Document: WT/DS397/R Page E-1 ANNEX E EXECUTIVE SUMMARIES OF THE SECOND WRITTEN SUBMISSIONS OF THE PARTIES Contents Page Annex E-1 Executive Summary of the Second Written Submission of China E-2 Annex E-2 Executive Summary of the Second Written Submission of
Document codes: WT/DS397/R
Complainant: China
Respondent: EU
Third parties: Brazil, Canada, Chile, Colombia, India, Japan, Norway, Taiwan, Thailand, Turkey, U.S.
Dispute stage: Implementation & Compliance
Agreements cited: Art. 6, 9, 5, 2, 3, 4  Anti-dumpingArt. I, X:3(a), VI:1  GATT 1994Art. XVI:4  Agreement Establishing the World Trade Organization

ANNEX E

EXECUTIVE SUMMARIES OF THE SECOND WRITTEN
SUBMISSIONS OF THE PARTIES

Contents Page
Annex E-1 Executive Summary of the Second Written Submission of China E-2
Annex E-2 Executive Summary of the Second Written Submission of
the European Union E-12

ANNEX E-1

EXECUTIVE SUMMARY OF THE SECOND WRITTEN
SUBMISSION OF CHINA

I. CLAIMS CONCERNING ARTICLE 9(5) OF COUNCIL REGULATION (EC)
No. 384/9 OF 22 DECEMBER 1995 ON PROTECTION AGAINST DUMPED
IMPORTS FROM COUNTRIES NOT MEMBERS OF THE EUROPEAN
COMMUNITY, AS CODIFIED AND REPLACED BY COUNCIL
REGULATION (EC) No. 1225/2009

1. China claims that Article 9(5) of Counc il Regulation No 384/96 as amended and as codified
and replaced by Council Regulation (EC) No 1225/2009 is, as such, inconsistent with Articles 6.10,
9.2, 9.3, 9.4 and 18.4 of the AD Agreement, Articles I and X:3(a) of the GATT 1994 and
Article XVI:4 of the WTO Agreement.

2. The EU starts its First Written Submission with a number of procedural arguments
. First ,
the EU submits that China's Panel Request failed to meet the requirement of Article 6.2 of the DSU
since it failed to "present the problem clearly" with r espect to its claims relating to Articles 6.10, 9.3
and 9.4 of the AD Agreement and X:3(a) of the GATT 1994. However, in making this argument,
the EU confuses the procedural requirements of Artic le 6.2 of the DSU with the substantive analysis
of the measure at issue. Indeed, Article 6.2 do es not impose obligations regarding the substantive
question of whether the "scope" or "content" of the m easure at issue is related to the obligations that
are claimed to be violated. The latter question forms part of the substantive issues. Furthermore, the
EU's argument that China failed to plainly c onnect the challenged measure with the provisions
claimed to be violated confuses "claims" and "arg uments". By alleging that China's Panel Request
failed to meet the Article 6.2 requirement because it did not explain how the provisions that deal with
specific legal obligations are violated by the measure at issue, the EU is in fact taking issue with the
"arguments" relating to the claims made by China. In the Panel Request, however, only the "legal
basis" of the complaint must be precisely iden tified. The arguments relating thereto may be
progressively developed and clarified during the pro ceedings. China further points out that the EU
fails to demonstrate that the alleged failure to meet the Article 6.2 requirements has prejudiced its
ability to defend its interests, although this is a pr erequisite in order to establish a violation of
Article 6.2 of the DSU. Finally, China stresse s that, in addition to these general comments which
should already be sufficient for the Panel to reject the EU's claim that China's Panel Request failed to
meet the Article 6.2 requirements, a claim by claim analysis leads to the same conclusion.

3. Second
, the EU claims that China has expanded the scope of this dispute to "other measures
and issues" which are outside the Pane l's terms of reference. First, the EU argues that, since "China's
Panel Request described the measure at issue as "Article 9(5) of Counc il Regulation No 384/96 as
amended", and because "Council Regulation No 1225/2 009 did not amend, correct or rectify the
measure identified by China" but "repeals" Counc il Regulation No. 384/96, Article 9(5) of Council
Regulation No. 1225/2009 is "a m easure outside the Panel's terms of reference". However, this
argument is purely semantic and ignores the fact that there is absolutely no difference in substance
between the two provisions. Second, the EU argues that China's First Written Submission contains
"other issues which fall outside the Panel's terms of reference", in particular the calculation and
determination of dumping margins. This, however, is a substantive issue that is not relevant for the
definition of the Panel's terms of reference. In any event, it is perfectly clear from China's Panel

Request that China considers that Article 9(5) effectively governs not only the imposition of anti-
dumping duties but also the determination of individual dumping margins.

4. Having made these procedural arguments, the EU still addresses China's claims on its merits.
At the outset, it is necessary to address the nature and scope of Article 9(5) of the Basic AD
Regulation, an issue which underlies several arguments (both of a procedural and substantive nature).
Article 9(5) does not deal with Market Econom y Treatment (MET) but only with Individual
Treatment (IT) which relates to the question wh ether dumping margin and anti-dumping duty must be
calculated for the exporting producer from China on an individual or a country-wide basis. Contrary
to what the EU argues, Article 9(5) is not limite d to the "very specific issue which refers to the
imposition of definitive anti-dumping duties". Whether the conditions set out in Article 9(5) of the
Basic AD Regulation are fulfilled do not only determ ine for an individual exporting producer whether
the anti-dumping duty is imposed on an individual basis or a country-wide basis but also whether the
dumping margin is calculated on an individual basis or country-wide basis. Contrary to what the EU
submits, whether the dumping margin is determined on an individual or country-wide basis does not
flow from Article 9(4) of the Basic AD Regulation which only lays down the broad principle that the
amount of the anti-dumping duty may not exceed th e dumping margin, but from Article 9(5). This
position is supported by the description provided by the EU itself in its First Written Submission of
how anti-dumping duties and dumping margins are determined in case of imports from non-market
economy countries, in particular at paragraph 81 of its First Written Submission. This is further
supported by the statements of the EU in various EU anti-dumping investigations concerning imports
from, inter alia, China.

5. Turning to the claim by claim analysis
, China's rebuttal is as follows.

6. China's claim in relation to Article 9.2 of the AD Agreement is that the obligation in
Article 9(5) requiring that exporting producers from non-market economy countries fulfill additional
criteria in order to receive an individual anti- dumping duty instead of a country-wide anti-dumping
duty is inconsistent with Article 9.2 of the AD Ag reement. The EU first argues that the measure at
issue does not fall within the scope of Article 9.2 of the AD Agreement and that Article VI of the
GATT and Article 9.2 do not require a company spec ific approach to the imposition of anti-dumping
duties. China fails to see the connection between th is statement and the scope of the obligation in
Article 9.2. Whether investigating authoriti es are permitted to impose anti-dumping duties on a
country-wide basis in the case of imports from China is a question of interpretation of Article 9.2
itself and does not relate to the scope of Article 9. 2. It should, therefore, not be examined as a
preliminary issue. In any event, Article 9.2 does not permit an interpretation which would, as a rule,
require or allow the imposition of anti-dumping duties on a country-wide basis.

7. The EU further submits that Article 9.2 does not require that anti-dumping duties are imposed
on an individual basis for each supplier involved and that, even assuming that such a principle exists,
it is not correct to argue that the only exception to th is principle is where it is impracticable to do so
because of the large number of suppliers involved. China submits that a correct interpretation of
Article 9.2 pursuant to the principles of treaty inte rpretation leads to the conclusion that anti-dumping
duties must, as a rule, be imposed on an individual basis and that, even if this principle is not absolute,
Article 9.2 does not allow investigating authoriti es to impose automatically a country-wide duty on
exporting producers from non-market economy countries. This position is supported by the "ordinary
meaning" of the relevant terms of Article 9.2, in particular, the terms "appropriate amounts",
"sources" and the obligation to "name the supplie r(s)" and the exception thereto when this is
"impracticable". The ordinary meaning of the word "impracticable" or "not practicable" as defined in
the relevant edition of the New Shorter Oxford Dic tionary implies something which is not feasible,
unable to be carried out, impossible in practice. This position is further supported by the context of
the provision, in particular Articles 6.10 and 9.4 of the AD Agreement, the object and purpose of the
AD Agreement, that is, to set out the specific conditions under which anti-dumping measures may be

imposed and the preparatory works of Article 8 of the Kennedy Round Anti-Dumping Code. Finally,
China points out that the EU's argument that China's Protocol of Accession codifies the understanding
that China is not yet a market economy country and that this implies that all provisions of the
AD Agreement, including Article 9.2, must be in terpreted as authorizing a special treatment for
exporting producers from China, fails. It is factually incorrect since no such understanding is
included in China's Protocol of Accession. More over, China is now a market economy country, as
acknowledged by many WTO Members. In any event, whether or not China is a market economy
country is irrelevant for this dispute. The oblig ations in Article 9.2 and 6.10 do not distinguish
between market economy and non-market economy countries.

8. With respect to China's claim that Artic le 9(5) of the Basic AD Regulation violates
Article 6.10 of the AD Agreement, including the chapeau of Article 6.10 and Article 6.10.2, the EU's
preliminary argument that Article 9(5) does not fall within the scope of Article 6.10 must be rejected
since Article 9(5) effectively deals with the question whether dumping margins for Chinese exporting
producers are determined on an individual or a country-wide basis. On the substance of the claim, the
EU argues that there would be exceptions other th an the one referred to in Article 6.10 second
sentence (i.e. sampling) to the rule requiring that dumping margins are determined on an individual
basis and that in the case of imports from non- market economy countries, the State, and not the
individual exporting producers, is to be regarded as the actual "producer" for which a margin of
dumping will be determined. It is , however, clear from the wording and context of Article 6.10 that
the use of sampling is the only permissible exception to the general rule contained in the first sentence
of Article 6.10. Furthermore, the reasoning applied by the Panel in Korea – Certain Paper cannot be
used by analogy in the context of Article 9(5) since the examination under the latter provision is
totally different from the situation examined by th e Panel in that case. Even considering that one
could apply the reasoning of Korea – Certain Paper by analogy, it is clear that that the Article 9(5) of
the Basic AD Regulation test applies criteria which go far beyond the conditions found to be
acceptable in that case. Moreover, Article 9(5) is discriminatory as it only applies in the case of
imports of non-market economy countries. There is no objective justification for this treatment since
there is no reason why the risk or "circumvention" or "manipulation" would be less in countries
considered as being market economy countries than in those regarded as being non-market economy
countries. Finally, the object and purpose of the AD Agreement and the preparatory works of
Article 6.10 support the finding that Article 9(5) of the Basic AD Regulation is inconsistent with
Article 6.10 of the AD Agreement.

9. In relation to China's claim that the EU violates Article 9.3 of the AD Agreement by
applying an anti-dumping duty which is determined on the basis of a country-wide dumping margin
for those exporting producers that do not fulfill th e conditions set out in Article 9(5) of the Basic
AD Regulation, the EU first argues that Article 9(5) does not fall within the scope of Article 9.3 of the
AD Agreement. Article 9(5), however, will determine whether the duty is based on an individual or a
country-wide dumping margin and thus falls within th e scope of Article 9.3. On the substance, the
EU argues that Article 9(5) does not violate Artic le 9.3 of the AD Agreement because it is permitted
under Articles 9.2 and 6.10 to determine a single country-wide anti-dumping duty and a country-wide
dumping margin for "the actual source of price discrimination", namely the State, in the case of
imports from non-market economy countries. Howeve r, this argument fails since these provisions do
not permit investigating authorities to determine automatically a single country-wide dumping margin
and a country-wide anti-dumping duty for all exporting producers who fail to me et the IT criteria.
The application of Article 9(5) leads to a result where exporting producers who sold at export prices
which are higher than the average export price de termined for non-IT exporting producers are subject
to a duty which exceeds their individual dumping margin as established under Article 2. The
imposition of an anti-dumping duty which is higher than the individual dumping margin is a clear
violation of Article 9.3 of the AD Agreement.

10. With respect to China's claim under Article 9.4 of the AD Agreement , the EU's preliminary
claim that Article 9(5) does not fall within the scope of Article 9.4 must be rejected. Indeed,
Article 9(5) imposes specific conditions that must be met before exporting producers included in the
sample or which have obtained individual examina tion can receive an individual anti-dumping duty.
Article 9(5) thus clearly falls within the scope of Article 9.4 since this Article specifically deals with
the imposition of duties where sampling is used. Chin a's claim under Article 9.4 is twofold. First,
China claims that Article 9(5) violates Artic le 9.4 since the anti-dumping duty applied to the
cooperating non-sampled exporting producers pursuant to Article 9(6) of the Basic AD Regulation is
based on the weighted average margin of dumping of all sampled exporting producers, including
those that do not qualify for IT and for which the dumping margin is not based on their own export
prices. The rebuttal by the EU is contradicted by its own practice. Second, China claims that
Article 9(5) of the Basic AD Regulation also violates Article 9.4 since it requires that the non-sampled
exporters who benefit from an "individual examinati on" demonstrate that they comply with the IT
criteria laid down in Article 9(5) while Article 9.4 expressly requires investigating authorities to
unconditionally "apply an individual anti-dumping duty to imports from any exporter or producer not
included in the examination who has provided th e necessary information during the course of the
investigation, as provided for in subparagraph 10.2 of Article 6". China notes that the EU does not
submit any argument in rebuttal to that second part of its claim.

11. China further claims that the EU violates Article I:1 of the GATT 1994 since the specific
conditions imposed by Article 9(5) only apply to so-called "non-market economy countries".
Contrary to what the EU alleges, there is no conflict between the AD Agreement and Article I:1 of the
GATT 1994. Furthermore, it needs to be stressed that a product is not different in nature, as alleged
by the EU, depending on whether it originates in a market economy or a non-market economy country
and that the conditions to be me t under Article 9(5) are not origin -neutral. On the contrary, the
advantage granted depends exclusively on the origin of the product under investigation. As such,
these conditions amount to discrimination with respect to the origin of like products.

12. China further challenges the manner in which Article 9(5) of the Basic AD Regulation is
administered by the EU under Article X:3(a) of the GATT 1994 since it is not administered in a
uniform and reasonable manner.

13. Furthermore, since Article 9(5) of the Basi c AD Regulation "as such" violates Articles 6.10,
9.2, 9.3 and 9.4 of the AD Agreement and Articles I:1 and X:3(a) of the GATT 1994, it automatically
follows that the EU is also in violation of Article XVI:4 of the Agreement Establishing the WTO
and Article 18.4 of the AD Agreement.

II. CLAIMS CONCERNING COUNCIL REGULATION (EC) No 91/2009 OF
26 JANUARY 2009 IMPOSING A DEFINI TIVE ANTI-DUMPING DUTY ON
IMPORTS OF CERTAIN IRON AND STEEL FASTENERS FROM CHINA

14. China first claims that by making the benefit of an individual dumping margin and the
imposition of an individual anti-dumping duty dependent on compliance with the conditions set
out in Article 9(5) of the Basic AD Regulation , the EU violated Articles 6.10, 9.2 and 9.4 of the
AD Agreement. The EU's defense is limited to tw o arguments. First, it submits that China's claim
under Article 9.4 is outside the Panel's terms of reference. However, as is clear from the Panel
Request as a whole, the issue which is being challe nged "as such" is being challenged "as applied"
with respect to the second measure at issue and given that Article 9.4 of the AD Agreement has been
included in China's Panel Request in connection with its challenge of Article 9(5) "as such", China's
claim that Article 9(5) as applied in the anti-dumping fasteners investigation violates Article 9.4 is
properly within the Panel's terms of reference. Second, the EU submits that China is challenging a
non-existent measure since in the anti-dumping investigation concerned IT was granted to all sampled
and individually examined cooperation suppliers that requested IT. The EU, however, distorts China's

claim since China does not challenge the fact that the sampled and individually examined cooperating
exporters did not receive IT or could, hypothetically , have failed to meet the Article 9(5) conditions.
Instead, China challenges the non-auto matic character of the benefit of an individual dumping margin
and an individual anti-dumping duty for the Chinese exporting producers in the anti-dumping
investigation which led to the measure at issue.

15. China claims that the EU's standing determination
 violated Article 5.4 of the
AD Agreement. The EU raises on a preliminary basi s three procedural objections which must all be
rejected. Indeed, (i) China has consulted with the EU concerning its Article 5.4 claim as required by
Article 4 of the DSU; (ii) China's Panel Request is specific and presents the problem clearly, as
required by Article 6.2 of the DSU; and (iii) the EU erroneously submits that the standing
determination is governed exclusively by the No tice of Initiation 2007/C 267/11 and not by Council
Regulation (EC) No. 91/2009. China's claim that the EU's standing determination violated Article 5.4
of the AD Agreement is based on three main arguments. First , the EU failed to examine whether the
figure for total EU production was reliable and correct. In this respect, the EU in fact argues that it is
permissible for investigating authorities to base themselves exclusively on the information submitted
in the Complaint when making their standing determin ation. However, the approach proposed by the
EU is not consistent with the "examination" requirement in Article 5.4 which imposes on
investigating authorities the obligation to "investig ate", that is, "inquire into" the degree of support
for, or opposition to, the application and this imposes something more than merely accepting the
information provided by the complainants. Second , the EU did not properly examine the degree of
support for, or opposition to, the application expressed by domestic producers of the like product prior
to the initiation. A mere statement that the matter has been "examined" and/or "determined" is not
enough to demonstrate that the EU effectiv ely conducted an examination. Third , the EU improperly
concluded that the application had been made by or on behalf of the domestic industry. According to
the EU, China failed to make a prima facie case. However, in order to determine whether the
threshold of Article 5.4 of the AD Agreement is met, it is necessary to at least identify, on the one
hand, the production figure of th ose producers expressly supporting th e application and, on the other
hand, the total domestic production of the like pr oduct. In its First Written Submission, China
provided substantial evidence which demonstrates that neither the determination of the production
figure of the complainants, nor the figure of total domestic production was correct and that the
threshold of 25% was not met. These elements are sufficient to meet the prima facie case threshold.
The EU, however, fails to rebut the evidence and ev en remains silent with respect to some of the
arguments raised. In other words, the EU failed to rebut the prima facie case made by China.

16. China further demonstrated that the EU's determination of the "domestic industry"

violated Articles 4.1 and 3.1 of the AD Agreement , for at least five reasons. First , by excluding
from the domestic industry EU producers that did no t make themselves known within 15 days of the
initiation of the investigation or that did not sup port the complaint, the EU violated Articles 4.1
and 3.1 of the AD Agreement. As a preliminary remark, it must be noted that China's claim is
covered by the Request for Consultations. With resp ect to China's claim that there is a violation of
Article 4.1, the EU submits that there is no viol ation given that Article 4.1 gives investigating
authorities the discretion to choose the producers to be included in the "domestic industry" as long as
the producers thus selected represent a "major proportion" of the total domestic production. However,
apart from the two explicit exclusions provided in Article 4.1, there are no other categories of
producers that the investigating authorities may exclude from the outset from the definition of the
domestic industry. This is plainly co nsistent with the Panel's findings in EC – Salmon (Norway) .
Furthermore, these findings are not limited to cate gories of producers "which produce a particular
type of the like product" but concern any category of producers of the like product other than those set
out in Article 4.1. Moreover, the justification give n by the EU to explain why it did exclude certain
categories of producers is not relevant. This exclusion also constitutes a violation of Article 3.1 of the
AD Agreement. Contrary to the assertions of the EU, it is clear that the objective determination of the
domestic industry is an integral part of an objective injury examination. By restricting the definition

of the domestic industry to only those producers that came forward within the 15-day period, the EU
investigating authorities made it more likely that the Community industry only included producers
supporting the investigation and, as a result, made it more likely that injury would be found.

17. Second
, the domestic industry as defined by th e EU does not include domestic producers
whose collective output constitutes a major propor tion of the total domestic production for two
reasons. First, the total EU production figure is underestimated and based on unreliable data. Second,
the Community producers included in the defin ition of the domestic industry do not represent a
"major proportion" of the total domestic production of the like product. In relation to this argument, it
has to be pointed out that, although the EU states that a major proportion "is not something that can be
determined in the abstract or based on specific pe rcentages", it immediately contradicts itself by
submitting that "there exists a legitimate presump tion that producers representing 25% or more of
total domestic production constitute "a major proportion" of such pr oduction". Moreover, the Basic
AD Regulation expressly provides that the "major propor tion" requirement of Article 4.1 is identical
to the 25% test which is used in the framework of the standing determination. This link established
by the EU between the "major proportion" test in Article 4.1, which deals with the domestic industry
definition, and the 25% test in Article 5.4 which concerns the standing determination, even in the
form of a "presumption", is manifestly erroneous and legally flawed. In the investigation that led to
the measure at issue, the EU did not examin e whether the domestic producers constituting the
domestic industry fulfilled the major proportion re quirement. Moreover, the producers constituting
the domestic industry failed to meet the major proportion requirement in light of the specific
circumstances of the case: they are not representative of the whole domestic production; it was
practically feasible for the investigating authorities to include more producers than those actually
included in the domestic industry; the producers in cluded in the "domestic industry" represented only
a small portion of the total number of producers; and the investigating authorities excluded categories
of producers other than the ones referred to in Article 4.1 (i) and (ii).

18. Third
, the domestic industry was not defined in re lation to the Investigation Period and this
constitutes a violation of Article 3.1 of th e AD Agreement. This is confirmed, inter alia , by the
Panel's findings in Argentina – Poultry Anti-Dumping Duties.

19. Fourth
, the EU violated 3.1 of the AD Agreement si nce it made an injury determination with
respect to a sample that was not representative of th e domestic industry, first, to the extent that the
"domestic industry" was defined in violation of Article 4.1 and, second, even assuming that the
domestic industry has been defined correctly – quod non –, the sample has not been selected in
conformity with Article 3.1 since the only criteri on used by the investigating authorities was the
producers' volume of production.

20. Fifth , the EU's determination of the "domestic i ndustry" violated Articles 4.1 and 3.1 of the
AD Agreement since it included in the domestic indu stry and the sample a number of producers that
were related to the exporters or importers or were themselves im porters of the allegedly dumped
product.

21. China further claims that the EU's determinations concerning the product concerned and
the like product violated Articles 2.1 and 2.6 of the AD Agreement . First , the investigating
authorities included in the product concerned produc ts that were not like. The EU argues that
Article 2.1 of the AD Agreement only imposes obligati ons with respect to the meaning of "dumping"
and "margin of dumping" and how they are calculate d and not with respect to the selection of the
product concerned. However, a correct interpreta tion of Articles 2.1 and 2.6 of the AD Agreement,
based on the ordinary meaning of their terms and in their context and in li ght of the object and
purpose of the AD Agreement, leads to the conclu sion that the product concerned must include only
"like" products. By including in the scope of the product concerned both special and standard
fasteners, which are not "like", the EU thus viol ated Articles 2.1 and 2.6 of the AD Agreement.

Second
, the EU violated Articles 2.1 and 2.6 of the AD Agreement by concluding that the fasteners
produced and sold by the Community industry in th e Community, the fasteners produced and sold on
the domestic market in China, those produced and sold on the domestic market in India and those
produced in China and sold to the Community are alike. The EU argu es that China's claim is without
object. This is, however, based on a distortion of China's claim.

22. With respect to China's claim that the EU's determinations of dumping violated Article 2.4
of the AD Agreement , it must be noted that the EU's preliminary argument that "China fails to refer
to the relevant Section of Council Regulation No . 91/2009 on the comparison between normal value
and export price and has thus failed to establish a prima facie case" is manifestly contradicted by
China's First Written Submission. China's claim is two-fold. First, the EU investigating authorities
failed to make the comparison between the expor t price and the normal value on the same basis,
namely, on the basis of the Product Control Numb ers ("PCNs") that the investigating authorities
themselves had identified at the beginning of the in vestigation as being necessary to enable a "fair
comparison". The EU rephrases China's claim to make it state that investigating authorities must
always follow a particular methodology when maki ng the comparison between export price and
normal value, namely that the comparison must al ways be made between the export price and the
normal value on the basis of the PCNs in the abstract. However, what China claims is that, in light of
the specific circumstances of the f asteners investigation, the physical characteristics reflected in the
PCNs had to be taken into account when making the comparison between normal value and export
price since such characteristics a ffect the price comparability between export price and normal value.
By failing to do so, the EU did not make a "fair comparison" and, therefore, violated Article 2.4 of the
AD Agreement. It has to be pointed out that th e EU erroneously presents the PCNs as constituting
only an "information gathering tool". That the PCN factors are necessary to make a fair comparison is
clear, inter alia , from the EU standard questionnaires u sed in the anti-dumping investigation
concerned. With respect to the fair comparison st andard itself, the EU considers that requesting the
necessary information from all interested parties on a PCN basis was sufficient for it to comply with
the obligations under Article 2.4 of the AD Agreement. However, to the extent that a comparison is
made without taking into account differences that affect price comparability, such comparison is not
"fair". In addition to the fact that the physical characteristics identified in the PCN affect price
comparability, the EU failed to make a "fair comp arison" for two other reasons. The investigating
authorities did not evaluate and a fortiori did not determine whether the differences in physical
characteristics reflected in the PCN factors affected price comparability and whether they had to be
taken into account for making a "fair" comparison. Moreover, the investigating authorities had
included in the PCNs those physical characteristics th at they considered relevant for making a "fair"
comparison. Logically, this implied that they had to make at least an evaluation of these differences
in order to determine whether they were necessary to en sure a fair comparison. To the extent that the
investigating authorities subsequently decided to igno re most of the PCN factors previously identified
as relevant and used another methodology, they we re required to properly and expressly inform all
interested parties in a timely manner. By failin g to do so, they prevented the exporting producers
from making claims that adjustments for differences in physical characteristics needed to be made.

23. Second
, the EU investigating authorities failed to make appropriate adjustments for the
differences that affect price comparability, namely the differences in physical characteristics as
reflected in the PCN as well as for quality diffe rences. The EU investigating authorities never
examined, once they decided to exclude from the PC Ns a number of physical characteristics initially
used to categorize products, whether the excluded char acteristics were to be considered as differences
in physical characteristics affecting price comparability and, a fortiori, never determined whether or
not an adjustment was required. However, it is cl ear that the characteristics identified in the PCNs
constitute physical differences that affect price comparability. The decision to exclude certain
physical characteristics from the PCNs had nothing to do with an evaluation that these physical
characteristics had no effect on price comparability, but , as admitted by the EU itself, related to the
fact that the Indian producer did not provide the necessary information on a PCN basis. However, this

cannot be a justification for the EU to simply ignor e those physical characteristics that affect price
comparability. In its First Written Submission, the EU tries to defend why it disregarded these factors
for the purposes of making the comparison. It has to be emphasized that the mere a posteriori
rationalizations given by the EU can neither obscure nor cure the fact that during the investigation the
investigating authorities did not examine whethe r the differences in question affected price
comparability when making the comparison. Similarly, no adjustment was made for quality
differences. Moreover, the EU appears to argue that , in order for it to comply with the obligation to
carry out a fair comparison pursuant to Article 2.4, it was sufficient for it to take into account those
physical characteristics which appeared to be the most important. However, all differences affecting
price comparability must be taken into account. Finally, China stresses th at the Chinese exporting
producers were not informed of the information whic h was necessary to ensure a fair comparison and
that the Chinese exporting producers as a whole were never informed that the comparison had not
been made on a PCN basis.

24. China claims that the EU violated Articles 3.1 and 3.2 of the AD Agreement when making
the price undercutting calculations by failing to make a product comparison on the basis of the full
PCNs and by comparing standard and special fasteners without making any adjustments for the
differences affecting price comparability when de termining the price undercutting margin. On a
preliminary basis, it must be noted that China's cl aim was subject to consultations and is within the
Panel's terms of reference. On the substance, the EU erroneously considers that the absence of
requirement in Article 3.2 as to a specific met hodology that should be used for the undercutting
calculation implies that any methodology is necessarily consistent with Articles 3.1 and 3.2 of the
AD Agreement. However, only methodologies which are objective, i.e. unbiased and even-handed,
are consistent with Articles 3.1 and 3.2 of the AD Ag reement. In order to ensure such an unbiased
and even-handed undercutting calculation, adjustme nts may be necessary. Product characteristics,
such as length and diameter, which were disregarded by the EU in its price undercutting analysis, are
differences which not only affect costs for the producers but "have a perceived importance to the
customer" and must, therefore, be taken into account in the framework of the price undercutting
analysis. The EU's sole defense is to allege th at "China has failed to adduce evidence that the
methodology that was followed was not "objective" or not "even-handed"". In its First Written
Submission, China has, however, explained and provided supporting evidence as to why the price
undercutting calculations made by the EU inves tigating authorities were not unbiased and even-
handed.

25. China makes two claims in connection with the examination by the EU investigating
authorities of the volume of dumped imports . China claims that the EU violated its obligations
under Articles 3.1, 3.2, 3.4 and 3.5 of the AD Agreement first because the EU included in the
volume of "dumped imports" imports from Chinese pr oducers that were found not to be dumping and
second, because it included in the volume of dumped imports all imports from non-sampled
producers. With respect to the first claim, the EU argues that no violation can be found in view of the
low percentage of the imports originating from th e two Chinese exporting producers that were found
not to be dumping. The examination of the volume of "dumped imports" which does not exclude
outright the volume of imports from producers whic h were found not to be dumping is, however,
contrary to the direct and clear text of Articles 3.1 and 3.2 of the AD Agreement. As to the second
claim, the conclusion that two non-sampled pr oducers which were individually examined in
accordance with Article 6.10.2 were found not to be dumping constitutes "positive evidence" within
the meaning of Article 3.1 of the AD Agreement. To the extent that such information has been
ignored by the EU investigation authorities when determining the volume of dumped imports, their
determination that all imports from all non-indivi dually examined producers are "dumped imports" is
not based on "positive evidence". As a consequence of these violations of Articles 3.1 and 3.2, the
EU also violated Articles 3.4 and 3.5 of the AD Agreement.

26. China also demonstrated that the EU failed to make an injury determination
 consistent with
its obligations under Articles 3.1 and 3.4 of the AD Agreement . First, the EU failed to examine the
injury factors in relation to a Community industry defined in a consistent manner. Certain injury
factors were examined on the basis of the data of the Community industry as a whole, whereas other
factors were examined on the basis of the data of the sampled producers only. China strongly
disagrees with the EU's view that both data sets "are essentially the same and both are interchangeable
bases for examining injury to the domestic industry". Furthermore, in the investigation that led to the
measure at issue, evidence shows that the analysis of certain injury factors with respect to the
domestic industry or the sampled producers leads to different results, thereby demonstrating the
biased nature of the examination carried out by the investigating authorities.

27. Second , China submits that, on the basis of th e evidence gathered, the EU could not
objectively conclude that the level of profitab ility was "low" and that the dumped imports had a
"negative impact on profitability".

28. Third
, the EU's overall analysis of the impact of dumped imports on the domestic industry is
not objective and not based on positive evidence. The EU improperly concluded that the domestic
industry suffered injury since an examination of th e relevant factors pursuan t to Article 3.4 of the
AD Agreement shows a positive state of the domestic industry. The overall examination of the injury
factors could not have led to a finding that material injury had been suffered by the domestic industry.
Indeed, almost all factors regarding the situati on of the EU industry showed a favorable trend
between 2003 and the IP. The EU's statement that several factors are to be considered as negative
developments is manifestly incorrect and contradict ed by its own findings. The sole factor possibly
showing a negative trend was a loss of market share in a rapidly growing market. A finding of
material injury, however, cannot solely be based on one negative factor. Having found that all factors
showed a positive trend over the period concerned, the EU should have concluded that the EU
industry had not suffered material injury. Fu rthermore, there is no thorough and persuasive
explanation as to whether and how the positive trends of most injury factors were outweighed by any
negative factor. Finally, the EU authorities failed to provide a persuasive explanation as to how or
why the trends for market share, sales volume, profitability, cash flow, return on investments, margins
of dumping and capacity utilization, effectively constitute "negative developments".

29. Fourth
, the EU improperly considered the displacement of EU products by imports from
China in some market segments as being relevant. The injury analysis is premised on the distinction
between the two market segments of special and st andard fasteners. For all injury factors which
showed a positive trend, the EU investigating authorit ies claimed that they should not be regarded as
"positive" since this "positive" aspect was merely du e to the shift from standard to special fasteners
which merely attenuated the allege d injurious consequences of dumping. As a result, the injury
analysis is de facto exclusively based on the standard fasten er market segment and is, therefore,
inconsistent with Articles 3.1 and 3.4 of the AD Agreement.

30. China further submits that the EU violated Articles 3.1 and 3.5 of the AD Agreement
 in
concluding that dumped imports caused material injury to the domestic industry, for two main
reasons. First, the EU failed to demonstrate that dumped imports are, through the effects of dumping,
causing injury to the domestic industry. This includ es two sets of arguments. The first argument is
that a causal link cannot be demonstrated on the sole basis of a mere "coincidence" in time between
the alleged injury and the increase in the volume of alleged dumped imports. The second argument is
that a finding of a causal relationship between dump ed imports and injury must necessarily be based
on positive evidence. The EU did not produce any ev idence showing that the shift by the domestic
industry towards the production of special fasteners was due to the dumped imports. There is,
therefore, no basis for the investigating authoriti es to conclude that dumped imports have caused
injury to the domestic industry.

31. Second , the EU failed to properly assess the injurious effects of other known factors, more in
particular, the increase in raw material prices and the export performance of the Community industry.
The non-attribution test as developed in the WTO case law requires an identification of the nature and
extent of the injurious effects as well as a satisfact ory explanation of the nature and extent of the
injurious effects of the other factors, as disti nguished from the injurious effects of the dumped
imports. The latter explanation must be clear and unambiguous and the r eason provided cannot be a
mere "assertion". However, the EU's analysis of the "increase in raw material prices" does not meet
this requirement. With respect to the export perform ance, China's main claim is that, on the basis of
the facts on the record, the investigating authorities could not come to the conclusion that the export
performance of the domestic industry was not a source of material injury. The EU thus violated
Articles 3.1 and 3.5 of the AD Agreement by cons idering this factor as not causing injury and,
therefore, by failing to conduct the non-attribution test. In addition, the EU violated Articles 3.1
and 3.5 of the AD Agreement by using the data c oncerning all producers in the Community while the
injury determination was made with respect to the domestic industry as defined by the EU.

32. China's last claim relates to the violation by the EU of the procedural requirements
imposed by Articles 6 and 12 of the AD Agreement . The fundamental lack of transparency
permeating all stages of the investigation has pr evented Chinese exporting producers from effectively
defending their interests. The breach of their due process rights is so substantial that it should lead
this Panel to recommend that the measure be withdr awn. The EU tries to dismiss China's claims on
the basis of a number of procedural tactics, i.e. by claiming that China did not submit any evidence or
that the evidence is not relevant, that the claims and arguments are presented in a confusing way or for
other obscure reasons. The EU, however, does not present any valid evidence that could rebut China's
prima facie case on the substance. At the outset, it is necessary to make some general comments
. In
China's view, the obligation set out in the first sentence of Article 6.2 is so broad that a finding of
violation of Article 6.4 necessarily entails a violat ion of Article 6.2 first sentence. Furthermore,
contrary to what the EU seems to consider, a comp laining party may claim the violation of different
obligations, in this case Articles 6.4 and 6.9, with r espect to the same set of facts. Moreover, the EU
intends to create confusion between, on the one hand, the claims made by China and, on the other
hand, the arguments and evidence submitted to support such claims. As evidence to support its claims
under Article 6.4, China has referred to the Defi nitive Regulation, as well as to the Disclosure
Documents and the correspondence between cert ain Chinese exporting producers and the EU
investigating authorities. When China refers to the Disclosure Documents and/or the Definitive
Regulation as part of the evidence concerning its cl aim under Article 6.4, China is not claiming that
these documents do not contain the essential facts as re quired under Article 6.9. In fact, the EU is
forced to rewrite China's claims and arguments in order to be able to rebut them.

33. China demonstrated the following due process violations by the EU
: (i) the EU failed to
disclose the identity of the comp lainants, thereby violating Articles 6.5, 6.2 and 6.4 of the
AD Agreement; (ii) the EU failed to disclose info rmation concerning the normal value determination
including product types and the comparison with export prices including any adjustments for
differences affecting price comparability thereby violati ng Articles 6.5, 6.2, 6.4 and 6.9; (iii) the EU
violated Articles 6.5, 6.2 and 6.4 since the non-c onfidential versions of the Community producers'
questionnaire responses and the questionnaire response of the producer in the analogue country were
largely deficient; (iv) the EU violated Article 6. 5, 6.2 and 6.4 by failing to make Eurostat data
available in the non-confidential file and by failing to provide an explanation as to how the estimation
of the production in the EU had been made; (v) the EU violated Articles 6.2, 6.5 and 6.9 through its
findings on the domestic industry; (vi) the EU viol ated Article 12.2.2 by failing to state all relevant
information concerning its IT determinations; (v ii) the EU violated Article 6.5 by disclosing a
document entitled "Assessment of Market Economy Tr eatment Claims by nine producers in the
PRC"; (viii) the EU violated Article 6.1.1 of the AD Agreement by limiting the time period for the
submission of MET and/or IT questionnaire responses to 15 days as of the date of publication of the
Notice of Initiation.

ANNEX E-2

EXECUTIVE SUMMARY OF THE SECOND WRITTEN SUBMISSION
OF THE EUROPEAN UNION

I. INTRODUCTION

1. The European Union takes i ssue with China's attempt to disregard the numerous and precise
arguments raised by the European Union under Articl es 4.2, 4.3, 4.5, 4.7, 6.2, 7.1 and 11 of the DSU.
As a matter of fact, the European Union's First Written Submission has addressed all the claims raised
by China in its Panel Request and its First Written Submission, going even beyond in many aspects of
what was required, due to the lack of both factual evidence and clarity of the legal arguments made by
China. Pursuant to Article 11 of the DSU, the European Union requests the Panel to examine whether
China has complied with the fundamental rules contained in the DSU when making its claims in the
present dispute.

II. CHINA'S "AS SUCH" CLAIM AGAINST ARTICLE 9(5) OF COUNCIL
REGULATION NO 384/96, AS AMENDED

A. P
ANEL'S TERMS OF REFERENCE

2. The European Union maintains that China's Pa nel Request failed to meet the requirements of
Article 6.2 of the DSU with respect to its claims relating to Articles 6.10, 9.3 and 9.4 of the Anti-
Dumping Agreement and Article X:3(a) of the GATT 1994. The European Union disagrees with
China's views on Article 6.2 of the DSU. Article 6. 2 of the DSU thus does not require that the brief
summary of the legal basis of the complaint amounts to an "argument" (something which is developed
at a later stage in the course of the panel proceedings ); however, it requires that the brief summary of
the legal basis of the complaint explains how and why the measure at issue violates the WTO
obligation in question in a sufficient manner to presen t the problem clearly. Put simply, if a panel
request identifies a measure in a precise manner but then includes legal claims which do not directly
pertain to the operation of the measure, the responde nt Member is left wondering how that measure
can be the source of the alleged impairment.

3. In its Panel Request, China challenged a pr ecise measure (i.e., Article 9(5) of Council
Regulation No 384/96, as amended) as being "as such " inconsistent with certain provisions of the
Anti-Dumping Agreement and the GATT 1994. In view of the "as such" nature of China's claim and
the requirement that the complaining Member has to state unambiguously the specific measures which
are subject to "as such" claims, the European Un ion was puzzled when reading in China's Panel
Request as well as its First Written Submission that th e brief summary of the legal claims related to
other issues (such as the calculation or determina tion of dumping margins, the level of anti-dumping
duties, and the imposition of anti-dumping duties in a specific context such as sampling) which are
not addressed by the specific measure at hand. In any event, the European Union considers that, in
view of the "as such" nature of China's claim, any disagreement between the parties on the scope of
the measure at issue should be resolved by examin ing the text of Article 9(5) of Council Regulation
No 384/96. The text of Article 9(5) of Council Re gulation No 384/96 leaves no doubt that the issue
contained in that provision refers to the impositi on of anti-dumping duties. When Article 9(5) of
Council Regulation No 384/96 is seen in the context of its other provisions, the same conclusion is
reached about its meaning and content. In any even t, the European Union has also explained in its
First Written Submission how Article 9(5) of Coun cil Regulation No 384/96 operates in practice.

Consequently, the measure at issue id entified by China in its "as such " claim the Panel is requested to
examine is Article 9(5) of Counc il Regulation No 384/96, on its face, and not everything which may
derive from the determination provided for by that provision, or anything under the other provisions
of the same regulation that may sequentially come after the Article 9(5) determination during the
investigation.

4. Should the Panel find that China's Panel Request plainly connects the challenged measure
with the provisions of the covered agreements in accordance with Article 6.2 of the DSU (quod non),
the European Union submits that the Panel s hould refrain from examining China's claims under
Articles 6.10, 9.2, 9.3 and 9.4 of the Anti-Dumpi ng Agreement and Article X:3(a) of the GATT 1994
since the specific measure described by China in its Panel Request (i.e., Article 9(5) of Council
Regulation No 384/96) does not fall within the scope of the obligations contained in the provisions of
the covered agreements invoked by China.

5. The European Union also requests the Panel to refrain from examining measures and issues
outside its terms of reference in relation to China' s "as such" claim, including Article 9(5) of Council
Regulation No 1225/2009, any matters pertaining to the calculation or individual determination of
dumping margins, or any other matters raised by Ch ina in its First Written Submission or in any other
subsequent submission which is di fferent from the one specifically identified by China in its Panel
Request (i.e., Article 9(5) of Council Regulation No 384/96, insofar as it provides for the imposition
of anti-dumping duties on a country-wide basis or on an individual basis, if certain criteria are met, in
the case of imports from non-market economy countries).

B. A
RTICLE 9(5) OF COUNCIL REGULATION NO 384/96 "AS SUCH" IS IN CONFORMITY WITH THE
PROVISIONS INVOKED BY CHINA

6. For the reasons mentioned in our First Wr itten Submission, the European Union maintains
that Article 9(5) of Council Regulation No 384/96 is as such consistent with the provisions invoked
by China. In particular, the European Union w ill address China's claim under Article 9.2 of the Anti-
Dumping Agreement, by examining that provision a nd referring to Article 6.10, where relevant, as
context to address the relationship between thes e two provisions, and to China's Protocol of
Accession. The European Union will also brie fly address China's claim under Article I:1 of the
GATT 1994.

1. Claim under Article 9.2 of the Anti-Dumping Agreement

7. China's understanding of Articles 6.10 and 9.2 of the Anti-Dumping Agreement is flawed on
numerous grounds. First, Article 6.10 does not contai n a strict rule requiring investigating authorities
to always determine dumping margins on an indivi dual basis.; rather, that provision contains a
preference for determining individual dumping margin s and then refers to one affirmative situation
(i.e., sampling) where such a preference "may" not be followed. Second, contrary to what China
asserts, Article 6.10 does not contemplate only one exception (i.e., sampling) where investigating
authorities are permitted to depart from the genera l principle of determining dumping margins on
individual basis. The second sentence of Article 6.10 on sampling is simply an affirmative statement
relating to (i) the conditions for sampling and (ii) the composition of the sample. There is no direct
link between the general principle of the first sen tence and the possibility of sampling in the second
sentence. These two sentences are simply two affirmative statements of what an authority ought to do
in general (individual margin determination), and what it is allowed to do (sampling). The
interpretation that Article 6.10, first sentence, does not contain a strict obligation and sampling is just
but one situation where the preference for the individual determination of dumping margins does not
need to be followed is supported by the existence of other situations where the preference mentioned
in Article 6.10, first sentence, may not apply. Third, as the relevant case-law has clarified,
Article 6.10 should not be interpreted as requiring the determination of dumping margins for each

legal entity in all cases, regardless of whether th ey are economically related to each other.
Investigating authorities are allowed to determin e one dumping margin for related companies as a
whole. Article 6.10, first sentence, would require the identification of the actual exporters/producers
in an investigation as a condition precedent to the determination of the dumping margin. Once the
single producer has been identified, investigati ng authorities would be able to impose anti-dumping
duties on the basis of that identification. Fourth, Article 9.2 does not contain a strict rule to impose
anti-dumping duties on individual basis; rather Article 9.2 expressly allows for the imposition of anti-
dumping duties on a country-wide basis. This is al so the consequence of the preference or guiding
principle contained in Article 6.10, first sentence. Fi fth, even if Article 9.2 could be read as requiring
the imposition of anti-dumping duties on an individual basis, its third sentence provides for exceptions
to that obligation (other than sampling) when it is "impracticable" to do so. Even by its own
admission, China concedes that such situation arises not only in cases where sampling is used but also
in other situations, such as when certain suppliers are not known. The fact that anti-dumping duties
do not need to be imposed on individual basis in other situations (e.g ., non-cooperating suppliers)
mirrors the fact that there are more situations (other than sampling) where the investigating authorities
can depart from the general rule contained in Article 6.10, first sentence. In sum, the European Union
considers that Article 9.2, when interpreted by using Article 6.10 as a context, does not support
China's claim that there is a strict obligation to impose anti-dumping duties on an individual basis,
with the only exception of the sampling situation. Indeed, Article 6.10 allows investigating
authorities to depart from the general rule to de termine dumping margins on an individual basis in
other situations than in the sampling scenario. Likewise, Article 9.2 perm its the imposition of duties
on a country-wide basis in other cases than the sampling scenario, in particular when it is
impracticable to do so on an individual basis.

8. Following the rationale of Article 9.2 of the Anti-Dumping Agreement, Article 9(5) of
Council Regulation No 384/96 contains certain crite ria to assess when it is impracticable to impose
anti-dumping duties on an individual basis in the case of imports from non-market economy countries.
These criteria serve to identify whethe r the applicant company is related to the State, i.e., the actual
supplier, or is an independent, non-related supplier. If the appl icant company is considered as a
supplier acting independently from the State, that IT supplier is considered an independent exporter or
producer and the source of the alleged price discrim ination. Then, an individual anti-dumping duty
will be specified for that IT supplier in the provisio nal and/or definitive measure. In contrast, if the
applicant company is considered as a supplier not acting independently from the State, that non-IT
supplier is not considered a genuine exporter or producer, but related to State (which is ultimately the
actual producer and the source of the alleged price discrimination). Then, that non-IT supplier will be
subject to the country-wide duty rate. If the supplier is not acting independently of the State, there is
also a risk that the actual producer of the product concerned (i.e., China) would channel all its exports
through the company with the lowest duty-rate, th ereby undermining the main objective of the anti-
dumping measure, i.e., to offset or prevent dumping.

9. The European Union also di sagrees with China's contention that Article 9.2 requires the
imposition of anti-dumping duties on an individual basis since this provision refers to the collection of
anti-dumping duties in the "appropriate amounts (…) from all sources found to be dumped and
causing injury". The European Union also disag rees with China's argument that the term
"impracticable" in the third sentence of Article 9. 2 refers to something which is "not feasible in
practice", rather than "ineffective" and covers onl y situations in which the specific action (i.e., of
naming the suppliers and determining the duties app licable to them) is not feasible for practical
reasons.

10. China argues that the European Union has separate rules to de al with the issue of related
companies and that Article 9(5) of Council Regulation No 384/96 applies in addition to them. The
European Union considers that the application of rules to consider related companies or companies

belonging to the same group as one single entity either before or after or in addition to Article 9(5) of
Council Regulation No 384/96 is irrelevant in the present dispute.

11. The European Union also considers that th e relationship between non-IT suppliers and the
State is similar to that addressed by the panel in Korea – Certain Paper. In that case, the reasoning of
the panel sought to identify the actual source of pric e discrimination and thus determine an individual
dumping margin for the actual supplier reflecting its real economic structure, duly delineated in legal
and factual terms. In order to do so, the panel ex amined the close relationship of three companies and
concluded that they were related in view of the f act that (i) one company owned a majority of shares
of the three companies and thus had a considerably controlling power over the operations of its three
subsidiaries; (ii) there was a significant comm onality with respect to the management of the
three companies, where most of th e directors of each company were present as directors of the other
companies; (iii) the three companies concerned had the ability to shift products among themselves to
harmonise their commercial activities to fulfil co mmon corporate objectives; and (iv) the three
companies made almost all thei r domestic sales through one company. Similarly, the criteria under
Article 9(5) of Council Regulation No 384/96 exam ine whether the Chinese su ppliers act sufficiently
independently from the State by examining, inter a lia, that (i) the majority of the shares belong to
private persons, and not to the State; that (ii) State officials appearing on the board of Directors or
holding key management positions are in minority; that (iii) export prices and quantities, and
conditions and terms of sale are freely determined, rather than directed or controlled by the State; and
that (iv) State interference is not such as to perm it circumvention of measures if individual exporters
are given different rates of duty. In this sense, the criteria contained in Article 9(5) of Council
Regulation No 384/96 aim at examining whether th e applicant companies are related through the
State. Thus, like in Korea – Certain Paper, the reasoning behind these criteria is to identify the actual
source of price discrimination, the single supplier of the product concerned. Only by doing so, the
anti-dumping duty imposed will address the actual source of price discrimination effectively.

12. Moreover, the European Union observes that the notion of whether producers are "related"
appears in Article 4.1(i) of the Anti-Dumping Agre ement and thus may serve as context to interpret
this implicit notion in Article 6.10.

13. Finally, the European Union considers that China's Protocol of Accession cannot be read in
such a narrow manner. The term "domestic" in Pa ragraph 15(a) of China's Protocol of Accession
seems to address the fact that domestic prices in China are significantly distorted due to State
intervention in the economy. However, the term "market economy conditions" also encompasses the
situation when State intervention in the economy incl uding international trade is so substantial that
operators cannot act independently from the State in th eir export activities. This is the case of China.
Likewise, the term "sale" also includes "export" sales. Thus, the terms "market economy conditions"
in Paragraph 15(i) and (ii) of China's Protocol of Accession would appear to allow investigating
authorities to have recourse to "a methodology that is not based on a strict comparison with domestic
prices or costs in China (…) in determining price comparability under Article VI of the GATT 1994
and the Anti Dumping Agreement". A methodology wh ich considers the State as the actual producer
of the product concerned and uses information av ailable to compare export prices of the actual
producer with an analogue country normal value is also "a methodology that is not based of a strict
comparison with domestic prices or costs in China".

2. Claim under Article I:1 of the GATT 1994

14. The European Union notes that China's argu ment is based on the presumption that the Anti-
Dumping Agreement does not allow for treating suppliers from non-market economy countries
differently. In other words, China assumes what it pleads for (i.e., that Article 9(5) of Council
Regulation No 384/96 violates certain provisions of the Anti-Dumping Agreement) in order to
conclude that there is no conflict with Article I:1 of the GATT 1994. Such a circular argument should

be rejected. More so where there are other re ferences in the Anti-Dumping Agreement which allow
WTO Members to treat non-market economy countries differently.

III. CLAIM 1: ARTICLE 9(5) OF COU NCIL REGULATION NO 384/96 "AS APPLIED"
IN COUNCIL REGULATION NO 91/2009 (ARTICLES 6.10, 9.2 AND 9.4 OF THE
ANTI-DUMPING AGREEMENT)

15. The European Union observes China has not raised any additional arguments in connection
with this claim. Thus, the European Union request s the Panel to reject Ch ina's claim that Council
Regulation No 91/2009 is incons istent with Articles 6.10, 9.2 and 9.4 of the Anti-Dumping
Agreement.

IV. CLAIM 2: STANDING OF THE EU DOMESTIC INDUSTRY FOR THE PURPOSES
OF INITIATION (ARTICLE 5.4 OF THE ANTI-DUMPING AGREEMENT)

16. The European Union observes China has not raised any additional arguments in connection
with this claim. In fact, by implication, it woul d appear that China acknowledges that the standing
determination was properly made. Thus, the European Union respectfully requests the Panel to reject
China's claims.

V. CLAIM 3: DETERMINATION OF "DOMESTIC INDUSTRY" (ARTICLES 4.1 AND
3.1 OF THE ANTI-DUMPING AGREEMENT)

17. China claims that the EU's determination of "domestic industry" violated Articles 4.1 and 3.1
of the Anti-Dumping Agreement . In particular, China presents five sets of claims against the EU's
determination of the domestic industry. In its firs t written submission, the EU explained why all five
of these claims are to be rejected. In its oral st atement, China has failed to rebut any of the EU's
arguments. The EU therefore refers to the arguments presented in its first written submission.

18. The EU clarifies that the EU authorities di d not exclude any domestic producers but simply
defined the domestic industry based on all tho se producers which made themselves known within
15 days following initiation and which expr essed a willingness to cooperate. China has
acknowledged that it is permissible to use reasonable deadlines to determine the scope of the domestic
industry. China has failed to even attempt to dem onstrate that this deadline was not reasonable. The
use of this deadline for purposes of defining th e domestic industry was an entirely reasonable and
objective way of grouping all c ooperative domestic producers, and was thus a method which did not
"favour either side".

19. Article 4.1 does not require an authority to in clude producers that indicate from the outset that
they are not going to cooperate. The EU's appr oach is an entirely reas onable approach which is
consistent with the discretion that is given to aut horities by Article 4.1 and the lack of a hierarchy of
preference in this provision.

20. In respect of the question whether 27% of production is a "major proportion", China accepted
in the course of the oral hearing that "a major pr oportion" could be much less than 100%, and even
less than 25 % depending on the circumstances of the case. Given this acknowledgement it is all the
more revealing that China has still failed to demons trate why 27 % is not an important, significant or
serious proportion in the particular circumstances of this case, even though this is what the panel in
Argentina – Poultry Anti-Dumping Duties considered it was required to do in order to demonstrate a
violation of Article 4.1. The only two particular "circumstances" that China refers to are either
completely irrelevant such as the number of producers or simply a different packaging of the
erroneous argument made in its fi rst written submission that the term "a major proportion" has to be

as close as practically possible to 100%. Neither explains why 27% of production is not an important
part of production.

21. China did not even attempt to re-but the EU's arguments in respect of the lack of merit of
China's claims in respect of the time period for the determination of the major proportion requirement,
the representativeness of the sampled producers when compared to total production or the need to
exclude related producers.

22. In sum, the EU reiterates its request that the Panel reject all of China' claims under
Articles 3.1 and 4.1 of the Anti-Dumping Agreement in respect of the EU's definition of the domestic
industry.

VI. CLAIM 4: SELECTION OF THE PR ODUCT CONCERNED (ARTICLES 2.1 AND
2.6 OF THE ANTI-DUMPING AGREEMENT)

23. The European Union observes China has not raised any additional arguments in connection
with this claim. Thus, the European Union request s the Panel to reject Ch ina's claim that Council
Regulation No 91/2009 is inconsistent with Articles 2.1 and 2.6 of the Anti-Dumping Agreement.

VII. CLAIM 5: DETERMINATION OF DUMPING (ARTICLE 2.4 OF THE ANTI-
DUMPING AGREEMENT

24. China alleges that the EU failed to make a fa ir comparison as required by Article 2.4 of the
AD Agreement between normal value and export pr ice because the authority did not base this
comparison on the full Product Control Number ("PC N"). In the first written submission, the
European Union explained why China's claims based on the alleged failure to use the full PCN are in
error and should be rejected by the Panel. China did not address any of these arguments in its oral
statement. The EU therefore reiterates its view that China has failed to establish a prima facie case of
violation.

25. In the absence of any prescribed methodology an d taking into consideration the fact that
comparisons were made between normal value and export price between products based on the
two main drivers that the exporters themselves cons idered to be affecting price comparability, it is
clear that China has failed to demonstrate that the comparison that was made was not a "fair
comparison" as required by Article 2.4.

26. China's argument raised in the course of the hearing that it did not know what the difference
was between special and standard fasteners, and that this lack of transparency hindered the defence of
the Chinese exporters' interests at the time of the investigation and of China in the current proceedings
is clearly contradicted by the facts on the record.

27. In sum, China failed to demonstrate that the authority violated its obligations under
Article 2.4 of the Anti-Dumping Agreement.

VIII. CLAIM 6: PRICE UNDERCUTTING ANALYSIS (ARTICLES 3.1 AND 3.2 OF THE
ANTI-DUMPING AGREEMENT)

28. China argues that the EU violated Articl es 3.1 and 3.2 of the AD Agreement since the
authority allegedly failed to make a price undercutti ng analysis on the basis of the full PCN. In the
first written submission the EU explained the reasons why China's claim is to be rejected. Once
again, none of the EU's arguments were addressed in China's opening oral statement. In addition, and
as clarified in response to a number of the Panel' s questions, China cannot seriously argue that it was
not aware of how the product groups were constituted or what the methodology was that was followed

for the price undercutting analysis. China's own e xhibit CHN-50 which is an example of a disclosure
document sent to the Chinese producers clearly explains it all in great detail. Three weeks were given
to exporters to comment on this approach. No comments challenging the reasonableness of the
methodology of the price undercutting comparison were received. China has failed to provide any
evidence to show that the price undercutting analys is was not conducted in an objective manner given
the broad discretionary power given to authorities under Article 3.2 in this respect.

29. In sum, China's claims under Articles 3.1 and 3.2 of the Anti-Dumping Agreement in respect
of the price undercutting analysis are to be rejected.

IX. CLAIM 7: EXAMINATION OF THE VOLUME OF DUMPED IMPORTS
(ARTICLES 3.1, 3,2, 3.4 AND 3.5 OF THE ANTI-DUMPING AGREEMENT)

30. China argues that the EU violated its obligati ons under Articles 3.1, 3.2, 3.4 and 3.5 because
the authority failed to exclude the volume of two exporters that were found not to be dumping from its
volume analysis under Article 3.2 and because the authority assumed for the purposes of that same
volume analysis that all non-examined exporters were dumping. For the reasons explained in its first
written submission, the EU requests the Panel to rej ect China's claim in this respect. China did not
even attempt to rebut the EU's arguments at the time of the first substantive meeting with the Panel.

31. The European Union requests the Panel not to a pproach this matter in a mechanistic fashion.
The Appellate Body has warned against such a me chanistic approach on many occasions, thus calling
for a substantive over a formalistic approach. It is not so that any inclusion of non-dumped imports
would necessarily, and ipso facto constitute a violati on of Articles 3.1 and 3.2. A violation will exist
only if the failure to do so jeopardizes the objectivit y of the examination. As explained before, as
well as in our First Written Submission, such was not the case in respect of the fasteners investigation.

32. Furthermore, the facts on the record show that in the fasteners case, all sampled producers
were found to be dumping. Indeed, in the fast ener case, 100% of the sampled producers representing
61% of exports from the cooperating companies and 39% of total exports from the People's Republic
of China were all found to be dumping. Clearly the authority's extrapolation of dumping in respect of
the non-sampled exporters on this basis was not in error.

33. China's claims under Articles, 3.1, 3.2, 3.4 and 3.5 of the Anti-Dumping Agreement are
therefore to be rejected.

X. CLAIM 8: IMPACT OF DUMPED IMPORTS ON DOMESTIC PRODUCERS
(ARTICLES 3.1 AND 3.4 OF THE ANTI-DUMPING AGREEMENT)

34. China argues that the EU violated its obligations under Articles 3.1 and 3.4 of the Anti-
Dumping Agreement to objectively examine the impact of the dumped imports on the situation of the
domestic industry. China presents four equally flawed arguments in this respect. In the first written
submission, it was clearly demonstrated why all four are in error. China fail ed to even attempt to
rebut these arguments in its oral statement.

35. It is recalled that China's claim lacks mer it since the record clearly shows that the EU
authorities did consistently use data relating only to the same domestic industry . WTO case law
confirms that China is wrong to suggest that the mere fact that the EU authorities examined certain
factors on the basis of data relating to a representa tive sample of the domestic industry while other
factors were examined based on data relating to a ll producers that are part of the domestic industry
vitiated the objectivity of the analysis.

36. China's claim in respect of the treatment of the factor profitability is based on an incorrect
understanding of the reasonable and nuanced explana tion provided by the EU authorities. Moreover,
in the first written submission, the European Union explained at length that it is simply not so that
market share was the "sole factor possibly showing a negative trend", as erroneously argued by China.
It is certainly not so that the EU authorities concl uded that injury existed "after having found that all
factors showed a positive trend over the period concer ned", as China wants the Panel to believe. Nor,
of course is it factually correct to argue, as does Chin a in its Closing Oral Statement, that the injury
determination was based "solely on a loss of poten tial sales". The EU authorities made an objective
determination of the facts in respect of all of these important factors, and provided a reasonable and
reasoned analysis of how these facts support a determination of injury to the domestic industry.
China's argument in respect of market displacement is also simply factually incorrect since the EU
authorities did not make a finding of market displaceme nt, but related its injury finding to fasteners as
a whole.

37. In view of the foregoing, the European Union requests the Panel to reject China's claim that
Council Regulation No 91/2009 violates Articles 3.1 and 3.4 of the Anti-Dumping Agreement.

XI. CLAIM 9: CAUSATION AND NON-ATTRIBUTION ANALYSIS ARTICLES 3.1
AND 3.5 OF THE ANTI-DUMPING AGREEMENT)

38. China claims that the EU's causation and non-a ttribution analysis violated Articles 3.1 and 3.5
of the Anti-Dumping Agreement. For the reasons explained in the first written submission, China's
claim is without merit. Once again, in the oral st atement China completely failed to address let alone
rebut any of the EU's arguments in respect of the causation and non-attribution analysis.

39. It is recalled that China's causation-related argument unduly limits the injury to a loss of
market share and is contradicted by the facts on th e record. China's allegati on that the authority did
not adequately distinguish the effects of other fact ors such as the increase in raw material prices and
the export performance of the EU industry is equally uns ubstantiated. It is cl ear from the record that
export performance was not a factor of injury and that the authority examined the role of the increase
in raw material prices but found that there did not exist a similar direct link between the increase in
raw material prices and the loss of market share as was found to exist in respect of the dumped
imports. China's claims under Articles 3.1 and 3.5 of the Anti-Dumping Agreement relating to the
authority's non-attribution analysis are thus to be rejected.

XII. CLAIM 10: CHINA'S PROCEDURAL CLAIMS UNDER ARTICLES 6 AND 12 OF
THE ANTI-DUMPING AGREEMENT

40. Rather than clarifying its position on its pr ocedural claims under Articles 6 and 123 of the
Anti-Dumping Agreement, China preferred to add to the confusio n in its first oral statement. Not a
single serious argument was advanced on the procedural claims, no evidence was provided. Instead, a
new 14
th claim seemed to be in the making when Ch ina asserted that "no information was given on
how price undercutting was calculated". However, it is wholly unclear on what basis this claim is
made. In these circumstances the Eu ropean Union is not in a position to defend itself in the face of
speculation and mere assertions. It is simply not acceptable to accuse the European Union of
"obscure reasons" when China continuously and rep eatedly fails to respect the most basic rules of
dispute settlement procedures. The "matter" before the Panel is not a continuously moving target. It
is fixed in the Panel request in which the complainant has to present the problem clearly.

XIII. CONCLUSION

41. In view of the foregoing, the European Union re quests the Panel to reject all of China's claims
and arguments, finding instead that, with respect to each of them, the European Union acted
consistently with all its obligations under the Anti-Dumping Agreement , the GATT 1994 and the
WTO Agreement.