1 INTERNATIONAL TRADE REMEDIES SEMINAR ANTI-CIRCUMVENTION JOSE MANUEL VARGAS SEOUL, KOREA, 2005

2 CIRCUMVENTION OF AN ANTIDUMPING DUTY Members of WTO have traditionally recognized two patterns: The first involves marginal alterations to the product itself; and The second, modifications in the pattern of shipment and assembly.

3 WTO DECISION ON ANTICIRCUMVENTION adopted by the Trade Negotiations Committee on December 15,  Circumvention of an antidumping duty formed part of the negotiations which preceded the ADA, negotiators were unable to agree on specific text;  Desire for the application of uniform rules;  Refer this matter to the Committee on Anti- Dumping Practices for resolution. For that reason, the Committee decided to have an Anticircumvention Working Group that has been discussing the issue for 10 years, without solutions.

4 WTO MEMBERS’ VIEW (Against the implementation) Hong Kong, China: (G/ADP/IG/W/8 April 28, 1998) Hong Kong, China: (G/ADP/IG/W/8 April 28, 1998) Slightly modified products: Mere product modifications should not be considered circumvention. There is a risk of expanding the scope of the original investigation. Slightly modified products: Mere product modifications should not be considered circumvention. There is a risk of expanding the scope of the original investigation. Assembly operations: Whenever a trade measure is applied, and there is a significant difference in duty treatment between imports of parts and imports of finished products, exporters may naturally choose to export in parts. This is already subject to international rules and, therefore, are not likely to pose circumvention (Rules of Origin, Custom classification rules). Assembly operations: Whenever a trade measure is applied, and there is a significant difference in duty treatment between imports of parts and imports of finished products, exporters may naturally choose to export in parts. This is already subject to international rules and, therefore, are not likely to pose circumvention (Rules of Origin, Custom classification rules).

5 WTO MEMBERS’ VIEW (Against the implementation) Korea: (G/ADP/IG/W/17 - May 28, 1999) A case involving the possibility of circumvention should be treated as a separate dumping case, therefore a new investigation should be conducted.

6 WTO MEMBERS’ VIEW (Advocating for the implementation) México: (G/ADP/IG/W/31 – March 21, 2001) In the absence of regulation, Mexican investigating authority conducts such investigations with its own legislation, being careful of ensuring legal certainty and security; and affording parties a full opportunity for their defense. New Zealand: (G/ADP/IG/W49 – April 24, 2003) Clearly identify and agree on the circumstances and behaviors that are not circumvention. Develop some common principles to deal with circumvention.

7 NEGOTIATING GROUP ON RULES WTO MEMBERS’ VIEW (Advocating for the implementation) United States: (TN/RL/GEN/29 – February 8, 2005) The absence of rules could lead Members to craft measures more broadly than necessary. Lack of procedural guidelines means that parties do not have necessarily opportunity for defense. United States: (TN/RL/GEN/29 – February 8, 2005) The absence of rules could lead Members to craft measures more broadly than necessary. Lack of procedural guidelines means that parties do not have necessarily opportunity for defense.

8 LEGISLATION OF UNITED STATES (US) Prevention of circumvention of antidumping and countervailing duty orders: Merchandise completed or assembled in US Merchandise completed or assembled in US Merchandise completed or assembled in other foreign country Merchandise completed or assembled in other foreign country Minor alterations of merchandise Minor alterations of merchandise Later-developed merchandise Later-developed merchandise

9 LEGISLATION OF US Factors to consider:  The pattern of trade, including sourcing patterns,  Whether the manufacturer or exporter of the parts of components is affiliated with the person who assembles or completes the merchandise sold in the in the US from the parts or components produced in the foreign country with respect to which the order or finding applies, and  Whether imports into the US of the parts or components produced in such foreign country have increased after the initiation of the investigation which resulted in the issuance of such order or finding.

10 LEGISLATION OF EUROPEAN UNION (EU) Circumvention must be defined as a change in the pattern of trade between third countries and the EU or between individual companies in the country subject to measures and the EU, which stems from a practice, process or work for which there is insufficient due cause or economic justification other than the imposition of the duty, and where there is evidence of injury or that the remedial effects of the duty are being undermined in terms of the prices and/or quantities of the like product, and where there is evidence of dumping in relation to the normal values previously established for the like product.

11 MEXICAN LAW The Mexican law states that circumvention could be presented in antidumping, countervailing and safeguard measures. Circumvention applied for:  Imports of inputs or supplies, parts or components for production or assembly of a product subject to a measure.  Imports of products subject to a measure assembled in a third country.

12 MEXICAN LAW  Imports of products that have minor differences from the product subject to a measure.  Imports of products subject to measure at a rate lower than the applicable duty.  Any other action resulting in failure to pay the duty imposed.

13 MEXICAN PRACTICE  According to the Mexican law the investigating authority (IA) pursues and analyzes the alleged circumvention practice and give full opportunity to all interested parties to defend themselves.  The Mexican IA has analyzed circumvention on four antidumping cases (none on countervailing and safeguards measures) with different circumstances as follows:

14 MEXICAN PRACTICE  Imports of the product on a different container (additive for gasoline).  Imports of a slightly different product (methyl parathion technical grade).  Imports of an input or supply to produce the product (high fructose corn syrup).  Imports through a different exporter (bovine meat).

15 CONCLUSIONS In the circumvention analysis there is no obligation for the IA to demonstrate the existance of the three elements involved in antidumping, countervailing and safeguards investigations. In the circumvention analysis there is no obligation for the IA to demonstrate the existance of the three elements involved in antidumping, countervailing and safeguards investigations. WTO guidance is needed in order to have common rules for a circumvention analysis. WTO guidance is needed in order to have common rules for a circumvention analysis.