the Uruguay Round leading to the adoption of
Article 2.2.2, and its subparts, to provide guidance for the derivation of profit and SG&A amounts in
constructed value calculations.34 In our view, this background indicates that the provision is intended
to ensure that actual data is used for determinin g the profit rate and SG&A in a constructed normal
value, rather than arbitrarily determined amounts. That there is only one producer whose information
is available for this use does not undermine this purpose. The requirement of a weighted average
resolves the question of how to determine the appropriate amounts in a case where there is more than
one investigated exporter whose actual data can be used. Thus, investigating authorities may not
select a single producer as the source of the necessary information when information is available from
more than one such producer, but must take a weighted average of the available information.
6.74 However, in this case, the European Communities did not arbitrarily pick one producer's data
to use in its calculation. Rather, it was faced with the factual situation that there was only one
producer whose data was available for the calculation under Article 2.2.2(ii). It is true that there was
at least one other exporter which had domestic sales of the like product during the period of
investigation. However, that producer was not in the sample on which the European Communities
based its calculations in the dumping investigation. It might, in theory at least, have been possible for
the EC investigating authorities to calculate a weig hted average profit rate including that producer’s
information.
35 However, India has made no persuasive argument as to why, absent a conclusion that
the sample was not properly selected 36, the European Communities should have been obligated to
consider, in this aspect of its analysis, information for a company not part of the sample, and whose
information was not considered otherwise. India argues that this producer was in the sample, but this
is not factually correct. It was considered by the European Communities as being in the reserve
sample, which is established in case the companies selected for the sample do not cooperate or
provide usable information.
37 Information was gathered from companies in the reserve sample to be
used if it became necessary, which did not happen. We therefore consider that, as a matter of fact,
there was only one producer whose data was available for use under Article 2.2.2(ii).
6.75 As we have concluded that Article 2.2.2(ii) may be applied in a case where there is data
concerning profit and SG&A for only one other producer or exporter, we conclude that the European
Communities was not precluded from applying the methodology set out in that provision in this case,
and therefore did not act inconsistently with Article 2.2.2(ii) in this regard.

34 See Stewart, Terence P., ed., The GATT Uruguay Round: A Negotiating History (1986-1992) ,
Kluwer Law International, The Hague, pp. 171-190.
35 We note in this regard that the European Communities argues that the information for the producer in
question would not have been considered in any event, as it had insufficient sales in the ordinary course of trade
to allow its information to be used. Moreover, the European Communities suggests that the inclusion of data for
that producer would have had little effect on the outcome.
36 We note that India has made no claim concerning the sample relied upon by the European
Communities.
37 Provisional Regulation, Exhibit India-8, para. 21; Exhibit India-22.

(c) Article 2.2.2(ii) – production and sales amounts “incurred and realised”
(i) Parties' arguments
6.76 India also asserts that the European Communities acted inconsistently with Article 2.2.2(ii) in
its application of the provision by using the production and sales amounts "incurred and realised" on
transactions in the ordinary course of trade, instead of the production and sales amounts “incurred and
realised” on all transactions. For India, the European Communities' approach is demonstrably
inconsistent with the express wording of Article 2.2.2(ii), which indicates that the entire purpose of
the provision is to provide for a different and alternative basis from the basis contained in the chapeau
of Article 2.2.2 upon which to establish SG&A and profits. Indeed, the second sentence of the
chapeau of Article 2.2.2 expressly states that one is only entitled to resort to the methodology under
Article 2.2.2(ii) when the basis under the chapeau of Article 2.2.2 “cannot” be used; it is clearly an
“either-or” situation. It would, therefore, be in India's view absurd to conclude that the limitation to
sales in the ordinary course of trade under Article 2.2.2 may be applied to calculations under
Article 2.2.2(ii).
6.77 India notes that the definition of amounts for SG&A and profits in the first sentence of the
chapeau includes the words “ordinary course of trade”. In India's view, since those words appear after
the words “based on”, that requirement was clearly intended to form part of the basis or foundation
for the specific method provided under the chapea u, but only for that method. Consequently, the
words “such amounts” in the second sentence of the chapeau cannot logically be taken to refer back to
SG&A and profits “in the ordinary course of trade”, but instead only to SG&A and profits as a whole.
India concludes that the word “amounts” used for the purposes of Article 2.2.2(ii) does not, therefore,
include any requirement that the amounts be incurred or realised in the ordinary course of trade.
6.78 In the European Communities' view, the issue under Article 2.2.2(ii) is whether the EC
authorities were entitled to limit the data they would consider for purposes of constructing the normal
value. The excluded classes of data in this case were, in the case of SG&A, data from sales that were
unrepresentative, and in the case of profits, data derived from sales that were unrepresentative and/or
unprofitable. These classes, the European Communities points out, correspond to the concepts
mentioned in the opening clauses of Article 2.2, which makes it clear that one object and purpose of
this part of the AD Agreement is to avoid reliance on sales that fall into either of these categories.
The European Communities argues that India is evidently suggesting that the drafters did not object to
normal value being based on unprofitable or unrepresentative sales as long as that data came from
other producers or exporters, which interpretation is not, in the European Communities' view, based
on a proper application of the rules of treaty interpretation of Article 31 of the Vienna Convention
and, even if it were, would lead to a result that was “manifestly absurd or unreasonable” and require
resort to the interpretive principles in Article 32 of the Vienna Convention.
6.79 Finally, the European Communities asserts that the basic principle of the “ordinary course of
trade” is expressed in Article 2.2. In fact, it is a two-part principle: data associated with sales that are
unprofitable, or are unrepresentative, are not reliable. For reasons of consistency, the European
Communities maintains that this principle applies to all provisions falling within Article 2.2,
including Article 2.2.2(ii).
6.80 Egypt, as third party, alleges that costs calculated by the European Communities were not
based on the records kept by the exporters or producers under investigation in the case of Egypt, as
required by Article 2.2.1.1, nor were amounts for SG&A costs based on actual data submitted by the
relevant exporters or producers, as required by Article 2.2.2.
6.81 Japan, as third party, argues that Article 2.2.2(ii) does not allow the exclusion of below-cost
sales before determining the profit amount. Article 2.2.2(ii) refers to “the actual amounts incurred

and realised” and does not include any qualifications. According to Japan, if authorities choose this
option, they must determine the weighted average of the actual profit margins reported by the
exporters or producers in their accounting records or reflected in the price and cost of the transactions
at issue. Article 2.2.2(ii) does not allow the authorities to modify these actual profit margins. Japan
considers it improper to graft the concept of “ordinary course of trade” onto Article 2.2.2(ii). It sees
the language of the first sentence of Article 2.2.2 as explicitly including the notion of “ordinary course
of trade” but grammatically distinct from the second sentence that serves as the chapeau for the
remainder of this provision. Japan notes the fact that the drafters were quite careful to insert the
concept “ordinary course of trade” where they intended it to apply, and the decision not to include the
concept in Article 2.2.2(ii) must, therefore, be given meaning when interpreting this language.
Finally, Japan considers that an interpretation which allows the exclusion of below-cost sales would
give no significance to the important distinction between the language of the option set out in
Article 2.2.2 based on “actual data” and the language of the option set out in Article 2.2.2(ii) based on
“actual amounts incurred and realised”.
6.82 The United States, as third party, asserts that it is a permissible interpretation of
Article 2.2.2(ii) to restrict consideration of “actual amounts incurred and realised” to those attributable
to sales made in the ordinary course of trade. Su ch an application is not prohibited by the Agreement
and would, in fact, be a more reasonable interpretation of the Agreement. There is no explicit
requirement within Article 2.2.2(ii) determining whether sales not in the ordinary course of trade
should be included or excluded from the calculation of SG&A and profit to be used to calculate the
constructed value for other producers or exporters. Further, although Article 2.2.2(ii) does not
explicitly provide for the exclusion of below-cost sales, Article 2.2.1 makes it clear that, when below-
cost sales have been made, the authorities are under no obligation to consider them in the
determination of normal value, provided that certain conditions have been met. Moreover, excluding
sales not in the ordinary course of trade is consistent with the overall operation of Article 2 of the
AD Agreement.
(ii) Findings
6.83 The last issue that we must address under Article 2.2.2 is whether the European Communities
erred in its application of Article 2.2.2(ii). In particular, the question before us is whether the
European Communities acted inconsistently with that provision in using production and sales amounts
incurred and realised only on transactions that were not made below cost – that is, transactions it
considered to be in the ordinary course of trade – instead of using all production and sales amounts
incurred and realised. More specifically, may the principle, set out in Article 2.2 – that data
associated with sales that are unprofitable are not reliable
38 – be applied to all provisions falling
within Article 2.2?
6.84 Looking first at the text of Article 2.2.2(ii), we note that there is no reference to sales in the
ordinary course of trade. Thus, we would agree with the view that exclusion of sales not in the
ordinary course of trade is not mandated by that provision. 39 However, we do not understand the
European Communities to be arguing that it was required to exclude those sales in its determination of

38 Article 2.2 sets out the rule that data associated with unrepresentative sales are not reliable. A
question similar to the one raised by India would be whet her this principle carries to Article 2.2.2, given that
only the "ordinary course of trade" rule is mentioned in Article 2.2.2. India does not, however, raise this issue,
and we, therefore, need not and do not consider the question.
39 Indeed, we note that although the chapeau of Article 2.2.2 indicates that such sales must not be
considered in calculating profit under that provision, Article 2.2 merely provides that sales below the cost of
production may be treated as not being in the ordinary course of trade. That is to say, even if the relevant
criteria for consideration of sales below cost as sales not in the ordinary course of trade are satisfied, an
investigating authority is not obligated to exclude th ose sales from its calculation of normal value except,
apparently, in determining the amounts for profit and SG&A under the chapeau of Article 2.2.2.

the profit rate, merely that it was permitted to do so, based on the general principle allowing the
exclusion of sales not in the ordinary course of trade from the calculation of normal value.
6.85 We consider that this principle may be properly understood to apply to all provisions falling
within Article 2.2, including Article 2.2.2(ii). We do not consider that a Member is obligated to
exclude sales not in the ordinary course of trade for purposes of determining the profit rate under the
subparagraphs of Article 2.2.2, merely that such exclusion is not prohibited by the text. In our view,
to read Article 2.2.2 as prohibiting the exclusion of sales not in the ordinary course of trade might, in
some cases, yield results under the alternatives set out in paragraphs (i) and (ii) that would be
contradictory of a basic principle contained in the chapeau methodology. Article 2 establishes as a
general principle that Members may base their calculations of normal value only on sales made in the
ordinary course of trade. We consider that in this context, absent a specific prohibition, it is
permissible to interpret the subparagraphs of Article 2.2.2 to allow application of this general
principle in the specific case of a profit rate determination under Article 2.2.2(ii). If the alternative
advocated by India were accepted, a prohibition on the exclusion of sales not in the ordinary course of
trade might result in a constructed value being based on data concerning the very sales that could not
be considered in determining normal value. Indeed, that would be the result in this case. Application
of the methods in paragraphs (i)-(iii) might, thus, yield results inconsistent with the basic principles of
Article 2.2.
6.86 We recall that the “ordinary course of trade” limitation forecloses the possibility of
calculating profits on the basis of sales at prices below cost.
40 The profit amount on sales at prices
below cost would be negative. In our view, to re quire the calculation of constructed normal value
including such sales would not be in keeping with the overall object and purpose of the provision – to
establish methodologies for the determination of a reasonable amount for profit to be used in the
calculation of a constructed normal value. If sales that are considered not in the ordinary course of
trade because they are below cost were used for the calculation of the profit rate, the constructed value
could be equal to cost and thus would not includ e a reasonable amount for profit. This would render
the calculation of a constructed value meaningless, and not consistent with Article 2.2. 41 In this
context, we recall that one reason an investigat ing authority would construct a normal value is
because the actual sales of the investigated exporter or producer are deemed inappropriate to serve as
the basis of normal value because they are made below cost. To conclude that such sales below cost
must then be taken into account in the construction of normal value in these circumstances makes no
sense.
6.87 Thus, we consider that an interpretation of Article 2.2.2(ii) under which sales not in the
ordinary course of trade are excluded from the determination of the profit amount to be used in the
calculation of a constructed normal value is permissible. We therefore conclude that the European
Communities did not err in its application of paragraph (ii) by using data only on transactions in the
ordinary course of trade.
2. Claim under Article 2.2 – reasonability (claim number 4)
(a) Parties' arguments
6.88 India submits that the European Communities acted inconsistently with Article 2.2 by
applying the SG&A and profit incorrectly determined under Article 2.2.2(ii) even though they were

40 It may also foreclose the possibility of calculating profits on the basis of sales between related parties
(albeit possibly made at cost). However, this is not an issue in this dispute.
41 With regard to the comments made by Egypt, we note that India has not brought a claim of violation
of Article 2.2.1.1 or the chapeau of Article 2.2.2. "Claims" brought by third parties are clearly not within the
terms of reference of, and, therefore, not properly before, the Panel.

clearly not "reasonable". For India, Article 2.2.2 lays down how the “amounts for administrative,
selling and general costs and for profits” are to be determined. It does not, however, explain how the
reasonable amounts for SG&A and for profits are to be determined. For India, the word reasonable
in Article 2.2 has a separate function, and the “reasonable” test of Article 2.2 is an independent, over-
arching requirement in addition to the requirements of Article 2.2.2, rather than a rule concretised by
Article 2.2.2. “Reasonable” must thus be interpreted as a substantive requirement: whatever method
under Article 2.2.2 is used, Article 2.2 requires that the result must be “reasonable”. Moreover, India
argues that Article 2.2.2(iii) contains an implicit definition of the notion of “reasonable”, which can
be used to test the results reached under the methods set out in the chapeau and paragraphs (i) and (ii)
of Article 2.2.2.
6.89 In respect of the specific factual situation in the bed linen proceeding, India recalls that some
producers did have sales of other products in the same general category (textiles). The average same-
category domestic profit rate of these other producers was 7.04% and the average overall profit rate of
these other producers was 5.41%. The average profit rate for bed linen was found to be 6.1% for the
other countries in the investigation, Egypt and Pakistan. India recalls that the reasonable profit rate
imputed to the EC industry was 5%. Finally, India notes that the profit rate determined by the
European Communities on the basis of the profitable sales of one Indian company, and applied in
calculating normal value for all other Indian producers was 18.65% . It is evident, in India' view, that
in comparison with all the other profit rates that were relevant in the context of the bed linen
proceeding, the figure of 18.65% stands out as a complete anomaly and does not reflect the profits
actually realised by bed linen producers inside and outside India. The figure is three times higher than
the average profit rates determined for the other two countries involved in the investigation as well as
that of the European Communities’ own bed linen industry. India submits that, if the word reasonable
is defined by reference to the criteria set out in the Article 2.2.2(iii), it is obvious that the profit rate
established for other Indian producers is unreasonable.
6.90 The European Communities is of the view that the methods of calculating SG&A and profits
that are set out in Articles 2.2.2(i)-(iii) provide for the determination of “a reasonable amount for
administrative, selling and general costs and for profits”. Those options represent, for the European
Communities, particular and detailed formulations of what constitutes "reasonable" amounts. The
European Communities also believes that the limitation set out in the third option – “provided that the
amount for profit so established shall not exceed . . .” – applies only to the third option, and not to the
other two. Had the drafters wished to apply this proviso to all the options, the European Communities
submits they would have attached it to the chapeau of Article 2.2.2.
6.91 The European Communities rejects India’s argument that option (iii) defines what is
reasonable. Options (i) and (ii) are, in the European Communities' view, formulae that produce
reasonable solutions. The European Communities further considers that it was obviously the intention
of the drafters that the application of these formulae would always produce figures for SG&A and for
profits that meet the standard of reasonability specified in the last sentence of the chapeau of
Article 2.2. The words “any other reasonable method” in option (iii) clearly refer to methods other
than those described in the preceding options (i) and (ii), which are in themselves reasonable and do
not need to be qualified as such. The wording of these options at least implies that the results
obtained through the application of options (i) and (ii) are presumed to satisfy the standard of
reasonability. The relevant question, the European Communities proposes, would then be: What kind
and weight of evidence would be required to overturn the presumption? The European Communities
asserts that India has presented no relevant evidence to rebut the presumption that the results obtained
through the application of option (ii) in the case were reasonable.
6.92 The European Communities suggests that the three options in Article 2.2.2 are intended to
produce approximations of the amounts that would emerge from applying the formula in the chapeau,
that is to say the SG&A and profits of a producer selling the like product in its own market. This, in

its turn, is intended to allow investigating authorities to construct a normal value that is as close as
possible to the normal value that would have been established on the basis of domestic prices, had
there been sufficient comparable sales in the ordi nary course of trade. The European Communities
points out that Bombay Dyeing has representative sales in the Indian market. That a single producer
can have 80% of the domestic market for bed linen and make a profit of over 18%, while numerous
other producers ignore this market and devote themselves to exports, may be an uncommon situation,
but that does not make the results arising from the use of data from this company ipso facto
unreasonable. Rather, the European Communities is of the view that it would have been unreasonable
to ignore this company and choose another source, which would inevitably be less typical of sellers in
that market.
6.93 The United States, as third party, maintains that Articles 2.2 and 2.2.2 of the Agreement set
forth the requirements for calculating profit when normal value is based on constructed value instead
of prices. Article 2.2 provides, inter alia, for the addition to cost of production of a reasonable
amount for profit. Article 2.2.2 then sets forth several explicit options for how a reasonable profit
may be determined. The United States disagrees with the view that there is a limitation on the amount
for constructed value profit. In the US view, no such limitation exists in the Agreement. With one
exception – subpart (iii) – the methodologies in Article 2.2.2 limit how the authorities may determine
the profit amount, not the amount of the profit itself . The “profit cap” in subpart (iii) is necessary to
impose some limitations on “other” “reasonable” methodologies for determining profit not
specifically articulated in the Agreement. Significantly, subpart (iii) does not expressly or implicitly
impose a similar limitation upon the preferred profit methodology in the chapeau or the alternatives in
subparts (i) or (ii).
(b) Findings
6.94 Having concluded that the European Communities could properly apply the option set out in
Article 2.2.2(ii), and that it acted consistently with that provision in making its calculation on the basis
of information for one other producer for its sales of the like product in the ordinary course of trade,
the next issue before us is whether the results of a proper calculation under Article 2.2.2(ii) are subject
to a separate test of “reasonability” before they may be used in constructing a normal value for other
producers.
6.95 We first consider the text of the provision. The chapeau of Article 2.2.2 begins with the
phrase “For the purpose of paragraph 2”, and provides that the amounts for, inter alia, profits "shall
be based on actual data pertaining to production and sales in the ordinary course of trade of the like
product by the exporter or producer under investigation. The second sentence of Article 2.2.2
specifies that if the chapeau methodology cannot be used, these amounts "may be determined on the
basis of" subparagraphs (i)-(iii). Article 2.2, which is referred to in the first sentence, establishes the
basic principle that when a constructed value is used, it shall include, inter alia, a reasonable amount
for profit.
6.96 The text thus indicates that the methodologies set out in Article 2.2.2 are outlined “for the
purpose” of calculating a reasonable profit amount pursuant to Article 2.2. There is no specific
language establishing a separate reasonability test, or indicating how such a test should be conducted.
In these circumstances, we consider that there is no textual basis for such a requirement. Thus, the
ordinary meaning of the text indicates that if on e of the methods of Article 2.2.2 is properly applied,
the results are by definition "reasonable" as required by Article 2.2.
6.97 Further, we note that Article 2.2.2(iii) provides for the use of "any other reasonable method",
without specifying such method, subject to a cap, defined as "the profit normally realized by other
exporters or producers on sales of products of the same general category in the domestic market of the
country of origin". To us, the inclusion of a cap where the methodology is not defined indicates that

where the methodology is defined, in subparagraphs (i) and (ii), the application of those
methodologies yields reasonable results. If those methodologies did not yield reasonable results,
presumably the drafters would have included some e xplicit constraint on the results, as they did for
subparagraph (iii).
6.98 Thus, we conclude that the text indicates that, if a Member bases its calculations on either the
chapeau or paragraphs (i) or (ii), there is no need to separately consider the reasonability of the profit
rate against some benchmark. In particular, there is no need to consider the limitation set out in
paragraph (iii). That limitation is triggered only when a Member does not apply one of the methods
set out in the chapeau or paragraphs (i) and (ii) of Article 2.2.2. Indeed, it is arguably precisely
because no specific method is outlined in paragraph (iii) that the limitation on the profit rate exists in
that provision.
6.99 We note further that the methodology set out in the chapeau of Article 2.2.2, as well as those
in subparagraphs (i) and (ii), rely on actual data from the books of the producer(s) or exporter(s) being
used as sources. India, however, argues that even where the chapeau methodology is applied, which
requires the use of actual data concerning the product under investigation sold by the producer being
investigated, the results are subject to a separate test of reasonability. 42 To test for reasonability
results arrived at through the use of actual data for the production of the like product by the
producer/exporter being investigated does not, in our view, serve any meaningful purpose. Whatever
the argument about the "reasonability" of a particular result – a 50% profit rate, for instance – if it is
based on actual data and properly calculated, then that is the reality. An important object and purpose
of Article 2.2.2, as discussed above, is to base the calculation of the profit amount on actual data.
Similarly, while the methods set out in paragraphs (i) and (ii) are derivatives of the chapeau
methodology, where actual data are used as required and the calculation is correct, the results obtained
themselves reflect objective reality. Thus, the use of actual data itself ensures that subjective
judgments about the reasonability of the results do not affect the calculation of constructed normal
value. We consider that no purpose would be served by testing the results obtained under the chapeau
and subparagraphs (i) and (ii) against some arbitrary or subjective standard of reasonability.
6.100 In this regard, we note that the standard of reasonability proposed by India – the
Article 2.2.2(iii) profit cap – is, in our view, arbitrary in the context of the "reality" of the results
obtained under paragraphs (i) and (ii). The other benchmarks suggested by India in respect of the
specific factual situation in the bed linen proceeding seem equally arbitrary and subjective. India
asserts that the average category domestic profit rate of other producers on the same category of
goods was 7.04% and the average overall profit rate of these other producers was 5.41%. India also
indicates that the average profit for bed linen producers in Egypt and Pakistan was determined to be
6.1% during the investigation. There is no objective basis we can discern for concluding that these
amounts are more "reasonable" than the amount determined on the basis of the actual data. The only
factor common to these figures is that they are al l lower than 18.65%, the profit rate determined by
the European Communities on the basis of the profitable sales of one Indian producer and applied in
the construction of normal value for the other Indian companies.
43 India puts forth no reason as to
why a "reasonable" profit rate in this case should be defined by reference to these data, except to
emphasise the difference between the profit rate actually used and these suggested benchmark profit
rates. Merely that these other profit rates are lower does not, in our opinion, make them more
"reasonable" than the rate actually calculated and applied by the European Communities.

42 In response to a question from the Panel, India confirms that "[t]he criterion of reasonability, as laid
down in Article 2.2, instructs the chapeau of Article 2.2.2 and its subparagraphs". Response of India to
Question 1 from the Panel following the first meeting of the Panel, Annex 1-6.
43 We note in this context that India has not challenged the reasonability of this rate, calculated on the
basis of the chapeau methodology, as applied to Bombay Dyeing itself, but only its use as the rate applied,
pursuant to Article 2.2.2(ii) for other Indian producers.

6.101 We, therefore, conclude that Article 2.2.2(ii), when applied correctly, necessarily yields
reasonable amounts for profits, and that the AD Agreement does not require consideration of a
separate reasonability test in respect of results arrived at through the use of that methodology. The
European Communities did not, therefore, act inconsistently with the requirements of Article 2.2 by
not having applied such a test to the results that it obtained under Article 2.2.2(ii).
3. Claim under Article 2.4.2 - "zeroing" (claim number 7)
6.102 The practice of "zeroing" arises in situations where an investigating authority makes multiple
comparisons of export price and normal value, and then aggregates the results of these individual
comparisons to calculate a dumping margin for the product as a whole. In this case, the European
Communities compared weighted averages of export prices and normal value for each of several
models or product types of bed linen. India has no complaint about this aspect of the EC
determination.44 The comparisons for the different models in some cases showed the export price to
be lower than the normal value, and in some cases showed the export price to be higher than the
normal value. The results of the latter comparison s are referred to as "negative" margins. The
European Communities then calculated a weighted average dumping margin for the product at issue,
cotton-type bed linen, on the basis of the results obtained in the comparisons by model. In the course
of this part of the calculation, the European Communities summed up the total value of the dumping –
the total "dumping amount" – on the investigated imports. The European Communities calculated the
dumping amounts by multiplying the value of the imports of each model by the margin of price
difference for each model. The European Communities counted as zero the dumping amount for those
models where the margin was negative. The European Communities then divided the total dumping
amount by the value of the exports involved, including the value of those models for which the
individual margin was negative, and the dumping amount was thus counted as zero. It is this aspect
of the calculation, the assigning of a value of zero to the comparisons yielding a "negative" margin,
which constitutes the challenged practice of zeroing which is the subject of India's claim under
Article 2.4.2.
(a) Parties' arguments
6.103 India argues that the European Communities acted inconsistently with Article 2.4.2 of the
AD Agreement by zeroing "negative dumping" amounts for certain types of bed linen in calculating
the overall weighted average dumping margin for the like product bed linen. According to India, the
European Communities effectively averaged only within a model, and not between models, and thus
did not compare a weighted average normal value to a weighted average of prices of all comparable
export transactions, as required by Article 2.4.2 of the AD Agreement. In India's view, Article 2.4.2
provides for three possibilities to establish a dumping margin:
• A comparison of a weighted average normal value with a weighted average of prices of all
comparable export transactions;
• A comparison of normal value and export prices on a transaction-to-transaction basis; or
• A comparison of the normal value established on a weighted average basis to prices of
individual export transactions (in certain specific cases).

44 Indeed India appears to acknowledge that comparisons for individual product types within a single
like product are appropriate in the context of an anti-dumping investigation, that the weighted average normal
value and weighted average export price for each model at issue in this case were properly calculated by the
European Communities, and that a fair comparison was made with respect to each product type considered.

India asserts that the European Communities opted to apply the first option in establishing the
dumping margin in this case, but did not properly make this comparison by engaging in the practice
of zeroing.45
6.104 In India's view, the practice of zeroing is not consistent with the requirement set forth in
Article 2.4.2 that the comparison take into account the "weighted average of prices of all comparable
export transactions". India asserts that this language precludes excluding certain amounts from the
calculation simply because they showed "negative" dumping. India argues that, given the use of the
words “weighted average” in Article 2.4.2 and the definition of the word “average”, there is clearly no
justification for excluding certain amounts in establ ishing an average. An “average” relates to the
total of given amounts and not to a number of given amounts from which a selection can be made as
to which ones are to be averaged. The use of the word “all” in Article 2.4.2 underlines this idea.
And, finally, India posits that the practice of attributing a zero value to "negative dumping" for the
eventual calculation of overall dumping margins is contrary to the concept of weighting and in fact
distorts the process of actually weighting dumping margins. Moreover, India maintains that this EC
method always will lead to a higher dumping margin compared to the method India asserts is
envisaged by the AD Agreement. India acknowledges that in the situation where all models are
dumped, the results would be the same, but argues that this situation did not occur in the bed linen
case. However, India asserts that in this case, because all models in the bed linen proceeding were not
dumped, the zeroing of "negative dumping" margins calculated for certain product types resulted in
the overstatement of the dumping margins for four companies, and for one company a finding of
dumping where dumping did not exist.
6.105 The European Communities maintains that its pr actice in calculating the dumping margin is
consistent with the requirements of Article 2.4.2. In the European Communities' view, the practice of
"zeroing" as applied in this case recognizes that the process of calculating dumping margins is
directed at dumping, and therefore the European Communities' methodology focuses on those product
types where dumping has been found. In the case of any product types for which there is no dumping
(i.e. the margin is zero or less than zero ("ne gative dumping")), the European Communities treats this
margin as zero. However, the types of products that are found to have margins less than zero (and
which therefore are not being dumped), are nevertheless kept in the calculation (albeit at notional zero
margins), on a weighted average basis, of the overall dumping margin for the like product, and
thereby reduce the overall weighted average dumping margin determined for that product.
6.106 The European Communities focuses on the need to consider all “comparable” export
transactions, which it asserts is done in its practice, which observes the principle of comparing
weighted averages for those products that are comparable. Moreover, the European Communities
argues, Article 2.4.2 refers to “the existence of margins of dumping”, making clear that the process of
comparing weighted averages will normally conclude with more than one dumping margin. However,
the process of determining a single dumping margin, on which the collection of the duty is based,
from these margins does not, in the European Comm unities' view, fall within the express terms of
Article 2.4.2, but is left to the discretion of Members. The European Communities also disputes
India's contention that its methodology will always lead to a higher dumping margin than would have
been the case if "zeroing" had not taken place.

45 India asserts that the European Communities does not always follow the practice of zeroing as
applied in the bed linen proceeding, referring to a doc ument disclosing the calculation in another EC anti-
dumping proceeding. In that other case, India maintain s that the "negative" dumping found for certain models
was offset against the dumping found for other models which were dumped. We do not consider that the
European Communities' practice in other investigations has any relevance to our decision here, as India has
made no claim of discriminatory treatment in this dispute.

6.107 Egypt argues that the European Communities manipulated the calculation of the overall
dumping margin for Egyptian producers by zeroing negative dumping amounts on a per-type basis, in
violation of Article 2.4.2 of the AD Agreement. In Egypt's view, had the Commission followed
strictly its own established practice, the outcome would have been different. In failing to do that, it is,
for Egypt, clear that the European Communities was determined to have bigger dumping margins.
6.108 Japan asserts that the EC practice of "zeroing" is not consistent with the requirements of
Article 2.4.2. In Japan's view, this provision explicitly calls for dumping margins to be based on a
comparison of a weighted average normal value with a weighted average of prices of all comparable
export transactions, and a proper weighted average does not arbitrarily raise some of the numbers in
the average in an effort to increase the final result of the weighted average. Japan maintains that the
term "comparable" as used in Article 2.4.2 cannot justify the European Communities' practice. In
Japan's view, the term speaks only to the need to make the comparison on an "apples-to-apples" basis,
and does not authorize zeroing. Japan argues that the European Communities seems to believe that if
it properly weight-averages once within the product type, then it need not properly weight-average in
the next stage, aggregation across the various product types. In Japan's view, this interpretation
ignores the plain meaning of Article 2.4.2, which requires the comparison of a weighted average
based on all comparable export transactions, not just those transactions found to be dumped. The EC
approach, including the volume of the non-dumped product types in the overall average, considers
only part of the export transactions, the volume element, but ignores the price element. By setting the
value of the non-dumped product type to zero, Japan asserts that the European Communities
essentially changed the prices of the underlying export transactions. In Japan's view, the text of
Article 2.4.2 explicitly calls for a weighted average of the prices, not of some actual prices and some
arbitrarily adjusted prices. In addition, Japan asserts that Article 2.4 creates an overall obligation of
fair comparison for the calculation of dumping margins. Japan maintains that it is not fair to skew a
weighted average by adjusting upward some prices used in the calculation of that weighted average.
6.109 The United States maintains that Article 2.4.2 does not prohibit the practice of zeroing.
46 In
the United States' view, all that Article 2.4.2 requires is that, in making comparisons between the
export price and the normal value of the like product in an investigation, each comparison shall be
made either on a weighted-average-to-weighted-average basis or a transaction-to-transaction basis.
This requirement of comparing weighted-average-t o-weighted-average figures or transaction-to-
transaction figures is explicitly made subject to the requirements of Article 2.4. Thus, it is clear that
the weight-averaging normally is not to involve transactions which are distinct in terms of physical
characteristics of the products, conditions and terms of sale, and other differences affecting price
comparability. In the United States' view, the “zeroing” practice applied by the European
Communities in this case is not covered by Articles 2.4 and 2.4.2 because it arises at a step
subsequent to the comparison of export price and normal value, when the individual, model-specific
margins were combined into an overall average rate of dumping. The United States asserts that its
view is confirmed by the fact that Article 2.4.2 explicitly permits transaction-to-transaction
comparisons without providing a methodology for combining margins calculated pursuant to that
methodology either. The United States points out that when this stage of combining the results of the
actual comparisons is reached, the individual, product-specific differences between normal value and
export price may be positive or negative. If positive, they represent the aggregate amount of dumping
duties that the importing country is permitted to collect for that product or group of transactions. If
negative, they represent the amount by which the export price exceeded the normal value. However,
the United States asserts that the AD Agreement imposes no requirement on the importing country to
make payments with respect to a lack of dumping of the merchandise in question. The negative

46 The United States notes that nothing in its argument on this issue should be construed as expressing
agreement or disagreement with the European Communities’ actual calculation of the dumping margin in this
case, because the United States does not have access to the specific factual inform ation considered by the
European Communities.

difference between normal value and export price simply means there is no dumping; , i.e. , the
dumping margin for that product or group of transact ions is zero. Thus, for such products with no
dumping margins, the amount of dumping duties which the importing country is permitted to collect
is properly considered to be zero. The United States argues than when the investigating authority
calculates an overall, average rate of dumping, no provision of the AD Agreement requires that more
credit be given for "negative dumping" amounts than if the dumping duties were to be collected on a
product-specific basis, which it asserts would be the result if India’s interpretation of Article 2.4.2
were accepted. The United States also argues that India’s reading of Article 2.4.2 would fail to give
meaning to the requirements of Article 2.4, which contemplate that comparisons be made at least on a
product-specific basis in order to account for physical and other differences which affect price
comparability. Finally, the United States notes that Article 2.4.2 was introduced to the
AD Agreement during the Uruguay Round to address the concern of certain Members with the
practice of some Members, including the European Communities and the United States, of comparing
individual export price transactions to weighted-average normal values. Article 2.4.2 was included in
the Agreement to provide that, except in the case of targeted dumping, margin calculations in an
investigation would be made on a consistent basis, i.e. , weight-average to weight-average or
transaction to transaction.
47 Thus, the United States asserts, the intent was to eliminate transaction-to-
average comparisons in investigations, not to alter the manner in which authorities calculated overall
margins after all appropriate comparisons were made.
(b) Findings
6.110 Article 2.4.2 of the AD Agreement provides:
“Subject to the provisions governing fair comparison in [Article 2.4], the existence of
margins of dumping during the investigation phase shall normally be established on
the basis of a comparison of a weighted average normal value with a weighted
average of prices of all comparable export transactions or by a comparison of normal
value and export prices on a transaction-to-transaction basis. A normal value
established on a weighted average basis may be compared to prices of individual
export transactions if the authorities find a pattern of export prices which differ
significantly among different purchasers, regions or time periods, and if an
explanation is provided as to why such differences cannot be taken into account
appropriately by the use of a weighted average-to-weighted average or
transaction-to-transaction comparison.”
6.111 As background, we note that Article 2.4 of the AD Agreement (which is not the subject of a
claim by India in this dispute) provides, in pertinent part:
"A fair comparison shall be made between the export price and the normal value. This
comparison shall be made at the same level of trade, normally at the ex-factory level,
and in respect of sales made at as nearly as possible the same time. Due allowance
shall be made in each case, on its merits, for differences which affect price
comparability, including differences in conditions and terms of sale, taxation, levels of
trade, quantities, physical characteristics, and any other differences which are also
demonstrated to affect price comparability.
7. . . ".

47 The United States cites, in this regard, Stewart, Terence P., ed., The GATT Uruguay Round: A
Negotiation History (1986-1992) , Kluwer Law International, The Hague, pp. 155-61 (discussing the
negotiations concerning, inter alia , weighted-average comparisons), and EC - Anti-Dumping Duties on Audio
Tapes and Cassettes Originating in Japan , Panel Report, ADP/136, 28 April 1995 (unadopted), para. 348
(discussing the European Communities’ prior practice of comparing individual export prices to a weighted
average normal value).

The two subparagraphs of Article 2.4 deal with specific aspects of the comparison of normal value
and export price. Article 2.4.1 (which is not at issue in this dispute) provides rules for the conversion
of currencies, when such conversion is necessary for the purposes of a comparison under Article 2.4.
Article 2.4.2 establishes that, subject to the provisions of Article 2.4 governing fair comparison,
dumping margins should normally be established on the basis of an average-to-average comparison or
a transaction-to-transaction comparison. These provisions are new to the AD Agreement - the Tokyo
Round AD Code contained no similar provisions.
6.112 In accordance with the provisions of the Vienna Convention governing treaty interpretation,
we look first to the ordinary meaning of the phrase "a comparison of a weighted average normal value
with a weighted average of prices of all comparable export transactions", in its context and in light of its
object and purpose, in determining whether the practice of zeroing is permitted under Article 2.4.2.
Looking first at the text, we note that Article 2.4.2 requires that normally, except in circumstances not
applicable here, the existence of "margins of dumping" is to be established on the basis of "a
comparison of a weighted average normal value with a weighted average of prices of all comparable
export transactions" or on the basis of comparison of individual transactions.
6.113 The European Communities argues that this provision simply does not address the question of
what to do with "multiple" margins determined on the basis of comparisons for different models
within the like product. This "subsequent stage" of the calculation simply does not fall within the
scope of Article 2.4.2 in the European Communities' view, and therefore the methodology to be
applied in arriving at the dumping margin for the like product as a whole, in a case where multiple
comparisons are made, is within the discretion of the Member conducting the investigation.
6.114 We cannot agree. The language of Article 2.4.2 specifically establishes the permissible bases
for establishing the "existence of margins of dumping". "Dumping" is defined in Article 2.1 of the
AD Agreement, which states that
"For the purpose of this Agreement, a product is to be considered as being
dumped, i.e., introduced into the commerce of another country at less than its normal
value, if the export price of the product exported from one country to another is less
than the comparable price in the ordinary course of trade, for the like product when
destined for consumption in the exporting country".
The succeeding provisions of Article 2 of the AD Agreement, which is entitled "Determination of
Dumping" set forth, in some detail, various information and methodologies to be used in the
determination of whether dumping exists. Article 2.4.2 sets out the permissible bases for comparison
of normal value and export price in order to establish the existence of margins of dumping. In light of
Article 2.1 of the AD Agreement, we consider that the "margins of dumping" established under
Article 2.4.2, based on the comparison methodologies set forth, must relate to the ultimate question
being addressed: whether the product at issue is being dumped. Thus, in our view, a margin of
dumping, that is, a determination that there is dumping, can only be established for the product at
issue, and not for individual transactions concerning that product, or discrete models of that product.
6.115 We note also that Article 2.4.2 specifies that the weighted average normal value shall be
compared with " a weighted average of prices of all comparable export transactions". In this case, the
European Communities' calculation of the final weighted average dumping margin for the product did

not, in fact, rest on a comparison with the prices of all comparable export transactions. By counting
as zero the results of comparisons showing a "negative" margin, the European Communities, in effect,
changed the prices of the export transactions in those comparisons. It is, in our view, impermissible
to "zero" such "negative" margins in establishing the existence of dumping for the product under
investigation, since this has the effect of changing the results of an otherwise proper comparison.
This effect arises because the zeroing effectively counts the weighted average export price to be
equal to the weighted average normal value for those models for which "negative" margins were
found in the comparison, despite the fact that it was, in reality, higher than the weighted average
normal value. This is the equivalent of manipulating the individual export prices counted in
calculating the weighted average, in order to arrive at a weighted average equal to the weighted
average normal value. As a result, we consider that an overall dumping margin calculated on the
basis of zeroing "negative" margins determined for some models is not based on comparisons which
fully reflect all comparable export prices, and is therefore calculated inconsistently with the
requirements of Article 2.4.2.
6.116 We recognize that Article 2.4.2 does not, in so many words, prohibit "zeroing". However,
this does not mean that the practice is permitted, if it produces results inconsistent with the obligations
set forth in that Article, as we believe it does. We consider that the requirements of Article 2.4.2 must
be understood to apply to the entire process of determining the existence of margins of dumping for
the product, and that there is no "subsequent stage" which escapes entirely from the strictures of
Article 2.4.2.
6.117 We do not mean to suggest that anything in Article 2.4.2 prohibits an investigating authority
from undertaking multiple comparisons of weighted average normal value and a weighted average of
prices of all comparable export transactions. To the contrary, we agree with the European
Communities and India that Article 2.4.2 allows investigating authorities to make multiple
comparisons on a model basis within the like product being investigated, as the European
Communities did in this case. In this regard, we note the word comparable in Article 2.4.2. Read in
light of the obligation in the Article 2.4 to make a fair comparison, the specific requirements to make
comparisons at the same level of trade and at as nearly as possible at the same time, and the obligation
to make due allowance for differences affecting price comparability, the use of the word comparable
in Article 2.4.2 indicates to us that investigatin g authorities may insure comparability either by
making necessary adjustments under Article 2.4, or by making comparisons for models which are,
themselves, comparable. However, in arriving at a conclusion whether the product as a whole is
being dumped, we consider that Article 2.4.2 obligates an investigating authority to make its
determination in a way which fully accounts for the export prices on all comparable transactions. The
European Communities' methodology, which focuses on those models which are, in its view, dumped,
and takes less than full account of those models where the comparison results in a negative margin,
does not accomplish this goal.
6.118 We note that the European Communities argues that Article 2.4.2 refers to the establishment
of “the existence of margins of dumping” in the plural, asserting that it is thus clear that the process of
comparing weighted averages will normally conclude with more than one dumping margin. As
discussed above, however, we consider that a dumping margin is established for the product under
investigation, and not for individual models being compared as the basis of the establishment of the
dumping margin. Thus, in our view, the fact that Article 2.4.2 refers to the existence of margins of
dumping in the plural is a general statement, taking account of the fact that, as is made clear in
Articles 6.10 and 9 of the AD Agreement, individual dumping margins are determined for each
producer or exporter under investigation, and for each product under investigation. While the
comparisons required under Article 2.4.2 yield margins of price difference, these are not, properly
speaking, margins of dumping to the extent that they relate to discrete models of or transactions
concerning the product under investigation, rather than the product under investigation as a whole.

6.119 Based on the foregoing, we conclude that the European Communities acted inconsistently
with Article 2.4.2 of the AD Agreement in establishing the existence of margins of dumping on the
basis of a methodology which included zeroing negative price differences calculated for some models
of bed linen.
D. CLAIMS UNDER ARTICLE 3
6.120 India's claims as to injury and causation raise multiple issues relating to the interpretation of
several provisions of Article 3 – in particular, Articles 3.1, 3.4 and 3.5. 48 Although India has broken
the issues down into multiple discrete claims and arguments, there are essentially three questions
under Article 3 before us: 1) whether the European Communities violated its obligations under
Articles 3.1, 3.4, and 3.5 by considering all imports from India (and Egypt and Pakistan) to be
dumped in carrying out its analysis of injury caused by dumped imports (India's claims numbers 8, 19,
and 20), 2) whether the European Communities violated its obligations under Article 3.4 by failing to
evaluate "all relevant economic factors and indices having a bearing on the state of the industry",
(India's claim number 11) and 3) whether the European Communities violated its obligations under
Article 3.4 by considering information for various groups of EC producers in its analysis of the impact
of dumped imports on the domestic industry (India's claim number 15).
1. Claims under Articles 3.1, 3.4, and 3.5 - consideration of all imports from India (and
Egypt and Pakistan) as dumped in the analysis of injury caused by dumped imports
(claims numbers 8, 19, and 20)
(a) Parties' arguments
6.121 India asserts that the European Communities assumed, for the purposes of the injury
determination, that all imports of the product concerned during the investigation period (1 July 1995-
30 June 1996) were dumped. In addition, India asserts that the European Communities assumed that
imports during the entire period of the injury investigation (1 January 1992-30 June 1996), as well as
imports prior to that period, were dumped. India asserts that, with respect to the first assumption,
much of the bed linen exported from India during the investigation period was not, or should have
been found not to be, dumped, and that with respect to the second assumption, there was no
investigation covering those periods on the basis of which a finding of dumping could have been
made, and thus imports before the period of the dumping investigation clearly can not be assumed to
be dumped. In India's view, inclusion of non-dumped imports in the analysis of injury and causation
is inconsistent with Articles 3.1, 3.2, 3.4, 3.5 and 3.6.
49
6.122 India notes that the European Communities cumulated the volume of all imports from the
three countries under investigation – Egypt, India and Pakistan – and not just the volume of imports
that was the subject of dumped transactions. (Exhibits India-23 and India-52). India further asserts
that if the European Communities had not zeroed, the imports from one company would have been
found not to be dumped at all. This company accounted for 28.5% of the volume of Indian bed linen
exports by sampled companies. Thus, India maintains that it is clear that the total amount of non-
dumped imports accounted for more than one-third of India’s exports. India asserts that, assuming the
percentages of non-dumped imports from Egypt and Pakistan are of a similar order of magnitude, this

48 In its response to the European Communities' request for preliminary rulings, India withdrew any
putative claims under Article 3.6, a fact of which we have taken note, stating that we would issue no ruling on
any such claim. See paragraph 6.18 above.
49 As noted above, India withdrew its Article 3.6 claim in this regard. The Article 3.4 claim in this
regard is the subject of the European Communities' preliminary objection based on failure to sufficiently
identify the claim in the request for establishment, which we have denied. See paragraph 6.28 above. In
addition, we note that while the parties have made reference to Article 3.2 in their arguments, India has made no
claim in respect of that Article, and we therefore make no findings under Article 3.2 of the AD Agreement.

indicates that the total market share of dumped imports was overstated by more than a fifth. With
respect to the imports during years prior to the dumping investigation period, India maintains that, as
no finding of dumping was ever made for any imports during this period, it was incorrect for the
European Communities to consider imports of bed linen from India in the years preceding the
dumping investigation period as dumped.
6.123 India also maintains, with reference to Article 3.5 of the AD Agreement, that the European
Communities failed to determine to what extent injuries caused by other factors (such as, for instance,
contraction in demand or changes in consumption patterns) were responsible for the injury allegedly
suffered by the domestic industry. Consequently, India argues that the establishment of the facts
considered under Article 3.5 was not proper and/or the evaluation of those facts was not unbiased and
objective. In particular, India argues that the term “dumped imports” in Article 3.5 has the same
meaning as in Article 3.4. Consequently, in India's view, the European Communities acted
inconsistently with Article 3.5 by automatically considering all imports of bed linen from India
between 1992 and 30 June 1995 as dumped.
6.124 The European Communities considers that the term “dumped imports” as used in Article 3 of
the AD Agreement includes all the imports of the product in question from the country that is found to
be dumping, as opposed to only those transactions that are dumped, as suggested by India. For the
European Communities, the interpretation of the term "dumped imports" proposed by India raises
doubts because of its uncertainty. If each transaction is to be allocated to a dumped or non-dumped
classification, there is no provision to cope with the situation where an exporter conceals the volume
of dumping by varying the prices from one consignment to another, perhaps in collusion with the
importer. There would need to be sub-categorisation by exporter in that case.
6.125 The European Communities cites Articles 2.1, 3.1 and 5.7of the AD Agreement as contextual
support for its view that dumping and injury-causa tion issues are to be analysed on a product and
country, rather than transaction, basis. Article 2.1, in the European Communities' view, makes clear
that the existence of dumping is to be determined for a country at the level of the product under
investigation, referred to as the “like product”. While Article 2 allows, or may even require, that the
product under investigation from a country be divided up by exporter and type in calculating the
margin of dumping, the determination of dumping is still made for the product under investigation
and the country. Further, the European Communities argues, Article 3.1 requires that a determination
of injury caused by dumped imports has to be made for the domestic market for, and the domestic
producers of, the like product. In the European Communities' view, it is not possible to isolate the
effects of individual transactions in a single product market, and the market situation is determined by
the overall impact of imports. The European Co mmunities also maintains that Article 5.7 requires
that “[t]he evidence of both dumping and injury shall be considered simultaneously (a) in the decision
whether or not to initiate an investigation, and (b) thereafter, during the course of the investigation,
starting on a date not later than the earliest date on which in accordance with the provisions of this
Agreement provisional measures may be applied”. Since injury has to be investigated before it is
established which transactions are dumped, it is clear, to the European Communities, that the term
“dumped products” used in connection with the injury provisions of Article 3 must refer to all imports
of the product under investigation (although a finding of injury is of course conditional upon dumping
being found).
6.126 Finally, the European Communities indicates that a consideration of the object and purpose of
Article 3 supports its interpretation of the term “dumped imports”. The European Communities states
that the unlikelihood of Article 3 pursuing its object and purpose with the needlessly complex notion
of “dumped imports” forwarded by India is reinforced by an examination of the first sentence of
Article 3.2, which requires consideration whether there have been significant increases in dumped
imports. In the European Communities' view, the AD Agreement evidently intends national
authorities to gather information covering a lengthy period, since the investigation period used to

assess dumping (typically a year) would hardly be enough to assess trends in the volume of imports.
Article 3.2 is manifestly for the benefit of exporters, according to the European Communities, because
it sets conditions that must be satisfied before causation is established. Nevertheless, on India’s
interpretation, in order to apply this provision, the exporters would have to provide not just one, but
several, years’ price data in order to establish whether dumping was occurring throughout the longer
period for which import volumes are considered. Far from benefiting exporters, such an interpretation
would in many cases make this provision unworkable.
6.127 The European Communities rejects India’s assertion that it assumed imports prior to the
dumping investigation period to be dumped and found injury caused by those imports. The European
Communities maintains that there is nothing in either the EC Regulation, or any other statement by
EC authorities that expressly or implicitly supports the view that it reached such a conclusion. The
European Communities maintains that imports in years preceding the dumping investigation period
were examined in order to put the situation during that period into context. The phrase “injury
investigation period” is used by the European Communities to refer to the longer period over which
the condition of the industry is evaluated, but this does not imply dumping during that period.
6.128 In response to the Indian contention that the European Communities “at several instances puts
great emphasis on companies allegedly disappeared from the EC market in the period 1992-POI”, the
European Communities draws attention to the statement in the Regulations that the principal basis for
the finding of material injury was the reduced profitability and price suppression of the Community
industry as observed among the sampled companies. The information on the contraction in the
number of producers showed that what might otherwise have seemed a contradiction was in fact a
realistic scenario. Otherwise put, the EC authoriti es found injury principally because of the domestic
industry’s reduced profitability and price suppression, and the data of the disappeared companies was
relevant to explaining the improved position of the industry with regard to sales and market share.
6.129 Egypt submits that by failing to separate out dumped exports and those that were not dumped,
the European Communities acted contrary to Articles 3.1, 3.2, 3.4, 3.5 and 3.6 of the AD Agreement.
Egypt focuses on the use of the words “dumped imports” in Article 3.1. Moreover, Egypt argues, the
European Communities failed to properly consider whether other factors could have caused the injury,
as required by Article 3.5 of the AD Agreement.
6.130 Japan believes that the language “dumped imports” in various places in Article 3 means that
the injury determination set forth in Article 3 must reflect the authorities’ assessment of only “dumped
imports”, and not imports that were not found to have been “dumped”. In Japan's view, if the
authorities find that some imports were "dumped" and others were not, then they must distinguish
between the two in making their in jury determination. Japan asserts that this obligation extends to
imports that are cumulated, as the investigating aut hority is obliged to make the injury determination
only for the “dumped” portion of the cumulated imports. Allowing “dumped” imports to taint all
imports from a company seriously skews the injury analysis required under Article 3.
6.131 The United States disagrees with the Euro pean Communities' reasoning that dumping is
determined for countries, and therefore that it is entitled to consider all imports from a country found
to be dumping as dumped imports for purposes of the injury investigation. However, the United
States submits that, even assuming the European Communities did treat all subject imports during the
injury assessment period as dumped, that treatment would have been consistent with the
AD Agreement. The reasons supporting the European Communities’ view that it acted consistently
with the Agreement in treating all subject imports as dumped during the period of investigation
similarly apply with respect to the treatment of subject imports during the portion of the injury

assessment period that was prior to the dumping investigation period.50 In the United States' view, the
requirements of the injury determination nece ssarily oblige Members to gather and consider
information for a period longer than the period of the dumping investigation, in order to evaluate
volume and price changes. This disparity of time periods has been an element of dumping
investigations since long before the current AD Agreement was negotiated and came into effect.
However, there is, in the United States' view, no reasonable way to eliminate this disparity, as it
would not be meaningful to assess injury only over the period of the dumping investigation, and it
would be unduly burdensome to investigating authorities and exporters to extend the period of the
dumping investigation. The United States points out that in the Salmon cases
51 the United States had
considered all imports during the injury investigation period to be dumped (and subsidised). The
Panels reviewing that injury determination concluded that the United States had properly considered
whether there had been a significant increase in the volume of dumped (and subsidised) imports under
the Tokyo Round Anti-Dumping and Subsidies Codes. The relevant text of the AD Agreement is the
same as that of the Tokyo Round Anti-Dumping Code.
(b) Findings
6.132 India’s claim regarding the European Communities’ treatment of all imports of the product
concerned during the investigation period as dumped is primarily characterised as a claim of
inconsistency with Article 3.1.
6.133 Article 3.1 states:
“A determination of injury for purposes of Article VI of GATT 1994
shall be based on positive evidence and involve an objective
examination of both (a) the volume of the dumped imports and the
effect of the dumped imports on prices in the domestic market for
like products, and (b) the consequent impact of these imports on
domestic producers of such products.”
Article 3.1, which requires consideration of the vo lume, price, and consequent impact of dumped
imports on the domestic industry sets out the general requirements for a determination of injury, and
the succeeding sections of Article 3 provide mo re specific guidance for such determinations.
Articles 3.4 and 3.5 similarly require consideration of dumped imports.
6.134 There is no dispute between the parties as to the facts with respect to the consideration of
imports as dumped during the period of the dumping investigation. The European Communities
explicitly acknowledges that it considered all imports from the three countries investigated, India,
Egypt and Pakistan, as dumped, and considered the volume and price effects of all imports from those
countries during that period in evaluating whether injury was caused by dumped imports. India
asserts that the European Communities was only enti tled to consider as dumped imports in its injury
analysis those imports attributable to specific transactions as to which dumping was actually found
during the period of the dumping investigation.

50 The United States stated, in response to questions from the Panel, that its own practice is to exclude
from the volume and price effects analysis imports from producers or exporters for which a finding of no
dumping is made. These are considered in its injury investigation in the category of "non-dumped" imports, as
are imports from third countries not subject to the investigation. However, while the United States clearly
disputes the principle espoused by the European Communities that dumping is determined for countries, it does
not assert that its own practice is required by the AD Agreement.
51 Imposition of Anti-Dumping Duties on Imports of Fresh and Chilled Atlantic Salmon from Norway
("Salmon - Anti-Dumping Duties "), Panel Report, ADP/87, adopted 26 April 1994, BISD 41S/228; Imposition
of Countervailing Duties on Imports of Fres h and Chilled Atlantic Salmon from Norway (" Salmon -
Countervailing Duties"), Panel Report, SCM/153, adopted 28 April 1994, BISD 41S/576.

6.135 Thus, we are faced with the question of the interpretation of the term “dumped imports” in
Articles 3.1, 3.4, and 3.5 of the AD Agreement, rather than an assessment of the facts as such. If we
were to conclude that the term “dumped imports” may be understood to comprise the volume of
imports of the product in question from the country for which an affirmative determination of
dumping has been made then we must, under the standard of review set forth in Article 17.6(ii), find
in favor of the European Communities on this issu e, at least with respect to the consideration of
imports during the period of the dumping investigation. On the other hand, to sustain India's position,
we would have to conclude that the phrase "dumped imports" must be understood to refer only to
imports which are the subject of transactions in which export price was below normal value, which
India considers to be "dumping" transactions.
6.136 However, consideration of the ordinary meaning of the phrase "dumped imports" in its
context, and in light of the object and purpose of Article 3 of the AD Agreement, leads us to the
conclusion that the interpretation proposed by India is not required. As discussed above,
52 we
consider that dumping is a determination made with reference to a product from a particular
producer/exporter, and not with reference to individual transactions. That is, the determination of
dumping is made on the basis of consideration of transactions involving a particular product from
particular producers/exporters. If the result of that consideration is a conclusion that the product in
question from particular producers/exporters is dumped, we are of the view that the conclusion applies
to all imports of that product from such source(s), at least over the period for which dumping was
considered. Thus, we consider that the investigatin g authority is entitled to consider all such imports
in its analysis of "dumped imports" under Articles 3.1, 3.4, and 3.5 of the AD Agreement.
6.137 We note that Article 9.2 of the AD Agreement, which may be considered relevant context for
our analysis, provides:
"When an anti-dumping duty is imposed in respect of any product, such anti-dumping
duty shall be collected in the appropriate amounts in each case, on a non-discriminatory
basis on imports of such product from a ll sources found to be dumped and causing
injury, except as to imports from those sources from which price undertakings under the
terms of this Agreement have been accepted. The authorities shall name the supplier or
suppliers of the product concerned".
We consider that this provision lends support to our conclusion that all imports from any
producer/exporter found to be dumping may be considered as dumped imports for purposes of injury
analysis.
6.138 In this regard, we note that, although the European Communities found de minimis margins
for four Pakistani exporters of bed linen, it did not make a negative determination of dumping with
respect to any producer or exporter subject to the investigation. India, of course, has made no claim
with respect to the treatment of Pakistani imports as dumped. India does argue that, had the European
Communities properly calculated the dumping margins for Indian producers, it would have come to
the conclusion that imports from one company were not dumped. We have found above that the
European Communities did act inconsistently with its obligations under Article 2.4.2 of the
AD Agreement in its calculation of dumping margins for Indian producers. It is possible that a
calculation conducted consistently with the AD Agr eement would lead to the conclusion that one or
another Indian producer should be attributed a zero or de minimis margin of dumping. In such a case,
it is our view that the imports attributable to such a producer/exporter may not be considered as
"dumped" for purposes of injury analysis. However, we lack legal competence to make a proper
calculation and consequent determination of dumping for any of the Indian producers – our task is to
review the determination of the EC authorities, not to replace that determination, where found to be

52 See section VI.C.3 (zeroing), supra.

inconsistent with the AD Agreement, with our own determination. In any event, we lack the
necessary data to undertake such a calculation. Thus, while the treatment of imports attributable to
producers or exporters found to not be dumping is an interesting question, it is not an issue before us
and we reach no conclusions in this regard.
6.139 Our conclusion that investigating authorities may treat all imports from producers/exporters
for which an affirmative determination of dumping is made as "dumped imports" for purposes of
injury analysis under Article 3 is bolstered by our view that the interpretation proposed by India,
which entails the conclusion that the phrase "dumped imports" refers only to those imports
attributable to transactions in which export price is below normal value, would lead to an
unworkable result in certain cases. One of the objects and purposes of the AD Agreement is to
establish the conditions under which Members may impose anti-dumping duties in cases of injurious
dumping. An interpretation which would, in many cases, make it impossible to assess one of the
necessary elements, injury, is not consistent with that object and purpose.
6.140 An assessment of the volume, price effects, and consequent impact, only of imports
attributable to transactions for which a positive margin was calculated would be, in many cases,
impossible, or at least impracticable. Attempting to segregate individual transactions as to whether
they were "dumped" or not, even assuming it could be done, would leave investigating authorities in a
quandary in cases in which the dumping investigation is undertaken for a sample of companies or
products. Such sampling is specifically provided for in the AD Agreement, yet it would not be
possible, in such cases, accurately to determine the volume of imports attributable to "dumped"
transactions.
53 Similarly, if dumping is determined on the basis of a comparison of weighted average
normal value to weighted average export price, there would be no comparisons concerning individual
transactions which could serve as the basis for segregating imports in "dumped" and "not-dumped"
categories.
6.141 We note, in this context, the findings of the GATT Panels in the Salmon cases. While the
specific issue raised here was neither raised nor addressed in that case, the Panel in Salmon - Anti-
Dumping Duties was considering the question of whether the United States had properly determined
that the imports caused material injury to the domestic industry "through the effects of dumping".
The Panel found that this language, which is found in Article 3.5 of the AD Agreement, did not
require that the volume, price, and impact "effects" to be considered be those of the dumping, but
rather those of the dumped imports, that is, the "effects of the dumping" were equated by the Panel
with "the effects of the dumped imports".
54 In that case, the "dumped imports" included all imports
from all producers in the country without distinction by transactions. In our view, this conclusion is
consistent with an interpretation of the phrase "dumped imports" as referring to all imports of the
product from producers/exporters as to which an affirmative determination of dumping has been
made.
6.142 We therefore conclude that the European Communities, having made an affirmative
determination of dumping with respect to imports from all producers/exporters in this case, did not act
inconsistently with Articles 3.1, 3.4, and 3.5 of the AD Agreement by considering all imports from
India (and Egypt and Pakistan) in its evaluation of the volume, price effects, and consequent impact of
dumped imports.

53 India's argument suggests that the proportion of imports attributable to dumped transactions for one
producer or country could be applied to determine the volume of dumped imports for a different producer or
country. We do not consider that such a practice would satisfy the general requirements of the AD Agreement
for consideration of positive evidence and objective decision-making.
54 Salmon - Anti-Dumping Duties, Panel Report, paras. 565-571; Salmon - Countervailing Duties, Panel
Report, paras. 328-340 ("effects of the subsidy" and "effects of the subsidised imports").

6.143 With respect to the question whether the European Communities improperly considered
imports before the dumping investigation period as dumped, we note the European Communities'
explanation that it did not determine injury caused by dumped imports for any period before the
dumping investigation period. Since we have c oncluded, as discussed below, that the European
Communities' determination of injury was not made consistently with its obligations under
Article 3.4, we do not consider it necessary or appropriate to decide this question.
6.144 Finally, with respect to India's claim that the European Communities failed to properly
consider "other factors" which might have been causing injury to the domestic industry, as required
by Article 3.5 of the AD Agreement, we note that , with the exception of the argument concerning
improper consideration of "dumped" imports, India has made no other arguments in support of this
claim. Having rejected India's position in that regard, we consider that India has failed to present a
prima facie case in this regard.
2. Claim under Article 3.4 - failure to evaluate "all relevant economic factors and indices
having a bearing on the state of the industry" (claim number 11)
(a) Parties' arguments
6.145 India considers that the European Communities failed to consider all injury factors mentioned
in Article 3.4 of the AD Agreement for the purpose of its determination of the impact of the dumped
imports on the domestic industry concerned. In particular, India asserts that the European
Communities did not consider the following elements: productivity; return on investments; utilisation
of capacity; magnitude of margin of dumping; cash flow; inventories; wages; growth; and ability to
raise capital or investments. In India’s opinion, the European Communities, therefore, acted
inconsistently with Article 3.4.
6.146 India emphasises the use of the word "shall" in Article 3.4, arguing that it follows that the
evaluation mentioned in Article 3.4 shall by necessity include "all relevant . . . factors". The word
"all" indicates that all relevant factors must be included in this "evaluation". The word "all",
according to India, is given further meaning by the word "including". In India's view, it follows from
the word "including" that, at a minimum, the factors and indices listed after the word "including" must
be evaluated.
6.147 The European Communities presents three defences to India’s claim, which it characterises as
relying on the supposedly compulsory nature of the evaluation of the factors listed in Article 3.4 and
not on the argument that, because of the circumstances of this particular case, the listed factors should
be evaluated. First, the European Communities asserts that the factors listed in Article 3.4 were
evaluated during the investigation.
55 For several of the factors, the data could be derived from the
exporters’ accounts and, for others, from the questionnaire sent to the domestic producers. The
European Communities also indicates the evaluation accorded to each of the factors.
6.148 Second, the European Communities asserts that the factors listed in Article 3.4 are negative in
character and, as such, were properly evaluated during the investigation. The European Communities
stresses that the one feature that stands out in a close examination of the terms of Article 3.4 is that the
listed factors are explicitly concerned with indications of injury, not the absence of injury. Of fifteen
factors, only two are not qualified by the words “decline” or “negative effects”. The opening clause
of Article 3.4 – which speaks of the “impact of the dumped imports” – reinforces this interpretation of
the listed factors. The purpose of the examination under Article 3.4 is to determine what is wrong
with the domestic industry, not what is right with it. The European Communities does not wish to
suggest that non-negative factors have no relevance. However, in the view of the European

55 See First Submission of the European Communities, Annex 2-1, Table 4.

Communities, India seeks to establish that Article 3.4 requires investigating authorities to evaluate in
an explicit fashion all the fifteen listed factors. However, the wording of Article 3.4 refers almost
exclusively to negative factors and, consequent ly, according to the European Communities, what
might be called the ‘comprehensive evaluation’ requirement, if it exists, applies only to such factors.
Profits and prices were the two principal negative factors identified by the EC authorities in the bed
linen proceeding, and these were thoroughly examined and evaluated.
6.149 Third, the European Communities puts forward various reasons for concluding that
Article 3.4 does not require that every one of the listed factors need be evaluated in every
investigation. The European Communities points to the use of the words “relevant” and “have a
bearing on the state of the industry” in Article 3.4 as well as the last sentence of the provision, which
states: “This list is not exhaustive, nor can one or several of these factors necessarily give decisive
guidance.” The European Communities also underlines the use of the word “including” and
emphasises what it calls the “nature” of the list, explaining that it is “broken into parts by semicolons,
and the word ‘or’ is used to indicate that not all of the factors need be considered”. Not only do the
factors differ in importance from case to case, but, for the European Communities, it is possible to
deduce that certain of them are inherently likely to be more significant than others and that findings
on some may make findings on others superfluous.
6.150 The European Communities argues that the obligation in Article 3.4 to consider injury factors
does not exist in isolation and, in particular, account must be taken of Articles 6.13 and 6.14, which
deal with the difficulties experienced by interested parties – particularly small companies – in
supplying information requested and the need for a Member to proceed expeditiously in its
investigation, respectively. In this context, aspects of the evaluation required by Article 3.4 may have
to be limited in order to observe the spirit of Article 6.13. The European Communities posits that the
decision on the limits to be set on the obligation in Article 3.4 is a matter of judgement that must be
exercised by the investigating authorities.
6.151 Japan, as third party, asserts that the language of Article 3.4 requires all listed factors to be
considered, and the list of factors is the minimum that must be evaluated by the investigating
authorities. The degree of importance of each factor may vary from case to case, but all of the listed
factors must be fully considered and evaluated in each case. Authorities may not exclude certain
factors because they deem these to be irrelevant. Japan is of the opinion that this interpretation finds
support in the change in the language of this provision over time. The change from the phrase “such
as” in the comparable provision of the Tokyo Round Anti-Dumping Code to the word “including” in
the AD Agreement underscores the interpretative si gnificance of the word “including”. Because
“including” means “part of a whole”, the factors after the word “including” must be viewed as a
subset of a potentially larger group of factors that must be evaluated by the authorities. Had the
drafters intended this list of factors to be a discretionary checklist from which authorities may pick
and choose, they would not have changed the words “such as” to “including”. The drafters would
also have used language to more clearly provide that authorities could consider as many or as few of
these factors as they wished.
6.152 The United States, as third party, takes the position that while, in light of Article 12.2,
investigating authorities are not required in each case to make a specific finding on each enumerated
factor in Articles 3.2 and 3.4, it should be discernible from the authorities’ determination that they
evaluated each of the enumerated factors. This objective may be achieved when a determination,
through its demonstration of why the authorities relied on the specific factors they found to be
material in the case, thereby discloses why other factors on which they do not make specific findings
were accorded little weight. In the current case, however, the United States shares some of India’s
concerns about the inadequacy of the European Communities’ findings, because the European
Communities’ specific findings on the factors it addressed do not elucidate why it did not give weight
to factors it did not discuss. The United States does not agree with the European Communities’

argument that some of the Article 3.4 factors are negative in character. The United States points out
that the European Communities ignores that Article 3.5 refers to “the effects of dumping, as set forth
in paragraphs 2 and 4 of Article 3”. The “relevance” of the Article 3.4 factors extends beyond
supporting an injury determination. Article 3.4 states that “all relevant economic factors and indices
having a bearing on the state of the industry” must be evaluated. Thus, even if a factor does not lend
support to an affirmative injury determination, the au thority must evaluate it so long as it sheds light
on the condition of the domestic industry.
(b) Findings
6.153 India's claim raises a number of issues. The most basic of these is the interpretation of
Article 3.4, i.e., whether the list of factors set out in that provision is illustrative or mandatory and, if
mandatory, whether there are only four groups of “factors” represented by the subgroups separated by
semicolons that must be evaluated, or whether each individual factor listed must be considered. We
must also consider the nature of the evaluation of the factors that is required, how the “relevance” of a
given factor is to be determined, and the extent to which the final determination must reflect the
required consideration, whatever its nature. Finally, we must consider the facts.
6.154 Article 3.4 provides:
“The examination of the impact of the dumped imports on the domestic industry
concerned shall include an evaluation of all relevant economic factors and indices
having a bearing on the state of the industry, including actual and potential decline in
sales, profits, output, market share, productivity, return on investments, or utilisation
of capacity; factors affecting domestic prices; the magnitude of the margin of
dumping; actual and potential negative effects on cash flow, inventories,
employment, wages, growth, ability to raise capital or investments. This list is not
exhaustive, nor can one or several of these factors necessarily give decisive
guidance.”
The use of the phrase "shall include" in Article 3.4 strongly suggests to us that the evaluation of the
listed factors in that provision is properly interpreted as mandatory in all cases. That is, in our view,
the ordinary meaning of the provision is that the examination of the impact of dumped imports must
include an evaluation of all the listed factors in Article 3.4.
6.155 The European Communities emphasises the use of the terms “relevant”, “having a bearing on
the state of the industry” and “including” in Article 3.4 in arguing that not all factors need be
evaluated in all cases. We do not consider that these textual elements affect the conclusion that the
ordinary meaning of Article 3.4 is properly understood as requiring the evaluation of all the listed
factors in all cases. We note that the terms "relevant" and the phrase "having a bearing on the state of
the industry" precede the introduction of the list of factors. In our view, the text of Article 3.4
indicates that the listed factors are a priori "relevant" factors "having a bearing on the state of the
industry", and therefore must be evaluated in all cases.
56

56 We note, in this regard, that the Panel in Korea - Dairy Safeguard , considered the language of
Article 4.2 of the Agreement on Safeguards, which provides that, in making a determination of serious injury or
threat thereof in a safeguard investigation, the investigating authority:
"shall evaluate all relevant factors of an objective and quantifiable nature having a bearing on
the situation of that industry, in particular, …"
The Panel concluded that the text of this provision made it clear that:

6.156 With regard to the use of the word "including", we consider that this simply emphasises that
there may be other "relevant economic factors and indices having a bearing on the state of the
industry" among "all" such factors that must be evaluated. We recall that, in the Tokyo Round AD
Code, the same list of factors was preceded by the phrase “such as”, which was changed to the word
“including” that now appears in Article 3.4 of the AD Agreement. The term “such as” is defined,
inter alia , as “Of the kind, degree, category being or about to be specified; for example”.
57 B y
contrast, the verb “include” is defined, inter alia, to mean “enclose”; “contain as part of a whole or as
a subordinate element; contain by implication, involve”; or “place in a class or category; treat or
regard as part of a whole”. 58 We thus read the phrase “shall include an evaluation of all relevant
economic factors and indices having a bearing on the state of the industry, including . . .” as
introducing a mandatory list of relevant economic factors which must be evaluated in every case. The
change in the wording that was introduced in the Uruguay Round in our view supports an
interpretation of the current text of Article 3.4 as setting forth a list that is mandatory, and not merely
indicative or illustrative.
59
6.157 The European Communities also focuses on the semicolons in the list of factors in Article 3.4.
However, in our view, neither the presence of semicolons separating certain groups of factors in the
text of Article 3.4, nor the presence of the word "or" within the first and fourth of these groups, serves
to render the mandatory list in Article 3.4 a list of only four "factors". We further note that the two
"ors" appear within – rather than between – the groups of factors separated by semicolons. Thus, we
consider that the use of the term “or” here does not detract from the mandatory nature of the textual
requirement that “all relevant economic factors” shall be evaluated. With respect to the second “or,”
it appears in the phrase "ability to raise capital or investments", which clearly indicates that the factor
that an investigating authority must examine is the "ability to raise capital" or the "ability to raise
investments", or both.
6.158 Finally, we consider the European Communities' assertion that not all factors listed in
Article 3.4, “being solely negative in character”, need to be evaluated. This characterisation of the
European Communities of the factors listed in Article 3.4 is somewhat perplexing to us. Each of the
factors to be evaluated may be found to indicate material injury, or not, to the industry. We fail to see
the purpose of describing them as “negative factors”, or factors having "negative character". Nor are
we able to reconcile the European Communities’ statement that “the listed factors are explicitly
concerned with indications of injury, not the absence of injury” with its statement that “[t]he

"among "all relevant factors" that the investigating authorities "shall
evaluate", the consideration of the factors listed is always relevant and
therefore required, even though the authority may later dismiss some of
them as not having a bearing on the situation of that industry". Korea -
See also , Argentina - Safeguard Measures on Imports of Footwear , Appellate Body Report,
WT/DS121/AB/R, adopted 12 January 2000, para. 136. The similarities between the drafting of the provisions
is obvious, and we consider that the same conclusion is appropriate in interpreting Article 3.4 of the
AD Agreement. While the standard for injury in safeguards cases ("serious injury") is different from that
applied to injury determinations in the anti-dumping context ("material injury"), the same type of analysis is
provided for in the respective covered agreements, i.e., evaluation or examination of a listed series of factors in
order to determine whether the requisite injury exists.
57 The New Shorter Oxford English Dictionary, Clarendon Press, Oxford, 1993.
58 Id.
59 Article 3.2 of the DSU directs panels to clarify the provisions of the covered agreements "in
accordance with customary rules of inte rpretation of public international law", which are set out in Articles 31
and 32 of the Vienna Convention . See, e.g., Japan – Taxes on Alcoholic Beverages , Appellate Body Report,
WT/DS8/AB/R–WT/DS10/AB/R–WT/DS11/AB/R, adopted 1 November 1996, pp.10-12. Here, we look to
negotiating history pursuant to Article 32 of the Vienna Convention in order to confirm the meaning resulting
from the application of the general rule of interpretation in Article 31 of the Vienna Convention.

European Communities does not wish to suggest that non-negative factors have no relevance”. On
the contrary, the European Communities’ comment th at “[the] wording [of Article 3.4] refers almost
exclusively to negative factors and, consequently, what might be called the ‘comprehensive
evaluation’ requirement, if it exists, applies only to such factors” suggests that the European
Communities believes that only factors indicating mate rial injury to the industry must be evaluated.
Such an interpretation of Article 3.4 clearly runs counter to the requirement to properly establish a
factual basis in support of a well-reasoned and meaningful analysis of the state of the industry and a
finding of injury as well as to the requirement of an unbiased and objective evaluation as provided for
in Articles 3.1 and 17.6(i) of the AD Agreement.
6.159 Based on the foregoing, we conclude that each of the fifteen factors listed in Article 3.4 of the
AD Agreement must be evaluated by the investiga ting authorities in each case in examining the
impact of the dumped imports on the domestic industry concerned.
6.160 We note that our conclusion is the same as that reached by the Panel on Mexico - HFCS on
this specific issue.60 The Panel stated 61:
“The text of Article 3.4 is mandatory:
‘The examination of the impact of the dumped imports on the domestic industry
concerned shall include an evaluation of all relevant economic factors and indices
having a bearing on the state of the industry , including . . . ’ (emphasis added by
HFCS panel)
In our view, this language makes it clear that the listed factors in Article 3.4 must be
considered in all cases. There may be other relevant economic factors in the
circumstances of a particular case, consideration of which would also be required."
6.161 Turning to the question of the nature of the evaluation of each factor that is required, we note
the views of the Mexico-HFCS panel on this question:62
"But consideration of the Article 3.4 factors is required in every case, even though
such consideration may lead the investigating authority to conclude that a particular
factor is not probative in the circumstances of a particular industry or a particular
case, and therefore is not relevant to the actual determination. Moreover, the
consideration of each of the Article 3.4 factors must be apparent in the final
determination of the investigating authority.
602
602In this regard, we note the text of Article 12.2.2, which provides:
‘A public notice of conclusion or suspension of an investigation in the case of an
affirmative determination providing for the imposition of a definitive duty or the
acceptance of a price undertaking shall contain, or otherwise make available through
a separate report, all relevant information on the matters of fact and law and reasons
which have led to the imposition of final measures . . .’”

60 While that panel was examining the application of the requirements of Article 3.4 in a case involving
"threat of material injury", we consider that its views on Article 3.4 are also relevant in this case, dealing with
material injury.
62 Id.

6.162 In other words, while the authorities may determine that some factors are not relevant or do
not weigh significantly in the decision, the authorities may not simply disregard such factors, but must
explain their conclusion as to the lack of relevance or significance of such factors. We agree. Thus,
we are of the view that every factor in Article 3.4 must be considered, and that the nature of this
consideration, including whether the investigating authority considered the factor relevant in its
analysis of the impact of dumped imports on the domestic industry, must be apparent in the final
determination.
6.163 We now consider the implications of a ruling that consideration of each factor must be
apparent in the final determination, and that the relevance or lack thereof of each factor must be
explained. The European Communities objects to the concept of a "checklist" and argues that the
relevance of some factors may be apparent early in the investigation. Even granting that the
investigating authority may be aware early in the proceeding, or indeed from the outset, that a certain
factor is not relevant to the examination of the impact of dumped imports on the domestic industry, it
must nonetheless be possible for a panel, reviewing that determination, to be able to assess whether all
of the Article 3.4 factors have been evaluated. We consider that an authority, in discussing why it
found certain factors relevant, may at the same time make apparent why it did not deem other factors
to be material and, thus, without following a ch ecklist approach, make it possible for a reviewing
panel to determine whether it complied with the requirements of Article 3.4. Thus, we conclude that,
as long as the lack of relevance or materiality of the factors not central to the decision is at least
implicitly apparent from the final determination, th e Agreement's requirements are satisfied. While a
checklist would perhaps increase an authority’s and a panel's confidence that all factors were
considered, we believe that it is not a required approach to decision-making under Article 3.4.
6.164 Having concluded that Article 3.4 requires an evaluation of all listed factors, which might
result in a conclusion that some of the listed factor s are not relevant to the examination of the impact
of dumped imports on the domestic industry in the particular circumstances of the investigation at
hand, and that the consideration of all the Article 3.4 factors must be apparent from the final
determination, the question before us is whether the European Communities' determination is
consistent with this obligation.
6.165 The European Communities submits that it evaluated the factors listed in Article 3.4 during
the investigation. In paragraphs 81-91 of the Provisional Regulation,
63 the European Communities,
under the heading "Situation of the Community i ndustry", addresses the following factors: (a)
production; (b) sales by volume; (c) sales by value; (d) market share; (e) price development; (f)
profitability; and (g) employment. The other factors listed in Article 3.4 – productivity; return on
investments; utilisation of capacity; the magnitude of the margin of dumping; cash flow; inventories;
wages; growth; ability to raise capital or investments – are not even referred to in this section.
6.166 We further note that, in paragraph 62 of the Provisional Regulation, the European
Communities states:
"Data for the examination of injury cause d to the Community industry was collected
and analysed at three different levels, as follows:
- at the level of the entire Community (EU-15) for trends concerning production,
consumption in the Community, imports, exports and market share . . .
- at the level of the Community industry . . . for trends concerning production, sales
by value and employment.

63 Exhibit India-8.

- at the level of the sampled Community producers, for the factors mentioned above
and also for trends concerning prices and profitability."
6.167 It appears from this listing that data was not even collected for all the factors listed in
Article 3.4, let alone evaluated by the EC investigating authorities. Surely a factor cannot be
evaluated without the collection of relevant data. While some of the data collected for the factors that
are mentioned in the Provisional Regulation by the EC authorities may have included data for the
factors not mentioned, we cannot be expected to assume that this was the case without some
indication to that effect in the determination. Nor is the relevance or lack thereof, as assessed by the
EC authorities, of the factors not mentioned under the heading “Situation of the Community industry”
at all apparent from the determination.
6.168 The European Communities explains that certain factors were evaluated, but were "found not
to be a significant independent factor". In response to a question from the Panel regarding the
meaning of the phrase “not a significant independent factor” as used by the European Communities,
the European Communities states: “The interpretation to be given to the phrase ‘an evaluation of all
relevant economic factors and indices’ must be flexible enough to cope with the enormous variety of
circumstances that arise in investigations into injury and injury causation. Relevance is a matter of
degree rather than of ‘yes or no’.”
64 While we certainly agree with the European Communities as to
the "enormous variety of circumstances" that may arise in investigations, and the need to be flexible
in the evaluation of relevant factors, we fail to see how relevance of a factor to the determination of
injury in a particular investigation can be a matter of degree. That is to say, it is clear that not all
factors will be, or will be equally, "relevant", in the sense of bearing on the state of the industry, in all
cases. Nonetheless, it would seem to us that in a particular case, a particular factor either is or is not
relevant to the determination of whether there is injury, depending on the particular facts and
circumstances of the industry in question. Indeed, it is precisely because, as the European
Communities states, “the process of determining the relevance of a factor may be little different from
that of evaluating it” that the authorities’ assessment of the lack of relevance of a factor, that is, the
conclusion that it has no (or little) bearing on the determination of injury, should that be the case,
must be as apparent from the determination as the authorities’ evaluation of a factor that does bear on
the determination of injury. Otherwise, it becomes impossible to determine which of the many factors
that have a bearing on the state of the industry actually were considered to weigh in the determination
of injury and were evaluated by the investigating authority. We find that, where factors set forth in
Article 3.4 are not even referred to in the determin ation being reviewed, if there is nothing in the
determination to indicate that the authorities consid ered them not to be relevant, the requirements of
Article 3.4 were not satisfied. A conclusion that a factor is not relevant which must be assumed from
the absence of any discussion of it is, in our view, simply not tenable.
6.169 Based on the foregoing, we conclude that the European Communities did not conduct “an
evaluation of all relevant economic factors and indices having a bearing on the state of the industry”
and, therefore, failed to act consistently with its obligations under Article 3.4 of the AD Agreement.
3. Claim under Article 3.4 - consideration of information for various groupings of EC
producers in analysis of the state of the domestic industry (claim number 15)
(a) Parties' arguments
6.170 India submits that the European Communities acted inconsistently with Article 3.4 by
considering information relating to different groupings of EC producers of bed linen in evaluating
certain of the factors under Article 3.4. India asserts that the European Communities, after defining

64 See Response of the European Communities to Question 20 from the Panel following the first
meeting, Annex 2-5.

the "Community industry" as a group of 35 producers, selected a sample of 17 of those 35 for
purposes of the injury investigation. However, India argues, the European Communities did not
consistently base the injury analysis on this sample group. India argues that the European
Communities' reliance on information for companies outside this group, specifically by considering
information for the "Community industry" as a whole, and for all EC producers of bed linen, in
determining injury, was a violation of Article 3.4. Moreover, India maintains, the European
Communities' choice of which group of producers to consider with respect to different aspects of its
analysis was without any apparent reason other than a goal-oriented ‘picking and choosing’ in order to
find injury.
6.171 The European Communities argues that Article 4.1 provides Members with two options for
defining the domestic industry, either the "domestic producers as a whole" of the like product, or
"those of them [the domestic producers] whose collective output of the products constitutes a major
proportion of the total domestic production of those like products". In EC practice, a "major
proportion" is defined by reference to the standing requirements of Article 5.4 of the Agreement, that
is, producers accounting for at least 25 per cent of domestic production. The European Communities
states that in the bed linen investigation, it applied the second option, defining as the "Community
industry" a group of 35 producers of bed linen supporting the application whose collective output
constituted more than 25 per cent of EC production of the like product. Because of the number of
companies in the Community industry, the European Communities decided to resort to sampling. An
initial list of 19 companies was decided upon for inclusion in the sample, which was subsequently
reduced to 17 companies. The European Communities collected and analysed data for the
examination of injury to the Community industry at three levels, i.e., for the sampled companies, for
the Community industry, and for all EC producers of bed linen.
65
6.172 The European Communities notes that the conclusions drawn from evidence must ultimately
concern the domestic industry as defined in the investigation, but argues that there is no intrinsic limit
to the types of evidence that may be used to arrive at such conclusions. In particular, the European
Communities submits that it cannot be excluded ab initio that the condition of EC producers of bed
linen as a whole may provide evidence of the condition of those producers who comprise the domestic
industry. The European Communities emphasises that the principal basis for the finding of material
injury was the reduced profitability and price suppression of the Community industry as observed
among the sampled companies.
6.173 In Egypt's view, there is no textual support in the AD Agreement for the approach adopted by
the European Communities, which is incompatible with Article 3.1, as well as Articles 3.3, 3.4, 3.5
and 3.6, of the AD Agreement. These provisions require the European Communities to determine
whether the domestic industry has suffered injury and do not permit an injury determination based on
data relating to companies not belonging to the dom estic industry. As an ancillary matter, Egypt
states that the Commission, by ignoring the results of its own sample of the domestic industry, failed
to make an unbiased and objective assessment of the facts and thus acted inconsistently with
Article 6.10 in conjunction with Articles 3.4, 3.5 and 3.6. In Egypt's view, in assessing whether the
domestic industry suffered material injury, the European Communities improperly considered both
the Community industry and the total EC production, drawing conclusions regarding the situation of
the Community industry on the basis of informati on concerning total EC production. Egypt submits
that the evidence shows that the domestic industry was in a healthy state, and that in any event, the
European Communities failed to take into account in its analysis the fact that consumption of the like
product in the European Communities decreased over the relevant period.
6.174 In the United States' view, the parties' arguments on this issue miss an important underlying
point. The United States is of the opinion that the European Communities, in applying its Regulation

on definition of the domestic industry, has defined the domestic industry in this case in a manner
which violates Article 4 of the AD Agreement, and that therefore the entire injury analysis is based on
a flawed premise. In the United States' view, the European Communities' position that Article 4.1
allows two equally valid options for defining the domestic industry - either producers as a whole, or
producers of a major proportion of domestic production, is wrong. The United States believes that the
second option is not a separate basis for defining industry, but is a provision which allows a
determination to be made in situations where information for the industry as a whole is not available,
so long as that information relates to producers of a major proportion of domestic production. The
United States asserts that the European Communities’ industry definition limited the domestic
industry to those producers that came forward to affirmatively pursue the investigation, and thus was
fundamentally skewed. A proper definition of th e domestic industry under Article 4.1 would have
required the European Communities to define the “domestic industry” as all EC producers of the like
product, and obtain information from that universe of producers, or at least from a sample drawn from
that universe of producers. Thus, with respect to India’s claim that the European Communities acted
impermissibly by considering some information concerning all EC producers, the United States, in
contrast, believes that the European Communities acted inconsistently with the AD Agreement by not
including all EC producers of bed linen in the domestic industry for the purposes of evaluating factors
such as price and impact under Articles 3.1, 3.2, 3.4 and 3.5. Moreover, the United States argues that
the European Communities' definition of domestic industry conflates the “domestic industry”
definition of Article 4.1 with the standing determination under Article 5.4, and thus misconstrues the
relationship between the two provisions. If Article 4.1 were intended to define the domestic industry
as those producers who expressly supported the petitio n, an injury investigation would be mostly a
pro forma exercise in which the authorities would simply check whether petitioning firms really were
materially injured. Article 5.4 does not provide a basis for the creation of such a self-selecting
industry and does not purport to define the term “a major proportion” as used in Article 4.1. The
United States adds that Article 3.1 reflects that Article 4.1 establishes a preference for basing an
injury determination on examination of the domestic producers as a whole. Further, Articles 3.4
and 3.5 specifically direct that an injury analysis shall concern “ the domestic industry”. These
provisions accordingly do not contemplate that an authority will at its discretion use one industry
definition in a determination examining injury and another definition in that determination for other
purposes.
(b) Findings
6.175 We first note that the issue raised by the Un ited States regarding the European Communities’
interpretation of “domestic industry” is an interesting one, and raises questions regarding the proper
application of that term in this case. However, India has made no claim under Article 4 of the
AD Agreement in this dispute regarding the European Communities' definition of the domestic
industry. Our analysis and finding relate only to the claim before us, whether having defined the
Community industry as a group of 35 producers and resorted to a sample of those producers, the
European Communities was precluded from consider ing information relating to producers not within
that sample, or not within the Community industry. We express no opinion as to the correctness vel
non of the European Communities' interpretation of Article 4 of the AD Agreement or its application
in this case.
6.176 India's claim raises two related questions. First, we must consider whether the fact that the
European Communities considered information for different groupings of producers of bed linen, the
17 producers in the sample, the 35 producers comprising the "Community industry", and all EC
producers of bed linen, constitutes a violation of Article 3.4. The second question is whether,
assuming that the consideration of different data sets with regard to analysis of the state of the
domestic industry under Article 3.4 is permissible, the European Communities explained how its
consideration of the information at the different levels supported its determination.

6.177 India's claim rests on premises concerning the correct definition of domestic industry and
sampling which are outside the scope of our terms of reference. Focusing solely on the claim that is
before us, we note that the European Communities defined the domestic industry by starting with the
list of companies which supported the application. After eliminating seven found not to be
complainants,66 and excluding several others for various reasons, the European Communities arrived
at a group of 35 companies whose production of bed linen the European Communities considered to
constitute a "major proportion" of total EC production of the like product. The European
Communities defined this group as the "Community industry".67 The European Communities decided
to establish a sample of this Community industry, and in consultation with the complainant
Eurocoton, an initial list of 19 producers was arrived at, which was subsequently reduced to 17
producers. These 17 companies represented 20.7 per cent of total EC production of bed linen, and
61.6 per cent of the production of the Community industry ( i.e., the 35 producers referred to above).
The EC investigating authorities considered this sample to be representative of the domestic industry.
6.178 As noted above, the European Communities collected information concerning injury with
respect to three groups of companies – all EC producers of bed linen (referred to in the Provisional
and Definitive Regulations as the "EU-15") for tr ends concerning production, consumption, imports,
exports, and market share; the Community industry for trends concerning production, sales by value,
and employment; and the sample for the factors mentioned above and for trends concerning prices
and profitability.
68 In its analysis of factors regarding the state of the domestic industry, the EC
authorities considered data for the three levels where available for the various factors.
6.179 To succeed, India's claim requires us to determine that, having selected a sample, the
European Communities was precluded as a matter of law from considering, in its analysis under
Article 3.4, any information for any factor for any producers of bed linen not included in the sample.
One aspect of this claim relates to those producers of bed linen who, while not included in the sample
set selected by the investigating authorities, were members of the "Community industry" as defined
by the European Communities. A second aspect of India's claim relates to those EC producers of bed
linen who were not members of the "Community industry" as defined by the European Communities.
6.180 There is simply no basis in the AD Agreement for the first aspect of India's claim. Keeping in
mind that India has made no claim regarding the constitution of the sample, and no claim regarding
the definition of the domestic industry, the only basis for India's position is that the findings of the
European Communities were not reached in an objective manner based on properly established facts.
However, India has not challenged the facts themselves, but rather the European Communities'
choices as to which facts, among those it had gathered, it would consider in evaluating the Article 3.4
factors. There may be inadequate explanation or analysis of those facts, which might constitute a
violation of Article 12.2.2 or a failure adequately to evaluate the Article 3.4 factors. However, this
does not answer the question whether considerati on of evidence for domestic producers outside the
selected sample but within the domestic industry constitutes, ipso facto, a violation of Article 3.4.
6.181 It is clear from the language of the AD Agreement, in particular Articles 3.1, 3.4, and 3.5, that
the determination of injury has to be reached for the domestic industry that is the subject of the
investigation. Article 3.4 specifically requires that "The examination of the impact of the dumped
imports on the domestic industry concerned shall include an evaluation of all relevant economic
factors and indices having a bearing on the state of the industry. . . " (emphasis added). In this case,
the European Communities defined the domestic industry as 35 producers of the like product. In our

66 We are somewhat at a loss to understand how the European Communities could find that companies
listed in the complaint were nonetheless not complainants, but this is not a question to be resolved in this case.
67 In EC proceedings, the "Community industry" is the domestic industry for purposes of the
AD Agreement.

view, it would be anomalous to conclude that, because the European Communities chose to consider a
sample of the domestic industry, it was required to close its eyes to and ignore other information
available to it concerning the domestic industry it had defined. Such a conclusion would be
inconsistent with the fundamental underlying principle that anti-dumping investigations should be fair
and that investigating authorities should base their conclusions on an objective evaluation of the
evidence. It is not possible to have an objective evaluation of the evidence if some of the evidence is
required to be ignored, even though it relates precisely to the issues to be resolved. Thus, we consider
that the European Communities did not act inconsistently with Articles 3.1, 3.4, and 3.5 of the
AD Agreement by taking into account in its analys is information regarding the Community industry
as a whole, including information pertaining to companies that were not included in the sample.
6.182 However, our conclusion with respect to the second aspect of India's claim is different. As
we have noted, the determination of injury has to be reached for the domestic industry as defined by
the investigating authorities, in this case the 35 producers comprising the "Community industry" as
defined by the European Communities. In our view, information concerning companies that are not
within the domestic industry is irrelevant to th e evaluation of the "relevant economic factors and
indices having a bearing on the state of the industry" required under Article 3.4. This is true even
though those companies may presently produce, or may have in the past produced, the like product,
bed linen. Information concerning the Article 3.4 factors for companies outside the domestic industry
provides no basis for conclusions about the impact of dumped imports on the domestic industry itself.
If other present or former bed linen producers had been considered part of the domestic industry, the
fact that some of them went out of business woul d be relevant to the evaluation of the impact of
dumped imports on the domestic industry. But given that the European Communities defined the
domestic industry as 35 producers of bed linen, information concerning other companies does not
inform the evaluation of "factors and indices having a bearing on the state of the industry" under
Article 3.4 of the AD Agreement, and thus cannot serve as the basis of findings regarding the impact
of dumped imports on the domestic industry.
6.183 We therefore conclude that, by relying on information concerning producers not part of the
domestic industry in its evaluation of the impact of dumped imports on the domestic industry under
Article 3.4 of the AD Agreement, the European Co mmunities failed to act consistently with that
provision.
69
E. CLAIMS UNDER ARTICLE 5
6.184 India makes two substantive claims under Article 5. First, India argues that the European
Communities failed to examine the accuracy and ade quacy of the allegations in the complaint before
initiating the anti-dumping investigation, as required by Article 5.3 (claim number 23). Second, India
argues that the European Communities failed to determine the standing of the domestic industry
consistently with Article 5.4 (claim number 24). These claims are addressed below. The associated
claims concerning the alleged failure of the European Communities to sufficiently explain its decision
in the Definitive Regulation (claims 25 and 28) are addressed in section VI.G, below.

69 Having found a violation of the AD Agreement in this regard, and having found a violation in the
failure of the European Communities to evaluate all the Article 3.4 factors, we do not consider it necessary to
consider questions regarding the European Communities' evaluation of information on Article 3.4 factors for
the different groupings of producers.

1. Claim under Article 5.3 - failure to examine a ccuracy and adequacy of evidence (claim
number 23)
(a) Parties' arguments
6.185 India asserts that the European Communities failed to comply with the obligation to "examine
the accuracy and adequacy of the evidence in the application". India maintains there is no evidence
on the record that such an examination was carrie d out prior to the initiation of the investigation.
India argues that the available evidence from the first bed linen anti-dumping proceeding made such
examination even more important in this case. 70 India asserts that it raised the issue of lack of
sufficient evidence to initiate during the course of the proceeding, but received no response from the
EC authorities beyond the bare statement in the Pr ovisional Regulation that "the complaint contained
evidence of dumping of the said product and of material injury resulting therefrom, which was
considered sufficient to justify the initiation of a proceeding".71
6.186 India asserts that the investigating authorities did not "examine" the allegations in the
complaint on the state of the domestic industry before initiating the anti-dumping investigation. In
this regard, India points to the notice of initiation, which stated that:
“The complainant alleges and has provided evidence that imports from Egypt, India
and Pakistan have increased significantly in absolute terms and in terms of market
share, during a period where the apparent consumption in the Community has
decreased.
It is further alleged that the volume and prices of the imported products have, among
other consequences, had a negative impact on the quantities sold and the prices
charged by the Community producers, resulting in substantial adverse effects on
employment and the financial situation of the Community industry. . . .
Having determined, after consulting the Advisory Committee, that the complaint has
been lodged by or on behalf of the Community industry and that there is sufficient
evidence to justify the initiation of proceedings, the Commission has commenced an
investigation pursuant to Article 5 of Regulation (EC) No 384/96.” (Emphasis added
by India)
72
In India's view, these statements constitute an ad mission, in effect, that the EC authorities did not
"examine" the evidence before deciding to initiate the investigation, since they refer only to the
allegations of the complainant, and do not specifically refer to the examination by the authorities.
India argues that the EC authorities "considered" th e allegations in the complaint sufficient to justify
initiation, but did not "examine the accuracy and adequacy of the evidence provided in the
application".
6.187 India also argues that the EC authorities had more information at their disposal than merely
the complaint, notably the facts related to the terminated first bed linen investigation. India
acknowledges that the first bed linen investigation was terminated because the complaint was
withdrawn, but argues that the authorities knew or could have known that the complaint was

70 In January 1994, the European Communities had initiated an anti-dumping investigation of bed linen
from India, Pakistan, Thailand, and Turkey, based on an application filed by Eurocoton, the complainant in this
investigation. The investigation was terminated, without any measures being imposed, in July 1996, following
the withdrawal of the complaint.
71 India acknowledged, in its response to Question 7 from the Panel following the first meeting, that it
was not challenging the sufficiency of the application under Article 5.2 of the AD Agreement. Annex 1-6.
72 Exhibit India-7.

withdrawn because it would have been impossible to ma ke an injury finding. In India's view, these
circumstances strongly indicated that the EC industry might not be injured, since it had refused to
support the previous proceeding. India asserts that the allegations in the complaint underlying the
investigation at issue here largely covered the same products, period and countries. In India's view
this was strong evidence against initiation, warranting further examination. India takes the position
that, while an investigating authority is not required to conduct any particular sort of investigation
prior to determining whether there is sufficient evidence, since there is an obligation to "examine" the
evidence in the application, that evidence "can in itself never be the only element "to justify the
initiation of an investigation"", citing the report of the Panel in Guatemala-Cement.
73
6.188 In its reply to the Panel's question number 7 following the first meeting, India asserts that it
did argue that the European Communities erred in determining that the evidence was sufficient to
justify initiation, pointing to the above-quoted statem ent in support. India is of the view that the
European Communities failed to take counter-eviden ce (relating to the first bed linen investigation)
into account, and therefore failed to examine the accuracy and adequacy of the evidence in the
application, and therefore initiated inconsistently with Article 5.3
6.189 In the European Communities' view, India's arguments are based on an impermissible and
vague interpretation of Article 5.3 of the AD Agreement as requiring some specific action in
connection with the "examination" of the accuracy and adequacy of the evidence in the application.
The European Communities asserts that India's argume nt seems to suggest that the information in a
complaint may not be relied upon, but must be substantiated by other information obtained by the
investigating authorities, a position which the European Communities rejects as having no basis in the
text of Article 5.3.
6.190 The European Communities argues that Article 5.3 must be considered in light of Article 5.2
of the AD Agreement. The European Communities suggests that, taken together, these provisions
suggest that evidence will be adequate if it covers th e topics listed in Article 5.2, and will be accurate
if it is sufficiently credible. Regarding the standard of proof required in making this decision, the
European Communities argues that the Panel in Mexico-HFCS observed that it is less than that
appropriate to a preliminary or final determination of dumping, but more than mere allegation or
conjecture.
74 Furthermore, in regard to injury, the European Communities notes that that Panel
concluded there is no need for the investigating authority “to have or consider information on all the
Article 3.4 factors”.75
6.191 The European Communities maintains that, in accordance with ordinary practice, the EC
authorities examined the complaint in the light of the requirements of Articles 5.2 and 5.3 of the
AD Agreement, and with the benefit of their considerable experience in dealing with such documents,
and concluded that initiation was warranted, which was recorded in the Notice of Initiation. In the
European Communities' view, this demonstrates that the authorities examined the information
contained in the Complaint and found it sufficient. The European Communities interprets India as
arguing that there must be something more on the record, and/or conveyed to the parties through
publication or a report, demonstrating the process of "examination" of the evidence in the application
and the conclusions based thereon. The European Communities rejects this suggestion, arguing that
there is no such obligation under the WTO.
6.192 In this regard, the European Communities notes that India has not challenged the sufficiency
of the notice of initiation, and refers to the views of the Panel in Mexico-HFCS in support of the

73 First Submission of India, Annex 1-1, para. 5.20.
74 Mexico - HFCS, para. 7.94.
75 Id., para. 7.97.

position that a more detailed explanation of the decision to initiate and the determinations underlying
that decision was not required by the AD Agreement:
"In our view, Article 5.3 cannot be interpreted to require the investigating authority to
issue an explanation of how it has resolved all underlying questions of fact at
initiation. That is a requirement that arises at later stages of the proceeding, and is
explicitly set forth in Article 12.2."
76
6.193 The European Communities also argues that th e information concerning the first bed linen
investigation, while known to EC officials and considered, was not relevant to the decision to initiate
the subject investigation. The first bed linen investigation concerned different exporters (Egypt was
not subject to that investigation, while Thailand and Turkey were), and concerned a different
investigation period. In any event, the European Communities notes that no substantive conclusions
were made in that investigation, and in particular, there was no finding that there was no injury.
6.194 Egypt, as third party, is of the view that, contrary to the express wording of Article 5.3 of the
AD Agreement, the European Communities failed to examine thoroughly the allegations in the
complaint. In Egypt's view, the European Comm unities failed to take into account information
available to it at the time of initiation pointing to lack of material injury caused by dumped imports,
i.e., information from the first bed linen investigation.
6.195 The United States, as third party, submits that Article 5.3 does not obligate the European
Communities to consider a previously terminated, incomplete investigation against a different group
of countries before initiating the investigation at issue here. The premise of each aspect of
Articles 5.2 and 5.3 is that the information covered is "evidence". The chapeau of Article 5.2
specifies that "Simple assertion, unsubstantiated by relevant evidence, cannot be considered sufficient
to meet the requirements of this paragraph." In this case, the United States does not believe that the
earlier investigation must be considered "evidence" within the meaning of Articles 5.2 and 5.3. First,
the earlier investigation was terminated based upon the withdrawal of the application without any
final determination by the investigating authorities. Second, that earlier investigation, although it may
have involved the same products, involved a different mix of countries. Finally, each bed linen
investigation constituted a separate proceeding for which a separate record was established by the
European Communities. The European Communities was obligated, consistent with the Agreement,
to base its determination on its assessment of the facts of the matter which were before it. To the
extent that it did so, and its decision was based on an unbiased and objective evaluation of the facts
before it, consistent with the standard contained in Article 17.6(i), that decision should not be
overturned.
(b) Findings
6.196 Article 5.3 of the AD Agreement provides:
“The authorities shall examine the accuracy and adequacy of the evidence provided in
the application to determine whether there is sufficient evidence to justify the
initiation of an investigation.”
6.197 It seems clear, and India does not dispute, that in this case, there was evidence submitted to
the EC authorities in the application, and that the application was sufficient under Article 5.2 of the
AD Agreement. It is also clear, simply from the language of the EC notice of initiation (which India
has not challenged), that the European Communities determined that there was sufficient evidence to
justify the initiation. Moreover, the European Communities asserts that it did, in fact, take into

76 Id., para. 7.110.

account the circumstances of the previous bed linen investigation, but that nothing in those
circumstances precluded the conclusion that there was sufficient evidence to justify initiation.
6.198 India claims that the European Communities failed to examine the accuracy and adequacy of
the evidence before initiating the investigation. Thus, we must determine what the parameters are of
the requirement to "examine" the accuracy and adequacy of the evidence, and on what basis can it be
assessed whether the necessary examination was carried out. It is difficult to see a basis on which a
violation of Article 5.3 could be found based purely on the claim that the investigating authorities
failed to examine the accuracy and adequacy of the evidence in the application unless we conclude
that the text of Article 5.3 establishes a specific process requirement, that is, a requirement as to how
the examination of the evidence must be conducted. Further, it is difficult to see a basis on which a
violation of Article 5.3 could be found on the ba sis of India's claim unless we conclude that
Article 5.3 establishes how the fact of and sufficiency of that examination must be made known,
beyond the notice required by Article 12.1, which as noted is not at issue here. We can find no such
requirements in the text of Article 5.3.
77 It is clear that Article 5.3 requires an investigating authority
to examine the evidence, and that the examinati on has a purpose – to determine whether there is
sufficient evidence to justify initiation of the investigation. However, Article 5.3 says nothing
regarding the nature of the examination to be carried out. Nor does it say anything requiring an
explanation of how that examination was carried out.
6.199 The only basis, in our view, on which a panel can determine whether a Member's
investigating authority has examined the accuracy a nd adequacy of the information in the application
is by reference to the determination that examination is in aid of - the determination whether there is
sufficient evidence to justify initiation. That is, if the investigating authority properly determined that
there was sufficient evidence to justify initiation, that determination can only have been made based
on an examination of the accuracy and adequacy of the information in the application, and
consideration of additional evidence (if any) before it.
6.200 However, in this case India has made no claim that the European Communities violated
Article 5.3 of the AD Agreement by in itiating this investigation without sufficient evidence to justify
doing so. Even assuming that India had actually raised such a claim, India has failed to present a
prima facie case that the European Communities erred in concluding that there was sufficient
evidence to justify initiation. India has presented no arguments or evidence to support such a
contention - rather, it has relied on the particular argument that the European Communities failed to
examine the evidence. It is difficult to imagine how a defending Member might demonstrate that it
has "examined" evidence in the face of India's allegations in this dispute, except by reference to the
determination that there was sufficient evidence to justify initiation, which is not at issue before us.
78

77 We note that Article 5.3 was recently considered by the Panel in Mexico - HFCS . In that case, an
issue similar to that before us was addressed, concerning the obligation (if any) on the investigating authority to
make specific determinations about factual issues involved in the initiation, based on the evidence in the
application prior to initiation, and the obligation (if any) to make such determinations known to the parties.
That Panel concluded that Article 5.3 did not itself establish any obligation to make, or to make known, a
determination concerning issues underlying the decision to initiate. Mexico - HFCS , paras. 7.105 and 7.110. In
our view, this lends support to our conclusion that there are no obligations in Article 5.3 regarding how the
examination of the accuracy and adequacy of the evidence is to be undertaken, or explained.
78 Moreover, India appears to be arguing that the European Communities failed to "examine" evidence
outside the scope of the application, when it argues that the European Communities failed to consider the events
concerning the first bed linen investigation. However, Article 5.3 specifically requires the investigating
authority to examine the "accuracy and adequacy of the evidence provide d in the application …". We note
that India appears to misapprehend the decision of the Panel in Guatemala - Cement , which held that the
obligation of the investigating authority under Article 5.3 goes beyond a determination that the requirements of
Article 5.2 are satisfied. In that case, the Panel further found that an investigating authority may, but is not
obligated to , seek out information beyond that in the application, and take such information into account in

In our view, it is clear from the mere fact that the EC investigating authorities initiated the
investigation indicates that they examined the evid ence in the application to determine that it was
sufficient to justify initiation.
6.201 We therefore conclude that the European Communities did not violate Article 5.3 of the
AD Agreement by failing to examine the accuracy and adequacy of the information in the application.
2. Claim under Article 5.4 - failure to properly establish industry support (claim
number 26)
(a) Parties' arguments
6.202 India makes two principal arguments challenging the European Communities' standing
determination, i.e., the determination that the application was supported by producers accounting for
at least 25 per cent of total EC production of the like product. First, India asserts that in assessing the
level of support for the application filed by Eurocoton, the European Communities wrongly
considered the support expressed by producers' associ ations on behalf of their members. In India's
view, while it is possible for an association of producers to file a complaint, it is not permissible,
under Article 5.4 of the AD Agreement, for the support of a producers’ association to be substituted
for support expressed by its members, the producers of the like product. Thus, in India's view, only
the expressions of support by individual producers, and not those of producers' associations, may be
considered in determining whether there is sufficient support for an application under Article 5.4 of
the AD Agreement.
6.203 Second, India argues that the European Communities failed to examine the level of support
prior to initiating the investigation. In this rega rd, India argues that the information in the non-
confidential file, which India submitted as exhibits, and that submitted by the European Communities,
concerning the expressions of support by individual producers of the like product, suggests that those
expressions of support were not received prior to initiation. India relies in this regard on conflicts in
the dates of the letters of support themselves, and the headers and footers imposed by sending and
receiving fax machines, which were not evident on the copies of these documents in the non-
confidential file. India acknowledges that, if the letters of support from individual producers were
accepted as fact (which India maintains they are not), the necessary level of support would have
existed, but maintains that the European Communities could not have made the standing examination
before initiation, an error which can not be corrected after the fact. India asks the Panel to conclude
that the documents submitted on the question of support do not show that the European Communities
examined standing prior to initiation the investigation, and that the removal of the fax headers and the
different "versions" of the letters of support would suggest that the European Communities is trying to
conceal its mistake of not examining standing prior to initiation.
6.204 India also argues that the European Communities could not have determined standing prior to
initiation based on the different numbers of producers which (a) are listed in the application as
supporting the complaint (46), (b) actively expressed support for the application either directly or
thorough producers association and were considered in the standing determination (38), and (c) were
considered as the domestic industry (35). India argues that the decisions defining the 38 and 35
producer groups took place only after initiation, but that the European Communities relied on the

determining whether there is sufficient evidence to justify initiation under Article 5.3 of the AD Agreement. See
Guatemala - Anti-Dumping Investigation Regarding Portland Cement from Mexico , Panel Report, WT/DS60/R,
adopted 25 November 1998, paras. 7.50-7.52. That is very different from the proposition suggested by India
that the obligation to examine the accuracy and adequacy of information in the app lication is rendered "more
acute" because an investigation of the same product from one of the same countries had recently been
terminated. The obligation imposed on investigating authorities under Article 5.3 does not vary by virtue of the
factual circumstances.

production of the 38 producers in justifying its standing determination after the fact. In support of this
contention, India asserts that the volume of production referenced in a note to the file dated 12
September 199679 refers to the production of the 38 producers, and thus can only have been produced
after the initiation, and back-dated.
6.205 The European Communities maintains that it properly made the standing determination
required by Article 5.4 of the Anti-dumping Agreement. The European Communities asserts that
India's argument is premised on the application of an unnecessarily and improperly high standard of
proof regarding the standing determination under Article 5.4 of the AD Agreement. The European
Communities also takes issue with India's view that the support of domestic producers for an
application must be expressed by each producer itself directly to the investigating authorities, and, in
particular, that support expressed by an association of producers does not count. The European
Communities argues that India's position imposes unnecessary and unworkable limitations that are not
intended by the text of the AD Agreement. In the European Communities' view, Article 5.4 of the
AD Agreement does not define to whom support must be expressed by producers, or whether that
expression of support must be made directly to the investigating authorities (although it obviously has
to be brought to their attention), or may be made indirectly. Furthermore, the provision explicitly
envisages that the application may be made on behalf of the domestic industry. Therefore, the
European Communities argues that the phrase “expressed by domestic producers”, considered in its
context, and in the light of the object and purpose of the Agreement, may include expressions of
support by a trade association.
80 The European Communities notes that there have been several
GATT/WTO dispute proceedings in which the anti-dumping measures at issue were initiated at the
instance of trade associations, and this fact was never challenged.81
6.206 In any event, the European Communities asse rts that even without considering the support
expressed by trade associations on behalf of their member-producers, the information on the record
demonstrated that the 25 per cent threshold set in Article 5.4 of the AD Agreement was satisfied. The
European Communities maintains that the record is clear that the individual expressions of support
were received prior to initiation, and that the apparent confusion of dates in the letters themselves and
the fax headers and footers is a result of photocopying. In addition, the European Communities
asserts that the investigating authority had estimated total EC production of bed linen, on the basis of
statistical information available to it from Eurocoton and Eurostat, as between 123,917 and 130,128
tonnes. Production of the 38 producers the European Communities considered as having expressed
support for the application was 45,952 tonnes, or 34 per cent of that total. The European Communities
points out that India bears the burden of proof in this regard, and argues that there is no basis for
finding that the European Communities erred in concluding that the information before the
investigating authority at initiation indicated that producers accounting for a sufficient percentage of
production of the like product supported the application to justify the determination of standing made
by the EC authorities.
6.207 After the second meeting with the parties, the European Communities offered to submit to the
Panel, for its inspection, in India's presence, the originals of the disputed faxes.
6.208 Egypt, as third party, argues that Eurocoton did not have the standing required under
Article 5.4 of the AD Agreement to lodge a complaint. Egypt asserts that the investigation revealed
that those Community producers who supported the complaint were in the minority, and that the
proportion of production represented by the complainant producers is extremely low, 34 percent.

79 Exhibit India-59.
80 In the European Communities' view, footnote 14 to Article 5.4, which allows trade unions to express
support on behalf of their members, also undermines India's arguments.
81 The European Communities cites, in this regard, the Panel Reports on Salmon - Anti-Dumping Duties
and Mexico - HFCS.

Egypt maintains that this percentage is sufficient only if producers accounting for the remaining 66 of
production did not object to the initiation of the investigation. For Egypt, the information on the
record does not contain conclusive proof that the complainants indeed represented 34 per cent of total
EC production of the like product. Furthermore, Egypt maintains that the European Communities was
obliged to inquire of EC producers to ascertain th eir position regarding the application, in order to
verify the claim of the applicant Eurocoton that it represented a "major proportion of the Community
industry" within the meaning of the AD Agreement.
6.209 The United States, as third party, argues that consideration of industry support information
submitted by associations of domestic producers is not inconsistent with Article 5.4 of the
AD Agreement. While the United States agrees with India that Article 5.4 places certain affirmative
obligations upon the authorities to evaluate the evidence concerning standing prior to initiating an
anti-dumping investigation and establishes numeric standards which the authorities must find to have
been met prior to initiation, in the United States' view, Article 5.4 does not address from whom the
authorities may receive this evidence. Rather, the evidence which may be considered by the
authorities in making any determinations and th e parties entitled to provide such evidence are
discussed in Article 6 of the Agreement. The United States points out that Article 6.11(iii) of the
AD Agreement makes clear that trade and business associations qualify as interested parties, provided
that a majority of their members produce the like product in the territory of the importing Member.
Further, the AD Agreement provides that these associations shall have the full opportunity to defend
their interests. The United States notes that the AD Agreement does, however, provide a limited
counter-balance to trade and business associations representing their members. Article 6.6 requires
the authorities to satisfy themselves as to the a ccuracy of the information provided by interested
parties upon which their findings are based. Nevertheless, if the authorities have, in fact, confirmed
the accuracy of the representations, contrary to th e position of India, the AD Agreement, in the view
of the United States, does not prohibit reliance on the representations of the associations to determine
the necessary level of support. The United States contends that the European Communities'
interpretation of the Agreement is permissible under Article 17.6(ii) of the AD Agreement. The
United States, however, takes no position as to whether the European Communities' determination of
industry support, as a factual matter, was consistent with the standards required by Articles 5.4 and 6
of the AD Agreement.
(b) Findings
6.210 Article 5.4 of the AD Agreement provides:
"5.4 An investigation shall not be initiated pursuant to paragraph 1 unless the
authorities have determined, on the basis of an examination of the degree of support for,
or opposition to, the application expressed
13 by domestic producers of the like product,
that the application has been made by or on behalf of the domestic industry. 14 The
application shall be considered to have been made "by or on
behalf of the domestic industry" if it is supported by those domestic producers whose
collective output constitutes more than 50 per cent of the total production of the like
product produced by that portion of the domestic industry expressing either support for
or opposition to the application. However, no investigation shall be initiated when
domestic producers expressly supporting the application account for less than 25 per
cent of total production of the like product produced by the domestic industry.
Communities' determination in this regard, both as a legal and as a factual matter, that is challenged
by India.
6.213 The issues raised by the Indian claim in this regard are similar to those discussed above
regarding Article 5.3 with respect to the lack of an express process requirement in Article 5.4 and the
question of whether and how the determination of standing must be made known to the parties. As
with Article 5.3, Article 5.4 of the AD Agreement requires that the investigating authorities make
certain determinations before an investigation may be initiated, and establishes the substance of the
determinations to be made, including that the application is supported by producers accounting for at
least 25 per cent of domestic production, but does not set out any specific requirements as to the
process by which that determination must be made . In our view, whether the necessary examination
of the degree of support for the application was carried out prior to the initiation can only be assessed
by reference to the determination that was actually made, and the evidence before the authority at the
time it made the determination. In this case, the EC investigating authority clearly concluded that the
application was supported by producers accounting for more than 25 per cent of total EC production
of bed linen, and we have before us documents which it asserts contain the relevant evidence on
which it relied. We therefore turn first to the facts of this matter.
6.214 We have carefully examined the documents submitted by both parties.
83 These documents are
photocopies, and in some cases photocopies of photocopies, of faxes of (1) letters of support sent by
individual producers of bed linen to the investigating authority indicating support for the application,
(2) letters of support sent by national associations of producers of bed linen to the investigating
authority expressing support on behalf of individual producers listed in annexes, and (3) letters of
support from national associations of producers of bed linen sent to the investigating authority
expressing support on behalf of their members. It appears that these letters of support were first sent,
by fax, to Eurocoton, which then sent them on, again by fax, to the EC investigating authority. All of
the letters themselves are dated prior to the initiation of the investigation by the European
Communities on 13 September 1996. Based on the letters themselves, individual producers of bed
linen individually communicating support for the application directly to the investigating authorities
accounted for 26.7 per cent of total EC production of bed linen. This is more than the minimum
necessary under Article 5.4 of the AD Agreement to find sufficient support for the application.

82 Consequently, we express no views on Egypt's arguments as third party, which seem to address this
aspect of the Article 5.4 determination in asserting that the European Communities was obliged to inquire of
producers concerning their support or opposition for the a pplication, and that the European Communities erred
in finding sufficient support without finding that producers who did not support the application did not object to
it.
83 These documents were submitted in various iterations as Exhibits India-59, India-86, India-87, EC-4
and EC-5.

6.215 India asks us to conclude that these letters were not, in fact, received by the EC investigating
authority prior to initiation, that the EC investigatin g authority did not, in fact, examine them prior to
initiation, and that the European Communities has tried to cover this fundamental error by
manufacturing evidence post hoc and misrepresenting the facts before us. This we decline to do. We
recognise that the dates in the fax headers and footers in the photocopied documents submitted to us
are inconsistent with one another and with the dates of the letters themselves. However, all these
dates are prior to the relevant date, that of initiation on 13 September 1996. We note that the
European Communities has offered to submit the originals of the faxes for our (and India's) inspection
in this dispute, should we deem it necessary to resolve this issue.
6.216 As noted above, India bears the burden of coming forward with sufficient evidence to make a
prima facie case that the European Communities failed to act consistently with its obligations under
Article 5.4 to determine the necessary level of support prior to initiation. We presume that Members
act in good faith in the context of dispute settlement proceedings, and are unwilling to assume
possible malfeasance in the absence of evidence to that effect. We consider that the "doubts" which
India has as to the European Communities' actions in this regard do not establish the necessary prima
facie case in this context – the "evidence" of the fax headers relied on by India does not, in our view,
constitute evidence of fraud sufficient to overcome the presumption of good faith. Moreover, we
believe it is more probable that these inconsistencies in the photocopies are attributable to the
photocopying itself, rather than to the perpetration of a massive fabrication of fax headers and footers
by the EC investigating authority to hide a failu re to make a determination of standing prior to
initiation. We therefore do not consider it necessary to examine the originals of the documents in
question.
6.217 We conclude that, as a matter of fact, the EC investigating authority had before it expressions
of support from 38 producers of bed linen prior to initiation.
84 Some of those expressions of support
were received from the individual producers directly, some were received from national producers
associations. As noted above, counting only those submitted by individual producers directly to the
EC investigating authority, that authority had before it expressions of support from producers
accounting for more than the necessary 25 per cent of total EC production of bed linen. Having
concluded that the European Communities' determination of standing does not violate Article 5.4 of
the AD Agreement on the basis of the express support of individual producers, we do not consider it
necessary to determine whether the European Communities could properly count the support of
associations of producers.
6.218 We therefore conclude that the European Communities did not violate Article 5.4 of the
AD Agreement by failing to make a proper determination of standing prior to initiation of the anti-
dumping investigation at issue.

84 India makes numerous references to the differences between the number of producers listed in the
application, the number of producers expressing support, and the number of producers eventually found to
comprise the domestic industry. While the import of its arguments in this regard is not entirely clear, we do not,
in any event, consider these differences to have any significance for the issue before us, whether the producers
expressing support accounted for the necessary minimum 25 pe r cent of total EC production of bed linen. It is
in our view understandable that some companies listed in the application as producers of the like product may
not subsequently specifically express support for the application. It is also understandable, in our view, that
following initiation, the actual definition of the domestic industry may change, as a result of exclusions, such
that the set of producers in the industry is not, in fact, the same as that considered in evaluating support.
However, in this latter respect, we note that the question is not before us, as India has made no claim suggesting
that standing somehow was lost or evaporated after initiation.

F. CLAIM UNDER ARTICLE 15 - FAILURE TO EXPLORE POSSIBILITIES OF
CONSTRUCTIVE REMEDIES (CLAIM NUMBER 29)
1. Parties' arguments
6.219 India asserts that the European Communities acted inconsistently with Article 15 of the
AD Agreement by not exploring possibilities of a constructive remedy prior to the imposition of anti-
dumping duties (provisional or final) and by not reacting to detailed arguments from Indian exporters
pertaining to Article 15. India maintains that, despite repeated and detailed arguments by the Indian
parties stressing the importance of the bed linen and textile industries to India's economy, the
European Communities failed to even mention India’s status as a developing country, let alone
consider or comment on possibilities of constructive remedies. India also pointed out that Texprocil,
the Cotton Textiles Export Promotion Council of I ndia, acting on behalf of Indian producers and
exporters, had communicated to the European Communities its desire, and that of its members, to
offer price undertakings. India charges that this offer was rejected by the European Communities
without substantive consideration.
6.220 India asserts that the two sentences of Article 15 are separate and distinct, and that the first
sentence does not impose any specific legal obligation, but simply expresses a preference that the
special situation of developing countries should be an element to be weighted when making that
evaluation. The second sentence, however, imposes a specific legal obligation to "explore
possibilities". In India's view, this requires a determination (or assessment) whether the essential
interests of the developing country concerned may be involved, to be made after a determination
(preliminary or final) of dumping and injury caused thereby, but before the application of anti-
dumping duties, including the imposition of provisional measures. Then (still before provisional
measures are imposed) the investigating authorities are required to explore possibilities of
constructive remedies “provided for by this Agreement”. India suggests that the reference to remedies
provided for by the AD Agreement indicates that such remedies may consist of, among others, the
non-imposition of anti-dumping measures, or an undertaking. India rejects the notion that any
procedural mechanisms, such as simplified questionnaires or extensions of time, can ever satisfy the
requirements of the second sentence of Article 15.
6.221 The European Communities agrees that the second sentence of Article 15 imposes a legal
obligation on Members. The European Communities further does not dispute that bedlinen producers
are part of the textile industry, that this is an “essential interest” of India, and that anti-dumping duties
would “affect” this interest. The European Communities asserts that its practice, when developing
countries are involved in an anti-dumping investig ation, is to give special consideration to the
possibility of accepting undertakings from their exporters. However, the European Communities
maintains that the difficulty that frequently aris es in relation to undertakings, that of effective
supervision, can also apply in the case of developing countries. In this case, the European
Communities argues, the reason no undertaking was accepted was that none had been offered by the
exporters within the time limits set by the EC Re gulation. Under EC procedures, undertakings may
be offered during the 10 day period following the disclosure of the confidential final dumping margin
calculations for investigated producers. In this case, such disclosure was made on 3 October 1997.
The European Communities asserts that these time limits are a reflection of those imposed by
Article 5.10 of the AD Agreement, and the general obligation to manage investigations expeditiously
(Article 6.14 of the AD Agreement).
6.222 The European Communities pointed out that the offer from Texprocil referred to by India was
made on the last day, under the normal EC schedule, for acceptance of offers of undertakings, and
was not in fact an offer of an undertaking by any producer, but merely an expression by the producers
association Texprocil of intent to offer an under taking. The European Communities asserts that its
authorities waited nine days, but no further details concerning such offers was made, as Texprocil's

letter had indicated would be the case, and thus the European Communities replied that it would no
longer be able consider any offers of undertakings, as it was necessary to proceed to conclude the
investigation.
6.223 Egypt, as third party, argues that Article 15 of the AD Agreement obligated the European
Communities to explore the possibilities of constructive remedies before applying anti-dumping
duties, and that the European Communities failed to comply with this provision, as it did not suggest
to the Egyptian exporters the possibility of, for instance, price undertakings. Egypt is of the view that
Article 15 imposes a legal obligation on developed countries any time they contemplate imposing
anti-dumping duties, and it is therefore up to th ose developed countries then to suggest to the
developing countries involved whether or not they would be interested in offering price undertakings.
6.224 In response to a question from the Panel, Japan asserted that the requirements of Article 15 do
not go beyond those of Article 8.3 of the AD Agreement, that the "constructive remedies under this
Agreement" referred to in Article 15 would include price undertakings, and that Article 15 imposes no
specific obligations on developed country Members.
6.225 The United States, as third party, submits that Article 15 of the AD Agreement, while it
provides procedural safeguards, does not require any particular substantive outcome, or any specific
accommodations to be made on the basis of developing country status. In the United States' view, the
second sentence of Article 15 does not impose anything other than a procedural obligation to
"explore" possibilities of constructive remedies. The word "explore" cannot fairly be read to imply an
obligation to reach a particular substantive outcome; it merely requires consideration of these
possibilities. The United States cites to the Tokyo Round Anti-Dumping Code Panel Report on
Cotton Yarn from Brazil as support for this interpretation. The question then, according to the United
States, is whether the European Communities explored the possibility of entering into such
constructive remedies, which is a factual determination. The United States takes no position on
whether the European Communities' actions were sufficient under Article 15. With regard to the
timing of such exploration under Article 15, the United States asserts that the reference in Article 15
to "applying anti-dumping duties" relates to the actual imposition and collection of anti-dumping
duties pursuant to Article 9 of the Agreement, which did not occur until the European Communities
made its final determination of dumping and injury. The imposition of provisional measures, which
may be provisional anti-dumping duties, is a separate and earlier step which is distinct from the
application of anti-dumping duties themselves. Furthermore, if the "possibilities" to be explored
include price undertakings, the United States maintains that this exploration can only occur after any
provisional determination by the investigating authorities, in light of the language of Article 8.2 of the
AD Agreement. In response to the Panel's questions, the United States observed that, in its view, the
Article 15 and Article 8.3 obligations were compleme ntary, and that the Article 15 obligation did not
extend beyond the Article 8.3 obligation. In addition, the United States suggested that a developing
country might be obligated to identify those instances in which its essential interests would be
affected, so that the developed country Member considering the imposition of anti-dumping duties
would know to consider possible constructive remedies before imposing duties.
2. Findings
6.226 Article 15 provides:
“It is recognized that special regard must be given by developed country Members to
the special situation of developing country Members when considering the
application of anti-dumping measures under this Agreement. Possibilities of
constructive remedies provided for by this Agreement shall be explored before
applying anti-dumping duties where they would affect the essential interests of
developing country Members.”

6.227 We turn first to consideration of the text of the second sentence of Article 15, which is the
basis of India's claim. 85 We note that there is no dispute in this case that the application of anti-
dumping duties would affect the essential interests of a developing country Member, India. However,
the parties disagree on what constitutes "constructive remedies provided for by this Agreement",
whether that exploration must take place before the application of provisional measures, or only
before the application of final anti-dumping measures, and what is required by the obligation to
"explore" the "possibilities" of such remedies.
6.228 "Remedy" is defined as, inter alia , "a means of counteracting or removing something
undesirable; redress, relief".86 "Constructive" is defined as "tending to construct or build up something
non-material; contributing helpfully, not destructive". 87 The term "constructive remedies" might
consequently be understood as helpful means of counteracting the effect of injurious dumping.
However, the term as used in Article 15 is limite d to constructive remedies "provided for under this
Agreement". The European Communities states that, in what it refers to as the "spirit" of Article 15, it
undertook several procedural steps which it considered helpful to Indian exporters, but it does not
consider that these procedural steps constitute "constructive remedies" per se. Rather, the European
Communities seems to view price undertakings as the constructive remedies provided for in
Article 15. India has declined to offer concrete suggestions as to other possible "constructive
remedies under this Agreement" that might be available under Article 15.
88 In India's view, the
obligation is on the European Communities to find and propose such remedies to developing countries
prior to imposition of anti-dumping measures. In this regard, India having asserted that the European
Communities failed to engage in some action which it was obligated to undertake, we view it as part
of India's burden to present a prima facie case of violation to indicate what actions it believes should
have been undertaken. India did suggest that a "constructive remedy" might be a decision not to
impose anti-dumping duties at all. We cannot agree. In our view, Article 15 refers to "remedies" in
respect of injurious dumping. A decision not to impose an anti-dumping duty, while clearly within
the authority of a Member under Article 9.1 of the AD Agreement 89, is not a "remedy" of any type,
constructive or otherwise.
6.229 We cannot come to any conclusions as to what might be encompassed by the phrase
"constructive remedies provided for under this Agreement" - that is, means of counteracting the
effects of injurious dumping - except by reference to the Agreement itself. The Agreement provides
for the imposition of anti-dumping duties, either in the full amount of the dumping margin, or
desirably, in a lesser amount, or the acceptance of price undertakings, as a means of resolving an anti-
dumping investigation resulting in a final affirmative determination of dumping, injury, and causal
link. Thus, in our view, imposition of a less er duty, or a price undertaking would constitute
"constructive remedies" within the meaning of Article 15. We come to no conclusions as to what
other actions might in addition be considered to constitute "constructive remedies" under Article 15,
as none have been proposed to us.90

85 The parties are in agreement that the first sentence of Article 15 imposes no legal obligations on
developed country Members. As there is no claim in this regard, we express no views on this matter.
86 The New Shorter Oxford English Dictionary, Clarendon Press, Oxford, 1993.
87 Id.
88 See, e.g., Response of India to Question 13 from the Panel following the first meeting, Annex 1-6,
and Oral Statement of India at the first meeting of the Panel, Annex 1-4, paras. 87-91.
89 Article 9.1 provides, in pertinent part, that "It is desirable that the imposition [of an anti-dumping
duty] be permissive…".
90 It is clear that the European Communities did consider the imposition of a lesser duty, although it
concluded that such a duty would not be appropriate in this case since the injury margin exceeded the dumping
margin for each company (paragraph 131, Provisional Regulation, Exhibit India-8). India has made no claim or
arguments in this regard.

6.230 With regard to the timing of the obligation in the second sentence of Article 15, India argues
that the exploration of possibilities of constructive remedies must take place prior to the imposition of
any provisional measures, as well as prior to the application of any final measures, while the
European Communities argues that the obligation only arises prior to the application of any final anti-
dumping duties.
6.231 In this regard, we note Article 1 of the AD Agreement, which provides that:
"An anti-dumping measure shall be applied only under the circumstances provided for
in Article VI of GATT 1994 and pursuant to investigations initiated and conducted in
accordance with the provisions of this Agreement." (footnote omitted).
In our view, this implies that the phrase "before applying anti-dumping duties" in Article 15 means
before the application of definitive anti-dumping measures. Looking at the whole of the
AD Agreement, we consider that the term "provisi onal measures" is consistently used where the
intention is to refer to measures imposed before the end of the investigative process. Indeed, in our
view, the AD Agreement clearly distinguishes between provisional measures and anti-dumping duties,
which term consistently refers to definitive measures. We find no instance in the Agreement where
the term "anti-dumping duties" is used in a context in which it can reasonably be understood to refer
to provisional measures. Thus, in our view, the ordinary meaning of the term "anti-dumping duties"
in Article 15 is clear – it refers to the imposition of definitive anti-dumping measures at the end of the
investigative process.
6.232 Consideration of practical elements reinforces this conclusion. Provisional measures are
based on a preliminary determination of dumping, injury, and causal link. While it is certainly
permitted, and may be in a foreign producer's or exporter's interest to offer or enter into an
undertaking at this stage of the proceeding, we do not consider that Article 15 can be understood to
require developed country Members to explore the possibilities of price undertakings prior to
imposition of provisional measures. In addition to the fact that such exploration may result in delay
or distraction from the continuation of the investigation, in some cases, a price undertaking based on
the preliminary determination of dumping could be subject to revision in light of the final
determination of dumping. However, unlike a provisional duty or security, which must, under
Article 10.3, be refunded or released in the even t the final dumping margin is lower than the
preliminarily calculated margin (as is frequently the case), a "provisional" price undertaking could not
be retroactively revised. We do not consider that an interpretation of Article 15 which could, in some
cases, have negative effects on the very parties it is intended to benefit, producers and exporters in
developing countries, is required.
6.233 We consider next the term "explore", which is defined, inter alia, as "investigate; examine
scrutinise".
91 In our view, while the exact parameters of the term are difficult to establish, the concept
of "explore" clearly does not imply any particular outcome. We recall that Article 15 does not require
that "constructive remedies" must be explored, but rather that the "possibilities" of such remedies
must be explored, which further suggests that the exploration may conclude that no possibilities exist,
or that no constructive remedies are possible, in the particular circumstances of a given case. Taken
in its context, however, and in light of the object and purpose of Article 15, we do consider that the
"exploration" of possibilities must be actively undertaken by the developed country authorities with a
willingness to reach a positive outcome. Thus, in our view, Article 15 imposes no obligation to
actually provide or accept any constructive remedy that may be identified and/or offered. 92 It does,

91 The New Shorter Oxford English Dictionary, Clarendon Press, Oxford, 1993.
92 We note that our interpretation of Article 15 in this regard is consistent with that of a GATT Panel
which considered the predecessor of that provision, Article 13 of the Tokyo Round Anti-Dumping Code, which
provision is substantively identical to present Article 15. That Panel found:

however, impose an obligation to actively consider, with an open mind, the possibility of such a
remedy prior to imposition of an anti-dumping measure that would affect the essential interests of a
developing country.
6.234 Based on the foregoing understanding of Article 15 of the AD Agreement, we consider the
issue before us in this case to be whether the EC authorities actively considered with an open mind the
possibilities of price undertakings with Indian exporters prior to the imposition of final anti-dumping
measures in the bed linen investigation.
6.235 India stresses that the Indian exporters and Texprocil made numerous arguments and
submissions concerning the developing country stat us of India, and the importance of the bed linen
proceeding for Indian interests. India appears to be dissatisfied as a general matter with the European
Communities' failure to address these arguments in the various public notices, but makes no specific
claims in this regard.93 We make no specific findings in this regard, as a consequence. However, we
do note in general that the provisions of Article 12, which we address below, are quite specific as to
the matters to be addressed in public notices. Beyond those public notices, we are not aware of, and
India has not presented any arguments indicating, a general obligation on the investigating authorities
to "explain" any aspect of their analysis or determinations. Clearly, when, in dispute settlement, a
prima facie case is made that a Member has failed to comply with its obligations under the
AD Agreement, that Member must present evidence and explanations as to how it considers that it did
comply with the relevant obligation. This does not, however, impose any general obligation to
explain various elements of the analysis or decision during the course of the proceedings, or in dispute
settlement, beyond the explanations required by the Agreement itself, or in order to rebut a claim of
inconsistent action.
6.236 According to India, counsel for Texprocil, a nd Texprocil itself, sought during the course of
the investigation to persuade Indian exporters to propose undertakings, but these attempts were
unsuccessful until very late in the proceeding. During the month of October 1997, there were
telephone communications between the EC authorities and counsel for the Indian producers'
association, Texprocil. According to the Europ ean Communities, during these conversations, the EC
authorities:
"emphasised the difficulty of drafting satisfactory undertakings because the product
was supplied in consignments according to individual specifications of purchasers,
involving hundreds of suppliers. They were advised to discuss the possibilities with
Texprocil, the exporters' association. This willingness to contemplate undertakings
by a trade association is not an automatic feature of the European Communities'
practice in this respect".94
Following the final disclosure of the anti-dumping calculations, a series of faxes between counsel for
Texprocil and Texprocil and Indian government authorities indicate that counsel explained the nature

"The Panel noted that if the application of anti-dumping measures "would affect the essential
interests of developing countries", the obligation that then arose was to explore the "possibilities"
of "constructive remedies". It was clear from the words "[p]ossibilities" and "explored"
that the investigating authorities were not required to adopt constructive remedies merely
because they were proposed." EC - Imposition of Anti-Dumping Duties on Imports of Cotton
Yarn from Brazil , Panel Report, ADP/137, adopted 30 October 1995, para. 584 (emphasis
added).
93 India's specific Article 12 claim with respect to the European Communities' determination in
connection with Article 15 is addressed below.
94 Response of the European Communities to Question 16 from the Panel following the second
meeting, Annex 2-8. India has not disputed this statement by the European Communities.

of undertakings and the relevant deadline for offering undertakings, in this case 13 October 1997. 95
Following further communications between the Indian parties and counsel, 96 on 13 October 1997,
counsel for Texprocil sent a telefax to the EC in vestigating authorities, communicating "the desire of
. . . Texprocil and its Members to offer price undertakings" in the bed linen investigation. 97 The letter
continued to note that Texprocil was "working on a detailed formula concerning the practical aspects
of this offer", and indicated that the proposed formula implementing the practical details of the offer
would be relayed "as soon as this has been worked out in detail". The letter expressed the hope that
the offer "can be given due consideration especially in light of Article 15 of the WTO Agreement".
98
There were no further communications from the Indian parties to the EC authorities in this regard. On
14 October 1997, counsel for Texprocil informed the Texprocil representatives that the letter had been
submitted, asked that the details of the formula for undertakings be sent at Texprocil's earliest
convenience, and noting that the EC authorities had indicated that "Bed Linen was "too complicated a
product for undertakings"".
99
6.237 There was no response from the European Communities until a letter to counsel for Texprocil
dated 22 October 1997. That response noted that the letter from counsel for Texprocil had reached
the European Communities the last day of the period for offering undertakings, but that "no detailed
offer of price undertakings has been made yet". The EC response noted that the investigation was to
be concluded within 15 months of initiation under EC law (in this case, by 13 December 1997), and
continued to state that the EC authorities would "not be in a position to consider any offer of
undertakings which your client may be considering submitting at this stage."
100
6.238 It is these facts which we must evaluate to determine whether the European Communities
gave adequate consideration to, that is "explored" the possibility of entering into an undertaking with
the Indian producers. As noted above, while the obligation is on the European Communities to
explore possibilities, we do not consider that this entails acceptance of any particular offer that might
be made. In this case, it is clear to us that no formal proposal of a price undertaking was made.
However, in light of the expressed desire of the Indian producers to offer undertakings, we consider
that the European Communities should have made some response upon receipt of the letter from
counsel for Texprocil dated 13 October 1997. The rejection expressed in the European Communities'
letter of 22 October 1997 does not, in our view, indicate that the possibility of an undertaking was
explored, but rather that the possibility was rejected out of hand. We cannot conclude, based on these
facts, that the European Communities explored the possibilities of constructive remedies prior to
imposing anti-dumping duties. In our view, the European Communities simply did nothing different
in this case, than it would have done in any other anti-dumping proceeding – there was no notice or
information concerning the opportunities for exploration of possibilities of constructive remedies
given to the Indian parties, nothing that would demonstrate that the European Communities actively
undertook the obligation imposed by Article 15 of the AD Agreement. Pure passivity is not
sufficient, in our view, to satisfy the obligation to "explore" possibilities of constructive remedies,
particularly where the possibility of an undertaking has already been broached by the developing
country concerned. Thus, we consider that the failure of the European Communities to respond in
some fashion other than bare rejection, particularly once the desire to offer undertakings had been
communicated to it , constituted a failure to "explore possibilities of constructive remedies", and
therefore conclude that the European Communities failed to act consistently with its obligations under
Article 15 of the AD Agreement.

95 Exhibit India-89.
96 Exhibits India-90 and -91.
97 Exhibit India-72.
98 Id.
99 Exhibit India-93.
100 Exhibit India-72.

G. CLAIMS UNDER ARTICLE 12.2.2 (CLAIMS NUMBERS 3, 6, 10, 13, 18, 22, 25, 28,
AND 31)
1. Parties' arguments
6.239 India argues, with respect to almost all of its substantive claims of violation of the
AD Agreement, that the European Communities failed adequately to explain its decisions relating to
those matters in the Definitive Regulation. India asserts that the Definitive Regulation does not set
forth the European Communities' reasoning as to why it applied relevant provisions of its domestic
legislation and the AD Agreement in the way it did, which in India's view is inconsistent with the
requirements of the AD Agreement. India also argues that the European Communities failed
adequately to explain its choices of methodology, analysis, and conclusions on questions of fact, and
failed adequately to explain why it rejected argu ments by the Indian exporters. India's claims under
Article 12.2.2 of the AD Agreement correspond to its substantive claims as follows:
• Claim 3 – Insufficient notice with respect to Article 2.2.2 (Claim 1)
• Claim 6 – Insufficient notice with respect Article 2.2 (Claim 4)
• Claim 10 – Insufficient notice with respect Article 3.1 (Claim 8)
• Claim 13 – Insufficient notice with respect Article 3.4 (Claim 11)
• Claim 18 – Insufficient notice with respect Article 6.10 and 6.11 (Claim 16)
• Claim 22 – Insufficient notice with respect Article 3.5 (Claim 20)
• Claim 25 – Insufficient notice with respect Article 5.3 (Claim 23)
• Claim 28 – Insufficient notice with respect Article 5.4 (Claim 26)
• Claim 31 – Insufficient notice with respect Article 15 (Claim 29)
6.240 India sets out four bases for its claim 3, asserting insufficient notice of the European
Communities' decisions and analysis under Article 2.2.2. First, India argues that the European
Communities failed to provide a sufficient explanation of why it applied Article 2.2.2(ii) instead of
Article 2.2.2(i). Second, India asserts that the European Communities failed to provide a sufficient
explanation as to why it applied an option for which the requirements were not fulfilled. Third, India
posits that the European Communities failed to explain why it considered only sales in the ordinary
course of trade in deriving an amount for profit under Article 2.2.2(ii). Finally, India maintains that
the European Communities failed to explain why it considered the profit rate it established to be
reasonable under Articles 2.2.2(iii) and 2.2.
6.241 India also argues that, to the extent the European Communities may argue that it did not
commit certain of the substantive violations alleged, and in particular to the extent the European
Communities may argue that it did consider all the relevant economic factors under Article 3.4
(India's claim 13), the European Communities' notice is inconsistent with the requirements of
Article 12.2.2. In India's view, any such consideration cannot be determined from that notice, which
is thus insufficient. India argues that, apart from access to the non-confidential file of the
investigation, the notice is the only basis for the Indian exporters to understand the facts on which the
determination was based, and know the determination that was made, and thus must be complete in
order to further the interest of transparency which underlies Article 12.2 as a whole.

6.242 Finally, India argues, based on the text of Article 12.2.2, that the notice of final determination
must contain a detailed explanation of decisions taken and information considered in the context of
initiation. This argument underlies India's cl aims25 and 28, which assert that the European
Communities' Definitive Regulation is inconsistent with Article 12.2.2 because it does not explain the
European Communities' examination of the information in the application under Article 5.3, and does
not address the information and arguments made by the Indian exporters concerning the standing of
the applicant under Article 5.4.
6.243 The European Communities posits, in general, that not every aspect of a final determination
must be explained in the notice thereof. Rather, the European Communities asserts that only certain
matters need to be set out in the final determination – those that are relevant to the final determination
itself, and those that are not known to the parties without reference to the final determination, because,
for example, they were discussed or addressed during earlier stages of the proceedings, or are well-
known elements of the practice of the investigating authorities. The European Communities
maintains that its Definitive Regulation (taken together with the Provisional Regulation where
appropriate) adequately explains its final determination, the legal analysis and facts relied upon and
the reasoning underlying its conclusions. In addition, the European Communities argues that to the
extent India's arguments under Article 12.2.2 assert that the European Communities failed to explain
why it acted in a manner that India considers incons istent with the AD Agreement, there was nothing
to explain, since the European Communities maintains that it committed no substantive violations.
6.244 Turning to the specific claims, the European Communities argues with regard to India's claim
3 that since the AD Agreement does not obligate a Member to explain its choice between the options
listed in Article 2.2.2, there can be no obligation to provide notice of such an explanation. With
regard to India's claim 6, the European Communities asserts that paragraphs 18 and 19 of the
Definitive Regulation adequately address various arguments raised by the exporters concerning the
determination of the profit rate for the constructed normal value. Moreover, the European
Communities maintains that since it did not act inconsistently with the AD Agreement in the
application of Article 2.2.2, no further explanation or justification of the European Communities'
decisions is necessary. Finally, the European Communities asserts that Article 12.2.2 requires notice
of decisions taken by the investigating authorities, while the European Communities' practice under
Article 2.2.2 is a matter of policy, not a case-by-case decision. Similarly, with respect to India's
claim 10, the European Communities argues that the European Communities' methodology in injury
analysis is standard practice and, in the absence of any argument on the point by one of the interested
parties to the investigation, the European Communities was not obligated to publish details of the
methodology applied.
6.245 With respect to India's claim 13, the Europ ean Communities maintains that paragraphs 40
and 41 of the Definitive Regulation set forth a detailed account of the factors considered in the
examination of injury, including those listed in Article 3.4 that were relevant to the determination. As
regards the alleged failure to address “relevant arguments or claims made by the exporters”, the
European Communities maintains that the arguments of the exporters were not raised in the final
phase of the investigation, but were directed at the original Complaint, and as such were not
arguments relevant to the final decisions made by the EC authorities. Consequently, the Article 12.2.2
requirement to give reasons for their acceptance or rejection did not apply.
6.246 With respect to India's claim 22, the Europ ean Communities argues that the Definitive
Regulation makes clear that employment was not a factor on which the European Communities relied
in concluding that the domestic industry was suffering injury. Consequently, the exporters’ argument
on this point was not relevant, and therefore the European Communities was not required to address
it. Moreover, the European Communities asserts that it did not regard imports prior to the
investigation period as constituting “dumped imports”. Consequently, it had no obligation to explain
such a conclusion, which it did not reach, in the Definitive Regulation.

6.247 With respect to India's claims 25 and 28, the European Communities disputes India's
interpretation of Article 12.2.2. The European Communities asserts that India’s approach fails to take
proper account of the structure of the Article. In the European Communities' view, Article 12 is
straightforward – initiation issues are dealt with by paragraph 1, while paragraph 2 covers the
measures adopted during and after the investigation (that is, provisional measures, definitive measures
and undertakings). India's claim 25 asserts failure to explain matters arising under Article 5.3,
concerning alleged failure to examine the eviden ce prior to initiation. The European Communities
maintains that the Definitive Regulation addresses the issues of dumping and causation of injury at the
end of the investigation and the imposition of final measures, as required by Article 12.2.2. In the
European Communities' view, arguments regarding the initiation of the investigation and the
determination of standing were not relevant to the final determination and definitive measure and,
therefore, there was no obligation to include any discussion of them in the Definitive Regulation. The
European Communities also asserts that the investigating authorities are under no obligation to review
an initiation decision with benefit of hindsight and, thus, arguments directed to the initiation decision
later in the investigation could never be relevant arguments that must be addressed in the notice of
final determination. The European Communities makes similar arguments concerning the obligation
to address only relevant arguments with respect to India's claim 28, asserting failure to address the
determination of standing. The European Communities asserts that the arguments of the exporters
which are allegedly not addressed in the Definitive Regulation were not relevant to the final
determination described in that notice.
6.248 Finally, with respect to India's claim 31, the European Communities argues that its practice
with respect to the obligations set forth in Arti cle 15 is well-known to exporters, and therefore no
further explanation was required. Moreover, the European Communities points out that, as India
acknowledges, the matter was discussed with the exporters.
6.249 Egypt, as third party, argues that, even if the European Communities carried out the
examination required by Article 5.3 of the Agreement, it failed to disclose this fact to the interested
parties and, therefore, acted in breach of Articles 12.1 (an Article of which India has not alleged a
violation) and 12.2 of the AD Agreement.
2. Findings
6.250 We will consider in turn each of India's claims under Article 12.2.2. Before doing so, we
recall our conclusion that India has withdrawn its claims under Article 12.2.1 regarding the
Provisional Regulation (India's claims 2, 5, 9, 12, 17, 21, 24, 27, and 30). Therefore, we have made
no rulings concerning these claims. In addition, we note that India's claim 18 relates to its substantive
claim 16, alleging a violation of Articles 6.10 and 6.11. We recall our conclusion that India's claims
under Article 6, claims 14 and 16, are not within our terms of reference. In these circumstances, we
consider it unnecessary and inappropriate to address India's claim 18.
6.251 Article 12 governs the contents of public notices issued in the course of anti-dumping
investigations. It provides, in pertinent part:
"12.2. Public notice shall be given of any preliminary or final determination, whether
affirmative or negative, of any decision to accept an undertaking pursuant to
Article 8, of the termination of such an undertaking, and of the termination of a
definitive anti-dumping duty. Each such notice shall set forth, or otherwise make
available through a separate report, in sufficient detail the findings and conclusions
reached on all issues of fact and law considered material by the investigating
authorities. All such notices and reports shall be forwarded to the Member or
Members the products of which are subject to such determination or undertaking and
to other interested parties known to have an interest therein.

12.2.1 A public notice of the imposition of provisional measures shall set
forth, or otherwise make available through a separate report, sufficiently
detailed explanations for the preliminary determinations on dumping and
injury and shall refer to the matters of fact and law which have led to
arguments being accepted or rejected. Such a notice or report shall, due
regard being paid to the requirement for the protection of confidential
information, contain in particular:
(i) the names of the suppliers, or when this is impracticable, the
supplying countries involved;
(ii) a description of the product which is sufficient for customs purposes;
(iii) the margins of dumping established 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;
(iv) considerations relevant to the injury determination as set out in
Article 3;
(v) the main reasons leading to the determination.
12.2.2 A public notice of conclusion or suspension of an investigation in the
case of an affirmative determination providing for the imposition of a
definitive duty or the acceptance of a price undertaking shall contain, or
otherwise make available through a separate report, all relevant information
on the matters of fact and law and reasons which have led to the imposition
of final measures or the acceptance of a price undertaking, due regard being
paid to the requirement for the protection of confidential information. In
particular, the notice or report shall contain the information described in
subparagraph 2.1, as well as the reasons for the acceptance or rejection of
relevant arguments or claims made by the exporters and importers, and the
basis for any decision made under subparagraph 10.2 of Article 6."
Claims 3 and 6
6.252 We consider first India's claims 3 and 6, which assert that the Definitive Regulation failed to
give sufficient notice of the European Communities' substantive determinations and analysis in
applying Article 2.2.2, which India alleges, in its claims 1 and 4, were inconsistent with Articles 2.2.2
and 2.2. We recall our conclusion that the order in which the three options are set out in Article 2.2.2
is without any hierarchical significance and that Members have complete discretion as to which of the
three methodologies they use in their investigations.
101 We found, therefore, that the European
Communities was not required by the AD Agreement to resort to option (i) before it could resort to
option (ii) and it did not act inconsistently with Article 2.2.2 by using the latter option. We note,
further, that the European Communities resorted to the methodology set out in paragraph 2.2.2(ii) in
accordance with Article 2(6) of its Regulation. In light of our finding in respect of the order of
options set out in Article 2.2.2 and the fact that the European Communities applied what is its
customary methodology for the calculation of SG&A and profit rates, and the basis for its
determination in this regard is clear from the final determination, we do not consider that
Article 12.2.2 requires the European Communities to explain its choice of methodology.

101 See paras. 6.54-6.62, supra.

6.253 We also recall our conclusion that Article 2.2.2(ii) may be applied in a case where there are
data concerning SG&A and profit for only one other exporter or producer. 102 We found, therefore,
that the European Communities was not precluded from applying the methodology set out in that
provision in this case and, therefore, did not act inconsistently with Article 2.2.2(ii) in this regard.
India's argument in support of its claim under Article 12.2.2 presupposes an inconsistency with
Article 2.2.2(ii), which we did not find. Since we did not find that the European Communities applied
an option for which the requirements were not fulfilled, and the basis for its determination in this
regard is clear from the final determination, we do not consider that the European Communities was
required to give any further explanation in this regard.
6.254 We also recall our conclusion that an interpretation of Article 2.2.2(ii) under which sales not
in the ordinary course of trade are excluded from th e determination of the profit rate to be used in the
calculation of a constructed normal value is permissible.
103 We found, therefore, that the European
Communities did not err in its application of paragraph (ii) by using data only on transactions in the
ordinary course of trade. We note, further, that the European Communities excluded data for sales not
in the ordinary course of trade in accordance with Article 2(4) of its Regulation. In light of our
finding in respect of the exclusion of data for sales not in the ordinary course of trade, the fact that the
European Communities applied the customary methodology set forth in its legislation for the
calculation of SG&A and profit rates, and the fact that its analysis in this regard is clear in its
determination, we do not consider that the European Communities was required to explain its decision
to derive profit on the basis of sales in the ordinary course of trade.
6.255 Finally, we recall our conclusion that Article 2.2.2(ii), when applied correctly, necessarily
yields amounts for profits that are deemed "reasonable" for purposes of Article 2.2, and that the
AD Agreement does not require consideration of a separate reasonability test in respect of results
arrived at through the use of that methodology.
104 We found, therefore, that the European
Communities did not act inconsistently with the requirements of Article 2.2 by not having applied
such a test to the results that it obtained under Article 2.2.2(ii). Clearly, where there is no obligation
for the European Communities to consider whether the profit established is reasonable on the basis of
a separate test of reasonability – as we have found to be the case – there can be no obligation to
explain a consideration that need not be undertaken.
6.256 The basis for the European Communities' application of and its analysis under Article 2.2.2
are apparent on the face of the Definitive Regulation, taken together with the Provisional Regulation
as appropriate, and with reference to EC legislation. For the foregoing reasons, we find that India's
claims 3 and 6, asserting that the European Communities failed to sufficiently explain why and how it
applied Article 2.2.2 and that the European Communities failed to sufficiently explain why and how it
applied Article 2.2, must both fail.
Claims 10 and 22
6.257 The next issue before us is whether, as India claims, the European Communities failed to
explain its consideration of all imports from India during the period of investigation (Claim 10) as
well as in the years prior to the period of investigation, i.e., 1 January 1992-30 June 1995 (Claim 22).
We recall our conclusion that the phrase "dumped imports" refers to all imports of the product from
exporters/producers as to which an affirmative determination of dumping has been made.
 105 W e
found, therefore, that the European Communities, having made an affirmative determination of
dumping with respect to imports from all producers/exporters in this case, did not act inconsistently

102 See paras. 6.69-6.75, supra.
103 See paras. 6.83-6.87, supra.
104 See paras. 6.94-6.101, supra.
105 See paras. 6.132-6.142, supra.

with Articles 3.1, 3.4 and 3.5 of the AD Agreement by considering all such imports in its evaluation
of the volume, price effects and consequent impact of dumped imports. That the European
Communities carried out its analysis on the basis of all imports is clear from the final determination.
It follows, therefore, in our view, that the European Communities' explanation of its determination is
adequate and in conformity with the AD Agreement, and that India's claim 10 must fail.
6.258 We turn next to India's claim regarding the European Communities' failure to explain its
consideration of imports from all producers/exporters as "dumped imports" in the years prior to the
period of investigation. We recall that we did not address this issue as a substantive matter, in light of
our conclusion that the European Communities' determination of injury was not made consistently
with its obligations under Article 3.4. 106 We find it neither necessary nor appropriate to address
India's claim 22 asserting a failure to explain this aspect of the determination.
Claim 13
6.259 We now turn to India's claim that the European Communities failed to adequately explain its
evaluation of certain factors listed in Article 3.4. We recall our finding that the European
Communities acted inconsistently with Article 3.4 of the AD Agreement by failing to evaluate all the
economic factors set forth in Article 3.4. 107 In light of our finding of inconsistency with Article 3.4,
we find it neither necessary nor appropriate to address India's claim of inadequate notice. We note
that our finding concerning Article 3.4 was based principally on the explanation of the injury
determination in the European Communities' notices. Having found a violation of the substantive
requirement to consider all the factors set forth in Article 3.4 in assessing the impact of imports, the
question of whether the notice of either the preliminary or affirmative determination of injury is
"sufficient" under Article 12.2 is immaterial. A notice may adequately explain the determination that
was made, but if the determination was substantively inconsistent with the relevant legal obligations,
the adequacy of the notice is meaningless. Further, in our view, it is meaningless to consider whether
the notice of a decision that is substantive inconsistent with the requirements of the AD Agreement is,
as a separate matter, insufficient under Article 12.2. A finding that the notice of an inconsistent action
is inadequate does not add anything to the finding of violation, the resolution of the dispute before us,
or to the understanding of the obligations imposed by the AD Agreement. We therefore make no
findings on claim 13.
Claims 25 and 28
6.260 We turn next to India's claims regarding the failure of the European Communities to explain,
in the Definitive Regulation, its examination of the evidence in the application under Article 5.3 and
the determination of industry support under Article 5.4. We do not agree with India's view that
Article 12.2.2 requires explanations relating to initiation to be set out in the notice of final
determination. Article 12.1 of the AD Agreement requires public notice of an initiation, and sets out
the requirements regarding the information to be contained in such notices. India has made no claim
under Article 12.1 in this dispute. Article 12.2 requires notice of preliminary and final
determinations, whether affirmative or negative, and notice of undertakings, and sets forth in some
detail in Articles 12.2.1, 12.2.2, and 12.2.3 the information to be included in such notices. Those
requirements, in addition to basic information concerning the product and parties, all provide for
transparency with respect to the decisions of which notice is being given. There is no reference to the
initiation decision among the elements to be addressed in notices under Article 12.2. Moreover, in
our view, it would be anomalous to interpret Article 12.2 as also requiring, in addition to the detailed
information concerning the decisions of which notice is being given, explanations concerning the
initiation of the investigation, of which notice has previously been given under Article 12.1. This is

106 See paras. 6.153-6.169, supra.
107 Id.

particularly the case with respect to elements which are not within the scope of the information to be
disclosed in the notice of initiation itself. 108 We do not believe that Article 12.2.2 requires a Member
to explain, in the notice of final determination, aspects of its decision to initiate the investigation in
the first place. We find, therefore, that India's claims under Article 12.2.2 regarding the European
Communities' examination of the evidence in the ap plication under Article 5.3 and its determination
of industry support under Article 5.4 must fail.
Claim 31
6.261 Finally, we turn to India's claim that the European Communities failed to explain its
consideration of the Indian exporters' arguments concerning Article 15 of the AD Agreement. In light
of our finding of inconsistency with Article 15, 109 we find it neither necessary nor appropriate to
address this claim. As discussed above in connect ion with India's claim 13, we consider that where
there is a violation of the substantive requirement, the question of whether the notice is sufficient
under Article 12.2.2 is immaterial. We therefore make no findings on claim 31.
VII CONCLUSIONS AND RECOMMENDATION
7.1 In light of the findings above, we conclude that the European Communities did not act
inconsistently with its obligations under Articles 2.2, 2.2.2, 3.1, 3.4, 3.5, 5.3, 5.4, and 12.2.2 of the
AD Agreement in:
(a) calculating the amount for profit in constructing normal value (India's claims 1
and 4),
(b) considering all imports from India (and Egypt and Pakistan) as dumped in the
analysis of injury caused by dumped imports (India's claims 8, 19, and 20),
(c) considering information for producers comprising the domestic industry but not
among the sampled producers in analyzing the state of the industry (India's claim 15,
in part),
(d) examining the accuracy and adequacy of the evidence prior to initiation (India's
claim 23),
(e) establishing industry support for the application (India's claim 26), and
(f) providing public notice of its final determination (India's claims 3, 6, 10, 22, 25
and 28).
7.2 In light of the findings above, we conclude that the European Communities acted
inconsistently with its obligations under Articles 2.4.2, 3.4, and 15 of the AD Agreement in:
(g) determining the existence of margins of dumping on the basis of a methodology
incorporating the practice of zeroing (India's claim 7),
(h) failing to evaluate all relevant factors having a bearing on the state of the domestic
industry, and specifically all the factors set forth in Article 3.4 (India's claim 11),

108 We note, in this regard, the decision of the Panel in Mexico - HFCS concerning the scope of the
information required in a notice of initiation.
109 See paras. 6.226-6.238, supra.

(i) considering information for producers not part of the domestic industry as defined by
the investigating authority in analyzing the state of the industry (India's claim 15, in
part), and
(j) failing to explore possibilities of constructive remedies before applying anti-dumping
duties (India's claim 29).
7.3 With respect to those of India's claims not addressed above we have:
(a) found that India has withdrawn those claims (claims 2, 5, 9, 12, 17, 21, 24, 27,
and 30),
(b) concluded that the claims are not within our terms of reference (claims 14 and 16),
and
(c) concluded that, in light of considerations of judicial economy, it is neither necessary
nor appropriate to make findings on those claims (claims 13, 18, and 31).
7.4 Under Article 3.8 of the DSU, in cases where there is infringement of the obligations assumed
under a covered agreement, the action is considered prima facie to constitute a case of nullification or
impairment of benefits under that agreement. A ccordingly, we conclude that to the extent the
European Communities has acted inconsistently with the provisions of the AD Agreement, it has
nullified or impaired benefits accruing to India under that Agreement.
7.5 We recommend that the Dispute Settlement Body request the European Communities to bring
its measure into conformity with its obligations under the AD Agreement.