Evaluation of EC Trade Defence Instrumentstrade.ec.europa.eu/doclib/docs/2006/february/tradoc... · 2019-04-29 · Section 2, Page 4 analysis of an EC investigation at the pre-initiation

Evaluation of EC Trade Defence Instruments

Prepared by:

Mayer, Brown, Rowe & Maw LLP

Project Manager and Principal Author Cliff Stevenson (Brussels/London)

FINAL REPORT

December 2005

CONTENTS

SECTION 1 INTRODUCTION

SECTION 2 EVALUATION OF IDENTIFIED ISSUES AND POSSIBLE AREAS OF IMPROVEMENT

ANNEX 1 BASIC DESCRIPTION OF EC TRADE DEFENCE INSTRUMENTS

ANNEX 2 SURVEY OF INTERESTED PARTIES ON EC TDI

ANNEX 3 LIST OF SURVEY RESPONDENTS

ANNEX 4 DISCUSSION ISSUES LISTS FOR EC SURVEY

ANNEX 5 BASIC DESCRIPTION OF US TRADE DEFENCE INSTRUMENTS

ANNEX 6 TECHNICAL ANALYSIS OF DIFFERENCES BETWEEN EC AND US TDI

ANNEX 7 STATISTICS ON USE OF TDI BY EC & US

ANNEX 8 TERMS OF REFERENCE

ANNEX 9 RESEARCH METHODOLOGY

ANNEX 10 ACRONYMS USED IN THE REPORT

Evaluation of EC TDI; Contents (Final Report December 2005)

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SECTION 1 - INTRODUCTION

1. RANGE OF VIEWS ON TRADE DEFENCE INSTRUMENTS (TDI)

TDI is an EC policy area that provokes strong passions and where people have strong views.

A wide range of views exist on anti-dumping. At one end of the spectrum, some people see TDI as a critical defence against unfair trade practices and distortions to trade. Alternatively, others think that TDI can only be justified on rare occasions and, to this extent, propose that TDI should be abolished. In this way, it is perhaps unique of all EC policy areas.

Given this, an evaluation study is timely. There are many entrenched positions and much perceived wisdom. Therefore, an objective evaluation of this policy area may be helpful in highlighting policy issues and identifying possible improvements.

2. TERMS OF REFERENCE & SCOPE OF EVALUATION

An extract from the terms of reference setting out the scope of the work is reproduced in annex 4.

The ultimate aim of the project is "to identify possible areas for the improvement of the EC's trade defence laws and practice, with a view to increase their efficiency (e.g. in terms of transparency, enforceability of measures and streamlining of procedures)".

Thus, the study is very clear in its objectives. It is not an evaluation of whether the EC should have TDI or a re-assessment of fundamental concepts. The starting point, therefore, is to basically accept EC TDI law as it is. This is not a fundamental evaluation of whether the EC laws are good or bad.

Rather, the project concerns the implementation of TDI, with the focus on the efficiency and operation of the instruments. This is an evaluation of practices and procedures in light of improving the efficiency of the instrument.

While a study which evaluated whether the EC should keep TDI in its current form or not would be interesting, the wide range of views on TDI would ensure that the project would become weighed down by controversy.

The fact that the evaluation is limited to points relating to the efficiency of the instruments means that the project can proceed free of such controversy. Whilst views on the efficiency of the instrument will, of course, be coloured by the perspective of the individual contributing, everyone has an interest in TDI operating efficiently. Indeed, in the work done so far, in which many people have been interviewed, all with different views towards TDI, the focus has consistently remained on the key objectives of this evaluation and therefore every single contribution has been constructive.

3. METHODOLOGY

Annex 9 contains information on the methodology used for the evaluation.

In short, there are two principle lines of research. First, a survey of EC interested parties and, second, a technical comparison of EC and US TDI.

Evaluation of EC TDI; Section 1 – Introduction (Final Report December 2005)

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Issues to be covered in the evaluation were identified by:

• Respondents in the survey

• Identified differences from the EC/US comparison

4. STRUCTURE OF REPORT

The report is intended for a wide audience with differing levels of knowledge and expertise on the issue of TDI.

The report has been structured in a way that makes it of use to both the expert and the laymen.

For those with no background on these complex issues, the report provides separate descriptions of EC and US TDI (annexes 2 and 5 respectively). These descriptions are aimed at the lay reader to give them sufficient background to be able to read and understand the main elements of the evaluation.

The evaluation of EC TDI is in section 2.

The back-up information for the evaluation is contained in annex 1 (survey of interested parties on EC TDI) and annex 6 (technical analysis of the difference between EC and US TDI).

Statistics on trends in use of EC and US TDI can be found in annex 7.

5. COMMENT ON EU/EC TERMINOLOGY

We use the terms EC and Community throughout the report, rather than EU or Union.

There is a need to choose one in order to be consistent. Given that TDI are governed by EC regulations with all references relating to the Community, we decided to use EC and European Community. This is also consistent with the Commission's approach in the terms of reference (TOR).

Evaluation of EC TDI; Section 1 – Introduction (Final Report December 2005)

SECTION 2 EVALUATION OF IDENTIFIED ISSUES AND POSSIBLE AREAS OF IMPROVEMENT

1. INTRODUCTION....................................................................................................................................... 3

2. PROCEDURE ............................................................................................................................................. 3 2.1 COMPLAINT THRESHOLD ...................................................................................................................... 3 2.2 TYPE OF EVIDENCE REQUIRED ON PRICES ............................................................................................. 4 2.3 WHO CAN BRING A COMPLAINT? .......................................................................................................... 5 2.4 LENGTH OF COMPLAINT PROCESS ......................................................................................................... 5 2.5 CHANGING REQUIREMENTS FOR COMPLAINANTS ................................................................................. 5 2.6 COMPARISON WITH STATE AID COMPLAINTS ........................................................................................ 6 2.7 BURDEN ON INDUSTRY WISHING TO MAKE A COMPLAINT ..................................................................... 6 2.8 DIFFICULTIES IN GETTING NECESSARY INFORMATION FOR COMPLAINT ................................................ 7 2.9 SENSITIVITY OF CONFIDENTIAL INFORMATION ..................................................................................... 8 2.10 INSUFFICIENT INFORMATION IN THE NON-CONFIDENTIAL COMPLAINT.................................................. 8 2.11 IDENTIFICATION OF USERS/IMPORTERS AT THE START OF THE INVESTIGATION..................................... 9 2.12 INFORMATION ON HOW MANY INDUSTRIES PREPARE COMPLAINTS ....................................................... 9 2.13 REPRESENTATIVENESS OF COMPLAINT ............................................................................................... 10 2.14 NON-DISCRIMINATION IN COMPLAINT ................................................................................................ 10 2.15 TRANSPARENCY OF THE INVESTIGATION PROCESS.............................................................................. 11

(a) General comments ............................................................................................................................. 11 (b) Access to confidential information under an APO-type system......................................................... 11 (c) Members of the advisory committee .................................................................................................. 12 (d) Agenda of meetings............................................................................................................................ 12 (e) Position of the Advisory Committee .................................................................................................. 13 (f) Contact numbers of case handlers for each investigation ................................................................. 13 (g) Availability of the non-confidential complaint .................................................................................. 13

2.16 ACCESS TO NON-CONFIDENTIAL FILES BY INTERESTED PARTIES ......................................................... 14 2.17 MEMBER STATES ACCESS TO INFORMATION....................................................................................... 14 2.18 INFORMATION MADE AVAILABLE ON THE WEBSITE AND THROUGH SEMINARS.................................... 14 2.19 PROTECTION OF CONFIDENTIAL INFORMATION................................................................................... 14 2.20 HEARINGS & SUBMISSIONS................................................................................................................. 14 2.21 ADDRESSING ALL ARGUMENTS SUBMITTED........................................................................................ 15 2.22 QUESTIONNAIRES ............................................................................................................................... 16 2.23 DEADLINES FOR USERS COMPLETING QUESTIONNAIRES ..................................................................... 16 2.24 TREATMENT OF NON-COOPERATING EXPORTERS ................................................................................ 17 2.25 CONSULTATION WITH MEMBER STATES............................................................................................. 18 2.26 PROVISIONAL MEASURES.................................................................................................................... 18 2.27 LEVEL OF MEASURES.......................................................................................................................... 20 2.28 RETROACTIVITY ................................................................................................................................. 20 2.29 NON-DISCRIMINATION IN THE APPLICATION OF MEASURES ................................................................ 21 2.30 DEFINITIVE MEASURES AND OVERALL LENGTH OF INVESTIGATION .................................................... 21 2.31 INTERIM REVIEWS............................................................................................................................... 22 2.32 EXPIRY REVIEWS ................................................................................................................................ 23

3. SUBSTANCE............................................................................................................................................. 23 3.1 OVERALL VIEWS ON DUMPING CALCULATION .................................................................................... 23 3.2 DUMPING CALCULATION METHODS .................................................................................................... 24 3.3 NON-MARKET ECONOMY (NME) METHODOLOGY .............................................................................. 24 3.4 MARKET ECONOMY TREATMENT........................................................................................................ 25 3.5 CALCULATION OF SGA AND PROFIT IN CONSTRUCTED NORMAL VALUE CALCULATIONS.................... 25 3.6 AUDITING OF COST FOR NORMAL VALUE PURPOSES ........................................................................... 26 3.7 IDENTIFYING THE CAUSE OF DUMPING................................................................................................ 26 3.8 ZEROING ............................................................................................................................................ 26 3.9 SPECIFICITY AND SUBSIDIES ............................................................................................................... 27 3.10 USE OF ANTI-SUBSIDY INSTRUMENT AGAINST NMES OR ECONOMIES IN TRANSITION ........................ 27 3.11 INJURY & CAUSAL LINK...................................................................................................................... 27 3.12 A GENERAL COMMENT ON COMMUNITY INTEREST ............................................................................. 28

Evaluation of EC TDI; Section 2 – Evaluation (Final Report December 2005)

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3.13 INTERPRETATION OF A LACK OF RESPONSE FROM USERS, IMPORTERS AND CONSUMERS..................... 28 3.14 COMMUNITY INTEREST IN AN ENLARGED EC ..................................................................................... 29 3.15 REPRESENTATION OF CONSUMERS IN AD OR AS PROCEEDINGS ......................................................... 29 3.16 CONCERNS RAISED BY COMPLAINANTS ABOUT COMMUNITY INTEREST.............................................. 30 3.17 ANALYSIS OF MARKET SITUATION PRIOR TO MEASURES ..................................................................... 30

4. INSTITUTIONS........................................................................................................................................ 30 4.1 POLITICAL ELEMENT TO DECISION-MAKING ....................................................................................... 30 4.2 IMPACT OF CHANGE IN VOTING AND THE EUROCOTON DECISION........................................................ 31 4.3 MEMBER STATES................................................................................................................................ 32 4.4 HOW MEMBER STATES MAKE THEIR DECISIONS................................................................................. 32 4.5 REPRESENTATIVES ON THE ADVISORY COMMITTEE ........................................................................... 33 4.6 LOBBYING .......................................................................................................................................... 33 4.7 INTERNAL ORGANISATION .................................................................................................................. 33 4.8 CASE HANDLERS................................................................................................................................. 34 4.9 INSUFFICIENT SPECIALISTS (INDUSTRY, ACCOUNTANTS ETC.) ............................................................ 34

5. EFFECTIVENESS OF MEASURES ...................................................................................................... 35 5.1 OVERALL EFFECTIVENESS .................................................................................................................. 35 5.2 CIRCUMVENTION & ENFORCEMENT.................................................................................................... 35 5.3 PRICE UNDERTAKINGS........................................................................................................................ 36 5.4 RETALIATION AGAINST EC COMPANIES FOR BEING INVOLVED IN TDI ACTIONS................................. 36

6. SAFEGUARDS.......................................................................................................................................... 36


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1. INTRODUCTION

This section is an evaluation of identified issues and identification of possible areas of improvement. The issues considered are those identified in the survey (see annex 2) and/or in the EC/US technical comparison (see annex 6).

Identified issues are catalogued below with the main points summarised and evaluated.

2. PROCEDURE

2.1 Complaint threshold

With regard to the level of evidence required by the Commission to initiate anti-dumping and anti-subsidy investigations, the following points were raised in the survey: • The threshold for accepting complaints in the EC is high i.e. the Commission expects a

high level of evidence. • Some felt that the threshold is too high, while others feel that it is too low • The EC is tougher in assessing complaints than the US The comparison with the US revealed the following: • The threshold for accepting complaints in the US may be lower, particularly with regard

to injury. • However, complainants certainly have to work hard and complaints are much more

expensive in the US (lawyers fees are typically $500,000 to $1,000,000 to prepare a petition).

There are a number of reasons why a high standard is desirable: • A high standard guarantees WTO consistency. • It sets an example and ensures that only strong cases are pursued because initiation of a

case itself has an impact on the market. • A high complaint standard is an important part of the balance between differing interests

in the EC. • If it is true that the US opens weaker injury cases than the EC (only to close them again

without measures) this creates unnecessary harassment for exporters and importers. The views of survey participants on the complaint threshold are, of course, influenced by their general attitude towards anti-dumping (AD). The Commission has to strike a balance between the differing interests within the Community (which vary considerably between protectionist and liberal extremes). On the one hand, the Commission tries to apply a high threshold to ensure WTO consistency and to set a good example to other countries using TDI. On the other hand, the Commission has to ensure that this legitimate instrument remains usable by its intended beneficiaries. It can be concluded that the Commission is applying more than a prima facie test and is making industry work harder than in many other TDI regimes. At the same time, the level of


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analysis of an EC investigation at the pre-initiation stage should not be overstated. Although complainants have to work hard, there is no detailed transaction by transaction analysis and no information is verified on-site at the complaint stage. This would duplicate the work of the subsequent investigation. Is the threshold applied by the Commission at the right level? The answer to this question is probably yes. Those on both sides of the spectrum (i.e. for and against anti-dumping) criticise the level applied, which in itself perhaps suggests that the balance is about right. Further, the fact that a significant number of cases are terminated by the EC (roughly 40%) would certainly suggest that the threshold is not too high i.e. some cases where there appears to be sufficient evidence of a problem turn out to not to meet all of the conditions to impose provisional or definitive measures. The fact that around 40% of cases are terminated without measures raises a question as to whether too many 'weak' cases are opened. However, the inherent differences between the pre-initiation and investigation stages (different periods analysed, individualised dumping/subsidy margins in investigations as opposed to single general ones at the complaint stage, different make-up of the Community industry, Community interest consideration etc) and the fact that many terminations are driven by Community industry which may decide to drop the case for various reasons may explain such termination rates. Benchmarked against the US, it would appear that the EC is applying a higher standard at least with regard to injury. The Commission has a good track record on initiations. The fact that the standard is high is also supported by the fact that an initiation has never successfully been challenged in the European courts nor at the WTO. The precise threshold level for a complaint to be accepted as providing sufficient evidence can never be precisely defined. Each case is different and complaints can only be judged on a case by case basis. However, the evidence suggests that overall the Commission gets the threshold level about right given all of the constraints and conditions under which TDI operate. 2.2 Type of evidence required on prices

In the survey, the point was made that the proof required by the Commission on prices for the purposes of making an anti-dumping complaint is unreasonable. It was suggested, for example, that salesmen's reports should sometimes be acceptable as evidence.

Given that the evaluation of the threshold for complaints has concluded that it is at about the right level, changing the type of evidence required for prices would not be desirable.

The Commission should recognise on a case by case basis that it may be difficult in certain circumstances to get documentary evidence, such as invoices. However, it appears that the Commission already does this and takes into account specific situations in order to determine what constitutes sufficient evidence.

Caution should certainly be exercised about salesmen's reports due to the fact that they could easily be created by dishonest complainants. The fact that verification cannot take place at the pre-initiation stage makes such reports unreliable as a source of sufficient evidence that dumping is taking place.


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2.3 Who can bring a complaint?

The EC/US comparison revealed that trade unions and groups of worker can make complaints in the US, whereas this is not possible in the EC.

The WTO AD agreement requires authorities to determine—on the basis of an examination of the degree of support for, or opposition to, the application expressed by domestic producers of the like product—that the application has been made by or on behalf of the domestic industry.

Footnote 14 of the WTO anti-dumping agreement states that Members are aware that in the territory of certain Members, employees of domestic producers of the like product or representatives of those employees may make or support an application for an investigation. Note that, even in the US, the implicit support of the management of companies concerned by the complaint is required. If the management of a firm expresses a position in direct opposition to the views of the workers in that firm, the production of that firm is treated as representing neither support for nor opposition to the petition. We have had no indication from the survey that this is an issue of significance within the EC. Further, requiring complaints to have the explicit support and cooperation of EC industry is actually a desirable feature of EC AD and AS rules. Finally, the fact that this is possible in the US is made possible by footnote 14 of the WTO anti-dumping agreement. However, it would probably be inconsistent with WTO rules for the EC to introduce such a possibility, even if it wanted to do so. 2.4 Length of complaint process

The survey revealed that many EC complainants are concerned that a typical complaint can take around six months from noticing a problem to getting it accepted by the Commission. Further, in some cases, the process can take 9 months.

The fact that a relatively high complaint threshold is applied by the Commission inevitably means that it takes time for EC industry to collect the necessary evidence and prepare a satisfactory complaint. The threshold should not be lowered just because it takes a long time to prepare a complaint.

However, this is a real problem and is related to the burden on complainants and the time before provisional duties are adopted (both of which are dealt with below).

2.5 Changing requirements for complainants

In the survey, EC industry complained that what is acceptable in one complaint may not be considered acceptable in another complaint. They accused the Commission of changing the requirements for complainants making it inevitable that a complaint is deficient and needs further work.

Some of those who complained did concede that such changes are often related to WTO rulings or cases in the European Courts. It should be noted that, although there have only been two EC anti-dumping measures (Bed Linen and Pipe Fittings) and one anti-subsidy (AS) measure (DRAMs) subject to review by the WTO, such rulings against other TDI-


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authorities' measures must for practical purposes also be taken into account by the Commission. Sometimes this may require changes.

It is perfectly reasonable that the Commission updates and modifies the complaint requirements. The Commission puts considerable effort into briefing EC industry when such changes occur (which is considered below).

However, this does serve to remind the Commission that it should remain constantly vigilant in ensuring that the complaint requirements are as consistent as possible between different cases.

2.6 Comparison with state aid complaints

In the survey, a comparison was made with the state aid complaints process (dealt with by DG Competition) which can be as short as a few days.

However, state aid is a much clearer cut issue than that faced in AD or AS investigations. Although there are always grey areas, the state aid rules are relatively black and white about what constitutes illegal state aid and what does not. Thus, once the basic facts have been presented, the Commission can fairly easily assess if there appears to be a problem. It is relatively straightforward for the Commission to initiate proceedings in order to start collecting more information on the alleged state aid. AD and AS rules are not as unambiguous. Given the need to establish that there is sufficient evidence of dumping/subsidy, injury and causality, the issues will never be as black and white as state aid complaints. It is inevitable, therefore that the AD and AS complaint process will be significantly longer than that which follows a complaint about state aid.

Further, complaints in State aid matters are only a "source of information" to the Commission. No formalities are required to make a State aid complaint (basically anybody can write a letter to the Commission and complain about an alleged unlawful aid). There are thus no standing requirements as there are with AD or AS complaints. Moreover, the Commission does not even need a complaint; it does not make a difference whether the Commission starts an investigation on the basis of information it found in a newspaper or in a detailed complaint. Finally, it should be noted that complainants have very limited rights in the proceeding (no access to the file, no disclosure, etc.) as they are not a party. Proceedings are strictly between the Commission and the Member State concerned. 2.7 Burden on industry wishing to make a complaint

Many participants in the survey highlighted how burdensome the complaint process is, particularly for SMEs.

It can be noted that the Commission has made considerable efforts to assist complainants in full objectivity and to ease the burden without compromising the high threshold. The following initiatives suggest that the Commission has been extremely proactive in this task:

• SME helpdesk facility • Dissemination of information in SME fora, including meetings with main industry

associations. • Chart of previously countervailed subsidy schemes on website. • Guide for complainants in all languages.


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• Mini-questionnaire to assist industries in putting together initial information. • Offer to visit companies in small industries, to assist them in understanding what

has to be done and how to collect information. • Wide language coverage in the complaints office. • Availability to discuss technical problems encountered in the process of drafting

complaints. The same facility is also available to exporters and importers who may be wishing to request reviews.

Clearly this issue is particularly a problem for SMEs. However, the Commission is already making considerable efforts in this regard, with many of the above-mentioned initiatives particularly targeted at easing the burden on SMEs. Whilst there seems to be general agreement that the Commission is doing a good job at the moment, it should remain vigilant in maintaining an innovative approach to easing this burden, particularly with regard to SMEs. Whilst those who oppose TDI will be sceptical of the burden on EC industry due to a belief that the current threshold is too low, it is important to dispel a common misconception. There is a perception amongst some that the threshold applied by the Commission is too low and that the Commission works closely with complainants to get complaints through. This is certainly not the case. Those who oppose current anti-dumping rules will inevitably feel that the threshold is too low. However, the fact is that the threshold is set at about the right level given the requirements of law (i.e. sufficient evidence). Whilst the Commission inevitably tries to assist EC industry as outlined above, it is not the "friend" of EC industry and is often very tough in its requirements as evidenced by the many comments made in the survey by EC industry complainants.

The burden is high and EC industries have to work hard to get a complaint accepted. This is how it should be and the Commission should be commended for its considerable efforts in trying to reduce this burden without compromising the standards it has set for a high complaint threshold.

With regard to SMEs, efforts should continue to ease the problems faced. However, it should be acknowledged that this is not only a problem related to TDI. When it comes to regulatory matters, SMEs are often disadvantaged in relation to their larger counterparts such as multinational companies. This is important because the fact that this is not a problem unique to TDI means that it cannot be completely solved within TDI practices and procedures. Despite the best efforts of the Commission, seeking protection from dumped or subsidised imports is often going to be difficult for small companies.

2.8 Difficulties in getting necessary information for complaint

In the survey, many EC industry participants raised the problem of getting hold of information for AD and AS complaints. The burdensome nature of the process, and the high standards, have been discussed above. A particular problem not dealt with in the points discussed above is the difficulty of obtaining information on subsidy schemes for AS complaints. The question was raised whether the Commission can do more to assist potential AS complainants?


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The Commission is already providing information on the schemes that have already been countervailed by EC AS measures. This information is available on DG Trade’s website and may be a useful resource if the problem stems from countries that have already been investigated. A particular problem was raised in the context of China. In this regard, it can be observed that the Commission has been pursuing China on its notification of subsidies to the WTO. This provides a source of information that may guide potential complainants in understanding where they might need to dig a bit further, if they feel that they are facing problems from subsidised imports. The Commission should assess whether there are additional ways in which potential AS complainants can be assisted in getting information on subsidy schemes. Could the EC commission surveys of key markets (e.g. China) to catalogue schemes and programmes that may be subsidies? Further, could EC delegations – considered unsupportive by EC industry – be provided with more resources to assist with gathering information for AS complaints? Both of these would involve more resources, which are outside the direct remit of this study. However, the Commission may reflect on whether such schemes could assist EC industry in making more use of the AS instrument. 2.9 Sensitivity of confidential information

The survey suggested that some complainants may be put off by the need to submit sensitive and confidential information to the European Commission.

The Commission goes to a considerable amount of trouble in order to ensure that confidential information supplied by interested parties is protected.

Further, most of the key injury indicators (e.g. market share, price, profitability) involve highly sensitive information. Yet it would be impossible for the Commission to conduct the injury analysis without such confidential information being provided.

Finally, the Commission has received high praise for the way in which it protects confidential information (see point on protection of confidential information below). To this extent, this cannot be considered as a significant issue.

It can also be noted that in the US, the APO system allows lawyers and consultants to see all confidential information submitted during the investigation. It is even possible in certain circumstances that in-house lawyers from companies involved in anti-dumping proceedings can be allowed access to the confidential information under the APO system. Whilst the US survey suggested that companies had a high level of confidence in the integrity of the US system and the protection of confidential information, it is clear that business submitting confidential information in the context of an EC TDI investigation has a higher level of comfort in the EC since fewer people will see and use any confidential information.

2.10 Insufficient information in the non-confidential complaint

Concerns were raised in the survey about insufficient information being provided in the non-confidential version of the complaint.


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As a general rule, the Commission is strict in ensuring that the complainant provides a comprehensive and meaningful summary of confidential information that has been excluded from the non-confidential version of the complaint.

A problem can arise where there is only a small number of domestic producers making a complaint. The smaller the number of producers making the complaint, the more difficulties there may be in summarising certain pieces of confidential information. Thus, where a non-confidential version of a complaint is absent, it may be for a reason.

Besides, problems can exist with retaliation (see paragraph 5.4 below), which may even justify the non-identification of complainant companies. Although historically, the incidence of this kind of problem is relatively low at first sight, this issue is inherently elusive and, while existing, may not always come to the surface. Complainants may be faced with such a situation, for example, in cases regarding certain specific exporting countries (e.g. China) or where the contractual power of distributors is large.

The Commission should devote considerable attention to ensuring that complainants provide the maximum amount of information that they can in the non-confidential version of the complaint. Exceptions to this for uniquely difficult circumstances should be kept to a minimum.

2.11 Identification of users/importers at the start of the investigation

The point was raised in the survey that complaints do not always accurately identify all users and importers. It was claimed that it is often the case that large users or importers are omitted from the complaint. The result of this is that they may not get sent questionnaires at the start of the investigation. There is no legal requirement for complainants to identify such operators. There is also a rationale for not doing so, since such identification implies the disclosure of client lists, which is a very sensitive issue. Nonetheless, within these constraints, the Commission should encourage complainants to provide details of all major known users and importers in order to maximise user coverage. 2.12 Information on how many industries prepare complaints

In the survey, a point was made that the EC should be more transparent on how many complaints are submitted and how many are accepted and rejected.

Whereas the number of accepted or rejected complaints is publicly available, this is only part of the picture. Two points come to mind in this context.

Firstly, if the Commission’s analysis shows that a complaint does not meet the necessary requirements, the complainant is notified. EC industries have then the choice of withdrawing the application or receiving a formal rejection. They overwhelmingly tend to withdraw the complaints—rather than having them formally rejected. In such cases, the law considers complaints as not having been lodged.

Secondly, most industries tend to have informal exchanges with the Commission services before complaints are formally presented. These exchanges typically address specific issues


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where the industry is uncertain as to which general standards apply for acceptability. If such exchanges underline deficiencies of an eventual application, potential applicants typically prefer not to submit the complaint. So even at such a preliminary stage, weak potential complaints go away rather than being formally rejected.

2.13 Representativeness of complaint

Some survey respondents thought that the minimum 25% production threshold could be higher.

It can be noted that industries that traditionally have a lot of SMEs (e.g. textiles, clothing and footwear) are often at a disadvantage in making complaints because there are many small companies spread throughout the EC. This can make meeting the 25% threshold difficult on a practical level.

Further, globalized companies, which may be doing business in various markets, may not want to be seen to participate openly in an AD proceeding which is hitting their competitors (and perhaps their subsidiary) in a third country.

Finally, not all producers may be able to participate in a complaint because of the cost of cooperation.

Therefore, the 25% level should not be changed but complaints with relatively low production levels (e.g. between 25% and 33%) should only be accepted when this kind of circumstance is adequately explained.

2.14 Non-discrimination in complaint

Concerns were raised in the survey that countries are sometimes 'unnecessarily' included in complaints on the grounds that there is a need for complaints to be non-discriminatory.

It is also important to note that individual companies, who only want to target certain competitors in certain countries, do not always have the full picture.

Though there is no explicit requirement to be non-discriminatory at the complaint stage, there is a general legal principle in EC law not to discriminate. Further, it is arguable that, under WTO rules, the content of the complaint is informed by the WTO agreements (both the anti-dumping agreement and the broader WTO agreements) which emphasise non-discrimination. The Commission therefore tends towards including more sources (where there is sufficient evidence of dumping and injury) to guard against such allegations.

As a final comment on this issue, non-inclusion of countries that may be contributing to injury through dumping or subsidies may complicate the analysis of the causal link. If countries have been cherry picked for particular commercial or political reasons, the Commission is obliged to examine whether other countries are significant causes of injury in the analysis of causal link.


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2.15 Transparency of the investigation process

(a) General comments

In general, the survey found that all interested parties find the level of transparency sufficient overall.

However, some concerns were raised about an unnecessary degree of confidentiality on internal matters which have an impact on the ability of parties to defend their interests. These included:

• Members of the Advisory Committee • Agenda of Advisory Committee • The opinion of the Advisory Committee on specific cases • Names and contact details of case handlers on a particular case.

Concerns were also raised about the lack of transparency on the dumping and injury calculations (which remain confidential except to the specific parties who have provided confidential information). Note, however, that the people who made this point did not want their own confidential information to be revealed to other parties.

At the same time, there was praise for the Commission on some aspects of transparency. All notices/decisions are well written, and are easy to obtain through the website. Further, the timeline for each case, available in spreadsheet form on the DG Trade website, is seen as an excellent innovation.

The Commission should be vigilant in improving transparency wherever possible. More transparency is always desirable, subject to the need to protect confidential information. In this regard, a number of potential ideas for improving transparency can be considered in the following subsections.

(b) Access to confidential information under an APO-type system

An obvious question is whether the EC should introduce an APO system as in the US (i.e. allow legal representatives and consultants to have access to all information on the files including confidential information). This 'ultimate' transparency, while protecting confidentiality, is at first sight very appealing. Many people complain that certain aspects of the Commission's work take place in a black box; and it is certainly true that the Commission has considerable discretion in the economic aspects of AD and AS investigations. Allowing counsel and other experts to check all aspects of the Commission's work would be good from the perspective that it would permit every aspect of the analysis to be checked and, if necessary, challenged. From the point of view of legal process and certainty, this would be highly desirable.

However, a number of other points should be taken into account when assessing whether an APO type system should be introduced in the EC:

• Full transparency greatly increases the cost of being involved in an AD or AS proceeding. In the US, because interested parties themselves cannot be granted APO


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access, it is almost necessary to engage counsel in order to be able to fully defend your rights.

• It can be expected that there would be much more litigation against EC TDI decisions.

• Some people make the point that setting up an APO system (with the necessary sanctions that need to exist to ensure that confidential information remains protected) would be difficult in a union of 25 Member States. In this regard, it has been pointed out that there is generally a different culture in the EC compared to the US, both in terms of the law (less litigious) and administrative culture (more discretion given to authorities).

This is certainly a complex issue. However, an APO type system comes with such clear advantages, in terms of legal process and certainty, that it is certainly worth a debate on the issue. Nevertheless, it has to be acknowledged that no one in the survey suggested that the EC should have such a system. If there were greater calls from EC interested parties for full transparency under an APO type system in the future, this might push the issue up the agenda, and allow consideration of some of the problems that would be faced in introducing such a system.

(c) Members of the advisory committee

Lobbying1 has become an important part of the process in adopting measures, and sometimes it will be unavoidable for interested parties to engage in it. However, it can be extremely difficult, particularly for SMEs.

In this regard it would be desirable for Member States to make relevant website links and/or contact telephone numbers readily available. A possible proposal is that links to such websites could be provided on the DG Trade website for TDI offices in each Member State to facilitate contact.

(d) Agenda of meetings

Those wishing to engage in lobbying need to know when is the best time to contact Member States. Member States generally do not like to be contacted too far in advance of the relevant advisory committee meeting.

One proposal would be to publish the agenda of the advisory committee meetings on the web. Several comments can be made in this regard:-

• Many other meeting agendas are now published (e.g., the “133” Committee agenda). The agenda need only list topics; it does not have to give anything away about what the Commission is proposing.

• Information about the agenda already leaks out, so some already have access to the information while others do not. This is likely to be another source of difficulty for SMEs. Perhaps it would be better to ensure an even distribution of such information.

1 For a further comment on lobbying see section 4.6, p. 33.


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(e) Position of the Advisory Committee

On cases where the vote is close, it is important for interested parties that want to lobby to know the position of each Member State in order to identify allies/targets etc.

One idea would be to publish the opinion of each Member State after advisory committee meetings. This is perhaps a controversial proposal as there is a possible problem of retaliation, particularly for small Member States. However, this is to a certain extent already a problem, as information on who supported and opposed a measure sometimes leaks out.

An alternative proposal, which might not have the possible retaliation problem, would be to publish the aggregate balance of opinions without citing individual Member States.

Given that this information may leak out, this is a less radical proposal than it may at first seem. A company that employs certain law firms will know how Member States voted, but an SME working alone may find it much more difficult to get the information. Again, such a proposal would ensure the even distribution of information.

(f) Contact numbers of case handlers for each investigation

Contact details are provided on the front of the questionnaires. However, not all interested parties are sent the questionnaire (if the Commission is unaware of their existence, for example). For companies that wish to request participation, or would like to speak to the case handlers for other reasons, contact details for each case should be provided on the website.

The Commission could provide a list of case handlers for each case on its website.

(g) Availability of the non-confidential complaint

Making the non-confidential complaint available after it has been submitted would have many advantages (all of which are evident in the US where complaints are available to general public through the reading room).

Making non-confidential complaints available prior to initiation would appear to have certain advantages:

• allows parties to start considering whether they would cooperate and to put preparations in place to play a full role in the investigation.

• would allow more time for parties to analyse the selection of an analogue country.

Negative aspects of such a proposal are:

• There is significant uncertainty about its legality. Both EC law and WTO rules require that authorities avoid any publicising of the complaint before a decision has been taken to initiate.

• Such a system could possibly be abused through the formal submission of weak complaints just to disturb the market.

The matter is therefore complex and could probably be best tackled in the current rules negotiations taking place within the DDA.


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2.16 Access to non-confidential files by interested parties

Survey respondents commented on how amenable the Commission is in organising access to the non-confidential files and that the files are always well organised.

However, concerns were raised about the content of non-confidential submissions. Such concerns were raised equally with regard to the non-confidential documentation of complainants, exporters and users.

The Commission is already under great pressure during AD and AS investigations, given the amount of work that has to be done within the deadlines. It is understandable that checking non-confidential versions of documents is not as important as many of their other tasks, such as verifications or calculations. However, meaningful information in non-confidential form is critical for all interested parties to be able to defend their interests. Thus, it is important for the Commission to make every effort to check that non-confidential submissions are as meaningful as possible.

2.17 Member States access to information

Several Member States raised concerns about the amount of information that they receive.

The Member States are familiar with the facility by which they can consult the confidential files of the Commission, or discuss the case with the Commission at any time. However, most Member States had never actually used this facility.

This is really a question of Member States' resources rather than the Commission doing things differently.

2.18 Information made available on the website and through seminars

The Commission can be praised for its efforts to make information available through the website and seminars.

2.19 Protection of confidential information

The Commission was universally praised for its care in handling confidential information.

2.20 Hearings & submissions

All survey respondents felt that there is sufficient opportunity to be heard during investigations, both through formal hearings and submissions and through informal contact and discussions with the case handlers.

One person raised the possibility of having a hearing officer for hearings, as in the case of DG Competition hearings. This possibility already exists though it is rarely used. Perhaps the Commission should consider making it clearer that this facility exists. For interested parties that feel that they are not getting their case across during the investigation, having a hearing officer can ensure that their rights are fully protected by having someone present who can consider the case more objectively due to their independence from the everyday workings of the investigation.


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At the same time, if all interested parties request a hearing officer, there may be a resource issue.

This was only raised by one EC industry participant in the survey. In addition, most survey respondents said that they were satisfied with the extent to which they have opportunities to present their views and arguments during a case. Thus, it does not appear that there is a major issue to be addressed here.

However, the lack of awareness of the possibility to have a hearing officer may be the reason why few people have strong feelings about it. The Commission might, therefore, consider being explicit about the possibility of requesting a hearing officer either in the notice of initiation or in the original correspondence with interested parties.

2.21 Addressing all arguments submitted

Another issue raised in the survey was that the Commission does not always answer points raised in submissions in the provisional and definitive regulations. In general, the Commission is thorough in addressing points raised by interested parties in the provisional and definitive regulations. Sometimes the Commission responds to certain points made by interested parties by responding individually to those parties, without the point being mentioned in the provisional or definitive regulations. Several comments can be made on this issue:

• The WTO anti-dumping agreement requires that public notices, inter alia, give reasons for the acceptance or rejection of relevant arguments or claims made by the exporters and importers. Clearly, the Commission has discretion here in that they can decide whether such arguments are relevant or not; the Commission is not required to give reasons for the acceptance or rejection of irrelevant arguments.

• In addition, it can be noted that many irrelevant arguments do get submitted to the Commission. Because there are always two (or more) sides to TDI investigations, the Commission's determinations will always be opposed by at least one side. Often, submissions made in such situations include every argument that could possibly be made to oppose the decision, and some of these may not be relevant. Thus, the Commission is right in selecting only relevant arguments, for which reasons for acceptance or rejection should be given.

• Sometimes there can be issues of confidentiality in mentioning certain points. • Documents would be unreadable if every single argument was summarised. The

Commission has to be selective and focus on the relevant arguments to keep the documentation readable.

Overall, it does not appear that this is a systematic problem. The provisional and definitive regulations are typically very comprehensive and address the relevant arguments, both those in support of, and those opposed to, the Commission’s decision.


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However, the Commission does need to ensure that every relevant argument is addressed in the provisional and definitive regulations. It can be argued that relevant issues should not be addressed only in private correspondence, or in disclosure documents that are not publicly available. 2.22 Questionnaires

Most survey respondents commented on the complexity and burdensome nature of questionnaires (both for complainants and exporters). As with other aspects of the investigation, this is a particular problem for SMEs.

However, overall, survey respondents found questionnaires to be complex and heavy but, at the same time, reasonable and logical.

Several EC industry participants with experience of other AD regimes made the point that EC questionnaires are reasonable compared to others.

The comparison with the US suggested that US questionnaires are at least, and probably more, burdensome then those in the EC.

The fact that the Commission undertakes an extremely detailed analysis of dumping, injury, causal link, and Community interest, means that it requires a lot of information. The questionnaires do not request more information than is absolutely necessary for undertaking this task.

Given the significance of the issue raised in the survey, the burdensome nature of questionnaires needs always to be borne in mind by the Commission. However, there has to be a balance between getting enough information to make reliable and accurate conclusions and minimising the burden on interested parties.

The Commission also received praise in the survey for its efforts in trying to simplify the questionnaires used in investigations. Thus, it would seem that the Commission is making great efforts to minimise the burden on interested parties. There is no easy answer to this problem. The Commission must get detailed information in order to undertake the necessary analysis as required by the law. Taking into account the fact that EC questionnaires are not more burdensome than other TDI authorities, including the US, it would appear that the Commission has the balance right on this issue. 2.23 Deadlines for users completing questionnaires

A concern was raised by EC industry about the fact that deadlines are not always respected by users.

However, users are not directly involved in the investigation in the same way as complainants and exporters. The latter parties have a direct involvement in the case, and they are sent detailed questionnaires that are absolutely necessary for the determination of dumping and injury. Complainants and exporters have to complete these questionnaires, as to be considered "non-cooperating" has a direct impact on the outcome of the dumping and injury findings.


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For users, the situation is somewhat different. Not all users need to participate in order for the Commission to incorporate the user interest into the Community interest analysis. Thus, there is a 'free-rider' problem that does not exist for complainants and exporters, who all know that their individual cooperation is critical to the outcome of the case.

That said, the Commission does not allow a 'free for all' for users. The Commission can be praised for its overall approach to deadlines for questionnaires. The Commission strikes the right balance between strictly applying deadlines in order to get its work completed, and showing some flexibility towards interested parties in recognition of the burden imposed on a business. All parties, including complainants and exporters, benefit from flexibility and extensions in questionnaire deadlines. The fact that users are shown a little more flexibility seems reasonable given the free-rider problem mentioned above, while still maintaining a strict approach.

Besides, the Commission attempts to obtain user information that is representative, and it does not rely on full cooperation from all user industries. This is an implicit recognition that the incentive to cooperate —and the disincentives attaching to non-cooperation – do not exist for users to the same level as for other interested parties.

2.24 Treatment of non-cooperating exporters

A point was raised in the survey about the harsh treatment of non-cooperators.

The comparison with the US indicates that exporters that do not cooperate get treated much worse than in the EC. This is evident from comparing residual duty levels applied in cases where there is a high level of non-cooperation. Such duty levels in the US are usually set at much higher levels than those in the EC.

Some may argue that the difference between a high residual duty and a very high residual duty is insignificant. The level of such duties, when there has been non-cooperation, is often sufficiently high as to be prohibitive.

However, there is no need for them to be prohibitive. The important point is that non-cooperation must not in any way be rewarded. Reliable and rigorous analysis during TDI investigations relies on good cooperation from exporters. Thus, there needs to be strong incentives that encourage exporters to cooperate in anti-dumping investigations. By ensuring that co-operators are treated better than non-cooperators, a desirable incentive to cooperate is created.

The comparison with the US also revealed that being considered as non-cooperating happens more easily in the US than in the EC. The US is much more rigid in its expectations of cooperators. Information must be complete with a very high level of accuracy first time. The Commission is much more flexible with exporters. As long as exporters have made a significant effort to answer the majority of questions, incomplete submissions are treated with some flexibility. Even at verification, exporters in EC investigations have the opportunity to provide additional information and fill in small gaps left in the questionnaire. This is not possible to the same extent at verifications under the US system.

It is crucial that cooperation is rewarded and that non-cooperators do not receive as good treatment as cooperators. Thus, it is quite right that non-cooperators face higher duties. However, the level of EC residual duties is lower than for the US, and the definition of non-


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cooperation is more flexible in the EC than in the US. Thus, it appears that the EC treatment of non-cooperation is not over-harsh.

2.25 Consultation with Member States

Several Member States raised concerns about the short time in which they have to consider working documents. The investigation leading up to provisional measures takes 9 months, yet Member States get only 10 days to consider the Commission's findings. Such concerns seem to be justified, if Member States are to play a meaningful role in the adoption of AD or AS measures. Given all that Member States have to do in terms of analysis, consultations, ministerial approvals etc., it is appreciated that 10 days is a very tight timetable.

Nevertheless, although 15 months seems like a long time for an investigation, it is clear that, taking into account all procedural requirements, the Commission does not have any spare time in AD or AS investigations. Thus, there is no time to give Member States more than 10 days in the final stages of the investigation.

If Member States would like to play more of a role in an investigation, they need to take the initiative to increase their involvement at an earlier stage. If Member States identify that a case has a particular importance for them (e.g. because of a strong EC producer and/or user interest), it always has the option to go and speak to the Commission for a briefing on where the case stands. Moreover, Member States have the ability to consult the confidential files, a facility that allows them to play more of a role if they feel the need. Member States can get involved in investigations at any stage. They do not have to wait until they receive the working document before they start considering a case. In the end, this may be a resource issue for Member States. The problem is really that Member States do not have sufficient resources to get more involved in this way. This was very clear in the survey from the fact that Member State survey respondents have made very little use of the facility to consult the confidential information on the Commission files. If they want to play more of a role in influencing the outcome of TDI decisions, they have to have sufficient numbers of staff in order to get involved in the detail of particular cases of importance.

2.26 Provisional measures

One of the main points raised by EC industry survey respondents was the difficulties arising from having to wait 9 months before provisional measures. Added to the typical 6 months to prepare a complaint, complainants have to wait on average more than a year (and sometimes even 18 months) before any protection is forthcoming. The fact that a complaint is made is already indicative of the fact that the industry is suffering. Once the investigation is initiated, and exporters/importers know about it, there is a great incentive to import as much product as possible, before provisional duties are adopted. Nine months is a long time in which to organise such surges of imports prior to any measures coming into effect. Of course, this exacerbates the injury that was already being suffered by the EC industry.

EC industry looks at the US, where provisional measures are adopted much more quickly than in the EC. The question is legitimately raised as to why, given the problems highlighted above, the EC cannot match the US timetable.


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The Commission is already very sympathetic to this point. However, it is difficult to speed up the investigation without lowering standards. The survey revealed that high standards at the provisional stage are considered by many to be important (this view was obviously expressed by those who are usually sceptical of TDI, but interestingly, also by complainants).

It is our opinion that it would be impossible, with current resources, to maintain the current standard of the provisional analysis if the provisional determination was made within 6 months rather than 9.

Also, there could be problem with the overall timescale for an investigation. Provisional duties can only be in place for 9 months if exporters agree. There is a lack of incentive for exporters to agree to additional time, and thus provisional duties would be restricted to 6 months. Thus, the whole investigation would have to be completed within 12 months if provisional measures had been adopted six months after initiation, which may be difficult with current resources and procedural requirements.

In US, provisional measures do come into effect much quicker but, inevitably, this means that they are more provisional than EC provisional measures. This is clear from the fact that there are a significant proportion of cases in the US where provisional measures are adopted but where there are no final measures (see the data on this in annex 6, 2.1(s)).

This happens to a much lesser degree in the EC where, once provisional measures have been adopted, they are very often made definitive. In fact, it is the case that EC provisional measures are, in effect, draft definitive measures rather than being truly provisional.

Some survey respondents made the point that EC provisional measures could be made more provisional and could be adopted earlier. However, several comments can be made on this:

• As mentioned elsewhere, the current TDI system is a careful balance between all of the various different views and interests that exist within the 25 Member States. Weakening the requirements for provisional measures, although perfectly consistent with WTO rules, would not be acceptable to some groups of EC interests. Overall, tough requirements for provisional measures are necessary to maintain that balance.

• The US system is much less flexible than the EC system due to the need to meet the very tight timetables. It is not clear that a US timetable would be better in the EC. The current timetable allows some flexibility – which is to the advantage of all parties, including complainants.

• A number of complainants in the survey support the idea of high standards for provisional measures. This gives them greater certainty than that enjoyed by US complainants. Under the US system the market is unnecessarily disrupted when provisional duties are not made definitive.

• Complainants also appreciate the flexibility inherent in the current timetable, especially in terms of obtaining extensions which many find crucial.

• It must also be acknowledged that the US has no public interest test/lesser duty rule nor does it have a decision-making procedure involving 25 Member States. These features of the EC system inevitably make the process longer.

• Reducing the time between initiation and provisional duties would require additional resources for DG Trade, Directorate B.


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Given the above points, we would conclude that a shortening of the timetable before provisional duties are imposed, is normally not desirable. The Commission is certainly open to finding a solution to this problem although but certain fundamental facts (as outlined above) cannot easily be avoided.

A special case arises where there are parallel investigations in other major markets, such as the US. The Commission could consider moving faster in such exceptional cases, where there is a high risk of trade diversion. One case which may provide such an example is TCCA . As shown in Appendix 1 of Annex 4, significant duties were adopted on Chinese imports into the US before the EC had reached its decision, which, it was claimed, raised a significant trade diversion risk. Such a situation may justify an expedited procedure to reach the provisional decision.

However, given the importance of maintaining the standard behind provisional measures, an expedited procedure should not mean lowering the standards. What it would mean is that the Commission would have to speed up its work, which would probably mean less flexibility for interested parties and higher resource implications. Nevertheless, given the real problem, this is certainly worthy of consideration.

2.27 Level of measures

EC survey respondents revealed overall satisfaction with the level of measures in terms of their ability to protect industry against the injurious impact of dumped or subsidised imports. At the same time, EC AD and AS duty levels appear to be generally lower than those of the US (though it is difficult to be certain about this point because we have also found that US administrative review can result in significant reductions in duties from the original rates). The lesser duty rule is generally viewed extremely positively. Overall, it appears that the level of EC AD and AS measures are getting the balance right between providing sufficient protection for EC industry from dumped and subsidised imports, yet ensuring that duties are set at the minimum level necessary to remove the problem.

However, concerns were raised about the lack of a lesser duty rule in other major markets such as the US. The implication of this is that US measures are often set at higher levels than in the EC and, in some cases, this raises the risk of trade diversion.

The mandatory lesser duty rule in the EC is almost universally perceived as a positive feature. Thus, it would not be desirable to weaken this innovative provision of EC TDI law. However, the lack of such features in other countries such as the US explains why the issue is high on the agenda of the EC in the DDA negotiations.

2.28 Retroactivity

Several survey respondents asked why duties are not collected retroactively more often. Retroactivity is permitted up to 90 days before the adoption of provisional measures. It could provide a partial answer to the problem of the length of time that elapses before provisional duties are imposed, in cases where there are clear surges in imports prior to the measures, or during parallel investigations in other major markets resulting in trade diversion. There is a practical problem in that retroactivity cannot be used without firm evidence of a further surge in imports, and statistics are not available quickly enough.


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If it is a question of having sufficient information to know whether use of registration is justified at month 6 (i.e. 3 months or 90 days before provisional measures), the Commission should consider what sources of information, and what standard of evidence, would be required in order to impose registration after 6 months. Of course, registration itself has an impact on the market, in that importers have a potential liability if the duty is to be backdated. If there is a real surge in imports and measures are justified, this would be the purpose of creating the possibility to collect the duties retroactively. However, if provisional measures ended up not being adopted, this would have been an unnecessary disturbance to trade. It can be noted that the US rarely makes use of its retroactivity provision (though, of course, provisional duties come quicker in the US than the EC). Where there are legitimate concerns about surges in imports, or parallel investigations, perhaps the Commission could consider either trying to speed up the process by applying more staff to the team – which raises a resource issue – or by requiring registration in certain circumstances. 2.29 Non-discrimination in the application of measures

There have been a small number of cases where an issue has arisen because, for political reasons, Member States do not want measures to be adopted against particular countries. The Commission's policy is that there should be no discrimination in the application of measures, and this has resulted in multiple country duties against the same product all being removed. This was a concern raised by some survey respondents.

The Commission's approach is the correct one, as this is required by the WTO AD agreement (article 9.2) which states that:

When an anti-dumping duty is imposed in respect of any product, such anti-dumping duty shall be collected in the appropriate amounts in each case, on a non-discriminatory basis on imports of such product from all sources found to be dumped and causing injury,

The anti-dumping rules are also informed by the general WTO agreements which emphasise non-discrimination throughout.

2.30 Definitive measures and overall length of investigation

The overall length of the investigation was also raised as a concern for EC industry. This point is related to the point made above on provisional duties. The further 6 months between provisional and definitive duties was not really highlighted as a problem in the survey.

One question that was raised was whether there is a reason for setting an overall time limit of 15 months for AD investigations, while AS investigations must be completed within 13 months. The difference comes about from the fact that provisional measures can be adopted for a maximum of 6 months in anti-dumping investigations, but only for 4 months in anti-subsidy investigations. However, there does not appear to be any other underlying rationale.


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Two points can be noted:

• There are far fewer anti-subsidy investigations, and therefore it is possible to make this commitment. It would not be possible to do this for all anti-dumping investigations on current resources.

• There is no market economy issue in anti-subsidy investigations, which is an extremely demanding part of anti-dumping investigations.

One survey respondent suggested that the definitive stage should be abolished and that definitive duties should be applied at the provisional stage after 9 months.

Such a proposal does have certain advantages. It would considerably reduce the overall institutional requirements of an anti-dumping investigation and thus free up some resources (as a result of only one round of translation, consultation etc.)

On the other hand, there are often changes between the provisional and definitive findings. The fact is that provisional measures are provisional, even if a high standard is applied before adopting provisional measures.

Overall, it is possible that some relatively straightforward cases could be completed definitively within 13 months, or even 9 months. However, some cases can get extremely complicated in the later stages. Cases where there are a lot of users, and a significant negative impact to the EC from adopting measures, have to be fully considered. In this situation, the full 15 months is necessary to ensure that the Community interest is fully assessed and explored. Further, it may not be possible to finish cases where undertakings might be appropriate within a more restricted deadline.

In conclusion, there do not seem to be strong reasons to change the overall 15 month deadline of an AD investigation.

In view of points mentioned at the beginning of this section, there is also no necessity to adjust the overall 13 month deadline for AS investigations. Thus, the two overall investigation deadlines should be kept at their current levels.

2.31 Interim reviews

The only point made on interim reviews was made in relation to the US. In the US, it is relatively easy to obtain revised dumping duties on an annual basis through the administrative review process, and it was observed that the same kind of facility does not exist within the EC. However, the corresponding mechanisms in the EC are not interim reviews but refunds. It is however true, that, unlike in the US, refunds do not lead to an adjustment of the duty for the future. That type of review of the duty can in the EC principally be achieved by an interim review. However, the EC/US comparison revealed that there are a lot less interim reviews in the EC than there are administrative reviews in the US.

One reason for this is that for an exporter requesting an interim review, there is a large element of uncertainty in making such a request. There have been cases where such a request has resulted in higher duties, and this makes companies very cautious about going down this route. Another reason could be simply that the exporter knows that dumping has increased subsequent to the imposition of the duty. It should finally be noted that in the US, duty levels


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can also go up following an administrative review.It is also important to remember that the EC operates a prospective duty system and it is explicitly not envisaged that the duty levels will be regularly reviewed. Thus, it is not surprising that there are a lot less interim reviews. The US system clearly envisages regular revisions to the duty levels through administrative reviews.

This is not, therefore, a problem in itself as it results from the EC system of collecting duties. The advantages and disadvantages of the prospective duty system are considered below.

2.32 Expiry reviews

Some EC industry survey respondents raised concerned about the difficulties that they experience in trying to get AD and AS measures maintained beyond the initial 5 year period, even when they feel that there are likely to be continuing problems. The comparison between the EC and US suggests that the EC is applying a higher standard in expiry reviews.

• For the period 2000 to October 2005, the EC has a much higher proportion of cases that expire without review (57.7% compared to 0%/15.6% for the US)2.

• Further, of those reviews initiated3, the EC maintains measures at a lower rate than

the US (55.3% compared to 88.7%). The evidence clearly suggests that the EC is applying a higher standard than the US for expiry reviews. Moreover, the US has had problems of WTO consistency with its expiry review standards.. The EC initiates expiry reviews for almost half of the cases about to expire, and half those reviews result in the measure being maintained. This is not an insignificant level of expiry review and of measure confirmation. It may be that in individual cases, EC industries are frustrated in their attempts to get measures extended. However, overall, and especially when considered against the US, there does not seem to be any systematic bias in favour of or against the maintenance of AD measures beyond 5 years. 3. SUBSTANCE

3.1 Overall views on dumping calculation

The Commission is generally praised for doing a good job on the dumping calculation.

2 Note that US expiry reviews are automatically initiated and, to this extent, there is a 0% rate of cases that

expire without review. However, not all such reviews have a DOC or ITC determination. If there is no domestic response to the notice of initiation, measures are allowed to expire. The 15.6% figure for the US relates to such cases (i.e. those where no determination was made are counted as expiry without review). See annex 6 2.1(z) for more detail on this point.

3 US 'initiations' in this case are those where there was a domestic response to the notice of initiation and determinations were made.


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3.2 Dumping calculation methods

The EC/US comparison concluded that the dumping calculation methods of the US and EC are similar but there are small methodological differences that can be significant.

Some of the differences between the US and EC make US dumping margins higher. However, other differences (e.g., a different way of applying the 5% test; see annex 6, 2.2(a) for more details) produce different results but can work in either direction: i.e., they may make a US margin calculation higher in one case but lower than the EC in another case.

The following comments can be made about dumping margins:

• In cases with multiple respondents, there is usually a range of dumping margins found. With regard to the lowest margins found, apart from zeroing, there are no major methodological differences that could explain higher US margins.

• With regard to the highest margins found, the US is considerably higher. This is

primarily as a result of the use of 'best information available' and adverse inference. • It should be noted that the US margins are not necessarily those used as the basis to

collect final duties. When companies request an administrative review, dumping margins can be much lower – based on actual transactions on a retrospective basis.

• Of course, it is also possible that exporters dump by a higher margin in the US. This

could be possible for products where US prices are lower than those in Europe. It would be desirable that small differences in method are narrowed down in order to create a consistency of approach for exporters to the EC and US. 3.3 Non-market economy (NME) methodology

However, several concerns were raised in the survey about analogue countries:

• the choice of analogue countries in specific EC investigations (e.g. a number of survey respondents questioned the appropriateness of the US as an analogue)

• the short period in which to comment on the analogue country chosen, and the difficulty in finding alternatives due to the need to find cooperating companies.

The US has a different method for non-market economies. At first glance, the US approach appears to have advantages in that it is actually based on the cost structure of the exporters in the NME (but the cost values are not used).

However, the margins produced by the US on NMEs are typically higher than those applied by the EC. Some argue that the factors approach has the effect of using western costs and NME inefficiencies. In using the EC method, although costs and prices may be higher in the analogue country, the productive process may be more efficient.

Thus, there do not seem to be any strong reasons to consider changing the EC approach. A further point to bear in mind is that the NME method may not be so significant in the medium term. It can only be used against China, for example, until 2016 at the latest.


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However, where the analogue country chosen is very different from the country subject to investigation, the Commission should be vigilant in ensuring that all differences are accounted for, particularly in the context of using the US as the analogue country.

3.4 Market economy treatment

There were some concerns about particular cases where companies had been granted market economy treatment (MET), where EC industry did not believe such treatment was justified.

However, on the whole, the MET system seems to function well. A significant number of companies have been granted MET, which establishes that the provision is a meaningful one. While exporters in economies in transition will always feel aggrieved if they do not get MET when they believe that they meet the criteria, the key factors that ensure success in an MET claim have now become quite clear, making it somewhat more predicable for MET applicants.

There is no evidence that companies are systematically getting MET when it is not justified. Many applications for MET still get rejected.

However, it is important that case handlers verifying MET claim forms are experienced enough to identify cases where claimants try to cheat by submitting false information – which unfortunately has happened in certain cases.

As a general comment, it has to be stated that the market economy issue has been taken somewhat out of perspective. It has been interpreted as formally classifying whether countries such as China are market economies or not, which gives the decision a political dimension that has nothing to with TDI. In the context of AD, the market economy issue is merely about assessing whether the Commission has reliable information with which to conduct its analysis. It is a decision about whether information is reliable or not for the purpose of calculating normal value, rather than a political determination relating to a particular country or to individual companies.

3.5 Calculation of SGA and profit in constructed normal value calculations

Concerns were raised by EC industry about the calculation of SGA and profit in constructed normal value calculations. They sometimes feel that the amounts used are too low, and that there is no way of checking the calculation due to confidentiality. They stated that they would like greater transparency on this.

However, whichever method is used, it will usually involve the use of confidential data of some form or another. Thus, it is not possible for there to be greater transparency on the evidence gathered by the Commission. However, the issue of transparency is limited to the actual figures used in the calculation and not to the method. Indeed, the Institutions choose the four possible methods in a quasi-hierarchical manner in the order set out in the law. Only the fourth method entails by definition some discretion (“any other reasonable method”) but the exercise of this discretion in any given case has to be explained fully.. Moreover, and as expressed elsewhere, the survey showed that the Commission is generally trusted to get the calculations right.


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3.6 Auditing of cost for normal value purposes

A concern was raised by EC industry about the ability of inexperienced case handlers to verify accurately the costs of exporters. Complainants sometime have doubts that cost structures have been properly audited, and that as a result measures end up being much lower than they should be.

Again this is an area where the Commission has to be trusted. However, given that trust, the Commission must ensure that officials are sufficiently trained to undertake this task.

The Commission does make efforts in this regard by organising regular cost accounting courses for case handlers.

There is a contrast in the way this aspect is handled by the EC and the US. Both the DOC and ITC include professional accountants on every cost verification (both for exporters and domestic industry). In the EC, there are less accountants employed. However, the team will normally include investigators who have an accounting background (e.g. those coming originally from national customs and tax administrations). The point about specialisation of case handlers is discussed elsewhere.

3.7 Identifying the cause of dumping

The point was made in the survey that, if dumping is caused by a closed export market, a complementary strategy of challenging the trade barriers should also be adopted.

This point really relates to other parts of the Commission than the TDI services, and to the coherence of different EC instruments. However, there is a valid point that the EC should have an offensive as well as a defensive strategy. Given that the EC has a proactive market access initiative (the market access strategy, the trade barriers regulation, the exporters helpdesk etc.), it would not be so difficult to identify situations examined in TDI investigations where there may be trade barriers that the EC could investigate and challenge.

In this regard, perhaps the Commission could distinguish between cases where dumping is caused by a high normal value (which could suggest that the market is closed), and those where it is the result of a low export price (where, for example, the exporter decides to export his product below cost). If dumping is caused by a very high normal value, suggesting a closed market, perhaps the TDI service could inform the relevant parts of DG Trade that deal with market access issues. The advantage of such a strategy is that successful removal of the trade barrier could result in an end of the dumping problem and thus perhaps provide an opportunity to remove the anti-dumping duty.

At the same time, not every case of dumping involves an illegitimate trade barrier. For example, high Indian customs tariffs create conditions where dumping can easily occur. Nonetheless, such tariffs are legitimate provided that they are within the bound levels contained in India's WTO tariff schedules.

Overall though, the more that DG Trade can have an integrated approach across its trade initiatives, both defensive and offensive, the better.

3.8 Zeroing

A difference exists between the EC and US with regard to zeroing.


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Following the Bed Linen WTO ruling, the EC has changed its approach to zeroing and is now acting in a manner consistent with WTO rules. However, there is a good deal of confusion about what kind of zeroing is permitted and what is outlawed. Some people believe that zeroing is totally prohibited – which is not true. The US continues to use zeroing practices that the EC has abandoned; namely inter-model zeroing when there is multiple averaging of dumping margins for different models or types. 3.9 Specificity and subsidies

One issue raised in the survey was a claim that the specificity test is not applied correctly. It was claimed that there only needs to be one small group that is de facto excluded from the subsidy and the Commission concludes that there is specificity.

The Commission should ensure that it maintains a consistent approach with regard to specificity. However, it is noted that Article 2.1(a) of the WTO agreement on subsidies and countervailing measures provides: "Where the granting authority, or the legislation pursuant to which the granting authority operates, explicitly limits access to a subsidy to certain enterprises, such subsidy shall be specific". Article 2.1(c) goes on to mention the circumstances in which a subsidy may be found to be de facto specific. Where the Commission has found subsidies to be specific or de facto specific, it has done so with due regard to these provisions.

3.10 Use of anti-subsidy instrument against NMEs or economies in transition

A second issue on subsidies was raised with regard to whether the AS instrument could be used against NMEs or against countries with economies in transition.. There is no reason in principle why the AS instrument cannot be used in these circumstances. However, certain practical problems arise. Because of the nature of the economy, it is not straightforward to calculate the benefit due to the distortions that exist or may have existed in the past. Thus, it is necessary to find suitable benchmarks, which is always a difficult task. It is particularly difficult for complainants who, even if they identify a possible subsidy, find it difficult to establish an appropriate benchmark.

However, the fact that using the AS instrument in such circumstances may be difficult does not mean that it should not be used. As countries such as China move towards market economy status, EC industry feels that the AS instrument may increase in importance. Thus, it may make sense for the Commission to start giving some thought now as to how the instrument might be used in such cases, all the more so as an increasing number of companies get individual ME status, thus leaving the issue of subsidies unaddressed.

3.11 Injury & causal link

No major issues were raised in the survey.

One point that was raised was the definition of domestic industry, and the exclusion of companies producing in the EC that are related to exporters in an anti-dumping investigation. The survey respondents making this point questioned whether they should be excluded.

Reasons why they might be excluded include:-


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• they may be gaining from dumping;

• they may have an incentive to oppose and block action on behalf of EC producers (which may undermine legitimate use of the instrument).

If such a related company producing in the EC is importing the product concerned from the country subject to investigation, as well as producing it, then it certainly makes sense that they are excluded. However, the performance of such companies could still be useful in assessing whether injury is caused by imports, for instance when they are not actually importing 'dumped' products. In such circumstances, they cannot be gaining in any way from the dumping and might thus be relevant to the injury analysis. On the other hand, if they are importing the dumped product or if they are linked to exporters engaged in dumping, it is normally very difficult to distinguish the injurious effects of dumping by their competitors from the benefits derived from their own dumping, or from their link with dumping exporters.

3.12 A general comment on Community interest

Overall, the process of assessing Community interest works well but a number of issues were raised (see 3.13 to 3.17 below).

A general point was raised by some of those opposed to anti-dumping that there is a bias towards finding that measures are in the Community interest.

However, despite the fairly small number of published terminations on the ground of a lack of Community interest, it cannot automatically be concluded that Community interest is not a meaningful test. Complainants often wish to withdraw their case if they learn that their case is unlikely to go ahead because of a lack of Community interest. More importantly, it does not make sense for any complainant to lodge a case if it is obvious that, at the end of the investigation, measures will not be imposed because they would not be in the Community interest. Thus, while Community interest is not a criterion for the admissibility of the complaint, it has an effect already at this stage. Thus, the relatively small number of published terminations on grounds of Community interest is not the whole picture.

3.13 Interpretation of a lack of response from users, importers and consumers

The point was made in the survey that the Commission can treat lack of response from interested parties that might oppose a measure as an indication that there is no issue. This was raised particularly in relation to consumers, which is discussed below.

The Commission can only base its evidence on reliable information submitted by interested parties. Thus ultimately, if no users participate, it is very difficult for the Commission adequately to analyse their point of view.

At the same time, there could be a significant negative impact on users, yet none of them cooperate because they do not believe it will make any difference to the outcome. In these circumstances, it would be wrong for the Commission to take a lack of response as evidence supporting the argument that that they will not be significantly adversely affected by the measure.


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Thus, the Commission should not automatically use non-cooperation by users as a reason to conclude that measures are in the Community interest. They must use whatever information they can to assess the situation.

In cases where there is little cooperation from users, the Commission still tries to get as much information as it can from users, and applies a flexible approach with regard to users that come forward late in the investigation. As long as the Commission makes such efforts, there is little more that can practically be done if users or consumer organisations do not participate.

In conclusion, the Commission needs information and, without it, its job becomes extremely difficult. No user involvement may mean that the Commission concludes that measures are in the Community interest; but the fact that no users participated should not, itself, be taken as evidence that users would not be adversely affected.

3.14 Community interest in an enlarged EC

It was noted that the user interest is growing in an enlarged EC. A concern was raised that, with 25 or more Member States, the balance may be altered: complaining industries may be concentrated in a small number of Member States, while users may be dispersed throughout all Member States. In this context, it was noted that lobbying is becoming more intense, and making a case is becoming more difficult from the perspective of complainants. This is related to the political nature of the instrument (see 4.1 below).

3.15 Representation of consumers in AD or AS proceedings

A particular problem was raised relating to consumers due to the fact that, for investigations involving consumer products, individual consumers are not even aware of AD or AS investigations taking place.

The responsibility of representing consumers falls to consumer organisations and, it was claimed, here is the problem. There are only a very small number of anti-dumping experts in the various EC consumer organisations. Even those that exist do not have the time and resources to participate regularly in anti-dumping investigations.

The Commission should always try to ensure that, where relevant, the views of consumers are represented in the study, whilst staying sensitive to the fact that consumer organisations do not have sufficient resources to get heavily involved in AD or AS proceedings.

However, this problem is not one that affects only TDI. Consumers are often far removed from regulatory issues that could have a negative impact on them, and consumer organisations face the same problems with regard to resources limiting the extent to which they can get involved. As long as the Commission makes real efforts to reflect the consumer interest in anti-dumping proceedings, there is not really anything else that can be done within the realm of TDI.

Finally, it can be argued that the majority of anti-dumping investigations involve raw materials and intermediate products. Although there are some cases that have a direct impact on consumers, such cases are in a minority.


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3.16 Concerns raised by complainants about Community interest

A number of small concerns were raised by EC industry in the survey on the issue of Community interest.

However, subject to the comments in 3.12 above, the relatively small number of cases with explicit or implicit determinations that measures are not in the Community interest suggests that this provision is not an unreasonable obstacle to complainants obtaining protection where the requirements of the basic regulation are met.

3.17 Analysis of market situation prior to measures

One survey respondent made the point that if a non-competitive situation had existed prior to the measures (the extreme example would be a monopolist), some analysis should be undertaken to ensure that the TDI are not merely restoring an anti-competitive position and monopoly profits. However, DG Trade should not be making competition determinations. Firstly it is not required by the EC legislation (which thus makes it outside the scope of this study) and secondly DG Trade is neither qualified nor has the resources to make such an assessment. 4. INSTITUTIONS

4.1 Political element to decision-making

Many survey respondents complained about the political nature of the decision-making process due to the role of the Commission and 25 different countries in adopting AD and AS measures. This is contrasted with the US where politics has a less explicit role in the decision on whether or not to adopt such measures..

How this is viewed partly depends on how one views the role of Member States (see below). Some would argue that TDI should be purely technical and, to this extent, that the MS should not be involved. However, if the Member States have a role, it has to be a meaningful one yet this may involve a political element.

The fact that Member States play a crucial role in the adoption of measures raises the question of whether there is an excessive political element to the decision-making process. This is not necessarily so. Member States are in a good position to review the Commission's activity on a technical basis but, of course, this implies some resources commitments from their side. Moreover, the involvement of Member States makes sense because they serve as an additional filter. They are often closer to their economic operators than Brussels. Thus, Member States might get a better idea as to the effects of taking measures or not taking measures. This additional ‘market knowledge’ is invaluable information in the decision making process.

It can also be noted that a political decision by Member States would be illegal and would almost certainly not be condoned by the Member States themselves.

To the extent that there is something of a political element to decision-making on AD and AS measures, it is not feasible to change this. This political influence has no impact on actual decision making as long as it is confined to a small minority of Member States. This means


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that the technical assessment of the majority of the Member States determines the decision and not the political consideration of a few. As mentioned elsewhere in this report, EC TDI policy is based on a careful balance between the many different and contradictory interests throughout the 25 Member States. Therefore, it seems impossible to envisage this being changed by transferring the decision-making to the Commmission.

It can be noted that there is not the same consensus between MS on TDI that there is on, say, competition issues Member States vary in their attitude towards the general desirability of TDI (particularly in relation to anti-dumping) while all Member States agree that cartels and abuse of monopoly power are a bad thing. This means that it is unlikely to be realistic for competence on this issue to be completely transferred to the Commission and that a certain political dimension will remain.

4.2 Impact of change in voting and the Eurocoton decision

There is a general view that the voting change and the Eurocoton decision are reasonable developments (see annex 2, 2.2(b) for more details), particularly since, taken together, they would appear to reduce the influence of politics in AD investigations.

However, a number of concerns were raised:

• Will Member States ever be able to prevent a measure being adopted again?

• How will Member States motivate a "no" decision if they all have different reasons for opposing measures?

It can be noted that, if the voting change does have an impact on voting patterns, the Member States are voting in an extremely superficial way. This stems from the fact that there is really no such thing as an abstention. The concept of abstentions was created by Member States that wanted to vote against measures as a way of making it look like they were not actually voting against. Abstentions have always been a façade.

If the voting change results in different outcomes in any case, it means that Member States that previously abstained (but who knew that their vote was counted as a no) would still abstain (even though they now know that their vote is counted as a yes). This does not make sense.

A concern has been expressed over whether smaller Member States will feel intimidated in now having to explicitly oppose measures, where previously a no vote could be registered through abstaining. Ultimately, the voting change is still a simple decision of whether you are for or against. It is nowhere near as significant as the Eurocoton decision, which changes the Member States' ability to reject TDI measures through the need to motivate their decision in Council.

Finally, it can be noted that even before Eurocoton and the change in the decision making procedure, the vast majority of Commission proposals were adopted by the Council (the Council has only rejected 10 measures since 1995).

As to the question whether or not Member States will ever be able to reject a Commission proposal, it would seem that this question is not pertinent. It somewhat implies that the final


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Commission proposal is by nature a political proposal and that Member States should therefore have unfettered discretion. However, this is not the case, as the Eurocoton judgement has made abundantly clear, also with regard to the concept of Community interest.

4.3 Member States

There is a general view that, despite the concerns about politics, Member States have an important role. Member States provide an additional filter to check the Commission's findings. They provide a final check and balance before the adoption of measures, though not in the same sense as that provided by the Commission’s Legal Service or by the European courts.

Despite the fact that Member States can get more involved during the investigation (e.g., by meeting the Commission or viewing the confidential files), Member States cannot redo the investigation nor carry out a parallel investigation.

If this is a correct characterisation of the role of Member States, the way in which the system works at present is correctly and effectively implementing their important but limited role. However, the Commission should always be vigilant in seeking improvement.. If in fact, the Member States’ role should be more than this, the current level of their involvement is not sufficient.

Ultimately, the actual role of Member States is also to a certain extent a choice made by each Member State individually. In this context, this may be a resource problem for Member States. However, this is a practical point and should not be the driving force behind determining Member States' role in the adoption of measures. If Member States believe that they should have a bigger role, there is the opportunity to view the confidential files, or to discuss the case with the Commission; to do so would require resources that the Member States do not seem willing to commit.

4.4 How Member States make their decisions

Some people interviewed in the survey claimed that Members States often vote in their national interest. The concern was raised that this creates a problem in cases where users are spread out throughout the EC and industry is concentrated in a very small number of countries. The Commission role in assessing Community interest is crucial as this is a different analysis than the mere cumulation of 25 national interests.

However, although Member States clearly look at the impact of measures on their national operators, this does not mean that they are automatically voting on the basis of their national interest. Indeed, there are many cases with industries only in few or even one Member State while there is a broad majority for the case.

It can further be noted that Member States voting in their national interest is unlawful. Every Member State must assess what is in the Community interest. The Council would lose in court if it motivated a rejection of a measure on the grounds of 13 negative national interest assessments.


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4.5 Representatives on the Advisory Committee

Concerns were raised about the low experience of certain members of the advisory committee.

It is important that Member States ensure they have sufficient expertise if their role is going to be a meaningful one.

At first sight, in a 25 Member State EC, the chance of one Member State influencing an investigation seems now very small. Thus, many MS do not apply a high priority to their respective TDI jobs. However, Member States also coordinate themselves. Thus, the position of one Member State can indeed have a certain ‘domino effect’ on other Member States, in particular if the question at issue raises systemic concerns.

The Commission does provide training courses and meets with MS regularly, both of which assist MS representatives to develop their skills and understanding with respect to TDI..

At the same time, MS should devote sufficient resources to ensuring that dedicated, expert people cover TDI.

As a final comment, it can be noted that survey respondents pointed out that some MS representatives were excellent and did a good job.

4.6 Lobbying

Lobbying has become more important but this is an inevitable reflection of the political aspects of the decision-making process.

Lobbying, if properly and transparently done, will provide the decision makers directly with information which the party engaging in such lobbying thinks is the most pertinent for the defence of their case. As such, it is certainly a useful and necessary tool in the decision making process. However, lobbying also entails the risk that the decision makers receive information which has not been properly introduced in the procedure which is of a quasi-judicial nature. Thus, there is a particular responsibility of decision makers who have such ex parte contacts to ensure that they do not take into account any information which is not fully reflected in the file officially assembled for the purposes of the investigation. The aforementioned advantages but also risks have always to be taken into account when assessing any proposals in this field.

Given the importance of lobbying, it is essential that interested parties engage in it as appropriate. However, as highlighted elsewhere, it is not easy for a company – particularly an SME – to identify the appropriate officials in each Member State to whom they might speak.

In this regard, see the proposal made in 2.15(b) above.

4.7 Internal organisation

One of the biggest differences with the US is the fact that the US has a bifurcated system while the EC does not. Moreover, the ITC enjoys considerable independence.


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Would it make sense for the EC anti-dumping service to be independent, either wholly or partially? From a theoretical perspective, one would say yes, it is better to have objective, technical institutions assessing such complex matters as free as possible from any constraints.

However, as noted elsewhere, the decision making power of Member States is an important part of the overall balance of interests in the way TDI policy is implemented in the EC. It is not practical for the additional checks and balances provided by the Member States to be removed from the system altogether.

Moreover, if the EC was to introduce a bifurcated system, such as exists in the US, it has to be appreciated that this comes at a certain financial cost. This is both in terms of the agencies themselves with regard to offices, staffing, etc.; and in terms of interested parties having to deal with two agencies rather than one. The 'experiment' of the past – in which dumping and injury investigations were split into separate directorates within DG Trade – was generally considered by survey respondents to be a disaster. EC interested parties appreciate an integrated, consistent approach to the whole investigation.

While a bifurcated, or completely independent, TDI service would have certain advantages, therefore, it does not appear to be a subject for further consideration.

4.8 Case handlers

Some survey respondents raised points relating to problems within case teams. However, these incidents seem to be isolated and teams normally appear to function well. Concerns were also raised about the high turnover of staff. A particular issue was highlighted about instances where case handlers move on in the middle of an investigation. Turnover of staff does create a problem for the TDI service. Know-how must be re-built when people leave and, given the extremely technical nature of TDI, there is a very steep learning curve. Training – especially of new entrants – and a learning culture, are therefore key. However, the European Commission encourages staff to move jobs for career development and, looking at aspects other than TDI issues, this is desirable. Thus, turnover of staff is just something that has to be tolerated and worked with. It is, however, a justification for having some spare capacity in terms of staffing levels, such that continuity on cases can always be ensured when people move on to other jobs in the middle of an investigation. 4.9 Insufficient specialists (industry, accountants etc.)

The TDI service does not encourage specialisation e.g. in dumping or injury, in professional expertise in areas such as law or accountancy, in designating industry specialists etc. Moreover, in view of the sensitivity of posts in the TDI area, mechanisms have been introduced to make sure that staff members do not deal repeatedly with the same economic operators. Therefore, the Commission policy is that TDI officials should be prepared to deal with any case.


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The advantage of this approach is that it allows an efficient utilisation of resources. The Commission does not have enough people to specialise in distinct tasks. Although there is more specialisation in the US, this is achieved with a much higher number of people. It also ensures that case handlers remain independent and do not become unduly influenced by having built close relationships with particular industries or countries. The Commission has 163 people currently working on TDI. This compares with around 300 and 75 people working on TDI in the DOC and ITC respectively. To put this into perspective, for the period 2000-2004, the US initiated 89% more anti-dumping cases than the EC yet there are 130% more people working on TDI in the DOC/ITC than there are in the European Commission. It would be good to have some specialists such as accountants and perhaps a Chinese speaker (which the TDI service currently does not have). However, this is unlikely to be feasible within current resources. This is a broader Commission issue in terms of whether more resources could be allocated to TDI. 5. EFFECTIVENESS OF MEASURES

5.1 Overall effectiveness

There is overall satisfaction with the effectiveness of measures.

5.2 Circumvention & enforcement

This was the highest priority issue raised by many EC industry survey respondents.

Many of the problems with enforcing measures actually relate to issues outside the scope of DG Trade's brief. For example, many issues relate to customs problems, and therefore are more in the realm of national customs authorities, DG Taxation and Olaf (the EC fraud service).

However, one reason why industry has identified this as a priority issue is that, in the past, this has not been adequately addressed by the various institutions that may be involved. In this regard, EC industry has looked to DG Trade to take up the role of following up problems concerning the effectiveness of AD and AS measures, and of trying to improve coordination between the various agencies involved..

DG Trade (the TDI service) has increasingly taken on this role and has made considerable efforts to try and improve the effectiveness of EC AD and AS measures. However, it is not a role that was ever explicitly given to the TDI service. Nevertheless, it is a role that the TDI service has taken on and, in this regard, there are certain resource implications that perhaps need to be considered if these efforts are to continue.

The Commission was praised by many in the survey for adopting a flexible approach to finding solutions to enforcement problems and the Commission has been innovative in trying to improve the overall situation. This includes:

• Ex officio initiation of absorption and circumvention investigations where the Commission finds problems;


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• Stricter on the acceptance of undertakings;

• Tighter monitoring and control of undertakings;

• Introduction of the possibility to withdraw undertakings with retroactive effect (e.g. see recent definitive duty on certain magnesia bricks from China; Regulation 1659/2005 Official Journal L267, 12. October 2005);

• Use of interim reviews to clarify how duties should applied when the product concerned is joined with other products but retains its distinct character. This has happened in relation to ammonium nitrate and zinc oxide.

The Commission has done an excellent job of trying to find ways that address problems in enforcing anti-dumping and anti-subsidy measures. All survey respondents support the policy of strict enforcement of measures, and the Commission has to be commended for the efforts it has made in this regard. However, the TDI service needs both support and cooperation from the other agencies that have a role in customs issues.

5.3 Price undertakings

Many EC industry survey respondents said that they do not like undertakings. However, the concerns raised relate primarily to enforcement rather than to undertakings per se. In this regard, the Commission has made significant efforts to improve the reliability of undertakings (see 5.2 above).

5.4 Retaliation against EC companies for being involved in TDI actions

There have been some serious instances of retaliation, but such problems appear to remain isolated. Most survey respondents had not experienced problems. However, it is possible that other cases remain unreported. The Commission should therefore stay vigilant in looking out for such issues, and in providing whatever assistance is possible when such instances occur.

6. SAFEGUARDS

Few views were expressed on safeguards, owing to a lack of experience with the instrument.

A number of survey respondents questioned why there is a conventional wisdom in the EC that safeguards should not be used.

Safeguards do have some attractive advantages, particularly in terms of some of the problems identified in this evaluation with other TDI (the burden on business, the speed of relief etc.).

It can be noted that safeguards are not relevant to all industries. However, they should not be ruled out as a possible instrument, since safeguards are potentially an important tool in the TDI armoury. Indeed, the EC has recently started to open some safeguard cases, which suggests that the past attitude of ruling out their use is now starting to change. In view of the advantages mentioned above, this may be desirable.


ANNEX 1 – BASIC DESCRIPTION OF EC TRADE DEFENCE INSTRUMENTS

1. THE CONTEXT OF EC TDI .................................................................................................................... 3 1.1 AN OVERVIEW OF EC TDI.................................................................................................................... 3 1.2 GLOBAL CONTEXT OF EC TDI AND IMPACT OF NEW TDI USERS ON EC EXPORTS ................................ 3 1.3 WHICH TRADING PARTNERS ARE SUBJECT TO TDI?.............................................................................. 4 1.4 INSTITUTIONS ....................................................................................................................................... 4 1.5 SUMMARY OF THE EC ANTI-DUMPING AND ANTI-SUBSIDY REGULATIONS............................................ 5

2. ANTI-DUMPING AND ANTI-SUBSIDY................................................................................................. 7 2.1 SUMMARY OF SUBSTANTIVE REQUIREMENTS ....................................................................................... 7 2.2 CONCEPT AND DEFINITION OF DUMPING ............................................................................................... 7 2.3 THE IMPORTANCE OF COST OF PRODUCTION ......................................................................................... 9 2.4 ELEMENTS OF THE DUMPING CALCULATION ......................................................................................... 9 2.5 NORMAL VALUE ................................................................................................................................ 10

(a) Definition........................................................................................................................................... 10 (b) Situations where actual domestic prices might not be used............................................................... 10 (c) Related sales...................................................................................................................................... 10 (d) No domestic sales .............................................................................................................................. 10 (e) Insufficient domestic sales ................................................................................................................. 10 (f) Prices below the cost of production................................................................................................... 11 (g) Alternatives to use of domestic prices ............................................................................................... 12 (h) Non-market economies and economies in transition ......................................................................... 13

2.6 EXPORT PRICE.................................................................................................................................... 14 (a) Definition........................................................................................................................................... 14 (b) Related sales companies in the EC.................................................................................................... 14 (c) Export price for non-market economies or economies in transition.................................................. 15

2.7 EXPORT PRICE (CIF) .......................................................................................................................... 15 2.8 COMPARISON AND ADJUSTMENTS ...................................................................................................... 16

(a) Fair Comparison ............................................................................................................................... 16 (b) Adjustments ....................................................................................................................................... 16 (c) Average export price or transaction by transaction? ........................................................................ 17

2.9 HOW THE COMMISSION MAKES A DUMPING CALCULATION ................................................................ 18 2.10 INSIGNIFICANT DUMPING MARGIN ...................................................................................................... 20 2.11 A GLOBAL DUMPING MARGIN OR INDIVIDUAL DUMPING MARGINS? ................................................... 20 2.12 SUBSIDY............................................................................................................................................. 21

(a) Definition of subsidy.......................................................................................................................... 21 (b) Calculation of benefit ........................................................................................................................ 22 (c) Calculation of subsidy margin........................................................................................................... 23 (d) Insignificant subsidy margins ............................................................................................................ 23 (e) EC state aid rules .............................................................................................................................. 23

2.13 INJURY AND CAUSAL LINK.................................................................................................................. 23 (a) Concepts of injury.............................................................................................................................. 23 (b) Determination of injury ..................................................................................................................... 24 (c) Cumulation ........................................................................................................................................ 24 (d) Volume of dumped imports ................................................................................................................ 24 (e) Effect on prices .................................................................................................................................. 24 (f) Impact on EC industry....................................................................................................................... 25 (g) Lesser-duty rule ................................................................................................................................. 25 (h) Threat of material injury and material retardation........................................................................... 26 (i) Insignificant injury ............................................................................................................................ 27

2.14 CAUSAL LINK ..................................................................................................................................... 27 2.15 COMMUNITY INTEREST ...................................................................................................................... 28 2.16 PROCEDURE........................................................................................................................................ 29

(a) Overview............................................................................................................................................ 29 (b) Complaint and initiation.................................................................................................................... 30 (c) Community industry support ............................................................................................................. 30 (d) Time Limits ........................................................................................................................................ 31 (e) Consultation with EC member states on complaint........................................................................... 31

Evaluation of EC Trade Defence Instruments; Annex 1 – Basic Description of EC Instruments (Final Report, December 2005)

Annex 1, Page 2

(f) Information released by the Commission .......................................................................................... 31 (g) Target of investigation....................................................................................................................... 32 (h) Questionnaire and investigation period ............................................................................................ 32 (i) Description of exporters’ questionnaire ............................................................................................ 32 (j) Who should complete a questionnaire?............................................................................................. 33 (k) Time Limits for collection of information.......................................................................................... 33 (l) Disclosing confidential information .................................................................................................. 34 (m) Verification visits .......................................................................................................................... 34 (n) Provisional duties .............................................................................................................................. 35 (o) Definitive duties................................................................................................................................. 35 (p) Undertakings ..................................................................................................................................... 36 (q) Types of duty...................................................................................................................................... 36 (r) No double counting of subsidies and dumping .................................................................................. 37 (s) Level of duty (lesser duty rule) .......................................................................................................... 37

2.17 ISSUES THAT CAN ARISE DURING PERIOD OF ANTI-DUMPING MEASURES............................................. 38 (a) Absorption ......................................................................................................................................... 38 (b) Circumvention ................................................................................................................................... 38 (c) Suspension of duties .......................................................................................................................... 38 (d) Refunds .............................................................................................................................................. 38

2.18 REVIEWS ............................................................................................................................................ 39 2.19 JUDICIAL REVIEW ............................................................................................................................... 40

3. SAFEGUARDS.......................................................................................................................................... 40 3.1 SUMMARY OF EC SAFEGUARD REGULATIONS ................................................................................... 40 3.2 SUBSTANCE ........................................................................................................................................ 41 3.3 PROCEDURE........................................................................................................................................ 42

Evaluation of EC Trade Defence Instruments – Annex 1; Basic Description of EC TDI (Final Report December 2005)

Annex 1, Page 3

1. THE CONTEXT OF EC TDI

1.1 An overview of EC TDI

The objective of the European Community's Trade Defence Instruments (TDI) is to either remedy market distortions created from unfair trade practices by third countries, such as dumping or subsidies, or to address the serious deterioration of the situation of European Community producers arising from unforeseen sharp and sudden import surges (through safeguard action).

The legal basis for these instruments is provided by the relevant WTO agreements, which have been transposed into Community legislation by Council Regulation (EC) No 384/96 (the basic anti-dumping Regulation), Council Regulation (EC) No 2026/97 (the basic anti-subsidy Regulation) and Council Regulations (EC) No 517/94/ 519/94 and 3285/94 (the basic safeguard Regulations).

Anti-dumping (AD) measures were created to counter dumping practices, the most frequently encountered trade-distorting practices. Dumping occurs when manufacturers from a non-EU country sell goods in the EC below the sales price in their domestic market, or below the cost of production plus a reasonable rate of profit.

Anti-subsidy (AS) measures were designed to combat certain types of subsidies, which are made available to manufacturers by public authorities and which can also distort trade when they help to reduce production costs or cut the prices of exports to the EC unfairly.

Safeguard measures may be used by WTO members to restrict imports of a product temporarily if its domestic industry is seriously injured, or threatened with serious injury, caused by a surge in imports.

1.2 Global context of EC TDI and impact of new TDI users on EC exports

Although TDI have been around for more than 100 years, it was only in the 1970s that their use became a global phenomenon. One reason for this is the extent of GATT liberalisation that had been achieved up to and including the Tokyo Round of trade negotiations. As trade barriers came down, and trade increased, domestic industries started to feel real competition from imports. The demand for TDI measures grew in response to the increasing market share of imports.

The EC has been one of the traditional global users of TDI over the past 30 years, the other main ones being the US, Canada, Australia and New Zealand.

However, in the last decade, many other countries have started using TDI, and now EC exports face more cases in overseas markets than TDI cases opened by the EC against imports.


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EC Investigations (defensive cases)

Investigations against the EC or individual Member States (offensive cases)

% of defensive / offensive cases

1995-2004 299 394 75% Of which: 1995-1999 185 219 85% 2000-2004 114 175 65%

The table shows the number of AD investigations opened by the EC in proportion to those initiated by other countries against the EC1. The last column of the table indicates the relative shift in the extent to which EC exporters are hit in other countries' AD investigations compared to EC actions.

This is an important point to realise in understanding the context of TDI. In former times, EC industry would have wished for TDI to be as restrictive as possible. However, this isno longer the case. Using TDI requires a careful balance between exercising the right to have protection against imports in clearly defined circumstances and ensuring that EC exports are not unduly hindered by other countries' use of TDI.

1.3 Which trading partners are subject to TDI?

EC TDI are applicable to all imports from outside of the EC except for EEA countries. Non-EC members of the EEA are excluded from TDI, except for products that fall outside of the EEA e.g. Norway has been subject to two AD/AS investigations in the fisheries area.

It can also be noted that TDI are not applied within the single market.

The EEA is the only customs union/free trade agreement to which the EC is a party where TDI are not applied. TDI apply to all other countries despite any free trade agreements or preferential arrangements that they may enjoy with the EC.

TDI continue to be applied against countries negotiating accession to the EC. Thus, TDI still apply to Bulgaria, Croatia, Romania and Turkey, even though the latter has a customs union with the EC.

1.4 Institutions

The institutions involved in TDI are as follows:

• DG Trade/European Commission - The Commission is the politically independent institution that represents and upholds the interests of the EC as a whole. It is the

1 Note that the EC actions and the actions against the EC are counted on a different basis. The EC actions are

counted on a per country basis (i.e. an investigation against one product from 5 countries counts as 5 cases. Actions against the EC are also counted on a per country basis. However, some of these cases have been initiated against the EC as a whole, in which case they only count as 1 case, while others have been initiated against several Member States (for the same product), in which case they count as several cases.


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driving force within the EC’s institutional system: it proposes legislation, policies and programmes of action and it is responsible for implementing the decisions of Parliament and the Council. In this way, it can be considered as the executive branch of the EC. The Commission plays a leading role in the implementation and enforcement of TDI. The Commission has several powers that allow it to take certain decisions in the TDI field. In addition, the Commission must prepare proposals for the adoption of measures by the Council.

• Council of Ministers - The Council is the EC's main decision-making body. It represents the member states, and its meetings are attended by one minister from each of the EC's national governments. For definitive AD and AS measures, the Council has the responsibility of adopting proposals made by the Commission. For safeguards, the Commission usually adopts measures but the Council still plays a key role in that it has the power to block such measures.

• EC Member States – In addition to the formal meetings of Member States in the council of Ministers, Member States also meet in an Advisory Committee for all TDI. In the Committee, the Member States will discuss all aspects of TDI investigations (e.g. initiations, provisional measures, definitive measures etc.) and debate TDI policy.

• Court of First Instance (CFI) and Court of Justice (ECJ) – Since 1993, the CFI has had jurisdiction over AD and AS cases. The ECJ is the court of appeal for cases falling within the jurisdiction of the CFI. There are limited opportunities to challenge safeguard measures but, to the extent that safeguards can be challenged, it is the ECJ that would hear such cases.

• European Parliament (EP) - The EP plays almost no role in TDI. It does discuss use of TDI within the Committee on International Trade and sometimes issues reports on the subject. MEPs also put questions to the Commission on TDI in an attempt to open up discussion or influence policy. They also address problems raised by their constituents. However, currently, the EP has no formal role in any part of the TDI process. If the new constitution is ratified by all Member States, the Parliament may have more influence over the adoption of legislation in the area of TDI, though it will still not have any role in investigations or the adoption of measures.

1.5 Summary of the EC anti-dumping and anti-subsidy regulations

EC anti-dumping rules are contained in Council Regulation (EC) No 384/96 (the "basic AD regulation") , the provisions of which came into effect on 1 January 1995.

This regulation reflects the provisions of the WTO agreement on anti-dumping agreed in the last completed round of multilateral trade negotiations (The Uruguay Round).

This regulation has been amended several times.

• Regulation 2331/96- in order to amend the provisions on adjustments necessary to compare domestic and export prices.


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• Regulation 905/98 - revised non-market economy provisions to allow Russian & Chinese companies to get market economy treatment if certain conditions are met.

• Regulation 2238/2000 - Added Ukraine, Vietnam and Kazakhstan to list of countries where companies able to apply for market economy treatment.

• Regulation 1972/2002 - further amendments on adjustments between domestic & export price, the determination of costs in anti-dumping investigations and treatment of Russia as a market economy.

• Regulation 461/2004 - adopted amendments relating to voting procedures, price undertakings, time limits on reviews, anti-circumvention and anti-absorption investigations, and other procedural points.

Copies of the basic regulation and all of the above amendments can be obtained from the following web link:

http://europa.eu.int/comm/trade/issues/respectrules/anti_dumping/legis/index_en.htm

A consolidated version is available at:

http://europa.eu.int/eur-lex/en/consleg/main/1996/en_1996R0384_index.html

EC anti-subsidy rules are contained in Regulation 2026/97 ("the basic AS regulation) and has been amended as follows:

• Regulation 1973/2002 – Clarifies ability to use benchmarks where subsidies are given in the form of provision of cheap goods & services where there is no market for such goods/services in the country concerned. Also repeals provisions on non-actionable subsidies given expiry of corresponding WTO provisions.

• Regulation 461/2004 (similar amendments as for anti-dumping as set out above).

The EC anti-dumping and anti-subsidy regulations cover all products including coal and steel. Previously, products covered by the European Coal and Steel Community Treaty (ECSC) had separate AD and AS provisions, though substantively they were identical to the EC regulations. The ECSC, and associated TDI legislation, expired in July 2002.


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2. ANTI-DUMPING AND ANTI-SUBSIDY

2.1 Summary of substantive requirements

There are four key requirements contained in the EC's anti-dumping and anti-subsidy regulations that must be met before any anti-dumping/subsidy measures can be adopted.

REQUIREMENT 1 - Imports must be dumped or subsidised Dumping - The export price of a product sold in the EC is normally considered to be dumped if it is less than the comparable price for that product in the domestic market (nb the domestic price must at least cover costs). Whether dumping is occurring or not is determined by the calculation of a single margin of dumping. Subsidy – Subsidised imports are those that benefit from a financial contribution by government. However, such subsidies are only countervailable if they are specific (limited to certain enterprises or regions). REQUIREMENT 2 - The dumped or subsidised imports must cause injury The EC industry must be suffering material injury. That is, it must be experiencing significant and measurable problems in terms of indicators such as prices, profit, market share etc. REQUIREMENT 3 - Causal link It must be demonstrated that the dumped/subsidised imports are causing the injury identified. In this context, it must also be ensured that injury caused by other factors is not attributed to the dumping/subsidised imports. REQUIREMENT 4 - Community Interest Even if dumping and/or subsidy, injury and a causal link are established, measures are only imposed if they are not against the Community interest. Community interest refers to the interests of the EC as a whole, including EC domestic industry, users and consumers.

2.2 Concept and definition of dumping

Dumping is a form of price discrimination. It occurs where the export price of a product sold in the EC is lower than the price for the same product when sold on the domestic market (domestic price; usually called normal value).

Price discrimination occurs when a product can be sold at different prices in different markets. In order to practice price discrimination, it is necessary to be able to differentiate between different customers. This differentiation of groups of customers requires some form of separation of the two markets, such that it is not possible to buy in the lower priced market and sell in the higher priced one. Thus, the ability to dump may arise from some sort of trade barrier that prevents arbitrage removing the price differential. However, for dumping to occur, there is no requirement to prove the existence of such a trade barrier. The existence of the price difference per se is sufficient to find dumping. It is such price discrimination


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between domestic and the foreign markets that WTO Members have agreed should be condemned.

The following table clarifies what constitutes dumping:

1 2 3 4 Domestic price in home market or analogue country

100 80 100 80

Export price to EC 100 80 80 100 EC producers' price 100 100 100 100 Dumping? NO NO YES NO

• In 1, the export price is equal to the domestic price and therefore there is no dumping.

• In 2, despite undercutting the EC price, there is no dumping as the export price is equal to the domestic price. This illustrates that the EC price is not relevant in assessing whether dumping is occurring.

• Dumping is occurring in situation 3, where the export price is lower than the domestic price.

• In 4, there is no dumping as the export price exceeds the domestic price, although price discrimination is occurring.

The key issue is that, regardless of the destination of the product (i.e. domestic or overseas markets), the ex factory price should be the same.

Although this is the basic principle behind the analysis of dumping, there is some flexibility.

• The European Commission usually uses weighted averages in calculating whether dumping is occurring. Therefore, individual consignments sold at different prices will usually not be of consequence, provided that on average the prices are not dumped and any dumped consignments are not targeted on any particular region, customer, or time period (i.e. there is a pattern of export prices that differ by region, customer or time period).

• Insignificant (de minimis) dumping margins are ignored. Insignificant is defined as less than 2%.

• If aggregate export volumes of the product concerned from any one country to the EC are small, they are unlikely to be the cause of any injury. EC rules confirm that no investigation will be initiated where the exports of the country concerned account for less than 1% of EC consumption, unless the exports of all such countries when grouped together account for more than 3% of EC consumption (or where imports from the country concerned account for less than 3% or 7% respectively of total imports).

• Export and domestic prices may diverge if there are differences in the product or terms of sale that account for this divergence.


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An important point to note here is that there is no such thing as an 'innocent' dumper. Even if an exporter is forced to start dumping in order to stay in the market, anti-dumping rules require that export price must be equal to or greater than the domestic price. No account is taken of why dumping may have started.

2.3 The importance of cost of production

There is an important proviso to the above. In order to be used in assessing whether dumping is occurring, the domestic price must at least cover costs. Thus, dumping occurs when export price is below domestic price or when export price is below costs.

Thus, dumping may still be occurring if a company's export price is the same as the domestic price, as illustrated in the following table.

Situation 1 Situation 2 Situation 3 Normal Value (domestic price) 100 60 100 Cost of Production 80 80 80 Export Price 60 60 90 Dumping? Yes Yes Yes

• In situation 1, export price is less than domestic price.

• In situation 2, export price and domestic price are equal so there would appear to be no dumping. However, domestic price is below cost of production and cannot be used. An export price below cost of production is always a dumped price.

• In situation 3, export price is profitable but less than domestic price i.e. an export price above cost of production can still be a dumped price.

2.4 Elements of the dumping calculation

The calculation of the dumping margin is based on a simple formula:

Dumping margin = (Normal Value – Export Price) / Export price (cif)

The actual calculation, although based on this simple formula, is extremely complicated. This section, therefore, breaks down this calculation into its three components; normal value, export price (ex works or fob), export price (cif).

Normally, a dumping margin is calculated for each company that has exported during the product from the country subject to investigation2.

2 AD and AS investigations are initiated against countries and not individual companies.


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2.5 Normal Value

(a) Definition

Normal value is the term used to describe the price of the product that is considered to be a "fair" price. Normal value is usually calculated on the basis of the price actually paid by an independent customer in the domestic market.

(b) Situations where actual domestic prices might not be used

The domestic price might not be used in the following situations:

- where there is a relationship between the producer and the domestic customer (if the product is re-sold, the price to the first independent customer would be used i.e. treating the related parties as one economic entity).

- where there are no domestic sales or the sales are insufficient to be representative

- where the domestic sales are sold at a price below cost of production

- where there is a non-market economy or, normally, where there is an economy in transition

(c) Related sales

Where the sale is made to an 'associated' party, or there is some form of compensatory arrangement between the producer and the buyer, domestic prices might not be used. They will only be used if it can be shown that the prices are unaffected by the relationship. In practice this is difficult to achieve.

(d) No domestic sales

It is clear that an alternative method of calculating normal value must be found where an exporter made no domestic sales of the product during the period under investigation. Another common occurrence is that the product type sold on the export market is different from that sold on the domestic market. In this situation, there is no domestic sale of the type that is exported. If the difference can be accounted for by a price adjustment, this will be done. Otherwise, one of the alternative methods must be used.

(e) Insufficient domestic sales

Even where there are domestic sales, the Commission may consider their volume is too low for representative price data to be obtained. Under the 5% rule domestic prices cannot be used where the volume of the domestic sales of the exporter is less than 5% of its sales volume to the EU. However, the Commission can decide, notwithstanding a sales volume below this 5% level, that the domestic prices are nevertheless still representative for the market concerned. In practice this is rare.


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The test is conducted at two levels. Firstly, all domestic sales of the product concerned are measured in relation to total exports of the product concerned. If this is passed, it is then done at the level of each type of the product concerned.

(f) Prices below the cost of production

Prices are considered to be below the cost of production where the price is below the per unit fixed and variable cost of production plus selling, general and administrative costs. Thus, the relevant cost of production is the total cost of production (see below for a brief summary of key cost concepts).

Average cost = Total cost of production / Number of units produced

Marginal cost = Increase in total cost for extra unit of production.

Average cost is based on the total cost of production, including both fixed and variable costs. Marginal cost measures the variable cost associated with increasing production by one unit.

Some commentators believe that marginal cost should be used in assessing dumping. If there is spare production capacity in a factory, and it is used to start producing a new product, it is true that the actual cost of such marginal production is lower than the average cost. Thus, commercially it can make sense to sell such additional products below full average cost.

However, anti-dumping rules generally require that the domestic price (and therefore the export price) must cover all costs (including fixed costs). That is, export prices must be based on at least full average costs. If the domestic price is higher than full average costs, the export price must match the former.

These requirements can be illustrated with a simple example. If the total cost of producing 100 units is 1000 Euros, the average cost of producing each unit is 10 Euros. This 10 Euros cost will be made up of fixed costs (factory, machinery etc) and variable costs (labour, raw materials etc).

In the above example, say that the cost of producing an extra unit costs only 5 Euros (i.e. this is the marginal cost). Therefore it may be rational economic behaviour to base the export price on this cost.

In this example, however, anti-dumping rules require that a minimum 'fair price' reflects the full average cost of 10 Euros. Of course if the domestic price is higher than 10 Euros, it must be matched by the export price in order to avoid dumping. In assessing whether prices are below the cost of production, the Commission will ensure that all costs have been included. Particularly where an allocation has been made, the Commission will carefully check that the amount allocated to the product concerned is accurate.

It can be noted that sales at a loss will not automatically mean that actual prices will not be used. If less than 20% by volume of sales are at a loss, the Commission will use the actual prices of all transactions. If sales at a loss are more than 20% but less than 90%, the Commission will use the profitable sales. If sales at a loss exceed 90%, no actual prices will be used.


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Sales at a loss Sales at a profit

Basis of domestic price

Situation 1 18% 82% All sales Situation 2 35% 65% 65% Profitable

sales Situation 3 92% 8% Alternative

methods

Normal value is often based partly on actual prices and partly using alternative methods

For products that have different grades/models, dumping will initially be assessed type by type. It is a common situation in anti-dumping investigations that the domestic prices of certain types of the product concerned can be used, while for other types it cannot. Given this, the actual calculation of normal value can be quite complex.

(g) Alternatives to use of domestic prices

In cases where the domestic prices of a particular company cannot be used, the Commission uses the following alternatives:

Alternative normal value 1: Prices of other producers

For each type for which there are no domestic prices, the first alternative is to use prices of other producers that are also selling in the same country.

Alternative normal value 2: Calculating a constructed normal value

If there are no such prices, the Commission will most likely use constructed normal value. This is calculated by taking the cost of production of the company concerned, adding sales and general administrative (SGA) costs and a reasonable rate of profit. This will normally be calculated on the basis of the manufacturer's own production accounting data.

When deciding on a reasonable rate of profit, the Basic Regulation gives the Institutions a certain discretion although the various methods provided for in the Basic Regulation are regularly applied in the order set out therein. There is no pick and choose. Often, the profit of other producers' domestic sales in the exporting country market will be used.

Alternative normal value 3: export prices to third countries

The Commission can use prices from the exporting country to a third country if such prices can be classified as "non-dumped". However, this method is rarely used due to the fact that the products may also be dumped and more information would have to be collected to have this option. Also, there can be problems in matching up different types if the products vary. In this way, constructing normal value has an advantage because it can be done for all product types exported and it is based on information that is already collected from exporters.


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It should be noted that most cases involve products with different types or grades. Each type may be treated according to its particular situation and, therefore, it is possible that normal value is based on a mix of actual prices and alternative normal values 1 and 2.

(h) Non-market economies and economies in transition

For countries or companies operating in a non-market economy environment, the approach to determine normal value has to reflect the particular circumstances in such countries..

The countries subject to such a different approach can be split into three groups:

Group 1 - Non-market economies (non-WTO members) – Albania, Azerbaijan, Belarus, Georgia, North Korea, Tajikistan, Turkmenistan, Uzbekistan.

Group 2 – Former non-market economies which became WTO members – Armenia, Kyrgyzstan, Moldova, Mongolia.

Group 3 - Economies in transition & WTO Members – China, Ukraine, Vietnam, Kazakhstan.

For group 1, domestic prices and costs are never used. In order to produce a normal value against which the export price(s) can be compared, the Commission will usually choose a market economy third country (analogue country).

The third country must be "appropriate" and selected in a "not unreasonable manner". In reality, the choice of this country depends on a number of factors including whether prices and costs are excessive in comparison with a world average for the product concerned. Also, the Commission will consider the conditions of competition in the third country and the characteristics of its domestic industry such as the production process, scale of production, quality, access to raw materials etc. as compared to the situation of producers in the non-market economy.

For countries in group 2 and 3, the situation is slightly different. In these two groups, individual companies that are operating in a market economy environment can apply to be treated as such. It should be noted that market economy treatment (MET) is only granted where it is claimed, and where sufficient evidence is provided that the market economy environment exists.

The following criteria must be met for market economy treatment to be given:

• Decisions with regard to prices, costs and inputs are made in response to market signals without significant state interference

• Cost of major inputs reflect market values

• The companies involved maintain clear accounting records, independently audited and in line with international accounting standards

• Production costs and financial situation are not subject to significant distortions as a result of former non-market economy environment


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• Legal certainty and stability are provided by bankruptcy and property laws

• Exchange rate conversions are carried out at the market rate

Companies in groups 2 and 3 that do not apply for MET, or those who apply but are unsuccessful, are treated in the same way as companies in group 1 (domestic prices and costs are based on the analogue country).

2.6 Export Price

(a) Definition

The export price is usually the price actually paid for the product when sold from the exporting country to the EC. It is usually calculated on an ex factory level so that it can be compared more easily to the domestic price.

The actual costs included in the export price shown on a particular invoice will depend on the delivery terms agreed in the contract between seller and buyer. The following diagram illustrates:-

Factory

Import Country

FOB Price

CIF Price

Ex factory price

Customer

Export Country

Delivered price

Where necessary, transport, insurance and other costs incurred in bringing the product to the point of delivery to the buyer will be subtracted to get back to the ex factory level.

(b) Related sales companies in the EC

Export prices may be considered to be unreliable where there is an association between the exporter and EC importer. In such cases the export price is calculated on the basis of the first resale price to an independent purchaser in the EC. Adjustments are then made to this price to remove all additional costs incurred after the goods arrived at the EC frontier.

P2P1 Independent customer in EC

Related importer in EC

Exporter

• P1 is usually considered to be unreliable.


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be based on that earned by unrelated importers of the product concerned. SGA costs will

ed.

A weighted average export price is calculated for all exporters under non-market economy

aggregated). It can be noted that when individual treatment is granted, the normal value of the company will still be based on the analogue country data (unless MET

The i

• ares held by private persons. Any state officials on board should be in minority or company should nonetheless be sufficiently independent form state

• State interference is not such as to permit circumvention of measures if individual

he state. A particular concern of the Institutions in this context is circumvention, i.e., where exports all get re-routed through a company with the lowest duty

figure for national customs authorities. They

• In such situations, export price is constructed;

• Constructed export price = P2 – costs and profits of importer

• Cost and profits are based on actual data from an unrelated importer.

The Commission will be vigilant to ensure that all appropriate deductions are made. This will include deducting profit and SGA costs of the related importer. The profit will usually

usually be based on actual costs incurred by the importing company concern

(c) Export price for non-market economies or economies in transition

treatment. The exception to this is where individual treatment has been granted.

Individual treatment means that an individual dumping calculation will be made for that company. This means that their own export prices will be used as the basis to calculate an individual dumping margin as opposed to the single one applying to all producers (based on all exporters prices

has been granted).

cr teria for individual treatment are as follows:

• profit and capital invested can be repatriated (in case of foreign investment)

• export prices, quantities, and conditions and terms of sale are freely determined

majority of sh

interference.

• Exchange rate conversions carried out at the market rate.

exporters are given different rates of duty.

The fundamental test underlying all above criteria is meaningful independence of the exporter from the influence of t

(see also below 2.11).

2.7 Export Price (CIF)

In the formula to calculate the dumping margin given at the start of this section, the denominator used is the "CIF" export price. The reason why the Commission divides the amount of dumping (the difference between ex factory export and domestic prices) by the CIF export price is to create a readily usable


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is will be the basis of the Commission's calculation. If, however, the export prices are ex works, an

at to the EC border must be made and added to the ex works export price for the purposes of making the dumping calculation.

2.8 Comparison and Adjustments

Once the Commission has calculated normal values for each type exported, it can calculate st those normal values. In doing this, it

is obliged to ensure that the comparison is a fair one.

The Commission is required to make a comparison:

-

- pes of sale). For example, the price to an end user will be different from the price to a

sales and domestic sales are different, an adjustment must be made. The comparison is usually done at an ex factory level.

bers; "PCNs"). It is often the case that domestic sales cannot be used because they do not exactly match the types that are exported and adjustments cannot be

e. ces are used and the job is to match up domestic transactions for each of the exported types.

stment must be made. The Commission will make adjustments for factors of which it is aware. The regulation provides,

is provided showing that the difference affects the price comparability of the products.

Adj y be made to take account of the following differences :

receive shipments of goods valued at the CIF level for customs purposes and it is at this level of trade that an anti-dumping duty is applied.

If the actual CIF value is available (either from the invoice or a related importer), th

estim e of transport and insurance costs

(a) Fair Comparison

the dumping margin by comparing export prices again

between comparable products: comparison must be between like with like.

at the same level of trade (that is, prices must be compared between equivalent ty

distributor. If the levels of trade for export

- sold as nearly as possible at the same time.

The comparison is done for each type identified during the investigation. That is, a normal value and export price is calculated for each type.

Only products of identical specification can be directly compared with each other. Therefore, the Commission will use strict product definitions (usually via a classification system of product control num

mad All export pri

(b) Adjustments

Where there are differences in the products under comparison and it is shown that the differences affect the price comparability of the products, an adju

however, that adjustments can be claimed by the exporter if evidence

ustments ma

• Physical Characteristics - on the basis of a reasonable estimate of the market value of the difference.


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• Discounts, Rebates, and Quantities - for differences in the amounts of discounts and

• e - where the domestic and export distribution chain have distinct differences. For example, if all domestic sales are made to end users, while export sales

s are directly included in the price of the product.

• ences in the directly related costs of packing

iding warranties, guarantees and technical assistance whether required by law or not.

•

• exchange will be used for the date of the sale, except where a forward contract directly related to the sale has been used. Fluctuations in

• Other Factors - Any other factor that affects price comparability where customers h

factors

Tw ows:

Level of trade: export sales are made in large consignments to distributors while domestic

Although the Commission should be responsible for ensuring that a fair comparison is made, is up by evidence to show that

otherwise the price comparability would be affected.

(c) Average export price or transaction by transaction?

There are a number of ways in which the price comparison can be done.

• Import Charges and Direct Taxes - where domestic taxes are not imposed or are refunded for export sales.

rebates applied to sales if it is shown that these amounts are directly linked to the sales covered by the investigation.

Level of Trad

are to distributors, this is likely to result in a price difference between domestic and export prices.

• Transport Insurance and Ancillary Costs - but only where cost

Packing - for differ

• Credit - where the cost of credit is included in the price (i.e. credit terms agreed at the time of invoicing)

• After Sales Costs - where costs differ for prov

Commissions - where commission rates differ.

Currency Conversions - rates of

exchange rates are ignored and exporters are allowed 60 days to reflect sustained changes in exchange rates in their prices.

consistently pay different prices on the domestic market because of differences in suc

o examples of adjustments that would work in the favour of the exporter are as foll

Credit terms: domestic customers have 60 days credit while export sales are cash on delivery. The cost of credit can be deducted from the domestic price in this case.

sales are made to end-users in much smaller quantities. To the extent that there are different levels of trade, an adjustment can be made to ensure a fair comparison.

exporters should nevertheless make a claim and back th


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The most common method in the past3 was for the Commission to calculate one figure for normal value (weighted average domestic price for each type) and for each export transaction to be compared to this figure on a transaction by transaction basis. This effectively produced a series of dumping margins (i.e. the value by which export price was below normal value) which were aggregated and expressed as a proportion of all export transactions4 to give a percentage margin of dumping. Note that under this "transaction by transaction" approach, negative dumping margins (export price greater than normal value) were counted as zero so as not to cancel out the effect of dumped transactions.

After 1995, the normal method became an average to average comparison within the model or type categories (i.e. if there are 10 models or types this calculation would be done for each model). For each of the 10 models, a weighted average normal value would be compared with a weighted average export price which by definition meant that negative dumping was allowed to offset dumped transactions). However, zeroing continued to be used between the models when aggregating the dumping found for each model. Zeroing could also be used within the model if there was a pattern of export prices that differed significantly among different purchasers, regions or time periods (so-called 'targeting').

Following the bed linen WTO dispute, the current method within the model continues to be, where possible, to compare the weighted average export price with the weighted average normal value for the period of the investigation. However, zeroing between models is now never used due to the fact that it is explicitly outlawed by WTO jurisprudence. This means that dumped imports can be cancelled out by imports sold at prices greater than normal value. Only where it appears that such dumping is 'targeted' at particular regions, customers or during particular time periods will the Commission revert to the old method of comparing export prices on a transaction by transaction basis.

2.9 How the Commission makes a dumping calculation

Calculating a dumping margin is a time consuming and complex task. The following simplified example shows how the Commission calculates the margin of dumping.

We will assume that the products under investigation are produced to only 1 specification. If there is more than one type or model, it is necessary to perform an equivalent calculation for each type.

During the period of investigation, five consignments are sold on the domestic market as listed in the table below.

The domestic sales are made in representative quantities to unrelated purchasers and all prices cover cost of production.

Normal value (domestic price) is calculated by taking a weighted average of these prices:

3 Pre-1995 when the WTO was created and the WTO anti-dumping agreement came into effect 4 CIF value of exports as explained above.


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Units Sold Price (€) Units * Price 1200 140 168,000 600 135 81,000 800 145 116,000 800 132 105,600 500 151 75,500 3900 546,100

Weighted average domestic price = 546,100 / 3900 = €140 (Normal Value)

During the same period, export consignments are indicated below. For each export transaction, the amount and value of dumping is calculated as follows:

InvoiceValue (ex works)

Quantity Export Price

Normal Value

Dumping Dumping*Quantity

144000 1200 120.00 140 20 24000 69000 600 115.00 140 25 15000 192000 1200 160.00 140 -20 -24000 94400 800 118.00 140 22 17600 232500 1500 155.00 140 -15 -22500 731900 5300 138.09 10100

The dumping margin is calculated as follows:

(Normal Value - Export Price) / CIF Price

If it is assumed that the cif price is 10% higher than the ex factory export price, the cif price would be 151.89

Thus the dumping margin is 140-138.09/151.89 = 1.25%

In practice, the way in which the Commission calculates the dumping margin is to calculate for each transaction the total value of the dumping (i.e. absolute dumping margin multiplied by quantity sold). The reason for this is that there are often hundreds of transactions (or more) involving more than one grade/model (i.e. there are a number of different normal values). Rather than calculating a dumping margin for each transaction and taking a weighted average, the value of the "total dumping " is divided by the total cif value of the imports. The cif invoice value is estimated at 10% of total ex factory invoice value (i.e.731900 * 1.10 = 805,090).

Thus, in the example above, the dumping margin would be calculated as follows:

10,100 / 805,090 = 1.25%

As mentioned previously, the Commission will usually calculate the dumping margin on a weighted average to weighted average basis. This is the basis on which the above calculation has been made. However, if the Commission decides that a weighted average normal value


Annex 1, Page 20

to individual export transaction comparison is necessary, the calculation will change significantly (though these days this rarely happens). The reason why it changes is that in this circumstance, positive dumping margins (i.e. where normal value is less than export price) are counted as zero. That is, they are not allowed fully to offset the negative dumping margins.

InvoiceValue Quantity Export Price

Normal Value


144000 1200 120.00 140 20 24000 69000 600 115.00 140 25 15000 192000 1200 160.00 140 -20 0 94400 800 118.00 140 22 17600 232500 1500 155.00 140 -15 0 731900 5300 138.09 56600

In this case, the dumping margin is 56,600/805,090 = 7.03%.

The above calculations are all based on the assumption that there is only one type or model. This is what we have labelled as the "within model" calculation in 2.8(c) above.

If there are five models, the dumping would be calculated for each model.

InvoiceValue Quantity Export Price

Normal Value


Model 1 200 100 120 20 4000 Model 2 300 150 140 -10 -3000 or 0 Model 3 150 150 160 10 1500

2500 or 5500

It can be seen that the total value of dumping varies according to whether the negative dumping of model 2 is allowed to offset the dumping of models 1 and 3. This is the "between model" calculation referred to above.

2.10 Insignificant dumping margin

When the dumping margin for any exporter is insignificant (de minimis), the investigation against that exporter is terminated. Insignificant is defined as less than 2%. Thus, in the above example, the first calculation gives a de minimis dumping margin, while the second calculation is clearly significant.

2.11 A global dumping margin or individual dumping margins?

Individual dumping margins are calculated for each company (except for non-market economies and for companies in non-market economies or economies in transition where neither MET or IT have been granted).


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For companies operating in a non-market economy environment or in an economy in transition (where MET or IT has not been granted), the Commission will normally calculate a single country-wide dumping margin. This is due to the fact that it is not considered possible to distinguish between individual producers when there appear to be links to the state. Imports from such companies are considered to be from "one producer" and therefore only one dumping margin is calculated. This will result in the application of only one anti-dumping measure to such imports which will apply regardless of which producer has actually supplied the product. One duty is applied to prevent circumvention through the company with the lowest duty.

However, individual exporters can still claim individual treatment even in a complete non-market economy.

The table below provides a summary of the possible treatment of exporters in various different situations with regard to normal value and export price.

Status Normal Value Export Price Duty Rate Market Economy Treatment (MET)

Actual prices/costs Actual prices Company by company

Non-Market Economy (NME) or economy in transition for companies not receiving MET or IT

Analogue country prices/costs

Actual prices One for all exporters

Individual Treatment (IT) in NME or economy in transition situation

Analogue country prices/costs

Actual prices Company by company

2.12 Subsidy

(a) Definition of subsidy

Certain types of subsidies can be countervailed (i.e. anti-subsidy measures applied) when the benefit received is deemed to give an advantage to exporters. Note that such benefit does not have to arise only from export subsidies.

The definition of subsidy is a broad one. A subsidy is defined as a "financial contribution by government" which confers a benefit to the recipient.

This can include:

• direct transfer of funds e.g. grants.

• revenue foregone e.g. tax exemptions

• government provision of goods & services

However, subsidies are only countervailable if they are specific. To be specific, the subsidy must be limited to certain enterprises or regions. Also subsidies contingent on export performance or use of domestic over imported goods are deemed to be specific.


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Thus, general government intervention in the economy that benefits all enterprises is not countervailable because it is not specific. Likewise, the setting or changing of generally applicable tax rates by any level of government entitled to do so is not considered to be a specific subsidy for the purposes of the AS Regulation.

Subsidies that are only received by certain enterprises are not automatically specific. Where there are objective criteria and eligibility is automatic, the subsidy may be considered to be non-specific. Objective criteria or conditions mean criteria or conditions which are neutral, which do not favour certain enterprises over others, and which are economic in nature and horizontal in application, such as number of employees or size of enterprise. The criteria or conditions must be clearly set out by law, regulation, or other official document, so as to be capable of verification;

However, such subsidies can be found to be specific if there are reasons to be believe they are in fact ("de facto") specific. In such a situation, other factors will be considered;

• is the subsidy programme used by a limited number of certain enterprises? A subsidy which is limited to certain enterprises located within a designated geographical region within the jurisdiction of the granting authority shall be specific.

• is the programme predominantly used by certain enterprises?

• are disproportionately large amounts of subsidy granted to certain enterprises?

• how is discretion exercised by the granting authority in the decision to grant a subsidy? In this regard, information on the frequency with which applications for a subsidy are refused or approved and the reasons for such decisions shall, in particular, be considered.

(b) Calculation of benefit

The amount of countervailable subsidy is calculated in terms of the benefit conferred on the recipient.

In calculating benefit, the following factors are taken into account:

• Government provision of equity capital does not confer benefit unless it is inconsistent with the usual investment practice of private investors.

• A government loan has no benefit unless the rate is below the rate payable for a comparable commercial loan (i.e., a loan at commercial rates is not a subsidy)

• A loan guarantee provided by government does not confer benefit unless the cost of the loan is less than what the firm would pay in the absence of a government guarantee.

• Purchase by government of goods and services is not a benefit unless consideration received is greater than "adequate", taking into account prevailing market conditions.


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• Provision by government of goods and services is not a benefit unless consideration given is less than “adequate”, taking into account prevailing market conditions.

In each case, a benchmark is established against which the benefit can be judged. If there is no benefit in relation to the benchmark, there is no subsidy. However, if there is a subsidy, the benchmark can be used to put a value on the benefit received.

(c) Calculation of subsidy margin

The amount of subsidy is calculated per unit taking into account the following;

• Fees/costs and export taxes or duties specifically intended to offset the subsidy should be subtracted..

• For subsidies not related to quantity, the total value of the subsidy should be allocated over production, sales or exports of product concerned.

For more details see the Commission's "guidelines for the calculation of subsidy in countervailing duty investigations" (published in Official Journal C394 17.12.98).

(d) Insignificant subsidy margins

Subsidy margins are considered insignificant (de minimis) if they are below 1%. For developing countries the de minimis level is less than 2%.

(e) EC state aid rules

EC state aid rules contain similar definitions of subsidy and benefit. The EC state aid regime prohibits illegal subsidies under EC law. Breaching EC state aid rules requires repayment of the subsidy, a much tougher sanction than anti-subsidy measures.

However, the rules are not identical. In this regard, for example, it is possible that a subsidy may be prohibited within the EU under the state aid rules, yet not be countervailable.

2.13 Injury and causal link

Once the existence of an unfair trading practice has been established (dumping or a subsidy), the second requirement before any measures can be adopted is that there must be injury. The third requirement is that a causal link must exist between the unfair trading practice and the injury (see paragraph 2.1 of a summary of the main requirements to impose AD or AS measures).

(a) Concepts of injury

Injury occurs when dumped or subsidised imports cause problems for the EC industry. The injury determination is an extremely important part of AD and AS investigations. If there is no injury, it is not possible to take measures, even against imports that are dumped at significant dumping margins.

There are three concepts of injury used in anti-dumping or anti-subsidy investigations:


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• Material injury - significant problems suffered by EC industry

• Threat of material injury - though not currently being faced, problems are imminent

• Material retardation - there is no EC industry, but the establishment of such an industry is prevented by dumped imports

(b) Determination of injury

The first point of note is that the AD or AS regulation requires that determination of injury is based on positive evidence. That is, clear, objective facts must be established by the Commission to show that the EC industry has been injured.

This requires an examination of two issues:

Volume of dumped imports and the effect on prices in the EC market; and

Consequent impact on the EC industry.

(c) Cumulation

With regard to the volume of imports where there is more than one country subject to investigation, the Commission will usually cumulate the imports of the various countries involved in the investigation. In this way, the injury analysis is conducted in terms of the total dumped imports, rather than at the level of the individual countries involved in the investigation. This can only be done, however, if the dumping margin and volume of imports from each country are not negligible and the conditions of competition are similar.

(d) Volume of dumped imports

The Commission checks whether there has been a significant increase in dumped or subsidised imports, either in absolute quantities or in terms of market share. The latter is usually the more important indicator as there are situations in which the absolute level of imports can be falling while market share increases.

This can occur where the fall in imports is less than the fall in EC sales. This results in an increased market share for exports despite a reduction in the size of the overall market.

(e) Effect on prices

In looking at the effect of imports on prices, the main consideration is the extent to which the import price undercuts the EC price.

Price Undercutting

Import Price

EC Producers Price


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However, the effect on prices of such imports may also be that EC prices have already decreased (price depression), or may have prevented a price increase (price suppression).

(f) Impact on EC industry

In analysing the impact of the imports on EC industry, the regulation requires an economic evaluation of the relevant economic indicators. The EC industry must clearly be suffering significant problems in order for a positive injury determination to be made.

The regulation lists typical economic factors that must be analysed in this context.

effect of past dumping/subsidy capacity utilisation

magnitude of dumping/subsidy margin factors affecting Community prices

actual and potential decline in sales cash flow

Profits Inventories

Output employment and wages

market share Growth

Productivity ability to raise capital

return on investments Investment

The regulation deliberately gives no guidance as to which indicators are the most important and it states that the list is not exhaustive. It also makes clear that any one or several of the listed factors do not necessarily give decisive guidance.

The reason for this is that injury is not always visible in the same way. The injury analysis is often focused on market shares and profits in actual investigations. However, there are cases where injury does not appear in the form of loss of market share. In certain cases, the share of the EC industry actually increased in a situation where dumping and injury were found.

In practice, the most important indicator is profitability. If profitability is unaffected, it is highly unlikely that there is injury. One reason for this is that it captures both price effects (e.g. price undercutting & underselling) and volume effects (e.g. loss of sales, reduced market share etc.)5.

(g) Lesser-duty rule

The extent to which the import price is injurious is very important given that the EC applies the lesser duty rule6.

5 Profit = Revenue – Costs; Revenue = Volume sold * Price; thus, injury either in reduced volume or reduced price will have the effect of reducing profit. 6 The lesser duty rule requires that the anti-dumping or countervailing (anti-subsidy) duty is the lesser of the

dumping margin or the injury margin.


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Therefore, a 'non-injurious price' is calculated based on the EC price that would be required to remove the injury. This is calculated by reference to the cost of production of the EC industry, with a reasonable profit added. The difference between the non-injurious price and the price of dumped imports is called price underselling. The amount of price underselling is used to calculate an injury margin for each company (or for the exporters as a whole in the case of non-market economy treatment). That is, a single % is calculated that represents the "amount" of injury being caused by dumped imports.

Price underselling (Injury margin)

Non-injurious price Profit in

absence of dumping or

subsidy

EC industry cost of

production

Injury Margin

Import Price

The injury margin is often less than the dumping margin. It is therefore often the basis on which the level of duty is calculated, given that the EC regulation requires the lesser of the two to be used. As in the case of the calculation of dumping, adjustments are often necessary in the calculation of price underselling.

(h) Threat of material injury and material retardation

The Commission can make a positive injury determination on the basis of 'threat of injury'. This is the case where injury does not yet exist but the change in circumstances that would lead to injury is clearly foreseen and imminent.

Factors that are particularly relevant in this context include the available capacity of exporters taking into account demand in other markets; and whether sufficient stocks exist to increase exports dramatically.

This provision is very rarely used.

It is also possible that a positive injury determination can be made if there is no EC industry. The only situation where this could happen is where an EC industry has been prevented from developing (material retardation) due to dumped imports. However, this has never been used as the basis on which to take anti-dumping or anti-subsidy measures.


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(i) Insignificant injury

For dumping, injury is normally regarded as negligible (de minimis), and proceedings terminated, where the imports from one country represent a market share of less than 1%.

An investigation should be terminated if the imports from the country concerned account for 1% or less of EC consumption. The exception to this occurs where there are a number of countries with market shares of less than 1% and where such countries collectively achieve more than 3% of EC consumption.

It can be noted that the EC has adopted rules different to those outlined in the WTO anti-dumping agreement. The latter defines de minimis injury as the situation where imports from the country accused of dumping are less than 3%/7% of total imports into the country in which the dumping complaint has been made. In most situations the EC rule is more generous.

However, where imports have a high overall market share, more than 1% of market share may still be less than 3% of total imports. That is, if total imports from all countries (including those not concerned) have a 70% market share, 1.5% market share is only a 2.1% share of imports i.e. this would not be de minimis under the 1% test but would be under the 3% test.

For subsidy investigations, de minimis injury is also less than 1% market share. However, for developing countries subsidised imports can be up to 4% of total imports before they are considered to be causing significant injury.

2.14 Causal link

A crucial part of the injury analysis is to demonstrate that dumped/subsidised imports are the cause of the injury as determined by the above criteria. The Commission must also ensure that injury caused by other factors is not attributed to dumped imports.

A positive determination of injury may reflect a number of problems faced by the EC industry, of which dumping is only one.

It may be that EC industry has been affected by a dramatic increase in the volume of non-dumped/subsided imports from countries not accused of an unfair trading practice. On the other hand, it might be the case that changes in demand in the EU, perhaps caused by recession, have 'injured' the EC industry. Similarly, poor productivity or inadequate application of technology may explain a worsening performance.

It should be stressed that dumped imports only have to be found to be a material cause of injury. It may well be that other factors are in fact extremely significant causes of injury. As long as the dumped imports are a cause of injury, and it is material, the Commission can find causality. It is not necessary to find that the dumped imports are the sole cause of material injury.


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2.15 Community Interest

The fourth and final requirement, before anti-dumping or anti-subsidy measures can be adopted, is that such measures must be in the Community interest (see paragraph 2.1).

Community interest refers to the overall interests of the European Community. By nature, the Community interest test is a forecast that examines whether the adoption of AD or AS measures would disadvantage the economy overall. More specifically, anti-dumping or anti-subsidy measures may not be applied where the Commission can clearly conclude that it is not in the Community interest to apply measures.

The Community interest part of the investigation requires an "appreciation" of all the various interests to be taken into account. These interests are generally interpreted to include: the domestic industry that is making the complaint; importers; EC industries that use the imported product and will ultimately pay a higher price (if it is used as an input in the production process); and the ultimate consumers of the product.

This is not a public interest in the broad sense, taking into account broader policy issue such as health, environment, security etc. Rather it is an economic balancing test to ensure that measures will be to the benefit of the EC.

In terms of how much importance is attached to each interest, however, the regulation states that "special attention" must be given to the need to eliminate the trade distorting effects of injurious dumping. This gives a built in tilt towards adopting measures once the first three requirements have been met (see paragraph 2.1). Thus, the negative impact of the measures really must be disproportionate in relation to the benefits, in order to reach a conclusion that such measures are not in the Community interest. Note that this additional test is not required under the WTO ADA.


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2.16 Procedure

(a) Overview

The procedure for anti-dumping and anti-subsidy investigations is very similar and is summarised in the table below.

STAGE

WHAT HAPPENS TIMING

Complaint

Industry submits evidence to the Commission requesting investigation

45 days for Commission to decide whether to initiate

Initiation

The Commission opens an investigation against one or a number of countries if there is sufficient evidence

Questionnaire

Information must be provided by each exporter - fill in questionnaire and make other submissions. Apply for individual treatment, if relevant.

40 days after initiation to respond to questionnaire (subject to possible extension)

Verification

The Commission visits the premises of each exporter to verify the information.

Around 1 -3 months after submission of questionnaire

Provisional duties

Imposed when the Commission makes a provisional determination of dumping and/or subsidy and injury/causality/Community interest.

Minimum 60 days, maximum 9 months between initiation and provisional decision. Usually 9 months.

Price Undertakings Offered by exporter to the Commission not to sell below a minimum price.

Can be offered at any time but not before provisional duties or after definitive duties

Definitive duties Final measures adopted if provisional findings are confirmed.

Provisional duties can be imposed for six or nine months depending on the circumstances. For CVD, provisional measures only 4 months.

Application of measures

Duties or undertakings are valid for 5 years, unless this is changed in an interim review. If there is a review, it should normally be concluded within 12 months

Expiry or review

Duties expire after 5 years unless an expiry review is requested and sufficiently documented.


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(b) Complaint and initiation

Although the Commission has powers to initiate in exceptional circumstances an investigation on its own initiative, almost all investigations result from the submission to the Commission of a complaint by or on behalf of the Community industry.

THE OBLIGATIONS OF THE EC INDUSTRY WHEN MAKING A COMPLAINT

A complaint must contain evidence of dumping/subsidy, injury and a causal link. It must include the best information the complainant has available on :

• the identity of the complainant (either an individual company or more usually an association of EC producers) and the products produced by it which are affected by the allegedly dumped imports.

• a description of the allegedly dumped products or amount, nature & countervailibility of subsidy.

• the exporting countries concerned and the identity of all exporters who are known to be involved together with details of EC importers.

• the domestic and export prices of the third country producers.

• how these imports have affected the development of the EC market and led to injury to the EC industry particularly in terms of trends in key economic indicators such as market share, production and profitability.

Before the Commission can initiate an investigation, it must be satisfied that the complaint includes sufficient evidence of the existence of both dumping and/or subsidy and injury to justify proceeding with the case.

No investigation can be initiated where the complaint concerns a third country whose total exports of the product to the EC account for less than 1% of Community consumption, except where these exports are aggregated with exports from other third countries which collectively account for 3% or more of Community consumption.

(c) Community industry support

A complaint can only be accepted where the Commission verifies that it has been made by or on behalf of the Community industry. To do this it must evaluate the extent to which the Community industry has supported or opposed the complaint. Support or opposition is measured by reference to the percentage volume of EC production accounted for by those in support and those opposing the complaint:

- a complaint must be supported by EC producers accounting for a minimum of 25% by volume of EC production;

- where there is support from producers representing 25% or more but less than 50% of EC production, those supporting the complaint must account for a greater volume of production than those who oppose the complaint.


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(d) Time Limits

The Commission has a maximum of 45 days from receipt of the complaint to decide whether or not to initiate an investigation. The reality is, however, that complainants—in case of doubt regarding the technicalities of a complaint—will hold discussions with the Commission informally; if need be, on a number of occasions. The Commission will explain what would be required for the complaint to be accepted. This means that, by the time it is formally submitted, a complaint is likely to contain sufficient evidence. Although this means that very few complaints are rejected once officially lodged, this process is useful in screening out time-wasting or weak complaints.

Once initiated, an investigation must in all cases be concluded within 15 months of initiation (13 months for AS investigations). All new investigations tend to take the full 15/13 months for AD/AS investigations respectively. These very demanding time scales create significant procedural pressures at all stages of the investigation.

(e) Consultation with EC member states on complaint

Once the Commission is satisfied that an investigation is justified, it consults the "Advisory Committee" about its intention to launch an investigation (or indeed to reject the complaint). The Advisory Committee is made up of representatives of the governments of each of the 25 EC member states. At this stage, the Commission is only under a duty to consult with the Advisory Committee. It is not obliged to take into account views expressed by the member states. However, objections raised by the committee can be of considerable practical significance in highlighting particular aspects of the complaint which the Member States believe need careful scrutiny. The final decision to impose definitive duties must be taken by the member states in the Council of Ministers . To this extent, the Commission does take account of member state views throughout the process.

(f) Information released by the Commission

No official publication is made by the Commission confirming the lodging of a complaint, indeed the Commission is under a duty to avoid publicising the fact that a complaint has been made.

The Commission will inform the government(s) concerned prior to initiating an investigation.

The first official publication is made when the Commission initiates an investigation. The initiation is formally announced in the Official Journal of the EU7. The Commission will also notify directly those exporters, importers and representative associations, of whom it is aware, that an investigation has been commenced. The Commission will also send them a questionnaire and a non-confidential version of the complaint. The Commission will also send out market economy and individual treatment claim forms if the investigation involves a non-market economy or an economy in transition.

7 The Official Journal can be consulted at the EUR-Lex website (http://europa.eu.int/eur-lex/lex/en/index.htm).

Also, the anti-dumping section of the DG Trade website contains a 'what's new' section that gives information on initiation of cases and adoption of measures. (http://europa.eu.int/comm/trade/issues/respectrules/anti_dumping/index_en.htm).


http://europa.eu.int/eur-lex/lex/en/index.htm

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(g) Target of investigation

Anti-dumping investigations are opened on a country basis i.e. all exporters in the country (or countries) investigated will be investigated.

In this respect, it differs from EC competition policy, where individual companies are investigated.

However, measures are generally applied on a company by company basis. That is, dumping and injury margins will be calculated for each cooperating exporter and individual duty levels applied accordingly.

Given that the cases are on a country basis, a so-called 'residual duty' will also be applied to all exports from the country being investigated. This will be set at the level of the highest individual duty applied (or even higher if there is significant non-cooperation). Thus, exports by any company not given an individual duty level will be subject to the residual duty rate. Newcomers can however subsequently request to have an individual duty rate.

(h) Questionnaire and investigation period

Having initiated an investigation, the Commission's first task is to obtain relevant information from the producers concerned on their products and prices. This information is obtained in two stages; requesting answers to a questionnaire, and verifying the accuracy of the information provided.

In the questionnaire the Commission will state the period of time to which the requested information should relate. The definition of the investigation period is of considerable importance as information relating to activities outside this time frame will not normally be taken into account. The investigation period must be of not less than 6 months, usually one year, starting immediately prior to the initiation of the proceedings.

Questionnaires are sent to exporters, EC producers, EC importers and users of the product.

(i) Description of exporters’ questionnaire

The Commission generally uses a fairly standard questionnaire, which is adapted to fit the particular features of the industry in question. It will set out a description of the products concerned, the time period of investigation and the time limits within which the replies must be provided to the Commission. It also confirms the names and contact details of the Commission officials responsible for the investigation.

For exporters, the questionnaire requires that detailed information is provided in the following general areas :

• details of the exporter including ownership structure and details of shareholders; copies of published accounts with confirmation of the accounting practices used; numbers of employees and the relevant product distribution structure.

• details of the products - the nature of the products sold by the exporter with details of all products sold; copies of relevant catalogues, price lists or brochures; details of


Annex 1, Page 33

recent year's annual turnover for the products broken down by reference to domestic and export sales; details of production capacity and levels of capacity utilisation; as well as details of the production costs, total production, domestic and export sales for all products concerned during the investigation period.

• details of sales during the period - provision of a list of all related customers of the exporter; list of export transactions to each of the 25 member states; the value of these sales and their cost of production, details of all domestic and export transactions made during the investigation period together with full documentation for selected transactions.

Similar information is requested from EC producers.

Companies situated in countries with economies in a state of transition must complete a claim form for market economy treatment if they wish to apply for it.

(j) Who should complete a questionnaire?

All EC industry producers that are making the complaint must complete a full questionnaire.

The most important players as regards exports in the investigation are the manufacturers. It is the manufacturers who are held responsible for the pricing of products that they have produced. Even if products are re-sold by trading companies, it is the producers that will have anti-dumping measures applied against their products. The difference for the trader is that he can supply from any source. Thus, products he sells may or may not be subject to anti-dumping measures depending on the source.

Traders and importers are sent questionnaires but they are much less demanding than the producers' questionnaire and it is optional to fill them in, though the information is exceptionally useful for the Commission. There is not the same incentive to cooperate as for a manufacturer. However, when the trading company or importer is related to the producer subject to anti-dumping investigation, they must fully cooperate in completing a questionnaire.

In AS investigations, a questionnaire will also be sent to the government concerned.

Note that it is the responsibility of exporters to make themselves known to the Commission (if they are not already known) and to request a questionnaire if they have not been sent one. Ignorance of the case is no defence. For this reason, governments and industry associations in the exporting country will normally try and inform all producers in an industry that the case is taking place.

(k) Time Limits for collection of information

Strict time limits apply to the collection of this information. Parties receiving questionnaires are given 30 days to reply. This time limit starts to run from the deemed date of receipt of the questionnaire, which is one week after the day it was sent to the exporter or transmitted to the appropriate diplomatic mission. Thus, 37 days from the date of initiation is the legal requirement. In practice, the Commission actually allows 40 days.


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An exporter may request an extension of time to respond to the questionnaire. However, the Commission is obliged to conclude all investigations within 15 months for anti-dumping and 13 months for anti-subsidy, which means that the Commission has little flexibility. The Commission usually agrees to short extensions (for both complainants and exporters) and the request should be made in writing stating the reasons why. .

(l) Disclosing confidential information

Many companies are concerned about confidentiality. Sensitive and confidential business information must be handed to the Commission during the investigation.

The interests of the party handing over this information (complainant or exporter) are protected by stringent legal obligations imposed on the Commission. These rules provide that:

- the Commission is required to treat in the strictest confidence information which is confidential by its nature and for which confidential treatment is claimed

- the Commission may not release such information to others, including the national administrations of the member states, except where the express approval of the supplier is given. The Commission would normally ask exporters and/or EC industry if they are in agreement.

- all information received in the context of an anti-dumping or anti-subsidy investigation can only be used for the purposes of that investigation. The information cannot, for example, be transmitted to other parts of the Commission (such as DG Competition).

To ensure that the other parties involved in an investigation are aware of any accusations or explanations that are being given to the Commission, wherever a confidential (formally called "limited") submission is made, a non-confidential version must also be provided. This non-confidential version is then available for inspection by the other parties and the member states.

Non-confidential summaries must be sufficiently detailed so as to permit a reasonable understanding of the information submitted in confidence. Typically, where schedules of production costs are provided, the non-confidential version will be made up of the same schedule with the financial data deleted or provided in index form.

Should the Commission consider that a request for confidential treatment is not warranted, it cannot disregard the supplier's claim and disclose the information. In such circumstances, however, the Commission can decide not to use the "confidential" information provided.

(m) Verification visits

A verification visit is made by a small group of Commission officials (normally, two) to the premises of the exporter, Community producers, importers and users. The visit typically lasts two or three days and during this time the officials will wish to see the source information used by the exporter to prepare its response to the questionnaire. The Commission is required to confirm to the exporters in advance of the visit what type of information will be verified.


Annex 1, Page 35

In AS investigations, as well as making on-the-spot investigations of the exporting countries, the Commission will also visit the government concerned to discuss the relevant subsidy programme(s) in detail.

(n) Provisional duties

Once all interested parties have been given an adequate opportunity to submit information and make comments, the Commission will make its provisional findings. If the following requirements are satisfied, the Commission can impose a provisional duty provided that:

• it has made a provisional affirmative determination of dumping/subsidy and injury

• the Commission is satisfied that the provisional duty is in the Community interest

Provisional duties are imposed by a Commission regulation. The regulation will specify the products and countries covered, the relevant customs tariff headings and the value of the additional duty levied. The duty is not directly payable but is given in the form of a security for payment such as a bank guarantee. The extent to which this security is called up will be determined at the time that definitive duties are imposed.

The Commission is obliged to consult the 25 Member States through the Advisory Committee prior to adopting provisional measures. However, the decision to adopt provisional measures rests with the Commission.

Provisional measures can be imposed for a maximum 9 months, subject to the overall time limit of 15 months. Usually, however, the Commission takes 9 months to make a provisional decision, leaving only a further 6 months before a definitive decision must be made.

The Commission will spend this time further analysing the information, perhaps asking additional questions of any of the parties involved, as it moves towards a definitive decision.

Immediately following the imposition of provisional duties, there is an opportunity for further submissions to be made, both orally and in writing. These are usually made in response to the detailed documents received from the Commission disclosing their findings.

(o) Definitive duties

Definitive duties are imposed by Council Regulation, adopted following a proposal made by the Commission. The proposal is considered to be adopted unless there is a simple majority of Member States that oppose it. To reject AD or AS measures, therefore, the proposal would have to be rejected by at least 13 Member States8.

An investigation can be terminated by a Commission Decision where, following discussions in the Advisory Committee, no member state objects and the Commission concludes that protective measures are unnecessary (due to no dumping, injury, causal link or Community

8 Previously, a Council Regulation imposing AD or AS measures had to be adopted by a simple majority of

Member States. However, a new regulation adopted on 8 March 2004 (Official Journal J L77 13.3.2004) amended the voting system to its current form.


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interest). Where member states do object, the Commission is required to submit to the Council a proposal that the investigation should be terminated. To prevent termination, the Council must reject the proposal by a qualified majority vote within one month.

Definitive duties are imposed on all relevant products of the stated origin arriving in the EC from all sources except from exporters from whom price undertakings have been accepted or who have been found to have 0% dumping or injury margins. Definitive duties are usually imposed for the maximum period of five years but are supposed only to remain in force for as long as they are required to remove the injury caused by the dumping.

The regulation imposing definitive duties will also confirm whether and to what extent the provisional duties are to be collected. Where the definitive duty is greater than the provisional duty, the difference cannot be collected. Where the definitive duty is lower than the provisional duty, the provisional duty can only be confirmed to the extent of the level of the definitive duty.

Prior to the imposition of definitive duties, the Commission will provide a final disclosure which provides a last opportunity to respond to the Commission's findings.

(p) Undertakings

Once the Commission has assessed the information provided at verification, and if the exporter is in a position where a provisional assessment of dumping and injury has been made against it, the exporter can explore whether the Commission would accept a voluntary price undertaking rather than anti-dumping duties.

Price undertakings are a form of anti-dumping or anti-subsidy measure equivalent in effect to anti-dumping or countervailing duties. By offering an undertaking, an exporter commits himself to increase his prices to levels which eliminates the injurious effect of the dumping or subsidisation found. These price levels are the so-called ‘minimum price, i.e. the exporters commits himself not to sell the specified products on the EC market below the minimum price. The same rules are applicable as those used to establish rates for provisional and definitive duties.

The Commission may refuse to accept an undertaking offer and will do so, notably if it is not satisfied that the injurious effect of the dumping is thereby eliminated or if it considers it as impractical. The latter may happen, for example, where the number of relevant exporters or products is large. A past history of failing to observe undertakings is also likely to result in the Commission rejecting an exporter's offer.

Undertakings may be offered at any time up to the final date at which representations may be given before definitive duties are imposed. In practice this means up to the deadline given for comments upon the definitive disclosure.

(q) Types of duty

Duties are usually ad valorem, i.e. they impose a percentage duty payable on the CIF price of imports on arrival in the EC (free of duties). The duty paid varies according to the actual price of the product.


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In certain cases, the Commission can decide to use specific duties. This imposes a duty on the basis of a measure of the quantity of goods imported. Such duties can be used where the products are raw materials (for example, 100 Euro per metric ton). They can also be in the form of a variable duty.

(r) No double counting of subsidies and dumping

No product can be subject to both AD and AS measures for the purpose of dealing with one and the same situation arising from dumping and export subsidisation.

The logic of this is that an export subsidy has the effect of reducing the export price. If the export price is, as a result, reduced below the level of the normal value, this will create dumping. Thus, applying AS and AD measures in such a situation would be dealing twice with the same issue.

Thus, where there are parallel AS and AD investigations, and there is an element of export subsidy in the subsidy margin, this would be subtracted from the dumping margin.

(s) Level of duty (lesser duty rule)

Both provisional or definitive dumping duties can only be imposed to cover the extent of the dumping margin found to exist. The actual dumping margin provides the absolute limit to the duty rate that can be imposed. However, as dumping duties may only be imposed to the extent required to remove injury, the Commission must adopt a lower duty rate than the maximum rate where a lower rate would be sufficient to remove the injury to the EC industry. To establish whether a lower duty rate is appropriate the Commission will compare the EC price required to remove the injury (non-injurious price) with the price of the dumped imports. This is taken as an indicator of the injury margin (see paragraph 2.13(g)).

The non-injurious price is based on a weighted average cost of production for EC industry plus a reasonable rate of profit (based on what they could earn in the absence of injurious dumping or subsidies).

THE LESSER DUTY RULE

EU producers' costs 100

Profit margin in absence of dumping/subsidy, say, 6% 6

Price required to remove injury (non-injurious price) 106

Export price of company A (cif level) 80

Injury Margin [(106 – 80) / 80] 32.5%

In the above example, the export price of company A has to be increased by 32.5% to be non-injurious.

The above applies mutatis mutandis to antisubsidy proceedings.


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2.17 Issues that can arise during period of anti-dumping measures

There are a number of issues that can arise during the period that definitive anti-dumping measures are in place of which the exporter should be aware.

(a) Absorption

Anti-dumping duties are designed to increase the price of dumped products on the EC market thereby removing injury.

Where it can be shown that anti-dumping duties have not led to an equivalent increase in selling prices in the EU, or to a drop in export prices, the Commission can re-calculate the dumping margin to investigate if the duty has been absorbed through lowering the selling price.

(b) Circumvention

Anti-dumping duties only apply to products of a specific origin. The place of shipment is of limited importance. If anti-dumping duties are payable on imports of a certain product with a certain origin these duties will still be payable if a consignment of the product is shipped to the EC through another country .

Where there are customs offences in order to try and avoid anti-dumping measures, such measures can be extended to cover sales of products from third countries where circumvention is taking place. The circumvention rules can also be applied to assembly operations taking place in the EC or in third countries.

Circumvention exists where it is shown that there has been a change in the pattern of trade between third countries and the EC, resulting from an activity (processing or working) for which there is insufficient due cause or economic justification other than the avoidance of the duty.

Circumvention investigations are initiated where requested, and where sufficient evidence is shown that such activities are taking place. Investigations are to be concluded within a period of 9 months from initiation.

(c) Suspension of duties

Where the Commission accepts that it would be in the Community interest to suspend the imposition of anti-dumping duties, it may do so after consultation with the Advisory Committee. A decision to suspend duties will apply for 9 months and may be extended for a further period not exceeding one year by decision of the Council of Ministers.

A suspension of duties will only be in the Community interest where it can be shown that market conditions have temporarily changed such that injury would be unlikely to recommence as a result of the suspension. Before a suspension decision can be taken, the Commission must consult with the Community industry concerned.

(d) Refunds


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Where an importer of products into the EC can show that its products have been imported into the EC at prices which eliminate the dumping margin, or reduce that margin to a level below that of the duties in force, the importer may apply for a refund of the anti-dumping duties it has had to pay.

Requests for refunds must be submitted to the member state in which the goods were originally imported into the EC and within 6 months of the date on which the definitive duties were levied or of the decision to collect payment of the provisional duties.

In practice, obtaining refunds requires a significant effort on the part of the exporting producer, because a full dumping calculation must be performed. As a result, not many applications are made (see annex 7, 1.1).

To assist in the process, the Commission has recently published a guide on obtaining refunds. This can be obtained at the following website address:

http://europa.eu.int/comm/trade/issues/respectrules/anti_dumping/refund/index_en.htm

2.18 Reviews

The right to request reviews is available to exporters, importers and the EC industry alike. There are four main reasons for applying for a review.

- Exporters, importers, the EC industry and other interested parties (as well as the Commission acting at its own initiative and the member states) can request a review to determine whether the continued application of the measure concerned is justified or whether the level of the measure is still appropriate if there has been a change of circumstances (interim review). Such a review cannot be requested until a definitive measure has been in force for at least one year. The Commission can self-initiate a review at any time.

- A review procedure is also used to offer individual treatment to exporters who did not export the products to the EC during the investigation period (newcomer review)9. If the Commission accepts an application for review by a new exporter, – which must inter alia show that it is not related to any exporters already covered by the relevant regulation – it will adopt an amending regulation excluding the producer from the scope of the anti-dumping duties, and making its imports subject to registration pending completion of its investigation. Following the review, the Commission will propose that the new exporter has its own anti-dumping duty. This will usually turn out to be lower than the residual duty which would otherwise have been payable.

- EC industry is given the opportunity, at the latest three months before the expiry of the regulation imposing definitive anti-dumping duties, to request a review of the current EC market position with the intention of convincing the Commission and Council to renew the definitive duties for a further five year period (expiry review). The effect of initiating such a review enables the life of the original regulation to be extended past the initial 5 year limit pending the outcome of the review.

9 Newcomers who did not participate in the original investigation otherwise pay the residual duty rate.


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2.19 Judicial review

During the course of an anti-dumping proceeding, the Commission carries out the tasks of the administrative body responsible for the investigation. As has been stated, the EC rules require that the procedures it uses and decisions it takes must be fair. To do this, the Commission must observe a number of general procedural safeguards.

The EC Treaty (Article 190) provides that all EC Regulations, Directives and Decisions must state the reasons and basis on which they were adopted. Article 173 of the EC Treaty enables parties who are directly and individually concerned by a Regulation imposing an anti-dumping duty to contest the validity of the Regulation by bringing proceedings before the European Courts (in trade cases initially before the Court of First Instance and, on appeal, on a point of law only, to the European Court of Justice). The Court of First Instance will carry out a review, not a retrial of the issues raised in the case. It will look to see if the evidence relied on and the procedures followed in the contested Regulation are accurate and justified.

On average, it will take the CFI 2 years and the ECJ 2-3 years to hand down judgements.

3. SAFEGUARDS

3.1 Summary of EC Safeguard Regulations

The principal EC regulation that authorises the adoption of safeguard measures is Council Regulation (EC) No 3285/94 on common rules for imports. Note that safeguard measures can only be adopted against imports from all sources and not targeted against specific countries (except as allowed for below).

Regulation 3285/94 applies to all products from all countries except as follows:

• Products originating in certain third countries listed in Regulation 519/94. This applies to imports of products originating in certain countries, excluding textiles products covered by 517/94. The countries are non-WTO members considered to be non-market economies for the purpose of EC safeguard rules: Armenia, Azerbaijan, Belarus, Kazakhstan, North Korea, Russia, Tajikstan, Turkmenistan, Ukraine, Uzbekistan, and Vietnam.

• Textile products subject to specific import rules under Regulation 517/94. It applies to certain non-WTO member third countries not covered by bilateral agreements, protocols or other arrangements, or by other specific Community import rules. It is used to apply quotas against non-WTO members such as North Korea, Serbia and Montenegro.

• Regulation 3030/93 allows safeguard measures to be adopted against textiles from non-WTO members that have bilateral agreements with the EC: Belarus, Russia, Ukraine, Uzbekistan, and Vietnam. It also allows China specific safeguards to be adopted on textile products.

• Regulation 427/2003 allows China specific safeguards to be adopted on all products..


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3.2 Substance

First, it must be established that there has been a significant increase in imports.

The increase in imports must be as a result of unforeseen circumstances. WTO jurisprudence has confirmed that this is a requirement, and more particularly, that the circumstances must not have been foreseen at the time of the last tariff negotiations (i.e. Uruguay Round). In this sense, almost any event now would have been unforeseen in 1994 at the finalisation of the Uruguay Round. Recent Commission practice places emphasis on the suddenness of the increase in imports.

The investigation must then determine whether the increased imports are causing or threatening to cause serious injury to Community producers concerned.

Serious injury – significant overall impairment.

Threat of serious injury – serious injury is clearly imminent.

There is no real definition of serious injury relative to material injury that allows a clear understanding of the difference between the two. It is clear that serious injury is worse than material injury and, to this extent, injury must be worse than the level required for AD or AS investigation.

As a general rule, for serious injury, it must be found that the majority of producers are facing a downward trend in profitability and making losses. Material injury does not require losses but rather a negative trend.

In accordance with WTO jurisprudence, the increase in imports must have been sudden, recent, sharp and significant.

In order to make the injury determination, the Commission will examine a series of economic factors. For example it will examine the trend in imports (volume/price etc). and the consequent impact on EC products.

Factors other than imports which are causing injury must be considered by the Commission. WTO jurisprudence requires that other factors causing injury must be separated and distinguished. Although some commentators disagree with the interpretations made by the Appellate Body in recent years, this interpretation seems to require formal measuring and separation of the factors of injury. The Commission does not do this. Nevertheless, the Commission is thorough in looking at other factors and in trying to identify the overall trend of the various injurious factors, and whether there is a consistent picture. It is arguable that to do any more is not possible.

Any measures must be determined not to be against the Community interest. There is no guidance on how this should be analysed by the Commission comparable to that given in the AD and AS regulations. Nevertheless, Commission practice is to consider the various interests mentioned under the AD and AS Community interest provisions, to ensure that the EC is not seriously disadvantaging itself by adopting such measures.


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3.3 Procedure

Unlike AD and AS, industries cannot formally submit safeguard complaints. It is Member States that have such a right. Member States must inform the Commission if trends in imports appear to call for surveillance or safeguard measures.

In practice, therefore, an industry that believes safeguard action might be justified would present the evidence to one or more Member States, in addition to the Commission.

An investigation, if justified, is initiated by the Commission within one month of receipt of information from a Member State. A notice is published in the Official Journal.

At this point, the Commission seeks all information necessary. In recent cases, the Commission has sent questionnaires to all countries exporting the product (though this is not required either under WTO rules or by the EC safeguard regulation).

Views of interested parties will be taken into consideration and thus there is the opportunity to submit written comments and request oral hearings..

Provisional safeguard measures can be adopted a) in critical circumstances and b) where preliminary determination provides clear evidence that increased imports have caused or are threatening to cause serious injury. The maximum duration of such provisional measures is 200 days. Such measures can only be duties (i.e. quotas cannot be used as provisional measures).

Definitive safeguard measures can take any form including duties or quotas. In deciding on measures, the regulation emphasises the desirability of maintaining traditional trade flows. In this regard, if quotas are adopted, they should be set not lower than the average level of imports over the last three years (unless a different level is necessary to prevent or remedy serious injury). Further, the way in which the quota is allocated may be agreed with countries having substantial interest in supplying the product.

For safeguards, there is a significant political dimension to the decision-making process. It is not clear that the decision to adopt measures can be challenged in court, which at face value gives the Commission and Member States considerable discretion in adopting safeguard measures. However, in practice (in the few safeguard investigations opened by the EC in recent times), the Commission treats the decision to adopt safeguards as a technical matter. Safeguards will not be adopted purely on political grounds but only where a substantive case exists.

Decision-making is complicated not least because there are two tracks to follow for a safeguard to be adopted:

• proposal by the Commission and measures adopted by the Council by qualified majority

• complicated procedure whereby Commission decides to impose measures. If one Member State opposes, the decision is referred to the Council. Within 3 months, the Council can, on a qualified majority, take the decision to conform, amend or revoke


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the measures. If the Council fails a decision within the 3 months, the Commission decision shall be revoked.

It is up to the Commission which route is followed.

Developing countries are excluded from any safeguard measures where they account for less than 3% of imports.

The duration of measures is limited to the period of time necessary to prevent/remedy serious injury and to facilitate adjustment on the part of Community producers. Safeguards can be in place for a maximum of four years from the adoption of provisional measures. Such measures can be extended where a) they are necessary to prevent or remedy serious injury b) there is evidence that EC producers are adjusting. The absolute maximum duration of a safeguard measure is 8 years.

For measures lasting more than 1 year, the measure must be progressively liberalised.

Note also that measures lasting more than 2 years would invoke the compensation clause of the WTO safeguards agreement (i.e. equivalent concessions such as tariff reductions on other products would have to be offered to the countries affected by the quota).

There are various restrictions on the re-application of safeguards. For example, where imports have already been subject to safeguard measures, no new measure can be adopted for at least two years and longer if the previous measure was in effect for longer period.

Investigations must be completed within a maximum of 10 months for terminations and 9 (or 11) months where measures are being adopted.

The extent to which safeguards can be subject to judicial review in the European Court of Justice is uncertain. Measures can be challenged but the opportunity to do so may be limited. Note that the CFI has no jurisdiction to review safeguard measures.


Annex 2, Page 1

ANNEX 2 – SURVEY OF INTERESTED PARTIES ON EC TDI

1. TRENDS IN USE OF TDI.......................................................................................................................... 3 2. ANTI-DUMPING/ANTI-SUBSIDY .......................................................................................................... 4 2.1 PROCEDURE...............................................................................................................4

(a) Threshold for accepting complaints .................................................................................................... 4 (b) Type of evidence required on prices.................................................................................................... 4 (c) Length of complaint process................................................................................................................ 5 (d) Changing requirements for complainants ........................................................................................... 5 (e) Comparison with state aid complaints ................................................................................................ 5 (f) Burden on industry wishing to submit a complaint ............................................................................. 5 (g) Sensitivity of confidential information and complaints ....................................................................... 5 (h) Difficulties in getting necessary information for complaint ................................................................ 5 (i) Transparency on vetting of complaints................................................................................................ 6 (j) Representativeness of complaint.......................................................................................................... 6 (k) Non-discrimination in complaint......................................................................................................... 6 (l) Identification of users/importers at the start of the investigation........................................................ 6 (m) Transparency of investigation process ........................................................................................... 6 (n) Access to non-confidential files by interested parties.......................................................................... 7 (o) Member States access to information .................................................................................................. 7 (p) Information made available on the website and through seminars ..................................................... 7 (q) Protection of Confidential Information ............................................................................................... 8 (r) Hearings & submissions...................................................................................................................... 8 (s) Questionnaires..................................................................................................................................... 8 (t) Deadlines for completing questionnaires ............................................................................................ 9 (u) Treatment of non-cooperators ............................................................................................................. 9 (v) Consultation with Member States........................................................................................................ 9 (w) Provisional Measures ..................................................................................................................... 9 (x) Level of measures .............................................................................................................................. 10 (y) Retroactivity ...................................................................................................................................... 10 (z) Non-discrimination............................................................................................................................ 11 (aa) Definitive Measures & Overall Length of Investigation ............................................................... 11 (bb) Interim Reviews ............................................................................................................................ 11 (cc) Expiry reviews .............................................................................................................................. 12

2.2 SUBSTANCE ..............................................................................................................12 (a) Overall views on dumping calculation .............................................................................................. 12 (b) Non-market economy methodology ................................................................................................... 12 (c) Market economy treatment ................................................................................................................ 12 (d) Calculation of SGA and profit in constructed normal value calculations ......................................... 13 (e) Auditing of costs for normal value purposes ..................................................................................... 13 (f) Taking into account the cause of dumping? ...................................................................................... 13 (g) Subsidy calculation............................................................................................................................ 13 (h) Injury & Causal Link......................................................................................................................... 14 (i) Injury margin..................................................................................................................................... 14 (j) A general comment on Community interest....................................................................................... 14 (k) Interpretation of a lack of response from users, importers and consumers....................................... 15 (l) Community interest in an enlarged EC.............................................................................................. 15 (m) Representation of consumers in AD or AS proceedings ............................................................... 15 (n) Concerns raised by complainants about Community interest ........................................................... 16 (o) Analysis of market situation prior to measures ................................................................................. 16

2.3 INSTITUTIONS ..........................................................................................................17 (a) Political nature of decision making................................................................................................... 17 (b) Impact of change in voting and the Eurocoton decision.................................................................... 17 (c) Member States ................................................................................................................................... 17 (d) How Member States make their decisions ......................................................................................... 18 (e) Representatives on the Advisory Committee...................................................................................... 18 (f) Lobbying............................................................................................................................................ 18

Evaluation of EC Trade Defence Instruments – Annex 2; Survey of interested parties on EC TDI (final report December 2005)

Annex 2, Page 2

(g) Internal organisation......................................................................................................................... 18 (h) Role of Commission........................................................................................................................... 18 (i) Case handlers .................................................................................................................................... 19

2.4 EFFECTIVENESS OF MEASURES ...............................................................................19 (a) Overall effectiveness.......................................................................................................................... 19 (b) Circumvention & Enforcement .......................................................................................................... 19 (c) Price undertakings............................................................................................................................. 20 (d) Retaliation against EC companies for being involved in AD action ................................................. 20

3. SAFEGUARDS.......................................................................................................................................... 21


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1. TRENDS IN USE OF TDI1

The survey was used to gather respondent's views on trends in use of TDI.

Annex 7, 1.1 shows that the number of anti-dumping investigations fluctuate from year to year. The following reasons were raised by survey participants for fluctuations in anti-dumping (AD) activity:

• business cycle (affects some industries more than others)

• general economic recession

• trends in distortions in overseas markets

The level of EC anti-dumping activity does appear to have been somewhat lower in the past five years. Two reasons were suggested for this:

• The Commission is being very careful in order to avoid being challenged in the WTO.

• TDI use is informed by the impact of other countries' TDI actions against EC exports. The EC needs to set the rest of the world an example by working to high standards and it is arguable that the standards have been increasing in the EC.

However, some survey respondents made the point that, to a large extent, use of TDI is driven by demand and need. Thus, it is possible that anti-dumping activity may increase to higher levels in the future depending on circumstances.

The following reasons were given for the relatively low level of anti-subsidy (AS) activity:

• difficulty in making anti-subsidy complaints due to problems with getting data/information on subsidies in third markets.

• generally low margins mean that countervailing (anti-subsidy) duties are low and not worth the trouble of making the complaint and going through the investigation.

• politically sensitive within companies e.g. where they themselves are receiving subsidies.

• politically sensitive because 'accusation' is made against a government rather than a competitor as in AD.

Reasons for the very low level of safeguards activity were given as follows:

• perception that politically it is not possible to use this instrument

1 This section is based on the statements and views expressed by survey respondents. All views expressed

are summarised in this section, in order to catalogue all points raised by respondents. However, there is no comment or evaluation on such points in this section. This can be found in section 2.


Annex 2, Page 4

• perception that safeguard measures are taken against 'fair' trade

• too blunt and too disruptive to normal competition

2. ANTI-DUMPING/ANTI-SUBSIDY

2.1 Procedure

(a) Threshold for accepting complaints

Many comments were made on the threshold for getting a complaint accepted by the European Commission ("Commission").

Most survey participants agreed that the threshold is high and that it has increased in recent years.

At the same time, most survey participants (including complainants) felt that the current threshold is at about the right level. In this regard, the following issues were stressed:

• The EC should be setting an example to other users that high standards should be adopted when using TDI.

• A high threshold for accepting complaints ensures WTO consistency.

• Complainants generally feel that they want their cases to be strong. According to survey participants making this point, a high complaint threshold ensures strong cases and, once initiated, there is a reasonable prospect of measures. People contrasted this with the US where there is uncertainty until the end due to the relatively high number of cases with negative final injury determinations by the ITC.

Some EC industries did complain that the initiation threshold was too high. They pointed out that the level required to get an investigation initiated is higher than the 'sufficient evidence' level in article 5.9 of the basic AD regulation.

Those who complained that it was too high pointed out that it is the highest in the world and that, given this, no-one would challenge the EC in the WTO if standards were dropped a little. The feeling was that it is too much of a challenge to get complaints accepted, particularly for those without experience. In this regard, it was claimed that potential complainants are put off. Too much work at pre-investigation stage, it was asserted, is off-putting and reduces the incentive to go ahead as there is no guarantee that the hard work will be rewarded.

At the same time, some other survey respondents (more liberal Member States, and importers/consumer associations) complained that the threshold is too low.

(b) Type of evidence required on prices

On the level of evidence required, it was claimed that the Commission always requires invoices as evidence of prices and that this is unreasonable. Where there are general difficulties, the Commission should be acceptable in accepting salesmen's reports.


Annex 2, Page 5

(c) Length of complaint process

Most EC industries complained that it takes around 6 months from noticing a problem to getting case initiated. Others suggested that it can take as long as 9-10 months.

It was pointed out that, given that provisional duties take 9 months from the date of initiation, and definitive duties take 15 months, industry can have up to wait up to two years between noticing a problem and obtaining relief.

(d) Changing requirements for complainants

A number of survey respondents that had been involved in submitting previous complaints survey made the point that the Commission often changes its requirements on complaints which can be frustrating. However, it was also conceded by that this is often related to WTO or court cases.

(e) Comparison with state aid complaints

The complaints procedure for AD/AS cases was compared with state aid complaints. It was claimed that the latter takes between half a day and three days to prepare and to be taken seriously by the Commission.

(f) Burden on industry wishing to submit a complaint

Many survey respondents made the point that complaints are very burdensome for industry, particularly SMEs. However, the same people said that most companies can cope with it. It was conceded by many that questions raised by the Commission about the complaint, whilst sometimes inconvenient, are often valid.

A particular problem was highlighted in respect of industries producing products with many types, models or grades e.g. clothing. This significantly complicates the collection of data for complainants. It was acknowledged that the Commission makes efforts to work with industry in order to find workable solutions but that this is only a case by case basis.

(g) Sensitivity of confidential information and complaints

It was claimed that the need to provide confidential and sensitive information is off-putting for some business people and, on these grounds, they do wish to get involved with complaints.

(h) Difficulties in getting necessary information for complaint

Difficulties were noted by some respondents with regard to collecting evidence on normal value and, particularly, subsidies.

It was claimed that this is a particular problem for SMEs that don't have subsidiaries in overseas markets.

Some participants had tried using EC delegations based in the respective countries but they had not seemed willing or able to help.


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Some survey respondents made the point that the Commission should devote resources towards finding out about subsidies in other countries rather than leaving it up to EC industry.

(i) Transparency on vetting of complaints

The point was made that the Commission is not transparent on the vetting of complaints. It was claimed that there should be more transparency to give interested parties an understanding of how many complaints are accepted or rejected.

(j) Representativeness of complaint

Some survey respondents thought that the minimum 25% production threshold could be higher.

(k) Non-discrimination in complaint

Some concerns were raised about countries "unnecessarily" being included in complaints. Some complainants had experienced disagreements with the Commission where companies had reasons not to include a particular country.

However, there was general agreement on the point that complainants should not be allowed to arbitrarily choose countries. A number of survey respondents felt that a high standard with regard to non-discrimination at the complaint stage is good.

The point was made by some that other countries have done this in their anti-dumping complaints against the EC or its Member States. It was felt that it is important for the EC to set a good example on this point.

(l) Identification of users/importers at the start of the investigation

A point was raised that complaints do not always accurately identify major users and importers of the product concerned. In this regard, it was claimed that the Commission should do more of its own research on the sector in question to ensure that key users and importers are contacted at the start of the case. The original letter and distribution of questionnaires, it was claimed, should be targeted more accurately.

(m) Transparency of investigation process

In general, participants felt that transparency was sufficient for interested parties to represent and defend their interests.

With regard to access to information, most participants felt overall that they have sufficient information. This includes survey respondents across a diverse range of opinions with regard to TDI i.e. it included both those who have argued for and against measures.

However, some concerns were raised about transparency:

• It was claimed that the Commission sometimes maintains an unnecessary degree of confidentiality on internal matters. Examples raised by survey respondents included issues such as a) who are the members of the advisory committee b) the agenda of advisory committee meetings c) how the Advisory Committee votes d) names and contact details of handlers in a particular case.


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• Information on when cases are being presented to the Committee is crucial for interested parties given the importance of lobbying.

• A point raised on duty calculations is that there is no way for complainants to check what the Commission does. There are cases where dumping margins are lower than the complainants expected based on their knowledge of the market. Some complainants said that they would like to be able to see the full dumping and injury margin calculations. At the same time, there would be significant concern amongst complainants if transparency was raised for exporters. On balance, therefore, the need to respect the confidentiality of information from both sides was acknowledged.

(n) Access to non-confidential files by interested parties

The majority of survey respondents praised the Commission for the fact that access to non-confidential files is always readily available. In addition, most people commented on the fact that the files are always well organised.

However, concerns were raised by survey respondents about the content of non-confidential submissions. Interestingly, this concern was raised in the context of the non-confidential responses of both complainants and exporters. Some observed that this varies from case to case and questioned whether there are internal guidelines.

(o) Member States access to information

Several concerns were raised by Member States about access to information (it can be noted that these comments were made by a number of Member States and not only those that traditionally tend to be against AD in principle):

• One member state claimed that the working document (i.e. the document received by Member States outlining the Commission's findings and proposed conclusions) is not detailed enough to take a view about whether the Commission is right or not.

• Another Member State said that, due to the fact that the report is a summary, it is impossible check Commission's findings.

• Another one said that the reports are not always sufficiently specific and it is not clear how the Commission reached all conclusions.

All Member States acknowledged the fact that they can consult all of the Commission's files at any stage during an investigation. However, in response to the question about how often Member States had used the facility to consult the confidential files of the Commission, it was discovered that only two Member States had done so. Even for those Member States, they had only done so in one case each.

Even though all information is available to the Member States in the confidential files, this tends to be very rarely used because Member States say they do not have the time or resources. Thus, they rely on the working document as their principal briefing on the case.

(p) Information made available on the website and through seminars


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The TDI section of the DG Trade website received overall positive reviews but suggestions for improvement.

Many survey respondents praised the website for providing comprehensive and up to date information. Others commented that they found it hard to find what they wanted and many people did not seem to be aware of everything that was available on the site.

Two specific comments were made about the website:

• The case-specific timetables provided on the website were particularly praised by those people that had seen them.

• The point was made that the initiation of cases could be made more obvious on the website.

Several survey respondents praised Commission efforts to give information through seminars.

(q) Protection of Confidential Information

The Commission was universally praised for its care in handling confidential information.

(r) Hearings & submissions

All survey respondents felt that there is sufficient opportunity to participate in the investigation in terms of oral hearings and written submissions.

There was universal agreement that the Commission is always available for hearings, meetings and telephone conversations.

A point was made that the Commission does not always answer points raised in submissions.

One person also raised the question of whether a hearing officer could be present at AD or AS Hearings. In competition hearings, it was claimed, there is always a hearing officer.

(s) Questionnaires

There was a general complaint about the complexity of questionnaires, particularly for SMEs.

However, overall, survey respondents found questionnaires to be complex and heavy but, at the same time, reasonable and logical.

Several EC industry participants with experience of other AD regimes made the point that EC questionnaires are reasonable compared to others.

For industries with many product models or types, e.g. clothing, the transaction by transaction listing is a very big job. PCNs are complicated and can vary between cases.

One such problem stems from the fact that each company has its own system and it is difficult to change to be in line with questionnaire requirements.


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Whilst it was understood that PCNs are necessary for the systematic organisation of data and allowing comparison with exports, a concern was raised that decisions on the PCN are often taken by case handlers who have no experience in industry and do not know the intricacies of product.

One person stated that case handlers have too much discretion in deciding how a product is to be classified e.g. in deciding subdivisions, though it was observed that this does vary between cases.

A number of survey respondents praised the Commission for its efforts on simplification of the questionnaire for SME complainants.

Further, it was noted that it is good from the complainants' perspective when the Commission uses sampling for injury. However, heavy questionnaires are still required to be completed by the members of the sample.

(t) Deadlines for completing questionnaires

Several survey respondents made the complaint that deadlines are not always respected by users.

At the same time, the point made by others that users and importers are not directly in involved in the case and therefore the incentive for them to participate is lower. The more that complainants and exporters play an active role in the case, the more chance they have of influencing the case in their direction. However, it was highlighted that there is not the same incentive for users and importers and it often only becomes real to them after actual measures are adopted at the provisional stage.

(u) Treatment of non-cooperators

One Member State stated that the rules on treatment of non-cooperating exporters are draconian.

(v) Consultation with Member States

Several Member States raised concerns about the short time in which they have to analyse and take a decision on cases. It was claimed that 10 days is not enough to do everything that has to be done e.g. receive the working document, analyse it, consult (both internally and externally), and get ministerial sign off.

The problem was raised that MS know nothing about the case between seeing the complaint prior to initiation and just before the adoption of provisional measures.

(w) Provisional Measures

Respondents from EC Industry highlighted the difficulties arising from the need to wait nine months from initiation before provisional measures are adopted. Many survey respondents from EC industry requested that provisional duties be adopted more quickly.

Given the comments made about the length of time to get a complaint accepted by the Commission, a further nine months before any relief is obtained is, it is claimed, far too long.


Annex 2, Page 10

Injury is allowed to continue completely unchecked for a minimum of a year from the date that EC industry first starts suffering a problem and sometimes as long as a year and a half.

Further, it is claimed, there is too much opportunity for surges of imports prior to the adoption of measures.

It was noted that provisional measures are not really provisional at all. Rather, they are draft definitive measures. In this regard, one survey respondent made the point that nine months is too long to wait for provisional measures given the level of detail in the preparatory stage.

At the same time, several survey respondents from EC industry said that, whilst they would support more rapid provisional measures, they would be concerned if provisional measures were adopted only to be later removed (the implication being that it would be better to have no duties than weak provisional measures which would be later removed).

Further, a number of survey respondents pointed out that, like exporters, EC complainants often request extensions due to difficulties in completing questionnaires within the given deadline. The Commission adopts a flexible approach to such requests from all interested parties. If shortening the nine month timetable between initiation and adoption of provisional measures meant that the Commission would have to enforce time limits more strictly, there would in fact be less support for introducing quicker provisional measures.

Others raised the point that, while nine months may be the norm, more rapid provisional duties could be used in specific circumstances. For example, where parallel investigations are occurring in other major markets, such as the US, trade diversion could occur. Thus, it was suggested, provisional duties could be adopted earlier in exceptional circumstances (see appendix 1 of annex 6 for an example of parallel investigations and the scope for trade diversion).

(x) Level of measures

Most survey respondents found that the level of AD or AS measures are acceptable and reasonable. On the whole, EC complainants feel that sufficient protection is provided against injuriously price imports.

Implicit in this is that most survey respondents were relatively positive about the mandatory lesser duty rule applied by the EC (which has the impact of lowering anti-dumping measures below the dumping margin in about 50% of cases).

However, most EC industry survey respondents raised a concern with the lesser duty rule. These concerns were not about the lesser duty rule per se but rather that it is unfair that other major markets, such as the US, do not have it. This means that when there are parallel investigations and duties applied to the same product from, say China, in the EC and US, the US tends to have higher measures which encourages trade diversion towards the EC.

(y) Retroactivity

Several survey respondents asked why duties are not collected retroactively more often. In cases such as the one raised in section Annex 6, appendix 1 (TCCA), where there is a serious risk of trade diversion, this could be one solution. It could also be helpful in preventing surges in imports just before provisional duties are adopted.


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A number of people questioned the reason why, if there are good reasons to conclude that quicker provisional measures are not practical, the Commission does not make any use of retroactivity provisions? If a provision is there, they asked, why has the Commission decided not to use it given that it could help to remedy injurious situations at an earlier date within existing EC law and WTO rules?

(z) Non-discrimination

There were mixed views on the need to be non-discriminatory in the adoption of measures. Some believe that if, say, for political reasons, Member States would like one country to be excluded from measures in a multi-country investigation, there should be nothing stopping measures being imposed or maintained against other countries. Others are of the view that this may not be WTO consistent and that the EC should not send out the signal that there is any arbitrariness in the way that it implements trade defence measures.

(aa) Definitive Measures & Overall Length of Investigation

The overall length of investigation was raised as a problem by complainants. If the complaint takes six months to prepare (which in many cases happens), it is fifteen months before provisional measures are taken.

The point was also made that a complaint cannot be made until injury has occurred for at least a year and perhaps even longer and therefore injury can be suffered for several years before protection is obtained..

Typical timeline for AD investigation

6 months

9 months

6 months 6 months

Injurious pricing commences

Data exists to indicated injury

Commission initiates investigation

Provisional measures

Definitive measures

Typical time between problem starting and protection for EC industry = 2 years and 3 months

Two further points were made by survey respondents on the duration of investigations:

• Where provisional measures have not been adopted (which occasionally happens), definitive measures should be adopted much earlier.

• There is no reason for an AS investigation to have a thirteen month deadline while an AD investigation has a fifteen month deadline. Many survey respondents suggested that they should be aligned at 13 months.

(bb) Interim Reviews

No views were expressed on EC interim reviews.


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However, some participants in the US interviews contrasted the low number of interim reviews with the high number of US administrative reviews.

(cc) Expiry reviews

Several concerns were raised about expiry reviews:

• Some EC industries complained that the Commission requires proof of things which cannot be proven. They claimed that the preparation of a request for an expiry review is worse than, or at least as bad as, an original complaint. It is felt that the Commission expects those requesting an expiry review to prove what will happen in the future which, of course, is impossible.

• Some EC industry survey respondents complained of a built in bias against extending measures beyond five years. They claimed that there is an underlying view that five years protection is enough. They stressed that, in some situations, protection is just as necessary after five years as it was at the beginning of the investigation.

• A point was raised about a particular type of situation where anti-dumping duties do their job by shutting irresponsible exporters out of the market while still allowing responsible exporting companies to continue trading following the imposition of an anti-dumping duty. In a combined expiry/interim review, a problem can occur if the responsible companies are found to have zero or de minimis margins. In a case he had experienced, he had been certain that less responsible companies would start trading again following the expiry of measures. However, he claimed, this could not be used as the basis to continue the measures.

Survey respondents generally were positive that a deadline now exists for expiry reviews. However, some felt that, while fifteen months is better than the previous situation of no deadline, it could be shorter.

2.2 Substance

(a) Overall views on dumping calculation

Few strong views were expressed on the dumping/subsidy calculations. Some commented that the Commission does a good job on calculating the dumping margin. Others commented that the Commission is generally trusted to get the calculation right.

(b) Non-market economy methodology

Whilst there seems to be general approval of the EC's non-market economy methodology, some Member States questioned the analogue countries sometimes used (particular reference was made to the US).

(c) Market economy treatment

With regard to market economy treatment for countries with an economy in transition, some EC industry survey respondents raised questions about some of the companies that have received MET. The question was raised in the context of whether young, inexperienced case handlers (who sometimes play a key role in conducting the analysis particularly at the on-site


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verification) are really able to apply five criteria. Concerns were raised that it may be easy for applicants to cheat in the face of such inexperienced officials.

However, one complainant pointed out that they had provided the Commission with updated information about a successful MET applicant during the investigation and it was taken into account.

Several survey respondents from EC industry made the point that once a positive decision on MET has been made, there is no real opportunity to challenge it. They questioned how the Commission's conclusions can be disproved. Also, by the time the decision comes, it was claimed, it is too late to challenge it. MET has big impact when granted and therefore this determination is very important.

Some EC industry survey respondents underlined the importance of appropriate adjustments when MET is granted (whether on a country basis as with Russia) or for individual companies (as with economies in transition such as China). Complaints are satisfied with the MET approach overall but not if it provides the exporters concerned with an unfair advantage (i.e. lower margin due to subsidised inputs and the consequent impact on normal value).

(d) Calculation of SGA and profit in constructed normal value calculations

With regard to SGA and profit calculations, concerns were raised that, following the bed linen WTO ruling, SGA and profit can no longer be based on one 'other' company when data from the company concerned cannot be used. It was claimed that, if the Commission uses other methods allowed (i.e. 2.6 (b) and (c)), there are problems with transparency.

(e) Auditing of costs for normal value purposes

Other concerns were raised about case handlers' ability to audit accurately costs of exporters (given the crucial importance of costs in determining normal value). Complainants can give guidelines on likely cost structure and items to check. However, it was questioned whether case handlers are able to judge costs correctly? Complainants can never be sure that cost structures have been properly audited.

(f) Taking into account the cause of dumping?

Several participants raised the point that it makes a difference whether the cause of dumping is a high domestic price or a low export price. A link here was made to enforcement of WTO rules (in opening markets with high levels of protective trade barriers) and ambition in the DDA negotiations. If dumping is due to a closed market, the cause of the closed market should be attacked (as a complement to anti-dumping measure).

(g) Subsidy calculation

Survey respondents had very little comment on the subsidy calculation.

One of the survey respondents in the US claimed that the Commission is not applying specificity test consistently. It was claimed that there only needs to be one small group that is de facto excluded from the subsidy and the Commission concludes that there is specificity.

Several EC industry survey respondents raised the question of using AS measures against non-market economies or economies in transition (e.g. China). However, it was


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acknowledged that getting information and finding benchmarks to calculate subsidy margins is problematic. Nevertheless, it was questioned whether this should be a barrier to using the AS instrument.

(h) Injury & Causal Link

No strong points were raised on injury and causal link.

Most survey respondents said that the Commission's analysis is done in a professional way and injury & causality are not a controversial topic.

A small number of points were made:

• It was claimed that the definition of domestic industry should not exclude related producers. This is part of EC industry and should not be excluded from the overall picture.

• With regard to like product, several participants claimed that Commission gives insufficient attention to quality and uses which can be critical when considering causality.

• One survey respondent made the point that, given the institutional structure within which TDI operates, once a complaint has been accepted, the Commission is likely to find injury and to defend its decision to initiate.

(i) Injury margin

On the calculation of the injury margin in the context of the lesser duty rule, EC industry survey respondents claimed that the profit margin used is often not sufficient.

Also, a problem was highlighted in cases where there are high and low value products yet average EC industry costs are used for the injury margin calculation. It was claimed that the non-injurious price is not sufficiently high for high value products. This penalizes high cost products within a range of products of the complainant. The impact of duties is limited for such products and thus injury is not removed.

A problem was raised with regard to the confidentiality of calculation. It was pointed out that the Commission calculates the injury margin "in a black box". Unlike the dumping calculation, where the whole calculation is revealed to the relevant interested parties (i.e. each exporter being investigated sees the whole calculation for their own dumping margin), only the Commission sees the whole injury margin calculation.

(j) A general comment on Community interest

Of all the substantive elements, Community interest was the subject on which survey respondents made comments. It has to be first recognised that how Community interest is viewed by any particular survey respondent depends on their general attitude to anti-dumping. There are many different views on dumping ranging from total support to the view that it should be abolished.

Survey respondents were reminded that the evaluation study is not performing a full review of substantive concepts such as Community interest (see section 1 for more information on


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the scope of this evaluation). Rather, it is looking at the operation and efficiency of TDI and it was in this context that the following points on Community interest were made.

In general, users felt that the process of the Community interest aspects of the investigation works well. Interested parties from all sides consulted in the survey felt that they have sufficient information and opportunity to make their points to the Commission at hearings and in writing.

To the extent that there is a concern from interested parties that often oppose measures (e.g. users, importers, consumers etc.), it is about the impact of their submissions on the final conclusions and an apparent 'bias' towards always finding that measures are in the Community interest.

(k) Interpretation of a lack of response from users, importers and consumers

Some Member States and various organisations representing importers and consumers felt that the Community interest analysis is too biased in favour of concluding that measures are not in the Community interest due to the interpretation of 'non-cooperation' from users, importers or consumers. The point was made that the Commission treats lack of response from interested parties that might oppose the measure as an indication that there is no issue.

An example was given from the provisional regulation concerning trout from Norway2:

No user or consumer associations made themselves known within the time limit set in the notice of initiation. The Commission services therefore also contacted the associations of users and consumers known from the recent salmon investigations and invited them to submit information regarding the ongoing proceeding. However, no replies were received either from individual users, their representative associations or from consumer associations. Given the non-cooperation of these parties, it can be provisionally concluded that the imposition of any anti-dumping measure would not unduly affect their situation.

Other survey respondents felt that if users have an interest, they will respond. Therefore, no responses from users means that there is no basis not to proceed with measures where the other conditions are met.

(l) Community interest in an enlarged EC

It was noted that the user interest is growing in an enlarged EC. A concern was raised that, with 25 or more Member States, the balance may be altered in that complaining industries may be concentrated in a small number of Member States while users may be dispersed throughout all Member States. In this context, it was noted that lobbying is becoming more intense and making cases more difficult from the perspective of complaints.

(m) Representation of consumers in AD or AS proceedings

A particular problem was raised in the context of TDI proceedings on consumer products.

2 Commission Regulation 1628/2003 (Official Journal L232 18 September 2003).


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Unlike users or importers, who often have a strong financial incentive to cooperate and put forward their points to the Commission, individual consumers typically are not aware of possible AD or AS measures on products.

Thus, for consumers, the Commission relies on the input of a small number of consumer organisations in the EC. One problem that was raised is that, even in these dedicated consumer organisations, there is actually only a very small number of people across Europe who have the expertise to participate in cases.

Further, consumers organisations tend to be modest with limited resources. The problem raised is that the time required to get involved in an AD or AS investigation is great and the chance of success (in terms of really influencing the outcome) is perceived as being low. Thus, while consumer organisations do get involved in some cases involving consumer products, their role in some cases is more limited than in others.

The point was made that the Commission could chase for more for information provided by consumers. At the same time, with current limited resources, a concern was raised that consumer organisations could not participate fully in every investigation even if the Commission offered it.

(n) Concerns raised by complainants about Community interest

A number of points were raised by EC industry complainants with regard to Community interest:

• Some EC industry survey respondents pointed out that users questionnaires often contain very little information. It was claimed that this means the Commission ends up drawing conclusions from poor and unsubstantiated information.

• One survey respondent from EC industry pointed that the Commission uses new concepts in Community interest to justify a particular finding. For example, in a case involving ferro silicon, it was claimed, the Commission applied a new concept of cumulative cost burden for users which was only ever used in the context of one case.

• One industry survey respondent objected to the Commission concluding that industry is no longer viable. They asked whether the Commission can really make this assessment in the context of a TDI investigation. In one case, it was claimed, an industry went out of business and now industry is in the hands of exporters (magnesium).

(o) Analysis of market situation prior to measures

One survey respondent from a consumer organisation raised the point that previous market situation is never considered in the Community Interest analysis. It was claimed that academic research has shown that most anti-dumping cases are brought by industries already concentrated at an EC level and that this should at least be considered in anti-dumping case. When considering injury, for example, it was suggested that the Commission should look at whether there was competition in the first place? A monopolist may have been earning excessive profits and AD duties merely provide a means to restore them. The Commission should take this into account.


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2.3 Institutions

(a) Political nature of decision making

Most EC industry survey respondents made the point that the process of adopting AD and AS measures is too political. The point was made that the Commission conducts a very detailed investigation and makes its conclusions on the basis of the extensive work undertaken. However, given that the adoption of measures is taken on a vote by the Member States, the ultimate decision is taken by people who are not involved in the detail of the investigation.

It was claimed by some survey respondents that TDI measures should be adopted as a Commission decision as in competition policy. Member States should be consulted but without their opinion being binding. The Commission, it was suggested, is in the best position to make what is essentially a technical decision because they have been investigating the issue.

(b) Impact of change in voting and the Eurocoton decision

Most survey respondents felt that voting change (AD and AS measures must now be rejected by a simple majority in the Council rather than accepted by a simple majority) and the Eurocoton judgement3 have had a significant effect, though participants felt that there has not yet been a case where this has really been tested.

Many EC industry participants expressed the opinion that the change in voting and the Eurocoton decision had somewhat eased the problems caused by the political nature of the decision-making process. They felt that the political element of decision-making has been reduced by these two developments.

Some Member States expressed concern that it would now be very difficult for a Commission proposal for AD or AS measures to be blocked.

With regard to the Eurocoton decision, a number of survey respondents pointed out that it is not clear how Member States would motivate the rejection of Commission proposal. Some stated that there is an "understanding" from the council Presidency that the Council Secretariat Legal Service would do this.

A further question was raised as to how decisions could be motivated if each Member State voting against was doing so for different reasons?

(c) Member States

Most survey respondents made points about the role of the Member States in the adoption of AD and AS measures.

Many participants felt that the Member States have a crucial role in providing a check on the Commission.

3 Case C-76/01 P Eurocoton and Others v Council and United Kingdom, 30 September 2003. The ECJ ruled that Member States must state reasons if it does not accept a proposal to impose AD duties from the European Commission.


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Given the comments made in the previous point about the fact that it may be more difficult for Member States to block measures in future, several Member States felt that their role during the consultation stages of the investigation has been reduced. However, some pointed out that the role of Member States may have to change slightly. It was suggested that Member States can still influence the case during the investigation (i.e. before the consultation stage by which time it becomes too late to influence the outcome). Member States were very positive about the Commission's willingness to discuss progress in the investigation with any Member State at any stage of the investigation. It was suggested that this type of involvement has become much more important to Member States if they want to influence the outcome of an investigation.

(d) How Member States make their decisions

It was pointed out by a significant number of survey respondents, including representatives from several Member States, that Member States often vote in their own national interest rather than the Community interest. Some Member States believe that the Community interest is a cumulation of the twenty five Member State national interests. Other believe that Community interest is a concept distinct from a simple cumulation of Member State national interests.

(e) Representatives on the Advisory Committee

Concern was raised by several survey respondents about the quality of some Member State representatives on the Advisory Committee. TDI is a very technical area and, it was claimed, some Member States have representatives that are not sufficiently knowledgeable on the technical aspects of the subject.

(f) Lobbying

There was general agreement that lobbying has become an important part of the process for everybody, though there were differing views on whether this is a good or bad thing.

All Member States consulted welcome being contacted by interested parties as it provides them with an alternative source of information to the Commission. However, it was generally acknowledged that, in some cases, lobbying can be overdone. Some Member States talked of being bombarded with materials.

Some EC industry survey respondents made the point that Member States allow their decisions to be heavily influenced by the lobbying of users that have not participated in the original investigation. Such parties, it was claimed, should be ignored.

(g) Internal organisation

There was general agreement amongst survey respondents that the current organisation of the TDI service in DG Trade is better as one complete directorate rather than when it was split into separate directorates for dumping and injury.

There was universal criticism of the system when the directorate was split into two. However, the desirability of two genuinely separate administrative bodies, as in US system, was raised by some.

(h) Role of Commission


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Some survey respondents claimed that the Commission has two conflicting roles in TDI investigation. First, it is the objective investigator while, second, it takes on the role in establishing the case on behalf of EC industry (which, it was claimed, is also partly about defending its decision to initiate the investigation). In this sense, the Commission was described as being both prosecutor and judge.

It was suggested that the complaints office could be separated from the investigation teams as a way to alleviate this perceived problem.

(i) Case handlers

Some participants complained of internal politics affecting TDI investigations and there were mixed reviews of case handlers. Several participants had experienced case handlers that did not want to share information with their colleagues or to discuss overall views on a case with each other. This was found to be unacceptable.

Generally, however, most survey respondents felt that investigation teams do function properly.

A concern was raised about the high turnover of staff amongst case handlers. Investigations where case handlers have changed in the middle of a case were particularly highlighted as problematic. It was claimed that the Commission should try to ensure permanent staff throughout proceeding.

Some survey respondents also made the point that they would like to see case handlers specialised by sector.

2.4 Effectiveness of measures

(a) Overall effectiveness

Overall, many expressed that AD and AS measures work in providing protection against dumped and subsidised pricing practices.

The level of measures was generally felt to be adequate by most parties that had made complaints. However, in certain specific cases, it was felt that protection had not been sufficient.

As mentioned earlier, there were some complaints about the lesser duty rule from the perspective that that complainants obtain lower levels of protection than domestic industries get under other regimes such as the US.

It was observed that, given that AS measures generally turn out to be significantly lower than AD measures, industry is less interested the AS instrument.

(b) Circumvention & Enforcement

There was almost universal agreement that the biggest issue for survey respondents from EC industry is enforcement of measures. It was claimed that the biggest problem in this regard is in relation to exports from China.


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The point was made that circumvention is worse in certain industries than in others. Some industries have simpler product types and a good match with CN codes. Problems tend to arise when CN codes have to be split.

Many of the problems are, in fact, customs problems. In this context, it was claimed that customs authorities and agencies (e.g.. the 25 Member State customs administrations and OLAF) do not give sufficiently high priority to enforcing TDI. Several respondents had complaints relating to Olaf (both in terms of its efficiency and the low priority given to TDI). One respondent found Olaf to be efficient.

Participants in the survey generally praised the Commission for being proactive on circumvention. problems. It was acknowledged by all complainants the Commission has improved a lot in trying deal with such problems and is showing more flexibility in finding solutions. The preparedness to open ex officio investigations was cited as an example of a good development.

Difficulties in getting actual evidence of circumvention was raised as a significant problem. In this regard, it was suggested that the Commission should consider doing random-checks on-spot to discourage exporters and traders from engaging in circumvention activity.

At the same time, some survey respondents raised the point that the Commission had been reluctant to initiate circumvention cases and, instead, encouraged the submission of new complaints.

With regard to Olaf, the point was made that there should be transparency between Olaf and DG Trade in the context of enforcing TDI. To the extent that this was a criticism, it was directed at Olaf rather than the Commission.

(c) Price undertakings

Many complainants strongly made the point that they do not like price undertakings. There is a feeling that the problem of circumvention is even greater with undertakings and they do not like the lack of transparency. Thus, a strong preference was expressed for duties to correct dumping or subsidies rather than undertakings.

However, one participant noted that the Commission has improved significantly in monitoring undertakings.

(d) Retaliation against EC companies for being involved in AD action

In a small number of cases, there has been retaliation against EC companies making anti-dumping complaints.

However, very few people interviewed in the survey had experienced any retaliatory threats for participating in complaints. Though it has clearly occurred in certain cases, it remains an isolated problem.

Retaliation included threats from companies not to import EC products and pressure from 3rd country governments (including harassment through unrelated regulatory procedures). Harassment has also included physical violence and threats but in a very small number of cases.


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3. SAFEGUARDS

Very few points were made on safeguards in the survey. Most survey respondents had no experience of them and, therefore, had no views to express.

There was a general perception amongst survey participants that use of safeguards is not encouraged by the Commission and Member States. Thus, complainants tend to think only about AD and AS complaints. On reflection, many questioned why this is the case. Some felt that they should have access to instrument if it is there and that there should not be a prior attitude against it.

In this regard, certain advantages of safeguards were acknowledged by some EC industry participants. For example, it was pointed that safeguard investigations are shorter and less burdensome than AD and AS investigations. It was claimed that, given that the duration of the investigation and burden on complainants are both concerns generally raised by EC industry, this makes more use of safeguards worth considering. Some concluded that safeguards are a valuable tool alongside the other trade defence instruments.

Some survey respondents stated that they did not think that safeguards should be used, giving the following reasons:

• They are imposed against 'fair trade'

• Proving that serious injury has been directly caused by volume is difficult

• The political nature of safeguards is more likely to affect bilateral relations.

• Industries need political weight to be able to use it.

• Price measures are preferable to quantity measures. Safeguards are too restrictive and affect our customers too much. AD and AS measures are less disruptive to trade.

On the other hand, it was pointed out that safeguards can maintain traditional trade flows which may work to the advantage of developing countries.

It was also highlighted that safeguards are not relevant to all industries. They are of use only to those industries where a surge in imports is possible. Some industries require sophisticated distribution networks (e.g. electronic or chemical products) and, therefore, a short term surge is not really possible. As agriculture becomes more liberalised safeguards may be important due to the likelihood of sudden surges of imports.

With regard to procedure for safeguard investigations, the only issue that was raised was to question why only Member States can request a safeguards investigation. It was asked why EC industry cannot be a complainant?


Annex 3

ANNEX 3 – INTERVIEWEES FOR SURVEY IN EC AND US

Organisation Name of PersonEC IndustryEurofer Gordon Moffat, Eurocoton (2 meetings) Michelle AnselmeCIRFS (2 meetings) Colin PurvisCEFIC (2 meetings) Judit Perez TassoUK Steel (2 meetings) Ian RodgersBritish Steel (2 meetings) Lyall SymeBASF Bernhard MarcinowskiEFMA (2 meetings) Sean MackleEurometaux (2 meetings) Monique JonesEuroalliages Ines Van LierdeCogent/Orb Electrical Steels Ltd Bill FordEC Member StatesCzech Republic Jana KlimovaFrance Emanuelle Ivanov DurandItaly Pasquale de MiccoDenmark Stig Munck LarsenNetherlands Arnold van RhijnSweden Bo EsseliusSweden Björn NellhedeUK Colin BaileySpain Ana Ocon MoraBelgium Charles GodartOther EC interestsUNICE Adrian Van HovenForeign Trade Association Maria LinderUK Consumers Association Phil EvansBEUC (European Consumers Association) Dominic ForestThai Office of Commercial Affairs, Brussels Chakarin KomolsiriEuropean CommissionHarald WenigPeter KleinHannes WelgeWolfgang MuellerMarko LattiFrancisco Perez CanadoStephen GospageAlberto SpagnolliUS AdministrationUS International Trade Commission James Lyons, General CounselUS International Trade Commission Robert Carpenter, Director InvestigationsUS International Trade Commission Catherine De Filippo, Chief Applied Economics DvisionDepartment of Commerce Joseph Spetrini, Acting Assistant Secretary for Import AdministrationDepartment of Commerce Ron Lorenzen, Director of Office of PolicyDepartment of Commerce Laurie Parkhill, Office DirectorDepartment of Commerce Michael RillDepartment of Commerce John Herrman, Special Assistant to the Assistant SecretaryDepartment of Commerce Robert Heilferty, Senior CounselUSTR John Henderson, Director, Trade RemediesUSTR Roy Malmrose, Director, Industrial Subsidy PolicyOther US intervieweesSkadden Arps Slate Meabher & Flom LLP John ManganSkadden Arps Slate Meabher & Flom LLP Jeffery GerrishCollier Shannon Scott Paul RosenthalWilmer Cutler Pickering Hale & Dorr Gary HorlickSteptoe & Johnson Susan EssermanMayer Brown Rowe & Maw James Jochum, Former Assistant Secretary of Import AdministrationMayer Brown Rowe & Maw Margeurite Trossevin, Former Deputy Counsel, DOCAmerican Iron & Steel Institute Barry Solarz, Vice President, Trade & Economic PolicyAmerican Institute for International Steel David Phelps, PresidentTradeWins LLC John Magnus, PresidentThai Office of Commercial Affairs Chaveevarn Chandanabhamma, Minister (formerly Minister in Brussels office)Crowell and Moring Jeff Snyder

Evaluation of EC TDI; Annex 3 – Survey Interviewees (Final Report December 2005)

Annex 4, Page 1

Evaluation of EC Trade Defence Instruments (TDI) Discussion Issues for Business

1. EXPERIENCE OF TDI

• Name and affiliation of respondent • What is your experience with EC TDI (complainant,

importer/user, exporter, trade/industry association official)?

• Have you been involved in TDI investigations against EC exports?

• Do you have specific experience of US TDI? In what context?

2. ANTI-DUMPING AND ANTI-SUBSIDY INSTRUMENTS

2.1 Trends

(a) Why does anti-dumping activity fluctuate? (b) Why has anti-subsidy activity remained at low levels

in comparison to anti-dumping?

2.2 Procedure (a) Is the threshold for accepting complaints set at a

reasonable level? (b) Access to instrument for EC industry attempting to

prepare complaints – issues might include cost, problems achieving standing, problems collecting necessary evidence of dumping or subsidy, SMEs, problems unique to particular sectors etc.

(c) Transparency and access to information. (d) Confidentiality of business sensitive information –

are companies confident that confidentiality will be respected when they submit business information?

(e) Is there sufficient opportunity to participate in the investigation (hearings, submission, disclosure etc.)?

(f) Length of investigation and timetable for adoption of measures (i.e. 9 months for provisional measures, 13 and 15 months for definitive dumping and subsidy measures respectively)

(g) Complexity of questionnaires – could they be simplified and, if so, in what way?

(h) Decision-making process for adopting measures. (i) WTO non-discrimination requirements (i.e. MFN)

and complaints/adoption of measures. (j) Interim-reviews (k) Expiry reviews (l) Other procedural issues affecting the needs and

opportunities of economic operators.

2.3 Substance (a) Definition of EC industry in view of globalisation

(exclusion due to relation or imports). (b) Dumping and Subsidy Margins

(i) Dumping calculation – • Normal Value – issues may include non-

market economy methodology, related companies, SGA and rate of profit in constructed normal value calculation.

• Export Price – issues may include related companies.

• Comparison and Adjustments

EVALUATION OF EC TDI ; Annex 4 – Discussion Issues Lists for EC Survey (Final Report December 2005)

Annex 4, Page 2

• De minimis dumping (ii) Subsidy calculation -

• Definition of subsidy • Calculation of benefit • CVD and countries in transition. • De-minims subsidy

(c) Injury and Causality

• Determination of material injury - issues might include threshold for 'material' injury, captive production, and treatment of non-complainants.

• Like product • Threat of material injury and material retardation • Causal link - attribution of injury between

dumped/subsidised imports and other factors. (d) Injury margin for implementation of lesser duty rule

– issues might include identification of non-injurious price, relevant costs and rate of profit to be used in calculating the NIP.

(e) Community Interest (f) Post-measure substantive issues

• Expiry review – likely continuation / recurrence of dumping/subsidy/injury.

• Interim review – changed circumstances. • Circumvention • Absorption • Duty refunds • Suspension

• Registration and retroactivity.

2.4 Institutions (a) How do you view the role of Member States in

adopting measures? (b) Impact of change in Council voting procedures

introduced in 2004 and of Eurocoton judgement. (c) Internal organisation of Commission investigations,

particularly with regard to the dumping/subsidy and injury investigations.

(d) How do you perceive ex parte meetings between Member States and economic operators (lobbying)?

(e) Any other comment on the respective roles of the Commission and Member States.

2.5 Effectiveness of anti-dumping and anti-subsidy

instruments (a) Application and enforcement – issues may include

circumvention, absorption, OLAF, customs. (b) Type of measures – duties and undertakings. (c) Level of measures (d) Threat of retaliation and disincentive to make

complaints (e) Examples of successful measures and those that

failed to achieve their objective

2.6 Comparison with US (a) Substance

(i) Dumping calculation methodology (e.g. adjustments, zeroing, domestic sales tests such as 5% test and % of profitable sales)

EVALUATION OF EC TDI; Annex 4 – Discussion Issues Lists for EC Survey (Final Report December 2005)

Annex 4, Page 3

(ii) Subsidy calculation methodology (e.g. pre-privatisation subsidies, allocation methodologies)

(iii) Injury and causal link – may include injury factors considered, treatment of captive production, attribution of injury.

(b) Procedure (i) Complaint – sufficient evidence threshold,

who can make complaints? (ii) Questionnaire and verification (iii) Provisional and definitive measures – speed

of adopting measures, duty collection systems and efficiency of duty collection., disclosure.

(iv) Administrative review (v) Judicial review. (vi) Treatment of confidential information. (vii) Cost of procedures (viii) Support of SMEs (ix) Byrd amendment

(c) Institutions – split of dumping/subsidy and injury between two US agencies.

3. SAFEGUARDS 3.1 Why have safeguards traditionally been seen as unusable

in the EC? 3.2 Substance

(a) Increased imports (b) Serious injury (c) Causality

(d) Community Interest (e) China and TPSSM/special textiles safeguard

3.3 Procedure

(a) Initiation of investigations (b) Provisional and definitive safeguard measures (c) Decision-making (d) Type and duration of measures (e) Compensation

3.4 Institutions 3.5 Effectiveness of measures 3.6 Comparison with US

Cliff Stevenson Chief Economist and Head of EU Trade Practice Mayer, Brown, Rowe and Maw LLP [email protected]+32 (0)2 502 5517 (Brussels office) +44 (0)207 334 2041 (London office)


mailto:[email protected]

Annex 4, Page 4

Evaluation of EC Trade Defence Instruments (TDI) Discussion Issues for Member States

4. EXPERIENCE OF TDI

• Name of person and Member State represented. • What is your role? In what way are you involved in TDI? • Have you been involved in TDI investigations against

EC exports? • Do you have specific experience of US TDI? In what

context?

5. ANTI-DUMPING AND ANTI-SUBSIDY INSTRUMENTS

5.1 Trends

(a) Why does anti-dumping activity fluctuate? (b) Why has anti-subsidy activity remained at low levels

in comparison to anti-dumping?

5.2 Procedure (a) Is the threshold for accepting complaints set at a

reasonable level? (b) Access to instrument for EC industry attempting to

prepare complaints – issues might include cost, problems achieving standing, problems collecting necessary evidence of dumping or subsidy, SMEs, problems unique to particular sectors etc.

(c) Transparency and access to information.

(d) Confidentiality of business sensitive information – are companies confident that confidentiality will be respected when they submit business information?

(e) Is there sufficient opportunity to participate in the investigation (hearings, submission, disclosure etc.)?

(f) Length of investigation and timetable for adoption of measures (i.e. 9 months for provisional measures, 13 and 15 months for definitive dumping and subsidy measures respectively)

(g) Complexity of questionnaires – could they be simplified and, if so, in what way?

(h) Decision-making process for adopting measures. (i) WTO non-discrimination requirements (i.e. MFN)

and complaints/adoption of measures. (j) Interim-reviews (k) Expiry reviews (l) Other procedural issues affecting the needs and

opportunities of economic operators.

5.3 Substance (a) Definition of EC industry in view of globalisation

(exclusion due to relation or imports). (b) Dumping and Subsidy Margins

(i) Dumping calculation – • Normal Value – issues may include non-

market economy methodology, related companies, SGA and rate of profit in constructed normal value calculation.

• Export Price – issues may include related companies.

• Comparison and Adjustments • De minimis dumping


Annex 4, Page 5

(ii) Subsidy calculation - • Definition of subsidy • Calculation of benefit • CVD and countries in transition. • De-minims subsidy

(c) Injury and Causality

• Determination of material injury - issues might include threshold for 'material' injury, captive production, and treatment of non-complainants.

• Like product • Threat of material injury and material retardation • Causal link - attribution of injury between

dumped/subsidised imports and other factors. (d) Injury margin for implementation of lesser duty rule

– issues might include identification of non-injurious price, relevant costs and rate of profit to be used in calculating the NIP.

(e) Community Interest (f) Post-measure substantive issues

• Expiry review – likely continuation / recurrence of dumping/subsidy/injury.

• Interim review – changed circumstances. • Circumvention • Absorption • Duty refunds • Suspension • Registration and retroactivity.

5.4 Institutions

(a) How do you view the role of Member States in adopting measures?

(b) Do you feel sufficiently informed? (c) Are working documents adequate? (d) Basis for Member States to decide how they vote,

their internal organisation and decision-making process.

(e) Impact of change in Council voting procedures introduced in 2004 and of Eurocoton judgement.

(f) Internal organisation of Commission investigations, particularly with regard to the dumping/subsidy and injury investigations.

(g) How do you perceive ex parte meetings with economic operators (lobbying)?

(h) Any other comment on the respective roles of the Commission and Member States.

5.5 Effectiveness of anti-dumping and anti-subsidy instruments (a) Application and enforcement – issues may include

circumvention, absorption, OLAF, customs. (b) Type of measures – duties and undertakings. (c) Level of measures (d) Threat of retaliation and disincentive to make

complaints (e) Examples of successful measures and those that

failed to achieve their objective


Annex 4, Page 6

5.6 Comparison with US (a) Substance

(i) Dumping calculation methodology (e.g. adjustments, zeroing, domestic sales tests such as 5% test and % of profitable sales)

(ii) Subsidy calculation methodology (e.g. pre-privatisation subsidies, allocation methodologies)

(iii) Injury and causal link – may include injury factors considered, treatment of captive production, attribution of injury.

(b) Procedure (i) Complaint – sufficient evidence threshold,

who can make complaints? (ii) Questionnaire and verification (iii) Provisional and definitive measures – speed

of adopting measures, duty collection systems and efficiency of duty collection., disclosure.

(iv) Administrative review (v) Judicial review. (vi) Treatment of confidential information. (vii) Cost of procedures (viii) Support of SMEs (ix) Byrd amendment

(c) Institutions – split of dumping/subsidy and injury between two US agencies.

6. SAFEGUARDS 6.1 Why have safeguards traditionally been seen as unusable

in the EC? 6.2 Substance

(a) Increased imports (b) Serious injury (c) Causality (d) Community Interest (e) China and TPSSM/special textiles safeguard

6.3 Procedure

(a) Initiation of investigations (b) Provisional and definitive safeguard measures (c) Decision-making (d) Type and duration of measures (e) Compensation

6.4 Institutions 6.5 Effectiveness of measures 6.6 Comparison with US

Cliff Stevenson Chief Economist and Head of EU Trade Practice Mayer, Brown, Rowe and Maw LLP [email protected]+32 (0)2 502 5517 (Brussels office) +44 (0)207 334 2041 (London office)


mailto:[email protected]

Annex 5, Page 1

ANNEX 5 – BASIC DESCRIPTION OF US TRADE DEFENCE INSTRUMENTS

1. OVERVIEW.......................................................................................................................................................3 1.1 LEGAL AUTHORITY .....................................................................................................................................3 1.2 INSTITUTIONS ..............................................................................................................................................3

2. ANTI-DUMPING AND COUNTERVAILING DUTIES ...............................................................................4 2.1 SUBSTANCE .................................................................................................................................................4

(a) Summary of Statute and Regulations..........................................................................................................4 (b) Definition of Dumping ................................................................................................................................4 (c) Normal Value..............................................................................................................................................5 (d) Export Price/Constructed Export Price......................................................................................................7 (e) Dumping Calculation .................................................................................................................................7 (f) Exporter-Specific Dumping Margins..........................................................................................................8 (g) All Others Rate ...........................................................................................................................................9 (h) Subsidy........................................................................................................................................................9 (i) Financial Contribution ...............................................................................................................................9 (j) Benefit.........................................................................................................................................................9 (k) Specificity .................................................................................................................................................10 (l) Allocation of the Benefit ...........................................................................................................................11 (m) Subsidy Rate Calculation.....................................................................................................................11 (n) Non-Market Economies ............................................................................................................................12 (o) Injury ........................................................................................................................................................12 (p) Like Product .............................................................................................................................................12 (q) Material Injury .........................................................................................................................................13 (r) Cumulation ...............................................................................................................................................13

2.2 PROCEDURE...............................................................................................................................................13 (a) Overview of Procedures ...........................................................................................................................13 (b) Petition and Initiation...............................................................................................................................16 (c) Petition Requirements...............................................................................................................................17 (d) Standard for Initiation ..............................................................................................................................17 (e) Industry Support .......................................................................................................................................17 (f) Time Limits ...............................................................................................................................................18 (g) Target of the Investigation........................................................................................................................18 (h) Notice of Initiation....................................................................................................................................18 (i) ITC Preliminary Investigation Phase .......................................................................................................19 (j) Negligibility ..............................................................................................................................................19 (k) Period of Investigation .............................................................................................................................19 (l) Questionnaire ...........................................................................................................................................19 (m) Description of the Standard Dumping Questionnaire .........................................................................20 (n) Time Limits ...............................................................................................................................................21 (o) Verification...............................................................................................................................................21 (p) Written Argument .....................................................................................................................................21 (q) Hearings ...................................................................................................................................................22 (r) Disclosure and Access to Information......................................................................................................22 (s) Overview of Duties ...................................................................................................................................23 (t) Provisional Measures ...............................................................................................................................23 (u) Final Phase of ITC Injury Investigation ...................................................................................................23 (v) Definitive Duties.......................................................................................................................................24 (w) Undertakings........................................................................................................................................24 (x) Structure of an Undertaking .....................................................................................................................25 (y) Types of Duties .........................................................................................................................................25 (z) Level of Duties..........................................................................................................................................25

Evaluation of EC Trade Defence Instruments – Annex 5; Basic Description of US TDI (Final Report, December 2005)

Annex 5, Page 2

(aa) Duty Absorption...................................................................................................................................25 (bb) Scope....................................................................................................................................................26 (cc) Circumvention......................................................................................................................................26 (dd) Revocation ...........................................................................................................................................26 (ee) Sunset...................................................................................................................................................26 (ff) Judicial Review....................................................................................................................................27

3. SAFEGUARDS.................................................................................................................................................27 3.1 SUBSTANCE ...............................................................................................................................................27

(a) Summary of Statute and Regulations........................................................................................................27 (b) Injury Phase Considerations ....................................................................................................................28 (c) Increased Imports .....................................................................................................................................28 (d) Injury or Threat of Injury to the Domestic Industry .................................................................................28 (e) Causation..................................................................................................................................................29 (f) Adjustment Plans ......................................................................................................................................29 (g) Types of Relief ..........................................................................................................................................30 (h) Presidential Discretion to Impose Relief ..................................................................................................30 (i) Limits on Relief Granted...........................................................................................................................30 (j) Exclusion of Certain Countries ................................................................................................................31 (k) Exclusion of Certain Products..................................................................................................................31

3.2 PROCEDURES.............................................................................................................................................31 (a) Overview of Procedures ...........................................................................................................................31 (b) Petition and Initiation...............................................................................................................................31 (c) Petition Requirements and Initiation........................................................................................................32 (d) Questionnaires..........................................................................................................................................32 (e) Hearings ...................................................................................................................................................32 (f) Disclosure and Access to Information......................................................................................................32 (g) Interagency Process Regarding Presidential Action................................................................................33 (h) Appellate Review ......................................................................................................................................33 (i) Limits on Subsequent Investigations.........................................................................................................33


Annex 5, Page 3

1. OVERVIEW

1.1 Legal Authority

U.S. trade defense instruments are governed by domestic laws, which implement the United States obligations under the relevant WTO Agreements. The WTO Agreements themselves do not have direct legal effect under U.S. law. The statutory authority for U.S. anti-dumping and countervailing (anti-subsidy) measures is found in Title VII (sections 701-783), of the Tariff Act of 1930, as amended. The statutory authority for safeguard actions is found in Title II (sections 201-204) of the Trade Act of 1974, as amended. These statutory authorities were most recently amended by the Uruguay Round Agreements Act to implement the WTO Agreements. 1.2 Institutions

The institutions that play a role in the imposition and enforcement of U.S. trade defense instruments are: the U.S. Department of Commerce (Commerce), the International Trade Commission (ITC), the Office of the United States Trade Representative (USTR), the Bureau of Customs and Border Protection (Customs), the Court of International Trade and the Court of Appeals for the Federal Circuit. Commerce, a cabinet level agency of the executive branch, has primary responsibility for enforcement of the U.S. anti-dumping and countervailing duty laws. Responsibility within Commerce for conducting investigations and administering anti-dumping and countervailing duty measures rests with Import Administration, and decision-making authority has been delegated by the Secretary of Commerce to the Assistant Secretary for Import Administration. The ITC, which is an independent agency comprised of six commissioners (3 Democrats and 3 Republicans) appointed by the President for 12-year terms, is responsible for making the injury determinations in anti-dumping and countervailing duty proceedings. The ITC is also responsible for conducting safeguard investigations. However, it is the President that makes the final determination as to whether relief will be provided and the extent of that relief. The President is advised by the USTR, which is part of the Office of the President. Customs collects anti-dumping and countervailing cash deposits and duty assessments, in accordance with instructions received from Commerce. Customs’ role is ministerial. Customs does not have decision-making authority in AD/CVD or safeguards cases. The Court of International Trade is responsible for judicial review of anti-dumping and countervailing duty and safeguard determinations by Commerce and the ITC. Decisions by the Court of International Trade may be appealed to the Court of Appeals for the Federal Circuit. Although further appeal to the U.S. Supreme Court is possible, review by the Supreme Court is rarely sought and was last granted in 1979.


Annex 5, Page 4

2. ANTI-DUMPING AND COUNTERVAILING DUTIES

2.1 Substance

(a) Summary of Statute and Regulations

Commerce is required by law to impose anti-dumping or countervailing duties if the following conditions exist: (i) either,

(A) the subject merchandise is being, or is likely to be, sold in the United States at less than normal value; or

(B) a government is providing, directly or indirectly, a countervailable subsidy with respect to the manufacture, production or export of the subject merchandise, and

(ii) an industry in the United States is materially injured or threatened with material

injury, or the establishment of an industry in the United States is materially retarded, by reason of the dumped or subsidized imports.

The United States has a bifurcated system in which Commerce determines whether dumping or subsidization exists and the ITC determines whether the U.S. domestic industry is injured by reason of those dumped or subsidized imports. The U.S. anti-dumping and countervailing duty laws are found in Title VII (sections 701-782) of the Tariff Act of 1930,1 as amended (“the Act”). Commerce’s implementing regulations are codified in Title 19 of the Code of Federal Regulations, Part 351 (“Commerce Regulations”). The ITC’s implementing regulations are codified at Title 19 of the Code of Federal Regulations, Part 207 (“ITC Regulations”). The Act and Regulations were amended, as necessary, to reflect the WTO Agreement on the Implementation of Article VI of GATT 1994 (“the Anti-dumping Agreement”) and the WTO Agreement on Subsidies and Countervailing Measures (“SCM Agreement”), which were negotiated in the Uruguay Round. (b) Definition of Dumping

Dumping is defined as the extent to which the “normal value” of the merchandise exceeds the export price to the United States. The comparison of export price and normal value is normally

1 These provisions are codified at 19 U.S.C. §§ 1671 et seq.


Annex 5, Page 5

made at the “ex-factory” level, i.e., exclusive of movement expenses. The dumping calculation is complex, usually requiring numerous adjustments to export price and normal value to eliminate differences that effect price comparability. (c) Normal Value

Whenever possible, normal value is determined on the basis of prices at which the exporter sells the foreign like product for consumption in the exporting country (“home market prices”). The three most common situations where home market prices do not provide a basis for determining normal value are: (1) the home market is not “viable” (i.e., total sales in the home market are less than 5% of total sales to the United States); (2) sales in the home market were made at prices below the cost of production; or (3) there are no home market sales of a comparable product. If normal value cannot be based on home market sales, Commerce will base normal value on prices at which the exporter sells the foreign like product in third countries, or on the basis of a “constructed value.” Note that the U.S. law defines “foreign like product” as an identical or comparable product “produced in the same country by the same person.” An exporter’s normal value is therefore never based on sales by other companies. There is a preference in U.S. law for determining normal value on the basis of actual prices. If possible, therefore, Commerce will use a viable third country market rather than constructed value when home market sales are unavailable. However, Commerce has the discretion to use constructed value in lieu of third country sales if the agency deems it to be more appropriate in a given case. Constructed value is most commonly used when, although the home market is viable, home market sales are found to be below the cost of production or otherwise outside the ordinary course of trade, or when there is no comparable product sold in the home market.

Constructed Value = Cost of Manufacturing, including, material, labor, variable and fixed overhead (“COM”) + selling general and administrative expenses (SG&A) + profit

Sales below cost. If, within an extended period of time, prices are below cost for a substantial quantity of sales, Commerce will disregard the below cost sales when calculating normal value. “Substantial quantities” means 20% or more and an “extended period of time” is normally one year. Therefore, if below cost sales during the period of investigation are less than 20% no sales are disregarded. Cost of Production = COM + SG&A Sales to affiliated parties. Home market sales to affiliated parties are only used in the normal value calculation if they are “in the ordinary course of trade.” In 2002, in response to an adverse WTO decision, Commerce adopted a new test to determine if affiliated party sales are in the ordinary course of trade. Sales to affiliates will be treated as in the ordinary course of trade if prices to the affiliate fall, on average, within a defined range around prices for the same or


Annex 5, Page 6

comparable merchandise sold to all unaffiliated customers. The price range for sales within the ordinary course of trade is between 98 percent and 102 percent, inclusive, of prices to unaffiliated customers. If sales to affiliates fall outside this range, Commerce normally requests the affiliate’s downstream sales. If, however, sales to the affiliate are less than 5% of the home market, Commerce will simply disregard them. Adjustments. Numerous adjustments are made to normal value to ensure comparability to the export transactions. Adjustments include:

Difference in Merchandise (“Difmer”): When the product sold in the home market is not identical to the product sold to the United States, the normal value is adjusted by the net difference in variable manufacturing costs incurred to produce the different physical characteristics. If the difmer adjustment exceeds 20% of the total average cost of manufacturing, on a model-specific basis, sales of the product will not be used to determine normal value. Normally in such cases, Commerce will use a constructed value.

Packing: To eliminate differences in packing costs, the packing costs for home market sales are deducted from normal value and packing costs for sales to the United States are added to normal value.

Circumstances of Sale: These adjustments account for differences in direct selling expenses such as commissions, warranties and credit expenses.

Level of Trade: Comparisons are made, to the extent possible, between sales at the same level of trade. If, however, sales in the home market are made at a different level of trade and the record evidence demonstrates that the difference in level of trade affects price comparability, Commerce makes a level of trade adjustment to normal value.

Non-Market Economies. When the exporting country is a non-market economy (“NME”), Commerce does not determine normal value on the basis of prices and costs in the NME. Instead, Commerce constructs a normal value using what is commonly referred to as the “factors of production” method. Under that method, the NME producer provides Commerce with its factors of production, i.e., labor hours, quantities of inputs, energy consumption and capital costs. Commerce then constructs normal value by valuing those factors, plus an amount for SG&A and profit, in a surrogate market economy that is a significant producer of comparable merchandise and is at a comparable level of economic development. Over the years, Commerce has compiled a significant amount of market-economy data on which to value the factors of production. Commerce publishes an index of that information on the Import Administration website. In addition, Commerce has established a practice of using the NME producer’s actual cost for inputs that the producer purchases from a market economy, rather than use a surrogate value for those input costs. If there is inadequate surrogate value information available to use the factors of production method, Commerce has the discretion to rely on prices at which comparable products produced


Annex 5, Page 7

in a surrogate market economy are sold in other markets, including the United States. Commerce has rarely, if ever, resorted to this alternative. Before Congress amended the anti-dumping law to establish the factors of production method, Commerce’s NME method relied to the extent possible on price and cost information from surrogate market economy producers. That approach was abandoned due, at least in part, to difficulties in finding surrogate producers willing to cooperate in the investigation. (d) Export Price/Constructed Export Price

Commerce bases it calculation of export price on the first sale to an unaffiliated party.

Export Price: U.S. law defines “export price” as the price at which the product is first sold before importation by the producer or exporter outside of the United States to an unaffiliated purchaser in the United States, or to an unaffiliated purchaser outside the United States for export to the United States. In sum, export price sales are made by someone outside the United States to an unaffiliated party in, or for export to, the United States. Constructed Export Price (“CEP”): There are other circumstances, however, in which the first sale to an unaffiliated party is made in the United States (before or after importation) by someone affiliated with, or acting on behalf of the foreign exporter or producer. These are not situations in which someone in the United States is merely facilitating a sale by the foreign exporter or producer (e.g., arranging customs clearance). Rather, they are situations in which the selling activity is taking place in the United States. In such cases, the price to the affiliate is not a legally permissible basis to determine export price. Commerce therefore constructs an export price. To do so, Commerce deducts from the price to the first unaffiliated purchaser in the United States all selling expenses incurred in the United States by or on behalf of the exporter or by the affiliated reseller.2

Non-market Economies: In NME cases, Commerce applies the normal rules for calculating the export price or constructed export price. (e) Dumping Calculation

The merchandise under investigation must fall within a single product type – what is referred to in U.S. law as a single “class or kind” of merchandise.3 The subject merchandise is, however, frequently comprised of multiple subcategories or models, not all of which are comparable to each other. For example, an investigation of widget imports may include various sizes of widgets ranging from one to ten inches. As discussed above, if the variable cost of manufacturing a ten-inch widget is more than 20% higher than the cost of a one-inch widget, Commerce would find that sales of one inch widgets are not comparable to sales of ten inch widgets. In addition, even if the products are identical, the sales transactions may not be comparable for other reasons, e.g., they may be made at different levels of trade. To perform the

2 These CEP deductions are in addition to the normal adjustments made to determine export price. 3 If the petition covers more than a single class or kind of merchandise, Commerce will conduct separate investigations of each class or kind of imports.


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dumping calculation, therefore, Commerce creates groups of comparable transactions, taking into account, to the extent possible, physical characteristics and level of trade so that sales to the United States are compared to the most comparable transactions in the home market. In an investigation, Commerce normally uses an average-to-average comparison. Under that method, Commerce calculates a single weighted-average export price for each group of comparable transactions, using all export transactions within the group. Likewise, Commerce calculates a single-weighted-average normal value for each group of comparable transactions, using all home market transactions in the group. Commerce then compares the two weighted-averages to determine the amount of dumping, if any, that occurred in each group of comparable transactions. Commerce then calculates the total amount of dumping by adding the amount, if any, by which the normal value for each group of comparable transactions exceeds the export price for the group. The total amount of dumping is then divided by the total value of the export sales to the United States to arrive at an ad valorem dumping margin. If, for a particular transaction group, the normal value is equal to or less than the export price, Commerce assigns a dumping value of zero to that comparison group when calculating the total amount of dumping. This is the practice commonly referred to as “zeroing.” The total value of U.S. sales in the “zero dumping” groups are included in the denominator of the ad valorem margin calculation, i.e., the total dumping is allocated over total U.S. sales of the product under investigation. This method has been found illegal by panels and the Appellate Body, notably in the case concerning the US anti-dumping duties on imports of softwood lumber from Canada (DS264). In reviews and final assessment proceedings, Commerce uses a transaction-to-average comparison. Under that method, Commerce calculates monthly weighted-average normal values for each group of comparable transactions. Commerce then compares each sale to the United States to the normal value for the month in which the sales was made. The total amount of dumping is determined by summing up the positive amounts of dumping, while the negative amounts of dumping are set a zero – a variation of the “zeroing” practice applied in initial investigations. As a rule, this “zeroing” practice will inflate the margin of dumping even more than the one applied in original investigations Commerce then calculates importer-specific assessment rates by dividing the amount of dumping on sales to the importer over the entered value of those imports. Commerce applies “zeroing” here as well on a transaction by transaction basis. In essence, the importer pays in excess of the actual margin of dumping of the exporter concerned. No refund proceeding for this excess payment is available. (f) Exporter-Specific Dumping Margins

Commerce calculates an exporter-specific dumping margin for each individually investigated exporter. If, in an investigation, Commerce determines that an exporter’s dumping margin is zero or de minimis, that exporter is excluded from the application of the order, i.e., that exporter’s merchandise is not subject to anti-dumping or countervailing duties or to subsequent review. The exporter’s merchandise enters the United States free of any anti-dumping duty liability.


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(g) All Others Rate

When, due to the large number of exporters, Commerce limits the number of individually investigated companies, Commerce calculates what is known as the “all others” rate, which applies to all uninvestigated exporters. The all others rate is the weighted-average of the rates determined for the investigated companies, excluding zero or de minimis rates and rates based entirely on facts available. In U.S. – Japan Hot Rolled Steel, the WTO Appellate Body found that the Anti-dumping Agreement required the United States to exclude from the all others rate calculation not only margins based entirely on facts available, but also any margins based in part on facts available. U.S. law has not yet been amended to implement that decision, although the United States has expressed its intention to do so. (h) Subsidy

The definition of a subsidy in the U.S. countervailing duty law is taken almost verbatim from the SCM Agreement. The elements of a subsidy are: (1) a financial contribution or income or price support by the government,4 which (2) confers a benefit. A subsidy may be subject to countervailing measures only if it is specific. (i) Financial Contribution

A government financial contribution is deemed to exist if the government

• makes a direct transfer of funds (e.g., grant, loan, equity infusion) or potential transfer of funds (e.g., loan guarantee);

• foregoes or does not collect revenue that is otherwise due (e.g., tax credits); • provides goods or services, other than general infrastructure, or • purchases goods

A government financial contribution may be made directly or indirectly. An indirect financial contribution occurs when the government makes a payment to a funding mechanism, or entrusts or directs a private party to make the financial contribution. (j) Benefit

A benefit is an artificial advantage, i.e., it is the extent to which the recipient is better off than it otherwise would have been absent the government’s financial contribution. To measure a subsidy benefit, therefore, Commerce uses a market benchmark, such as a commercial loan rate (including a risk premium if the recipient is not creditworthy), or a market price for goods provided. The U.S. statutory guidelines for market benchmarks are essentially identical to the guidelines in Article 14 of the SCM Agreement.

4 Income or price support has the same meaning as in Article XVI of GATT 1994.


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To calculate the subsidy benefit, Commerce compares what the government provided to what the marketplace would have otherwise provided, e.g., the difference between the interest on a government loan and the interest that would have been paid on a comparable commercial loan.5 The “net countervailable subsidy” is that difference, less: (1) any fees or similar payments made to qualify for or receive the subsidy; (2) loss in value of the subsidy due to a government-mandated deferral of receipt; and (3) any export taxes, duties or other charges imposed on exports of the subject merchandise to the United States by the foreign government to offset the subsidy. (k) Specificity

Not all government largesse constitutes a countervailable subsidy. Only subsidies that are “specific” may be subject to countervailing duties. The specificity of an alleged subsidy is often a very contentious issue in a countervailing duty investigation. A subsidy is specific if it is limited to an enterprise, industry, or group of enterprises or industries within the jurisdiction of the granting authority. Thus, while the specificity of a federal subsidy program is determined at the national level, the specificity of a subsidy granted by a state government is determined at the state level. Moreover, a subsidy may be specific in law (de jure) or in fact (de facto). A subsidy is de jure specific if the granting authority, or the legislation under which it operates the subsidy program, explicitly limits access to the subsidy to certain enterprises or industries. If, however, the granting authority or the legislation establishes objective, neutral criteria under which eligibility for, and the amount of, the subsidy is determined automatically (e.g., certain tax benefits), the subsidy is not specific. A subsidy is de facto specific if, despite the absence of any express limitation,

• the number of actual subsidy recipients is limited, • a certain enterprise or industry is a predominant user of the subsidy, or • a certain enterprise or industry receives a disproportionately large amount of the subsidy.

A subsidy that is limited to enterprises or industries within a designated geographical region within the jurisdiction of the granting authority is also specific. (Note that the US also considers “regional aid” i.e. federal government aid to a limited number of regions, to be specific, even if the aid is generally available within the regions concerned). Finally, subsidies that are contingent on export performance or on the use of domestic over imported goods – the two types of subsidies prohibited under the WTO rules – are deemed to be specific in all cases. 5 Certain types of government assistance, such as grants and tax benefits, have no counterpart in the market. Thus, the benefit from a grant or tax credit is simply the face value.


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(l) Allocation of the Benefit

Commerce determines the subsidy benefit received in a particular period based on when the benefit is realized by the recipient. When the benefit is realized depends upon whether the subsidy is “recurring” or “non-recurring.” Recurring subsidies are those that provide benefits on a recurring basis. For example, the Commerce Regulations identify tax exemptions, price supports and the provision of goods or services as types of subsidies that Commerce will normally treat as providing recurring benefits. The benefit from a recurring subsidy is expensed in the year of receipt. For example, in the case of a direct tax credit the benefit (tax savings) is received each year when the company files its tax return. The benefit is therefore attributed to that year. In addition, if the subsidy benefits may fluctuate from year to year, Commerce treats the subsidy as recurring. For example, a long-term variable rate loan is a recurring subsidy. The amount of the benefit varies from year to year with the interest rate, and the benefit received each year is expensed in that year. Non-recurring subsidies generally provide a lump sum benefit amount. For example, the Commerce Regulations specifically identify grants, debt forgiveness and equity infusions as types of subsidies that Commerce normally treats as non-recurring. In the case of a non-recurring subsidy, Commerce calculates the benefit (e.g., the amount of the grant or debt forgiveness) then amortizes the benefit over a certain number of years, based on the average useful life of assets in the industry, using a declining balance method. The rationale is that, given the time value of money, the value of the benefit realized in each subsequent year diminishes. The “time value of money” approach inflates the face amount of the subsidy to take account of notional interest on the unamortized part ; as the unamortized amount declines every year, the amount of subsidy allocated to each year declines. Thus, the benefit calculated for the period of investigation or review will be lower the further removed in time the investigation or review is from the time at which the subsidy was granted, i.e., where you are in the benefit stream. In a recent change in methodology (June 2003), the US accepted that a privatization or other change in ownership, at arms-length and for fair market value, removes the benefit of prior non-recurring subsidies. This change was made following the British Steel (DS138) and Certain products from the EC (DS212) WTO cases brought by the EC. (m) Subsidy Rate Calculation

Once the amount of the benefit for a particular period has been calculated, Commerce calculates the ad valorem subsidy rate by attributing the benefit to production. Commerce attributes export subsidies only to products that were exported during the period. In contrast, all other subsidies (“domestic” subsidies) are attributed to all products sold by the company during the period. Subsidy Program A (export subsidy) Net benefit during the period: $100 ÷


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Total Export Sales during the period: $10,000 Subsidy Rate: 1% Subsidy Program B (domestic subsidy) Net benefit during the period: $2,000 ÷ Total Sales during the period: $40,000 Subsidy Rate: 5% Total Ad Valorem Subsidy Rate: 6% (n) Non-Market Economies

Although there is no explicit exclusion of non-market economies in the U.S. countervailing duty law, Commerce’s longstanding interpretation of the law is that it does not apply to non-market economies. In the landmark decision in Georgetown Steel, the Court of Appeals upheld Commerce’s interpretation. However, primarily in response to concerns about imports from China, legislation has recently been introduced in the U.S. Congress that would explicitly apply the countervailing duty law to non-market economies. (o) Injury

As noted above, under the bifurcated U.S. system, the ITC is responsible for making the injury determination. Anti-dumping or countervailing duties may be imposed only if the domestic industry is materially injured, or threatened with material injury, or the establishment of an industry is materially retarded, by reason of the dumped or subsidized imports. The ITC therefore must find both injury and a causal link between the imports and the injury. (p) Like Product

The ITC must determine whether there is injury to the domestic industry, which is generally defined as producers of the “domestic like product.” The Commission’s injury analysis must therefore begin with defining the like product and the U.S. industry. Note that the ITC’s like product determination may differ from the like product used by Commerce to determine industry support for purposes of initiation (see discussion of Procedures below). The domestic like product is defined as the product that is “like,” or “most similar in characteristics and uses,” to the subject imports. In determining the domestic like product, the ITC considers: physical characteristics and uses; channels of distribution; common manufacturing facilities, production processes, and production employees; customer and producer perceptions; and, if appropriate, price.6 No single factor is determinative and the ITC may consider other factors, as appropriate.

6 Note that these factors are very similar to those used by Commerce to determine if the subject imports constitute a single class or kind of merchandise or multiple classes or kinds. See footnote 9, below.


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In defining the like product, the ITC ignores minor product variations and looks for clear dividing lines. Thus, the ITC may define the domestic like product to include a broader range of merchandise than is within the class or kind of imports under investigation (e.g., the domestic like product might be “widgets” even though only imports of “blue” widgets are under investigation). The Commission may also find that there are multiple domestic like products that correspond to the class or kind of imports under investigation (e.g., if the class or kind of imports were citrus fruit, lemons, limes and oranges might constitute separate domestic like products). Once the Commission defines the domestic like product, the industry is normally defined as all U.S. producers of that product. The only exceptions to that general rule are where a “regional industry” exists, and the exclusion of certain related parties. (q) Material Injury

The statute defines material injury as “harm which is not inconsequential, immaterial, or unimportant.”7 In determining whether material injury exists, the Commission must consider: the volume of the subject imports, the effect of the imports on prices in the United States for the domestic like product (price undercutting, price depression, or price suppression), and the impact of the imports on U.S. producers of a domestic like product (e.g., declines in output, sales, market share, profits, employment). (r) Cumulation

In evaluating injury, the statute requires the Commission to cumulatively assess the impact of imports from all countries with respect to which petitions were filed, or cases were self-initiated, on the same day, if the imports compete with each and with domestic like products in the United States. In evaluating a threat of injury, the Commission has the discretion to do a cumulative assessment but is not required to do so. 2.2 Procedure

(a) Overview of Procedures

Generally, the procedures for anti-dumping and countervailing duty investigations are identical, but there are a few differences, primarily in the timing of decisions. An investigation normally takes between 12 and 18 months, with many, if not most, cases probably falling within the 15-18 month range. There are five determinations made during the course of the investigation, which occur in the following order: Commerce’s decision to initiate, the ITC’s preliminary injury determination (if negative the entire proceeding is immediately terminated), Commerce’s preliminary dumping or subsidy determination, Commerce’s final dumping or subsidy determination and, finally, the ITC’s final injury determination. The timeline for these determinations is set out below. Notice of each of the Commerce and ITC determinations is published in the Federal Register. The bases for Commerce’s preliminary determinations are normally explained in the Federal Register notice. Commerce final

7 Section 771(7) of the Act.


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determinations, however, are normally more lengthy because they also respond to comments submitted by interested parties on the preliminary determination. Thus, although Commerce publishes a notice of the final determination in the Federal Register, the explanation for the decision and the agency’s response to comments is contained in a “Decision Memorandum” posted on Import Administration’s website (http://ia.ita.doc.gov). Similarly, the ITC also publishes a notice of its preliminary and final injury determinations in the Federal Register, but the detailed explanation of the decisions is contained in published reports which are posted on the ITC’s website (http://usitc.gov).


http://usitc.gov/

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STAGE

WHAT HAPPENS TIMING

Petition

Industry files petition simultaneously with Commerce and the ITC

Initiation

Commerce initiates an investigation against one or a number of countries

20 days for Commerce to decide whether to initiate; may be extended another 20 days if necessary to determine industry support

ITC Preliminary Injury Determination

The ITC determines whether there is a “reasonable indication” of material injury; if the ITC preliminary determination is negative the investigation is terminated

Within 45 days of the filing of the petition or, if Commerce extended the period of initiation, 25 days after receiving notice of Commerce’s decision to initiate

Commerce Preliminary Determination and Provisional measures

If Commerce makes an affirmative preliminary determination, Commerce orders Customs to suspend liquidation8 of entries of the subject merchandise and to collect cash deposits or bonds for all entries of subject merchandise on or after the date of publication of the preliminary determination; if Commerce makes a negative preliminary determination, the investigation continues but these provisional measures are not imposed

AD prelim within 140 days from initiation; can be extended to 190 days CVD prelim within 65 days from initiation; can be extended to 130 days; AD - provisional measures may be imposed for 4 to 6 months CVD – provisional measures for 4 months only

Undertakings Price undertakings (AD), or Quotas or elimination of subsidies (CVD), may be proposed by exporter to Commerce

After an affirmative preliminary determination, up to 30 days prior to the final determination

Commerce Final Determination

If Commerce makes an affirmative final determination, Commerce orders Customs to continue suspension of liquidation (i.e., suspension of final assessment) and to collect cash deposits; if Commerce makes a negative final determination, the investigation is terminated, suspension of liquidation is discontinued and all cash deposits are refunded

Final determination within 75 days after prelim; may be extended to 135 days in AD cases; CVD final may be aligned with AD final if there are simultaneous cases.

8 “Liquidation” refers to the final assessment of duties, i.e., a “liquidated” Customs entry means that the merchandise has entered the United States and the final duty liability has been determined and assessed. When liquidation is suspended, the goods enter the United States but Customs does not assess final duties because the final assessment amount has not yet been determined.


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ITC Final Injury Determination

If the ITC makes an affirmative final determination of injury, Commerce issues an anti-dumping or countervailing duty order; cash deposits at the rates established in Commerce’s final determination are required for all entries of subject merchandise on or after the date of the ITC final determination, bonds are no longer sufficient. If the ITC determination is negative, Commerce orders Customs to discontinue suspension of liquidation and return all cash deposits.

ITC final within 120 days of affirmative Commerce prelim, or 45 days of affirmative Commerce final, whichever is later. If Commerce prelim is negative but final is affirmative, 75 days from Commerce final Commerce publishes AD/CVD Order within 7 days of notification of ITC final

Administrative Review Each year, an interested party may request a review to determine the amount of duties to be assessed on specific entries during the previous 12 months (18 months for the first review period). If no review is requested for a particular exporter, entries of that exporter’s merchandise will be assessed at the cash deposit rate in effect at the time of entry.

Requests for administrative (assessment) review must be made during the anniversary month of the order

Expiry (“Sunset”) Review

The order is revoked unless Commerce and the ITC determine that dumping or subsidization and injury are likely to continue or recur; revocation is effective as of the fifth anniversary of the order. All subsequent entries are liquidated without regard to AD/CVD duties.

Sunset reviews are automatically initiated 30 days prior to the fifth anniversary of the order

(b) Petition and Initiation

Typically, anti-dumping and anti-subsidy investigations are initiated by a petition filed by the domestic industry. Petitions are filed simultaneously with Commerce and the ITC, but Commerce makes the decision whether to initiate an investigation. Commerce does have the authority to self-initiate an investigation, but that authority has rarely been used. A petition may be filed by any domestic “interested party”, which is defined to include: U.S. manufacturers, producers or wholesalers of a domestic like product; a union or group of workers which is representative of an industry engaged in the manufacture, production, or wholesale in the United States of a domestic like product; a trade or business association a majority of whose members manufacture, produce or wholesale a domestic like product in the United States, and an association, a majority of whose members are composed of interested parties that fall within the preceding groups. Potential petitioners may, and normally do, submit draft petitions to Commerce for review and comment before they are formally filed. This “pre-petition counseling” enables Commerce to


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make petitioners aware of potential problems, such as the adequacy of supporting information. If Commerce raises significant concerns with a draft petition and those concerns cannot be addressed, it is unlikely that the petition will ever be formally filed. Commerce is prohibited from disclosing the existence of a draft petition. (c) Petition Requirements

In addition to identifying the petitioner, a petition must contain information reasonably available to the petitioner on: (1) the identity of the industry on behalf of which the petitioner is filing, including the names and contact information for all other known members of the industry; (2) the degree of industry support for the petition, including the volume and value of U.S. production of the domestic like product, and the volume and value of the domestic like product produced by the petitioner and each of the other identified producers; (3) a detailed description of the subject imports, including technical characteristics, uses and tariff classification; (4) the name of the country (or countries) where the subject imports are produced; and (5) the names and addresses of each person alleged to be dumping or receiving subsidies and the percentage of total exports to the United States accounted for by that person in the most recent 12-month period. The petition must also allege the elements necessary for the imposition of anti-dumping or countervailing duties (i.e., dumping or subsidization and injury) and provide information reasonably available to the petitioner in support of those allegations, in particular documentary evidence on export price and normal value, or the alleged subsidy. When a petition is filed, it is a public document that immediately becomes part of the administrative record of the investigation. Although the public has access to petitions, Commerce does not publicize their existence. (d) Standard for Initiation

Although a petition is filed simultaneously with Commerce and the ITC, as noted above, Commerce has sole authority to determine whether the petition is sufficient to warrant an investigation. In order to initiate an investigation, Commerce must determine that the petition alleges the elements necessary for relief and includes information reasonably available to the petitioner supporting the allegations. With the exception of the industry support determination (discussed below), Commerce’s initiation decision is generally based on the adequacy and accuracy of the information contained in the petition. Commerce may ask the petitioner for additional information or clarification. However, Commerce does not accept comments on the petition from other interested parties, except for comments pertaining to industry support. (e) Industry Support

Commerce must also determine that the petition is supported by the U.S. domestic industry, a decision that is subject to strict numerical requirements. The requisite industry support exists if: (1) domestic producers or workers supporting the petition account for at least 25% of total production of the domestic like product, and (2) those supporting domestic producers and workers account for at least 50% of the production of the domestic like product by that portion of the industry that expresses either support for, or opposition to, the petition. Normally,


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Commerce will conduct the industry support analysis on the basis of the like product defined in the petition. It is not uncommon, however, for the like product definition to be heavily disputed at the ITC for purposes of the injury analysis.

INDUSTRY SUPPORT If the petition itself does not establish support by producers or workers accounting for more than 50% of total production, Commerce is required to poll the industry or rely on other information to determine if the requisite support exists. Polling situations rarely arise, however. Expressions of support or opposition by workers and the position of management are given equal weight. As a result, if workers and management express opposing views they cancel each other out and are counted as neutral. Moreover, except where the facts demonstrate the existence of a regional industry, the ITC examines the domestic industry “as a whole”, i.e., all producers of the domestic like product. The ITC’s investigation is not limited to petitioners. (f) Time Limits

Normally, Commerce must decide whether to initiate within 20 days after the filing of the petition. If additional time is necessary to determine whether the requisite industry support exists, Commerce may extend the initiation decision for 20 days, with a total of 40 days being the maximum time within which Commerce may make the initiation decision. Occasionally, if a petitioner believes that Commerce has significant problems with a petition (usually in the area of industry support) the petitioner will withdraw the petition before the deadline to avoid having the petition rejected. The petitioner may then revise and resubmit the petition. If a petition meets the statutory requirements, Commerce must initiate the investigation. Commerce does not have the discretion to decline a legally valid petition. (g) Target of the Investigation

A single petition normally covers a single “class or kind” of merchandise, but may cover imports of the subject merchandise from multiple countries. Commerce treats multi-country petitions as requests for separate investigations of imports from each country. Thus, Commerce will initiate separate proceedings for each country, with a separate case number and administrative record. Occasionally, respondents claim that the petition covers multiple classes or kinds of merchandise. If Commerce determines that is the case, it will define the separate classes or kinds of merchandise and conduct separate investigations of each.9

(h) Notice of Initiation

Commerce will publish in the Federal Register a Notice of Initiation which identifies the petitioner, the products and countries subject to investigation and an explanation of Commerce’s examination of the allegations and information in the petition.

9 To define a “class or kind” of merchandise Commerce considers the following factors: physical characteristics; expectations of the ultimate purchaser; ultimate use of the product; and channels of trade in which the product is advertised and sold.


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(i) ITC Preliminary Investigation Phase

Because the ITC is required to make a preliminary injury finding within 25 days after initiation, the ITC initiates the preliminary phase of its investigation very soon after a petition is filed. In this preliminary phase, the ITC issues questionnaires to domestic producers of the “like” product, U.S. importers and foreign producers. Normally, approximately three weeks after the petition is filed, the ITC also holds a public conference with the investigation staff (Commissioners are not present). At the staff conference, interested parties may present legal and factual arguments and testimony by witnesses. The ITC staff may ask questions, and usually does so. Parties may also file post-conference briefs. The staff then prepares a report to the Commission presenting and analyzing all of the information obtained during the preliminary phase of the investigation. Approximately four days after receiving the report, the Commission holds a public meeting in which the Commissioners may question the staff and then each Commissioner announces his or her vote on the preliminary injury determination. The vote of the majority constitutes the determination of the Commission. A tied vote is deemed to be an affirmative determination. (j) Negligibility

An investigation must be terminated immediately if the Commission finds that imports of the subject merchandise are “negligible”. Negligible imports are defined as imports accounting for less than 3 percent of the volume of all such products imported into the United States in the most recent 12-month period preceding the filing of the petition for which data is available. If cases are initiated on multiple countries (on the same day) that individually account for less than 3 percent of the total volume of subject imports, but imports from those countries collectively exceed 7 percent of total imports, the imports for those countries are deemed not to be negligible. (k) Period of Investigation

In a dumping investigation, Commerce normally examines sales made during the four most recently completed fiscal quarters as of the month preceding the month in which the petition was filed. In a subsidy investigation, Commerce normally will examine information relating to the most recently completed fiscal year for the government and the exporters. If the fiscal years differ, Commerce normally looks at the most recently completed calendar year. The ITC’s injury investigation generally covers the three years prior to filing of the petition but that information is normally updated in the final phase of the investigation to include more recent data. (l) Questionnaire

Commerce obtains the bulk of the information considered in an investigation by issuing questionnaires and verifying the responses to the questionnaires. Questionnaires contain instructions for completion, including the time period for which data is requested and definitions of terms, and the deadline for responding to the questionnaire. Responses to the original (“standard”) questionnaire are reviewed by the case analysts, and supplemental questionnaires are sent out to clarify the initial response and obtain additional information, as necessary.


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Normally, at least one round of supplemental questionnaires is necessary. Multiple supplemental questionnaires, time permitting, are not uncommon. (m) Description of the Standard Dumping Questionnaire

Commerce’s initial anti-dumping questionnaire is highly standardized, but may be tailored, as necessary, to meet the specific needs of a particular case. Normally, in an investigation, the questionnaire is sent out as soon as possible, at least by the time of the ITC’s preliminary injury determination. The questionnaire is divided into five parts: Section A. This section may be sent out in advance of the other sections. The Section A information is relevant to certain methodological decisions that Commerce must make, and the Section A response may be used to tailor the remainder of the questionnaire, as appropriate. For example, Section A requests information on the volume and value of sales to the United States and in the home market and, if necessary, third country markets. This information is necessary to determine the appropriate market in which to calculate normal value. Section A also requests information on corporate structure and affiliations and sales to affiliated parties which is necessary, for example, to determine if an export price or constructed export price calculation is appropriate. Section A also requests information on the sales and distribution process; accounting and financial practices; the merchandise sold to the United States and the merchandise sold in the home (or third country) market; further manufacturing in the United States; and exports through intermediate countries. Section B (Normal Value). The response to this section is comprised of two parts: a computer tape or disk containing information on all home market sales during the POI, including product and customer identifiers, dates of sale, quantities, prices and adjustments to price (e.g., level of trade, indirect expenses, packing costs); and (2) a narrative description of each of the elements in the sales listing. Section C (Export Price). This section requests for sales to the United States the same information requested in Section B for home market sales. In addition, Section C also requests information on international movement charges and duty drawback,10 and information to determine if export price or constructed export price is appropriate. Section D (Cost of Production). Section D seeks information on the cost to produce the merchandise. This section is required if it is likely that normal value will be based on a constructed value. For example, section D is required if the petitioner makes a timely allegation that the respondent is making sales in the home market at prices below the cost of production. Section E. This section is used, if necessary, to obtain information on further manufacturing in the United States. Non-Market Economy Questionnaires. In cases involving a non-market economy, Commerce uses a special questionnaire that requests information on the producer’s factors of production in 10 “Duty drawback” refers to programs under which the duties paid on imported inputs are refunded when the products produced from those inputs are exported.


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lieu of Section B of the standard questionnaire. In addition, NME exporters who wish to receive a company-specific rate must complete a “separate rates” questionnaire to establish that the company’s export activities are free of government control. (n) Time Limits

Normally, respondents are given 21 days from issuance of the questionnaire to complete Section A, and at least 30 days from receipt of the questionnaire for the remaining sections. Extensions may be requested, but must be in writing and filed before the deadline expires. Normally, extensions do not exceed two weeks. It is common for Commerce to grant one two-week extension of the 30-day deadline to respond to the initial questionnaire. Subsequent extensions are much less common, as are extensions for responding to supplemental questionnaires. (o) Verification

In an investigation, Commerce bases its preliminary dumping determination on the unverified questionnaire responses. Verification takes place after the preliminary determination. Verification of the export price and normal value questionnaires normally takes one week. If there is also a cost questionnaire response (Section D), verification of that response normally takes an additional week. In addition, where U.S. sales are made through an affiliate in the United States, Commerce will also conduct a sales verification in the United States, which normally takes approximately one week. In subsidy cases, information received from the government is also verified. Normally at least two weeks prior to verification, Commerce sends the respondent a standardized verification outline which sets out the various steps in verification, and the records and supporting information that Commerce will need to examine at verification. The outline identifies specific transactions in the sales database that will be verified and notifies the respondent that an additional group of unidentified transactions will also be verified. The key element of verification is the completeness checks. These are the various means by which Commerce tests the thoroughness and accuracy of the information in the questionnaire response. The most import of these checks is for completeness and accuracy in the listing of U.S. and home market sales. Following verification, Commerce issues a Verification Report. The purpose of the verification report is to create a factual record of what was done at verification and the results, i.e., whether the information in the response was verified, or whether discrepancies were found. The report is intended to be purely factual. The report does not contain an analysis of the information verified or draw any conclusions. (p) Written Argument

In an investigation, within 50 days of publication of the preliminary determination, interested parties may submit written comments on the preliminary determination (commonly referred to as a “case brief”). Within 5 days after the deadline for case briefs, parties may submit rebuttal briefs, which must be limited to issues raised in case briefs.


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Comments typically address both legal and methodological issues and questions of fact. Case briefs should contain the party’s comments on all issues the party believes to be in dispute. In the final determination, Commerce will only address those comments raised in the case briefs. Failure to address an issue in the case brief may affect the party’s ability to raise that issue in a subsequent court challenge. (q) Hearings

Within 30 days after publication of the preliminary determination, any interested party may request a public hearing. The purpose of the hearing, which takes place late in the investigation, is not for parties to raise new issues. Rather, the purpose is to clarify or elaborate on issues previously raised. Under Commerce’s regulations, parties may make an affirmative presentation at the hearing only on issues raised in their case brief, and may make a rebuttal presentation only on issues raised in that party’s rebuttal brief. (r) Disclosure and Access to Information

U.S. law requires that the administrative records of anti-dumping and countervailing duty proceedings include copies of all information presented to or obtained by Commerce during the course of the administrative proceeding, including all government memoranda pertaining to the case and a record of any ex parte meetings with decision-makers. Interested parties have extensive access to the administrative record, which is facilitated by a requirement that written submissions must be provided (“served”) by the submitting party to all other interested parties. Commerce maintains two “service lists.” Public Service List. All parties that participate in a proceeding are placed on a “public” service list. Whenever a party makes a submission, the party must provide each person on the public service list with a copy of the public version of the submission. In the public version all business proprietary information is redacted. APO Service List. The other service list is comprised of independent representatives (normally legal counsel) who have applied for and been granted access to business proprietary information under what is known as an Administrative Protective Order (APO). Copies of the business proprietary version of all submissions must be provided by the submitting party to all individuals on the APO service list. The public and APO service lists for each proceeding are available on Import Administration’s website. Only in very limited circumstances does Commerce decline to release certain information under APO (e.g., to protect certain confidential sources). Thus, normally the representatives have access to the full administrative record on which Commerce will base its determination. Normally within five days of issuing a preliminary or final determination, Commerce discloses its calculations, including computer printouts, under APO and will, if requested, conduct a


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disclosure conference. The scope of disclosure is normally limited to a factual presentation by Commerce of the calculations. Although Commerce will answer specific factual questions, legal or methodological arguments and comments are not normally addressed during disclosure. Within five days of disclosure, a party may submit comments on what it believes to be “ministerial” errors in the calculation. A ministerial error is defined as an error in an arithmetic function, a clerical error resulting from (e.g.) inaccurate copying, and similar types of unintentional administrative errors. Commerce will correct a “significant” ministerial error in a preliminary determination. A significant error is defined as one that makes a difference of at least 5 percentage points, but not less than 25 percent of the weighted average margin. Commerce will amend a final determination to correct any ministerial error. (s) Overview of Duties

The United States has a “retrospective” assessment system. Under that system, the liability for antidumping duties attaches at the time of entry, but duties are not actually assessed until later. At the time of importation, Customs collects security in the form of a cash deposit or bond to cover the estimated duty liability. Definitive duties are not assessed until at least one year later, when parties have the opportunity to request an “administrative review” to determine the amount of the assessment. As noted above, the assessment of the final liability is based on a methodology incorporating “zeroing”. (t) Provisional Measures

When Commerce issues a preliminary affirmative determination of dumping or subsidization, it orders the imposition of provisional measures. Specifically, Commerce instructs Customs to suspend liquidation (i.e., final duty assessment) of entries of the subject merchandise on or after the date of publication of the preliminary determination, and to require the importer to post a cash deposit or bond in the amount of the estimated anti-dumping or countervailing duties. After publication of the ITC’s final injury determination, the “provisional measures” period is over and bonds in lieu of cash deposits are no longer permitted. A cash deposit in the amount of the estimated duties is required on all future imports. (u) Final Phase of ITC Injury Investigation

Following Commerce’s preliminary determination of dumping or subsidization, the ITC enters the final stage of its injury investigation. Taking into account the record developed during the preliminary phase and any comments by Commissioners on data collection issues, the staff prepares questionnaires for U.S. and foreign producers, U.S. importers and U.S. purchasers to obtain the information necessary for a final determination. The staff again prepares a report for the Commission presenting and analyzing all of the information obtained during the investigation. Parties also receive the staff report and may file pre-hearing briefs.


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Soon after Commerce issues a final affirmative determination of dumping or subsidization, the Commission holds a public hearing. The hearing is considered a forum for fact finding. The Commissioners ask questions and solicit information. Parties express their views and may submit supplemental information. Persons testify at the hearing under oath. Following the hearing, the staff prepares a final report to the Commission. The public record is then closed and parties have an opportunity to comment on information on which they have not previously had an opportunity to comment. Shortly after the deadline for final comments, the Commission holds a public briefing and votes.

(v) Definitive Duties

Within seven days after an affirmative final determination of injury by the ITC, Commerce issues an anti-dumping or countervailing duty order in which it instructs Customs to impose duties “upon further advice” from Commerce. Thus, although definitive duties are ordered, Commerce’s advice as to the amount of those duties comes later. Once a year, during the anniversary month of the anti-dumping or countervailing duty order, interested parties may request a review to determine the amount of duties to be assessed on each entry made during the previous year (“period of review”).11 Antidumping duties are calculated based on sales data during the period of review. The duties are calculated on a transaction-specific basis and are assessed on an importer-specific basis. Countervailing duties are calculated based on the amount of the subsidy benefit received during the period of review. Based on the results of the review, Commerce advises Customs regarding the amount of duties to be assessed on imports made during the period of review. If, based on the results of the review, the duties owed are less than the cash deposits, the excess cash deposits are refunded with interest. If the duties owed exceed the cash deposits the additional duties, plus interest, are collected. If no review is requested, soon after the close of the anniversary month Commerce advises Customs to assess duties on imports during the review period in an amount equal to the cash deposits paid at the time of importation -- a process referred to as “automatic assessment.” (w) Undertakings

Commerce has sole authority to negotiate undertakings, commonly referred to under U.S. law as “suspension agreements.” Commerce’s longstanding policy is that suspension agreements are a sparingly used exception to the normal remedy, i.e., the imposition of duties. The majority of suspension agreements have been accepted in non-market economy cases.

11 The first review period is normally approximately 18 months because it covers imports on or after the date of the preliminary determination, up through the month preceding the anniversary month of the order.


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(x) Structure of an Undertaking Generally, the law provides that a suspension agreement will require:

• the exporters accounting for substantially all (at least 85%) of the imports to eliminate dumped sales by either (a) ceasing exports to the United States, or (b) not selling the subject merchandise for export to the United States at prices less than a specified constructed normal value;

• the government of the exporting country, or exporters accounting for substantially all of

the imports agree to eliminate subsidized imports by either (a) ceasing exports to the United States, or (b) eliminating or offsetting the subsidy; or

• the government or exporters agree to eliminate the injurious effects of dumped or

subsidized imports (this type of agreement is very rare; it may only be used in if Commerce determines it is “more beneficial” to the domestic industry than continuation of the investigation); or

• the foreign government agrees to restrict the volume of exports to the United States

(countervailing duty and non-market economy cases only). In addition, Commerce may not accept a suspension agreement unless it determines that the agreement is in the public interest and that effective monitoring of the agreement is practicable. (y) Types of Duties

Normally Commerce assesses duties on an ad valorem basis.12 As explained above, for antidumping duties, the ad valorem rate is normally calculated on an importer-specific basis, by dividing the total amount of dumping duties owed on the transactions examined by the entered value of the imports during the period of review. For countervailing duties, the ad valorem rate is normally calculated by dividing the total amount of the subsidy benefit received during the period of review by total value of the relevant sales during the period. (z) Level of Duties

The United States does not have a lesser duty rule. Commerce is required by law to impose duties in an amount equal to the amount of dumping or subsidization found to exist. (aa) Duty Absorption

During the second and fourth review periods following publication of an anti-dumping duty order, Commerce will, upon request, determine whether duties have been absorbed by the foreign producer or exporter. This situation normally arises when the goods are sold in the United States through an affiliated party or when the exporter is itself also the importer. In such 12 In exceptional cases, Commerce has calculated a specific duty amount (e.g., x cents per pound).


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cases, Commerce will normally find that duty absorption exists unless the foreign producer or exporter can demonstrate that the cost of the duties has been passed on to the first unaffiliated purchaser in the United States. Commerce notifies the ITC of the results of the duty absorption inquiry for the ITC to consider in the five-year sunset review. The duty absorption finding does not, however, have any effect on Commerce’s calculation of the anti-dumping duties to be assessed. (bb) Scope

While an order is in effect, questions may arise whether a specific product falls within the scope of the order. Questions concerning the scope of an order are resolved by Commerce. An interested party may submit technical information concerning a particular product and request that Commerce make a scope ruling. If Commerce can decide the issue based on the language of the scope and prior determinations by Commerce and the Commission, it will make a ruling without conducting a formal inquiry. If the issue is more complex, however, Commerce will initiate a formal inquiry and solicit information and comment from interested parties. (cc) Circumvention

An interested party may request that Commerce conduct an inquiry to determine whether certain imports are circumventing the order. There are three types of circumvention inquiries: (1) products that have undergone a “minor alteration” such that they now fall outside the technical description in the scope; (2) products that are comprised of inputs from the subject country but undergo minor assembly in a third country before importation into the United States; and (3) imports into the United States of parts and components that then undergo minor assembly in the United States. (dd) Revocation

Commerce has two procedures under which an order may be revoked, in whole or in part, other than through a five-year sunset review (discussed below). First, if the producer/exporter has been found not to be dumping in three consecutive review periods, Commerce will revoke the order with respect to that producer/exporter, unless there is substantial evidence that revocation is likely to lead to a recurrence of dumping. In addition, Commerce has broad authority to revoke an order, in whole or in part, whenever it determines that there are “changed circumstances” sufficient to warrant revocation. Normally, this procedure is used when the domestic industry no longer has an interest in maintaining all or a part of the order. If substantially all of the industry expresses no further interest, Commerce will revoke. (ee) Sunset

Every five years an anti-dumping or countervailing duty order must be reviewed to determine whether dumping or subsidies and material injury are likely to continue or recur if the order is revoked. If the decision regarding either dumping/subsidies or injury is negative, the order is revoked. This is known as a “five year sunset review.” As in the original investigation, Commerce makes the determination with respect to dumping or subsidies and the ITC makes the


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determination with respect to injury. Initiation of the sunset review is automatic. No later than 30 days prior to the fifth anniversary of the order, Commerce must publish a notice initiating the review. If no interested party responds to the Notice of Initiation, or the responses do not contain all the required information, Commerce and the ITC will conduct the review under an expedited schedule. Parties may waive participation in the Commerce proceeding, in which case Commerce would issue a decision that dumping or subsidies are likely to continue or recur. Parties would then focus solely on the ITC’s review of injury. The U.S. waiver provisions were found to be inconsistent with the WTO Anti-dumping Agreement in United States - Sunset Reviews of Anti-Dumping Measures on Oil Country Tubular Goods from Argentina. (ff) Judicial Review

Any interested party who participated in the anti-dumping or countervailing duty proceeding (i.e., investigation, review, scope determination, anti-circumvention inquiry) has the right to challenge the results of that proceeding in the Court of International Trade (CIT). A majority of cases are challenged in court. The CIT does not review the determinations of Commerce and the ITC de novo. Rather, the court reviews the determination “on the record” and will reverse the decisions of those agencies only if the determination is not supported by substantial evidence or is not otherwise in accordance with the law. The CIT is required to accord the agency deference in interpreting the statute and regulations that it administers. On findings of fact, the purpose of the court is to determine whether the agency’s determination is supported by the evidence, not whether the court would have reached the same or a different conclusion based on the record evidence. Despite this deferential standard of review, the CIT frequently overturns the agency’s determination in at least some respects. In such cases, the court remands the decision to the agency for further consideration in light of the court’s opinion. Once the decision of the CIT is final, the agencies or the parties have the right to appeal the court’s decision to the Court of Appeals for the Federal Circuit (CAFC). 3. SAFEGUARDS

3.1 Substance

(a) Summary of Statute and Regulations

The global U.S. safeguards law is found in Title II (Sections 201-204) of the Trade Act of 1974, as amended. A global safeguards action under U.S. law is often referred as a “Section 201” action due to its location in the Trade Act. The U.S. law implements U.S. obligations under the WTO Agreement on Safeguards and Article XIX of GATT 1994. The regulations of the U.S. International Trade Commission (the “ITC”) governing Section 201 investigations can be found at 19 Code of Federal Regulations, Part 206.

Section 201 allows the United States to escape from its obligations under international trade agreements when increased imports of a product are found to be a substantial cause of serious


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injury, or threat of serious injury, to the U.S. industry producing a like or directly competitive product. Safeguard measures are intended to be of limited duration while the domestic industry adjusts to import competition.

Global safeguards do not require the finding of an unfair trade practice as in the case of U.S. antidumping and countervailing duty laws. Another major difference from the unfair trade practice statutes is that safeguard investigations apply to all countries that export the subject merchandise to the U.S., while antidumping and countervailing duty proceedings are country specific.

The ITC is responsible for conducting safeguard investigations, although the President makes the final determination as to whether relief will be provided and the extent of that relief. The ITC’s investigation is conducted in two phases: the injury phase and the remedy phase.

(b) Injury Phase Considerations

During the injury phase of an investigation, the ITC considers three basic criteria: (i) whether imports of the subject merchandise have increased; (ii) whether U.S. producers of a like or directly competitive product with the subject merchandise are being seriously injured, or threatened with serious injury; and (iii) whether the increased imports were the substantial cause of the serious injury or threat of serious injury to the domestic industry.

(c) Increased Imports

Imports are considered to have increased when the increase is “either actual or relative to domestic production.” The U.S. safeguards law does not specify a minimum amount by which imports must have increased, nor the time period during which the increase must have occurred. Typically, the ITC will examine the import trends over the most recent five-year period. The ITC has considered longer and shorter periods, however, when warranted by the circumstances. (d) Injury or Threat of Injury to the Domestic Industry

The ITC must find that the domestic industry is seriously injured or threatened with serious injury at the time the ITC makes its determination. The injury standard under Section 201 is considered to be more difficult to meet than the injury standard in the antidumping and countervailing duty statutes because of its requirements that the injury or threatened injury must be serious. The term “serious injury” is defined as “a significant overall impairment in the position of a domestic industry.” The term “threat of serious injury” is defined as “serious injury that is clearly imminent.”

In making its determination of serious injury, the ITC must consider all relevant economic factors, including, but not limited to:

(i) the significant idling of productive facilities in the domestic industry;

(ii) the inability of a significant number of firms to carry out domestic production operations at a reasonable level of profit; and


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(iii) significant unemployment or underemployment within the domestic industry.

With respect to determining whether a threat of serious injury exists, the ITC is also directed to consider all relevant economic factors, including, but not limited to:

(i) a decline in sales or market share, a higher and growing inventory (whether maintained by domestic producers, importers, wholesalers, or retailers), and a downward trend in production, profits, wages, productivity, or employment (or increasing underemployment) in the domestic industry;

(ii) the extent to which firms in the domestic industry are unable to generate adequate capital to finance the modernization of their domestic plants and equipment, or are unable to maintain existing levels of expenditures for research and development; and

(iii) the extent to which the United States market is the focal point for the diversion of exports of the article concerned by reason of restraints on exports of such article to, or on imports of such article into, third country markets.

In examining whether serious injury or threat exists, the ITC should not regard the presence or absence of any of the economic factors that it is required to evaluate as being “necessarily dispositive.”

(e) Causation

The causation requirement under Section 201 is considered to be more difficult to meet than the causation requirement in the antidumping and countervailing duty statutes because increased imports must be a “substantial cause” of injury. As defined in the statute, “substantial cause” means a “cause which is important and not less than any other cause.” In determining whether increased imports are a substantial cause of serious injury, the ITC is directed by the statute to “consider the condition of the domestic industry over the course of the relevant business cycle,” but the ITC “may not aggregate the causes of declining demand associated with a recession or economic downturn in the United States economy into a single cause of serious injury or threat of injury.” The statute also directs the ITC to “examine factors other than imports” that may be a cause of injury and include the results of its examination in its report. The ITC typically engages in a two part analysis, first examining whether the increased imports are an important cause of the serious injury, or threat, and second, if they are, whether other possible causes of injury are a more important cause of the serious injury. The ITC is not required to make a finding that an injury caused by other factors is not attributable to imports.

(f) Adjustment Plans

Petitioners may submit to the ITC an adjustment plan to explain how the domestic industry plans to facilitate positive adjustment to import competition, either at the time the petition is filed or within 120 days of the filing of the petition. The ITC, in determining what action to recommend, and the President, in deciding whether to take action, are directed to consider any adjustment plans submitted.


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(g) Types of Relief

If the ITC makes an affirmative injury determination, it may recommend to the President any of the following forms of trade relief, or any combination of these measures:

• An increase in or imposition of a tariff

• A modification or imposition of a quantitative restriction

• A tariff-rate quota system where goods enter at a higher duty once the quota is filled

• Trade adjustment assistance or other appropriate adjustment measures

• Initiation of international negotiations to address the underlying cause of the increase in imports

• Implementation of any other action authorized under law that is likely to facilitate positive adjustment to import competition

Where more than one product is under investigation, the ITC’s relief may be different for each product.

(h) Presidential Discretion to Impose Relief

The President makes the final determination as to whether relief will be provided and the type and duration of such relief. The President is to take “all appropriate and feasible action within his power which the President determines will facilitate efforts by the domestic industry to make a positive adjustment to import competition and provide greater economic and social benefits than costs.” In deciding what action to take, if any, the President is directed to take into account the ITC’s report, industry adjustment plans, factors related to the national economic interest of the United States, including consumer interests, and other statutory factors. The President must report to Congress the relief he is granting. If he takes action that differs from the ITC or decides not to grant any relief, Congress is authorized to pass a joint resolution within 90 days to direct the President to take the action recommended by the ITC.

(i) Limits on Relief Granted

Initially, the President may grant relief for a period of up to four years and this may be extended one or more times. The overall period of relief may not exceed eight years, however. A tariff may not be increased to a level that is more than 50 percent ad valorem above the rate existing before relief was granted. Any quantitative restriction imposed must allow entry of at least that quantity or value of imports entered during the most recent three years that is representative of imports of such item, unless the President determines that a different quantity or value is clearly justified in order to prevent or remedy serious injury. If action is taken for more than one year in the form of a tariff, tariff-rate quota or quantitative restriction, it must be phased down at regular intervals.


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(j) Exclusion of Certain Countries

As noted above, safeguard actions apply to all countries that export the subject item to the United States. However, the North American Free Trade Agreement (“NAFTA”) limits the relief that may be imposed on imports from Canada and Mexico. The President must exclude imports from Canada or Mexico from relief if he determines that imports from such country or countries do not account for a substantial share of total imports or do not contribute importantly to the injury or threat of injury found by the ITC. These countries may be included at a later day if it is determined that a surge of imports from a NAFTA country or countries is undermining the effectiveness of the action taken. Certain other FTAs concluded with the U.S. provide for the exclusion from safeguard measures of imports from the FTA partner, if certain conditions are met. The President may also exclude imports from certain WTO developing countries from safeguard measures.

(k) Exclusion of Certain Products

The President has the authority to exclude specific products from a safeguard remedy. Typically, a notice is published in the Federal Register requesting the submission of exclusion requests and outlining the procedures and timeline for such exclusion requests. The President makes the decision whether to exclude specific products and notices of such exclusions are published in the Federal Register.

3.2 Procedures

(a) Overview of Procedures

When the ITC commences a safeguard investigation, it must publish a notice in the Federal Register to alert the public to the investigation. The overall investigation must be completed within 180 days from the receipt of the petition or request. Typically, the ITC has 120 days (150 days in more complicated cases) to complete the injury phase and, assuming there is an affirmative injury determination, 60 days to complete the remedy phase. Typically, a tied vote of the ITC in a trade remedy investigation is considered as an affirmative determination. In a safeguard investigation, a tied vote of the ITC on the injury determination may be considered an affirmative determination by the President. Only those members of the ITC who agreed to the affirmative injury determination may vote on the remedy recommendations. The ITC forwards its findings and any remedy recommendations in a report to the President.

The President has complete discretion to decide whether relief will be granted and the type and duration of such relief, subject only to statutory time deadlines. Within 60 days of receiving the ITC’s report, the President must decide whether to provide relief to the U.S. industry and the type of relief to provide. The President may request additional information from the ITC within 15 days of receiving its report. The ITC then has 30 days to provide such information.

(b) Petition and Initiation

An entity that is representative of a domestic industry (including a trade association, firm, certified or recognized union, or group of workers) may file a petition with the ITC requesting an investigation under Section 201. The law also authorizes the President, U.S. Trade


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Representative (“the USTR”), the Senate Committee on Finance and the House Committee on Ways and Means to make such a request. While it is unusual for the request not to come from sources within the industry concerned, it is not unprecedented. For example, the USTR requested a recent safeguard action against steel imports. Prior to that, the Administration had not requested the initiation of a safeguard action since 1985. In addition, the ITC may initiate an investigation on its own initiative. The ITC is required to promptly make each petition, request or ITC motion available for public inspection (with the exception of business confidential information).

(c) Petition Requirements and Initiation

Petitions must describe the imported product, provide detailed information supporting the claim that increased imports are causing serious injury, and set forth the remedy requested. The petition is also required to include data, covering at least the most recent five years, on volumes of imports, domestic sales and production, productivity, employment, capacity utilization of the domestic industry and overall financial performance. The petition must also include a description of the steps being taken, or planned to be taken, by firms and workers in the industry to make a positive adjustment to import competition. If the petition is properly filed, the ITC will promptly institute an investigation (subject to the limitations on subsequent investigations for the same product, discussed below). (d) Questionnaires

Once the ITC initiates an investigation, it sends out formal questionnaires to members of the domestic industry, importers, foreign producers and U.S. purchasers of the subject merchandise. The ITC uses the data reported in the responses to the questionnaires, along with other information gathered by ITC staff, to produce a staff report that is released to the parties in a confidential form and released to the public in a non-confidential form (with business proprietary information redacted from the report). (e) Hearings

The ITC is required to hold a public hearing during the injury phase of the investigation, and if it makes an affirmative injury determination, it must hold a second hearing during the remedy phase. All interested parties, including consumers, may appear, testify, and present evidence.

(f) Disclosure and Access to Information

The ITC releases confidential business information submitted to it under administrative protective order (“APO”) to authorized representatives of interested parties that are parties to the proceeding. As with antidumping and countervailing duty proceedings, only in very limited circumstances will the ITC decline to release certain information under APO. Parties to the investigation must serve all information subject to APO on all other parties that have applied for and been granted access to APO materials.


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The ITC’s final report to the President is made available to the public (with the exception of information which the ITC determines to be confidential) and a summary of the report is published in the Federal Register.

(g) Interagency Process Regarding Presidential Action

After the ITC makes its recommendations to the President, an interagency group, chaired by the Office of the USTR, conducts an information-gathering process to examine all of the relevant issues involving whether to take action. Interested parties typically may provide written submissions, present hearing testimony and provide other input.

(h) Appellate Review

ITC decisions are appealable to U.S. courts on procedural grounds only. WTO members may seek review of any U.S. action under the WTO Dispute Settlement Understanding. Canada and Mexico may seek review of a U.S. safeguard action under NAFTA.

(i) Limits on Subsequent Investigations

As a general rule, the ITC may not initiate a new investigation covering the same subject matter within one year of completing a prior investigation, unless good cause is found to exist. Moreover, an item that has been the subject of prior relief under Section 201 may not be the subject of a new action unless a period of time equal to the period of prior relief has elapsed since termination of that relief. This rule does not apply to relief in effect for 180 days or less, however.


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ANNEX 6 - ANALYSIS OF DIFFERENCES BETWEEN EC AND US TDI

1. INTRODUCTORY COMMENTS............................................................................................................. 2 2. ANTI-DUMPING (AD) & ANTI-SUBSIDY (AS) .................................................................................... 2

2.1 PROCEDURE.......................................................................................................................................... 2 (a) Who can bring complaints?................................................................................................................. 2 (b) Threshold for anti-dumping complaints .............................................................................................. 2 (c) The US does not formally assess injury at the complaint stage........................................................... 4 (d) Evidence required from complainants on prices ................................................................................. 5 (e) Effort required from complainants in preparing complaint ................................................................ 5 (f) Early injury determination .................................................................................................................. 6 (g) Questionnaires..................................................................................................................................... 6 (h) Assistance to complainants, particularly SMEs .................................................................................. 7 (i) Cooperation and ability to participate in the investigation................................................................. 7 (j) Verification.......................................................................................................................................... 8 (k) Lower US tolerance of incomplete or inaccurate information ............................................................ 8 (l) Longer verifications............................................................................................................................. 9 (m) Confidentiality ................................................................................................................................ 9 (n) Publicly available information .......................................................................................................... 10 (o) Availability of complaint ................................................................................................................... 10 (p) Provisional Measures ........................................................................................................................ 10 (q) Price Undertakings............................................................................................................................ 11 (r) 'Success rates' .................................................................................................................................... 11 (s) Proportion of provisional measures made definitive......................................................................... 12 (t) Disclosure.......................................................................................................................................... 13 (u) Magnitude of measures...................................................................................................................... 13 (v) Impact of administrative reviews on US duty levels .......................................................................... 16 (w) Judicial Review............................................................................................................................. 17 (x) Cost.................................................................................................................................................... 18 (y) Interim reviews .................................................................................................................................. 18 (z) Expiry reviews ................................................................................................................................... 18 (aa) Retrospective duty collection ........................................................................................................ 19

2.2 DUMPING............................................................................................................................................ 20 (a) Dumping calculation methodologies are similar but small differences can be significant ............... 20 (b) Normal Value..................................................................................................................................... 22 (c) Export Price....................................................................................................................................... 23 (d) Comparison of normal value and export price .................................................................................. 24 (e) Calculation software ......................................................................................................................... 24

2.3 SUBSIDY............................................................................................................................................. 25 (a) Higher subsidy margins and duties ................................................................................................... 25 (b) Anti-subsidy in non-market economy situations ................................................................................ 26

2.4 INJURY & CAUSAL LINK..................................................................................................................... 26 2.5 PUBLIC INTEREST ............................................................................................................................... 26 2.6 INSTITUTIONS ..................................................................................................................................... 27

(a) US system is bifurcated...................................................................................................................... 27 (b) Nature of decision-making................................................................................................................. 27 (c) .US more partisan?............................................................................................................................ 28 (d) More case handlers working on TDI in the US ................................................................................. 28 (e) Specialised case-handlers in both DOC and ITC.............................................................................. 28

2.7 EFFECTIVENESS OF MEASURES ........................................................................................................... 29 3. SAFEGUARD............................................................................................................................................ 29

3.1 GENERAL ATTITUDE TOWARDS SAFEGUARDS..................................................................................... 29 3.2 PROCEDURE........................................................................................................................................ 30

APPENDIX 1 - TIMELINE OF PARALLEL EC AND US AD INVESTIGATION INVOLVING TCCA/CHLORINATED ISOCYANURATES ................................................................................................ 31

Evaluation of EC TDI - Annex 6; EC/US comparison (Final Report December 2005)

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1. INTRODUCTORY COMMENTS

This section is primarily based on a technical analysis of EC and US trade defence instruments (TDI) in order to identify the main differences. In addition, where survey respondents commented on differences between the EC and US, these are noted.

It should be noted that this is not an evaluation of US TDI. The purpose of the comparison with the US is to provide a benchmark against which EC TDI can be assessed. The survey has identified a list of issues that will be considered in the evaluation of EC TDI. Likewise, the technical comparison with the US will provide a list of differences which will be added to the list of issues for the evaluation of EC TDI. They will then be used to help in identifying strengths and weaknesses in EC TDI.

This section merely identifies the differences between EC and US TDI, without any detailed analysis of where such differences indicate a strength or weakness of the EC system. The analysis of the differences is incorporated into the evaluation in section 2 of the main report.

2. ANTI-DUMPING (AD) & ANTI-SUBSIDY (AS)

2.1 Procedure

(a) Who can bring complaints?

In the US, trade unions or groups of workers can bring complaints by or on behalf of a domestic industry. This does not happen in the EC. Article 5.1 of the basic EC AD regulation states that an investigation to determine the existence, degree and effect of any alleged dumping shall be initiated upon a written complaint by any natural or legal person, or any association not having legal personality, acting on behalf of the Community industry. This means that a trade union could submit a complaint as an agent for an EC industry if it was empowered to do so. (b) Threshold for anti-dumping complaints

Claims were made by EC industry that the EC is tougher on accepting anti-dumping complaints than the US i.e. that the threshold of evidence to initiate a case is higher for the EC than it is for the US.

This is a difficult issue to assess. However, it is useful to start by looking at the relative number of anti-dumping cases initiated by the EC and US. Looking at anti-dumping cases initiated, it is certainly true that the US has opened significantly more investigations than the EC since the creation of the WTO.


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Number of anti-dumping investigations initiated1

1995-2004 US 350 EC 287

However, it should be acknowledged that US imports are greater than EC imports. Therefore, it could be expected that the US would initiate more anti-dumping investigations than the EC overall.

In order to assess whether the US has higher propensity than the EC to initiate anti-dumping investigations, it is necessary to look at the number of initiations relative to imports. The following table does this for the years 2000-2004.

US and EC imports and anti-dumping investigations

Imports (bn euros)2 AD Investigations US EU US EU 2000 1297.6 995.6 46 31 2001 1278.9 983.4 77 27 2002 1235.9 941.5 34 20 2003 1124.7 940.4 37 7 2004 1181.6 1029.3 21 29

6118.7 4890.2 215 114

Over the period 2000-2004, US imports were 25% higher than EC imports. At the same time, the US initiated 89% more anti-dumping investigations than the EC. This would suggest that, at least recently, the US has a higher rate of initiating AD investigations.

Over the longer period 1995-2004, the US initiated 22% more investigations than the EC, which is broadly in line with what might be expected given the higher level of US imports.

This evidence would suggest that the US has relatively a higher rate of initiating anti-dumping investigations than the EC. Of course, to really measure this, one would have to know the number of complaints received and rejected to make a definitive conclusion on the propensity to initiate anti-dumping cases. Nevertheless, the fact that the US proportionately initiates more cases than the EC is perhaps indicative of the fact that, as survey respondents claim, the EC has a higher complaint threshold.

It can be noted that the US and EC broadly adopt similar absolute numbers of definitive anti-dumping measures, particularly when the higher level of US imports is taken into account.

1 Based on WTO, European Commission and DOC statistics. 2 All import data from DG Trade website


Annex 6, Page 4

1995-2004

EC US US/EC Initiations 287 350 1.22 Provisional measures 190 297 1.56 Definitive measures 188 174 0.92

2000-2004

EC US US/EC Initiations 114 215 1.89 Provisional measures 85 180 2.11 Definitive measures 89 103 1.16

The above data confirms that, in the long run, the EC and US adopt similar levels of definitive anti-dumping measures3. For the recent past (i.e. 2000-2004), the US has adopted 16% more definitive measures than the EC which is not out of line with the difference in imports.

The above would also seem to be confirm that US initiation rates are relatively higher, particularly for the past five years.

Overall, it is difficult to make definitive conclusions about the relative EC and US propensities to initiate anti-dumping investigations. The number of cases initiated depends on many factors, some of which will be unique to either the EC or US (including the number of complaints received). However, benchmarked against the US, it does appear that the EC initiation standard for anti-dumping complaints is stricterthan – that of the US since the WTO was created. In addition, for the last 5 years the EC appears to have been applying a higher standard, perhaps bearing out what survey respondents said.

(c) The US does not formally assess injury at the complaint stage

One possible explanation for the apparently higher initiation rate in the US may be the fact that there is no formal review of injury by the ITC at the initiation stage. In the US, the DOC has sole responsibility for determining whether a complaint provides a sufficient basis to initiate an investigation. This means that the ITC, the agency responsible for injury, has no formal role in deciding whether or not there is sufficient evidence of injury to initiate an investigation. The DOC does review the injury allegations in the petition but this is not an in-depth analysis.

The EC assesses in detail whether there is sufficient evidence of both dumping and injury before initiating an investigation. Therefore, it does seem to be the case that the EC requires a higher level of evidence than the US in order to be persuaded to initiate anti-dumping investigations.

From the point of view of the US, the lower initiation threshold is balanced by the fact that the ITC makes a preliminary determination of injury relatively quickly. The preliminary 3 It can be noted that the US imposes significantly more provisional measures than the EC which, although not

all US provisional measures are made definitive, is potentially more disruptive for imports..


Annex 6, Page 5

injury determination is made by the ITC within 45 days of the submission of the complaint (i.e. 25 days after initiation of the case). Several survey respondents made the point that the injury threshold applied at this stage is perhaps higher than the injury threshold applied by the EC in accepting complaints.

An analysis of the stages at which investigations resulting in no measures are terminated perhaps backs up this point. From data for the period 2000-2003, as shown in the following table, it appears that 39% of cases resulting in no measures were terminated as a result of an ITC negative preliminary decision after only 45 days from submission of complaint (25 days after initiation of the investigation).

US AD and CVD investigations resulting in no measures4

2000 2001 2002 2003 TOTAL ITC negative (prelim) 10 10 17 10 47 38.84%ITC negative (final) 5 36 7 5 53 43.80%ITA negative (prelim) 0 1 0 1 2 1.65%ITA negative (final) 2 8 0 2 12 9.92%Withdrawal 0 1 0 6 7 5.79%TOTAL 17 56 24 24 121 100.00%

It appears to be the case that the injury analysis done at the initiation stage by the DOC is not as rigorous as the Commission's analysis of injury pre-initiation, thus explaining the higher initiation propensity of the US. Nevertheless, it may be the case that the ITC preliminary determination is possibly more rigorous than the EC pre-initiation injury analysis. It should be noted, however, that, to the extent that the preliminary ITC injury determination can result in termination of weak injury cases quickly, by this time, respondents already have had to fill in a questionnaire. Identifying weak injury cases at the pre-initiation stage is preferable to resources being wasted between initiation and a preliminary injury determination.

(d) Evidence required from complainants on prices

The EC requires firm documentary evidence of prices (usually invoices) in order to establish sufficient evidence of dumping. The US is more flexible. {The DOC will accept affidavits attesting to oral quotations or knowledge of actual prices, salespersons’ “call reports”, market research information provided by a market research firm etc.

(e) Effort required from complainants in preparing complaint

Those EC companies that had been involved in US cases felt that the threshold is slightly lower, but that the amount of documentation required of US industry is very significant.

One of the US participants in the survey from the complainants' side made the point that, in his experience, EC complaints seem less voluminous than US petitions. In looking at the non-confidential versions of US complaints they certainly seem to be at least as thick, and in some case significantly thicker, than EC complaints. Also, US petitioners point out that they typically incur $1million legal fees for preparation of an anti-dumping complaint. 4 Decisions are counted by country not by product. Thus, an ITC negative final decision involving 5

countries is counted as 5 negative decisions.


Annex 6, Page 6

These facts seem to be correct. However, this is partly due to a much more formalistic approach in the US than in the EC. There is no evidence that the more formalistic complaints contain more substance than EC complaints. In fact, as discussed above, the reverse seems to be true in some cases. This does not mean, however, that US complainants can merely turn up at the DOC and they will be successful in getting a case initiated.

(f) Early injury determination

Some US commentators pointed out that under the US approach, all parties have a chance to go through injury arguments very early on in the case. While the DOC may apply a lower injury standard than the EC on initiation of cases, the ITC preliminary injury analysis may well apply a higher standard than the EC applies in assessing complaints. This means that there is an opportunity for those opposing the imposition of measures in the US to intervene early if the injury case is weak and to get the case closed. In the EC, interested parties do not have chance to comment on the injury case until the case has been initiated. Then it will be 9-15 months before any decision is made compared to the initial 45 day injury decision in the US. At the same time, this apparent disadvantage of the EC system in fact gives all parties (and not only those who can afford costly legal counsel to be able to make rapid representations) a proper opportunity to fully exercise their rights of defence before the far reaching decision on whether or not to impose measures. Also, it can be noted that the US has a much higher proportion of provisional measures that are not made definitive compared to the EC (see 2.1(s) below). From data presented in section 2.1(b) above, for the past five years, the US adopted 111% more provisional anti-dumping measures than the EC yet only 16% more definitive measures. This may imply that some weak injury cases may make it through to the definitive stage of the investigation before they are thrown out but in the meanwhile provisional measures are adopted. In other words, the early injury determination does not necessarily apply a high injury standard before provisional measures are adopted. The fact is that of the 83% of US anti-dumping investigation terminated without measures on the grounds of no injury, more than half of them were not terminated until the definitive stage of the investigation (44% of all terminations were at the USITC final stage compared to 39% at the USITC preliminary stage). A much higher proportion of EC provisional anti-dumping measures are made definitive than is the case for the US. This would suggest that the EC provisional injury analysis is almost at the standard of its definitive analysis and, therefore, much higher than the US preliminary injury analysis. Overall, therefore, the ITC preliminary injury analysis may well be not much more than the standard applied by the EC at the complaint stage. (g) Questionnaires

Both the EC and US use detailed questionnaires to collect information from cooperating parties.


Annex 6, Page 7

In the EC, questionnaires are sent to exporters, importers, EC producers and users. Each of these groups receives a single questionnaire which is dispatched at the start of the investigation.

Because of the bifurcated nature of the US system (see 2.6), cooperating parties receive different questionnaires from the DOC and ITC. The DOC, like the EC, basically sends out one questionnaire, though there can be supplemental questionnaires. Unlike the EC, however, the ITC usually has several rounds of questionnaires during the various phases of the investigation.

In the US, the ITC collects additional information after preliminary measures have been adopted taking into account additional periods to the information requested in the original questionnaires. This means that the ITC can use updated data during the investigation. EC practice, on the other hand, is to have one round of data collection and then for the whole investigation to be based on that data (the DOC approach is basically the same as that of the EC). Thus, for the analysis of dumping, injury and causal link, updated data is not usually used. In fact it is European Commission policy to ignore data relating to periods following the investigation period.5

EC industry survey respondents who had experience of US anti-dumping cases stated that, for exporters, the questionnaire is much more onerous than the equivalent questionnaire used by the EC.

(h) Assistance to complainants, particularly SMEs

The EC has a number of initiatives to assist SMEs. Likewise the US provides assistance to SMEs (the DOC's Petition Counselling and Analysis Unit and the ITC Trade Remedy Assistance Office).

However, the point was stressed by many participants in the US survey that it is virtually essential to use counsel in US proceedings. The cost of obtaining counsel may make it much more difficult for SMEs to file cases in the US. In some instances, however, US Producers may form ad hoc groups that share the expense of counsel.

In the EC, industries more often than not submit complaints without the use of a law firm (usually done through relevant industry associations).

(i) Cooperation and ability to participate in the investigation

In the EC, whether an exporter is considered cooperating or not depends on whether the questionnaire is completed and on-site verification takes place. Non-cooperating exporters do not normally play any role in the investigation including submitting injury arguments.

In the US, exporters sometimes choose not to participate in the DOC dumping investigation and instead focus on injury at ITC. There is a perception amongst some that the DOC always finds dumping, and that their money is better spent on a defence at the ITC where a significant number of investigations are terminated.

5 This is not the case for the analysis of Community Interest which is a more prospective analysis.


Annex 6, Page 8

In the EC, there is nothing in principle that stops the Commission from accepting injury arguments from exporters that have not completed the questionnaire. Moreover, an exporter can also have its own injury margin even without cooperating for dumping purposes provided that it fully cooperates with regard to its export prices and related information. However, such partial cooperations occurs rarely..

Exporters are often represented in the injury investigation by an industry association that will organise an injury defence on behalf of the whole industry. The EC always accepts such participation from industry and trade associations, provided that the normal deadlines are respected.

Thus, it would appear that this is not a major difference between the EC and US.

(j) Verification

The general practice of the EC is to verify the questionnaires of as many parties as possible. Unless sampling has been used, it will verify all questionnaires received from complainants and respondents. It also often verifies questionnaires completed by importers and users.

The DOC adopts a similar approach with regard to respondents.

However, unlike the EC, the US does not verify all complainants. The ITC will generally only verify information from the biggest US producer(s).

In the EC survey, some claimed that the EC verifies petitioner’s questionnaire responses much more thoroughly than US does. This appears to be true. Verification usually occurs prior to the adoption of provisional measures. Even after provisional measures the EC appears to be more systematic in conducting verifications of the data provided by complainants.

The ITC verifies at least one US producer (after provisional measures) and sometimes two. Usually companies that have the greatest financial impact and largest financial losses are the ones selected and two to three days are spent at each company. This contrasts with EC where the general rule is that questionnaire responses of all complaining companies are verified.

(k) Lower US tolerance of incomplete or inaccurate information

There appears to be a difference between the EC and US approach at verification. The US is stricter than the EC on the necessity for information provided in the original questionnaire response to be almost fully complete and accurate. In the US, companies must certify as to the accuracy of information provided. Incorrect information is often heavily penalised through rejection of information and use of facts available (though "neutral" facts available are used for minor inadvertent errors).

The Commission adopts a more flexible approach and allows small errors or omissions to be put right at the verification. Whilst the DOC has a practice of allowing correction of minor errors or omissions at verification, survey respondents made the point that the US is more formal than the EC in its approach at verification.

The lower tolerance of the US to incomplete or inaccurate questionnaires, and the use of best information available and adverse inferences, has the result that respondent exporters make every effort to provide very reliable information. Companies know they may be subject to


Annex 6, Page 9

verification and the level of accuracy is generally high. The DOC usually only find small inaccuracies at verification.

For the EC, there appears to be a lower threshold of completeness and accuracy which, if it is met, means that the Commission will be quite flexible in receiving corrections and additional information during and sometimes even after the verification. .

(l) Longer verifications

A verification of a full exporter's questionnaire response by the DOC typically lasts for two weeks (one week for sales, one week for costs).

For the EC, they are usually 2-3 days in total.

This suggests that the US is more thorough in verifying the responses of exporters. However, one survey respondent claimed that US exporters' verifications tend to be very formalistic and like a complete audit of the information contained in the questionnaire. The EC approach is different in that within 3 days a lot less can be done.

(m) Confidentiality

US law requires that the administrative records of anti-dumping and countervailing duty proceedings include copies of all information presented to or obtained by the DOC. Interested parties have extensive access to the administrative record, which is facilitated by a requirement that written submissions must be provided ("served") by the submitting party to all other interested parties. With regard to confidential information, independent representatives (normally legal counsel) can have access to business propriety information under an Administrative Protective Order (APO) (see annex 5, 2.2(r)).

In the EC, interested parties only have access to the non-confidential files, which usually – due to inherent limitations in summarizing confidential information - contain little information. The EC does not have an equivalent to the APO system.

The implications of this are quite far reaching. In the US, for example, lawyers and consultants representing complainants can go through all of the exporters' dumping calculations and try to find reasons why the dumping margin should be higher. By the same token, respondents have full access to Commerce's calculations and therefore can ensure that the information has been used correctly and argue for changes that would bring the margin down. In the EC, neither complainants, nor their lawyers, have access to any confidential information from the exporters. Thus, very little information is known about the detail of the dumping calculation, either by EC complainants or by their advisers. This means that a lot of trust is put in the European Commission. It also means that it is harder for complainants to challenge a dumping calculation by the Commission because they do not have sufficient information to do so. This is quite the opposite in the US where complainants regularly challenge DOC dumping calculations in the courts.

On the other hand, the fact that lawyers can do so much work with the confidential data has a significant cost implication.


Annex 6, Page 10

(n) Publicly available information

The US has much more information publicly available than the EC. Indeed, non-confidential documents are actually available to the public in the US. All non-confidential documents relating to an investigation are available to any member of the general public who visits the reading room.

All parties that participate in a proceeding are placed on a public service list. Whenever a party makes a submission, the party must provide each person on the public service list with a copy of the public version (i.e. excluding confidential information) of the submission.

In the EC, non-confidential information is only available to those interested parties that have registered their interest in the investigation.

(o) Availability of complaint

In the US, the non-confidential version of the complaint becomes publicly available as soon as it is submitted to the DOC i.e. before a decision has been taken to initiate. This is also different from the EC where the fact that a complaint has been received is formally kept confidential until the day of initiation.

(p) Provisional Measures

When provisional measures are imposed, they come into effect much earlier in the US than in the EC.

In the EC, provisional measures do not come into effect until the maximum deadline of nine months has passed both for AD and AS measures.

For the US, provisional measures are adopted as early as 140 days from initiation and, in fact, once the ITC has made its preliminary determination after 25 days (45 days from submission of complaint), industry is virtually certain that preliminary measures will be adopted due to the extremely low number of negative dumping findings at the DOC preliminary stage. In fact, between 2000 and 2003, there were only two cases of a negative preliminary DOC finding (less than 2% of all negative determinations during this period). Thus, 25 days after initiation (i.e. preliminary ITC determination) parties know whether or not there will provisional measures. In the EC, this is not known for nine months.

The 45 day preliminary injury investigation is thorough and there are often negative determinations at this stage. By contrast, in the EC, once a case has been initiated, it is unlikely to be terminated for at least nine months and possibly even fifteen months. However, as noted in 2.1(s) below, it appears that US provisional injury analysis is not at the same level as that in the EC. Of course this makes sense given that the comparison is between a 45-day preliminary injury investigation with no verification, and a 9-month EC investigation with all information verified.

A practical example of the difference in timing of provisional measures is shown in appendix 1 for the TCCA investigation. This involved the EC and US having AD investigations on basically the same product (both investigations included China).


Annex 6, Page 11

(q) Price Undertakings

In the US, normally price undertakings will not be accepted unless complainants agree. That is not the case in the EC where price undertakings can be adopted in situations where the EC industry would have preferred to have anti-dumping measures.

(r) 'Success rates'

The proportion of investigations initiated that result in definitive measures being adopted is sometimes called the "success rate".

We can calculate success rates for the EC and US based on the proportion of decisions to impose measures as a proportion of the total decisions for each year.

EC definitive ADD as % of total decisions6

US definitive ADD as % of total

decisions 1980-2004 55% 42% Of which: 1980-1994 53% 39% 1995-2004 57% 50%

For the period 1980-2004, 55% of EC AD investigations resulted in the imposition of definitive AD measures. For the US, the figure appears to be lower at 42%. This would suggest a much higher 'success rate' in EC investigations than in the US.

The implication of this is that the EC has terminated less cases than the US taking into account this period as a whole. This would appear to back up the belief that the US has a lower threshold for initiating anti-dumping cases but is just as tough as the EC in adopting measures.

For the EC, the trend pre- and post-WTO has not really changed. Interestingly, however, the picture for the US is slightly different looking at the period since the creation of the WTO. Between 1980 and 1994, 39% of US investigations resulted in measures, whilst the success rate increased to 50% for the period 1995-2004. The US success rate is now closer to that of the EC.

The fact that there is a difference between success rates at least partly reflects the fact that a significant number of cases are terminated at the preliminary ITC stage. As noted above, this is perhaps due to the fact that a lower injury threshold is applied by the US at the initiation stage but that some of the weak injury cases are thrown out at the preliminary ITC determination only 25 days into the investigation. It is suggested that such cases would probably never have been opened in the EC, which would explain why there appears to be a lower success rate in the US.

6 Note that these figures do not include cases where the complaint was withdrawn which, in the absence of the

withdrawal, would have resulted in a negative decision. In the EC, this can cover up to one third of cases meaning that the percentages of the EC are in all likelihood overstated.


Annex 6, Page 12

(s) Proportion of provisional measures made definitive

Taking the period 1980-2004, the extent to which provisional measures are made definitive is shown in the following graphs.

US Provisional and Definitive Measures 1980-2004

01020304050607080

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

US ProvUS Def

EC Provisional and Definitive Measures 1980-2004

01020304050607080

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

EC ProvEC Def

Looking at the two graphs above (which are both on the same scale), it is clear that there is a bigger gap between provisional and definitive measures in the US than in the EC.

We can aggregate the total number of provisional measures for this period and express them as a proportion the total number of definitive measures. This is not a precise measure as there will be definitive measures in 1980 where the provisional measure was adopted in 1979. Likewise, there will be provisional measures in 2004, where the definitive measure is in 2005 and not included in the data. However, for the period as a whole, this will be a relatively small issue, and the calculation should provide a good indicator of the extent to which provisional measures are made definitive.

For the EC the provisional/definitive ratio is 89%, while for the US it is much lower at 54%. This suggests that the EC is applying a higher standard in adopting provisional measures. In


Annex 6, Page 13

fact, it implies that EC provisional determinations may not be so provisional and are, in fact, a draft version of the definitive determination. In considering the lower figure for the US, it should be taken into account that it can be expected by their nature that not all provisional measures will be made definitive. The EC is perhaps applying a level of analysis that is higher than is actually required for a decision that is provisional in nature.

(t) Disclosure

There is no formal disclosure of definitive dumping and injury findings in the US prior to the adoption of definitive measures as there is in the EC. Disclosure conferences are held after preliminary and final determinations, at which time the margin calculation is provided. The parties have an opportunity to request correction of ministerial (clerical) errors in the calculation .

The situation is different in the EC where all interested parties receive written disclosure packages setting out details of relevant calculations (as appropriate given confidentiality requirements) and all legal reasoning. For provisional duties, disclosure normally occurs just after provisional measures have been adopted. In the case of definitive duties, the disclosure documents are sent some way in advance of the measures actually being adopted.

However, the fact that APO gives interested parties’ representatives access to the confidential files of the DOC and ITC means that additional disclosure is not as necessary, since every detail of the case can be followed throughout the investigation. The implication of this, however, is that in order to fully exercise their rights of defence, interested parties must engage counsel to be able to take advantage of APO access. Whilst a respondent without counsel can receive full disclosure of its own margin calculation and public DOC decision memoranda etc, they will not be able to defend themselves as well as respondents being advised by counsel with access to much more information through the APO system.

(u) Magnitude of measures

At face value, US anti-dumping measures appear to be generally higher than in the EC when initially imposed following the investigation.

Because different duties are applied to different companies, there is always a range of duties applied in any particular case. We have analysed the upper and lower end of these ranges to see if there is any systematic difference between the EC and US.

The following charts indicate the level of all measures adopted by both the EC and US for the period 2000-20047. The measures for the EC and US are graphed in date order but the dates do not necessarily correspond between the EC and US. Nevertheless, the charts do provide an interesting overall picture of the relative duty levels during this period.

Trend lines have been added. They do not measure any real trends except they reflect the fact that the US duties, on average, are higher than the EC ones.

7 The EC cases were taken by date of imposition while the US cases are on the basis of date of original

initiation of the investigation. However, for the purpose of comparing overall levels of duty, this makes no difference.


Annex 6, Page 14

Anti-Dumping Duties 2000-2004 (lower)

0

50

100

150

200

250

3001 4 7 10 13 16 19 22 25 28 31 34 37

USECLinear (EC)Linear (US)

Anti-Dumping Duties 2000-2004 (higher)

050

100150200250300350400450

1 4 7 10 13 16 19 22 25 28 31 34 37

USECLinear (US)Linear (EC)

The above graphs demonstrate that there is a clear and systematic difference between EC and US duty levels. Of course, one would expect that measures would vary from case to case according to the particular circumstances. Looking at the overall figures does not take into account the fact that the products and countries analysed are different. However, if this was the explanation for the difference, one would expect that over time such differences would cancel out (i.e. sometimes the US would be higher, sometimes the EC would be higher).

To further support the fact that initial US duties are systematically higher than EC duties, we have identified parallel cases (i.e. where both the EC have investigated the same product from the same country). Of course, these investigations do not necessarily cover the same time period but they do seem to support the hypothesis that US duties are, on average, higher than the EC. Again, the comparison has been done for the upper and lower ends of the range of duties applicable.


Annex 6, Page 15

High duties (%)

Case Country EC US Hand pullet trucks China 46.7 383.6 Foundry coke products China 43.6 214.89 Trichloroisocyanuric acid (TCCA) China 42.6 285.63 Barium carbonate China 31.7 81.3 Silicon Russia 23.6 79.42

Low duties (%)

Case Country EC US Silicon Russia 22.7 56.11 Foundry coke products China 43.6 48.55 Barium carbonate China 3.4 34.44 Hand pullet trucks China 7.6 26.49 Trichloroisocyanuric acid (TCCA) China 7.3 75.78

Finally, we can include some older data8 that confirms the same trend.

1990-1994 1995-1999

Median Duty Mean Duty Median Duty Mean Duty

US 56.2 37.9 47.6 30.9

EC 31.0 22.0 27.7 24.8

There are a number of comments that can be made about the fact that US duties appear to be higher than EC duties;

• Most of the common cases identified above involve China, for which both the EC and US still use non-market economy methodologies. The NME methodology used by each is different (see 2.2(b) below) which can give dramatically different results and is probably the cause of some differences above.

• There is no lesser duty rule in the US. US measures are based on purely on the dumping margin whereas in the EC, a significant number of duties are based on the injury margin as a result of the lesser duty rule (though as indicated in 2.2(a), even looking at EC and US dumping margins, there is a difference).

• The differences in the US and EC duty collection systems (see 2.1(aa)) need to be taken into account when comparing the level of duties paid. For the US, the duty rates quoted above are those based on the data in the original investigation. However, it is possible that these rates are more or less than those actually paid. For an exporter

8 Anti-Dumping action in the US and around the world. June 2001. Congress Budget Office.


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that requests an administrative review each year, the duties payable will depend on the actual data for each one-year annual review period. For such companies, the original duty rates are only the "cash deposit" rate (a type of security until the actual duty level is known). However, for a company that does not request administrative reviews, this is the level of duty that will apply.

(v) Impact of administrative reviews on US duty levels

With regard to administrative reviews and the possibility for rates to come down from those found in the original investigation, we have tried to collect some data to look at the impact of such reviews. However, no data is readily available apart from the annual number of administrative reviews completed (source: DOC website).

1995 1996 1997 1998 1999 2000 2001 2002 2003 96 126 104 111 92 86 74 81 65

This data must be carefully interpreted. Each administrative review relates to one or more exporters and will result in importer-specific assessment rates. If, for example, two importers have bought products from an exporter, an administrative review would calculate the level of duty payable by each of the importers.

In order to be able to assess the impact of administrative reviews on the level of duty actually payable in the US, we have tried to identify some examples of recent administrative reviews. We have identified the reviews from two sources a) US notification of anti-dumping activity to the WTO (document G/ADP/N132/USA) and b) administrative reviews published in the Federal Register up to September 2005. This is not supposed to be an exhaustive analysis but at least gives an indication of what happens in US administrative reviews (where a range is given, more than one exporter was involved).

Product (Source) Original After Review Honey (Argentina) 27.04%-55.15% 0.00-55.15%

Stainless steel plate in coils (Argentina) 9.86% 2.71% Carbon and certain alloy steel wire rod (Brazil) 94.73% 98.69%

Softwood lumber (Canada) 2.26%-15.83% 0.91%-9.10% IQF raspberries (Chile) 6.33% 0.25%-13.41%

Stainless steel bar (Germany) 13.63% 0.01% PET film 24.14% 6.28%

Carbon and certain alloy steel wire rod (Mexico) 20.11% 1.06%-5.45% Glycine (China) 155.89% 2.95%

Automotive replacement glass windshields (China) 9.84% 0.93%-0.91% Preserved mushrooms (China) 121.47%-198.63% 0.24%-198.63%

Garlic (China) 376.67% 10.78%-19.68% Uranium (France) 19.95% 12.62%

Stainless steel bar (India) 12.45% 19.8%

The above table suggests that in most cases, the administrative reviews did result in lower duties, in some cases very significantly lower. In three cases (shaded), it appears that the review resulted in a higher duty.

Complainants, exporters and importers all have a right to request a review. Thus, complainants can request a review if they believe that the dumping margin has increased and


Annex 6, Page 17

importer or exporters can request a review if they believe that the dumping margin has gone down. Importers can only request a review for the exporters from which they have exported the product concerned.

Of course, amended rates in an administrative review will only apply to the company subject to the review. The original investigation rates would still apply for exporters who have not had a review.

Of course, in the EC, there is the possibility for measures to be reviewed through an interim review.

EC Interim Reviews

1996 1997 1998 1999 2000 2001 2002 2003 200420 7 16 15 20 14 35 8 26

However, few of these interim reviews relate to reviews of the level of the dumping duty. In 2004, only one out of 26 interim reviews related to an attempt by exporters to get a lower duty. Moreover, this case was tied in with an expiry review, so it was not actually during the five year duration of the measure. ]

(w) Judicial Review

There are far more challenges to anti-dumping and CVD orders in the US than there are in the EC.

In the EC, we have calculated that there have been 124 CFI and ECJ cases between 1970 and 2005 concerning TDI (see annex 7, 4.1). In the US, no data is produced on the number of AD/CVD cases challenged. However, we have checked the Court of International Trade's electronic docket and there were approximately 143 complaints filed in the past 12 months regarding AD/CVD cases. The actual number of administrative decisions challenged is less, because it is frequently the case that multiple parties file and then the cases are consolidated. Nevertheless, it is confirmed from this data that there is far more TDI litigation in the US than in the EC.

Judicial review in the US is used more by both parties (petitioners and respondents), whereas historically in the EC few cases have been taken by petitioners (though this has changed more recently e.g. EFMA, Eurocoton and Eurometaux). Overall, complainants have accounted for around 10% of all cases where the Commission has been challenged on TDI. In the US, again there are no figures breaking down the plaintiffs in TDI court challenges. However, one of our experienced lawyers in Washington DC estimated from experience that the split between complainants and respondents is pretty even, with perhaps respondents being a little ahead. Note also that it is not uncommon for both sides in the US to file challenges.

A further difference relating to judicial review is that, in the US, it is possible for the courts to remand cases. (Cash deposits are still collected while the case is on remand).

One possible implication of the much higher incidence of judicial review in the US is that the European Commission has somewhat more discretion, since less scrutiny by courts means that it is less likely to be challenged. Some survey respondents told us that the DOC and ITC


Annex 6, Page 18

are over-thorough – down to the very last detail – because they are more likely to be scrutinised.

This may not be a difference to do with TDI. It has to be recognised that US business is generally more litigious than its EC counterpart. Legal cultures in the EC and US are very different and this has implications for the discretion that is conferred on authorities. Ultimately, therefore, this may not be so much a difference in US and EC TDI but, rather, a difference in legal culture.

(x) Cost

It is clear that the US system is much more costly than the EC both for complainants and respondents. Questionnaires are bigger and verifications are longer, resulting in heavy legal procedures and costs.

Also, in the US it is very rare for a petition to be filed without counsel. This makes it difficult for small industries composed of SMEs to make complaints.

Although many determinations are appealed in the courts, and this would appear to be desirable because it makes the DOC and ITC very careful in its actions, the appeals take a long time. This becomes very expensive for plaintiffs because the DOC and ITC will often appeal adverse rulings. There are cases where the outcome of administrative reviews are appealed and – even before the case is finalised – the next review is started. Appeals relating to different strands of the same case may be taking place at the same time, which is extremely confusing and costly to administer for the plaintiffs.

In the EC, industries often submit complaints without law firms assisting them. In addition, while exporters who respond to an EC TDI investigation often retain counsel in the EC, the fees are very modest compared to those typically quoted in the US.

(y) Interim reviews

The key difference on interim reviews relates to duty collection. In the EC, interim reviews are the only means by which an exporter can get the duty level amended. In the US, because this can be done through the administrative review process, interim (or 'changed circumstances') reviews have much less importance.

(z) Expiry reviews

With regard to expiry reviews, an EC survey respondent claimed that the US has a higher proportion of expiry reviews that result in continuation of the measures. It was claimed that the US operates under a presumption of the recurrence of problems; rather than requiring a positive finding of the likelihood of a recurrence of problems, as is the case in the EC.

Indeed, the US has had problems of WTO consistency with its approach to expiry reviews in terms of establishing the likelihood of recurring problems if duties were allowed to expire (OCTG and the corrosion resistant steel cases).

Reviewing the data has established that the US initiates a higher proportion of expiry reviews than the EC and, of the reviews initiated, the US maintains measures in a higher proportion of cases than the EC.


Annex 6, Page 19

EC

US

Jan 00 – 19 Oct 05

Jan 00 - 4 Oct 05

No % No % Cases due to expire 142 115 Expiry review initiated 60 42.3% 97 84.3% Expired without review9 82 57.7% 18 15.5% Number of expiry review decisions 38 71 Extension of measures 21 55.3% 63 88.7% Termination of measures 17 44.7% 8 11.3%

The US figures are based on normal expiry reviews and do not include transition reviews (i.e. relating to pre-1995 measures).

For the period analysed, the EC has a much higher proportion of cases that expired without review; 57.8% compared to 15.5%.

Furthermore, of those reviews initiated, 88.7% of US cases resulted in a continuation of the measure. For the EC, the figure is lower at 55.3%.

(aa) Retrospective duty collection

EC duties are set prospectively and, unless an interim review is requested, which is relatively rare, the level stays the same for the five year duration of the duty. In the US, duties are calculated retrospectively based on an administrative review of actual export prices for the previous year and, as noted above, the levels often decline.

One of the key differences here is that in the EC, if an exporter subject to anti-dumping dutiesraises prices, the duty is still applied to the higher price. In the US, if the price is increased, the duty paid will be less. Further, if the price is equal to or above the normal value, no duty will be paid i.e. exporters can get 0% margin regardless of what their initial margin was.

If the dumping margin is zero in three consecutive administrative reviews, the exporter can be excluded from the duty order. This means that they are also excluded from any future expiry reviews. They can only be brought back in with a new complaint.

Some US survey respondents raised negative points about the retrospective system. The issue raised was that it creates a problem of uncertainty for exporters and importers. It is difficult to stay in the market because the importer takes on an uncertain liability. For US industry also it can be problematic because US industry has no certainty that duties will remain in place. EC industry does have greater certainty through the fact that duties, once adopted, often remain in place for 5 years. 9 For the US, expiry reviews are automatically initiated. The figure for the US under this row measures the

number of cases where the measure was revoked because there was no domestic response to the DOC's notice of initiation i.e. neither the DOC or ITC made any assessment whether the measure should be revoked or not and the measure was allowed to expire.


Annex 6, Page 20

Some US survey respondents told us that manipulation of administrative reviews and new shipper reviews reduced the effectiveness of protection received by anti-dumping duties and that the EC system does not have the same scope for manipulation.

2.2 Dumping

(a) Dumping calculation methodologies are similar but small differences can be significant

Both the EC and US closely follow the WTO Agreement in relation to the calculation of dumping and to that extent the two methodologies employed are extremely close. However, despite the detailed rules contained in the WTO Agreement and – on the whole – both administrations' close observance of these rules, there are some differences.

As agreed with the Commission, an extensive survey of every small difference in US AD law and procedure with regard to the substance of the dumping calculations is not within the scope of this report. However, we have identified some of the principal differences and these can have a significant impact on the dumping margins calculated.

An analysis of the dumping margins found by both the EC and US for the last five years shows that the range of US margins is significantly higher than for the EC. Of course, for the US, the dumping margins found are equal to the measures applied (reviewed in 2.1(u) above). For the EC, however, the dumping margins are not always the basis for the dumping duty and, therefore, on average the EC dumping margins are higher than the EC measures applied.

The following charts indicate the level of dumping margins found in the definitive determinations by both the EC and US for the period 2000-2004. The measures are graphed in date order but the dates do not necessarily precisely correspond between the EC and US. Nevertheless, the charts do provide an interesting overall picture of the relative levels of dumping margins calculated during this period.

The trend lines have been added. They do not measure any real trends except they reflect the fact that the US margins, on average, are higher than the EC ones.

Dumping margins (lower)

0

50

100

150

200

250

300

1 4 7 10 13 16 19 22 25 28 31 34 37

USECLinear (US)Linear (EC)


Annex 6, Page 21

Dumping margins (higher)

050

100150200250300350400450

1 4 7 10 13 16 19 22 25 28 31 34 37

US ECLinear (US )Linear (EC)

There are many reasons why the level of dumping margins may vary, and one of them is the different methods used for calculating dumping margins.

The point was made by some US respondents that care should be taken in comparing margins. First, it was claimed, the initial margin is only relevant for a) determining de minimis or zero dumping and b) setting cash deposit rate for first year. In many cases, actual duty paid is lower due to administrative reviews (which indeed is true as we have established in2.1(v)). However, administrative reviews are company specific and therefore the higher level of duties still apply to other companies that have not requested such a review.

Second, the point was made that, in most cases, there is no difference between 50% and 350%. Thus, the high end of the dumping margins is irrelevant. If you compare the low end of duty ranges, it was claimed, the US is as low as the EC. Our analysis suggests that this is not true and the lower US dumping margins are in fact higher in general than for the EC. However, it is true that the gap between the margins is smaller at the lower end of the range than for the higher levels.

It is particularly interesting to compare similar cases involving the same products and countries. This confirms that US margins do appear to be higher.

Highest dumping margins found (%)

Case Country EC US Hand pullet trucks China 46.7 383.6Foundry coke products China 60 214.89Trichloroisocyanuric acid (TCCA) China 42.6 285.63Barium carbonate China 31.7 81.3Silicon Russia 24.8 79.42


Annex 6, Page 22

Lowest dumping margins found (%)

Case Country EC US Silicon Russia 23.6 56.11Foundry coke products China 60 48.55Barium carbonate China 3.4 34.44Hand pullet trucks China 7.6 26.49Trichloroisocyanuric acid (TCCA) China 7.3 75.78

It is hard to explain why US low margins tend to be higher than EC low margins. The high margins can be explained, at least partly, by the US being more prone to use facts available with adverse inference.

Also, the highest margins may also be affected by differences in the approach to calculating residual duties when there is a high level of non-cooperation. In the EC, the residual duty in the situation of a high level of non-cooperation is often based on the highest dumped model whereas in the US it is often based on the highest dumped transaction.

(b) Normal Value

A number of differences in relation to normal value exist. These principally relate to issues that are not dealt with by the WTO Agreement. Examples include:

• The 5% representativeness test for domestic sales is done for each model/type in EC, whereas it is only done globally in US. Thus, as long as domestic sales are at least 5% of export sales, the DOC will use all types/models to assess normal value. In the EC, the Commission applies the text globally in the same way as in the US, and then on a type by type basis. Thus, the Commission can reject prices of individual types that fail the 5% test, while such prices would be used by the DOC.

• In the WTO Agreement, while there are rules on the maximum proportion of sales below cost that is permissible (i.e. if loss making transactions account for less than 20% of all sales by volume, those prices must stay in the normal value determination) there is no guidance on a minimum level of profitable sales on which to base normal value. In the EC, the Commission has adopted an informal guideline that sales at a profit must constitute at least 10% of the sales by volume. The DOC has no such minimum level of profitable sales.

• If the DOC finds that one exporter has a zero, or de minimis, dumping margin, that exporter drops completely out of the scope of the measure. This means that it is excluded from all future reviews of the measure. If it is felt that such a company has started dumping, a whole new investigation must be started. In the EC, this is not the case. Zero or de minimis dumping margins mean that no measure will apply. However, in future reviews, the Commission can re-consider the position of such exporters if the evidence warrants it.

• There is a significant difference with regard to the method used to calculate normal value in non-market economy (NME) situations.


Annex 6, Page 23

• The EC selects an analogue country. This requires at least one company in that country to complete a questionnaire on domestic prices and costs which is used as the basis to determine the normal value in NME situations.

• In the US, the DOC will analyse the production process of the NME exporters and the volume of all inputs used. The inputs (or factors) are valued in a surrogate market economy (imputed market economy values). The DOC publishes data used in previous investigations as to provide a guide for future cases.

• A further difference with the EC is that there is much more comment and debate in the US on the surrogate values used. In the EC, comments must be received on the choice of analogue country within 10 days of the initiation of an investigation. In practice, due to the need to find a cooperating company in other countries that might be proposed, it is in fact very difficult to challenge the analogue country to be used. In the US, while DOC will start off with certain values that it has itself determined or the parties have submitted, there can be significant changes depending on what other evidence parties submit. The DOC even allows the use of actual input costs in an NME situation where the input has been imported from a market economy.

• The EC has developed an approach whereby individual companies can apply for market economy treatment. In addition, whilst not set out in the regulation, the EC has informal procedures for reviewing the treatment of countries in transition to market economies and can graduate countries to full market economy status. In the US, individual companies cannot apply for market economy treatment. Such treatment can be granted on a country basis or on an industry basis (although the latter is viewed as a useless provision and is never used).

(c) Export Price

It was claimed by one of the US survey respondents that, with regard to constructed export price, the US performs a strange and complicated calculation of profits to be subtracted from the actual export price.

The following is an extract from the DOC anti-dumping manual on calculating constructed export price (CEP) profits.

In a market economy case, CEP profit is calculated by first deriving the ratio of per-unit US expenses to the respondent's total expenses and then multiplying this ratio by the total actual profit earned by the respondent.

For example, assume the following:

Total US expenses (per unit) = $0.45

Total expenses - $8,200,000

Total profit = $800,000

In this case, CEP profit would equal $0.0439 per unit, calculated using the following formula.

CEP profit = (.45/8,200,000) x 800,000 = $0.0439

The logic of this calculation is not easy to understand.


Annex 6, Page 24

The EC adopts a more straightforward approach. Profit margins can be determined on the basis of information provided to the Commission by other independent importers. If no such data exists, the Commission uses other reasonable but similar methods. For example, there are cases where information from an importer in a separate anti-dumping investigation in a similar product sector was used.

(d) Comparison of normal value and export price

In making the comparison between normal value and export price, one of the most controversial differences between the EC and US concerns the use of zeroing.

The US continues to use zeroing in situations where there is multiple averaging across different models or types. If the weighted average export price is above that of the normal value for a particular model, it does not allow 'negative' dumping to cancel out the dumping found for other models. In other words, the US applies a zero to that model instead of the negative dumping value. This makes the overall level of dumping higher than if the negative and positive values were offset before determining the final margin of dumping.

The EC used to use the same approach, but it has stopped this practice following the Bed Linen ruling of the WTO Dispute Settlement Body.

The US does not use other types of zeroing (i.e. so-called targeted dumping by time, region etc) in the original investigation whereas, in principle, the EC does. However, even the EC is using this type of zeroing much less frequently.

However, in administrative reviews, the US uses zeroing for every transaction. This is the subject of a current WTO dispute.

It was very interesting to discuss this issue with survey respondents in the US. With the retroactive duty system, it was argued that "zeroing" in administrative reviews is only replicating a situation where the level of duty is calculated on each shipment as it arrives in the US. When the level of duty is calculated on each shipment, a negative dumping margin does not make sense. This would imply that US customs should be making a payment to the importer, an absurd situation. Instead, if a product is deemed not to be dumped in such a situation, then no duty should be paid. By how much it is not dumped is irrelevant. However, it remains the fact that the nature and the extent of zeroing in US administrative reviews is wider than in original US investigations.

A detailed consideration of this issue is outside the scope of this report. However, the comment can be made that the above logic for continuing to use zeroing does not justify the use of inter-model zeroing in the original investigation.

A final comment on zeroing is that it does not affect every case. It only has an impact on those cases where there is a large variation in export prices, such that some transactions are not dumped.

(e) Calculation software

The US uses software (the SAS programme) to calculate dumping which is widely available. This means that all parties with APO access can calculate the dumping margin of every respondent.


Annex 6, Page 25

No such software exists in the EC. The Commission undertakes its own calculations which are set up manually in a spreadsheet. A printout of the spreadsheet calculation is sent to each of the exporters (only the exporters see the calculations due to the confidential nature of the data contained in them).

Unlike the US, each exporter can only check its own calculations and not those of its competitors. Likewise, EC industry is not able to check any of the dumping calculations. They can only engage in the discussion of the methodologies used.

2.3 Subsidy

(a) Higher subsidy margins and duties

It would appear that the US method produces somewhat higher subsidy margins that the EC method.

The data in annex 7, 2.11-2.13 indicates that US margins are higher, though the differences are not as great as those apparent when looking at AD duties and margins.

One reason why the differences may not be as great is the fact that neither the EC nor US have initiated any AS investigations against China. Many of the very high US duties involve Chinese exporters.

Two parallel cases (i.e. where the EC and US looked at similar products from the same country) indicate that US margins are higher:

Lowest subsidy margins (%)

Case Country EC US DRAMs (CVD) South Korea 34.8 44.29PET Film (CVD) India 3.8 18.66

Highest subsidy margins (%)

Case Country EC USDRAMs (CVD) South Korea 34.8 44.29PET Film (CVD) India 19.1 24.48

We have identified two possible explanations so far for the higher US subsidy margins:

• On some of the older cases, the US used a specific method for privatised companies which was found to be inconsistent with WTO rules. For cases involving companies that had been privatised, the change in method resulted in lower margins.

• US margins can vary from EC margins due to the fact that, for non-recurring subsidies, the US amortizes the benefit on a declining balance basis, while the EC does this on a straight line basis. Thus, for non-recurring subsidies, the magnitude of margins in the US will depend on how long ago the subsidy was received. If the subsidy was received just before the investigation was initiated, the benefit would be high when calculated on a declining balance basis. Note that it is possible in the US


Annex 6, Page 26

to request administrative reviews where the subsidy was recent and the benefit would be lower in ensuing years. However, this is not done automatically by the US, even though it is clear that the amount of benefit would be lower in later years.

(b) Anti-subsidy in non-market economy situations

In the US, CVD cannot be used against non-market economies. In the EC, there is nothing that stops the AS instrument being used against NMEs. However, in practice, AS is never used against such countries.

2.4 Injury & Causal Link

A number of issues emerged in the comparison of EC and US AD and AS in relation to injury and causal link.

• The outcome of injury determination appears to be less certain in the US than in the EC. The US has a higher rate of cases terminated on findings of no injury. In fact, in the US, for the majority of cases that do not result in measures, the reason is that the ITC did not find injury (either at the preliminary and final stage). However, as discussed in 2.1(b) above, it is arguable that the EC applies a higher standard in assessing injury at the initiation stage than the US. If this is the case, it really is not surprising that the US terminates more investigations than the EC on injury grounds.

• The US considers data on companies that have gone out of business (to avoid "survivor bias") whereas the EC will only look at businesses that are still going-concerns.

• The US always considers injury to the whole domestic industry. From the domestic industry, it will select certain companies to fill in detailed questionnaires. Not all complainants have to complete questionnaires. The EC only considers injury to the complainants.

• The ITC does not require complainants to prepare a full transaction listing. In order to calculate price undercutting the ITC will select representative transactions. In the EC, all complainants have to complete a questionnaire with a full transaction listing for all domestic sales.

• The ITC often uses updated information relating to a period after the investigation period (IP) (i.e. in the final stage, they may request additional data in a second or even third questionnaire). In the EC, the Commission only uses information strictly from the IP.

• The ITC can issue an administrative subpoena, if necessary, and obtain information by court enforcement. However, this happens is only a small number of cases (less than 1%).

2.5 Public Interest

Unlike the EC, the US does not have a public interest test for AD & AS. There is no provision in US law that allows the broader public interest to be taken into account, evenwhere wider considerations of public policy clearly exist.


Annex 6, Page 27

Users and consumers may participate in the investigation, but they normally only make comments relating to injury. One problem for users/consumers is that they do not have standing and therefore cannot be granted access to confidential information under APO.

The ITC can take the interests of users into account if, for example, there is limited supply in the US and they are purchasing on availability grounds rather than for price. Similarly, their interests can also be taken into account if users are choosing to import for reasons of quality.

2.6 Institutions

DG Trade of the European Commission has competence for all aspects of AD and AS investigations, including both procedure and substance. AD and AS are administered under a politically controlled system with a politically appointed Commissioner and the necessity of Council approval before any definitive measures can be adopted although the framework is a strictly legal one.

(a) US system is bifurcated

The Department of Commerce (DOC) is responsible for assessing AD/AS complaints10, initiating investigations and issuing and administering duty orders. The DOC is also responsible for calculating dumping and subsidy margins which, in all cases, determine the level of AD or AS measures. The DOC is a cabinet level agency of the executive branch of government and therefore is under political control. That said, decision-making authority is delegated by the Secretary of Commerce to the Assistant Secretary for Import Administration and dumping determinations appear to be undertaken in a purely technical manner.

The International Trade Commission (ITC) is responsible for making injury determinations in AD and AS investigations. The ITC is an independent agency comprise of six Commissioners (3 from each of the two main political parties, Republicans and Democrats). Although the Commissioners can have a reputation for looking at cases in certain ways, the decisions appear to be truly independent and based on the technical aspects of each case.

Some participants in the US survey compared the EC system to that which existed historically in the US. Until 1979, the US Treasury Department was responsible for the dumping calculation. US survey participants confirmed that the Treasury Department did not operate with the same level of transparency that the DOC now operates under. Also, survey participants claimed, decisions were much more political.

Even further back, until the 1950s, the Treasury Department conducted both the dumping/subsidy and injury analysis.

(b) Nature of decision-making

US participants in the survey raising this point implied that the EC system (described as non-transparent and extremely political) has similarities to the way the US system used to work.

The EC system is somewhat more complex than the US system because it involves not only a decision of the investigating authority, i.e. the Commission, but also a decision of 25 Member

10 "Import Administration" is the branch of the DOC dealing with TDI.


Annex 6, Page 28

States. Moreover, the fact that the EC has to operate in a mutilingual environment with adds to the complexity.

The framework in which the EC system is operated is nevertheless a legal one, as evidenced by the Court ruling on Eurocoton. Complexity is added by the fact that the EC carries out a number of additional tests before measures are applied, notably the lesser-duty rule and the Community interest test.

In the US, AD and AS are considered by some to be political in nature. However, in the conduct of investigations, the DOC and ITC approach their tasks in a purely technical way. The US has no public interest test and this means that the investigation focuses on the technically defined issues of dumping/subsidy margin calculations and injury/causality determinations. The adoption of measures is automatic if the requirements are met.

(c) .US more partisan?

A number of survey respondents claimed that the US DOC and ITC are more partisan than the European Commission. This is extremely difficult to assess.

However two comments can be made in this regard:

• The more complex nature of EC TDI investigations (e.g. a public interest test and Member States’ decision-making) perhaps makes the Commission more cautious in adopting measures. In the US, the investigation is more partisan in the sense that the focus is really only on whether domestic industry should be protected or not.

• The US has been targeted in other countries' TDI investigations much less than the EC. This has perhaps increased the sensitivity of using TDI for the Commission and EC Member States. Perhaps there is less concern in the US about taking into account export interests when undertaking TDI actions and more determination to press ahead as an active user of TDI.

(d) More case handlers working on TDI in the US

There are 163 people working on TDI in Directorate B of DG Trade (currently there are 13 vacancies).

This compares with over 300 people (including 35 lawyers) and 75 people working on TDI in the DOC and ITC respectively.

(e) Specialised case-handlers in both DOC and ITC

Whilst some case handlers in the EC have professional backgrounds in law, economics and accountancy, there is no systematic recruitment of professionals in each of these areas.

Further, case handlers are allocated to cases on a case-by-case basis. As a result, case handlers can be allocated to either the dumping or injury aspects of investigations. Further, while some case handlers have informally developed specialisations in particular countries, specialisation of case handlers in specific industries is avoided.

In the US, by definition DOC staff work on the dumping side of the investigation and ITC staff work on the injury analysis.


Annex 6, Page 29

Also, in both the DOC and ITC, every investigation team conducting a cost audit would include an accountant.

In the ITC, every injury determination is allocated at least six staff including a lawyer, economist, and accountant. The team will also include an industry specialist that keeps up to date on an industry whether or not there are any current investigations in that sector.

One survey respondent claimed that the accountancy expertise of US case handlers is exaggerated. The same person explained that the best case handlers actually have a tax and customs background.

In the EC, a team assigned to the dumping or injury part of a case would include also somebody with a strong accounting background (eg acquired in tax or customs field), although not necessarily an accountant by profession. Moreover, the Commission does organise internal training on accountancy and auditing issues.

2.7 Effectiveness of measures

As in the EC, enforcement of US measures is also a significant concern of US industry.

Some participants in the EC survey felt that the US has a big advantage with a single, unified customs authority. The EC has potentially more problems with enforcement caused solely by the fact that AD and AS measures are imposed by a multitude of different customs authorities (each Member State has its own customs authority). However, the Commission has stepped up efforts to reinforce coordination with national customs authorities in the area of TDI.

In the US, those on the domestic industry side felt that there are some problems. First, following the 9/11 disaster in New York, the priority of US Customs has shifted towards security which has resulted in a lower priority being placed on TDI implementation.

Also, US survey respondents highlighted recent problems in collecting duties (particularly on new shipper reviews). More than $100 million of anti-dumping duties on Chinese imports were not collected in 2003 because of problems with collecting the duties in new shipper reviews (as reported in 'Inside US Trade' on 26 March 2004).

US survey respondents also said that traditional types of circumvention (e.g. screwdriver plants, origin and classification misdeclarations etc.) have been experienced in US for a long time.

In general, however, US respondents thought that US measures are well enforced. As in the EC, problems emerge in specific situations.

3. SAFEGUARD

3.1 General attitude towards safeguards

Safeguards have traditionally been used more by the US than the EC. However, most participants in the US survey claimed that the safeguard instrument has been weakened by the adverse WTO rulings. In addition, those representing US industry interests complained about the political aspects of the decision to adopt measures. Overall, the feeling seems to be that industry will need compelling reasons to use safeguards again.


Annex 6, Page 30

In the EC, there has not been very much experience of safeguards and therefore survey respondents had few comments on safeguards. In addition, there is a general perception in the EC that use of safeguards is not encouraged by the Commission and Member States. This explains why safeguards have been less used in the EC. However, in recent years, the EC has started to have a small number of safeguard cases.

The US and EC safeguard laws both contain the same definition of serious injury (i.e. significant overall impairment in the position of Community producers. The EC legislation contains a list of factors to be considered in the examination of serious injury. These include all of the factors mentioned in the WTO safeguards agreement, though the EC does not use identical wording to that found in the WTO provisions. US legislation does not list all of the factors but does list some factors to be taken into account when considering serious injury:-

(i) the significant idling of productive facilities in the domestic industry,

(ii) the inability of a significant number of firms to carry out domestic production operations at a reasonable level of profit, and

(iii) significant unemployment or underemployment within the domestic industry;

In determining whether there is causation, the ITC must find that imports are a substantial cause of injury (i.e. a cause which is important and not less than any other cause). US law does not require the ITC to determine that injury caused by other factors is not attributable to imports. The EC adopts the approach that imports must be a genuine and substantial cause of serious injuryA number of US practices on the substance side have been found to be WTO inconsistent. This includes the lack of a determination of unforeseen circumstances; failure to separate and distinguish other causes of injury: and the absence of a sudden, sharp, significant, and recent increase in imports.

Due to the fact that the President makes the final decision on whether safeguards should be adopted, and at what level, safeguards have more of a political element than AD and AS. The President can be influenced by lobbying from various interests, including those that oppose the measures. In this way, US safeguards are effectively subject to a public, although non-transparent interest test. As in AD and AS, the EC applies the Community interest test before adopting safeguard measures.

3.2 Procedure

In the US, it is usually a domestic industry that submits a safeguards petition. In the EC, Member States request the initiation of a case. It is not possible for industries to complain directly to the Commission.

The President can exclude imports from NAFTA countries (Canada & Mexico).


Annex 6, Page 31

APPENDIX 1 - TIMELINE OF PARALLEL EC AND US AD INVESTIGATION INVOLVING TCCA/CHLORINATED ISOCYANURATES

11 months

6 months (can be as short as 4.5 months)

US definitive duties adopted 10 May 2004

US provisional duties adopted

16 December 2004

US investigation initiated

10 June 2004

10 July 2004 EC investigation

initiated7 April 2005

EC provisional duties adopted

7 October 2005 EC definitive

decision expected

15 months

9 months


Annex 7, Page 1

ANNEX 7 - EC & US STATISTICS ON TRADE DEFENCE INSTRUMENTS

1. ANTI-DUMPING........................................................................................................................................ 3 1.1 EC & US INITIATIONS .......................................................................................................................... 3 1.2 EC & US PROVISIONAL MEASURES ..................................................................................................... 4 1.3 EC & US DEFINITIVE MEASURES......................................................................................................... 5 1.4 EC AD TERMINATIONS 1980-2004 ...................................................................................................... 6 1.5 US ITC INJURY DETERMINATIONS 1980-2003..................................................................................... 7 1.6 EC & US COUNTRIES TARGETED BY AD ............................................................................................. 8

(a) EC Top 10 Countries in AD Investigations 1995-2004 ....................................................................... 8 (b) US Top 10 Countries in AD Investigations 1995-2004 ....................................................................... 9

1.7 EC AD EXPIRY REVIEWS 1996-2004 ................................................................................................. 10 (a) AD Expiry Reviews Initiated.............................................................................................................. 10 (b) Expiry Reviews Outcome: Confirmation of measures ....................................................................... 10 (c) Expiry Reviews Outcome: Termination of measures ......................................................................... 11

1.8 EC AD INTERIM REVIEWS 1996-2004................................................................................................ 12 (a) Interim Reviews Initiated................................................................................................................... 12 (b) Interim Reviews Outcome: Confirmation of measures ...................................................................... 12 (c) Interim Reviews Outcome: Termination of measures........................................................................ 13

1.9 US AD & CVD EXPIRY REVIEWS (SUNSET REVIEWS) 1998-2004..................................................... 14 (a) Expiry Reviews Outcome: Confirmation of measures ....................................................................... 14 (b) Expiry Reviews Outcome: Termination (Revocations) of measures .................................................. 14

1.10 EC AD MEASURES EXPIRED 1996-2004 ............................................................................................ 15 1.11 EC ANTI-DUMPING REFUNDS............................................................................................................. 16

(a) Refunds Applications Lodged ............................................................................................................ 16 (b) Refunds Decisions Adopted ............................................................................................................... 16

1.12 US ANTI-DUMPING ADMINISTRATIVE REVIEWS ............................................................................... 16 1.13 EC RANGE OF DUTIES IN AD CASES 2000-2004 ................................................................................. 17 1.14 EC DUMPING MARGINS IN AD CASES 2000-2004.............................................................................. 18 1.15 USA RANGE OF DUTIES IN AD CASES 2000-2004 .............................................................................. 19

2. COUNTERVAILING DUTIES ............................................................................................................... 20 2.1 EC & US INITIATIONS ........................................................................................................................ 20 2.2 EC & US PROVISIONAL ANTI-SUBSIDY MEASURES ............................................................................ 21 2.3 EC & US DEFINITIVE ANTI-SUBSIDY MEASURES............................................................................... 22 2.4 EC CVD TERMINATIONS 1980-2004.................................................................................................. 23 2.5 US ITC INJURY DETERMINATIONS 1980-2003................................................................................... 24 2.6 EC COUNTRIES TARGETED BY CVD .................................................................................................. 25 2.7 EC CVD EXPIRY REVIEWS 1996-2004 .............................................................................................. 26

(a) CVD Expiry Reviews Initiated........................................................................................................... 26 (b) Expiry Reviews Outcome: Confirmation of measures ....................................................................... 26 (c) Expiry Reviews Outcome: Termination of measures ......................................................................... 26

2.8 EC CVD INTERIM REVIEWS 1996-2004............................................................................................. 27 (a) Interim Reviews Initiated................................................................................................................... 27 (b) Interim Reviews Outcome: Confirmation of measures ...................................................................... 27 (c) Interim Reviews Outcome: Termination of measures........................................................................ 27

2.9 CVD MEASURES EXPIRED 1996-2004 ............................................................................................... 28 2.10 US COUNTERVAILING DUTY ADMINISTRATIVE REVIEWS .................................................................. 29 2.11 EC RANGE OF DUTIES IN CVD CASES 2000-2004............................................................................... 30 2.12 EC SUBSIDY MARGINS IN CVD CASES 2000-2004 ............................................................................ 31 2.13 USA RANGE OF DUTIES IN CVD CASES 2000-2004............................................................................ 32

3. SAFEGUARDS.......................................................................................................................................... 33 3.1 EC& US INITIATIONS ......................................................................................................................... 33 3.2 EC & US PROVISIONAL MEASURES ................................................................................................... 34 3.3 EC & DEFINITIVE MEASURES............................................................................................................. 35

4. EC COURT CASES: ECJ AND CFI 1970-2005 .................................................................................... 36 4.1 CASES BY TYPE OF TRADE DEFENCE INSTRUMENT .............................................................................. 36

Evaluation of EC TDI; Annex 7 – Statistics on EC/US TDI (Final Report, December 2005)

Annex 7, Page 2

4.2 CASES BY TYPE OF PROCEEDING......................................................................................................... 36 4.3 CASES BY IDENTIFY OF APPLICANT..................................................................................................... 37 4.4 CASES BY ACT IN DISPUTE ................................................................................................................. 37 4.5 CASES BY COURT ORDER ................................................................................................................... 38 SOURCES.......................................................................................................................................................... 40


Annex 7, Page 3

ANTI-DUMPING 1.

1.1 EC & US initiations

EC and US AD Initiations 1980-2004

0

10

20

30

40

50

60

70

80

90

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

ECUS

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 EC 25 47 55 36 48 36 24 39 39 26 43 US 16 14 35 46 38 69 83 16 42 24 35 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004EC 20 30 21 43 33 24 41 21 66 31 27 20 7 29US 66 84 37 51 14 21 14 36 46 46 77 34 37 21


Annex 7, Page 4

1.2 EC & US PROVISIONAL MEASURES

EC & US Provisional Measures 1980-2004

0

10

20

30

40

50

60

70

80

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

ECUS

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 EC 6 10 18 21 11 9 6 13 28 10 23 US 7 10 21 30 34 54 52 45 35 23 25 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004EC 18 18 16 25 21 11 33 28 12 38 18 15 9 5US 43 54 67 46 23 16 16 28 34 22 61 44 19 34


Annex 7, Page 5

1.3 EC & US DEFINITIVE MEASURES

EC & US Definitive Measures 1980-2004

0

10

20

30

40

50

60

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

ECUS

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 EC 7 10 7 19 4 8 4 9 10 18 18 US 5 4 5 13 20 12 26 53 12 24 14 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004EC 19 16 19 19 13 23 23 26 14 40 12 25 3 9US 19 16 42 16 23 9 11 9 19 21 32 26 16 8


Annex 7, Page 6

1.4 EC AD TERMINATIONS 1980-2004

EC Terminations in AD Cases 1980-2004

0

5

10

15

20

25

30

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Year

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 12 14 10 10 10 19 18 4 8 5 17 11 12

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 8 8 8 25 13 15 18 27 12 2 21 2


Annex 7, Page 7

1.5 US ITC INJURY DETERMINATIONS 1980-2003

AD Case Summary 1980-2003

0

5

10

15

20

25

30

35

40

45

50

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

AffirmativeNegativeTerminated

Affirmative Negative Terminated Affirmative Negative Terminated 1980 9 15 10 1991 19 40 61981 4 5 6 1992 38 47 41982 12 25 28 1993 11 9 161983 12 14 8 1994 29 26 41984 16 13 29 1995 9 6 31985 26 20 36 1996 9 2 21986 37 14 12 1997 14 7 21987 17 15 4 1998 22 11 01988 21 14 3 1999 20 24 61989 17 9 3 2000 18 15 21990 15 4 2 2001 40 43 9

2002 12 21 2 2003 14 11 10


Annex 7, Page 8

1.6 EC & US COUNTRIES TARGETED BY AD

(a) EC Top 10 Countries in AD Investigations 1995-2004

EC Top 10 Countries Targeted in AD cases 1995-2004

24%

12%

11%9%9%

8%

8%

7%6%

6%China

India

Thailand

Russia

South Korea

Indonesia

Malaysia

Ukraine

Chinese Taipei

Poland

EC AD Targets 1995-2004

Country No. of AD measuresChina 32India 15Thailand 14Russia 12South Korea 11Indonesia 10Malaysia 10Ukraine 9Chinese Taipei 8Poland 8

Note: Targets are counted by the number of anti-dumping measures imposed rather than by the number of cases initiated.


Annex 7, Page 9

(b) US Top 10 Countries in AD Investigations 1995-2004

US Top 10 Countries Targeted in AD cases 1995-2004

27%

19%

12%8%

7%

5%

5%5%

4% 4% 4%

China

EC

Japan

South Korea

Chinese Taipei

India

Indonesia

South Africa

Mexico

Russia

Thailand

Top 10 countries cited in AD cases 1995-2004

Country No. of AD measuresChina 44EC 31Japan 20South Korea 13Chinese Taipei 12India 9Indonesia 8South Africa 8Mexico 7Russia 7Thailand 7

Note: Targets are counted by the number of anti-dumping measures imposed rather than by the number of cases initiated.


Annex 7, Page 10

1.7 EC AD EXPIRY REVIEWS 1996-2004

(a) AD Expiry Reviews Initiated

EC Expiry Reviews Initiated 1996-2004

0

2

4

6

8

10

12

14

16

18

1996 1997 1998 1999 2000 2001 2002 2003 2004

1996 1997 1998 1999 2000 2001 2002 2003 20042 4 16 13 9 12 13 4 5

(b) Expiry Reviews Outcome: Confirmation of measures

AD Expiry Reviews: Confirmation of measures 1996-2004

0

2

4

6

8

10

12

14

1996 1997 1998 1999 2000 2001 2002 2003 2004

Year

1996 1997 1998 1999 2000 2001 2002 2003 20042 2 6 2 11 7 12 4 5


Annex 7, Page 11

(c) Expiry Reviews Outcome: Termination of measures

AD Expiry Reviews: Termination of measures 1996-2004

0

1

2

3

4

5

6

7

8

1996 1997 1998 1999 2000 2001 2002 2003 2004

Year

1996 1997 1998 1999 2000 2001 2002 2003 20040 3 7 3 4 6 6 5 4


Annex 7, Page 12

1.8 EC AD Interim Reviews 1996-2004

(a) Interim Reviews Initiated

AD Interim Reviews Initiated 1996-2004

0

5

10

15

20

25

30

35

40

1996 1997 1998 1999 2000 2001 2002 2003 2004

Year

1996 1997 1998 1999 2000 2001 2002 2003 200420 7 16 15 20 14 35 8 26

(b) Interim Reviews Outcome: Confirmation of measures

AD Interim Reviews: Confirmation of measures 1996-2004

0

5

10

15

20

25

1996 1997 1998 1999 2000 2001 2002 2003 2004

Year

1996 1997 1998 1999 2000 2001 2002 2003 20043 6 13 18 14 6 9 21 16


Annex 7, Page 13

(c) Interim Reviews Outcome: Termination of measures

AD Interim Reviews: Termination of measures 1996-2004

0

2

4

6

8

10

12

1996 1997 1998 1999 2000 2001 2002 2003 2004

Year

1996 1997 1998 1999 2000 2001 2002 2003 20041 8 11 0 6 1 10 8 2


Annex 7, Page 14

1.9 US AD & CVD EXPIRY REVIEWS (SUNSET REVIEWS) 1998-2004

(a) Expiry Reviews Outcome: Confirmation of measures

AD & CVD Expiry Reviews: Confirmation of measures 1999-2004

0

20

40

60

80

100

120

140

1999 2000 2001 2002 2003 2004

1999 2000 2001 2002 2003 2004

34 124 23 2 5 18

(b) Expiry Reviews Outcome: Termination (Revocations) of measures

AD & CVD Expiry Reviews: Termination of measures 1998-2004

0

20

40

60

80

100

120

140

160

1998 1999 2000 2001 2002 2003 2004

1998 1999 2000 2001 2002 2003 2004

4 1 150 10 9 0 11


Annex 7, Page 15

1.10 EC AD MEASURES EXPIRED 1996-2004

AD Measures Expired 1996-2004

0

5

10

15

20

1996 1997 1998 1999 2000 2001 2002 2003 2004

Year

1996 1997 1998 1999 2000 2001 2002 2003 200419 18 5 7 4 8 14 18 12


Annex 7, Page 16

1.11 EC ANTI-DUMPING REFUNDS

(a) Refunds Applications Lodged

1998 1999 2000 2001 2002 2003 20049 2 2 7 N/A N/A N/A

(b) Refunds Decisions Adopted

1998 1999 2000 2001Partial Refund 5 8 3 2Full Refund 1 1 1 0Inadmissible 2 0 0 0Withdrawn 8 3 0 0No refund 0 11 2 1Total 16 23 6 3

Note: The refund procedure appears to have gradually become irrelevant as a tool t obtain refund of duties paid in excess of what is necessary to offset the actual dumping margin. Between 1985-1995, only 53 refund decisions were published, of which 9 granted a full refund, 26 granted a partial refund and 15 were rejected as inadmissible. Between 1996-2003 only 5 refund decisions were published of which 3 granted a partial refund.

1.12 US ANTI-DUMPING ADMINISTRATIVE REVIEWS

US AD Administrative Reviews Completed 1980-2003

0

20

40

60

80

100

120

140

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 4 48 77 65 71 30 33 63 46 41 58

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 200385 81 69 49 96 126 104 111 92 86 74 81 65


Annex 7, Page 17

1.13 EC RANGE OF DUTIES IN AD CASES 2000-2004

EC Duty Range-Lower Level EC Duty Range-Higher Level Product Date

1 8.4 27.7 Polyester staple fibres (PSF) 14-Jul-00 2 5.7 22.3 Hot-rolled flat products of non-alloy steel 10-Aug-00 3 6.3 49.4 Malleable cast iron tube or pipe fittings 18-Aug-00 4 18.9 18.9 Black colorformers 13-Oct-00 5 7.6 34.2 Polyethylene terephthalate (PET) 30-Nov-00 6 4.8 35.4 Polyester staple fibres 28-Dec-00 7 22.3 43.4 Ammonium nitrate 25-Jan-01 8 43.6 43.6 Coke of coal in pieces with a diameter of more than 80 mm 15-Dec-00 9 5.3 20 Styrene-butadiene-styrene thermoplastic rubber 22-Sep-00

10 19.7 20.5 Cathode-ray colour television picture tubes 20-Oct-00 11 5.8 45.7 Solutions of urea and ammonium nitrate 22-Sep-00 12 1.5 37.8 Hot rolled coils (Flat rolled products of iron or non-alloy steel) 05-Feb-00 13 23 38.5 Seamless pipes and tubes of non-alloy steel 17-Feb-00 14 4.7 30.7 Electronic weighing scales (REWS) 30-Nov-00 15 17.7 38.5 Recordable compact disks 18-Jun-02 16 6.9 28 Zinc Oxides 05-Mar-02 17 22.5 22.5 Ferro Molybdenum 06-Feb-02 18 5.7 24.2 Urea 19-Jan-02 19 7.5 62.6 Polyethylene terephthalate film 23-Aug-01 20 8.4 66.1 Compact fluorescent lamps 19-Jul-01 21 17.8 50.7 Iron or steel ropes and cables 04-Aug-01 22 11.3 11.3 Internal gear hubs for bicycles 26-Oct-01 23 14.9 15 Aluminium foil 17-May-01 24 5 52.6 Welded Tubes and Pipes of iron or non-alloy steel 27-Sep-02 25 15 75 Tube and Pipe Fittings if iron or steel 24-Aug-02 26 32.3 32.3 Ring Binder Mechanisms 08-Jun-02 27 18.3 21 Sulphanilic acid 25-Jul-02 28 3.7 7.9 Polyester textured filament yarn (PTY) 25-Jul-02 29 8.9 32.1 Furfuryl alcohol 31-Oct-03 30 10.8 40.7 Paracresol 20-Sep-03 31 22.7 23.6 Silicon 24-Dec-04 32 6.9 18.1 Sodium Cyclamate 11-Mar-04 33 30 54.4 Large rainbow trout 11-Mar-04 34 13.1 13.1 Cotton-type bed linen 04-Mar-04 35 6.5 66.7 Okoume' plywood 12-Nov-04 36 7.8 22.9 Polyethylene terephthalate (PET) 19-Aug-04


Annex 7, Page 18

1.14 EC DUMPING MARGINS IN AD CASES 2000-2004

Low dumping margin High dumping margin Product Date 1 8.4 20.8 Polyester staple fibres (PSF) 14-Jul-00 2 12.1 52.6 Hot-rolled flat products of non-alloy steel 10-Aug-00 3 6.3 65.7 Malleable cast iron tube or pipe fittings 18-Aug-00 4 49.8 49.8 Black colorformers 13-Oct-00 5 1.4 73.7 Polyethylene terephthalate (PET) 30-Nov-00 6 4.8 35.4 Polyester staple fibres 28-Dec-00 7 22.3 41.6 Ammonium nitrate 25-Jan-01 8 60 60 Coke of coal in pieces with a diameter of more than 80 mm 15-Dec-00 9 5.3 20 Styrene-butadiene-styrene thermoplastic rubber 22-Sep-00

10 0.7 20.5 Cathode-ray colour television picture tubes 20-Oct-00 11 5.8 55 Solutions of urea and ammonium nitrate 22-Sep-00 12 27.1 56.3 Hot rolled coils (Flat rolled products of iron or non-alloy steel) 05-Feb-00 13 40.8 123.7 Seamless pipes and tubes of non-alloy steel 17-Feb-00 14 4.7 12.8 Electronic weighing scales (REWS) 30-Nov-00 15 17.7 38.5 Recordable compact disks 18-Jun-02 16 6.9 69.8 Zinc Oxides 05-Mar-02 17 38.5 38.5 Ferro Molybdenum 06-Feb-02 18 10 90.3 Urea 19-Jan-02 19 7.5 65.3 Polyethylene terephthalate film 23-Aug-01 20 8.4 66.1 Compact fluorescent lamps 19-Jul-01 21 17.8 55.2 Iron or steel ropes and cables 04-Aug-01 22 36.6 36.6 Internal gear hubs for bicycles 26-Oct-01 23 14.9 26.8 Aluminium foil 17-May-01 24 5 65.3 Welded Tubes and Pipes of iron or non-alloy steel 27-Sep-02 25 7.7 83.9 Tube and Pipe Fittings if iron or steel 24-Aug-02 26 144 144 Ring Binder Mechanisms 08-Jun-02 27 21 24.6 Sulphanilic acid 25-Jul-02 28 6.1 17 Polyester textured filament yarn (PTY) 25-Jul-02 29 78 112 Furfuryl alcohol 31-Oct-03 30 10.8 40.7 Paracresol 20-Sep-03 31 23.6 24.8 Silicon 24-Dec-04 32 6.9 18.1 Sodium Cyclamate 11-Mar-04 33 24.8 54.5 Large rainbow trout 11-Mar-04 34 13.1 13.1 Cotton-type bed linen 04-Mar-04 36 6.5 66.7 Okoume' plywood 12-Nov-04 37 2.6 22.9 Polyethylene terephthalate (PET) 19-Aug-04


Annex 7, Page 19

1.15 USA RANGE OF DUTIES IN AD CASES 2000-2004

US Duty Range-Lower Level US Duty Range-Higher Level Product Date 1 7.51 33.81 Stainless Steel Butt-Weld Pipe Fittings 23-Feb-01 2 24.32 114.51 Steel Concrete Reinforcing Bars 18-May-01 3 2.07 232.86 Stainless Steel Angle 07-Sep-01 4 156.29 156.29 Foundry Coke Products 12-Sep-01 5 48.55 214.89 Honey 17-Sep-01 6 24.67 305.56 Solid Agricultural Grade Ammonium Nitrate 19-Nov-01 7 2.38 243.46 Pure Magnesium 29-Nov-01 8 27.04 55.15 Certain Hot-Rolled Carbon Steel Flat Products 10-Dec-01 9 1.67 164.75 Low Enriched Uranium 08-Jan-02

10 19.95 19.95 Stainless Steel Bar 13-Feb-02 11 30.8 49.86 Welded Large Diameter Line Pipes 27-Feb-02 12 2.5 125.77 Certain Folding Gift Boxes 07-Mar-02 13 3.71 124.5 Automotive Replacement Glass Windshields 04-Apr-02 14 5.96 12.44 Certain Softwood Lumber Products 22-May-02 15 15.32 247.88 Silicomanganese 23-May-02 16 13.72 70.71 Folding Metal Tables and Folding Metal Chairs 27-Jun-02 17 2 24.14 Polyethylene Terephthalate Film, Sheet, and Strip (PET film) 01-Jul-02 18 1 6.33 IQF Red Raspberries 09-Jul-02 19 1.18 369.1 Carbon and Certain Alloy Steel Wire Rod 29-Oct-02 20 20.98 74.14 Sulfanilic Acid 08-Nov-02 21 12.97 116 Ferrovanadium 28-Jan-03 22 56.11 79.42 Non-Malleable Cast Iron Pipe Fittings 26-Mar-03 23 6.34 75.5 Silicon Metal 07-Apr-03 24 6.6 15.61 Lawn and Garden Steel Fence Posts 12-Jun-03 25 249.89 329.94 Certain Frozen Fish Fillets 09-Jul-03 26 36.84 63.88 Saccharin 12-Aug-03 27 6.91 144.16 Polyvinyl Alcohol 01-Oct-03 28 34.44 81.3 Barium Carbonate 01-Oct-03 29 8.86 8.86 Hard Red Spring Wheat 23-Oct-03 30 135.18 135.18 Certain Malleable Iron Pipe Fittings 19-Nov-03 31 7.35 111.36 Refined Brown Aluminum Oxide 12-Dec-03 32 105.8 105.8 High and Ultra-High Voltage Ceramic Station Post Insulators 30-Dec-03 33 12.91 118.75 Prestressed Concrete Steel Wire Strand 04-Feb-04 34 5.22 78.45 Certain Color Television Receivers 03-Jun-04 35 9.47 157.68 Polyethylene Retail Carrier Bags 06-Aug-04 36 136.86 136.86 Tetrahydrofurfuryl Alcohol 06-Aug-04 37 2.26 122.88 Floor-Standing, Metal-Top Ironing Tables and Certain Parts 09-Aug-04 38 26.49 383.6 Hand Trucks and Certain Parts 02-Dec-04 39 5.51 217.94 Carbazole Violet Pigment 23 29-Dec-04


Annex 7, Page 20

COUNTERVAILING DUTIES 2.

2.1 EC & US INITIATIONS

EC & US CVD Initiations 1980-2004

0

10

20

30

40

50

60

70

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

EC

US

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 EC 0 1 3 2 1 0 0 0 1 2 0 US 9 11 60 19 37 37 28 8 17 7 7 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 EC 0 0 0 0 0 1 4 8 20 0 6 3 1 0 US 11 22 5 7 2 1 6 12 11 7 18 4 5 3


Annex 7, Page 21

2.2 EC & US PROVISIONAL ANTI-SUBSIDY MEASURES

EC & US Provisional Measures 1980-2004

05

101520253035404550

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

ECUS

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 EC 1 0 0 1 0 0 0 0 0 0 0 US 7 7 45 17 36 32 28 10 18 6 4 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004EC 1 0 0 0 0 0 0 2 5 10 0 2 1 1US 9 26 1 7 3 0 3 7 9 0 15 6 4 2


Annex 7, Page 22

2.3 EC & US DEFINITIVE ANTI-SUBSIDY MEASURES

EC & US Definitive Measures 1980-2004

0

2

4

6

8

10

12

14

16

18

20

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

ECUS

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 EC 1 0 0 1 1 0 0 0 0 0 0 US 6 3 11 15 12 18 13 14 7 6 2 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004EC 0 0 0 0 0 0 1 2 7 11 0 3 2 2US 2 4 16 1 2 2 0 1 6 6 6 10 2 3


Annex 7, Page 23

2.4 EC CVD TERMINATIONS 1980-2004

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 19921 0 0 1 0 1 0 0 0 0 0 1 0

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 0 0 0 0 0 1 4 5 0 3 0 0


Annex 7, Page 24

2.5 US ITC INJURY DETERMINATIONS 1980-2003

CVD Case Summary 1980-2003

0

10

20

30

40

50

60

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

AffirmativeNegativeTerminated

Affirmative Negative Terminated Affirmative Negative Terminated 1980 2 55 9 1991 1 3 51981 1 0 16 1992 18 25 11982 18 53 42 1993 1 0 01983 3 2 3 1994 2 6 31984 8 8 6 1995 2 0 01985 8 12 18 1996 0 0 11986 10 7 9 1997 1 4 11987 4 1 3 1998 7 1 31988 3 3 4 1999 6 5 61989 2 0 1 2000 1 0 01990 1 2 1 2001 15 5 4

2002 1 1 2 2003 2 3 1


Annex 7, Page 25

2.6 EC COUNTRIES TARGETED BY CVD

EC Top 10 Countries in CVD Investigations 1980-2003

EC-Countries Targeted by CVD-1995-2004

14, 34%

6, 15%6, 15%

4, 10%

3, 7%

2, 5%

1, 2%

1, 2%

1, 2%

1, 2% 1, 2% 1, 2% 1, 2%

India

Chinese Taipei

South Korea

Indonesia

Thailand

Malaysia

Australia

Norway

Peru

Philippines

Saudi Arabia

Singapore

South Africa

EC CVD Targets 1995-2004 (to 30/6/04)

Country No. of CVD cases India 14 Chinese Taipei 6 South Korea 6 Indonesia 4 Thailand 3 Malaysia 2 Australia 1 Norway 1 Peru 1 Philippines 1 Saudi Arabia 1 Singapore 1 South Africa 1


Annex 7, Page 26

2.7 EC CVD Expiry Reviews 1996-2004

(a) CVD Expiry Reviews Initiated

Year No. 1996 1 1997 0 1998 0 1999 0 2000 0 2001 0 2002 0 2003 1 2004 1

(b)

(c)

Expiry Reviews Outcome: Confirmation of measures

There were no confirmations of CVD measures following an expiry review during this period.

Expiry Reviews Outcome: Termination of measures

1996 1997 1998 1999 2000 2001 2002 2003 20040 0 1 0 0 0 0 0 0


Annex 7, Page 27

2.8 EC CVD INTERIM REVIEWS 1996-2004

(a) Interim Reviews Initiated

1996 1997 1998 1999 2000 2001 2002 2003 20041 0 1 0 1 1 2 1 0

(b) Interim Reviews Outcome: Confirmation of measures

1996 1997 1998 1999 2000 2001 2002 2003 20040 0 0 1 0 0 1 0 0

(c) Interim Reviews Outcome: Termination of measures

1996 1997 1998 1999 2000 2001 2002 2003 20040 0 1 0 1 0 0 1 0


Annex 7, Page 28

2.9 CVD MEASURES EXPIRED 1996-2004

1996 1997 1998 1999 2000 2001 2002 2003 20040 0 1 0 0 0 0 3 2


Annex 7, Page 29

2.10 US COUNTERVAILING DUTY ADMINISTRATIVE REVIEWS

US CVD Administrative Reviews Completed 1980-2003

0

10

20

30

40

50

60

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 0 28 20 39 40 29 39 22 19 25 30

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 53 21 9 14 25 34 12 14 12 5 13 11 6


Annex 7, Page 30

2.11 EC RANGE OF DUTIES IN CVD CASES 2000-2004

Duty Range-Lower Level Duty Range-Higher Level Product Date 1 1 10 Polyester staple fibres (PSF) 2000 2 1.8 3.5 Stainless steel fasteners 2000 3 0.2 8.4 Polyethylene terephthalate (PET) 2000 4 1 8.2 Styrene-butadiene-styrene thermoplastic rubber 2000 5 4.4 13.1 Flat rolled products of iron or non-alloy steel 2000 6 4.1 9.1 Polyester textured filament yarn (PTY) 2002 7 10 10 Ring Binder Mechanisms 2002 8 7.1 7.1 Sulphanilic acid 2002 9 34.8 34.8 DRAMs 2003

10 7.3 7.3 Recordable compact disks 2003 11 7 15.7 Graphite electrode systems 2004 12 4.4 10.4 Cotton-type bed linen 2004


Annex 7, Page 31

2.12 EC SUBSIDY MARGINS IN CVD CASES 2000-2004

Low subsidy margin High subsidy margin Product Date 1 1 10 Polyester staple fibres (PSF) 2000 2 2.31 4.71 Stainless steel fasteners 2000 3 0.37 8.4 Polyethylene terephthalate (PET) 2000 4 0.06 1.5 Styrene-butadiene-styrene thermoplastic rubber 2000 5 4.9 12.3 Flat rolled products of iron or non-alloy steel 2000 6 1 9.1 Polyester textured filament yarn (PTY) 2002 7 10 10 Ring Binder Mechanisms 2002 8 7.1 7.1 Sulphanilic acid 2002 9 34.8 34.8 DRAMs 2003

10 7.3 7.3 Recordable compact disks 2003 11 22.4 31.1 Graphite electrode systems 2004 12 3.09 10.44 Cotton-type bed linen 2004


Annex 7, Page 32

2.13 USA RANGE OF DUTIES IN CVD CASES 2000-2004

Duty Range-Lower Level Duty Range-Higher Level Product Date

1 20.28 29.14 Certain Hot-Rolled Carbon Steel Flat Products 2001 2 2.23 12.15 Low Enriched Uranium 2002 3 2 13.7 Stainless Steel Bar 2002 4 18.79 18.79 Certain Softwood Lumber Products 2002 5 18.66 24.48 Polyethylene Terephthalate Film Sheet, and Strip (PET film) 2002 6 2.76 6.74 Carbon and Certain Alloy Steel Wire Rod 2002 7 2.87 2.87 Sulfanilic Acid 2002 8 5.29 5.29 Hard Red Spring Wheat 2003 9 44.29 44.29 Dynamic Random Access Memory Semiconductors 2003

10 62.92 62.92 Prestressed Concrete Steel Wire Strand 2004 11 17.33 33.61 Carbazole Violet Pigment 23 2004


Annex 7, Page 33

SAFEGUARDS 3.

3.1 EC& US INITIATIONS

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

EC and USA Safeguard Initiations 1995-2004

ECUS

EC US 1995 0 1 1996 0 2 1997 0 1 1998 0 1 1999 0 2 2000 0 2 2001 0 1 2002 1 0 2003 1 0 2004 1 0


Annex 7, Page 34

3.2 EC & US PROVISIONAL MEASURES

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

EC and USA Provisional Safeguard Measures 1995-2004

ECUS

EC US 1995 0 0 1996 0 0 1997 0 0 1998 0 0 1999 0 0 2000 0 0 2001 0 0 2002 1 0 2003 1 1 2004 1 0


Annex 7, Page 35

3.3 EC & DEFINITIVE MEASURES

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

EC and USA Definitive Safeguard Measures 1995-2004

ECUS

EC US 1995 0 0 1996 0 1 1997 0 0 1998 0 1 1999 0 0 2000 0 0 2001 0 0 2002 1 1 2003 0 0 2004 1 0


Annex 7, Page 36

4. EC Court Cases: ECJ and CFI 1970-2005

4.1 Cases by type of trade defence instrument

TRADE DEFENCE INSTRUMENT NO. OF CASES (ECJ AND CFI)

ANTI-DUMPING 112

ANTI-SUBSIDY 4

SAFEGUARDS 8

TOTAL 124

4.2 Cases by type of proceeding

TYPE OF PROCEEDINGS NO. OF CASES (ECJ AND CFI)

Action for annulment:

-of which Action for annulment appealed:

-of which Action for interim measures:

108

11

7

Reference for preliminary ruling: 10

Action for damages: 4 4

request for confidential treatment of documents: 2

2

TOTAL 124


Annex 7, Page 37

4.3 Cases by identify of applicant

TYPE OF APPLICANT NO. OF CASES

Exporter (producer) 57

Unrelated importer 26

Related importer 19

Community industry (association of Community industry; complainants) 13

Member State 5

Users 3

Consumer protection association 3

Exporter State 2

OEM 1

Other (customs agent) 1

4.4 Cases by Act in Dispute

ACT IN DISPUTE NO. OF CASES

Council Regulation imposing definitive anti-dumping duties 74

Commission Regulation imposing provisional anti-dumping duties 17

Council Decision terminating an anti-dumping proceeding 3

Council Regulation repealing a Council Regulation accepting undertakings 1

Commission Decision refusing to grant the applicant an interested third party status

2

Council Regulation repealing a Council Regulation imposing definitive anti-dumping duties

1

Council Regulation extending definitive anti-dumping duties 2


Annex 7, Page 38

Commission Decision on refunding anti-dumping duties

Commission Decision imposing definitive anti-dumping duties (ECSC) 1

Commission Decision terminating an anti-dumping proceeding 2

Commission Decision refusing an undertaking 2

Commission Decision refusing access to the non-confidential file 1

Council Regulation imposing definitive anti-dumping duties following a review

3

Commission Decision terminating a review procedure 1

Notice of initiation of an anti-dumping proceeding 3

Council Decision rejecting to adopt a proposal to impose definitive anti-dumping duties

5

Council Regulation imposing definitive countervailing duties 2

Commission Decision refusing to initiate an anti-subsidy proceeding 1

Council Regulation imposing safeguard measures 5

Commission Regulation imposing provisional safeguard measures 3

Note: In certain cases more than one act were in dispute.

4.5 Cases by Court Order

COURT ORDER NO OF CASES

Dismissal as inadmissible 21

Dismissal as unfounded 72

Validity of act in dispute not affected (preliminary rulings) 4

Annulment of TDI-measure 18

Other:

grant of damages 1

grant of interim measure 1

Declaration of admissibility (no final judgement) 1


Annex 7, Page 39

grant of confidential treatment 2

no proceed to final judgement 2

interpretation of Council Regulation or Commission decision 5

Note:: in three judgements, the courts ordered the application partly inadmissible and partly unfounded.


Annex 7, Page 40

SOURCES

European Commission

Import Administration, Department of Commerce of the United States of America

United States International Trade Commission

World Trade Organisation (WTO)


Annex 8, Page 1

ANNEX 8 - EXTRACT FROM PROJECT TERMS OF REFERENCE

Related to a contract to carry out an evaluation of the European Community’s trade defence practice

1. INTRODUCTION:

The objective of the European Community’s Trade Defence Instruments (TDI) is to either remedy market distortions created from unfair trade practices by third countries, such as dumping or subsidies, or to address the serious deterioration of the situation of European Community producers arising from unforeseen sharp and sudden import surges (through safeguard action). The legal basis for these instruments is provided by the relevant WTO agreements, which have been transposed into Community legislation by Council Regulation (EC) No 384/96 (the basic anti-dumping Regulation), Council Regulation (EC) No 2026/97 (the basic anti-subsidy Regulation) and Council Regulations (EC) No 517/94/ 519/94 and 3285/94 (the basic safeguard Regulations).

Anti-dumping measures were created to counter dumping practices, the most frequently encountered trade-distorting practices. Dumping occurs when manufacturers from a non-EU country sell goods in the EU below the sales price in their domestic market, or below the cost of production.

Anti-subsidy measures were designed to combat certain types of subsidies, which are made available to manufacturers by public authorities and which can also distort trade when they help to reduce production costs or cut the prices of exports to the EU unfairly. Safeguard measures may be used by WTO members to restrict imports of a product temporarily if its domestic industry is seriously injured or threatened with injury caused by a surge in imports.

2. OBJECTIVES

The objectives of the current project, which is tendered by DG Trade, are:

a) to provide a broad description of the European Community’s trade defence practice in terms of institutional arrangements, substantial provisions, administrative procedures and investigation practices, while also giving an account of the United States’ practice in this area or the purpose of providing an element of comparison;

b) to identify and evaluate differences between the European Community and the United States, higlighting their strong and weak points;

c) to identify possible areas for improvement of the European Community’s trade defence laws and practice, with a view to increase their efficiency (e.g. in terms of transparency, enforceability of measures and streamlining of procedures).

3. THE PROJECT FOCUS OR CONTEXT OF THE PROJECT

The European Commission’s Directorate-Generals and Services carry out regular ex post evaluations of their activities and policies. In the case of the European Community’s trade defence it was considered useful to have such an evaluation carried out by an external body.

The beneficiaries of this project are: 1) European Community operators and third country exporters involved in trade defence investigations as well as consumers; 2) the EU citizens

EC Evaluation of TDI; Annex 8 – Terms of Reference (Final Report, December 2005)

Annex 8, Page 2

exercising the right to scrutinise the policymaking process; 3) other EU institutions involved in the work of the Commission; 4) management and staff of the Commission’s Trade Defence services and other Commission services;

4. WORK TO BE CARRIED OUT / SERVICES TO BE RENDERED

The work to be carried out consists in an extensive and detailed report which addresses the objectives set out in point 2 above.

i) The description of the European Community’s trade defence practice should be the result of an analysis carried out both at the theoretical and empirical level. The former will assess the Community’s legislative framework in terms of the institutional arrangements, substantial provisions and administrative procedures set out therein. The latter will evaluate the implementation of this framework in terms of the way the actual investigations are carried out, including investigative practices, and the results of trade defence actions. In this respect, the evaluation study is expected to feature a significant amount of fieldwork, compiling the views of a number of important actors and stakeholders in trade defence matters, such as representatives of the domestic industry and of European Community Member States’ administrations, through direct interviews and questionnaires. A similar account is expected regarding the United States: as this is for purposes of comparison, this account can be more concise than the one concerning the European Community’s practice;

ii) The differences between the European Community’s and the United States’s systems should be highlighted in terms of their respective legislations (and how they have been developed in different directions albeit within the common WTO framework), including the decision-making process, and of the concrete results of their respective trade defence actions. The strong and weak points of each approach should be identified;

iii) The evaluation study must provide concrete recommendations, as set out in point 2c above, whose implementation is arguably feasible. These recommendations should be made both regarding the legislative framework (including the decision-making process) and current investigative practice.

EC Evaluation of TDI; Annex 8 – Terms of Reference (Final Report, December 2005)

Annex 9 , Page 1

ANNEX 9 - COMMENTS ON RESEARCH METHODOLOGY

1. SOURCES OF DATA

• Survey (covering both views on EC TDI and comparison between EC/US – The objective of the survey is to gather the views of the following parties: European Commission, EC Member States, EC Industry Associations, EC companies involved in complaints, EC importers/users/consumers that have been affected by TDI, exporters involved in EC TDI proceedings, US TDI agencies, US industries making complaints, US users/importers in TDI investigations, US respondents in TDI investigations, and US lawyers.

• Technical analysis – Joint technical work of Mayer, Brown, Rowe & Maw LLP Brussels/London/Washington DC offices to identify and catalogue differences between EC and US.

• Analysis of other published sources - Key sources include: EC & US legislation, EC & US TDI decisions, EC & US official statistics on TDI decisions (including annual Commission reports to the Parliament (1980 to 2004), WTO Panel and Appellate Body Rulings, judgements of the Court of First Instance / European Court of Justice, European Commission website, US International Trade Commission website, US Import Administration/Department of Commerce website, academic articles on TDI in trade journals.

2. SURVEY METHODOLOGY

For the survey, where possible, face to face interviews were conducted with participants due to the number and complexity of potential issues to address.

Survey participants were sent a list of 'discussion issues' to provide structure to, and stimulate, discussion. Two discussion lists were produced; one for EC business and one for Member States (the only real difference being that the latter contained some specific issues to be addressed from the perspective of Member States).

Interviews with other parties (e.g. European Commission, US interviewees, other EC parties) was structured around the EC business discussion issue list.

The advantages of the discussion issues list over a formal questionnaire can be summarised as follows:

• Questions in a formal questionnaire are specific in nature. Thus, they guide the respondent into commenting on the particular focused on in the question. If the 'question' is left more general, different respondents may respond in different ways. Each discussion issue was designed to prompt the respondent to raise their particular comments or concerns rather than being led by a specific questions.

• All of the respondents have been intimately involved in TDI issues either as an interested party or a Member State. They can therefore be expected to have considerable experience and knowledge. The checklist does not need more explanation for such people as the issues in themselves will provoke thoughts on which the respondent can comment.

Evaluation of EC TDI; Annex 9 – Comments on research methodology (Final Report December 2005)

Annex 9 , Page 2

• The discussions will, as far as possible, take place face to face. Thus, to the extent that a particular issue in the list does not provoke comments, we asked more specific questions on the topic to prompt them.

• Even without specific questions, the list of discussion issues is six pages long (a questionnaire would have been longer to take account of all the issues that needed to be discussed). For presentation purposes, we formatted this with 2 pages to a page in landscape format. This gives a reasonable 3 page document which will provide the working discussion list for consultations with interested parties.

The results in the survey were highly successful. Typically, meetings have lasted at least two hours and provided detailed comments on many issues.

3. STRUCTURE OF THE DISCUSSION LIST

The discussion lists are reproduced in annex 4.

The discussion lists have three sections.

Section 1 gathers information about the interest and experience of the survey respondent. This is useful in several ways:

• for summarising the composition of the sample surveyed

• to identify those participants that have experience of the US system that may be able to provide useful information in terms of the comparison between EC and US TDI.

• to assess the extent to which EC industry is concerned about the TDI activity of other countries against EC exports. The fact that the EC is consistently targeted more by TDI investigations than it undertakes itself seems to influence opinions on TDI by some interested parties. It will therefore be useful to assess the importance of this factor in conditioning the answers of interested parties.

Section 2 covers the detailed points on anti-dumping and anti-subsidy which have been combined into one section. The reason for combining the two is that, apart from the dumping and subsidy calculations, the substance and procedure for these two instruments is virtually identical. Thus, the most effective way to cover these two instruments is to work through them both at the same time, separating discussion as appropriate (e.g. time limits under procedure and dumping/subsidy calculation under substance).

Section 3 covers safeguards. This section is much shorter given the relatively low level of experience in this area.

4. CHOOSING INTERVIEWEES

The survey is very focused and targeted on people with real experience and knowledge. The initial list of key industry and Member State contacts was discussed with the European Commission.

In speaking with these key contacts, we have tried to identify other suitable interviewees for the survey. The idea is that the industry associations, for example, have been happy to


Annex 9 , Page 3

provide us with contacts in some of their members that might be willing to participate in the survey.

For the US, interviewees were chosen by colleagues in our Washington DC Office. It was ensured that we met senior staff of the main US agencies and other interesting contacts


Annex 10

ANNEX 10 – ACRONYMS AND ABBREVIATIONS USED IN THE REPORT AD Anti-Dumping

APO Administrative Protective Order

AS Anti-Subsidy

CFI European Court of First Instance

CEP Constructed export price

CIF Cost, insurance, freight

Commerce US Department of Commerce

Commission European Commission

CVD Countervailing Duties

DG

Competition

European Commission Directorate General for

Competition

DOC Department of Commerce

DG Trade European Commission Directorate General for Trade

EC European Community

ECJ European Court of Justice

EX WORKS Factory gate

FOB Free on board

ITC US International Trade Commission

MET Market Economy Treatment

PCNs Product Control Numbers

SGA Sales and general administrative expenses

TCCA Trichloroisocyanuric acid

TDI Trade defence instruments

US United States

WTO World Trade Organisation

Evaluation of EC TDI; Annex 10 - Acronyms (Final Report December 2005)