Guide of the consolidated text on Anti-dumping and Subsidies.

Guide of the consolidated text on Anti-dumping and Subsidies. 06/12/2007 Pablo Klein-Bernard This Guide covers the main substantive elements of the consolidated texts on rules circulated by Guillermo Valles on November 30, 2007. I. Introduction The consolidated text on rules of Anti-dumping is slanted towards facilitating the imposition of anti-dumping measures. The issues with major impact are zeroing, where all demands were granted to the United States, a new article about investigations against circumvention, and anti-dumping measures in favor of a third country. It is also surprising that the chairman erased all references to the application of the lesser duty (which is considered “desirable” in the language of the original Agreement), lesser duty means imposing an anti-dumping duty lower than the margin of dumping if this is sufficient to remove injury to the domestic industry. The only really substantive element which strengthens the disciplines for maintaining antidumping duties is in the area of sunset, where the consolidated text provides for the absolute termination of any anti-dumping duty in ten years from its imposition, together with stronger disciplines for conducting sunset reviews (although there is the possibility of adopting preliminary measures immediately after a definitive duty has expired, while a new original investigation is being conducted). II. Most Relevant Proposals Zeroing: (2.4.2, 3.1 and new 9.3.1, 9.3.2): The only prohibited form of zeroing is “model zeroing” in an original investigation initiated pursuant to article 5. This prohibition is totally useless, since any authority can keep practicing zeroing by simply switching comparison method from average to average to transaction to transaction, as United States did after the finding of Softwood Lumber from Canada1. In all the other cases, the text of Valles makes explicit that the amounts in which the export price exceeds the normal value may be ignored by the authority. --in the original investigation in the transaction-to-transaction method and in the weighted average-to-transaction method --in all the duty assessment proceedings under article 9.3, (with a specific language for this article as well as to make a reference in article 2.4.2) --in the new shippers’ reviews under article 9.5, --in the interim reviews under article 11.2, and --in sunset reviews under article 11.3 1 “Model zeroing” occurs when adding the results of comparisons for different models of the product under consideration, obtained using a weighted average-to-weighted average comparison method, to establish the margin of dumping for an exporter. In this case all the model-specific comparisons must be taken into account. Making zero the results of comparisons where the weighted average export price exceeds the weighted average normal value is not allowed. . In all other situations, the margin of dumping is calculated by adding the results of the individual exports. In these circumstances the negative results can be “ignored” to make them equal to zero in the addition. This includes the dumping margins obtained. The next chart summarizes the findings of the Appellate Body and the positions reflected on the text on rules. Investigation Stage Original Investigation Average to Average  AB: (EC-Bed Linen, Softwood Lumber, Zeroing I) Rules I: Retrospective Duty Assessment (9.3.1)  AB: (EC-Bed Linen, Softwood Lumber, Zeroing I) Rules I: Prospective Duty Assessment (9.3.2)    AB: (EC-Bed Linen, Softwood Lumber, Zeroing I) Rules I: Article 11 Reviews (Interim, Sunset)  AB: (EC-Bed Linen, Softwood Lumber, Zeroing I) Rules I: New Shippers’ Reviews (9.5)    AB: (Zeroing II) Rules I:  Transaction to Transaction  AB: (Softwood Lumber 21.5, Zeroing II) Rules I:   AB: (Zeroing I, Zeroing II) Rules I:   AB: (Zeroing I, Zeroing II) Rules I:   AB: (Zeroing I, Zeroing II) Rules I:   AB: (Zeroing II) Rules I:  Average to Transaction AB: ¿? Rules I:   AB: (Zeroing I, Zeroing II) Rules I:   AB: (Zeroing I, Zeroing II) Rules I:   AB: (Zeroing II) Rules I:  AB: ¿? Rules I:  2. Sunset (11.3, new 18.3bis): It adds 6 new paragraphs with the overall result of strengthening disciplines governing the duration of anti-dumping duties. Any definitive antidumping duty shall be terminated on a date not later than ten years from its imposition. On the other hand, the text also allows imposing provisional measures immediately after the expiry of a definitive duty, pending the outcome of a new original investigation, and this can be done at any time in the first two years after the expiry of the definitive duty2. Other provisions that strengthen sunset disciplines are: --Higher standards for initiating a sunset review upon request from the domestic industry (more substantiation, the degree of support by domestic industry must be assessed using the same criteria as for an original investigation). -- Ex officio initiation only in special circumstances. --A sunset review shall be initiated on a date not later than six months prior to the date of expiry of the definitive duty, and it shall be concluded not later than six months after this date. 3. Circumvention (new article): The text introduces a new article specific to anticircumvention investigations, which allow to extend the scope of an anti-dumping duty, when imports of a slightly modified product, of parts or unfinished forms of a product for assembly, or imports of the product assembled or completed in a third country are substituted for imports of a product subject to anti-dumping duties, with the sole purpose of circumventing such a duty. There are some provisions limiting the abuse of the procedure by an authority; i.e. to carry out an anti-circumvention procedure, the value of the unassembled parts must be at least 60% of the total value of the product, or the value added during the assembly operation must be less than 25% of the total. 4. Product under consideration (new 2.6 (a), new 5.6). The wide definition of the scope of an original investigation (the “product under consideration”) favors United States practice to initiate on a very long list of separate products. However, there is an obligation to limit the coverage in the course of the investigation if authorities determine that included products were incorporated incorrectly. 5. Dumping to a Third Party (14): Member A can impose a duty against Member B, even when Member A does not have a domestic industry, to benefit from Member C (who exports to A). The requirement that Member B agrees with the measure is eliminated, making article 14 operational. III. Other Issues Lesser Duty (articles 9.1, 8.2, 7.4). All the references to apply the lesser duty are erased from the anti-dumping agreement. This does not prohibit the practice, but makes it less desirable. Particularly, it is eliminated from article 9 (duty assessment), from 8.1 with regard to price undertakings, it eliminates an incentive to apply lesser duty which was a power to extend the provisional measures for two more months. These provisions made operational Article VI:2 of the GATT. No attribution (3.5). There is no obligation to quantify injury caused by factors other than dumping. This proposal reverts a prior finding of the AB. Its effect can be multiplied by zeroing, exaggerating the margin of dumping. 2 There is a provision in article 18.3bis that effectively allow to all anti-dumping duties in force at the moment of the Doha Round enters into force to be considered as if they were initiated on that date. This will automatically grant all duties up to an additional 5 years of life. For example, a duty imposed in 2004 could last up to 15 years (2019) if the Doha Round enters into force in 2009. Material retardation (3.9): The rules allow reaching determinations of material retardation under situations where there is no domestic production or when it represents at least 10% of the domestic market. Also, a foot note to article 5.6 specifies the case where material retardation is one of the circumstances in which an authority can initiate an investigation by law. Domestic Industry (4.1 and 5.4): In article 4.1, it establishes the fact that a producer is also importer of the product under consideration does not necessarily imply that it has to be excluded from domestic industry, if its imports represent an insignificant proportion of the total production. Nevertheless, the changes in the language of article 5.4 favor the practice of excluding domestic producers who are also importers. Initiation (5.2, 5.4, 5.5, new 5.10bis). Higher standards are proposed in the information presented by the domestic industry to initiate an investigation3. This proposal is identical to the practice held by the United Stated (5.2). It is prohibited to initiate an investigation when not even a year after a negative determination (back-to-back) has passed, except when circumstances have changed (new 5.10bis). Information (new 6.4bis, 6.5.1, 6.7, 6.9, 6.8.1, new 6.9bis). There are important changes in this article that improve the procedures. These changes are identical to United States practice. For example: -- All non confidential information can be consulted and copied by any person who requires it (new 6.4 bis). --Present the non confidential summaries in a period no longer than two days (6.5.1). --A written report for the interested parties, of facts with definitive determination basis, providing them 20 days to reply. A sufficient period has to be provided to offer price undertakings in response to this report (6.9). --The authority cannot consider that an exporter did not cooperate in the investigation for not being able to present information regarding another company which is an interested party (6.8.1). --the definition of interested parties has widened (6.8.1 foot note). Sampling (new 6.10.3). The substantial rules are not changed but additional explanations are required about the selection of the sample, especially in the case in where nonselection exporters who presented the information to participate in the investigation are not taken into account. Provisional measures (7.4): The maximum period of validity is extended to six months (previously they were four). The incentive to apply the lesser duty has been eliminated. Price Undertaking (8.1, 8.2). The text included language of Mexico’s proposal et al., in the sense that it clarifies that price undertakings can be accepted even when no 3 Identity of all known domestic producers (or associations of domestic producers in case of fragmented industries), as well as those who support the application; volume and value of domestic production furthermore the total of producers supporting the application. preliminary determination is given, once authorities have made disclosure pursuant to article 6.9. It eliminates the reference to lesser duty. The rest are cosmetic changes. Public Interest (9.1): It requires Members to adopt domestic dispositions in order to consider industrial user’s associations, suppliers of raw material for domestic industry and consumers in the final decision to adopt a measure. However, this not subject to be challenged in the WTO, nor to the procedures of internal revision of the Members. New shipper review (9.5): It establishes a period of nine months to make this revision, and considers transactions carried out to “commercial quantities”, including pre-paid contracts for sales until six months before the date. However, there is an inconsistency in these terms since it implies that the exporter will have to ship the merchandise before concluding the exam, even though when it does not know what is going to be its antidumping duty. Neither “commercial quantities” are defined. Modification in the level of a duty (11.2): The requirement of removing the measure is diluted if the revision determines that it’s not necessary. Now, a change of circumstances of “long-lasting nature” is required. Review of Anti-dumping Practices (Annex III): It is a type of TPR for anti-dumping measures, in which major users are more frequently reviewed. It won’t have more impact than the TPR or the exchange of questions and answers in the Anti-dumping Committee.