Document: WT/DS141/RW Annex A-1 Page 1 ANNEX A First Submission by the Parties Contents Page Annex A-1 First Written Submission of India A-2
Document codes: WT/DS141/RW
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

Annex A-1

ANNEX A

First Submission by the Parties

Contents Page
Annex A-1 First Written Submission of India A-2
Annex A-2 First Submission of the European Communities A-50

Annex A-1

LIST OF EXHIBITS

INDIA-RW-1 of 22 March 2001

INDIA-RW-2 of 1 May 2001

I
NDIA-RW-3 General disclosure document of 19 June 2001, EC reference 055826

I
NDIA-RW-4 Fax from TEXPROCIL to EC dated 19 June 2001

INDIA-RW-5 Fax from EC to law firm with general disclosure document dated 19 June 2001,
EC reference 055857

I
NDIA-RW-6 Disclosure document of Bombay Dyeing faxed to law firm on 20 June 2001,
EC reference 055894

INDIA-RW-7 Disclosure document of Madhu faxed to law firm on 22 June 2001, EC
reference 055945

INDIA-RW-8 Disclosure document of Omkar faxed to law firm on 22 June 2001, EC
reference 055967

INDIA-RW-9 Disclosure document of Prakash and Anglo-French faxed to law firm on
25 June 2001, EC reference 056037

I
NDIA-RW-10 Fax of law firm to EC dated 25 June 2001, reference 47515

INDIA-RW-11 Fax of EC to law firm dated 25 June 2001, EC reference 056038

I
NDIA-RW-12 Fax of law firm to EC dated 26 June 2001, reference 47531

I
NDIA-RW-13 Fax of EC to law firm dated 27 June 2001, EC reference 056099

INDIA-RW-14 Oral statement presented during hearing of 3 July 2001

I
NDIA-RW-15 Disclosure comments of TEXPROCIL presented on 3 July 2001

INDIA-RW-16 Council Regulation (EC) No 1515/2001 of 23 July 2001 on the measures that
may be taken by the Community following a report adopted by the WTO
Dispute Settlement Body concerning anti-dumping and anti-subsidy matters

I
NDIA-RW-17 Fax of EC to TEXPROCIL dated 27 July 2001, EC reference 057638

INDIA-RW-18 Council Regulation (EC) No 1644/ 2001 of 7 August 2001 amending
Regulation (EC) No 2398/97, imposing a definitive anti-dumping duty on
imports of cotton-type bed linen origin ating in Egypt, India and Pakistan and
suspending its application with regard to imports originating in India

INDIA-RW-19 WT/DS141/11 of 21 September 2001

I
NDIA-RW-20 WT/DSB/M/108 (relevant paragraphs only)

Annex A-1

I
NDIA-RW-21 Request for review by EUROCOTON of 19 December 2001

I
NDIA-RW-22 Council Regulation (EC) No 160/20 02 of 28 January 2002 amending
Regulation (EC) No 2398/97 imposing a definitive anti-dumping duty on
imports of cotton-type bed linen origin ating in Egypt, India and Pakistan and
terminating the proceeding with regard to imports originating in Pakistan

I
NDIA-RW-23 Notice of initiation of a partial interim review of the anti-dumping measures
applicable to imports of cotton-type bed linen originating in India

I
NDIA-RW-24 Notice of the expiry of EC anti-dumping measures against Egypt on
28 February 2002

INDIA-RW-25 WT/DS141/12 of 14 March 2002

I
NDIA-RW-26 Fax with disclosure of re-assessed injury findings of EC to law firm dated
14 March 2001, EC reference 052697

I
NDIA-RW-27 Disclosure comments of TEXPROCIL of 25 March 2002

INDIA-RW-28 WT/DS141/13 of 5 April 2002

I
NDIA-RW-29 Fax from EC to law firm of 18 April 2002 with reaction to disclosure
comments

INDIA-RW-30 Regulation No 696/2002 confirming the definitive anti-dumping duty
imposed on imports of cotton-type bed linen originating in India

I
NDIA-RW-31 WT/DS141/13/Rev.1 of 8 May 2002

INDIA-RW-32 WT/DS141/14 of 2 July 2002, as corrected by WT/DS141/14/Corr.1 of
10 July 2002

INDIA-RW-33 Judgment of the European Court of First Instance of 17 July 1998 in Case
T-118/96

OLD EXHIBITS

(ATTACHED FOR EASY REFERENCE)

INDIA-8 PROVISIONAL REGULATION

I
NDIA-9 DEFINITIVE REGULATION

Annex A-1

I. INTRODUCTION

1. On 12 March 2001, the Dispute Settleme nt Body (hereinafter: "DSB") adopted1 the Appellate
Body Report 2 and the Panel Report 3 as modified by the Appellate Body, in the dispute " European
Communities – Anti-Dumping Duties On Imports Of Cotton-Type Bed Linen From India "
(WT/DS141). These Reports concluded that the EC’s imposition of definitive anti-dumping duties on
imports of Cotton-Type Bed Linen from India ha d been inconsistent with the Agreement on
Implementation of Article VI of the General Ag reement on Tariffs and Trade 1994 (hereinafter:
"Anti-Dumping Agreement" or "ADA"). Pursuant to the recommendations of these Reports, the DSB
requested the European Communities to bring its m easure into conformity with its obligations under
the Anti-Dumping Agreement.

2. On 26 April 2001, in accordance with Artic le 21.3(b) of the Understanding on Rules and
Procedures Governing the Settlement of Disputes (" DSU"), the EC and India mutually agreed on a
reasonable period of five months and two days to implement the r ecommendations and rulings of the
DSB.
4 This reasonable period of time (RPT) expired on 14 August 2001.

3. Regulation 1644/2001 , amending the original definitive anti-dumping duties on Bed Linen
from India (hereinafter: "re-determination" or "Regulation 1644/2001"), adopted by the Council of the
European Union on 7 August 2001, and published on 14 August 2001
5, is the measure taken by the
EC, ostensibly to comply with the recommenda tions and rulings of the DSB, following the
proceedings before the Panel and the Appellate Body.

4. In the view of India this re-determination does not, however, bring the EC into compliance
with those recommendations and rulings and, more over, introduces further inconsistencies with the
ADA and the DSU, for the reasons that India will explain in detail below. Although the application of
the re-determination is currently suspended, this suspension is tantamount to a virtual sword of
Damocles: since the EC is presently conducting, with full speed, a "partial interim review" of the
dumping margins, new results are imminent.
6 Accordingly, once these new dumping margins are
confirmed, they can, under EC law, enter into force based on the injury and causality "findings" of the
re-determination. This imminent re-introduction of anti-dumping measures will then enable an expiry
review to start before 28 November 2002, which, in turn, can extend the duration of the anti-dumping
measures with, at least, another five years.

5. Section II will summarize, in chronological form, the factual events following 12 March 2001
and is limited to essential information. More de tails about the re-determination and the surrounding
actions will be provided, as and when needed. Section III contains an executive summary of the
claims. Section IV will elaborate these claims in detail. Section V will conclude this Submission.

1 WT/DS141/9 of 22 March 2001, copy attached as Exhibit-India-RW-1.
2 WT/DS141/AB/R of 1 March 2001.
3 WT/DS141/R of 30 October 2000.
4 WT/DS141/10 of 1 May 2001, copy attached as Exhibit-India-RW-2.
5 Council Regulation (EC) No 1644/2001 of 7 August 2001 amending Regulation (EC) No 2398/97,
imposing a definitive anti-dumping duty on imports of cotton-type bed linen originating in Egypt, India and
Pakistan and suspending its application with regard to imports originating in India, published in Official Journal
of the European Communities of 14 August 2001, L-series, No 219, pages 1-11. Due to the chronology of
events, set forth below in Section II, a copy of this Regulation is attached as Exhibit-India-RW-18.
6 The speed with which this review is being conducted is unprecedente d. In fact, the EC has already
disclosed new dumping margins. Based on calculation techniques with which all Indian exporters take issue,
and in direct contradiction with the text of Article 11 .2 ADA, it transpires that the EC seeks to impose duties
that are even higher than in the original provisional Regulation.

Annex A-1

II. FACTUAL BACKGROUND AND SEQUENCE OF EVENTS

6. In this second section, India will summarize, in chronological order, the events that followed
the adoption of the Reports on 12 March 2001. Wher e necessary, further factual details will be
provided in the subsequent sections. In light of the fact that the Panel is well aware of the background
of this dispute through its work on the original Pa nel Report, this factual summary omits events from
before that date. However, for the sake of easy reference, India attaches additional copies of the
original provisional and definitive Regulations.
7

7. As noted above, on 26 April 2001, in accordan ce with Article 21.3(b) of the Understanding
on Rules and Procedures Governing the Settlement of Disputes ("DSU"), the EC and India mutually
agreed on a reasonable period of five months a nd two days to implement the recommendations and
rulings of the DSB.8

8. On 19 June 2001, the Commission Services fa xed the general disclosure document to the
Indian trade association 'TEXPROCIL' 9, with a copy to the Embassy of India in Brussels.
Simultaneously, the EC faxed copies of company-speci fic disclosure documents to the five exporting
producers that originally constituted the main sample. 10 In these faxes the Commission Services
granted ten days to comment on the disclosure and also inquired whether the law firm involved in the
original proceeding was still representing TEXPROCIL and/or any of its members. On the same day,
TEXPROCIL clarified that the law firm was still representing it,
11 and subsequently the EC faxed a
copy of the general disclosure document to the law firm.12

9. The copies of the company-specific disclosures for Bombay Dyeing, Madhu, Omkar, Prakash,
and Anglo-French were faxed to the la w firm on, respectively, 20 June 2001
13, 22 June 2001 14,
22 June 200115, 25 June 200116, and 25 June 2001.17

10. On 25 June 2001 the law firm noted that the rights of defence of its clients were being
impeded because of the delay in the transmission of the disclosure documents. In that fax the law
firm also requested the detailed dumping calculati ons for the company Standard Industries of the
reserve sample, as well as access to the non-confidential file.
18

11. In response, the EC sent a fax on the same da y in which it stated that the rights of defence
were not impeded. 19 The EC also clarified that no dumping calculations existed for Standard
Industries, and that the non-confidential files had not been changed since the original investigation.

12. On 26 June 2001 the law firm sent another fax to the EC in which it, inter alia, again
requested access to the calculation details pertaining to Standard Industries. 20 On 27 June 2001, the

7 To avoid confusion these copies are separately a ttached and carry the same number as the original
Exhibits, i.e. Exhibit-India-8 and Exhibit-India-9, respectively.
8 WT/DS141/10 of 1 May 2001, copy attached as Exhibit-India-RW-2.
9 Copy attached as Exhibit-India-RW-3.
10 I.e., Anglo-French, Bombay Dyeing, Madhu, Omkar, and Prakash.
11 Copy attached as Exhibit-India-RW-4.
12 Copy attached as Exhibit-India-RW-5.
13 Copy attached as Exhibit-India-RW-6.
14 Copy attached as Exhibit-India-RW-7.
15 Copy attached as Exhibit-India-RW-8.
16 Copy attached as Exhibit-India-RW-9.
17 Copy attached as Exhibit-India-RW-9.
18 Copy attached as Exhibit-India-RW-10.
19 Copy attached as Exhibit-India-RW-11.
20 Copy attached as Exhibit-India-RW-12.

Annex A-1

EC (finally) released calculation details insofar as th ey contained information pertaining to Standard
Industries.21

13. On 3 July 2001 a hearing took place. The or al statement presented during that hearing is
attached.
22 On the same day, TEXPROCIL also filed its written disclosure comments.23

14. On 26 July 2001, the Council of the European Union adopted Council Regulation 1515/2001
on the measures that may be taken by the EC follo wing a report adopted by the Dispute Settlement
Body concerning anti-dumping and anti-subsidy matters.
24

15. On 27 July 2001, the EC sent a fax to TEXPR OCIL in which it reacted to the disclosure
comments and the arguments presented during the hearing. 25 A copy of this fax was sent to Ministry
of Textiles in New Delhi, the Embassy of India in Brussels, and the law firm in Brussels.

16. On 7 August 2001 the Council of the European Union adopted Regulation 1644/2001
amending the original definitive anti-dumping duti es on Bed Linen from India, purporting to comply
with the DSB’s recommendations and rulings, whilst simultaneously suspending its application. 26
This latter measure is hereinafter referred to as th e "re-determination". India strongly disagreed that
this re-determination complied with the findings of the Panel and Appellate Body.27

17. The re-determination, inter alia, provided for the expiry of the amended measures within six
months after entry into force of the re-determina tion, unless a review had been initiated before that
date. For this reason, and in an attempt to de-escalat e the dispute, the matter was laid to rest by India
in the belief that the illegal measure would, altho ugh clearly outside the 'reasonable period of time',
finally, expire by 14 February 2002.

18. On 19 December 2001, the association EUROCO TON filed a request with the EC authorities
to re-examine the dumping margins.28

19. Council Regulation (EC) No 160/2002 of 28 Ja nuary 2002 terminating the proceeding against
Pakistan,
29 amended the re-determination.

21 Copy attached as Exhibit-India-RW-13.
22 Copy attached as Exhibit-India-RW-14.
23 Copy attached as Exhibit-India-RW-15.
24 Council Regulation (EC) No 1515/2001 of 23 July 2001 on the measures that may be taken by the
Community following a report adopted by the WTO Dispute Settlement Body concerning anti-dumping and
anti-subsidy measures, published in Official Journal of the European Communities of 26 July 2001, L-series,
No 201, pages 10-11. Copy attached as Exhibit-India-RW-16.
25 Copy attached as Exhibit-India-RW-17.
26 Council Regulation (EC) No 1644/2001 of 7 August 2001 amending Regulation (EC) No 2398/97,
imposing a definitive anti-dumping duty on imports of cotton-type bed linen originating in Egypt, India and
Pakistan and suspending its application with regard to imports originating in India, published in Official Journal
of the European Communities of 14 August 2001, L-series, No 219, pages 1-11. Copy attached as Exhibit-
India-RW-18.
27 WT/DS141/11 of 21 September 2001, a copy of which is attached as Exhibit-India-RW-19.
WT/DSB/M/108 at paragraph 85, a copy of which is attached as Exhibit-India-RW-20.
28 Copy attached as Exhibit-India-RW-21.
29 Council Regulation (EC) No 160/2002 of 28 January 2002 amending Regulation (EC) No 2398/97
imposing a definitive anti-dumping duty on imports of cotton-type bed linen originating in Egypt, India and
Pakistan and terminating the proceeding with regard to imports originating in Pakistan, published in Official
Journal of the European Communities of 30 January 2002, L-series, No 26, pages 1-4. Copy attached as
Exhibit-India-RW-22.

Annex A-1

20. On 13 February 2002 the EC initiated a so- called "partial interim review" against India.
30

21. On 28 February 2002 the anti-dumping measures against Egypt expired.
31

22. On 8 March 2002 India initiated procedures unde r Article 21.5 of the DSU by requesting the
EC to enter into consultations. The request was circulated in document WT/DS141/12 of
14 March 2001.32

23. On 14 March 2002 the EC faxed a disclosure of "re-assessed" injury findings to TEXPROCIL
and to the law firm in Brussels.
33 On 25 March 2002 TEXPROCIL provided disclosure comments in
writing and requested a hearing.34

24. On 25 and 26 March 2002 consu ltations were held in Geneva. In the view of India these
consultations failed to settle the dispute. Accord ingly, India requested a Panel under the procedures
of Article 21.5 DSU on 4 April 2002.
35

25. On 18 April 2002, the EC faxed a reply to the disclosure comments of TEXPROCIL.
36 On
19 April 2002 a hearing took place in connection with the disclosure provided on 25 March.

26. On 22 April 2002 the Council of the European Union adopted Regulation (EC) No 696/2002
confirming the definitive anti-dumping duty imposed on imports of cotton-type bed linen originating
in India by Regulation (EC) No 2398/97, as am ended and suspended by Council Regulation (EC)
No. 1644/2001.
37

27. On 7 May 2002 India reiterated its request for the original Panel to be re-convened to
examine this issue under Article 21.5 of the DSU.
38 India also requested that the Panel be established
with standard terms of reference set out in Article 7 of the DSU.

28. The Panel was established on 22 May 2002.

29. The Panel was composed on 25 June 2002.

III. EXECUTIVE SUMMARY OF CLAIMS

30. There is disagreement between India and the EC as to the consistency with the WTO Covered
Agreements, including GATT 1994, of measures ta ken to comply with the recommendations and
rulings of the DSB within the meaning of Article 21.5 of the DSU.

30 Notice of initiation of a partial interim review of the anti-dumping measures applicable to imports of
cotton-type bed linen originating in India, published in Official Journal of the European Communities of
13 February 2002, C-series, No 39, pages 17-19. Copy attached as Exhibit-India-RW-23.
31 Notice of the expiry of certain anti-dumping measures, published in Official Journal of the European
Communities of 14 March 2002, C-series, No 65, page 12. Copy attached as Exhibit-India-RW-24.
32 WT/DS141/12 of 14 March 2002, copy attached as Exhibit-India-RW-25.
33 Fax of 14 March 2002, with EC reference 052697. Copy attached as Exhibit-India-RW-26.
34 Copy attached as Exhibit-India-RW-27.
35 WT/DS141/13. Copy attached as Exhibit-India-RW-28.
36 Copy attached as Exhibit-India-RW-29.
37 Council Regulation (EC) No 696/2002 of 22 April 2002 confirming the definitive anti-dumping duty
imposed on imports of cotton-type bed linen originating in India by Regulation (EC) No 2398/97, as amended
and suspended by Council Regulation (EC) No 1644/2001, published in Official Journal of the European
Communities of 25 April 2002, L-series, No 109, pages 3-13. Copy attached as Exhibit-India-RW-30.
38 WT/DS141/13/Rev.1. Copy attached as Exhibit-India-RW-31.

Annex A-1

31. India is of the opinion that the re-determination, and the surrounding actions, as identified
above, did not bring the EC into compliance with the recommendations and rulings of the DSB. The
re-determination suffers from similar inconsistenc ies as regards Articles 2, 3, and 15 of the Anti-
Dumping Agreement. Notably, parts of the re-d etermination took place outside the reasonable period
of time, in the form of an amendment or confirmati on. Moreover, India is of the view that the re-
determination and the other acti ons have introduced further inc onsistencies with the Covered
Agreements and the DSU.

32. Accordingly, India has requested that the Panel be established with standard terms of
reference set out in Article 7 of the DSU. Pursuant to Article 21.5 of the DSU India has also
requested that, if possible, the DSB refer the matter to the original Panel.

33. The mandate of the Panel pursuant to Article 21. 5 of the DSU, and in light of Article 17 of the
Anti-Dumping Agreement, is

"to examine, in light of the relevant provi sions of the covered agreements cited by
India in document WT/DS141/13/Rev.1, the ma tter referred by India to the DSB in
that document, and to make such findings as will assist the DSB in making the
recommendations or in giving the rulings provided for in those agreements."
39

34. India will summarize the reasons why it consider s that the re-determination failed to comply
with the DSB recommendations and rulings by the due date and why the EC's ac tions are inconsistent
with ADA. In particular, India will claim and respectfully request the Panel to find that:

 Claim 1: The EC acted inconsistently with its obligations under Article 2.2.2(ii) of the
Agreement on Implementation of Article VI of GATT 1994

 The EC did not properly calculate a "weighted average" of amounts for SG&A and profits.
By taking an about-turn in the presentation of the relative size of Bombay Dyeing and
Standard Industries the EC continued to miscalculate and overstate the dumping margins;

 Claim 2: The EC acted inconsistently with its obligations under Articles 3.1 and 3.3 of
the Agreement on Implementation of Article VI of GATT 1994

 The EC cumulated Indian imports with those from a country for which no dumping was
found;

 Claim 3: The EC acted inconsistently with its obligations under Article 5.7 of the
Agreement on Implementation of Article VI of GATT 1994

 The EC did not simultaneously consider the ev idence of dumping and injury. Instead, the EC
resorted to ex-post 'reparations', which further undermin e the re-determination. Even these
reparations took place in various episodes and after the deadline;

 Claim 4: The EC acted inconsistently with its obligations under Articles 3.1 and 3.2 of
the Agreement on Implementation of Article VI of GATT 1994

39 WT/DS141/14, as corrected by WT/DS141/14/Corr.1. Copy of both documents attached as Exhibit-
India-RW-32.

Annex A-1

 The EC did not properly exclude the portion of non-dumped imports from the total volume of
Indian imports. By misrepresenting that proportion from the sample that was non-dumped the
EC significantly overstated the total volume of dumped imports;

 Claim 5: The EC acted inconsistently with its obligations under Articles 3.1 and 3.4 of
the Agreement on Implementation of Article VI of GATT 1994

 The EC evaluated factors without even collec ting data on them. The re-determination merely
puts a gloss on the original finding. A proper implementation of the Panel's findings would
have required not a mere recitation of injury factors but an overall reconsideration and
analysis of the information in light of the requirements of the Anti-Dumping Agreement;

 Claim 6: The EC acted inconsistently with its obligations under Article 3.5 of the
Agreement on Implementation of Article VI of GATT 1994

 The EC incorrectly established a causal rela tionship between dumped imports and injury.
The EC disregarded the non-attribution language.

 Claim 7: The EC acted consistently with its obligations under Article 15 of the
Agreement on Implementation of Article VI of GATT 1994

 The EC did not explore any remedy, constructive or otherwise. Quite on the contrary, a
review was initiated and new results, higher than ever, are imminent; and

 Claim 8: The EC acted inconsistently with its obligations under Article 21.2 of the DSU

 The EC did not pay any particular attention to this matter which affects India and which has
been the subject of dispute settlement.

35. For the sake of brevity India will not pursue its claims under Articles 11 and 18 of the ADA,
even though it considers that the EC did not respect its obligations under these Articles.
40

36. In presenting its claims, India is mindful of the standard of review as, for example, clarified in
cases such as US–Hot Rolled Steel:
41

" … Article 17.6(i) requires panels to make an "assessment of the facts ". The
language of this phrase reflects closely the obligation imposed on panels under
Article 11 of the DSU to make an "objective assessment of the facts ". Thus the text
of both provisions requires panels to "assess" the facts and this, in our view, clearly
necessitates an active review or examination of the pertinent facts.
…
Panels must assess if the establishment of the facts by the investigating authorities
was proper and if the evaluation of those facts by those authorities was unbiased and
objective." (Emphasis added)

40 There is therefore no need fo r the EC to request a preliminary ruling on Articles 11 and 18 ADA,
since India's claims under these Articles are not pursued in the context of this Article 21.5 proceeding for the
above-mentioned sake.
41 US–Hot Rolled Steel, AB, paras. 55-56.

Annex A-1

37. India is of the view that the EC did not meet those (latter two) broad standards when
establishing facts nor when evaluating facts (keep ing in mind the interpretative guidance provided
under 17.6(ii) ADA).42

38. In view of its eight claims presented India is also mindful about the possibility for a Panel to
apply judicial economy. In this latter regard however India recalls the case law of the Appellate Body
in Australia–Salmon43 where it was made clear that only a partial resolution of the matter would be
false judicial economy. In this latter light India finds compelling, for example, the findings in other
cases where Panels recognized but refused to apply judicial economy. 44 Therefore, India requests the
Panel to rule on all eight claims so as to enable the DSB to make sufficiently precise
recommendations and rulings. Only that would a llow prompt compliance by the EC in order to
ensure an effective resolution of this dispute.

39. Accordingly, India will, in its conc lusions, request the Panel to find that:

 1. By failing to withdraw the measures found to be inconsistent with the Anti-Dumping
Agreement and to bring its measures into c onformity with its obligations under the
Anti-Dumping Agreement within the mutually agreed reasonable period of time, the
EC has failed to comply with the DSB reco mmendations and rulings in this dispute;
and

 2. The re-determination, as amended, and the subsequent actions, as identified above,
are inconsistent with the above provision s of the Anti-Dumping Agreement and the
DSU.

IV. CLAIMS AND ARGUMENTS

A. THE EC CONTINUED TO MISCALCULATE AND OVERSTATE THE
DUMPING MARGINS

1. Claim 1: The EC acted inconsistently with its obligations under Article 2.2.2(ii) of the
Agreement on Implementation of Article VI of GATT 1994

(a) Introduction

40. In its re-determination, the EC recalculate d the dumping margins for India for the five
companies of the main sample.
45 This re-calculation was performed, ostensibly, to comply with the
findings of the Panel and the Appellate Body with respect to the correct interpretations of
Articles 2.2.2(ii) and 2.4.2. If, however, the re-calcu lation is scrutinized in greater detail, it becomes
clear that the requirement of "weighted average", as stipulated in Article 2.2.2(ii), and as interpreted
by the Appellate Body, has not been properly respected.

41. The issue is material. Instead of two co mpanies found not to have dumped in the re-
determination, there were in fact three companies without dumping. I.e., not only Omkar and

42 India is mindful of the number of cases addressing the question of standard of review. For the sake
of brevity India does not here repeat this case law. For a concise overview India refers to, paras. 5.13 thru 5.16
of the recent Panel report in United States–Countervailing Duties on Certain Corrosion Resistant Carbon Steel
Flat Products from Germany, WT/DS213/R of 3 July 2002. India considers that the additional considerations in
those paragraphs apply mutatis mutandis to the current dispute.
43 Australia–Salmon AB, para. 223.
44 E.g. Brazil–Aircraft 21.5 II, paras. 5.56 and 5.208.
45 Recitals (5) – (14) of the re-determination.

Annex A-1

Prakash, but also Madhu should have been properly attributed its zero margin. Further, the dumping
margin for Anglo-French would have been much lower, thereby also affecting the residual duty,
which would then become based on the margin of Bombay Dyeing. This would also affect the
weighted average duty, which would then become based on the average of Anglo-French and Bombay
Dyeing.

42. More specifically, the differences between the current re-determination and a calculation that
properly respects the requirements of Article 2.2.2(ii) can be summarized as follows:

EC: dumping margins as per new
weighted average of re-
determination
India: dumping margins as per
weighted average based on
previous EC data
Anglo-French 9.8% 3.8%
Bombay Dyeing 5.5% 5.5%
Madhu 3.0% 0%
Omkar 0% 0%
Prakash 0% 0%
Weighted average margin for co-
operating companies
5.7% 4.6%
Residual 9.8% 5.5%

43. How these overstatements occurred can, perhap s unfortunately, only be grasped by going into
the details of the calculations; those details will reveal the about-turn, between the facts of the original
panel proceeding and the facts of the re-calculati on, as performed by the EC. Since these details,
however, are a pre-requisite for th e proper understanding of this clai m, we respectfully request the
Panel to bear with us, and to review these diffe rences in calculation method. After having unveiled
the differences in question, we w ill explain our claim in further detail and set forth the arguments on
the basis of which it will become clear that the EC's method was not permissible.

(b) Facts

44. In the re-determination, the EC has, fo r producers without sufficient domestic sales,
calculated the amounts for SGA and profits, as well as the amounts for allowances to be made to the
constructed normal value so arrived at, on the basis of an amalgamation of data. I.e., whilst no longer
basing the SGA and profits, and allowances, solely on the data of Bombay Dyeing, the EC has
combined the data of Bombay Dyeing and Standard Industries.

45. In so doing, the EC has taken as a basis the following sets of figures:

Base data as per disclosure46 Bombay Dyeing St andard Industries
SGA percentage 10.39% 19.15%
Profit percentage 12.09% (35.49%)
Allowance percentage (2.23%) (0.37%)
Overall addition to COP 20.25% (16.71)

46. Up to this stage, these figures appear undisputed. 47

46 Negative amounts are put in brackets.
47 The direct source is page 2 of Exhibit-India-RW-13.

Annex A-1

47. The divergence of views as to the correct in terpretation stems from the manner in which these
percentages are to be combined or, more to the poi nt, "weighted". The EC has applied the following
proportion in its weighing technique:

New EC method Bombay Dyei ng Standard Industries
Total net sales value 134,154,064 13,276,083
Relative weight in the mean 91% 9%

 Thus, the EC has weighted on the basis of sales value .

48. In the view of India, the correct interpretation, the arguments for which will be provided
below, would have necessitated a weighing on the basis of sales quantities
, as follows:

Correct weighted average and
previous EC position
Bombay Dyeing Stan dard Industries
Total domestic sales quantit y (in
units/sets)
627,764 179,775
Relative weight in the mean 77.74% 22.26%

49. The overall impact of proper volume-based weighing becomes clear when comparing the
resulting weighted averages:

 New EC Method

('value'-based)
Correct weighted average and
previous EC position

('volume'-based)
Overall percentage for SGA,
profits, and allowances to be
added to cost
16.93%
(18.99-2.06)
12.03%
(13.84-1.82)

50. The resulting difference is clear. By employi ng the method as it did, the EC was able to
minimize the impact of Standard Industries. By doing so the EC inflated the constructed normal
values and the resulting dumping margins by 4.90 per cent. By contrast, India's understanding of the
interpretation of the Appellate Body's finding wo uld have led to constr ucted normal values (and
dumping margins) that are approximately 4.9 per cent lower.
48

(c) Arguments

(i) Argument 1: The text of the Article and its in terpretation by the Appellate Body do not permit
a value-based weighing in the circumstances under consideration

48 The difference for Anglo-French and Madhu is not exactly 4.9 per cent but could be more. This is
due to the effects of negative dumping: where constructed normal values for certain "models" become lower,
they may at some point drop below the weighted average export price, as a result of which the negative dumping
amounts that so ensue, offset possible positive dumpi ng amounts of other models. The resulting difference on
the dumping margin by virtue of a 4.90 per cent drop in the constructed normal value is therefore
mathematically equal to, or greater than, 4.90 per cent.

Annex A-1

51. First of all, India recalls that the text of the relevant part of Article 2.2.2(ii) mandates SGA
and profits to be determined on the basis of:

"the weighted average of the actual amounts incurred and realized 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".
52. In interpreting this provisi on we recall the pertinent observation of the Appellate Body in
paragraph 74 of its Report:

" . . . the textual directive to "weight" the average further supports this view because
the "average" which results from combini ng the data from different exporters or
producers must reflect the relative importance of these different exporters or
producers in the overall mean." (underlining and emphasis added)
53. It is submitted that by choosing the method as it did, the EC did not reflect the relative
importance of these two exporters in the mean. Even if there were to be two permissible
interpretations, which India will show below ther e are not, the very choice for the method that
weighted the amounts based on value, significantly understated the relative im portance of Standard
Industries as the second company on the Indian domestic market. As the EC previously did, when it
chose to zero amounts that were negatively dumped, it has again chosen that method which results in
the highest possible dumping margins. By doing so , the relative importance of Standard Industries
has become trivialized to reflect less than 1/10 th of the mean. This has, in these circumstances, in the
words of the Appellate Body:

"substantially emptied the phrase "weighted average" of meaning."
49
54. Since an interpreter is not free to adopt a reading that reduces terms to redundancy or
inutility,50 the EC has acted contrary to that principle by applying a method which de facto deprived
the term "weighted average" of meaning.

(ii) Argument 2: The context of the Article as well as case law of the European Court of Justice
representing consistent EC administrative prac tice do not permit a value-based average in
the circumstances under consideration

55. Article 2.2.2(ii) does not operate in a vac uum nor does it lead its own life outside the
framework of the Anti-Dumping Agreement. The Artic le should also be seen in its context. In the
framework of this question this context can be sub-di vided in 'direct context' such as Article 2 itself,
as well as 'indirect context' such as Article 6.

56. Direct context is provided in Article 2 itself. In this Article 2 it is clear that the two normative
cut-off points that pertain to the relative importance of domestic sales always hinge on a quantity-
(volume)-parameter: first of all, the five-per cent rule, enshrined in Article 2.2 and footnote 2 of the
Anti-Dumping Agreement bases itself on quantity
 of sales:

" … shall normally be considered a sufficient quantity for the determination of the
normal value if such sales constitute 5 per cent or more … ". (underlining added)

49 Appellate Body Report on Bed Linen at paragraph 75, last sentence.
50 Ut res magis valeat quam pereat . This principle of effectiveness has become consistent case law
since United States–Standards for Reformulated and Conventional Gasoline, Report of the Appellate Body ,
WT/DS2/AB/R of 29 April 1996, page 23.

Annex A-1

57. Secondly, the test laid down in Article 2.2.1 chapeau, juncto footnote 5, which decides when
sufficient quantities of sales are made at a loss, a nd may therefore be disregarded as not being in the
ordinary course of trade, also bases itself on quantity:

"Sales below per unit costs are made in substantial quantities when … the volume of
sales below per unit costs represents not less than 20 per cent of the volume sold … ".
(underlining added)
58. Article 6 also provides context. This Artic le attaches significance to the percentage of
volume of exports from the country in question. Cl early, where the volume is the benchmark on the
export-sales-side of the exporters, the same benchmar k should apply on the domestic-sales-side of the
exporters. Applying different standards to the tw o sides does not do justice to the requirement of a
proper establishment of the facts and the requirement of an unbiased and objective evaluation.

59. Moreover, it is not only these provisions in the ADA themselves, but also the European Court
of First Instance that has pronounced itself in its case-law on the application of volume as a
benchmark. In an important judgment on the question whether the Community Institutions had
correctly based themselves on volume
, rather than value, for the determination of the "10 per cent
rule" in the context of the ordinary course of trade test, 51 the Court upheld the choice of the
institutions for the use of volume.52

60. In the context of these important Articles, and in the context of the relevant case law of the
ECJ, all enshrining quantity as a basis for the determination of relative importance of domestic sales
in a set, it is illegal to interpret Article 2.2.2(ii) in a different fashion. Indeed, the "value-method"
does no justice to the important observations of th e Appellate Body that the relative importance of
producers must be reflected and that words "weighted average" should not become bereft of meaning.

(iii) Argument 3: The current weighing on value-bas is contradicts the previous position of the EC

61. In connection with this claim it is also important to recall that the EC itself, during the
original Panel proceedings, made no secret of the fact that Bombay Dyeing represented eighty per
cent, rather than (now, and suddenly), ninety per cent, of the mean. We only need to refer to
paragraph 190 of the EC's first written submission to the Panel where the EC noted that

51 Case T-118/96, Judgment of the Court of First Instance of 17 July 1998, notably recital 79. Copy of
judgment attached as Exhibit-India-RW-33. Here it may be noted, for the sake of understanding the so-called
‘10 per cent rule’, that the EC institutions have developed, in their own practice, a secondary rule in addition to
the ‘20 per cent rule’ as foreseen in footnote 5 of the ADA. I.e., as per footnote 5, where sales at a loss exceed
20 per cent of the domestic sales volume , these may be disregarded in establis hing the weighted average price.
The EC would then base itself on the remaining sales at a profit, except where the profitable remaining quantity
is less than 10 per cent of the total quantity
. This practice of using an upper and lower cut-off point in terms of
quantity is often referred to as the "80-10 rule". The lower cut-off point is this ‘10 per cent rule’. Since only the
first part of that rule is written in the ADA and the EC Regulation, the applicant in this Court case argued, inter
alia, that the 10 per cent rule (the second cut-off point) should be calculated on value, rather than volume . In
view of the structure of th e Regulation the Court rejected that plea, recitals 76-79, and underlined that volume
should be the norm. For the record, India disassociates itself from this and other arguments put forward by the
applicant in that case. India solely refers to this Court case as a means of illustration to show that, within the EC
jurisdiction, the authorities and the Court attach, in the context of the size of measuring domestic sales, the
importance to volume
, rather than value . The Court has found that the 'volume'-context of the Regulation was
sufficient to override any preference for a value-based dete rmination. It is also in this light that the current
sudden and impulsive choice of the EC for a value-based criterion should be dismissed as incongruous, and
inconsistent with normal practice.
52 I.e. to act inconsistent with its own case law would be contrary to the principle of good faith,
enshrined in Article 31.1 of the Vienna Convention.

Annex A-1

" … Bombay Dyeing has almost 80 per cent of the domestic market … ".
62. This statement was not accidental, but repeated in various instances. For example, in the next
sentence the EC stated:

"That one producer can have 80 per cent of its domestic market … ".
63. In the oral statements the EC repeated these vi ews. One may for example look at the first oral
statement at paragraph 52 in fine or the second oral statement at paragraph 39:

" … how a company with 80 per cent of the market can be more << anomalous and
peculiar >> than one with only 14 per cent."
64. Suddenly, and surprisingly, however, when it comes to the actual weighing of the relative
importance of the companies and their amounts, the EC shifted its position in the re-determination and
came up with a calculation technique that changed 80 per cent into 90 per cent and that, accordingly,
marginalizes the influence of Standard Industries.

65. It is submitted that an unbiased and objectiv e authority cannot be permitted to shift positions
as regards important aspects of a proceeding, ther eby rendering the outcome into a moving target,
displaying various views as and when deemed fit. On the contrary, it would have been prudent and
bearing witness of impartiality, if the EC's previous arguments, pronounced during earlier
submissions had been followed up and if the c onsequences would have been taken to its logical
conclusion. India deplores the EC's sudden shift in position and hopes that the Panel can underline
India's view as to the correct interpretation of Article 2.2.2(ii) given the factual circumstances of this
case.

2. Intermediate conclusions

66. In view of the above, India considers that it has presented a prima facie case as to the fact that
the EC has engaged in an incorrect application of Article 2.2.2(ii) insofar as the weighing was based
on value. India has cited the pertinent consid erations of the Appellate Body concerning the
interpretation of the text of the provision, the relevant context in which the provision operates, and the
factual history of this panel proceeding (with the previous ' EC position) in the context of which the
EC re-calculated the dumping margins. The une xpected choice for weighing based on value was
incongruous with these three important considerati ons. The weighing did no justice to the actual
absence of dumping by the company Madhu and has led to an overstatement of the dumping margins
for Anglo-French, the co-operating non-sampled producers, as well as the residual dumping margin.

67. India respectfully requests that the Panel concl ude that the EC acted inconsistently with its
obligations under Article 2.2.2(ii) of the Anti-Dumping Agreement. India is mindful of the technical
nature of this first claim and would therefore be happy to present any additional and/or specific
information that might assist the Panel in reaching its conclusion.

B. THE EC RESORTED TO UNWARRANTED CUMULATION AND EX-POST
'REPARATIONS'

1. Claim 2: The EC acted inconsistently with its obligations under Articles 3.1 and 3.3 of
the Agreement on Implementation of Article VI of GATT 1994

Annex A-1

2. Claim 3: The EC acted inconsistently with its obligations under Article 5.7 of the
Agreement on Implementation of Article VI of GATT 1994

(a) Introduction

68. In this section, India will put forward its clai m with respect to Articles 3.3 and 3.1. India
considers that the EC acted manifestly inconsistent ly with its obligations under Articles 3.3 and 3.1,
when it cumulated India's imports with the non-dumped imports of Pakistan. In case the EC were to
argue that the dumping determination against imports from Pakistan was made at a later stage than the
injury determination in Regulation 1644/2001, then that argument in itself would be clear proof that
the EC did not respect the deadline of 15 August 20 01. Moreover, in such latter case India submits
that the EC acted contrary to Article 5.7. In any event, India also submits that the EC (again) acted
contrary to Article 5.7 when it separately consid ered the dumping determination for Pakistan in
Regulation 160/2002 of 28 January 2002 and the related injury dete rmination in Regulation 696/2002
of 22 April 2002.

(b) Facts

69. Article 3.3 stipulates, in the relevant part that:

"Where imports of a product from more than one country are simultaneously subject
to anti-dumping investigations, the inves tigating authorities may cumulatively assess
the effects of such imports only
 if they determine that (a) the margin of dumping
established in relation to the imports from ea ch country is more than de minimis … "
(underlining added)
(c) Arguments

(i) Argument 1: In view of the fact that the im ports from Pakistan were not dumped, the EC acted
inconsistently with Article 3.3 when it cumulated these imports with those of India

70. In Regulation 1644/2001 (the re-determinati on) the EC cumulated Indian exports with those
of Pakistan. Pakistani imports were in fact not dumped, a fact which was revealed to India by
publication of Regulation 160/2002. India cannot be blamed for the fact that the EC revealed this
absence of dumping on part of Pakistan only by the end of January 2002, i.e. more than five months
after the publication of Regulation 1644/2001.

71. Accordingly, by cumulating (partly dumped) imports from India with the non-dumped
imports from Pakistan, the EC acted directly contra ry to Article 3.3 of the basic Regulation. The
word 'only' in Article 3.3 denotes a clear prohibition: cumulation is not permitted when a country does
not dump. The fact that such cumulation neverthe less took place is therefore directly inconsistent
with the text of Article 3.3.

72. Accordingly, by relying on evidence that was not 'positive' and thereby not 'credible', the EC
also acted inconsistently with Article 3.1.

(ii) Conditional argument 2: In case the EC we re to argue that the dumping determination
against imports from Pakistan was made at a later stage, then the EC acted contrary to
Article 5.7

73. The EC might, perhaps, argue that the re vised dumping determination against Pakistan was
made only after August 2001. Of course, that itself would be clear proof that the EC did not respect
the deadline of 15 August 2001 since the EC was required to prepare a legally correct re-

Annex A-1

determination within the deadline. Such reasoning on part of the EC would run directly counter to the
text of Article 5.7 which requires that:

"The
 evidence of both dumping and injury shall be considered simultaneously …
during the course of the investigation …" (underlining added)
74. It is clear from the text of this Article that all evidence must be considered at the same time.
If the drafters had wished to be so lenient and allo w for some evidence to be considered at some time,
and some evidence at another date, the Article could have been drafted differently, for example,

"evidence of dumping and injury shall be considered during the course of the
investigation."
75. Clearly, this latter discretion was not the inten tion, as a result of which the text of the actual
provision is mandatory: the words "the", "both" an d "shall" leave no room for doubt. In case the EC
wishes to defy common sense by arguing that the in vestigation was only against India, then we have
no choice but to refer to the published notices such as the Notice of initiation, which clearly clarifies
that the proceeding was against Egypt, India, and Pakistan.

76. Hence, by not considering all the evidence on dumping within the mutually agreed reasonable
period of time the EC clearly acted contrary to the text of Article 5.7.

(iii) Argument 3: By not simultaneously consid ering the evidence on both dumping and injury the
EC again acted contrary to Article 5.7 when it separated the dumping and injury findings in
Regulations 160/2002 and 696/2002

77. The violation of Article 5.7 did not stop after the set of facts addressed in the second
argument. When the EC published Regulation 160/ 2002 it clearly had not re-considered the injury
findings.

78. On 8 March 2002, when India requested consultations, India cited the above-mentioned
pertinent and repeated violations of Articles 3.3 an d 5.7 in its written request. In reaction, the EC
quickly came up with a new injury disclosure on 14 March 2002.
53 This disclosure later led to the
adoption of Regulation 696/2002, published on 25 April 2002.

79. Thus, the EC through Regulations 160/2002 and 696/2002 also violated Article 5.7 since it
acted directly contrary to the explicit requirements of the text of that provision. It first "revised"
dumping aspects and later injury aspects. Again, this means that, it was not "the" evidence of "both"
dumping and injury that was considered—as stipulated in Article 5.7—but only part of the evidence
in January and another part in April.

80. Indeed, Regulation 696/2002 of April 2002 tries to justify, in retrospect, how the EC could
have known, in August 2001 , that the measures of Regulation 1644/2001 could also be based on the
imports of India alone. The puzzling question of how the EC could already have guessed in
August 2001 that the measures against Egypt—failing a complaint—were going to expire in
February 2002
54 remains.

81. Moreover, India recalls, it is well-establis hed case law that such afterthoughts, or ex-post
facto justifications, are not permissible. As the EC argued in Argentina–Floor Tiles:

53 See the EC disclosure of 14 March 2002, Exhibit-India-RW-26.
54 Clearly, February 2002 was well before the regular (five year) expiry date of 28 November 2002.

Annex A-1

" … It was no more than an ex-post facto justification and, as such, should be rejected
by the Panel"55
82. Accordingly, Regulation 696/2002 cannot provi de a valid legal ground for justifying actions
that were illegal in the past. In any event Re gulation 696/2002 took place outside the reasonable
period of time and is therefore also for that reason a non-permissible "justification".

3. Intermediate conclusions

83. India considers that it has provided convi ncing arguments showing that the EC acted
manifestly contrary to Articles 3.3, 3.1, and 5. 7. Cumulation took place that was not permitted.
Determinations regarding dumping and injury took place at differe nt times, but never simultaneously.
The justification of actions in the form of afterthought s is contrary to consistent case law as well as to
the EC's own views. In any event, the reasonable period of time was a cut-off point to which the EC
itself had agreed. Even that period of time was not respected.

84. India therefore considers that it has presented a prima facie case showing where and how
Articles 3.1, 3.3 and 5.7 were violated. Accordingly, India respectfully requests the Panel to find that
the EC acted inconsistently with its obligations under Articles 3.1, 3.3, and 5.7 of the Anti-Dumping
Agreement. India would be pleased to answer any questions from the Panel in case there are any
issues that require clarification.

C. THE EC OVERSTATED THE VOLUME OF DUMPED IMPORTS FROM INDIA

1. Claim 4: The EC acted inconsistently with its obligations under Articles 3.1 and 3.2 of
the Agreement on Implementation of Article VI of GATT 1994

(a) Introduction

85. In order to facilitate the unders tanding of this claim of India, we briefly recall the facts as they
unfolded during the various injury determinations of the EC authorities.

86. In the original measure imposing anti- dumping duties (Regulation 2398/97 imposing
definitive duties), the injury determination was b ased on the total volume of imports from all three
countries (Egypt, India, and Pakistan).

87. In the "re-determination" of August 2001, th e injury findings were based on (a) the volume of
dumped imports from Egypt; (b) the volume of non-dumped imports from Pakistan; and (c) the
volume of dumped imports as well as most of the volume of non-dumped imports from India.

88. In another, more recent, determination (Regulation 696/2002), "confirming" the injury
established in August 2001, the injury findings were based on (a) part of the volume of imports from
India and, specifically, not on (b) the volume of dumped imports from Egypt nor on (c) the non-
dumped imports from Pakistan.

55 Argentina–Definitive Anti-Dumping Measures on Imports of Ceramic Floor Tiles from Italy,
WT/DS189/R of 28 September 2001 at paragraph 4.262. The fact that af terthoughts are not permitted is also
consistent case law, such as for example witnessed by Brazil–Milk, Report of the Panel adopted by the
Committee on Subsidies and Countervailing Measures on 28 April 1994 (SCM/179, and Corr.1*), at para. 312:
"For the Panel to take into account such considerations would be tantamount to allowing a Party to modify and
rationalize its determination ex post facto ". Clearly, Regulation 696/2002 is way beyond the RPT of
15 August 2001.

Annex A-1

89. This claim concerns specifically the EC's cal culation of the portion of dumped imports out of
the total Indian imports. For this purpose India will first recall the pertinent facts in more detail after
which it will present its arguments.

(b) Facts

90. It is first recalled that the total volume of imports from India developed as follows:

 1992 1993 1994 1995 IP
India's total import
volume in tonnes56
11,845 12,424 13,113 17,998 18,428

91. Secondly, it is recalled that the total vol ume of imports of Indian sample developed as
follows:

 1992 1993 1994 1995 IP
India's sample
import volume in
tonnes
3,016 3,016 4,405 4,753 4,888

Out of this sample, the non-dumped imports developed as follows:

 1992 1993 1994 1995 IP
Volume of non-
dumped imports of
the sample
57
1,612 1,612 2,354 2,540 2,612
Percentage of non-
dumped imports of
the sample58
53% 53% 53% 53% 53%

92. In other words, the non-dumped imports in th e sample represented more than half (53 per
cent) of the volume of the sample. In case the error in the dumping margin for Madhu is corrected the
amount of non-dumped imports in the sample represen ts more than two-thirds (70 per cent) of the
imports of the sample.

93. Up to here, it would appear that the figures are undisputed.

94. The divergence of views between the EC and India results however from how the non-
dumped imports of the sample should be treated. We assume that both the EC and India wish to
respect the important finding of the Panel that:

"… It is possible that a calculation conduc ted consistently with the AD Agreement
would lead to the conclusion that one or a nother Indian producer should be attributed
a zero or de minimis margin of dumping. In such a case, it is our view that the

56 E.g., Regulation 696/2002 at rec. (5).
57 E.g., Regulation 696/2002 at rec. (45).
58 Volume of non-dumped imports of the sample expressed as percentage of total volume of imports of
the sample.

Annex A-1

imports attributable to such a producer/expor ter may not be considered as "dumped"
for the purposes of injury analysis."59
95. In reaching this view the Panel took into account, inter alia , the consideration that the
interpretation of the term "dum ped imports" shoul d be "workable" 60 and that it was in line with the
findings of the GATT Panels in the Salmon cases.61

96. While it is further clear that th e Panel reached no explicit conclusions,
62 it is equally clear that
the EC has, in its re-determination, purported to pay heed to the Panel's finding.63

97. It is therefore no longer a question whether dumped imports should be considered: on this
issue both the EC and India seem to be in agreem ent (non-dumped imports should not be considered,
as was the view of the Panel). The question has instead come down to the difference in approach as to
how imports from companies in a sample that are not dumping should be approached.

98. Basically, in the view of the EC, the total volume of imports in absolute terms should in
principle be considered dumped, but from this total should be deducted th e absolute amount of non-
dumped imports from the sample . This method was applied by the EC in its injury findings of
Regulation 1644/2001 and its injury findings of Regul ation 696/2002. Thus, in these two Regulations
the EC considered the total absolute volume of 18,428 tonnes as dumped, but deducted the non-
dumped absolute amount of the non-dumping companies from the sample (2,612 out of 4,887).

99. Basically, India considers that the sample (with a volume of 4,887 tonnes) was meant to
represent the total volume of India's exports (18,428).
64 When, 53 per cent (or 70 per cent, if the
mistake for Madhu is corrected) of that sample was found not dumped, the view of India is that this
53 per cent (70 per cent) should be applied to the total of 18,428 tonnes on a pro rata basis. Thus, in
the view of India the same proportion of non-dumped imports of the sample (currently 53 per cent)
should also be considered non-dumped when looking at the total, thereby resulting in a non-dumped
amount of 9,767 tonnes. 65 Hence, in the view of India, the absolute amount of the total imports and
the relative absolute amount of the sample should not be improperly mixed.

100. In the view of India, the issue is material. Basically, the entire import volume of dumped
imports and non-dumped imports is dramatically different in absolu te and relative terms, once the
calculation is performed properly:

 1992 1993 1994 1995 IP
Consumption 199,838 194,524 193,674 189,233 185,825
A. Total imports from India 11,845 12,424 13,113 17,998 18,428
B. Market share of A. 5.9% 6.4% 6.8% 9.5% 9.9%
C. EC view of absolute amount
of dumped import volume
10,233 10,812 10,758 15,458 15,816
D. Market share of C. (EC view) 5.1% 5.5% 5.5% 8.2% 8.5%

59 Panel Report at paragraph 6.138.
60 Panel Report at paragraph 6.139.
61 Panel Report at paragraph 6.141. The Panel stated at that para:
" … 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." (underlining added, emphasis in original).
62 Panel Report at paragraph 6.138, last sentence.
63 Re-determination, recital (22).
64 On the exact meaning of a sample see paragraphs 102 ff., infra.
65 18,428*53 per cent. Some small differences could result from rounding.

Annex A-1

 1992 1993 1994 1995 IP
E. Absolute amount of dumped
imports if sample truly serves as
a sample (i.e. 53% non-dumped,
46% dumped)
5,449 5,715 6,032 8,279 8,477
F. Market share of E. as % of EC
market
2.7% 2.9% 3.1% 4.4% 4.6%

101. This table illustrates,
66 the point that by interpreting the term dumped imports as it did, the
EC's entire foundation for its injury determination was incorrect since it was not based on credible
evidence.

(c) Arguments

(i) Argument (1): A 'sample' is intended to show what the whole is like. By disregarding this
fact, the EC neither based itself on positive evidence nor engaged in an objective examination

102. According to the New Shorter Oxford Dictionary, the noun sample, in its third meaning is
described as:

"A relatively small part or quantity inte nded to show what the whole is like; a
specimen."
103. In the context of statistics this dictionary adds that a sample is:

"a portion selected from a population, the study of which is intended to provide
statistical estimates relating to the whole."
104. Thus, in the view of India, the exports from the sample were intended to show what the whole
of the imports were like; it should have served as a basis to provide an estimate relating to the whole
of the imports.

105. By contrast, according to the EC, a sample onl y serves as a basis to show what the whole is
like as far as dumped imports are concerned. To the extent that a sample does not show dumping then
only the remaining portion of the sample is relevant for the analysis.

106. The EC, clearly, has tried to defy co mmon sense as well as accepted definitions and
understandings of what is a 'sample'.

107. Article 3.1 stipulates that the determination of injury shall be based on "positive evidence"
and involve an "objective examination".

108. In US–Hot Rolled Steel the Appellate Body recalled its finding in Thailand—H-Beams . The
Appellate Body stated at paragraph 192 with respect to "positive evidence":

"The thrust of the investigating authorities' obligation, in Article 3.1, lies in the
requirement that they base their determina tion on "positive evidence" and conduct an
"objective examination". The term "positive evidence" relates, in our view, to the
quality of the evidence that authorities may rely upon in making a determination. The

66 The table is restricted to the absence of dumping as established for Prakash and Omkar. The figures
would be even more dramatic once Madhu is properly attributed its zero margin.

Annex A-1

word "positive" means, to us, that the evid ence must be of an affirmative, objective
and verifiable character, and that it must be credible."67
109. In paragraph 193 of US–Hot Rolled Steel the Appellate Body clarified the meaning of an
"objective examination":

"The term "objective examination" aims at a different aspect of the investigating
authorities' determination. While the te rm "positive evidence" focuses on the facts
underpinning and justifying the injury determination, the term "objective
examination" is concerned with the i nvestigative process itself. The word
"examination" relates, in our view, to th e way in which the evidence is gathered,
inquired into and, subsequently, evaluated; that is, it relates to the conduct of the
investigation generally. The word "objective", which qualifies the word
"examination", indicates essentially that the "examination" process must conform to
the dictates of the basic principles of good faith and fundamental fairness."
68
110. Turning back to the speci fics of the re-determination.

111. It is well known and undisputed that the EC authorities selected a sample of exporters in order
to investigate the total Indian exports.
69 The exports of the five comp anies that were investigated,
were a specimen "to see what the rest was like"; the sample was intended to provide statistical
estimates relating to the whole.

112. The evidence that was available is that (slightly over) 53 per cent of the sample was not
dumped, while (slightly over) 46 per cent was dump ed. It was the positive evidence of this sample
pool that should have formed the basi s for the examination. There is no evidence with respect to the
dumping or non-dumping of the remainder of the exports which was not sampled.

113. Hence, by deducting an absolute amount calculated from a sample representing a total
amount of exports , the EC has neither based itself on positiv e evidence nor engaged in an objective
examination. Instead, however, the EC 'concluded' that, based on the evidence that 53 per cent of the
sample was not dumped, a mere 14 per cent of the total [(2,612/18,428)*100] was not dumped!

114. India considers that such conclusion is not ob jective, since it involves an inappropriate mix of
a relative amount with an absolute total. Following the EC's "logic" India could equally argue that if
dumping was only found for 47 per cent of the sample, only 12 per cent [(2,276/18,428)*100] of the
total imports was dumped. Neither of such met hods would draw "objective" conclusions based on
"positive evidence".

115. The correct approach would have been that for the remainder (or total) of exports an objective
examination should therefore take place: based on the positive evidence of the sample, the authorities
should have objectively examined how the rest (total) of the exports looked like.

116. The EC's method runs therefore directly c ontrary to Article 3.1, as interpreted by the
Appellate Body, which mandates such objective examination based on positive evidence. This
inconsistency with Article 3.1 also results in a direct inconsistency with Article 3.2 since the failure to
correctly establish the "volume of the dumped import s" leads automatically to the impossibility to
correctly "consider whether there has been a significant increase in dumped imports".

67 United States–Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan , Report of
the Appellate Body, WT/DS184/AB/R of 24 July 2001.
68 Ibid.
69 E.g. see Panel Report, Section II Factual Aspects, paragraph 2.5.

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(ii) Argument 2: The EC's 'legal jus tification' is tantamount to a pretext

117. The EC, probably fully aware of its fatal fallacy in the re-determination did not want to
correct this enormous error, since it would take away the entire fundamentals of its 'finding' of injury.
Instead of acknowledging its mistake th e EC resorted to a pretext, possibly in order to be able to
continue the investigation.

118. More specifically, in its reply of 27 July 2001, the EC mentions:

"their [the non-sampled exporter's] dump ing margin was determined pursuant to
Article 9(6) of the Basic Regulation and, on that basis, these imports were found to be
dumped."
119. Article 9(6) of the Basic Regulation is (more or less) the equivalent of Article 9.4 of the
ADA. It deals with the determination of an anti-dumping duty with respect to non-sampled co-
operating producers. In that calculation of a dumping duty authorities disregard zero, de minimis, and
margins based on facts available . This Article however has no bearing to the question under
consideration, which is the volume of dumped impo rts for injury purposes. The EC conveniently
forgets to mention that Article 9.4 ADA (and its dom estic equivalent) specifically states that the rules
in this paragraph, including the obligation to disr egard, are restricted "for the purpose of this
paragraph". Article 9.4 does therefore not operate elsewhere, and especially not in the context of an
injury determination. Indeed, Article 9 refers to the imposition and collection of anti-dumping duties ,
and does not bear on the determination of injury —including the volume of dumped imports—under
Article 3.

120. It is recalled that also in the context of Ar ticle 2.4.2 the EC previously tried to justify its
actions with a resort to Article 9. In that inst ance the Appellate Body did not (wish to) spend more
than one footnote dismissing such type of 'justification'.
70

121. The EC's 'justification' is therefore incorr ect and irrelevant in the context of properly
establishing the total volume of dumped imports. The EC's 'justification' has nothing to do with a
proper injury determination.

(iii) Argument 3: Taking the EC's rea soning to its ultimate consequence

122. An illustrative example may clarify the ultimat e and absurd consequence of the EC's position,
if the EC's reasoning is pushed to its limits.

123. Suppose that this time the total export volume was 100,000. Suppose that the investigating
authority would resort to sampling. Suppose that th at sample consists of 5 producers. Suppose that
these five producers have a total export volume of 5,000 tonnes. Suppose that there are four
producers in that sample who are not dumping. Suppose that these four producers represent 95 per
cent of the exports in that sample. Suppose theref ore that these four producers represent 4,750 tons
out of that sample and that therefore 4,750 tons out of 5,000 tons are not dumped. Then it is the
EC’s position that for the purpose of injury, it should consider 95,250 tons as dumped
! Or in other
words: even though 95 per cent of the sample (repres enting the total exports) is not-dumped, then still
95 per cent of the total exports will be considered dumped.

124. In the view of India such absurd results can only be avoided when the requirements of
Articles 3.1 and 3.2 are duly respected. There should be positive evidence involving an objective

70 Footnote 30 of Bed Linen Appellate Body Report.

Annex A-1

examination. An objective examination involves, inter alia , respect for elementary principles of
mathematics and statistics. This means that if , in a certain case, 53 per cent of a sample is non-
dumped, then 53 per cent of the total should also be considered as non-dumped. The EC’s view
results in the opposite conclusion.

125. Furthermore, for all practical purposes, if th e EC’s interpretation is correct, then no country
can ever "win" any dumping case against the EC on no- injury grounds since all the EC has to do is
find one producer with a dumping margin slightly over the de minimis threshold, and a subsequent
finding of injury is guaranteed.

(iv) Argument 4: The EC's view on a sample is inherently contradictory

126. Finally, as is known, the EC did also engage in sampling on the side of the domestic industry.
Clearly, on that side of the investigation the EC did consider that the result of the sample (on the state
of the industry) should represent the Community industry.

127. Hence, by applying different standards, as to what a sample is supposed to mean, on the
export and domestic side of an investigation, the EC has clearly not engaged in an objective
examination as mandated by Article 3.1 of the ADA.

2. Intermediate conclusions

128. India considers that it has provided a prima facie case showing that the EC's actions run
counter to the basic fundamentals of Articles 3.1 an d 3.2, as interpreted by the Appellate Body. For
these reasons India respectfully requests the Pane l to conclude and find that the EC acted
inconsistently with its obligati ons under Articles 3.1 and 3.2 of the Anti-Dumping Agreement. India
would be pleased to answer any question from th e Panel should the Panel require any further
information.

D. THE EC 'EVALUATED' DATA WITHOUT EVEN COLLECTING THEM. THE RE-
DETERMINATION MERELY PUTS A GLOSS ON THE ORIGINAL FINDING

1. Claim 5: The EC acted inconsistently with its obligations under Articles 3.1 and 3.4 of
the Agreement on Implementation of Article VI of GATT 1994

(a) Introduction

129. The Panel, in its Report, found that:

"[i]t appears from this listing [in the Provisi onal Regulation] that data was not even
collected for all the factors in Article 3.4, let alone evaluated by the EC investigating
authorities."
71
130. On this basis the Panel found that a violation of the substantive requirement under Article 3.4
had taken place. Notably, the Pane l added, in a later part of its Report, when dismissing India's
claim 13, that:

"if the determination was substantively inconsistent with the relevant legal
obligations, the adequacy of the notice is meaningless."
72

71 Panel Report paragraph 6.167. Relevant details of the Panel's determination are well known and are
set forth in paragraphs 6.153 through 6.169 of the Panel Report.

Annex A-1

131. These findings, inter alia , implied that absence of data collection in the first place could
impossibly be repaired by a mere re-statement of the notice.

132. Not disturbed by these clear-cut findings of the Panel, the EC in its re-determination simply
stated: "the determinations … [in the or iginal measure] were not fully described."
73 This put paid to
the entire DSB deliberations, by creating facts w hose existence itself had neither been brought on
record before, nor were accepted by, the Panel.

133. Even if the facts had originally been duly collected and evaluated— quod non— then also the
other findings of the Panel and the Appellate Body, as well as the results of these other findings,
should have necessitated an overall reconsideration and analysis of the determination of injury.
74
Such overall reconsideration and analysis was all th e more necessary in view of the other findings of
the Panel which had an impact on the dumping marg in, an impact on the definition of the domestic
industry, and an impact on which dumped imports to consider.

134. Moreover, such overall rec onsideration and analysis shoul d have taken place within the
mutually agreed reasonable period of time ('RPT').

135. Furthermore, India wishes to point out that the EC's injury 'findings' contain certain factual
errors. These errors are also witness to the fact that no objective examination has taken place on the
basis of positive evidence.

(b) Facts

136. The Panel will appreciate that this claim is pa rt of a 'rich' factual and legal record—a large
part of which is known from the original proceedings . Accordingly, rather than trying to summarize
all facts, India proposes to refer to the relevant facts, as when presenting its arguments hereinafter.

(c) Arguments

(i) Argument 1: Data which were not collected cannot be evaluated

137. As noted, the Panel originally found a violation of the substantive requirement of Article 3.4
and did not merely relate to the explanation of the EC's notice.
75 The Panel found that it appeared
from the listing in the Provisional Regulation that fo r a number of injury factors listed in Article 3.4
data collection had not even taken place,76 let alone evaluated.77

138. The Panel added, in a later part of its Repor t, when dismissing India's claim 13 (regarding the
inadequacy of the explanation), that:

72 Panel Report paragraph 6.259.
73 Re-determination, recital 17 (ii), second sentence.
74 Mexico–Anti-Dumping Investigation of High Fructose Corn Syrup (HFCS) from the United States ,
Panel Report, WT/DS132/RW, at paragraph 6.37. This argument is further developed, infra, at para. 0 ff.
75 The EC did not appeal this finding.
76 The Panel refers in its conclusion in para. 6.169 to the "foregoing" which includes the reference in
para. 6.167 that it appears that data was not even collected. The "foregoing" also includes the Panel's dismissal
in para. 6.168 of the EC's argument that data were evaluated but not discussed.
77 Ibid.

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"if the determination was substantively inconsistent with the relevant legal
obligations, the adequacy of the notice is meaningless."78
139. These two findings of the Panel implied, inter alia, that the original absence of data collection
and evaluation could impossibly be repaired by a mere re-statement of the notice.

140. Despite these clear-cut findings of the Panel, th e EC in its re-determination merely stated that:
"the determinations … [in the origin al measure] were not fully described."79

141. The Commission Services continued this lin e of reasoning in recital (19) of the re-
determination:

"The approach described in recital 62 of the provisional Regulat ion was revised by
eliminating data relating to producers wh ich were not part of the Community
industry. In the present Regulation, the data were analysed as follows:
(i) at the level of the Community industry, for trends concerning production,
sales by volume, market share, employm ent and growth. The relevant data
were obtained from the verified questionnaire responses of the 17 sampled
producers, and from the information collect ed with regard to the further 18
producers forming part of the Community industry;
(ii) at the level of the sampled Community producers, for the trends concerning
prices and profitability, cash flow, abili ty to raise capital and investments,
stocks, utilisation of capacity, wages a nd productivity, on the basis of the
aforementioned questionnaire responses.
 In addition, the magnitude of the margin of dumping was examined."
142. This line of reasoning permits two observations from India.

143. Firstly, in view of the findings of the Panel that a substantive violation of Article 3.4 had
occurred, and specifically not Article 12, it is impo ssible that such data are subsequently evaluated
without first being collected.
80

144. In case the Panel at the time would merely have taken issue with the problem of an adequate
explanation, then the Panel would have acted in accord ance with the case law of the Appellate Body
in Thailand–H-Beams:

" … Article 12, like Article 6, sets fort h important procedural and due process
obligations. However, as in the case of Artic le 6, there is no justification for reading
these obligations into the substantive provisions of Article 3.1. We do not, however,
imply that the injury determination of the Thai authorities in this case necessarily met
the requirements of Article 12. This issu e was not considered by the Panel, since
Poland did not make a claim under this provision.
111. We consider, therefore, that the requirement in Article 3.1 that an injury
determination be based on "positive" evidence and involve an "objective"

78 Panel Report paragraph 6.259.
79 Re-determination, recital 17 (ii), second sentence.
80 It appears from the record, and is undisputed by the EC, that after 12 March 2001, and during the
reasonable period of time, no new collection of data took place whatsoever.

Annex A-1

examination of the required elements of injury does not imply that the determination
must be based only on reasoning or facts that were disclosed to, or discernible by, the
parties to an anti-dumping investigation. Article 3.1, on the contrary, permits an
investigating authority making an injury de termination to base its determination on
all relevant reasoning and facts before it."
81
145. In India's view it remains therefore impossible that data are now suddenly evaluated in the re-
determination if they were not even collected. For this reason India will not (again) enter into
(endless) discussions as to whether the EC collected information in the questionnaires since the Panel
had already factually established this absence of data collection as part of the substantive violation of
Article 3.4.

146. Secondly, India will highlight two economic factors th at are illustrative as to the fact that no
data had been collected.

 Inventories

147. While the EC makes no secret of the fact that stock data were not even taken into account
when establishing consumption,
82 this absence of data collection for inventories is replicated at the
level of the description of the sampled EC producers.

148. At the level of the sampled producers
83 the EC first explains why, in the abstract, it
considered that the indicator stock did not have a bearing on the state of the Community industry:

"As to stocks, this is the case for two reasons. Firstly, … Secondly … "
149. Only then did the EC reveal part of the allegedly collected facts: "While some increase in
stocks was observed in some companies … ". 84

150. The EC then mentions that with respect to these partially revealed facts "neither the
complainant [sic] nor any sampled Community pro ducer adduced increase in stocks as evidence of
injury."
85

151. Clearly, such 'evaluation' turns the world on its head. It can only be understood if no data
collection had taken place. By contrast, the or iginal Panel, also referring to the Panel in Korea –
Dairy Safeguards made abundantly clear how a proper fact finding and subsequent evaluation should
take place:86

81 Thailand–H-Beams, WT/DS122/AB/R of 12 March 2001, section VII, notably paragraphs 110 and
111.
82 Recital (20) of the re-determinati on confirms recital (63) of the pr ovisional Regulation. Recital (63)
of the provisional Regulation measured consumption as production plus imports minus exports but without
taking account for stocks. Clearly, while no auditor in her or his right mind would ever approve of measuring
consumption whilst purposefully disregarding inventories, this non-consideration of stocks is in itself already a
first indication that information on inventories was simply never collected.
83 Re-determination, recital (29).
84 Up to the present date, it is anyone's guess how stocks developed for all companies.
85 One may only wonder what the complainant has to do with the investigation. Once an investigation
has started a complainant should normally not form part of the investigative process. One may also wonder why
an investigating authority considers this ( i.e. whether a "complainant … [or] producer adduced increase in
stocks as evidence of injury") to be a 'criterion' to determine whether or not a factor is relevant.
86 Panel Report, paragraph 6.155.

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"… 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.55
The Panel concluded that the text of this provision made it clear that:
"among "all relevant factors" that the inv estigating authorities "shall evaluate", the
consideration of the factors listed is alwa ys 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 – Dairy Safeguard , Panel Report, para. 8.123."
(underlining and emphasis added)
152. Clearly, facts pertaining to a certain factor must first be collected and brought on record, after
which they can be evaluated. The EC's current de termination switches this around. Following such a
sequence of 'reasoning', facts could equally not have been collected.

 Utilization of Capacity

153. The same observation goes, for example, for the factor "utilization of capacity".
87 The EC
first tries to explain as to why the factor did not have a bearing on the industry. It then explains that
reliable figures were extremely difficult to establish. It subsequently explains however that there was
a high rate of capacity utilization where production even had to be sub-contracted.

154. The subsequently—barely re vealed—factual data follow the a priori dismissal of the
relevance of the factor. Moreover, the factual data, if anything, do not point to wards injury at all, on
the contrary.
88

155. Clearly, and as pointed out by the original Panel which cited Korea – Dairy Safeguards, facts
pertaining to a certain factor must first be collected and brought on record, after which they can be
evaluated.

156. Finally, it may be noted that whilst for some of the other factors the EC in the re-
determination suddenly and purportedly came up with some 'hard and fast' figures and indices,
89 the

87 Re-determination, paragraph 30. In the re-determination this factor 'utilization of capacity' is
described under the title 'production capacity' which, of c ourse, something different. The discussion itself also
confuses the two factors. While India can only speculate that this mi stake stems from a basic misunderstanding
of the difference between these two f actors, India will at present make no argument on this puzzle since that
would not seem to add to the substance of the issue of 'utilization of capacity'.
88 High capacity utilization was maintained; this doe s not point towards injury. Production had to be
sub-contracted; this means that own capacity was not even sufficient to keep up with the demand. High
utilization even took place during depr essed periods; this means that even in so-called 'depressed' periods the
capacity utilization was high. None of these three observations points to injury at all, on the contrary!

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"evaluation" of inventories and utilization of cap acity remained stranded in vague generalizations
about allegedly collected facts.

(ii) Argument 2: Even if data had been collected—quod non—there should have been an overall
reconsideration and analysis; the evaluation should be adequate

157. In the view of India the EC has in fact done nothing else other than to issue a new
determination that, while professing to comply w ith the Panel's conclusi ons and findings, is
essentially a restatement of its original determination. Information is mis-characterized and there is
no reasoned explanation why improvements in trends were not probative in ascertaining the condition
of the industry. The new gloss that the EC has put on its original determination cannot hide the fact
that the finding of injury continues to be contradicted by facts on the record.

158. In short: The new gloss does not remedy the errors found by the Panel.

159. Examples of important changes as a result of the original Panel Report that should have been
taken into account by the EC for the determination of injury included, for example, the observations
from the Panel that:

 - information was never collected let alone evaluated;

 - the EC may for its injury determination not rely on companies outside the
Community industry;

 - only countries found to be dumping should be considered; and

 - only dumped imports from India should be considered.

160. Also the reduction in dumping margins should have been considered.

161. The Panel will be aware of a recent similar case wh ere the Mexican authorities also re-stated
their original determination in a manner found to be inconsistent with the ADA. In the 'compliance
Panel' regarding HFCS, it was found that a proper implementation of the Panel's findings requires not
only a recitation of those injury factors which should have been examined in the original
investigation, but an overall positive injury determination in line with the requirements of the ADA:

" … Part of the difficulty with SECOFI's re determination in this case is that while
SECOFI apparently undertook to respond to the specific criticisms set out in the
original Panel's report, and has set out add itional information relevant to the specific
points made by the Panel in that report, there does not appear to have been an overall
reconsideration and analysis of the information in light of the requirements of the
AD Agreement, as clarified by the original Panel."
90 (emphasis added)
162. The HFCS compliance Panel Report was upheld by the Appellate Body.91

89 The data are less 'hard and fast' than the figures wish the reader to believe. While India will devote a
separate section infra ( i.e. paras. 214 ff.), to factual errors, it may be pointed out here that while most data
pertain to the period 1992–I.P., the increase on consumer prices (recital (33)) starts only with the year 1993, and
the factor growth is, without rhyme or reason, restricted to the period 1994–I.P.
90 Mexico–Anti-Dumping Investigation of High Fructose Corn Syrup (HFCS) from the United States ,
Panel Report, WT/DS132/RW, at paragraph 6.37.
91 WT/DS132/AB/RW of 22 October 2001.

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163. Hence, in order to comply with the original Panel Report, the re-assessment carried out by the
Commission Services must show that there has been an overall reconsideration and analysis of the
injury factors listed in Article 3.4 of the ADA. Not only should all factors be evaluated, but the
evaluation of each factor should also be adequate.

164. Despite these findings of the compliance Panel in HFCS, the 'analysis' of the state of the
domestic industry was apparently carried out as follows. First the Commission Services professed to
have examined data with regard to the relevant injury factors listed in Article 3.4. Yet, the
'examination' is curt and includes references to the or iginal provisional Regulation, in itself a sign that
no re-consideration took place. The original relianc e on information regarding companies outside the
Community industry is allegedly disregarded (by alleged 'elimination' of such data
92) although the EC
continues to refer to them in at various parts of the re-determination.93

165. We now turn to the EC's analysis of th e injury factors and will show examples of the
inadequate analysis or examples of the fact that analysis did not even take place.

 Actual and potential decline in sales, Market share, Price development

166. The sales volume of the Community industry went up from 36,205 tonnes in 1992, to
36,553 tonnes in the IP.
94 The sales turnover of the Community industry also went up from
ECU 428.6 million in 1992 to ECU 446.6 million in the I.P. While sales information on the sampled
producers is also available, that information can be set aside in a situation where positive information
on the entire domestic industry is available, since the issue to be resolved is exactly the state of the
entire domestic industry.95

92 Re-determination, recital (19).
93 E.g., re-determination recital (44) second paragraph. This also happened in the context of causation,
e.g., recital (61) second paragraph.
94 Recital (35) re-determination.
95 In line with the reasoning of the original Panel at 6.181:

" … anti-dumping investigations should be fair and … 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 ignore d, even though it relates precisely to the issues to be
resolved."

The Appellate Body in Hot Rolled Steel also expressed its views on a limited examination of the
domestic industry. ( United States–Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan ,
Report of the Appellate Body, WT/DS184/AB/R of 24 July 2001.) While the Appellate Body in that case did
not object to a limited investigation as such, it offered important warnings with respect to such approach:

"195. … Similarly, it seems to us perfectly compatible with Article 3.4 for investigating authorities to
undertake, or for a Member to require its investigating authorities to undertake, an evaluation of particular parts,
sectors or segments within a domestic industry. Such a sectoral analysis may be highly pertinent, from an
economic perspective, in assessing the state of an industry as a whole.
196. However, the investigating authorities' eval uation of the relevant factors must respect the
fundamental obligation, in Article 3. 1, of those authorities to conduct an "objective examination". If an
examination is to be "objective", the identification, investigation and evaluation of the relevant factors must be
even-handed. Thus, investigating authorities are not entitled to conduct their investigation in such a way that it
becomes more likely that, as a result of the fact-finding or evaluation process, they will determine that the
domestic industry is injured.
…
204. … where investigating authorities undertake an examination of one part of a domestic
industry, they should, in prin ciple, examine, in like manner, all of the other parts that make up the industry, as
well as examine the industry as a whole. Or, in the alternative, the investigating authorities should provide a

Annex A-1

167. According to the original EC's provisional regulation, the market share of the domestic
industry went up from 22.4 per cent to 25.1 per cent.
96 According to current facts as disclosed, the
market share of the domestic industry went up from 18.12 per cent to 19.67 per cent. 97 While India
does not quite understand the difference in figures it appears that under both calculations the market
share went up.

168. Since the increase of (domestic) sales in value terms
98 is greater than the increase in volume
terms99 it is also clear that average prices went up.100

169. Information on export sales has not been collected let alone been evaluated. In the absence of
information on inventories, it is in fact impossible to calculate how export sales have performed.

170. Clearly, the factors sales, market share, as well as price development do not point towards
injury. The EC does not evaluate nor offer any co mment on these three factors that all do not point
towards injury. The only remark that is offered is that mark et share increase was due to sales of
"higher value niche products".
101 Clearly, such kind of observation from the EC does not meet any
standard of a proper evaluation. Nor does the observation conform to the findings of the Appellate
Body with respect to the existence of one like product:

" … Having defined the product as it did, the European Communities was bound to
treat that product consistently thereafter in accordance with that definition."
102

satisfactory explanation as to why it is not necessary to examine directly or specifica lly the other parts of the
domestic industry. Different parts of an industry may exhibit quite different economic performance during any
given period. Some parts may be performing well, while others are performing poorly. To examine only the
poorly performing parts of an industry, even if coupled with an examination of the whole industry, may give a
misleading impression of the data relating to the industry as a whole, and may overlook positive developments
in other parts of the industry. Such an examination may result in highlighting the negative data in the poorly
performing part, without drawing attention to the positive data in other parts of the industry. We note that the
reverse may also be true – to examine only the parts of an industry which are performing well may lead to
overlooking the significance of deteriorating performance in other parts of the industry.
205. Moreover, by examining only one part of an industry, the investigating authorities may fail
properly to appreciate the economic relationship between that part of the industry and the other parts of the
industry, or between one or more of those parts and the whole industry. For instance, we can envisage that an
industry, with two parts, may be overall in mild recession, where one part is performing very poorly and the
other part is performing very well. It may be that the relationship between the two parts is such that the
healthier part will lead the other part, and the industry as a whole, out of recession. Alterna tively, the healthy
part may follow the other part, and the industry as a whole, into recession.
206. Accordingly, an examination of only certain parts of a domestic industry does not ensure a
proper evaluation of the state of the domestic industry as a whole, and does not, therefore, satisfy the
requirements of "objectiv[ity]" in Article 3.1 of the Anti-Dumping Agreement." (footnotes omitted)
96 Provisional Regulation, recital (85): " … market share by volume: … Community industry … gained
market share, from 22.4 per cent to 25.1 per cent … ".
97 Volume as disclosed in re-determination divided by consumption disclosed in fax of EC of
27 July 2001, page 12. (36,205 ./.. 199,838)*100 = 18.12 per cent and (36,553 ./.. 185,825)*100 = 19.67 per
cent. These market share figures coincide with the market share figures in recital (35) of the re-determination.
98 From 428.6 million Ecu to 446.6 million Ecu.
99 From 36,205 tonnes to 36,553 tonnes.
100 From 11.8 Ecu/kg to 12.2 Ecu/kg.
101 Re-determination, recital (35).
102 Appellate Body, Bed Linen, at paragraph 53.

Annex A-1

171. In fact, the EC's remark that market shar e increase was due to sales of "higher value niche
products" is also at odds with its determination in recital (97) of the provisional Regulation where it
argued that "the market for bed linen is characterized by product substitutability and transparency."

 Profits

172. As a preliminary remark it is noted that dur ing all these years the EC has been suspiciously
silent on the profits achieved by the Community industry . In view of the fact that profit reduction
formed the main, if not only, factor on which alleged injury is based it would have been not more than
prudent to reveal those profits.

173. The entire injury determination is theref ore based on a doubtful and limited piece of
information, i.e. the profits of the sampled producers. The EC allegedly did possess information on
the total sales values and volumes of the domestic industry and the sampled producers but,
surprisingly, profits only for the sampled producers. If this vital information was indeed not collected
at the level of the domestic industry, then this fails to meet the standard pronounced by the Appellate
Body on the requirements of objectiv[ity] of Artic le 3.1 of the Anti-Dumping Agreement. As the
Appellate Body, quoted in more detail above,
103 noted:

" … an examination of only certain parts of a domestic industry does not ensure a
proper evaluation of the state of the domestic industry as a whole, and does not,
therefore, satisfy the requirements of "objectiv[ity]" in Article 3.1 of the Anti-
Dumping Agreement."
174. Moreover, India has reservations with the absolute figures of profits attributed to the
"domestic industry" in recital (36) of the re-determination; according to India this was the profit
amount for the sampled producers. To be sure, India takes no issue with having the sample
representing the total; 104 however, India (again) ta kes issue with attributing absolute amounts of a
sample to a total pool. Furthermore, India can only wonder how the change in turnover of the
sampled producers between the provisional Regula tion and the re-determination still managed to
result in the same profit figures.105

175. In any event, it is undisputed that the sampled companies made a profit throughout the
investigation period. The EC does not further ev aluate this profit figure. The EC in the re-
determination merely confirms th e provisional Regulation. The pr ovisional Regulation in turn did
nothing more than allege that the profit is belo w the minimum level of 5 per cent. The EC does not
provide any proof for such minimum level of profit. It only states that this minimum was the level of
profits made in 1991, i.e. a year outside the injury investigation period.

176. In this connection India also recalls the finding of the panel concerning India's previous
arguments regarding the reasonability of profits in the context of normal value:

103 United States–Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, Report of
the Appellate Body, WT/DS184/AB/R of 24 July 2001, at para. 206.
104 Indeed, this is what a sample is for, as argued earlier.
105 In the provisional Regulation the value of Bed Linen sales by the sampled producers rose from
ECU 280.6 million in 1992 to ECU 446.6 million in the investigation period. In the provisional Regulation the
corresponding profits dropped from 3.6 per cent to 1.6 per cent. In the disclosure of 19 June 2001, the EC table
at page 13 shows a turnover of ECU 276.9 million in 1992 and ECU 281.2 million in the I.P. The profit for
these two years however remained the same at 3.6 and 1.6 per cent respectively.

Annex A-1

" … 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 EC."
106
177. Now that the reverse situation occurs on the si de of the domestic industry, in the context of
injury, the Panel would not hesitate to draw the mi rror-conclusion: that the actual profit rates of EC
producers are lower than those achieved in another year (outside the IIP) does not ipso facto render
those actual profits less adequate.

178. Finally, it may be added that these were profits after (very) significant investments. The
sampled producers were profitable even after making all the investments that they made. One could
only imagine the profit levels had no such heavy inv estments been made. Indeed, if one takes away
the average yearly investments of 20 per cent, th e profit margins would have consistently exceeded
20 per cent.

179. Accordingly, India submits that the EC has fa iled to adequately evaluate the factor profits.
India has provided four straightforward reasons fo r this assertion. (1) This being the single most
important factor for injury for the EC's determin ation it should have tried to obtain (or, perhaps,
reveal) the information for the entire domestic industr y. (2) There are factual contradictions between
the original Regulation and the re-determination which remain unexplained. (3) No objective proof
has been provided for the fact that profit levels obtained throughout the period were not adequate. (4)
On the contrary, profit was achieved throughout the IIP, even after significant yearly investments of
over 20 per cent.

 Output

180. The domestic industry increased its output from 39,370 tonnes to 42,781 tonnes. Recital (31)
of the re-determination refers to the (short) statem ent in recital (81) of the provisional Regulation.
Other than recital (81) this factor remains unevaluated. In recital (81) the EC states:

"The Commission concluded that the Community industry represented those
companies which were strong enough to survive competition from dumped imports
and which to a certain extent had benefited from the demise of those which had not so
survived."(Emphasis added)
107
181. If anything, this factor clearly does not point towards injury since output increased, and the
Commission considers the producers of the Community industry were "strong enough". Other than
that, India considers that this factor has not been adequately evaluated.

182. Indeed, if India understands the EC's logic pr onounced in recital (19) of the re-determination
the references to producers not forming part of th e Community industry should have been considered
eliminated. It is therefore unclear if and how recital (81) of the provisional Regulation should be
read: if recital (81) is indeed eliminated the EC has not discussed output. If recital (81) is not
eliminated it refers to producers outside the domestic industry. In such latter case India objects to the
EC trying to introduce alleged injury by referen ces to non-industry through the backdoor (a practice
which the panel disallowed).

 Productivity

183. Productivity increased with 11 per cent from the beginning to end the injury investigation
period. The factor remains completely unevaluated and, if anything, does not point towards injury.

107 Provisional Regulation recital (81).

Annex A-1

 Return on investments

184. The investments made throughout the entire inju ry investigation period were substantial. The
table attached to the fax of 19 June 2001 108 shows that investments by sample companies for Bed
Linen production were over 20 per cent (!) for each year (!) of the injury investigation period.109 This
is remarkable since the EC noted in recital (90) of the provisional Regulation that " … the industry in
question is not capital intensive".

185. Throughout the injury investigation peri od the companies obtained a positive return on
investments. Again, India takes i ssue with the mistake that in the re-determination the EC refers to
the sampled companies as Community industry. This error will be addressed below.

186. In any event, no evaluation takes place of th e factor. The EC merely states that "the
maintenance of production tools was the main purpo se of the Community industry's [sic] investments
during the period concerned" and "the overall trend followed by the return on investments is similar to
that of profitability." India considers that this is not an adequate evaluation of a factor which in
essence does not point towards injury. The high level of the investments moreover does not point
towards a mere maintenance of tools at all, but points towards significant upgrading of machinery.
110

 Factors affecting domestic prices

187. The EC refers to the contracti on in demand and raw cotton prices.

188. As regards contraction in demand ( i.e. decrease in consumption), no evaluation takes place.
The EC merely concludes that "given that the pri ces of the dumped imports were the lowest", "the
contraction in demand in itself did not have an overriding impact on prices".
111 No reasoning or logic
is provided which adequately explai ns this statement. The conclusion that "contraction of demand in
itself did not have an overriding impact on prices" because India's imports were allegedly among the
lowest of all operators is equally incomprehensible.

189. As regards the price of raw cotton there agai n seems to be a problem with the evaluation of
the evidence. The EC merely states that price of raw cotton "can represent up to 15 per cent" and
"increased significantly". It is then stated that pr oducers should have been able to pass on this cost
increase but were not able to do so. Clearly, if it is true then this is another factor affecting prices and
has nothing to do with the imports from India.

190. In the more recent injury 're-confirmation'
112 the EC suddenly refers to "gap left by
Community factory closures", the "fall in imports from certain other third countries" and the "imports
from India, which most were found to be dumped." Apart from the fact that 53 per cent of the sample
imports from India were not dumped, India fails to see what factory closures of producers not
belonging to the Community industry have to do with the state of the domestic industry.
113 Again,

108 Exhibit-India-RW-5.
109 The total investments of the sampled companies for Bed Linen for five years amounted to more than
300 million ECU.
110 Normal repair and maintenance would not have be en booked as separate investments. Nor would
they have ever reached such enormous levels. Normal maintenance in the textile sector would not exceed a few
percentage points, at most.
111 Re-determination recital (44).
112 Regulation 696/2002.
113 As the original Panel stated in para. 6.182:
"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."

Annex A-1

India objects to the EC trying to introduce alleged injury by references to non-industry through the
backdoor.

 The magnitude of the margin of dumping

191. We first recall the meaning of the word "magnitude".

192. According to the New Shorter Oxford Dictionary magnitude is, in its second meaning,
described as: "great size or extent; great degree or importance."

193. Fact is that the dumped imports from the I ndian sample represented, as shown above, less
than half. The two largest exporters from India, re presenting more than 50 per cent of the exports of
the sample were not dumping. One further dumpi ng margin was 3 per cent. These three margins
represented over 70 per cent of the sample.

194. While there could perhaps be many perceptions of the words "great size or extent; great
degree or importance" it appears unlikely that the absence of dumping by two producers, and one
producer with 3 per cent would be covered by such understanding. This was perhaps also the view of
EUROCOTON by filing its recent complaint which has lead to Bed Linen-III initiated in
February 2002; if EUROCOTON would have consid ered that the duties, all based on the dumping
margins, would have been of such "great size or importance", it would not have filed yet another
complaint.

195. Again, in the recent "re-confirmation" the EC concludes that the dumping margins found:

"are still substantial and distinctly above de minimis levels."
196. This statement is at odds with the facts, which showed that two producers had zero dumping
margins. Also the margin of 3 per cent can also hardly qualifies fo r the statement to be correct.
Again, these three producers represented 70 per cent of the sample. These examples illustrate that the
assertion of the EC in the last sentence of recital (19) is also incorrect.

197. India considers that the evaluation by the EC, restricted to a cursory one sentence, was
inadequate and factually incorrect.

 Actual and potential negative effects on cash flow

198. The 'evaluation' of cash flow is restricted to two sentences.
114 It is mentioned that cash flow
remained positive but declined from 25 million Ecu to 18 million Ecu It is then mentioned that cash
flow followed a similar decreasing trend as profitability.

199. Apart from the fact that India does not consider this 'evaluation' adequate at all, it is also
based on a factual error. As will be explained fu rther below, the cash flow declared in the re-
determination was the cash flow of the sampled producers, not that of the Community industry.

 Inventories

200. India has earlier signalled its fundamental obj ections against the manner in which the item
inventories has been addressed. In India's view info rmation was not collected, let alone evaluated, let
alone evaluated adequately.

114 Re-determination recital (37).

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 Employment

201. Employment decreased from 7,000 to 6,700. 115 The EC has clubbed the discussion of
employment with that of production and productivit y. Under the EC’s logic, the producers suffered
from imports, had to lay off 300 jobs , managed to force the remaining labour to work 8.7 per cent per
cent harder (without any trade union protests), a nd—notwithstanding their injured position, spent
20 per cent on investments in new Bed Linen machin ery. India considers that such reasoning is
fallacious.

202. Instead, based from the facts on the record it seems more probable that the continuous
investments in new machinery resulted in an increased production. The increased production from
more efficient machines could have been the reason to the 300 lay-offs in the sector.

203. In other words, since production increased during the same period with 8.7 per cent (a
productivity increase of 11 per cent), the decrease in employment is not caused by imports but rather
is a function of the productivity increase (India notes in this context the data on investments in new
machinery showing heavy investments of over 20 per cent being made throughout the injury
investigation period).

204. In any event, India also takes issue with the factual error in the re-determination. While it is
stated in recital (91) of the provisional Regulation that employment in the Community industry
decreased from 7,000 to 6,700, the EC's re-determina tion qualifies this as a decline of 5.3 per cent.
However, if we express 300 as a percentage of 7,000 or 6,700 then the result is either 4.28 per cent or
4.47 per cent. The EC has yet to account for its 5.3 per cent.

 Wages

205. Wages increased during the injury investigation period. The evaluation of the EC is restricted
to the observation that for part of the IIP the wages went up in line with consumer prices. India does
not consider this evaluation adequate. In any event the factor does not point towards injury.

 Growth

206. The evaluation of growth of the Community in dustry is restricted to part of the facts, i.e. from
1994 to the I.P. and is restricted to sales volume. The EC disregards that overall sales volume
increased, and that other important growth factors such as output, productivity, capacity utilization,
market share, wages, ability to raise capital, all showed a positive trend.

207. The EC then even refers to the supposed growth of the dumped imports which has nothing to
do with the "state of the domestic industry" . India is of the opinion that it is the growth of the
domestic industry that should be evaluated. In any event the data that allegedly refer to the "low-
priced dumped imports" are wrong, since they include a country that did not dump. In its recent
injury 're-confirmation' the EC changed this discu ssion into the imports from India. As pointed out
earlier in this submission, the calculation of dumped imports from India was wrong. In any event, the
alleged increase of dumped imports is not directly relevant in the context of growth of the domestic
industry.

208. India considers that the evaluation was not adequate.

115 Provisional Regulation recital (91).

Annex A-1

 Ability to raise Capital

209. The sampled producers were able to raise capital throughout the IIP at a stable and,
eventually, increasing level.

210. The EC's evaluation is however restricted to the observation that there was no claim nor any
indication that there were problems to raise capital. The EC then even goes on to state that no major
investments were made, despite the fact on the reco rd that the average yearly investments amounted
to approximately 20 per cent. India considers that the evaluation was factually wrong, not adequate
and that also this factor does not point towards injury.

 EC's conclusion on injury

211. The conclusion that follows in recitals (48) through (51) of the re-determination is in itself
wrong since it bases itself on wrong figures; for example, the data in recital (48) regarding the volume
of imports cannot be sustained by facts. Based on such wrong base-data, it is impossible that the
conclusion could be correct. Accordingly, by no t basing itself on positive evidence, the EC in its
conclusions acted contrary to Article 3.1.

212. Moreover, in the conclusions in recitals (50) and (51) the EC misleadingly attribute the actual
absolute data of the sampled producers to the Community industry .
116 Such factual errors in
themselves taint the conclusions.

213. In any event, the EC's conclusion is based on inadequate or poor evaluations, as shown above.
Also in the conclusions there is a clear absence of an overall reconsideration and analysis, as would
have been in line with the requirements of HFCS 21.5 (as confirmed by the Appellate Body). The
complete inadequacy of the examination, rende rs the EC's conclusion inconsistent with the
requirements of Articles 3.1 and 3.4.

(iii) Argument 3: Errors on the factual record invalidate the re-determination

214. The re-determination also contains factual erro rs that might be pointed out. The existence of
such errors makes it not possible that the evalua tion was based on positive evidence. It also casts
doubt on the objectivity of the examination. We will distinguish between facts that appear to have
been ignored, facts that appear to have changed without explanation, and facts that have been
misrepresented.

 3.a Facts on the record appear to have been deliberately ignored

215. Recital (54) of the original provisional Regul ation indicated that the EC had eliminated (the
data from) one sampled company, after verification, because it imported Bed Linen from Pakistan. In
this regard the EC had (presumably) resorted to Article 4.1(i) of the ADA, which is the only
legitimate justification on the basis of which such elimination can legally be explained.

216. Hence, since Pakistan was not dumping, the re-investigation of injury should have included
the verified information of that sampled producer. There was no legal justification to continue to
exclude (or disregard) information on the record pert aining to that producer. Article 4.1(i) could not
be invoked. The consideration of this available a nd verified evidence should have taken place before
the deadline of 15 August 2001. However, considera tion of that evidence never took place within the

116 For example, absolute figur es on profits, cash flow, etc. are all erroneously attributed as belonging
to the Community industry.

Annex A-1

RPT. The consideration of that evidence did also not take place in the "re-confirmation" issued eight
months after the RPT.

217. The result is that by examining only a certain part of the information pertaining to the
domestic industry, the EC did not properly evaluate the state of the domestic industry as a whole. The
EC has purposefully disregarded "positive evidence" on the record. Therefore, this failure to consider
the evidence pertaining to the company in question is inconsistent with the requirements of an
objective examination in Article 3.1 of the Anti-Dumping Agreement.

 3.b Facts on the record appear to have changed without explanation

218. In the provisional Regulation the sales valu es of the sampled producers for Bed Linen rose
from ECU 280.6 million in 1992 to ECU 285.3 million in the I.P.
117 In the re-determination, these
sales values changed into ECU 276.9 million and ECU 281.2 million, respectively. 118 The EC did not
provide any explanation for this change in facts. Despite this change in turnover, the alleged profit
reduction remained the same: from 3.6 per cent to 1.6 per cent.

219. A similar change took place as regards the mark et share of the Community industry. In the
provisional Regulation this market share allege dly developed from 22.4 per cent to 25.1 per cent
(+2.7 per cent).
119 In the re-determination, this market share increased from 18.1 per cent to 19.7 per
cent (+1.6 per cent). 120 While under both calculations the share went up, the EC did not provide an
explanation for this apparent change in facts.

 3.c Facts on the record are misrepresented

220. Also important, the re-determination contains errors as regards the information presented on
profits, cash flow, and return on investments.

221. Starting with recital (19), it is clear that th e EC asserts that information on factors such as
profit, cash flow, and investments was only collected at the level of the sample. As far as profits are
concerned, the provisional Regulation contained the same assertion.
121 Allegedly (and unfortunately)
profits for the Community industry were never collected (or revealed).

222. Yet despite the assertion that this inform ation was collected at the level of the sample, the EC
suddenly, further in the re-determination at recital (36), asserts that profitability of the Community
industry shrunk from ECU 10 million to ECU 4.6 million. In the table that accompanies the
disclosure of 19 June 2001 the EC also refers to the profit figures of 10 million and 4.6 million.
These latter profit data pertain to sales turnovers of ECU 276 million and ECU 281 million, which
were the turnovers of the sampled producers.
122 This implies that the profit reduction from to 10 to
4.6 million is that of the sampled producers and not, as explicitly asserted, those of the Community
industry.

223. The same errors are repeated for cash flow and for investments.

117 Provisional Regulation recital (83).
118 See, table attached to disclosure of 19 June 2001 (Exhibit-India-RW-5). The table is attached to the
end of this disclosure; the turnovers are reported on page 1 of that table.
119 Provisional Regulation, recital (85).
120 Re-determination, recital (35).
121 Re-determination, recital (89).
122 Since the sales of the Community industry was 428.6 million in 1992 and 446.6 million in the I.P.,
the data in the disclosure of 19 June 2001 (276 and 281 million respectively) can logically only relate to the
sales of the sampled producers.

Annex A-1

224. As another example of misrepresentation of fact s can serve the recent injury 're-confirmation.'
In recital (19) it is stated that:

"the dumping margins found are still substantial and distinctly above de minimis
levels."
225. Clearly, this is not true. The dumping margins for the two largest exporters from the sample
were zero, i.e. lower than de minimis. This means that the statement of recital (19) is factually wrong.

226. Similarly, the statement in the next sentence of the recital, that "one third of the undercutting
would have disappeared if the imports from India ha d not been dumped" is equally puzzling. The EC
conveniently forgets that normal value is one part of the dumping margin and that a change in normal
value does nothing to the margins of undercutting.

227. The issue of these misrepresentations is materi al, since the conclusions that are drawn in the
re-determination, in recitals (50) and (51), as we ll as in the re-confirmation, are all based on these
misrepresentations and other errors. Accordingly, the EC did not base itself on positive evidence
when drawing its conclusions. It therefore acted co ntrary to Article 3.1. Equally, the examination
cannot be said to have been objective since the evalua tion is based on misrepresented facts; this again
is therefore contrary to Article 3.1.

2. Intermediate conclusions

228. India considers that it has presented a prima facie case with respect to the inconsistencies with
Articles 3.1 and 3.4. Data were evaluated which had not even been collected. No overall re-
consideration and analysis has ever taken place. Inju ry is based on reduction in profit of a profitable
sample, while price depression is the other reason mentioned (even though average prices increased).
Most, if not all, injury factors point towards a healthy industry making significant investments over a
long period of time. Important factors such as market share, output, and productivity all showed
positive trends and there was no reasoned nor fa ct-supported explanation concerning why these
improvements were not probative in ascertaining the condition of the industry.

229. For these reasons an objective injury dete rmination did not take place and the EC acted
contrary to Articles 3.1 and 3.4. In case the Panel w ould require any further clarifications that may be
of assistance in making its findings India would be pleased to provide these clarifications.

E. THE EC IMPROPERLY 'ESTABLISHED' A CAUSAL LINK. THE EC DISREGARDED
THE NON-ATTRIBUTION LANGUAGE

1. Claim 6: The EC acted inconsistently with its obligations under Article 3.5 of the
Agreement on Implementation of Article VI of GATT 1994

(a) Introduction

230. Not only the injury finding, but also the de termination of the alleged cause of the alleged
injury is of concern to India.

231. In its conclusions the EC declares in recital (50) that the declining and inadequate profitability
is:

Annex A-1

"basically the result of prices which had not been able to reflect the increases in the
costs of raw cotton or to keep pace with inflation in prices of consumer goods."
232. Despite this pertinent statement on what is, in effect, causation of alleged injury by other
factors, the EC under point 5 again discusses causation.

233. In that point 5 of the re-determination however the EC completely fails to ensure that the
injurious effects of the other known factors are not "attributed" to dumped imports. For example, one
factor mentioned in recital (50), the result of prices not being able to pace with inflation in prices of
consumer goods, is not discussed at all in point 5.3. Another fact, that in the provisional Regulation
the Commission had "concluded that increases in raw material prices had caused injury",
123 is not
separated and distinguished from the alleged injury caused by dumped imports.

234. Further factors that are curtly discussed are al so not separated and are merely lumped together
and remain indistinguishable from alleged injury caused by dumped imports:

"the effects of other factors … confirmed the above direct causal link."
124
235. Thus, in the absence of such separation and dis tinction of the different injurious effects, the
EC would have no rational basis to conclude that the dumped imports were indeed causing the alleged
injury. Accordingly, the EC acted contrary to Artic le 3.5 when it concluded, without more, that the
alleged injury was caused by the dumped imports.

(b) Facts

236. Before presenting its arguments India br iefly highlights some perplexing factual
determinations by the EC contained in the causality determination.

237. The EC starts off by declaring in recital (50) that the alleged injury was actually caused by
another factor: the declining and inadequate profita bility is "basically the result of prices which had
not been able to reflect the increas es in the costs of raw cotton or to keep pace with inflation in prices
of consumer goods."

238. In recital (53) the EC states that it does not co nsider relevant the refe rences to producers not
forming part of the Community industry; yet in recital (61) the EC includes such very reference.

239. In recital (54) the EC recalls the volume of dumped imports. It is clear that these figures are
wrong, since they include the volume of a country that was not found dumping.

240. In recital (55) the EC recalls the market sh are increase of the Community industry. The EC
also states in this recital that the Community industry's weighted average sales price remained "by and
large stable". India is theref ore asked to accept that an increase of sales prices with 3.1 per cent
125 is
"by and large stable" while a decrease in profits with 2 per cent is "declining."126

123 Provisional determination, recital (103).
124 Re-determination. Recital (69).
125 Total sales value of Community industry in 1992 is ECU 428.6 million (Provisional Regulation at
(83)) and sales volume, per the figures of the re-determination is 36,205 tonnes. I.e. the weighted average price
in 1992 is 11.83 ECU/kg. These figures are in the I.P., respectively, ECU 446.6 million and 36,553 tonnes, i.e.
12.21 ECU/kg. The price rise is therefore 0.38 ECU/kg, or 3.1 per cent.
126 Re-determination, recital (50).

Annex A-1

241. In recital (56) the EC recalls that the low prices offered by the exporting producers have
exercised downward pressure on prices on the Co mmunity market. The statement is based on a
premise where non-dumping countries are taken into consideration.

242. In recital (57) the EC again states that: "average sales prices did not increase." As India
pointed out, the fact is that the average sales prices went up with 3.1 per cent.
127 In this recital India is
therefore again asked to accept th at an increase of sales prices with 3.1 per cent means that these
"sales prices did not increase" while a decrease in profits with 2 per cent is "declining."128

243. More recently, in its Regula tion 696/2002 (the 're-confirmation'), the EC changed some of the
facts on which it 'establishes' the causal link.

244. Under point 3.2 of that 're-confirmation' th e effect from what previously were the dumped
imports from three countries is replaced by the effect of the dumped imports from India. The alleged
market share increase of the re-determination (15.3 per cent to 21.4 per cent) is replaced by 5.1 to
8.5 per cent. Under this point India takes issue with the fact that the Indian dumped imports are
characterized to have increased in market shar e from 5.1 to 8.5 per cent. As shown earlier,
129 India
considers that this calculation is erroneous.130

245. Under point 3.3 of the 're-confirmation' the EC "re-examines" other factors with a focus on
imports from third countries. For this purpose the EC first recalls five countries with a market share
above de minimis . The EC then summarizes the imports from all other countries. The EC then
summarizes the development of Pakistani and Egyptian imports. At no point does the EC summarize
together the imports from all third countries (with a market share over the de minimis level).
131

246. Under point 3.4 of the re-confirmation the EC basically confirms its previous findings on the
causal link except that in the re-confirmation the cau se of the alleged injury is the Indian imports
instead of the imports from Egypt, India, and Pakistan.

(c) Arguments

(i) Argument 1: The causality determination is incorrect

247. As noted earlier, the re-determi nation contains factual assertions, e.g. concerning the alleged
dumping countries that are not true. To the exte nt that these assertions are repaired in the re-
confirmation it is clear that this took place afte r the reasonable period of time. As regards the
allegedly dumped imports from India alone, India takes issue with the calculation of the amount of
dumped imports. Those amounts were overstated. This claim has been elaborated above.

248. In any event, India considers that the EC has not adequately proven at all that the increase in
market share of dumped imports from India with 1.9 per cent (over a five year period)—and which

127 Total sales value of Community industry in 1992 is ECU 428.6 million (Provisional Regulation at
(83)) and sales volume, per the figures of the re-determination is 36,205 tonnes. I.e. the weighted average price
in 1992 is 11.83 ECU/kg. These figures are in the I.P., respectively, ECU 446.6 million and 36,553 tonnes, i.e.
12.21 ECU/kg. The price rise is therefore 0.38 ECU/kg, or 3.1 per cent.
128 Re-determination, recital (50).
129 See supra paragraph 100.
130 As India has shown, the increase of the market share of dumped imports was from 2.7 to 4.6 per
cent.
131 If the EC would have shown such table then such imports would have increased from 37,965 tonnes
in 1992 (19 per cent market share) to 48,110 tonnes in the I.P. (25.8 per cent market share). These figures can
be calculated by adding the imports of the table with countries with more than 1 per cent market share with the
imports from Egypt and Pakistan.

Annex A-1

coincided with an increase in market share of th e Community industry from 18.1 to 19.7 per cent (or
from 22.4 to 25.1 per cent)132—were the cause of the profit reduction of the Community industry from
3.6 to 1.6 per cent (over a period of five years and which was, in fact, the alleged 'injury').

(ii) Argument 2: The EC disregarded the non-a ttribution language: neither did the EC examine
all other factors which might have caused injury nor did the EC separately distinguish the
injury caused by other factors

249. India considers that the EC has disregar ded the non-attribution language contained in
Article 3.5. The Appellate Body in United States—Hot Rolled Steel had occasion to provide its views
in detail with respect to this provision.
133 The Appellate Body noted that:

"This provision requires investigating author ities, as part of their causation analysis,
first, to examine all "known factors", "other than dumped imports", which are causing
injury to the domestic industry "at the same time" as dumped imports." 134 (Emphasis
added by Appellate Body)
250. India is of the view that the factor identified by the EC authorities in recital (50) that "prices
… had not been able … to keep pace with inflation in prices of consumer goods" has not been
examined at all in section 5.3. Since this factor was singled out by the EC as one of the causes for the
declining profitability, the EC cannot argue that this factor was not known. India considers therefore
that this first aspect of the non-attribution language of Article 3.5 has been frustrated.

251. Second, the Appellate Body continued,

" … investigating authorities must ensure that injuries which are caused to the
domestic industry by known factors, other than dumped imports, are not " attributed
to the dumped imports."
135 (Emphasis added by Appellate Body)
252. This second aspect was further explained in detail in subsequent sections of the Report.

253. In paragraph 223, the Ap pellate Body added that:

" … If the injurious effects of the dumped imports are not appropriately separated and
distinguished from the injurious effects of the other factors, the authorities will be
unable to conclude that the injury they ascribe to dumped imports is actually caused
by those imports, rather than by the othe r factors. Thus, in the absence of such
separation and distinction of the different injurious effects, the investigating
authorities would have no rational basis to conclude that the dumped imports are
indeed causing the injury which, under the Anti-Dumping Agreement , justifies the
imposition of anti-dumping duties."
254. In paragraph 228, the Appellate Body explained that:

" … If the injurious effects of the dumped imports and the other known factors
remain lumped together and indistinguishable, there is simply no means of knowing

132 This depends on whether one takes the data of the provisional Regulation, recital (85) or those of the
re-determination, recital (35).
133 United States—Anti-Dumping Measures on Certain Hot Rolled Steel Products from Japan , Report
of the Appellate Body of 24 July 2001, WT/DS184/AB/R.
134 Ibid., paragraph 222.
135 Ibid.

Annex A-1

whether injury ascribed to dumped imports wa s, in reality, caused by other factors.
Article 3.5, therefore, requires investigating authorities to undertake the process of
assessing appropriately, and separating and di stinguishing, the injurious effects of
dumped imports from those of other known causal factors."
255. Clearly, therefore, there is the obligation to separate and distinguish the different injurious
effects caused by other factors, from the effects of the dumped imports.

256. In India's view, the EC did not engage in su ch separation nor did it distinguish the different
injurious effects. For example, as regards the incr ease in raw cotton prices, the EC merely confirmed
the findings of the provisional Regulation.
136 That provisional Regulation, in recital (103) stated that
"The Commission concluded that increases in raw material prices had caused injury." Nowhere in the
provisional Regulation, nor elsewhere for that matter , are the injurious effects caused by this price
increase separated and distinguished from the effects of the dumped imports.

257. By not engaging in such mandatory separati on and distinguishing of effects of this other
factor the EC therefore acted manifestly incons istently with the non-attribution language of
Article 3.5 as clarified by the Appellate Body.

2. Intermediate conclusions

258. India considers that it has presented a prima facie case showing that the EC has not respected
the requirements of Article 3.5, as clarified by the Appellate Body. The EC has (1) not proven a
causal link between the dumped imports and the alle ged injury, (2) not examined all other factors
which might have caused injury, and (3) not separ ately distinguished the injury caused by other
factors. Moreover, the causality findings contain pertinent factual errors, some of which were only
partially 'repaired' as an afterthought more than ei ght months after the deadline. Needless to say,
India would be pleased to provide any further inform ation or clarification which the Panel might need
in reaching its findings.

F. THE EC DID NOT PAY PARTICULAR ATTENTION TO THE INTERESTS OF INDIA
EVEN THOUGH THE MEASURES HAD BEEN SUBJECT TO DISPUTE SETTLEMENT.
THE EC FAILED TO EXPLORE ANY REMEDY, CONSTRUCTIVE OR OTHERWISE

1. Claim 7: The EC acted consistently wi th its obligations under Article 15 of the
Agreement on Implementation of Article VI of GATT 1994

2. Claim 8: The EC acted inconsistently with its obligations under Article 21.2 of the DSU

(a) Introduction and Facts

259. The Panel is fully aware of the facts of the original dispute. The EC failed to explore any
constructive remedy, even though the desire for under takings had been broached. As a result of the
EC's complete and bare rejection of the Indian request for an undertaking, Indian exporters have, from
28 November 1997 to 14 August 2001 had to face illegal anti-dumping duties. They were prevented
from 'benefiting from' any constructive remedy, such as for example a price undertaking.

260. As a result of these illegal duties (both on acc ount of dumping as well as on account of injury)
a number of Indian exporters ha ve faced bankruptcy, the most glaring example of which is perhaps
the company Omkar. While Omkar never dumped, as was finally admitted, it had to face a high anti-
dumping duty. Other similar examples abound.

136 Re-determination at recital (60).

Annex A-1

261. Yet, despite the disastrous results of the orig inal Regulation for the Indian companies, the EC
refuses to take responsibility for its actions. Indi an exporters respectfully requested that the EC
compensate for the damage done.
137 Despite this logical request, the EC did nothing other than adopt
'emergency legislation', which a lthough drafted in generic form, de facto appears to be specifically
tailored to address the results of the Bed Linen dispute.138 If this emergency legislation would not have
been adopted (with retro-active effect!), two weeks before Regulation 1644/2001, importers could
have qualified for a legitimate refund under EC legislation.

262. In other words, inadmissible duties were collected on Indian exports, which otherwise could
all these years have legitimately gone to the Indian exporters by means of a price undertaking.

263. Apart from this first aspect, the EC, as we know, took no steps to terminate the proceeding.
On the contrary, measures were kept alive, in a ' dormant' form. Indian exporters (once again) sought
to explore a 'constructive remedy'
139 but no response was forthcoming from EC.

264. On the other hand, the first, immediate, EC action with a legal consequence was the
suspension of the new results, even though the Panel had clearly held that:

"[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, is not a "remedy" of any type,
constructive or otherwise".
140
265. The second, less immediate event, was the action to initiate a review, this time with India as
the sole target. Indeed, India's hope that non-initia tion on its part of an Article 21.5 proceeding on 16
August 2001 might have the effect of de-escalating the dispute, has unfortunately proven to be a fata
morgana. On the contrary, diametrically opposite to any offer of a remedy, constructive or otherwise,
the EC initiated yet another anti-dumping investigation: Bed Linen-3. As a result of the speed with
which that partial interim review has been conducte d Indian exporters may soon, once again, have to
face another ordeal of inadmissible anti-dumping measures on imports of Bed Linen from India to
EU.

(b) Arguments

(i) First Argument: the EC acted contrary to Article 21.2 of the DSU

266. Article 21.2 of the DSU sets forth that:

"Particular attention should
 be paid to matters affecti ng the interests of developing
country Members with respect to measure s which have been subject to dispute
settlement." (emphasis added)
267. Clearly, the text is not permissive. The word "should", rather than "may", clearly adds the
mandatory element to the attention to be paid. There is no indication that there is discretion on part of
the importing country authority in the sense that such attention would not have to be paid.141

137 India-Exhibit-RW-14, page 3.
138 India-Exhibit-RW-16.
139 India-Exhibit-RW-14, page 3.
140 Original Panel report, paragraph 6.229, last sentence.
141 Cf. Canada–Aircraft AB, Report of 2 August 1999, WT/DS70/AB/R at paragraph 187 ff. At
Paragraph 187 the Appellate Body held:

Annex A-1

268. Paraphrasing the relevant reasoning of the Appellate Body to the situation at hand: ' If
Members that are requested, under Article 21.2 DSU, to pay particular attention to matters affecting
the interests of developing country, and Members had no legal duty
 to pay such particular attention
then this Article would be rendered meaningless.'142

269. Thus, Article 21.2 contains a clear obligati on once the other elements of the provision are
fulfilled. This line of reasoning was also the view of the EC in Korea–Dairy Products .
143 In that
proceeding the EC argued, as regards the meaning of 'should', that " even assuming that an obligation
which is not accompanied by criteria is not mandatory" 144 (emphasis added) this would be different in
the case there were express criteria. It will be noted that Article 21.2 does contain two express
criteria that trigger the obligation; thus even assuming that 'should' alone is not always mandatory as
such, the two additional express criteria leave no doubt.

270. That these two other criteria are fulfilled a nd are not disputed is beyond doubt: the matter
affects the interests of India,
145 and has been subject to dispute settlement.146

"We note that Article 13.1 of the DSU provides that "A Member should respond promptly and fully to
any request by a panel for such information as the panel considers necessary and appropriate." (emphasis added)
Although the word "should" is often used colloquially to im ply an exhortation, or to state a preference, it is not
always used in those ways. It can also be used "to express a duty [or] obligation".120 The word "should" has, for
instance, previously been interpreted by us as expressing a "duty" of panels in the context of Article 11 of the
DSU.121 Similarly, we are of the view th at the word "should" in the third sentence of Article 13.1 is, in the
context of the whole of Article 13, used in a normative, rather than a merely exhortative, sense. Members are, in
other words, under a duty and an obligation to "respond promptly and fully" to requests made by panels for
information under Article 13.1 of the DSU.
Shorter Oxford English Dictionary , (Clarendon Press, 1993), Vol. II, p. 2808, and Black's Law Dictionary ,
(West Publishing Co., 1990), p. 1379, which states that "should" "ordinarily impl[ies] duty or obligation;
although usually no more than an obligation of propriety or expediency, or moral obligation, thereby
distinguishing it from 'ought'."
121 European Communities – Hormones, supra, footnote 64, para. 133."
142 Ibid. Paraphrase based on first sentence of para. 188, where the Appellate Body stated that:

"If Members that were requested by a panel to provide information had no legal duty to "respond" by
providing such information, that panel's undoubted legal " right to seek" information und er the first sentence of
Article 13.1 would be rendered meaningless. A Member party to a dispute could, at will, thwart the panel's fact-
finding powers and take control itself of the information-gathering process that Articles 12 and 13 of the DSU
place in the hands of the panel.
122 A Member could, in other words, prevent a panel from carrying out its task
of finding the facts constituting the dispute before it and, inevitably, from going forward with the legal
characterization of those facts. Article 12.7 of the DSU provides, in relevant part, that "…the report of a panel
shall set out the findings of fact, the applicability of relevant provisions and the basic rationale behind any
findings and recommendations that it makes." If a panel is prevented from ascertaining the real or relevant facts
of a dispute, it will not be in a position to determine th e applicability of the pertinent treaty provisions to those
facts, and, therefore, it will be unable to make any principled findings and recommendations to the DSB."
Appellate Body of 14 December 1999, WT/DS98/AB/R, paragraph 33.
144 Ibid., paragraph 34. The EC therefore also depa rts from the point of view that in fact even without
express criteria the word 'should' contains an obligation.
145 Original Panel report, paragraph 6.221, second sentence.
146 India-Exhibit-RW-1.

Annex A-1

271. Despite these criteria having been fulfilled, and accordingly the obligation having been
triggered beyond doubt, the EC did not pay any particul ar attention to the Article. Nothing particular
happened, except the suspension of measures, which, however, as already indicated by the original
panel, is not a remedy of any type, constructive or otherwise. The EC would not wish to defy
common sense by arguing that where suspension does not qualify as a 'remedy' (constructive or
otherwise), it does qualify as 'particular attention'. Perplexing enough, and contrary to any
interpretation of Article 21.2 DSU, Indi an exporters are the target of a third Bed linen anti-dumping
proceeding.

(ii) Second Argument: The EC ac ted contrary to Article 15 ADA

272. As pointed out, the Panel had previously held that:

"[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, is not a "remedy" of any type,
constructive or otherwise".
147
273. Despite this pertinent finding of the Panel, this decision not to impose is exactly what the EC
did. The EC neither terminated the proceeding, as the outcome-decisive injury findings would have
mandated, nor explored any remedy, constructive or otherwise.

274. India had in the past already explained the pr eference of exporters for an undertaking. The
EC was reminded of this fact on 3 July 2001.
148

275. Yet, once again, nothing was explored, d espite the mandatory language of the text of
Article 15: "shall". India once again regrets the inaction. India requests the Panel to find that the
failure to pay heed to the mandatory la nguage of the provision, and moreover to do exactly
 what the
Panel found not to be a remedy, constitutes an inconsistency with Article 15.

3. Intermediate Conclusions

276. India considers that it has presented a prima facie case with respect to the question as to how
the EC has acted inconsistently with Articles 15 ADA and 21.2 DSU. Accordingly, India requests
that the Panel make such finding.

V. CONCLUSIONS

277. For the above reasons, India re quests the Panel to find that:

 1. By failing to withdraw the measures fou nd to be inconsistent with the Anti-Dumping
Agreement and to bring its measures into conf ormity with its obligations under the Anti-
Dumping Agreement within the mutually agreed reasonable period of time, the EC has failed
to comply with the DSB recommendations and rulings in this dispute; and

 2. The re-determination, as amended, and the subsequent actions, as identified above,
are inconsistent with the following provisions of the Anti-Dumping Agreement and the DSU:

 • Article 2.2.2(ii) of the ADA by not properl y calculating a "weighted average" of
amounts for SG&A and profits;

147 Original Panel report, paragraph 6.229, last sentence.
148 Exhibit-India-RW-14.

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 • Articles 3.1 and 3.3 of the ADA by cumula ting Indian imports with those from a
country for which no dumping was found;

 • Article 5.7 of the ADA by not simultaneously considering the evidence of dumping
and injury;

 • Articles 3.1 and 3.2 of the ADA by not properly excluding the portion of non-dumped
imports from the total volume of Indian imports;

 • Articles 3.1 and 3.4 of the ADA by reciting factors without even collecting them and
by failing to enter into an overall reconsider ation and analysis of the information in
light of the requirements of the Anti-Dumping Agreement;

 • Article 3.5 of the ADA by incorrectly est ablishing a causal relationship between
dumped imports and injury and by disregarding the non-attribution language;

 • Article 15 of the ADA by not exploring any remedy, constructive or otherwise; and

 • Article 21.2 of the DSU by failing to pay par ticular attention to this matter affecting
India, and which already had formed the subject of dispute settlement.

Annex A-2

I. INTRODUCTION AND SUMMARY

1. This first submission of the European Comm unities (the “EC”) is filed in response to the
submission of India of 15 July 2002. In Section II the EC raises a series of preliminary objections in
accordance with paragraph 13 of the Working Procedur es. In Section III the EC addresses the claims
and arguments made by India.

2. The EC requests the Panel to make preliminary rulings to the effect that certain claims raised
in India’s submission are not within the Panel’s jurisdiction, because they concern measures which
were not “taken to comply” with the recommendati ons and rulings of the Dispute Settlement Body
(the “DSB”) in the original dispute, or because they concern findings which could have been raised by
India during the original proceeding, or because they were not properly stated in the request for the
establishment of the Panel.

3. To the extent that the Panel would consider that the claims raised in India’s submission are
within its jurisdiction, the EC submits that they are manifestly unfounded.

4. Article 2.2.2(ii) of the Agreement on Implementation of the General Agreement on Tariffs and
Trade 1994 (the “Anti-Dumping Agreement”) does not prescribe the use of any specific averaging
method. By using the sales value of the “other e xporters or producers” as averaging factor, the EC
authorities have exercised the discr etion afforded by Article 2.2.2 (ii) in a reasonable manner. In
contrast, the averaging method proposed by Indi a would lead to a meaningless and unreasonable
result. In any event, the violation alleged by I ndia is inconsequential and does not give rise to
nullification or impairment.

5. The EC authorities acted consis tently with Article 3.3 of the Anti-Dumping Agreement. At
the time when Regulation 1644/2001
1 (which is the only measure “taken to comply”) was adopted,
the EC authorities were entitled to treat imports from Pakistan as “dumped”. In any event, as of the
date of establishment of the Panel (which is the relevant date for assessing the consistency of the
measures “taken to comply” with the covered agreements) the injury finding was based exclusively on
the effects of the dumped imports from India.

6. Article 5.7 of the Anti-Dumping Agreement applies only with respect to the original
investigation. It does not apply to subsequent revi ews or to re-determinations made for the purpose of
implementing the DSB’s rulings and recommendations or of applying the legal interpretations made
in adopted Appellate Body or panel reports.

7. The EC authorities found that all imports from non-sampled exporters (both co-operating and
non-co-operating) were “dumped”. Therefore, they were entitled to consider all such imports as
“dumped” for the purposes of Article 3.2 of the Anti-Dumping Agreement. India’s claim is illogical
and untenable. It implies that the same imports may be simultaneously “dumped” and “non-dumped”
under different provisions of the Anti-Dumping Agreement.

8. The EC carried out an overall reconsidera tion and analysis of the economic indicators
pertaining to injury. In doing so, it properly evaluated these factors, for which it had already collected
data in the original investigati on, in accordance with the requirements of Article 3.1 and 3.4. It
concluded that whilst the Community industry managed to increase production and to slightly
increase its sales volume and market share by concentr ating on sales of higher value niche products, it
nevertheless suffered declining and inadequate prof itability, which was basically the result of price

1 Council Regulation (EC) No 1644/2001, of 7 August 2001 (OJ L 219/1, 14.8.2001) (“Regulation
1644/2001”) (Exhibit India – RW – 18).

Annex A-2

suppression. The injury indicators for cash flow, retu rn on investments and employment also showed
declining trends. The EC did not base its injury determination on erroneous or misrepresented facts.

9. The EC authorities made a proper determina tion that dumped imports were a genuine and
substantial cause of injury, as required by Article 3.5 of the Anti-Dumping Agreement . They did
examine all known causes of injury. The increase in the cost of raw cotton was not a separate cause
of injury.

10. The requirement to explore “constructive remedies” provided for in Article 15 of the Anti-
Dumping Agreement must be fulfilled before “applying” anti- dumping duties. Since the EC is not
“applying” anti-dumping duties, it cannot be accused of having violated that obligation. Assuming
arguendo that the EC authorities had been required to explore “constructive remedies”, the suspension
of the application of the anti-dumping duties would qualify as a “constructive remedy”.

11. Article 21.2 of the Understanding on Rules and Proce dures Governing the Settlement of
Disputes (the “DSU”) is a non-mandatory provision. In any event, the EC authorities did pay
“particular attention” to the interests of India.

II. REQUESTS FOR PRELIMINARY RULINGS

1. Introduction

12. The EC requests that the Panel make the following preliminary rulings in accordance with
paragraph 13 of its Working Procedures:

 (1) Regulations 160/2002
2 and 696/2002 3are not measures “taken to comply” with the
DSB’s rulings and recommendations within the meaning of Article 21.5 of the DSU
and, therefore, are not within the Panel’s jurisdiction;

 (2) the relevant date for assessing the cons istency of the measures “taken to comply”
with the covered agreements is the date of establishment of the Panel;

 (3) certain claims raised by India in its first submission with respect to findings set out in
the original measure which were not challe nged by India before the original Panel,
and which have not been modified by the measures at issue in this dispute, are not
properly before this Panel; and

 (4) the following claims raised by India in its first submission were not stated in its
request for the establishment of the Panel, contrary to the requirement imposed by
Article 6.2 of the DSU, and are, therefore, not within the Panel’s terms of reference:

 - the claim that the EC acted inconsistently with Article 4.1(i) of the Anti-Dumping
Agreement by excluding from the “Community industry” a producer which had
imported bed linen from Pakistan;

 - the claim that the EC failed to respect the “reasonable period of time” agreed by
the parties under Article 21.3 b) of the DSU.

2 Council Regulation (EC) No 160/2002, of 28 January 2002 (OJ L 26/1, 30.1.2002) (“Regulation
160/2002”) (Exhibit India – RW – 22).
3 Council Regulation (EC) No 696/2002, of 22 April 2002 (OJ L 109/3, 25.4.2002) (“Regulation
696/2002”) (Exhibit India – RW – 30).

Annex A-2

2. Regulations 160/2002 and 696/2002 are not measures “taken to comply” within the
meaning of Article 21.5 of the DSU

 A. Summary of relevant facts

13. In the original panel proceeding India subm itted no claims against the findings of dumping
with respect to imports originating in Pakistan a nd Egypt reached by the EC authorities in Regulation
2398/97.4 Nor, consequently, did the DSB make any rulings or recommendations with respect to such
findings.

14. For that reason, when implementing the DSB’s rulings and recommendations, the EC
authorities did not re-examine the findings of dumping for Egypt and Pakistan. This was clearly
explained in Regulation 1644/2001, which states that

The findings on dumping with regard to impor ts originating in Egypt and Pakistan
have not been revised. The relevant dumpi ng margins are set out in recitals 29 to 31
of the definitive Regulation.
5
15. Subsequently, nevertheless, the EC authoriti es decided, on their own motion, to determine
whether imports originating in Pakistan and E gypt were dumped in the light of the legal
interpretations made by the pa nel and the Appellate Body in Bed Linen . The results of that re-
determination are set out in Regulation 160/2002.

16. The EC authorities concluded in Regulation 16 0/2002 that imports originating in Pakistan
were not dumped.
6 It was decided, therefore, to termin ate the anti-dumping proceeding with respect
to those imports.7

17. As regards imports originating in Egypt, th e EC authorities concluded that they lacked the
necessary information to re-calculate the dumping ma rgin in accordance with the legal interpretations
made in Bed Linen and, therefore, to reach a finding on whether or not imports from Egypt were
dumped. More specifically, Regulation 160/2002 states that

There are no data available from the origin al investigation which would allow the
determination of the amount for profit on the basis of any methodology provided for
under Article 2(6) of the basic regulation. In these circumstances, a detailed
reconsideration of the dumping margin for Egypt is not possible.
8
18. In view of the above, it was decided to susp end the application of the anti-dumping duties on
imports from Egypt. 9 It was further provided that the duties would expire unless an interested party
requested a review within a certain time-limit. 10 Eventually, no such review was requested and the
duties on imports originating in Egypt expired as of 28 February 2002.11

4 Council Regulation (EC) No 2398/1997, of 28 November 1997 (OJ L 133/1, 4.12.1997)
(“Regulation 2398/97”) (Exhibit India – 9).
5 Regulation 1644/2001, recital 15.
6 Regulation 160/2002, recital 13.
7 Ibid., Article 2.
8 Ibid., recital 14.
9 Ibid., Article 1.1.
10 Ibid., Article 1. 2.
11 Notice of Expiry published on OJ C65/12, 14.3.2002 (Exhibit India – RW – 24).

Annex A-2

19. Following the termination of the proceeding ag ainst Pakistan and the expiry of the duties on
Egypt, the EC authorities re-assessed the finding of injury made in Regulation 2398/97, as amended
by Regulation 1644/2001, in order to determine whether imports from India were, on their own, a
cause of injury. The results of that re-assessment are set out in Regulation 696/2002.

20. The EC authorities concluded in Regulation 696/2 002 that imports of India, when considered
in isolation, were a cause of injury and, therefore, confirmed the imposition of definitive anti-dumping
duties on those imports.
12 At the same time, nonetheless, th e EC authorities confirmed also the
suspension of the application of those anti-dumping duties.13.

21. India has asserted that the EC authorities “quickly came up” with Regulation 696/2002 “in
reaction to” India’s request fo r consultations of 8 March 2002.
14 That is not true. Regulation
160/2002 already envisaged expressly that it could be necessary to re-assess the injury findings.15 The
reason why no such re-assessment was conducted in Regulation 160/2002 was because of the
uncertainty at that moment as to whether the measure s applied with regard to imports originating in
India and/or Egypt would expire. Following the subsequent decision by the EC Commission to open
a review of the measures applied to imports from India and the expiry of the measures on Pakistan
and Egypt, the EC Commission conducted a re-assessmen t of the injury findings, the results of which
were promptly disclosed to India.

 B. Argument

22. Article 21.5 of the DSU provides in pertinent part that

Where there is disagreement as to the ex istence or consistency with a covered
agreement of measures taken to comply with the recommendations and rulings such
dispute shall be decided through recourse to these dispute settlement procedures …
16
23. As clarified by the Appellate Body in Canada – Aircraft (21.5),

Proceedings under Article 21.5 do not concern just any measure of a Member of the
WTO; rather, Article 21.5 proceedings are limited to those ‘measures taken to
comply with the recommendations and rulings’ of the DSB. In our view, the phrase
“measures taken to comply” refers to measures which have been, or which should be,
adopted by a Member to bring about compliance with the recommendations and rulings
of the DSB.17
24. Of all the measures cited in India’s panel request, the only measure “taken to comply” with
the DSB’s recommendations and rulings is Regulati on 1644/2001. Accordingly, that is the only
measure which should be considered by the Panel when addressing India’s claims.

25. Regulation 160/2002 is not a measure “taken to comply” with the DSB’s recommendations
and rulings in Bed Linen. As explained, Regulation 160/2002 sets out the results of the re-examination
of the findings of dumping made in Regulation 2398/97 with regard to imports originating in Pakistan

12 Regulation 696/2002, Article 1.
13 Ibid.
15 Regulation 160/2002, recitals 20 –21.
16 Emphasis added.
17 Appellate Body Report, Canada – Measures Affecting the Export of Civilian Aircraft – recourse by
Brazil to Article 21.5 of the DSU (“Canada – Aircraft (21.5)” ), WT/DS/AB/RW, para. 36. (Emphasis added in
the original).

Annex A-2

and Egypt. The DSB made no recommendations or rulings with respect to such dumping findings,
which were not challenged by India at any point du ring the original panel proceedings. Thus, the EC
was under no obligation to re-examine the findings of dumping for Egypt and Pakistan. Therefore,
Regulation 160/2002 cannot be considered as a meas ure “taken to comply” within the meaning of
Article 21.5. It is a subsequent and distinct me asure, which can be reviewed only by an ordinary
panel established under Article 4.7 of the DSU.

26. For the same reason, Regulation 696/2002 is not a measure “taken to comply” with the DSB’s
rulings and recommendations in Bed Linen . The injury re-determination made in Regulation
696/2002 was rendered necessary by the earlier decisi on of the EC authorities to re-determine the
findings of dumping for Pakistan and Egypt, which decision, as explained, was not itself a measure
“taken to comply” with the DSB’s recommendations and rulings in that dispute.

27. Since Regulations 160/2002 and 696/2002 are not measures “taken to comply” with the
DSB’s recommendations and rulings in Bed Linen, any claims involving the findings made by the EC
authorities in those two regulations are beyond this Panel’s jurisdiction. Those claims should have
been brought by India before an ordinary panel established in accordance with Article 4.7 of the DSU.

3. The relevant date for assessing the consistenc y of the measures “taken to comply” is the
date of establishment of the Panel

 A. Summary of relevant facts

28. In accordance with Article 21.3 (b) of the DSU, on 26 April 2001 the EC and India agreed on
a “reasonable period of time” for implementing the recommendations and rulings of the DSB of five
months and two days, i.e. until 14 August 2002.
18

29. Regulation 1644/2001 was adopted on 7 Augus t 2001 and published in the EC’s Official
Journal on 14 August 2001. Re gulation 160/2002 was adopted on 28 January 2002 and published on
30 January 2002. Finally, Regulation 696/2 002 was adopted on 22 April 2002 and published on
25 April 2002.

30. This Panel was established on 22 May 2002 on the basis of a request made by India on
3 May 2002.

31. Thus, Regulation 1644/2001 was adopted and published before the end of the “reasonable
period of time”, while Regulations 160/2002 and 696/ 2002 were adopted and published after the end
of the “reasonable period of time”, but before this Panel was established.

 B. Argument

32. At several points in its submission, India argue s that, even if the alle ged inconsistencies with
the Anti-Dumping Agreement had been cured by Regulations 160/2002 and 696/2002, those
regulations cannot provide a valid “justification” because they were adopted outside the “reasonable
period of time”.
19

33. India’s allegations reflect a basic misunders tanding of the scope of a panel’s mandate under
Article 21.5 of the DSU. India assumes erroneously that such mandate is limited to establish whether
the measures “taken to comply” within the “reasonable period of time” are consistent with the covered
agreements.

18 WT/DS141/10 of 1 May 2001 (Exhibit India - RW - 2).
19 See e.g. paras. 73, 82, 134 and 247 of India’s First Submission.

Annex A-2

34. As noted by the panel in US – Shrimps (Article 21.5) , “the DSU is silent as to the date on
which the existence or consistency of the implementing measure must be assessed”.
20 The same panel
went on to find that

… it should take into account all the releva nt facts occurring until the date the matter
was referred to it. By applying this a pproach, an Article 21.5 panel can reach a
decision that favours a prompt settlement of the dispute. Indeed, it avoids situations
where implementing measures allowing for compliance with the DSB
recommendations and rulings would be disregarded simply because they occur after
the end of the reasonable period of time. The Panel, while mindful of the obligation
of the United States to bring its legisla tion into conformity by the end of the
reasonable period of time, considers that it is consistent with the spirit of Article 3.3
of the DSU to take into account any rele vant facts until the date on which the matter
was referred to the Panel.
21
35. The EC agrees with the views of the panel in US – Shrimps (21.5).22 As submitted above, the
EC considers that Regulations 160/2002 and 696/2002 are not measures “taken to comply”.
However, should the Panel conclude that they are, th e EC submits that the relevant date for assessing
the consistency of the measures “taken to comply ” with the covered agreements is the date of
establishment of the panel, and not that of the end of the “reasonable period of time”.

36. Of course, the EC is not suggesting that the implementing Member is under no obligation to
implement the DSB’s rulings and recommendations w ithin the “reasonable period of time”. That
obligation, however, does not flow from Article 21.5, but instead from Article 21.3 of the DSU, which
states in pertinent part that

If it is impracticable to comply immediat ely with the recommendations and rulings,
the Member concerned shall have a reasonable period to comply.
37. It is obvious, nevertheless, that a finding that a Member has violated Article 21.3 of the DSU
by implementing late the DSB’s recommendations and rulings would be necessarily declaratory, since
there is nothing that such Member could do in order to correct that violation. In any event, as
discussed below, in the present case India did not state in its panel request any claims based on
Article 21.3 of the DSU.

4. Claims that could have been raised in the original dispute but were not

 A. Summary of relevant facts

38. In its First Submission, India raises a number of claims against findings set out in the original
measure which were not challenged by India before the original Panel and which have not been
modified by the findings made in the measures at issue in this proceeding.

39. For example, in the original proceeding Indi a’s only claim under Article 3.5 was that the EC
authorities had not established that injury had been caused “through the effects of dumping” because

 20 Panel Report, United States - Import Prohibition of Certain Shrimp and Shrimp Products – Recourse
to Article 21.5 by Malaysia (“United States – Shrimp (21.5)”), WT/DS58/RW, para. 5.12.
21 Ibid., para. 5.13.
 22 In Australia – Measures Affecti ng Importation of Salmon – Recourse to Article 21.5 by Canada ,
WT/DS18/RW, para. 7.10, the panel went even further by taking into account facts that occurred after the end of
the establishment of the panel.

Annex A-2

they had treated as “dumped imports” what India considered to be “non-dumped transactions”.
23 That
claim was dismissed by the Panel.24

40. Yet, India now complains that the causality de termination is inconsiste nt with Article 3.5,
inter alia , because the EC authorities failed to examin e the effects of the increase in consumer
prices.
25 and to separate the effects of th e increase in the cost of raw cotton. 26. The findings made by
the EC authorities with respect to those factors ha ve been confirmed without any modification in the
re-determination at issue in this dispute. Thus, the claims now raised by India under Article 3.5 are
claims which India could have raised during the or iginal proceedings, but which India chose not to
raise.

41. Similarly, in the original proceeding, Indi a’s only claim under Article 3.4 was that the EC
authorities had failed to consider all the relevant injury factors.
27 Yet, now India contests the
adequacy of the findings made by the EC authoriti es with respect to those Article 3.4 factors which
were examined in the original measure. For exampl e, India claims that the evaluation of factors such
as sales 28, market share 29, price development 30, production 31, profitability 32 or employment 33 is
inadequate, even though Regulation 1644/2001 limits itself to confirm the findings with respect to
those factors made in Regulation 1069/1997. 34 Thus, once again, India is making claims under
Article 3.4 which it could have raised in the original proceeding.

 B. Argument

42. The EC submits that, to the extent that th e re-determination at issue in this dispute does
nothing but confirm the findings already set out in the measure at issue in the original proceeding, it
cannot be considered that such re-determination c onstitutes a measure “taken to comply” within the
meaning of Article 21.5 of the DSU. Therefore, any claims relating to those findings should be
dismissed as not being properly before the Panel.

43. The EC is aware that in Canada – Aircraft (21.5), the Appellate Body noted that
35

in carrying out its review under Article 21.5 of the DSU, a panel is not confined to
examining the “measures taken to comply”, from the perspective of the claims,
arguments and factual circumstances that related to the measure that was the subject
of the original proceedings.

23 India’s First Submission to the original Panel, paras. 4.217- 4.220, reproduced in Panel report,
p. 221.
24 Panel report, para. 6.142.
26 Ibid., para. 256.
27 India’s First Submission to the original Panel, paras. 4.56-4.76, reproduced in Panel report, pp. 170-
177.
28 India’s First Submission, paras. 166-171.
29 Ibid.
30 Ibid.
31 Ibid., paras. 180-182.
32 Ibid., paras. 172-1793
33 Ibid., paras. 201-204.
34 Commission Regulation (EC) No 1069/97, of 12 June 1997, imposing a provisional anti-dumping
duty on imports of cotton-type bed linen originating In Egypt, India and Pakistan, (OJ 13.6.97 L 156/11)
(“Regulation 1069/97” or “Provisional Regulation”) (Exhibit India – 8), at recitals 31, 34 and 36.
35 Appellate Body Report, Canada – Aircraft (Article 21.5), para. 41

Annex A-2

44. Nevertheless, the present case differs fundamentally from Canada – Aircraft (21.5 ). In that
case, Canada objected to the claims raised by Brazil against a new and different measure on the
grounds that no similar claims had been raised agai nst the original measure. Had Canada’s objection
been upheld, Brazil would have been barred from maki ng claims that could not have been raised in
the original proceedings. In contrast, the issue before this Panel is whether India should be allowed to
raise at this stage claims that it could have raised before the original panel.

45. Even if the Panel were to take the view that the claims at issue concern measures “taken to
comply”, the EC submits that by not raising t hose claims in a timely manner, India has acted
inconsistently with the requirements of Article 13.10 of the DSU, which provides that

… if a dispute arises, all Members will enga ge in these procedures in good faith in an
effort to resolve the dispute.
46. In US – FSC, the Appellate Body noted that
36

Article 3.10 of the DSU commits Members of the WTO, if a dispute arises, to engage
in dispute settlement procedures "in good faith in an effort to resolve the dispute".
This is another specific manifestation of the principle of good faith which, we have
pointed out, is at once a general principle of law and a principle of general
international law. This pervasive principle requires both complaining and responding
Members to comply with the requirements of the DSU (and related requirements in
other covered agreements) in good faith. By good faith compliance, complaining
Members accord to the responding Members the full measure of protection and
opportunity to defend, contemplated by the letter and spirit of the procedural rules.
The same principle of good faith requires that responding Members seasonably and
promptly bring claimed procedural deficiencies to the attention of the complaining
Member, and to the DSB or the Panel, so th at corrections, if needed, can be made to
resolve disputes. The procedural rules of WTO dispute settlement are designed to
promote, not the development of litigation techniques, but simply the fair, prompt and
effective resolution of trade disputes.
47. In the same way as the principle of good faith requires that the defendant raises its objections
“seasonably and promptly”, it requires also that the complaining party raises its claims in a timely
manner.

48. The purpose of Article 21.5 is to provide an expeditious procedure to establish whether a
Member has properly implemented the DSB’s reco mmendations and rulings. Article 21.5 is not
intended to provide a “second service” to complaining parties which, by negligence or calculation,
have omitted to raise certain claims during the original proceeding.

49. By withholding certain claims which it could ha ve raised before the original panel until these
proceedings, India has prejudiced the procedural rights of the EC. In the first place, the deadlines are
shorter in Article 21.5 proceedings, thus rendering more difficult the EC’s defence. (The EC recalls
that it has been granted only two weeks for replying to India’s first submission, which India had had
several months to prepare, and that a request for a one week extension was summarily rejected due to
India’s opposition). Second, and more important, were the Panel to uphold the claims at issue, the EC
would not be entitled to a “reasonable period of time” for implementation.

36 Appellate Body Report, United States – Tax Treatment for Foreign Sales Corporations, (“US
– FSC”), WT/DS108/AB/R, para. 166. [footnotes omitted] . See also Report of the Appellate Body in Mexico
Anti-Dumping Investigation of High Fructose Corn Syrup (HFCS) from the United States (Recourse to Article
21.5), WT/DS132/AB/R, para. 50.

Annex A-2

50. In so far as India did not make claims with r espect to a finding set out in the original measure,
the EC authorities could assume legitimately that su ch finding was WTO consistent and need not be
corrected. It would be manifestly unfair to expose the EC to the possibility of an immediate
suspension of concessions under Article 22 of the DSU in response to a violation which the EC could
not have anticipated when the implementing me asures were taken and wh ich it will be given no
opportunity to correct.

5. Claims not stated in the panel request

 A. Introduction

51. In the original proceeding, the Panel ruled that certain claims raised by India were not within
its terms of reference because India had not even cited the relevant treaty Articles in the panel request,
contrary to the requirement imposed by Article 6.2 of the DSU
37.

52. India has done the same again. As discussed be low, in its first submission, India has asserted
certain claims that are based on legal provisions wh ich were not cited in the panel request. The EC
requests the Panel to make a preliminary ruling to the effect that such claims are outside the scope of
its terms of reference.

 B. Article 4.1 (i)

53. India alleges that, by not taking into account for the purposes of the injury analysis evidence
concerning a company which was excluded from th e “Community industry” in the original
investigation because it had imported the produ ct under investigation from Pakistan, the EC
authorities acted inconsistently with Article 3.1.
38

54. Although India appears to allege exclusively a violation of Article 3.1, this claim involves
necessarily a claim based on Article 4.1(i). The Pane l cannot find a violation of Article 3.1 unless it
determines first whether the exclusion of the co mpany concerned from the “domestic industry” was
consistent with Article 4.1 (i). Yet, that provision is nowhere stated in the Panel request.

 C. Claims that the EC failed to respect the agreed “reasonable period of time”

55. As mentioned above, at severa l points in its submission, India alleges that the EC did not
respect the deadline agreed under Article 21.3 b)
 .39

56. This claim is not mentioned in the panel requ est. Furthermore, even in its first submission,
India fails to identify these allegations as a separate claim and to cite the appropriate legal basis,
which, as explained above, is Article 21.3 of the DSU and not Article 21.5.

37 Panel report, paras. 6.12-6.17.
38 India’s First Submission, paras. 215-217.
39 See e.g. paras. 73, 82, 134 and 247 of India’s First Submission.

Annex A-2

III. CLAIMS BROUGHT BY INDIA

A. CLAIMS UNDER THE ANTI-DUMPING AGREEMENT

 1. Claim 1 : Article 2.2.2 (ii)

 A . C l a i m

57. India alleges that the EC authorities acted in consistently with Article 2.2.2 (ii) “by not
properly calculating a weighted average of actual amounts for SGA & profits”.
40

58. More precisely, India claims that the EC authorities violated that provision by weighting the
amounts for administrative, selling and general cost s (“SGA”) and profits according to the sales value
of each of the “other exporters and producers”. Ac cording to India, those amounts should have been
averaged according to the sales volume of those exporters, measured by “units/sets”.

 B. Summary of relevant facts

59. In the re-determination of dumping for India contained in Regulation 1644/2001, the EC
authorities resorted to constructed normal value fo r the five exporters included in the sample (Anglo-
French, Bombay Dyeing, Madhu, Omkar and Prakash).

60. The amounts for SGA and profit included in the constructed normal value of one of the five
exporters in the sample (Bombay Dyeing) were established in accordance with the chapeau of
Article 2.2.2, while the amounts for SGA and profits for the other four exporte rs were calculated in
accordance with the method laid down in Article 2.2.2 (ii).

61. For the purposes of applying Article 2.2.2 (ii), the EC authorities averaged the amounts for
SGA and profits incurred and realised by Bombay Dyeing and by Standard Industries (a reserve
company) on the basis of the net value of their domestic sales.

 C. Argument

 (a) Introduction

62. Article 2.2.2(ii) does not prescribe the use of any specific averaging factor. Therefore, the
investigating authorities have discretion to use the averaging factor which they deem most
appropriate.

63. In the case at hand, the EC authorities have ex ercised that discretion in a reasonable manner.
The pertinence of using the value of the domestic sales made by the “other exporters or producers” for
averaging the amounts for SGA and profits incurred and realised in respect of such sales is beyond
question. Furthermore, the sales value is an objective and neutral criterion which , a priori, does not
confer an advantage to any interested party. In c ontrast, the method proposed by India would lead to a
meaningless result and is manifestly unreasonable.

64. Even assuming that Article 2.2.2 (ii) required to use the sales volume, India advances no
reason to justify why the sales volume must be measured in “units/sets” rather than by weight or size.
As shown below, had the EC authorities used th e sales volume measured by weight, the dumping
margins would be higher than those calculated by using the sales value. Thus, in any event, the

40 Request for the Establishment of a Panel of 7 May 2002, WT/DS141/13/Rev.1.

Annex A-2

violation alleged by India would be inconsequential and give rise to no nullification or impairment of
benefits accrued to India under Article 2.2.2 (ii).

 (b) India’s claim has no basis on the text of Article 2.2.2 (ii)

65. It is manifest that, contrary to India’s assertions
41, the text of Article 2.2.2 (ii) lends no
support to its claim that the EC authorities were not permitted to average the amounts for SGA and
profits according to sales value.

66. Article 2.2.2 (ii) states that, where the method set out in the chapeau of Article 2.2.2 cannot
be applied, the amounts for SGA and for profits may be determined on the basis of

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.
67. Thus, while Article 2.2.2(ii) provides for th e calculation of a “weighted average”, it does not
prescribe the use of any specific averaging factor.

68. India’s allegations that the EC method re duces the terms “weighted average” to redundancy
42
are groundless. It is beyond question that the EC method involves the calculation of a “weighted
average” of the amounts for SGA and profits incurred and realised by other exporters and producers,
as required by Article 2.2.2 (ii).

69. The EC agrees with India’s obvious proposition that the weighted average must reflect the
“relative importance” of the “other exporters or producers”.
43 However, contrary to India’s
assumption, there is no reason why the “relative importance” of each exporter or producer should be
measured necessarily in terms of sales volume, rather than of sales value.

 (c) India’s contextual arguments are without merit

70. Well aware that its interpretation finds no suppor t in the text of Article 2.2.2 (ii), India puts
forward a series of contrived “contextual” arguments
44. All of them are without merit.

71. The provisions of the Anti-dumping Agreement invoked by India address different issues and
serve different purposes. They ca nnot be relied upon in order to r ead into Article 2.2.2 (ii) an
additional requirement which, quite simply, is not there.

72. In fact, if anything, Footnotes 2 and 5 and Artic le 6.10 suggest that, when the drafters of the
Anti-Dumping Agreement intended that quantities be used, they said so expressly. A contrario, it may
be inferred from those provisions that, when the Anti-Dumping Agreement remains silent, the
investigating authorities must be accorded discretion to chose between sales volume and other
pertinent criteria.

73. Footnotes 2 and 5 do not provide for the calculation of “weighted averages”. Therefore, it is
difficult to see how they could be relevant for the in terpretation of those terms in Article 2.2.2 (ii).
Furthermore, the purpose of the “5 per cent rule” in Footnote 2 and of the “20 per cent rule” in
Footnote 5 is to establish whether the domestic pri ce (i.e. the domestic sales value) provides a reliable

41 India’s First Submission, paras. 51-53.
42 Ibid., paras. 53-54.
43 Ibid., paras. 52-53.
44 Ibid., paras. 55-60.

Annex A-2

basis for calculating the normal value. In view of that, it would have been illogical to apply those
thresholds to the sales value.

74. Article 6.10, which India itself describes as “indirect context”
45, is equally irrelevant.
Article 6.10 is not concerned with the calculation of “weighted averages”. It provides that the
investigating authorities may resort to sampling where the determination of individual dumping
margins for all the exporters is “i mpracticable”. The “practicability” of a dumping determination is a
function of the number of sales to be examined and not of their price: the examination of a sale does
not become more cumbersome simply because it is made at a higher price. This explains why
Article 6.10 refers to the “largest volume of the exports … which can reasonably be investigated”,
rather than to the “largest value of exports … which can be investigated”.

75. The Judgement of the Court of First Inst ance (“CFI”) of 17 July 1998 in the case T-118/96
cited by India
46 does not constitute “context” within the meaning of Article 31 of the Vienna
Convention. Moreover, that judgement does not address th e interpretation of Article 2.6 (a) of the
EC Basic Regulation (the equivalent of Article 2.2. 2 (ii)). In any event, the CFI’s reasoning does not
support, but rather contradicts, India’s position. Co ntrary to India’s assertions, the CFI did not rule
that “volume should be the norm”.47 Rather, the CFI held that

The decision to apply a figure of 10 per cen t to the volume rather than the value of
domestic sales falls within the broad discretion enjoyed by the institutions.48
76. In other words, the CFI was of the view that , in the absence of any specific provision in the
EC Basic Anti-Dumping Regulation, the institutions had discretion to use either volume or value,
which is also the position maintained by the EC in this case.

77. Nor is correct India’s assertion that the CFI found “that the volume-context of the Regulation
was sufficient to override any preferen ce for a value-based determination”.
49 After concluding that
the EC institutions had broad discretion to use either volume or value, the CFI went on to note that

Moreover, the institutions’ decision does not exceed the limits of their discretion. It
should be observed that the criteria they use in connection with the concept of the
ordinary course of trade … and for assessing whether sales on the domestic market
are representative …. apply also to th e volume of sales of the like product.
50
78. Thus, the CFI relied upon the “5 per cent rul e” and the “20 per cent ru le” exclusively for the
purpose of confirming that, by choosing to use volum e when applying the “10 per cent rule”, the EC
authorities remained within the limits of their marg in of discretion. Furthermore, the CFI did not
mention Article 2.6 (a) of the EC Basic Anti-Dumping Regulation among those provisions which
provided relevant context for the interpretation of the “10 per cent rule”.

45 Ibid., para. 55.
46 Ibid. para. 59.
47 Ibid., footnote 51.
48 Judgement of the CFI of 17 July 1998 in the case T - 118/96, at para. 76.
49 India’s First Submission, footnote 51.
50 Judgement of the CFI of 17 July 1998 in the case T - 118/96, para. 79.

Annex A-2

 (d) The EC’s interpretation does not contradict the positions expressed in the
original proceeding

79. India appears to assume that the figures menti oned in the EC’s statements to the original
panel which it cites in its submission 51 are percentages of the sales volume. That assumption is
incorrect. As the EC authorities have already explained to the Indian exporters 52, those figures are
percentages of the sales value. They differ from the percentages used in the calculation of the
reasonable amount for profit and SGA because they are percentages of all domestic sales, and not of
the combined value of sales by Bombay Dyeing and Standard Industries.

 (e) The EC has exercised reasonably the discretion afforded by Article 2.2.2 (ii)

80. The averaging method used in this case is th e same generally applied by the EC authorities
when resorting to Article 2.2.2 (ii). The EC authorities average the amounts for SGA and profits
according to the sales value because that method is easier to apply and can be used in all the
investigations. In contrast, if the averaging w as made according to volume, it would be necessary to
choose in each investigation one of the several po ssible criteria for measuring the sales volume of the
product concerned. For example, in the case at ha nd it would have been necessary to decide whether
to average the SGA and profits accord ing to the number of “units/sets”, as proposed now by India, or
according to weight or size.

81. Moreover, the method applied by the EC is c onsistent with the methodologies applied by the
EC authorities at previous steps of the dumping calculation in the Bed Linen investigation. Thus, in
accordance with well established practice, the SGA expenses of eac h exporter were allocated among
the different products manufactured by that exporter, and then among the different types of the
product under consideration, on the basis of turnover, and not on the basis of quantity. Likewise, the
SGA and profits incurred and realised by each e xporter with respect to each product type were
averaged according to value, rather than volume, in order to establish the SGA and profit margins for
the product under investigation. India has at no point challenged the use of these methodologies.

82. Furthermore, the EC authorities generally u se the same averaging factor whenever it is
necessary to calculate a weighted average of data for different companies. For instance, when
calculating the “all-others” dumping rate in accordance with Article 9.4 (i) of the Anti-Dumping
Agreement, the EC authorities averaged the dumping margins of the exporters included in the
examination according to their sales value, and not according to their sales volume. Similarly, to
mention but another example, for the purposes of the injury determination, the EC authorities
averaged the profit margins of the EC producers incl uded in the sample according to their sales value.
Again, India has not challenged the use of the sale value for these purposes.

83. Compared to the method proposed by India, the averaging method applied by the EC
authorities gives a greater weight to the exporters with relatively higher unit prices for the product
under consideration. However, higher unit prices for the product under consideration do not imply
necessarily higher SGA or profit margins. They may reflect also a different product mix (and more
specifically, a greater proportion of relatively higher priced product types) or higher production costs
(other than SGA). Thus, the method applied by the EC authorities does not result necessarily in
higher amounts for SGA and profits than India’s proposed method.

84. Indeed, India does not seem to argue that the method used by the EC authorities is inherently
biased against the exporters. Rather, the only basis for India’s claim is that, had the EC authorities

51 India’s First Submission, paras. 61-64.
52 EC Commission’s reply to Texprocil comments on the disclosure document of 19 June 2001, p. 2
(Exhibit India – RW –17).

Annex A-2

applied India’s method in this specific case, the “reasonable” amount for SGA and profits would have
been lower. However, the mere fact that, in the specific circumstances of this case, the method
applied by the EC authorities yields a result which is less favourable to the exporters than India’s
proposed method is not sufficient to render the EC’s method inconsistent per se with Article 2.2.2 (ii).
In a different set of factual circ umstances, the EC’s method might well have been more favourable to
the exporters than India’s own method.

85. India’s position would have unacceptable im plications for the conduct of anti-dumping
investigations. By India’s logic, the investiga ting authorities would be prevented from adopting any
generally applicable rules for the calculation of dumping margins. Instead, they would have to test all
possible calculation methods at each step of the dum ping determination, and then choose that method
which is the most favourable to the exporter in the particular circumstances of each investigation.
This would impose an unreasonable burden on the investigating authorities and, at the same time, be a
source of unacceptable legal uncertainty and unpredictability for all the interested parties.

 (f) The method proposed by India is unreasonable

86. Whilst the averaging method used by the EC authorities constitutes a reasonable exercise of
the discretion afforded by Article 2.2.2 (ii), India’s own method would lead to a meaningless result
and is manifestly unreasonable

87. The EC recalls that the product under inv estigation (bed linen) includes bed sheets, duvet
covers and pillow cases, packaged for sale either separately or in sets.
53 The “units/sets” used in
India’s calculation can be units of any of those pr oducts or of sets of t hose products. Thus, for
example, a pillow case sold separately is accounted by India as one “unit”, just like a sheet sold
separately or a set consisting of a pillow case, a sheet and, sometimes, a duvet cover.

88. In other words, India’s averaging method gives identical weight to all the product types
covered by the investigation, regardless of th eir differences. For example, a pillow case sold
separately is accorded the same weight as a double set comprising one sheet, one duvet covers and
two pillow cases. As a result, the weight of each “o ther exporter or producer” included in the average
will depend to a large extent on its product mix. For instance, an exporter which sells 100,000 pillow
cases in India will be accorded the same weight as an exporter who sells 100,000 sets comprising, in
addition to 100,000 (or 200,0 00) pillow cases, also 100,000 thousand sheets and 100,000 thousand
duvet covers.

89. The above example evidences clearly that, to use India’s own terms
54, India’s averaging
method fails to reflect the “relative importance” of each of the “other exporters or producers”.
Therefore, unlike the EC’s method, India’s method cannot be considered a reasonable exercise of the
discretion afforded by Article 2.2.2 (ii).

 (g) Averaging the SGA and profit according to volume measured by weight would
result in higher dumping margins

90. Sales volume may be measured in a number of different ways. In the present case, for
instance, it can be measured in weight (as the EC authorities did for the purposes of the injury
determination), in size (square metres) or in pieces (of pillow cases, sheets, duvet covers, sets, etc).

91. India argues that Article 2.2.2 (ii) requires to average the SGA and profits on the basis of the
sales volume of the “other exporters and producers” and does not permit the use of the sales value.

53 Regulation 1069/97, recital 10.

Annex A-2

But it has not advanced any single reason to jus tify why the sales volume must be measured in
“units/sets” rather in kilos or in square metres.

92. The EC submits that, even assuming that, on th e basis of India’s arguments, Article 2.2.2(ii)
had to be interpreted as requiring the use of the sales volume, nothing would prevent the EC
authorities from using the sales volume measured by weight rather than by “units/sets”.

93. For the sake of argument, the EC has calcul ated the weighted average amount for SGA and
profit on the basis of the sales volume measured by weight. The relevant information was available
from the questionnaire responses of the companies c oncerned. As shown by the table below, the
amounts thus obtained are higher than those obtained by using the sales value.
55

 Bombay Dyeing Standard
Industries
Total/average
Domestic turnover in Rs 134,154,064 13,276,083 147,430,147
Domestic sales in tones 465.00 43.39 508.39
Domestic sales in units/sets 627,764 179,775 807,539
SG&A plus profit/loss 22.48%
(10.39%+12.09%)
-16.34%
(19.15%-35.49%)

Allowances for fair comparison 2.23% 0.37%
Company's weight on turnover 91.0% 9.0% SG&A+profit/loss: 18.99%
Allowances: 2.06%
Company's weight on tones 91.5% 8.5% SG&A+profit/loss: 19.17%
Allowances: 2.07%
Company's weight on units/sets 77.7% 22.3% SG&A+profit/loss: 13.84%
Allowances: 1.82%

94. The above table evidences that, had the EC authorities used the sales volume measured by
weight as averaging factor, the weighted average S GA and profit and, consequently, the constructed
normal values and the dumping margins for the co mpanies concerned would be higher than those
calculated by using the sales value. Thus, even if th e Panel were to conclude that Article 2.2.2 (ii)
requires the use of sales volume, the violation alleged by India would not result in the nullification or
impairment of the benefits accrued to India under that provision.

 2. Claim 2: Articles 3.1 and 3.3

 A . C l a i m

95. India alleges that the EC “acted inconsis tent with Articles 3.1 and 3.3 of the ADA by
cumulating Indian imports with those of a country for which no dumping was found”.
 56

96 More specifically, India alleges that Regula tion 1644/2001 is inconsistent with Articles 3.1
and 3.3 because the EC authorities cumulated imports originating in India with imports originating in
Pakistan, which “were in fact not dumped, a fact which was revealed by publication of Regulation
160/2002.”
57

55 The EC requests that the information set out in this table be treated as confidential pursuant to
Article 17.7 of the Anti-Dumping Agreement and paragraph of the Panel’s Working Procedures.
56 Request for the Establishment of a Panel of 7 May 2002, WT/DS141/13/Rev.1.

Annex A-2

 B. Summary of relevant facts

97. The pertinent facts for the examination of th is claim have already been summarised above in
section II.3.A.

 C. Argument

98. As submitted above, the only measure “taken to comply” with the DSB’s recommendations
and rulings is Regulation 1644/2001, which is, th erefore, the only measure within the Panel’s
jurisdiction.

99. Regulation 1644/2001 confirme d the finding of dumping for Pakistan reached in Regulation
160/2002. Thus, at the time when Regulation 1644/2001 was adopted, the EC authorities were
entitled to treat imports originating in Pakistan as “dumped” and, consequently, to cumulate them
with imports from India in accordance with Article 3.3 of the Anti-Dumping Agreement.

100. India cannot rely on the finding of no-dumpi ng reached in Regulation 160/2002 in order to
claim that imports from Pakistan were “in fact”
58 non-dumped already when Regulation 1644/2001
was adopted. The finding of no-dumping containe d in Regulation 1644/2001 was reached under EC
law and does not prejudge the consistency with the Anti-Dumping Agreement of the finding of
dumping made in Regulation 2938/97 and conf irmed by Regulation 1644/2001. The WTO
consistency of that finding can be examined and ru led upon only by a WTO panel. Yet, India did not
challenge that finding before the original panel. Nor has India brought a claim against that finding
before this Panel.

101. Should the Panel take the view that the other regulations cited in India’s panel request are
also measures “taken to comply” and, therefore, within its jurisdiction, the EC submits in the
alternative that in Regulation 696/2002 the EC au thorities established that imports of India, when
taken in isolation, were a cause of injury. Therefor e, as of the date of establishment of the Panel, the
“measures taken to comply” were not based on the cumulation of imports from India with non-
dumped imports from Pakistan.

 3. Claim 3: Article 5.7

 A . C l a i m

102. India alleges that

The EC acted inconsistent with Article 5.7 of the ADA by not simultaneously
considering the evidence of dumping and injury. In fact, by cumulating countries for
injury purposes and by subsequently excl uding a particular source on account of non-
dumping, the EC engaged in sequencing that was entirely improper.
 59
103. More precisely, India claims that the EC aut horities acted inconsistently with Article 5.7 by

 (1) making the dumping re-determination fo r Pakistan after the adoption Regulation
1644/2001; and

 (2) separating the dumping and injury findings in Regulations 160/2002 and 696/2002.

58 Ibid.
59 Request for the Establishment of a Panel of 7 May 2002, WT/DS141/13/Rev.1.

Annex A-2

 B. Summary of relevant facts

104 The relevant facts for the examination of this claim have been already summarised in
section II.3.A of this submission.

 C. Argument

105. At the outset, the EC recalls once again its position that Regula tions 160/2002 and 696/2002
are not measures “taken to comply” with the DSB’s recommendations and rulings and, therefore, are
not within the Panel’s jurisdiction. Accordingl y, the arguments presented here below are submitted
only in the event that the Panel were to rule that those regulations are measures “taken to comply”.

106. India’s claim reflects a basic misunderstanding with regard to the scope of the obligations
imposed by Article 5.7. By its own words, Artic le 5.7 applies only with respect to the original
investigation. It states that

The evidence of both dumping and injury sh all 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 that the earliest date on which
in accordance with the provisions of this Agreement provisional measures may be
applied.
107. Thus, Article 5.7 does not apply to subsequent reviews. This is confirmed by Articles 11.2,
which envisages expressly that a review may be limited to dumping or to injury.
60 Further
confirmation is provided by Article 11.4, which does not mention Article 5.7 among the procedural
provisions that apply to reviews carried out under Article 11.61

108 The EC submits that, by the same token, Artic le 5.7 does not apply to the re-determination of
dumping or injury findings for the purposes of implementing the DSB’s recommendations and rulings
(regardless of whether such re-determinations may be characterised as reviews under Article 11.2).
Indeed, implementation re-determinations do not involve an “investigation”, but merely a re-
assessment of the evidence gathered during the cour se of the original investigation. Moreover,
applying Article 5.7 to implementation re-determina tions would have the absurd consequence of
requiring the implementing Member to re-consider a ll the findings made during the investigation,
regardless of whether those findings have an y connection with the DSB’s recommendations and
rulings.

60 Article 11.2 provides in relevant part that

Interested parties shall have the right to request the authorities to examine whether the
continued imposition of the duty is necessary to offset dumping, whether the injury would be
likely to continue or recur if the duty were removed or varied, or both.

Further confirmation is provided by Article 11.3, which states that

Notwithstanding the provisions of paragraphs 1 and 2, any definitive anti-dumping duty shall
be terminated on a date not later than five years from its imposition (or from the date of the
most recent review under paragraph 2 if that review has covered both dumping and injury , or
under this paragraph)… (emphasis added).

61 Article 11.4 provides that

The provisions of Article 6 regarding evidence and procedure shall apply to any review carried
out under this Article …

Annex A-2

109. Finally, and for the same reasons, the EC subm its that Article 5.7 does not apply either where,
as in the case at hand, a Member conducts volunta rily a re-determination of the dumping or injury
findings in order to apply the lega l interpretations made in a panel or Appellate Body report adopted
by the DSB.

 4. Claim 4: Articles 3.1 and 3.2

 A . C l a i m

110. India claims that the EC “acted inconsistent with Articles 3.1 and 3.2 of the ADA, by not
properly excluding the correct portion of non-dumped imports from the total volume of Indian
exports”.
 62

111. Specifically, India alleges that since Omkar and Prakash, two exporters which were found not
to be dumping, accounted for 53 per cent of all th e imports in the sample, the EC authorities should
have considered that the same proportion of im ports outside the sample was not dumped for the
purposes of the injury analysis.

 B. Summary of relevant facts

112. Given the large number of Indian producers and exporters concerned by the investigation, the
EC authorities decided to limit their examination to a sample of exporte rs in accordance with
Article 6.10 of the Anti-Dumping Agreement.

113. In the re-determination of dumping containe d in Regulation 1644/2001, the EC authorities
established the following dumping margins for the five exporters included in the sample.
63

 Anglo French Textile 9.8 %
 Bombay Dyeing & Manufacturing 5.5 %
 M a d h u 3 . 0 %
 O m k a r 0 . 0 %
 Prakash Cotton Mills 0.0 %

114. Co-operating exporters not included in the sample were attributed the average dumping
margin of the sampled exporters, weighted on the basis of their export turnover to the EC. In
accordance with Article 9.4 (i) of the Anti-Dumping Agreement, zero margins were disregarded. The
dumping margin thus established for the non-sampl ed co-operating exporters was 5.7 per cent.
64 India
has not challenged the method used to calculate that margin.

115. Co-operating exporters represen ted approximately 82 per cent of the total exports from India
to the EC.
65 The dumping margin for the non co-operating exporters, was established on the basis of
“facts available”. More specifically, the EC authorities attributed to the non-cooperating exporters the
highest dumping margin established for the expor ters in the sample, i.e. 9.8 per cent. 66 India has not
challenged the method applied to establish that dumping margin.

62 Request for the Establishment of a Panel of 7 May 2002, WT/DS141/13/Rev.1.
63 Regulation 1644/2001, recital 12.
64 Ibid., recital 13.
65 Regulation 1069/97, recital 16.
66 Regulation 1644/2001, recital 14.

Annex A-2

116. In the injury re-determinations made in Regulations 1644/2001 and 696/2002, the EC
authorities assessed the volume and the effect of “dumped imports” both when exports by Omkar and
Prakash were included in that notion and when they were excluded.
67 They concluded that the
exclusion of Omkar and Prakash would not affect the outcome of the analysis.

117. The EC authorities treated all the imports from co-operating exporters not included in the
sample and from non-co-operating exporters as “d umped imports” for the purposes of the injury
analysis.

 C. Argument

118. In the original proceeding, India claimed th at non-dumped transactions should be excluded
from the injury analysis.
68

119 In response, the EC argued that dumping is dete rmined for countries and, therefore, that it
was entitled to consider all imports from a country found to be dumping as “dumped imports” for the
purposes of Article 3.

120. The Panel rejected India’s claim without, however, ruling on the EC’s defence. The Panel
considered the question of whether imports fro m an exporter found not to be dumping could be
considered as “dumped imports” for the purposes of the injury analysis. But, as India had not
contested the injury finding on this ground and there were no Indian producers in that situation, the
Panel refrained from reaching any conclusions.
69

121. The EC refers the Panel to the arguments made in the original proceedings and reiterates its
position that it was entitled to consider all imports from India as “dumped imports” for the purposes
of the injury analysis.
70

122. However, should the Panel reach the conclusi on that imports from an exporter which has been
found not to be dumping must be excluded from the injury analysis, the EC submits that, in any event,
all imports from co-operating exporters not includ ed in the sample, as well as all imports from non-
co-operating exporters were found to be “dumped” by the EC authorities, which, therefore, were
entitled to treat them as “dumped imports” also for the purposes of Articles 3.1 and 3.2.

123. India has not challenged in these proceedings the finding that all imports outside the sample
(both from co-operating and from not co-operating exporters) were “dumped”. Therefore, it is
illogical and contradictory for India to claim that some of those imports should be considered as “non-
dumped” for the purposes of the injury determination.

67 Regulation 160/2002, recitals 22-24 and Regulation 696/2002, recitals 7-10 and 45-46
68 Panel report, paras. 6.132-6-142.
69 Ibid., para. 6.138
70 In addition, the EC would like to point out that its interpretation is also warranted in view of the fact
that a joint injury analysis is po ssible or even warranted when anti- dumping and anti-subsidy proceedings
concerning the same country run in parallel. The salm on Panel has recognized that the injury analysis can be
carried out jointly for both su ch proceedings (see paras 572 and 573 of the Panel Report on United States -
Imposition of Anti-Dumping Duties on Imports of Fresh Atlantic Salmon from Norway , ADP/87, adopted on
27 April 1994). Indeed, since the starting point for such analysis is the volume and the prices of the imports
concerned (and not the level of dumping or subsidization), it does not seem appropriate to distinguish at
company level. If the EC’s interpretation were not accepted, two different injury examinations would have to be
carried out if a company is found to be dumping but not to be subsidized or vice versa. This makes injury
examinations often unworkable and that cannot have been the intention of the drafters of the Anti-Dumping
Agreement.

Annex A-2

 (a) Imports from cooperating ex porters not included in the sample

124. Article 6.10 of the Anti-Dumping Agreement states that

The authorities shall, as a rule, determine an individual margin of dumping for each
known exporter or producer concerned of the product under investigation. In cases
where the number of exporters, producers, im porters or types of products involved is
so large as to make such a determination impracticable, the authorities may limit their
examination either to a reasonable number of interested parties or products by using
samples which are statistically valid on the basis of information available to the
authorities at the time of the selection, or to the largest percentage of the volume of
the exporters which can reasonably be investigated.
125. Thus, Article 6.10 provides that, as a rule, the authorities must determine an individual
dumping margin for each exporter. By way of ex ception, in the circumstances described in the
second sentence of Article 6.10, the authorities may li mit their examination to a sample of exporters
and calculate individual dumping margins only for those exporters.
71.

126. It is implicit in Article 6.10 that, when the authorities limit their examination to a sample of
exporters, they may calculate an “all-others” dum ping margin for all the non-examined cooperating
exporters on the basis of the margins determined for the companies included in the sample.

127. Indeed, as argued by India, the purpose of a sample is precisely “to provide an estimate
relating to the whole”.
72 However, India disregards that Article 6.10 allows the use of samples with
the specific purpose of rendering practicable the determination of dumping margins for all the
exporters under investigation, and not for the purpo se of calculating the volume of dumped imports.
Therefore, the data pertaining to a sample establishe d in accordance with Article 6.10 must be used in
order to calculate the dumping margin for “the whol e”, and not in order to establish what proportion
of “the whole” is dumped.

128. The Anti-Dumping Agreement does not prescribe any specific rules for calculating the “all-
others” dumping margin.
73. Nevertheless, Article 9.4 of the Anti-Dumping Agreement places a
maximum limit or ceiling on the level of the anti-dum ping duty that may be applied to imports from
non-examined exporters.74

129. Specifically, Article 9.4 provides as follows:

When the authorities have limited their ex amination in accordance with the second
sentence of paragraph 10 of Article 6, any anti-dumping duty applied to imports from
exporters or producers not included in the examination shall not exceed
(i) the weighted average margin of du mping established with respect to the
selected exporters or producers or,

71 Panel Report, Argentina – Definitive Anti-Dumping Measures on Imports of Ceramic Floor Tiles
73 Appellate Body Report, United States – Anti-Dumping Measures on Certain Hot-Rolled Steel
Products from Japan (“US- Hot Rolled Steel”), WT/DS184/AB/R, para. 116.
74 Ibid.

Annex A-2

(ii) where the liability for payment of anti-dumping duties is calculated on the
basis of a prospective normal value, the difference between the weighted
average normal value of the selected exporters or producers and the export
prices of exporters or producers not individually examined,
provided that the authorities shall disregard for the purposes of this paragraph any
zero and de minimis margins and margins establis hed under the circumstances
referred to in paragraph 8 of Article 6. The authorities shall apply individual duties
or normal values to imports from any exporter or producer not included in the
examination which has provided the necessar y information during the course of the
investigation, as provided for in subparagraph 10.2 of Article 6.
130. Article 9.4 contains no suggestion to the effe ct that the “all-others” duty may be applied only
to a certain proportion of imports from the non-examin ed exporters. It contemplates that the “all-
others” duty will be applied to “imports from exporters or producers not included in the examination”,
without any restriction or qualification. The onl y exclusion from the “all-others” duty envisaged by
Article 9.4 concerns the imports from non-examined exporters which have requested individual
dumping margins in accordance with Article 6.10.2. A contrario, this confirms that all imports from
the non-examined exporters may be subjected to the “all-others” duty.

131. The Anti-Dumping Agreement is premised on the basic notion that anti-dumping duties can be
applied only to imports which are “dumped”. This is reflected in Article 9.3, which provides that

… the amount of the duty shall not exceed the margin of dumping as established
under Article 2.
and in Article 11. 1, which stipulates that

an anti-dumping duty shall remain in force only as along as and to the extent
necessary to counteract dumping which is causing injury.
as well as in the system of refunds and reviews provided for in Articles 9.3.1 and 9.3.2 and in
Articles 11.2 and 11.3, respectively.

132. Thus, if Article 9.4 allows the application of anti-dumping duties to all imports from all the
exporters not included in the examination, it is because all such imports can be considered as
“dumped”, including for the purposes of Articles 3.1 and 3.2.

133. India does not dispute the application of the “all-others” duty to all imports from co-operating
exporters not included in the sample. Nor doe s India contest the underlying determination of
dumping made by the EC authorities with respect to all such imports. Yet, India pretends that some
of those imports should not be considered as dumpe d for the purposes of the injury analysis. India’s
interpretation is contradictory and untenable. It implies that imports from the non-sampled exporters
can be simultaneously “dumpe d” and “non-dumped” under the Anti-Dumping Agreement . That
proposition is manifestly illogical. If imports from the non-sampled exporters are considered
“dumped” for the purposes of applying anti-dumping duties, then it follows that they can be treated as
such also for the purposes of the injury analysis.

134. India seeks to deny the relevance of Article 9.4 by arguing that Article 9 refers to the
imposition and collection of anti-dumping duties, and “does not bear on the determination of injury –
including the volume of dumped imports – under Article 3”.
75 Yet, the EC would recall that the

Annex A-2

original Panel held expressly that Article 9.2 was relevant context for the in terpretation of the term
“dumped imports” in Article 3.2.
76

135. In similar vein, India argues that “the rul es in [Article 9.4], including the obligation to
disregard, are restricted for the purposes of this paragraph”.
77 To begin with, however, the phrase “for
the purposes of this paragraph” only applies with respect to the obligation to disregard certain
margins, and not with respect to other “rules” provi ded for in Article 9.4. Moreover, that phrase
serves simply to clarify that zero, de minimis and “best fact available” margins cannot be disregarded
for the purposes of applying duties to the exporters in the sample for which th ose margins have been
established.

136. The supposedly “absurd consequences” allege d by India do not result from the EC’s position
that the term “dumped imports” must be interpreted consistently throughout the Agreement, but rather
from the specific rules for the calcu lation of the “all-others” rate cont ained in Article 9.4, and more
specifically from the requirement to disregard zero and de minimis margins. It is well known,
however, that the exclusion of those margins is the quid-pro-quo for the exclusion of the “best-facts-
available” margins. The finely balanced compro mise embodied in Article 9.4 may yield less than
perfect results in extreme cases, such as the one described in India’s example, but it has been
accepted by all Members, including India.

137. Finally, the EC rejects India’s unsupporte d allegation that the EC authorities applied
“different standards, as to what a sample is suppo sed to mean, on the export and domestic side of an
investigation”.
78 The EC authorities used the dumping ma rgins established for the companies in the
sample in order to estimate the overall dumping marg in for the companies outside the sample. The
same kind of analysis was applied to the data pert aining to the sample of domestic producers. For
example, the EC authorities used the profit data for the companies in the sample in order to estimate
the level of profitability of the EC industry as a whole, rather than the proportion of sales of the EC
industry that was made profitably, as would have been required by India’s interpretation.

 (b) Imports from non-co-operating exporters

138. As explained above, the EC authorities calculated the dumping margin for the non-co-
operating exporters by resorting to “facts available”. On that basis, the EC concluded that imports
from non-co-operating exporters were dumped.

139. India has not challenged the dumping determin ation made by the EC authorities with respect
to imports from non-co-operating exporters. In particular, India has not claimed that such
determination is inconsistent with Article 6.8 and Annex II.

140. Since India does not contest the finding that imports from non-co-operating exporters were
“dumped”, it cannot challenge the treatment of such imports as “dumped imports” for the purposes of
the injury analysis.

76 Panel report, para. 6.137.
78 Ibid., paras. 126-127.

Annex A-2

 5. Claim 5: Articles 3.1 and 3.4

 A . C l a i m

141. India claims that

The EC acted inconsistently with Articles 3.1 and 3.4 of the ADA by evaluating data
without even collecting them, or even if the data were collected, a proper
implementation of the Panel’s findings requi red not only a mere recitation of injury
factors but an overall reconsideration and anal ysis of the information in the light of
the requirements of the Anti-Dumping Agreement.
 B. Summary of relevant facts

142. It should be pointed out that the first limb of India’s claim rests on the assumption that
information relating to certain data was never collected. India tries to find support for its claim by
relying on paragraph 6.167 of the original Panel report. This assumption is entirely incorrect.

143. First of all, India’s statement that the Pa nel “factually established this absence of data
collection as a substantive violation” of Article 3.4 is misleading.
79 In particular, the Panel merely
found that in the absence of any indication on the face of the Provisional and Definitive Regulations,
it could not simply assume that the data had been collected. Indeed, the Panel acknowledged that
“some of the data collected for other factor s may have included data for the factors not
mentioned”.

144. Secondly, during the Panel proceeding, the EC consistently indicated that the data
constituting the basis for the evaluation of all injury factors was collected during the investigation.
80

145. In its reply of 27 July 2001
81 to Texprocil’s comments on the disclosure document of
19 June 2001, the EC Commission further explained how such data had been collected at the time of
the original investigation.

146. Since the information concerning the injury factors mentioned in Article 3.4 had therefore
been collected, it could be and was properly evalua ted in accordance with the requirements of that
provision.

 Para 6.167 of the Panel Report provides:

"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 inves tigating 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." (emphasis
added). Thus, the Panel merely concludes that there is no indication in the determination that
the EC authorities evaluated (the relevance of) all of the factors listed in Article 3.4.
80 See EC submission of 27 March 2000, point D: reply to India claim no. 11 point 1; in particular para
249 to 255
81 Exhibit India – RW –17.

Annex A-2

 C. Argument

147. India makes three arguments in support of its claim:

(1) That data which has not been collected cannot be evaluated;

(2) That if even data has been collected it has not been an adequate evaluation; and

(3) That factual errors have invalidated the redetermination.

The EC will rebut each of these arguments in turn.

 (a) Data not collected cannot be evaluated

148. As already explained, the EC authorities did in fact collect the data in respect of the injury
factors mentioned in Article 3.4
82 and was therefore able to evaluate that data in its redetermination.
There are no ‘clear-cut findings’ of the original Pane l to the contrary. Moreover, since the EC in its
redetermination reassessed and evaluated this information it cannot be argued that the redetermination
constitutes ‘a mere restatement of the notice.’83

149. Neither did the Panel decide that the EC’s infringement of Article 3.4 could not possibly be
remedied by way of a redetermination c onsistent with the requirements of the Anti-Dumping
Agreement. At paragraph 6.259 of the Panel report it is found that

… 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 affirma tive 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 th e 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
adequate does not add anything to the finding of violation, the resolution of the
dispute before us, or to the understandi ng of the obligations imposed by the AD
Agreement. We therefore make no findings on claim 13.
150. The Panel merely found that it was unnecess ary to make a finding regarding the procedural
violation having already found that the substantive vi olation exists. Whilst the EC accepts that it is
necessary to take account of the findings regarding the substantive violation, it rejects the suggestion
that it was not possible to do so in this case. As stated above, Indi a’s arguments in this respect are
based on the misplaced notion that the EC had not co llected certain data in the first place. The EC
will now demonstrate how misplaced India’s allegati ons are with respect to the two examples they
have given, namely inventories and capacity utilisation.
84

82 Ibid.

Annex A-2

 (i) Inventories

151. India alleges that no data for inventori es were obtained and that therefore no proper
evaluation could be made. This is simply incorrect. The EC Commission's findings 85 on stocks were
precisely made after examining the situation of stoc ks for the sampled Community producers. Even
the Panel acknowledged that some of the data collect ed for other factors may have included data for
the factors not mentioned86, and this is exactly the case for data concerning stocks.

152. Inventories increase or decrease depend ing on the volume produced and the volume sold/
exported during a given period. Since data con cerning production, sales volumes and exports were
collected
87, the EC authorities did have data on stocks, as was clearly confirmed to Texprocil in the
EC Commission’s letter of 27 July 2001.88 This information was also obtained from the accounts and
verified on spot for sampled producers. The EC will address the question of whether it properly
evaluated the relevance of this factor at paragraph 192 below.

153. As regards India’s argument that stock le vels should have been taken into account when
establishing consumption89, the EC points out that complete industry data was not available from all
the Community producers. This is often the case in anti-dumping investigations and consumption is
analysed in such circum stances on the basis of apparent consumption, without taking account of
stocks. Finally, during the original investigatio n neither India nor any other interested party
questioned this calculation.

 (ii) Utilisation of capacity

154. India alleges that the EC authorities did not collect and properly evaluate data concerning
capacity utilisation. India tries to argue that th e EC confuses ‘production capacity’ and ‘utilisation of
capacity’. In order to analyse utilisation of capac ity, however, it is clearly necessary to consider the
level of production capacity. Under the heading ‘capacity’, the EC therefore considered both
production capacity and capacity utilisation. In ev aluating this factor the EC took into account
information which was submitted in the complaint qu estionnaire replies and subsequently verified on
spot. The investigation confirmed that reliabl e statistics on production machinery for the product
concerned are extremely difficult to establish because the machinery can be bought, sold or used for
different products with relative ease. As th e same machinery could yield different production
capacity depending on the nature of the product mix, it is difficult to draw any meaningful data. It
should be noted that the product con cerned consists of a large number and variety of products which
differ in size, colour, construction and quality. Th e original complaint mentioned that “statistics
about production machines in bed linen making up do not exist, being by far too specific.”90 This was
never disputed by India or any other interested party.

155. Whilst the EC was able to establish that a number of producers were contracting out surplus
productions and may therefore have been able to maintain a high rate of capacity utilisation, this data
was not available for all sampled producers or th e Community industry for the reasons explained
above. Thus, the EC considered that in the absen ce of meaningful data for all companies in the
sample, this factor did not have a bearing on th e situation of the industry within the meaning in
Article 3.4.

85 Regulation 1644/2001, recital 29.
86 Panel report, para. 6.167. It is recalled that the Panel merely found that it could not “be expected to
assume that [such data had been collected] without some indication to that effect in the determination.”.
87 Regulation 1069/97, recitals 63, 81 and 82.
88 Exhibit – India – RW – 17, page 4.
90 See page 30 of the complaint (Exhibit-India-6).

Annex A-2

156. The EC concludes that the two examples used by India to highlight the fact that no data was
collected by the EC are totally unfounded.

 (iii) Assessment of relevance

157. Finally, the EC submits that India’s claims in relation to the assessme nt of relevance of the
factors ‘inventories’ and ‘capacity utilisation’ are equally unfounded. India alleges that the EC just
dismissed the factors concerning capacity and stocks as irrelevant and only then referred to the data
collected. It argues that this amounts to a violation of Article 3.4 since facts pertaining to a certain
factor must first be ‘collected and brought on record ’ after which they can be evaluated. India seems
to exclude the possibility that sometimes it may not be materially possible to bring on record data
which simply does not exist or for which data only exists but not in any reliable or comparable form.

158. The EC would submit that in order to comply with Article 3.4 it is not necessary to adopt a
checklist approach to the evaluation of (the relevance of) the factors cited therein. What is required is
an evaluation of all the factors which may result in some of them not having a bearing on the situation
of the domestic industry. Whether an administrative authority sets out the result before or after setting
out the evaluation on which those results are ba sed does not determine the adequacy of that
evaluation. There was no ‘a priori’ dismissal of the relevance of these factors. The key point is that
each factor is considered and that the evaluation is objective. The EC submits that its evaluation of
relevance met the required standards under Article 3.4.

 (b) Alleged inadequate evaluation

 (i) Preliminary remark

159. India argues that the EC failed to properly evaluate or offer any comment on a number of
factors which it submits do not point towards injury . The EC will demonstrate that these submissions
are incorrect and that its careful analysis of all th e factors was consistent with the requirements of
Article 3.4.

160. To dismiss out of hand, as India implies one should, any possibility of material injury being
suffered simply because certain factors do not on th e face of it show a clear negative development,
would, on the contrary fall foul of Article 3.4 and the very oblig ation to examine objectively each
factor mentioned in Article 3.4. In the context of Article 3.4, one Panel said:

An evaluation of a factor implies putting da ta in context and assessing such data both
in their internal evolution and vis-à-vis other factors examined.
91
161. In any event, as explained above, India comple tely misrepresents the degree of evaluation and
analysis performed by the EC in reaching its conclusions on injury.

162. The EC recalls that according to Article 17.6 (i) of the Anti-Dumping Agreement

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 unbiased and objective, ev en though the panel might have reached
a different conclusion, the evaluation shall not be overturned.

91 Panel Report, United States – Hot Rolled Steel, para 7.232.

Annex A-2

163. It should be noted that India argues several times that the EC’s evaluation of injury is
somehow not objective simply because it is based on or includes analysis of data collected for the
sample. Since India did not contest the representativity of the sample, however, the EC fails to
understand what violation of Article 3.4 or 3.1 is supposed to have occurred.

164. India suggests that the references in Re gulation 1644/2001 to the Provisional regulation
indicate a failure to reconsider the information. Th is is a purely formalistic argument which must be
rejected along with the assertion that the redetermina tion is only a ‘restatement’. The fact that the EC
may have confirmed certain of its original findings is of no relevance to the question of whether the
findings are consistent with a proper evaluation.

 (ii) Sales

165. At paragraph 166 of its First Written Submissi on, India suggests that as information on sales
by sampled producers is available in addition to information on sales by the Community industry, the
sampled data should be ‘set aside’. The EC fails to understand India’s complaint in this respect, since
it actually evaluated sales at the level of the Community industry.
92 India relies on the statement by
the original Panel at paragraph 6.181 that

It is not possible to have an objective evaluation of the evidence if some of the
evidence is required to be ignored, even t hough it relates precisely to the issues to be
resolved.
166. This statement by the original Panel does not support India’s contention that sampled data
should be set aside. The Panel’s statement must be read in context –it did not suggest that any
information pertaining to the sample must be ignor ed. It should be noted that the original Panel
pointed out that

In our view, it would be anomalous to conclude that because the EC 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.
93
167. Thus, the Panel simply found that it the EC di d not act inconsistently with Article 3.4 by
taking into account information relating to the Comm unity industry as a whole, including information
relating to companies that were not included in the sample. Since this is precisely what the EC did
here, it fails to understand what vi olation of Article 3.4 it is supposed to have committed. In any
event, an increase in sales is not inconsistent with a finding of injurious price suppression.

 (iii) Market share

168. Contrary to what India claims, there is no di fference in figures regarding the market share of
the Community industry. It is correct that it increased its market share by volume from 18.12 per cent
in 1992 to 19.67 per cent in the IP, whereas it increa sed its market share by value from 22.4 per cent
to 25.1 per cent during that period.
94 As explained in Regulation 1644/2001, market share is
considered to have increased due to the focus on higher value niche products.95

92 Regulation 1644/2001, recital 35; Regulation 1069/97, recitals 82 and 83.
94 Whilst India refers to these latter figures being set out in recital 85 of the Provisional Regulation, that
provision describes market share by value, not market share by volume.
95 Regulation 1644/2001, recital 35. See also Regulation 1069/97, recital 84.

Annex A-2

 ( i v ) P r i c e s

169. It is not disputed that, at the level of th e Community industry, the increase in sales in value
terms is greater than the increase in volume terms, and that consequently, average prices increased by
3.2 per cent. However, this analysis does not ta ke account of the change in product mix by the
Community industry, including the sampled producers, over the period of analysis concerned. This is
quite obvious when the data for average prices ar e compared with data for the defined reference
products, which decreased over roughly the same period.

170. The EC authorities collected and verified da ta on prices at the level of the sample for a
constant product mix. Whilst the average prices per kilogram of the sampled producers increased by
3.2 per cent, the development in average prices fo r the defined reference pr oducts fell in index terms
from 100 in 1993 to 99.2 in the IP
96. Hence the EC examined both the overall increase in prices by
both the Community industry and sampled producer s and the decrease in average prices for the
defined reference products sold by sampled pr oducers and noted that the more positive overall
development in prices compared to the defined refe rence products reflected the fact that the sampled
producers had moved into niche markets and away from high volume mass markets.97

171. India argues that the explanation relating to higher value niche products is inconsistent with
its determination in recital 97 of the Provisiona l Regulation that the market for bed linen is
characterised by product substitutability and transparen cy. However, the fact that the market for bed
linen is characterised by product substitutability do es not necessarily undermine the finding that there
are some high quality niche products. Indeed, it is quite common that a product, which consists of
several types or ranges the highest and lowest of which may not be directly substitutable with one
another, will nevertheless be sufficiently substitutabl e to be considered a like product. Furthermore,
the EC notes that India has not disputed that there are some high quality niche products.

172. India further submits
98 that the reference to higher value niche products is contrary to the
Appellate Body’s finding in Bed Linen regarding the existence of one like product. In the context of
zeroing, the Appellate Body criticised the EC for its failure to calculate overall margins of dumping
for the product under investigation:

Having defined the product as it did, the EC was bound to treat that product
consistently thereafter in acco rdance with that definition. Thus it follows that, with
respect to Article 2.4.2, the EC had to establish “the existence of margins of
dumping” for the product –cotton-type bed linen –and not for various types of models
of that product.99
173. The same criticism cannot be made here: the EC has evaluated overall sales, prices and
market share data for the Community industry. It has also done so at the level of the sample for a
number of defined reference products. The fact that the increase in overall prices and in market share
was found to be explained by the shift in the product mix does not alter the fact that the EC evaluated
these indicators at the level of the like product.

 (v) Profits

174. India alleges that in regard to profits (and certain other factors), the EC has attributed absolute
amounts from the sample to the total pool. However, recital 36 of Regulation 1644/2001 must be read

96 Regulation 1069/97, recital 86.
97 Regulation 1069/97, recital 87.
98 India’s First Submission, paras 170-171.
99 Appellate Body Report, EC-Bed Linen, para 53.

Annex A-2

together with recital 19(ii) of that Regulation, wh ich makes it perfectly clear that data for trends
concerning profitability were analysed at the level of the sample. Since India does not challenge the
representativity of the sample it cannot argue that th e EC is obliged to collect, verify and evaluate
company specific data for the entire Community in dustry; to do so would completely ignore the
fundamental purpose of sampling.

175. India goes on to suggest that any analysis of profits which did not include an evaluation of
profits for the entire Community industry and not ju st sampled Community producers, fails to meet
the requirements of objectivity in Article 3.1. Such an interpretation completely ignores the purpose
of sampling which enables the authorities to base th eir conclusions on the data collected and verified
for the members of the sample in certain circumst ances, for instance where the domestic industry is
particularly fragmented. In such situations, certain macro-economic information may also be
available to the investigating authority and could th erefore be taken into account at the level of the
domestic industry too. However, information regarding profits, a nd other company specific data
related to profitability which must be properly verifi ed, can normally only be obtained at the level of
the sample.

176. India also relies on paragraph 206 of the Appellate Body Report in US- Hot Rolled Steel:

Accordingly, an examination of only certain parts of a domestic industry does not
ensure a proper evaluation of the state of the domestic industry as a whole and does
not therefore satisfy the requirements of “obectiv[ity]” in Article 3.1 of the Anti-
Dumping Agreement.
100
177. The EC points out that the Appellate Body was considering in that context whether an
examination of the merchant industry to the exclusio n of the captive industry would have satisfied the
requirements of objectivity in Article 3.1. This is not analogous with the selection of a sample, the
representativity of which is not contested. In any event, since the EC did not exclude from its
consideration of injury the other Community prod ucers forming part of the Community industry its
analysis was not automatically biased. The fact that the EC was only able to collect and verify data
concerning profitability for a representative number of sampled producers within the definition of the
Community industry does not disclose any bias either; this is normal in cases where it is justified to
base findings on a representative sample of the domestic industry. In the light of the above, and since
India states that it takes no issue with the sample representing the total Community industry, the EC
fails to understand what violation of the Anti-Dumping Agreement is alleged.

178. As regards the factual errors alluded to, the EC admits that a minor clerical error occurred in
the disclosure document dated 19 June 2001.
101 Recital 83 of the Provisional Regulation provides

Sales by the Community industry rose by 4.2 per cent from ECU 428.6 million in
1992 to ECU 446.6 million in the investigation period. Sales by the sampled
producers also rose, from 280.6 million in 1992 to ECU 285.3 million (a rise of
1.7 per cent).
These figures are correct.

179. In the disclosure of 19 June 2001, however, the turnover for sampled producers is shown as
ECU 276.9 million in 1992 and ECU 281.2 million in the IP. This figure is incorrect as it does not
take account of the turnover of a small producer included in the definition of the Community industry.

100 Appellate Body Report, United States –Hot Rolled Steel, para 206.
101 Exhibit India – RW –17.

Annex A-2

180. It is not disputed that the profits of sampl ed producers decreased by over 50 per cent from
3.6 per cent to 1.6 per cent. India states that this factor is not adequately evaluated since the EC “did
nothing more than allege that the profit is below the minimum level of 5 per cent” without providing
any proof for such a level of profit. The EC does however provide evidence in support of this level of
profitability, since it was actually achieved by the sam pled companies in the past, in a year in which
dumped imports were 30 per cent lower than in the IP.
102 The fact that this level is derived from
actual profit levels is important.

181. India seeks to rely on paragr aph 6.100 of the Panel Report in Bed Linen to demonstrate that
the fact that the profits of EC producers are lower in the IP than in an earlier year does not render
those profit levels inadequate. If this analogy is at all applicable, however, it does not support India’s
contention. The 5 per cent profit level cannot be said to be arbitrarily chosen or subjective since it
represents an amount based on actual profit data.

182. In any event India has not suggested any alternative supposedly more objective level of
profitability which could be expected in the absence of unfair competition from dumped imports.
Moreover, the low level of profitability was also found by the EC to be below levels achieved by
importers.

183. India goes on to argue that the profits for sampled producers would have exceeded 20 per cent
if one takes into account the level of investments made.
103 This is grossly inaccurate and based on a
lack of understanding of establishe d international accounting practices. It has been made quite clear
that the figures for investment do not represent yearly amounts but rather the accumulated amounts. 104
In other words India implies that a proper evalua tion of profits consists in adding the amount of
investments accumulated over many fiscal years to the profit realised one single year. Moreover,
India fails to recognise that according to establis hed international accountin g practices investments
are considered part of the assets of a company and cannot simply be added to profits.

 (vi) Output

184. The Community industry was found to have increased production by 8.7 per cent from 39370
tonnes in 1992 to 42781 tonnes in the IP. India argu es that since output increased, this does not point
towards injury and the EC cannot rely on the reasoning in recital 81 of the Provisional Regulation that
those companies were the ones which were str ong enough to survive the competition from dumped
imports and which to a certain extent had benef ited from the demise of other producers which had not
survived.

185. India submits that this reasoning runs c ounter to the Panels findings as it “refers” to
producers outside the domestic industry. The Pa nel criticised the EC for basing some of it
conclusions regarding injury on the negative devel opments for producers outside the definition of the
domestic industry. It did not pr ohibit all references to facts which merely put in context the
information relating to the domestic industry.

186. Whilst there was an increase in production by the Community industry, which consisted of
some relatively strong companies which had manage d to survive in circumstances where others had
not, the Community industry only managed to increase production (and to increase its sales volume
and market share) by concentrating on more sales of higher value niche products. It nevertheless
suffered declining and inadequate profitability, due inter alia to price suppression caused by dumped
imports.

102 Regulation 1069/97, recital 89.
104 See the table at page 8 of the fax from EC to Texprocil of 27 July 2002 (India Exhibit RW-17).

Annex A-2

187. India seems to completely ignore other pertinen t analysis relating to output. From 1994 to the
IP the Community industry’s outpu t actually decreased by 1.6 per cent. Furthermore, it was noted
that the increase in exports had also led to the overall increase in production.
105

 (vii) Productivity

188. The EC found that productivity had improved as a result of the decline in employment. The
investigation showed that the gain in productivit y occurred mainly in the period from 1992 to 1994
when most of the jobs were lost.

 (viii) Return on investments

189. First, it has already been pointed out that the figures for investments in the table attached to
the disclosure document of 19 June 2001
106 represent accumulated and not yearly amounts. 107 Whilst
the return on investments remain ed positive throughout the injury analysis period, it decreased by
over 50 per cent.108

 (ix) Factors affecting domestic prices

190. India alleges that the contraction in de mand and raw cotton prices have nothing to do with
the imports from India. The EC found, however, that in fair market conditions, and in the absence of
other factors preventing this, domestic producers shoul d have been able to increase their prices and
pass on to their customers the increase in the cost of the raw material. 109 Furthermore, despite the
contraction in demand the Community industry should have been able to benefit from the gap left by
factory closures; instead the growth of the Community industry was negative between 1994 and the
IP.

 (x) Margin of dumping

191. India alleges that the EC’s evaluation in its redetermination was factually incorrect and
inadequate. It bases its argument on the fact that two producers had zero dumping margins and one
producer had a dumping margin of 3 per cent. Give n that India has argued that the determination of
injury should only be based on the effects of dump ed imports by excluding Indian exports found not
to have dumped, it seems somewhat surprising th at India now contends that the zero margins of
dumping should be taken into account. Based on the positive margins of dumping found, presumably
India would not argue that these margins are not substantial or above de minimis levels. Even taking
into account the margins of non-dumping producers, it can still be said that the margin of dumping is
substantial and above de minimis.

 (xi) Cash flow

192. As stated in recital 19 of Regulation 1644/2001, data for trends concerning cash flow was
collected at the level of the sample. The EC found that as with profitability, cash flow had decreased
by 28 per cent from 1992 to the IP. This is not di sputed. Whilst India submits that the evaluation
regarding cash flow is inadequate, this allegation is wholly unsupported.

105 Regulation 1069/97, recital 81.
106 Exhibit –India- RW –5.
107 This is clearly indicated in the table in page 8 of the EC’s fax to Texprocil of 27 July 2001 (India
exhibit RW-17).
108 Regulation 1644/2001, recital 39.
109 Regulation 1644/2001, recital 45. See also Regulation 1069/97, recital 88.

Annex A-2

 (xii) Inventories

193. As has been demonstrated, data was obtain ed in relation to inventories from questionnaire
replies and company accounts (see paras 150 - 151 above ). At recital 29 of Regulation 1644/2001 it
was explained in detail that production (e.g. of printe d patterns) often takes place in response to or in
anticipation of orders placed by particular clie nts. Secondly, stock valuation often takes place at
31 December which is towards the end of a peak pe riod for the bed linen sector. While some increase
in stocks was observed in some companies, there wa s no suggestion that this was evidence of injury.
An increase in stocks or decrease in stocks in this sector can thus indicate actual or anticipated orders
rather than unsold production.
110 Consequently, the EC was entitled to conclude that stocks did not
have a bearing on the state of the domestic industry.

 (xiii) Employment

194. India claims that the decrease in employment
111 is more probably due to the increase in
productivity from more efficient machines. However no evidence is provided in support of this claim:
it is merely asserted that “the increased production from more efficient machines could have been the
reason to the 300 lay-offs in the sector”.112 In any event, there is not an increase but rather a decrease
in production during the periods in which employment for the Community industry decreased. The
same trend was found at the level of the sampled producers, as is evident from the table annexed to
the disclosure document of 19 June 2001.113

 (xiv) Wages

195. It is accepted that wages increased over the injury investigation period114, but this factor is not
decisive as to the determination of injury and has to be viewed alongside all other factors.

 (xv) Growth

196. The EC considered the growth of the domes tic industry and evaluated this in context by
comparison to the growth in dumped imports. Whether one compares the growth of the domestic
industry to the growth of the low priced dumped imports from India alone or from dumped imports
from all countries concerned, it is clear that growth on the part of the Community industry was far less
significant in both absolute and relative terms.

197. The EC does not disregard the fact that sales volume overall has increased but it does note
that growth was negative for a significant period of the injury analysis period, i.e. between 1994 and
the IP and growth in market share was also very limited during that period. In analysing the trends
over the whole of the injury investigation period an investigating authority cannot be expected to
ignore clear negative trends during that period. In this context, the EC recalls the finding of the
Appellate Body in Argentina – Footwear Safeguard

110 Regulation 1644/2001, recital 29.
111 Recital 91 of Regulation 1069/97 provides that direct employment in the Community industry
decreased from “around 7000 jobs to 6900”. The exact figures (7059 in 1992 to 6684 in the IP) correspond to
the decrease of 5.3 per cent mentioned; see page 31 of provisional disclosure document of 2 June 1997 (Exhibit-
India-23). The decrease in em ployment is mirrored at the level of the sample (a decrease of 5.9 per cent) as
disclosed to Texprocil on 19 June 2001 (Exhibit-India –RW-5).
113 Exhibit –India –RW-5.
114 Regulation 1644/2001, recital 33.

Annex A-2

… we do not dispute the view and ultimate conclusion that the competent authorities
are required to consider the trends in imports over the period of investigation (rather
than just comparing the end points) under Article 4.2 (a).115
198. Furthermore, whilst some factors may have showed a positive trend overall, this does not
necessarily mean that there could have been no obj ective finding of injury. Indeed, in order to
evaluate injury it is necessary to consider all the relevant economic indicators in context. Where there
are both positive and negative trends, a balancing act must normally be performed, as one or several
of these factors cannot necessarily give decisive guidance.

 (xvi) Ability to raise capital

199. The EC evaluated the sampled producers’ ability to raise capital and found that the level of
credits increased by 3 per cent from 1992 to the IP. Whilst the level of credits raised decreased during
the period considered and then increased during th e IP, there was no indication that the Community
industry had encountered difficulties raising capital. The fact that credits raised increased does not
necessarily indicate that sampled producers were perfor ming better. Indeed, whilst the level of credits
remained fairly stable, the debt ratio was particularly high.

 (c) Alleged factual errors

200. India alleges that there are a number of factual errors or factual misrepresentations in the EC’s
redetermination. By and large, these allegations have already been raised and dealt with under the
second argument, so the EC shall limit its treatment of these claims and refer where appropriate to its
earlier comments.

 (i) Composition of the sample

201. India considers that the producer which was eliminated from the sample during the original
investigation because it was found to have importe d dumped imports from Pakistan should have been
included in the sample in the redetermination si nce Pakistan was no longer found to be dumping.
First, the EC submits that this amounts to a claim that the EC has violated Article 4.1(i), however
since this claim was not stated in the Panel request it is outside the scope of the Panel’s terms of
reference.
116 Second, the original Panel and Appellate Body findings do not give rise to any
obligation to alter the composition of the sample. Fi nally, this can hardly be described as a deliberate
decision to ignore positive evidence, as suggested by India. Nor can it seriously be contended that
even if the EC committed an error in not including the data again for this one excluded producer –
quod non- that this would have amounted to a manifest error such as to render the entire evaluation
biased or otherwise not objective.

 (ii) Sales values

202. Whilst it is admitted that there was a minor cler ical error in the table annexed to the disclosure
document of 19 June 2001 in respect of sales valu es for the sampled companies, the redetermination
correctly confirms that profit on turnover decreased from 3.6 per cent in 1992 to 1.6 per cent in the
IP.
117

115 Appellate Body report, Argentina – Safeguard Measures on Imports of Footwear ,
WT/DS121/AB/R, (“Argentina – Footwear Safeguard”) para. 129
116 See paras 51-54 above.
117 See paras 177-178 above.

Annex A-2

 (iii) Market share

203. There is no change in figures for market share of the Community industry in the
redetermination; India has itself confused the figures for market share by value and market share by
volume, as explained at para 187 above.

 (iv) Attribution of sampled figures to Community industry

204. The EC has already explained that it was ma de clear in recital 19 of Regulation 1644/2001
that certain information was collected only at the leve l of the sampled producers. The fact that India
points this provision out itself demonstrates that it w as not misled by any of these figures, rather, it
understood perfectly well that they related to sampled producers.

 (v) Margin of dumping

205. In the event that the alleged factual erro rs or misrepresentations regarding Regulation
696/2002 are considered to be within the jurisdiction of the Panel, the EC submits that the margin of
dumping was objectively examined for the same reasons set out at para 211 above. Similarly, the
statement in recital 19 of that Regulation regardi ng undercutting and the level of dumping is based on
the established findings for normal value and for dumping during the investigation period

206. In the light of the above, the EC submits that it did not base itself on erroneous or
misrepresented facts and did not act inconsistently with Article 3.1.

 (d) Conclusion on Article 3.1 and 3.4

207. The EC submits that it did carry out an overa ll reconsideration an analysis of the economic
indicators pertaining to injury. In doing so, it pr operly evaluated these factors in accordance with the
requirements of Article 3.1 and 3.4. It concl uded that whilst the Community industry managed to
increase production and to slightly increase its sales volume and market share by concentrating on
sales of higher value niche products, it nevertheless suffered declining and in adequate profitability,
which was basically the result of price suppression. The injury indicators for cash flow, return on
investments and employment also showed declining trends.

208. India fails to demonstrate that the EC did not have due regard to the relevant economic factors
and concentrates in its criticism of the EC’s analysis by referring to the fact that certain information
was collected only at the level of the representative sample (a practice which is perfectly legitimate
for the reasons given above), and it alleges a number of factual errors, which have been demonstrated
to be either false or inconsequential.

 6. Claim 6: Article 3.5

 A . C l a i m

209. India alleges that “the EC acted inconsistent with Article 3.5 of the ADA, by incorrectly
establishing a causal relationship between dumped imports and injury”.
118

118 Request for the Establishment of a Panel of 7 May 2002, WT/DS141/13/Rev.1.

Annex A-2

 B. Facts

210. India “briefly highlights” what it describes as “some perplexing factual determinations by the
EC”.
119 The precise relevance of those determinations to the arguments made subsequently by India
is nowhere explained. In any event, as shown below, India’s criticisms are unjustified.

 ( a ) Regulation 1644/2001

211. India suggests that in recital 50 of Regulation 1644/2001 the EC authorities would have
acknowledged that the alleged injury was actually caused by other factors, namely the increase in the
costs of raw cotton and in consumer prices.
120

212. As will be shown below, the passage quoted by India has been taken out of context. Recital
50 is not part of the causation analysis. It belongs to the analysis of the situation of the EC, the
purpose of which is to establish whether the EC industry has suffered injury, regardless of the causes.

213. India complains that in recital 61 the EC incl udes “references to producers not forming part of
the Community industry”.
121 The EC believes that this criticism is based upon a misreading of the
findings of the original report. The original panel found that

information concerning companies that are not within the domestic industry is
irrelevant to the evaluation of the ‘rele vant economic factors and indices having a
bearing on the state of the industry” required under Article 3.4.
122
214. Thus, the original panel did not say that info rmation concerning companies that are not within
the domestic industry can never be relevant, but rath er that such information is irrelevant for the
purpose of assessing the sate of the domestic industry. Recital 61, however, is not concerned with the
state of the domestic industry. The point made in recital 61 is that the impact of the decrease in
consumption was felt notably by EC producers which were not part of the domestic industry, rather
than by the domestic industry. The EC submits that such finding is perfectly relevant for the
causation analysis.

215. India criticises that recital 54 considers as “dumped imports” the imports from Pakistan.
123.
This issue has already been addressed in the EC’s reply to Claim 4.

216. India also criticises the pri ce analysis made in recitals 55 and 57, and in particular that “an
increase of sales prices with 3.1 per cent is ‘by and large stable’, while a decrease in profits with 2
per cent is ‘declining’”.
124

217. The evolution of the prices of the domestic i ndustry has been discussed in detail in the EC’s
response to Claim 5. At this point, the EC will limit itself to note that India’s comparison is
misleading. Indeed, India compares an increase in percentage points (for profits) to an increase in
percentage (for sales). In percentage terms, profits fell by 56 per cent. The EC considers that, in view
of that, it is no exaggeration to say that profits were “declining”. Nor is it inaccurate to say that that,
where prices vary by 3.1 per cent over five years, they are “by and large stable”.

121 Ibid., para. 237.
122 Panel report, para. 6.182.
124 Ibid., paras. 240 and 242. [Footnotes omitted]

Annex A-2

 (b) Regulation 696/2002

218. India contests that the market share held by dumped Indian imports increased from 5.1 per
cent to 8.5 per cent.
125 This issue has already been addressed at length in the EC’s rebuttal to Claim 4.

219. India contends that, for the purposes assessing th e effects of the imports from other countries,
the EC should have disregarded imports from countries with a market share de minimis, which India
defines as less than 1 per cent.126

220. The EC is not aware of any provision in the Anti-Dumping Agreement that requires to
disregard particular sources of imports on account of their volume for the purposes of Article 3.5. In
particular, the EC considers that the rule on “n egligible” imports contained in Article 5.8 does not
apply in this context. In any event, even if it applied, imports from countries which individually
accounted for less than 3 per cent of total imports accounted collectively for more than 7 per cent of
total imports.

 C. Argument

221. India puts forwards three different arguments in support of this claim
127:

(1) that the EC “has not proven a causal link between the dumped imports and the alleged
injury”;

(2) that the EC “has not examined all the f actors which might have caused injury”; and

(3) that the EC “has not separately distingu ished the injury caused by other factors”.

222. The EC will address and rebut in turn each of the above three arguments.

 (a) India’s first argument

223. India alleges two different gr ounds in support of its argument th at the EC authorities have not
proven the causal link between dumped imports and injury.

224. In the first place, India contends that the determination of causality is based on incorrect
factual findings.
128 Specifically, India mentions the following findings:

 (i) the EC treated imports from Pakistan as dumped imports; and

 (ii) the EC overstated the amount of dumped imports from India.

225. The EC has already dealt with these two alleged errors in its rebuttal of Claims 2, 3 and 4.

226. Second, India argues, in no more words, that

… the EC has not adequately proven at a ll that the increase in market share of
dumped imports from India with 1.9 per cent (over a five year period) – and which
coincided with an increase in market sh are of the Community industry from 18.1 to

125 Ibid., para. 244.
126 Ibid., para. 245.
127 Ibid., para. 258.
128 Ibid., para. 247.

Annex A-2

19.7 per cent (or from 22.4 to 25.1 per cent)- were the cause of the profit reduction
of the Community industry from 3.6 to 1.6 per cent (over a period of five years and
which was, in fact, the alleged injury).
129

227. As will be shown below, the above statement is, despite its brevity, replete with both legal
and factual errors. In particular,

• Article 3.5 does not require that dumped imports be the sole cause of injury;

• injury can be found to exist even if dumped imports have not gained market share;

• the finding of injury reached by the EC authorities is not based upon the loss of
market share by the domestic industry; and

• in any event, the increase in market share of the dumped imports was significant.

(i) Dumped imports do not have to be the sole cause of injury

228. The EC authorities were not require d to prove that dumped imports were the cause of the
injury suffered by the EC industry. The EC recalls that in US – Wheat Gluten the Appellate Body has
clarified that

the language in the first sentence of Article 4.2 (b) [of the Agreement on Safeguards]
does not suggest that increased imports be th e sole cause of injury, or that “other
factors” causing injury must be excluded from the determination of serious injury. To
the contrary, the language of Article 4.2 (b), as a whole, suggests that “causal link”
between increased imports and serious injury may exist, even though other factors are
also contributing, “at the same time”, to the situation of the domestic industry.
130.
229. In the same case, the Appellate Body emphasi sed that the non-attribution language in the
second sentence of Article 4.2 (b) of the Agreement on Safeguards means that the effects of increased
imports must be examined in order to determine whether the effects of those imports establish a
“genuine and substantial rela tionship of cause and effect”
131 between the increased imports and
serious injury.

230. The wording of Article 3.5 of the Anti-Dumping Agreement is similar to that of Article 4.2 (b)
of the Agreement on Safeguards . For that reason, as confirmed by the Appellate Body in US - Hot
Rolled Steel, adopted panel and Appellate Bo dy reports relating to the non-attribution language in the
Agreement on Safeguards can provide guidance in interpretin g the non-attribution language in
Article 3.5 of the Anti-Dumping Agreement.
132

231. In view of the above, the EC submits that, contrary to India’s position, the relevant issue is
not whether dumped imports were the cause of the injury suffered by the EC industry, but rather
whether there was a “genuine and substantive relationship of cause and effect” between the two.

130 Appellate Body report, United States – Definitive Safeguard Measure on Imports of Wheat Gluten
from the European Communities (“US – Wheat Gluten ”), WT/DS166/AB/R, , para. 67. See also the Appellate
Body report in United States – Safeguard Measures on Imports of Fresh, Chilled or Frozen lamb meat from
New Zealand and Australia (“US – Lamb”), WT/DS177/AB/R, WT/DS178/AB/R, para. 166.
131 Appellate Body Report, US – Wheat Gluten, para. 69; Appellate Body report, US – Lamb, para. 168.
132 Report of the Appellate Body Report, US – Hot Rolled Steel, para. 230.

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 (ii) Injury can be found to exist even where dumped imports have not increased

232. India’s argument suggests that if the increase in the market sh are held by the dumped imports
is relatively small, those imports cannot be considered a cause of injury. That suggestion is incorrect.

233. Article 3.2 of the Anti-Dumping Agreement requires the investigating authorities to consider
not only the volume of imports, but also the effect of the dumped imports on prices, including

whether the effect of such imports is otherwise to depress prices to a significant
degree or prevent increases, which otherwise would have occurred, to a significant
degree.
234. Clearly, if the Anti-Dumping Agreement directs the investigating authorities to consider the
existence of price depression and price suppression, it is because those two situations are considered
as a relevant form of injury. Yet, the existence of price depression or price suppression is perfectly
consistent with the lack of increase, or even the decrease, in the market share held by dumped
imports.

235. Further evidence that an increase in the mark et share of the dumped imports (and a correlative
decrease in the market share of the domestic industry) is not necessary in order to establish the
existence of injury is provided by Article 3.4. The first sentence of that Article lists the market share
as one of the relevant factors having a bearing on the state of the domestic industry. Nevertheless, the
second sentence of Article 3.4 provides that neither one nor several of those factors (including the
market share) can “necessarily give decisive guida nce”. India’s argument effectively renders the
market share of the domestic industry a “decisive” factor.

 (iii) the injury finding was not based upon a decrease of the EC industry’s market
share

236. The finding of injury reached by the EC authorities was not based upon the loss of market
share by the domestic industry, but mainly upon its declining profitability, which was the result of
price suppression and not of a decrease in sales.
133

237. Given the type of injury suffered by the EC industry, the contribution to that injury by the
dumped imports cannot be measured by considering only the market share gained by those imports.
Indeed, the prices of the dumped imports and their effects on the prices of the EC industry should also
be considered. In any event, as explained below, dumped imports from India did increase
significantly.

 (iv) the market share of dumped imports increased significantly

238. The market share held by the dumped imports from India increased from 5.9 per cent to
9.9 per cent (5.1 per cent to 8.5 per cent, if imports from exporters f ound not to be dumping are
excluded) between 1992 and the investigation peri od. As a result, dumped imports from India
represented over 50 per cent of the EC industry’s sales volume during the investigation period.
134

239. Imports from India increased more than imports from any other source
135 in both absolute and
relative terms. For example, imports from Pakistan increased by 1.5 percentage points.136

133 Cf. Regulation 1644/2001, recitals 50 and 51.
134 Ibid., 17.
135 Ibid., recital 30.

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240. Moreover, imports from India grew most in the period between 1994 and the investigation
period (from 6.8 per cent to 9.9 per cent)
137, thus coinciding with the deterioration of the financial
situation of the Community industry.138

 (b) India’s second argument

241. India alleges that the EC authorities cited th e increase in consumer prices as one of the causes
of injury but then failed to examine it as an “other factor” under Article 3.5.139

242. This argument misrepresents the findings made by the EC authorities. The EC authorities did
indeed make the observation that the prices of the domestic industry did not keep pace with inflation
in prices in consumer prices.140 But they did not identify that f act as a cause of injury. The statement
cited by India is not part of th e causality analysis, but instead of the assessment of the state of the
domestic industry. The fact that the domestic prices failed to keep pace with the inflation in prices for
consumer goods was regarded as a further indication of price suppression and inadequate profitability.
The causes of that price suppression and inadequate profitability were examined in a subsequent
section of the determination (Section 5), where the EC authorities concluded that they were the
consequence of the downward pressure on prices applied by dumped imports.141

 (c) India’s third argument

243. India states this argument as follows
142:

In India’s view, the EC did not engage in such separation nor did it distinguish the
injurious different effects. For example, as regards the increase in raw cotton prices,
the EC merely confirmed the findings of the provisional Regulation. That provisional
Regulation in recital (103) stated that “The Commission concluded that increases in
raw materials had caused injury. Nowher e, in the provisional Regulation, nor
elsewhere for that matter, are the injurious effects caused by this price increase
separated and distinguished from the effects of the dumped imports.
244. The EC rejects India’s broad and unsupported allegations to the effect that the EC authorities
failed to separate and distinguish the effects of dumped imports from those of other, unspecified,
causes of injury. The EC refers the Panel to the re levant sections of the Provisional Regulation and of
Regulation 1644/2001 and, to the extent that it was considered a measure “taken to comply”, of
Regulation 696/2002, where the EC authorities set out in detail the results of its careful examination
of all relevant “other factors”.

245. Since India has presented arguments with resp ect to only one alleged “other factor” (the
increase in the cost of raw cotton), the EC will limit itself to reply to those arguments.

246. Once again, India’s arguments misrepresen t the findings of the EC authorities through
selective quotation. While the EC authorities stated that the increase in the cost of raw cotton “had

136 Ibid.
137 Ibid, recital 5.
138 Ibid., recital 26.
140 Regulation 1644/2001, recital 51. See also Provisional Regulation, recital 86.
141 Provisional Regulation, recitals 102 and 102, confirmed by Regulation 1644/2001, recital 60.

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caused injury”, the context makes it clear that the EC authorities did not consider that factor as a
separate cause of injury.

247. The relevant findings are set out in recita ls 102 and 103 of the Provisional Regulation, which
state that

The world raw cotton price, as measured by the Cotton Outlook A index (converted
from US$ into ECUs) rose by 48 per cent between 1992 and the investigation period.
Over the same period prices on the Community market of the product concerned by
this proceeding were experiencing strong downward pressure because of price
undercutting by the dumped imports. In th is period the sampled producers were not
able to achieve a satisfactor y price development. As noted in recital (86) above,
prices of the reference products fell on average in real terms.
The Commission concluded that increases in ra w materials prices had caused injury.
However, the extent of such injury depends on the ability to pass on some or all of the
increased cost. In this case, it was reasonabl e to assess that the dumped imports were
the main reason why such pass-through did not occur.
248. Also of relevance is reci tal 45 of Regulation 1644/2001:

The price of raw cotton, which can represent up to 15 per cent of the total cost of bed
linen, increased significantly during the period considered. Normally, in fair market
conditions, producers should have been able to pass on his cost increase to customers.
The investigators has shown that the Community industry was not able to do so in
this case.
249. The above passages evidence that the EC authoriti es considered that the increase in the cost of
raw cotton “had caused injury” only because the EC industry was unable to reflect that increase in its
prices. (In other words, because the Commun ity industry had suffered “price suppression”, as
described in Article 3.2). The EC authorities f ound that, in turn, the reason why the EC industry
could not pass on the cost increases was the downward pressure on prices exerted by the dumped
imports. Thus, ultimately, the cause of the injury were the dumped imports, and not the increase in
the cost of raw cotton. Since the increase in th e cost of the raw cotton was not a separate cause of
injury, its injurious effects cannot possibly be “separated/distinguished” from those of the dumped
imports.

 7. Claim 7: Article 15

 A . C l a i m

250. India alleges that “the EC acted inconsistent with Article 15 of the ADA by failing to explore
constructive remedies”.
143

 B. Summary of relevant facts

251. In order to implement the DSB’s rulings a nd recommendations, the EC authorities carried out
a re-determination of the dumping findings made in Regulation 2398/97 with respect to imports of
bed linen originating in India, as well as a re-determi nation of the injury findings reached in the same
regulation. The results of those re-determinations are set out in Regulation 1644/2001.

143 Request for the Establishment of a Panel of 7 May 2002, WT/DS141/13/Rev.1.

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252. Although the EC authorities concluded in Re gulation 1644/2001 that im ports originating in
India were dumped
144 and, together with the imports originating in Pakistan and Egypt, caused injury
to the EC industry 145, they decided to “suspend the appli cation” of anti-dumping duties on imports
originating in India.146

253. The suspension stipulated in Regulation 1644/2001 has been confirmed by Regulation
696/2002.
147 Thus, currently the EC is applying no anti-dumping duties on imports of bed linen
originating in India.

254. Regulation 1644/2001 further provided that the anti-dumping duties on imports originating in
India would expire six months after its entry in to force unless a review was initiated before that
date.
148 Further to duly substantiated application made by the EC industry, the EC authorities opened
a review on 13 February 2002. 149 That review is still ongoing. The EC authorities will decide
whether or not to levy anti-dumping duties, or to accept an undertaking, once that review is
completed. In the meantime, the application of the duties imposed pursuant to the original
investigation will remain suspended.150

255. Contrary to what is suggested now by India
151, the Indian exporters proposed no “constructive
remedies” to the EC authorities. Instead, follo wing the disclosure by the EC authorities of the
findings which provided the basis for Regulation 1644/2001, the Indian exporters requested the
following.152

 - the repeal of the anti-dumping measures with retroactive effect;

 - the reimbursement of the duties paid;

 - the reparation of the damages suffered; and

 - a moratorium on the initiation of ne w investigations until 31 December 2004

256. The above actions would not have provided any relief to the domestic industry and, therefore,
are not “constructive remedies” within the meaning of Article 15.

257. The EC also wishes to clarify that Regulation 1515/2001
153 is not, contrary to India’s
allegations, “emergency legislation”. 154 The adoption of Regulation 1515/2001 was rendered
necessary by the Bed Linen report, which was, and remains, the only adopted report concerning an
anti-dumping or anti-subsidy measure of the EC. Nonetheless, Regulation 151 5/2001 is a generally
applicable regulation which was not “specifically tailored to address the results of the Bed Linen

144 Regulation 1644/2001, recitals 8-14.
145 Ibid., recitals 17-70.
146 Ibid., Article 1.1
147 Regulation 696/2002, Article 1.
148 Regulation 1644/2001, Article 2.2.
149 OJ C 39/17, 13.2.2002 (Exhibit India-RW-23).
150 Regulation 1644/2001, Article 2.2.
152 Texprocil’s comments to the disclosure of 19 of June of 2001, pp. 17-18 (Exhibit IND – RW – 15).
153 Council Regulation (EC) No 1515/2001, of 23 July 2001, on the measures that may be taken by the
Community following a report adopted by the WTO Dispute Settlement Body concerning anti-dumping and
anti-subsidy matters (OJ L 201/10, 26.7.2001) (“Regulation 1515/2001”) (Exhibit India – RW – 16).

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dispute”.
155 Furthermore, contrary to India’s assertions 156, Regulation 1515/2001 has no retroactive
effect. Article 3 of Regulation 1515/2001 provides that

Any measures adopted pursuant to this Regula tion shall take effect from the date of
their entry into force and shall not serve as basis for the reimbursement of the duties
collected prior to that date, unless otherwise provided for.
258. Regulation 1515/2001 would have been retroactiv e if, as requested by the Indian exporters, it
had provided for the adoption of implementing measur es with effects from the day of introduction of
the disputed measure.

 C. Argument

 (a) Introduction

259. The obligation to explore constructive reme dies must be fulfilled before “applying” anti-
dumping duties. The EC has suspended the “appli cation” of anti-dumping duties on imports of bed
linen from India. If and when the EC authorities decide to “apply” anti-dumping duties as a result of
the ongoing review, they will explore first the po ssibilities of constructive remedies, and more
specifically the possibility of a price undertaking with the Indian exporters. In the meantime, India’s
claim is premature and should be rejected by the Panel.

260. Furthermore, assuming arguendo that the EC authorities had been required to explore
possibilities of constructive remedies, notwithstanding their decision to suspend the application of the
duties, it is submitted in the alternative that such suspension would qualify as a “constructive remedy”
for the purposes of Article 15.

 (b) The EC is not “applying” anti-dumping duties

261 The second sentence of Article 15 provides that

Possibilities of constructive remedies pr ovided for by this Agreement shall be
explored before applying anti-dumping duties where they would affect the essential
interests of developing country Members.
262. Thus, the obligation to explore constructive re medies must be fulfilled “before applying anti-
dumping duties”.
157 It follows that, as long as a develope d country Member is not “applying” any
anti-dumping duties, it has still the possibility to ex plore constructive remedies and, therefore, cannot
be found to be in violation of Article 15.

263. Currently the EC is not “applying” any anti-dumping duties on imports of bed linen
originating in India. Although those imports were found to be dumped and to cause injury, the EC
authorities decided to “suspend the application” of duties. Moreover, such suspension will remain in
place for as long as the EC authorities do not decide expressly otherwise.

264. Should the EC authorities decide at a later stage to “apply” duties on imports of bed linen
from India, they will still be able to comply with the obligation imposed by Article 15.

155 Ibid., para. 261.
156 Ibid.
157 According to the original Panel, “the phrase ‘before applying anti-dumping duties’ in Article 15
means before the application of definitive measures” (para. 6.231).

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265. More precisely, in the event that, as a result of the ongoing review, the EC authorities decided
to “apply” duties on imports of bed linen from Indi a, they would explore first the possibilities of
constructive remedies, and in particular the possibilities of a price undertaking.

266. As long as no such decision to “apply” duties is taken by the EC authorities, India’s claim that
the EC authorities have acted inconsistently with Article 15 is premature and unfounded and should
be rejected by this Panel.

 (c) In the alternative, the suspension of the application of duties is a “constructive
remedy”

267. If, notwithstanding the decision of the EC au thorities to “suspend the application” of anti-
dumping duties on imports of bed linen originating in I ndia, the Panel were to conclude that the EC is
“applying” those duties within the meaning of Article 15, the EC submits in the alternative that such
suspension would have to be considered as a “constructive remedy” for the purposes of Article 15.

268. The EC recalls that the original Panel held that a price undertaking is a “constructive
remedy”.
158 In essence, a price undertaking amounts to the suspension of the application of duties
subject to the condition that the exporters respect certain price conditions. The suspension decided by
the EC in the case at hand is more advantageous fo r the exporters than a price undertaking, because it
is unconditional. It is, therefore, “constructive” a fortiori.

269. India argues that the suspension decided by th e EC authorities is not “a remedy of any type”
and, therefore, cannot be a “constructive remedy”.
159 This argument begs the question: if the
suspension of duties is not a “remedy of any typ e” for the EC industry, why does India consider it
necessary to complain against that measure?

270. In fact, this argument undermines India’s ow n position. If the suspension is “no remedy of
any type”, it follows that, as argued by the EC in the first place, the EC authorities are under no
obligation to explore “constructive remedies”, becau se such obligation only arises before, and as an
alternative to, applying the b asic “remedy” envisaged by the Anti-Dumping Agreement : definitive
duties. Put another way, if a Member decides to “a pply” no “remedy” at all, what could be the point
of requiring that Member to explore possibilities of applying “constructive remedies”?

271. India further argues that the suspension is “a pretext to continue the proceeding and
circumvent the Panel’s finding with respect to Article 15”.
160 This allegation is unfounded, and
indeed illogical.

272. In the first place, the EC authorities need no “p retext to continue the proceeding”. They have
established that imports of bed linen from India ar e dumped and cause injury to the EC industry.
Therefore, they would be entitled to apply anti-dumping duties on such imports.

273. Second, as recalled by the original Panel, Article 15 imposes “no obligation to actually
provide or accept any constructive remedy that may be identified and/or offered”.
161

274. Third, the suspension of duties decided by th e EC authorities is far more favourable to the
exporters than a price undertaking, the “constructive remedy” which India appears to have in mind.
162

158 Panel report, para. 6.229.
159 Request for the Establishment of a Panel, claim (h), WT/DS141/13/Rev.1, 8 May 2002. See also
paras. 272-273 of India’s First Submission.
160 Ibid.
161 Panel report, para. 6.233.

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It is absurd to pretend that, in order to avoi d “exploring the possibilities” of a price undertaking,
which, as explained above amounts to a conditional su spension of the application of duties, the EC
authorities would have decided to suspend it unconditionally.

275. Finally, as explained repeatedly, should the EC authorities decide to apply duties as a result of
the pending review, they will explore first with th e Indian exporters the possibilities of constructive
remedies.

B. CLAIMS UNDER THE DSU

 1. Claim 8: Article 21.2

 A . C l a i m

276 India alleges that the EC has “failed to resp ect the stipulations of Article 21.2 of the DSU”
 .163

 B. Summary of relevant facts

277. The relevant facts for the examination of this claim have been summarised above in
section II.7.B.

 C. Argument

278. Article 21.2 provides that

Particular attention should be paid to ma tters affecting the interests of developing
country Members with respect to measures which have been the subject to dispute
settlement.
279. As explained below, Article 21.2 of the DSU is a non-mandatory provision, which therefore
imposes no binding obligations upon de veloped country Members, such as the EC. In any event, the
EC authorities did pay “particular attention” to the interests of India.

 (a) Article 21.2 is not a mandatory provision

280. Article 21.2 is worded in horta tory terms: it uses the word “should”, rather than “shall”. India
has not identified any relevant contextual elemen t which would suggest that “should” is used in
Article 21.2 with the meaning of “shall”, unlik e in the case of the provision examined by the
Appellate Body in Canada – Aircraft.
164

281. Moreover, Article 21.2 is cast in exceedingly br oad and vague terms. It fails to specify with a
minimum degree of precision what action, if any, is expected from developed country Members. As
noted by a recent panel report in connection with a similarly worded provision contained in the first
sentence of Article 15 of the Anti-Dumping Agreement
165, “Members cannot be expected to comply
with an obligation whose parameters are entirely undefined”.166

163 Request for the Establishment of a Panel of 7 May 2002, WT/DS141/13/Rev.1.
164 Appellate Body Report, Canada – Measures affecting the Export of Civilian Aircraft ,
WT/DS70/AB/R, para. 187.
165 The first sentence of Article 15 of the Anti-Dumping Agreement provides that

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282. The EC recalls that the Decision on Implementation- Related Issues and Concerns adopted at
the Ministerial Conference of Doha instructed the Committee on Trade and Development

to identify those special and differentia l treatment provisions that are already
mandatory in nature and those that are non-bi nding in character, to consider the legal
and practical implications for develope d and developing Members of converting
special and differential treatment measures into mandatory provisions, to identify
those that Members consider should be made mandatory, and to report to the General
Council with clear recommendations for a decision by July 2002.
167
283. By issuing that instruction, the Ministerial C onference recognised that some of the special and
differential treatment provisions included in the WTO Agreements are non-mandatory. The EC
submits that Article 21.2 of the DSU is one of such non-mandatory provisions.168

284. India itself has acknowledged as much in the proposal which it has submitted to the
Committee on Trade and Development, where it has s uggested that in Article 21.2 “the word ‘should’
be replaced by ‘shall’, so as to make this provision mandatory”.169

285. The EC supports India’s proposal. But, as the law stands now, Article 21.2 of the DSU
imposes no obligation upon develope d country Members which can be enforced by resorting to
dispute settlement.

 (b) Article 21.2 does not restrict the discretion of Members to select the
implementing measures

286. Assuming arguendo that Article 21.2 imposed a binding obligation upon developed country
Members, such obligation would relate to the proc edural requirements of th e implementation process
set out in the other provisions of Article 21, and not to the content of any implementing measures
adopted by those Members.

287. In other words, a developed country Member could not be found to violate Article 21.2
simply because it has chosen to take an implemen ting measure which, while being fully consistent
with its substantive obligations under the WTO Agreement, is less favourable to the “interests” of a
developing country Member than another measure suggested by that Member.

288. India has agreed with the above proposition outsi de the context of this proceeding. Thus, in
the proposals which it has submitted to the Trade and Development Committee it has suggested that
the phrase “matters affecting the interests of deve loping countries” should be clarified by providing
that, where the dispute is brought by a developi ng country Member against a developed country
Member,

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.
166 Panel Report, United States – Anti-Dumping and Countervailing Measures on Steel Plate from
India, WT/DS206/R, para. 7.110.
167 WT/MIN (01)/17, at para. 12.1.
168 The Notes by the Secretaria t of 4 February 2002 on Implementation of Special and Differential
Treatment Provisions in WTO Agreements and Decisions – Mandatory and Non-Mandatory Special and
Differential Treatment Provisions (WT/COMTD/W/77 Rev. 1/Add.1/Corr.1) and on Non Mandatory Special
and Differential treatment Provisions in WTO Agreements and Decisions ( WT/COMTD/W/77/Rev. 1/Add. 3)
categorise Article 21.2 of the DSU as a non-mandatory provision.
169 TN/CTD/W/6 of 17 June 2002.

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The defending developed country Member s hould be given no more than 15 months
of RPT in any circumstance; existing 90 days time limit for 21.5 procedures should
be observed strictly. In case of delay, it should entail an obligation to compensate for
continuing trade losses to the developing country complainants.
289 The above suggests that India considers th at any obligations imposed by Article 21.2 are
procedural, rather than substantive.

 (c) The EC authorities did pay particular attention to the interests of India

290. If, despite the above, the Panel were to conc lude that Article 21.2 is a mandatory provision,
the EC submits that, in any event, the facts of this case evidence that it did pay “particular attention”
to the interests of India.

291. In the first place, the EC paid particular a ttention to India’s interests by agreeing to an
implementation period of only five months and two days, i.e. considerably less than the 15 months
period, which India’s proposal to the Trade a nd Development Committee considers sufficient to
satisfy the obligation imposed by Article 21.2.
170

292. The EC also paid particular attention to th e interests of India by accepting the establishment
of this Panel at the first meeting of the DSB in which India’s request was put in the agenda, even
though, in accordance with Article 6.1 of the DSU
171 and well established practice, it could have
delayed the establishment of the panel until the following DSB meeting.

293. Finally, should the Panel take the view that Article 21.2 limits the discretion of the
implementing Member to choose the content of th e implementing measures, the EC submits in the
further alternative that it paid “particular atten tion” to the interests of India by suspending the
application of the anti-dumping duties, notwithsta nding the findings that imports from India are
dumped and cause injury to the EC industry.

IV. CONCLUSION

294. In light of the foregoing, the EC respectfully requests the Panel:

(1) to make the other preliminary rulings specified under Section II;

(2) to all the claims submitted by India fo r the reasons stated in Section III; and

(3) should the Panel conclude that the EC has violated Article 2.2.2 (ii) of the Anti-Dumping
Agreement, to find that such violation has not nul lified or impaired the benefits accrued to
India under that provision

170 Cf. Agreement between the EC and India under Article 21.3 (b) of the DSU, of 26 April 2001,
WT/DS141/10 (Exhibit India-RW-2).
171 Article 6.1 of the DSU provides as follows:

If the complaining party so requests, a panel shall be established at the latest at the DSB
meeting following that at which the request first appears as an item on the DSB’s agenda,
unless at that meeting the DSB decides by consensus not to establish a panel [footnotes
omitted]