1. 1 Anti-Dumping (An Unfair Trade Practice) Presented by Ben L. Irvin International Trade & Customs Attorney Chemonics, EIF & USAID December 2007

2. 2 WTO Principles Binding of tariffs and applying them equally to all trading partners (Most Favored Nation or MFN) are key to the smooth flow of trade in goods. The WTO Agreements uphold these principles, but they also allow exceptions in some circumstances. Three of these issues are: 1. actions taken against dumping; 2. actions to offset subsidies (countervailing); and 3. emergency measures to limit imports temporarily, designed to “safeguard” domestic industries.

3. 3 Types of Trade Remedies Unfair Trade Practices Safeguard Measures

4. 4 Form of Trade Remedy Measures Anti-dumping Additional import duties Countervailing Additional import duties Safeguards Additional import duties or quantitative restrictions

5. 5 Unfair Trade Practices Anti-dumping – Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 Countervailing Duties – WTO Agreement on Subsidies and Countervailing Measures

6. 6 Dumping – an International Unfair Trade Practice Dumping is considered to be an international unfair trade practice employed by a company or companies.

7. 7 What is Dumping? Dumping occurs when a product is sold for export to the importing country at a price lower than the price at which the same (or similar) product is sold on its own home market.

8. 8 Criteria for Anti-dumping Action 1. Determination that the “export price” is lower than the “normal value.” 2. Determination that there is “material injury” to the competing industry in the importing country 3. Causal link between injury and “dumped imports”

9. 9 Price Comparison Comparing prices in the two markets is how the occurrence of dumping is identified. However, to make this comparison, it is necessary to undertake a series of complex analytical steps in order to determine the market price in the exporting country and the price at which the product is sold to the importing country.

10. 10 Price Comparison ( continued) In practice, when making price comparisons, generally investigators or analysis work back to an ex-factory price for both “normal value” and the “export price.”

11. 11 Determination of “normal value” Normal value is the price of the product, in the ordinary course of trade, when destined for consumption in the exporting country’ market. Three methods may be applied to calculate “normal value and are: 1.The domestic market (sales) prices; 2.The price at which the product is sold to a third country; or 3.The “constructed value” of the product.

12. 12 What is “normal value” (continued) “Normal value” is defined as: - the comparable price - in the ordinary course of trade - for the like product - when destined for consumption in the exporting country Simply stated, normal value is the price of domestic sales in the exporting country Article 2.1

13. 13 What is a “Like Product” A product which is identical, i.e., alike in all respects, to the product exported or A product, although not identical to the subject product, having characteristics closely resembling those of the subject product. Article 2.6

14. 14 Critia for Determining “Like Product” Compare the following aspects: - raw material used - manufacturing process - tariff classification - consumer preference and end use - quality

15. 15 When Domestic Prices may be Rejected as Basis for Normal Value - where there are no sales of the like product; OR - when such sales do not permit a proper comparison because of: * a particular market situation, or * low volume of sales in the domestic market of the exporting country. Then = the normal value will be either: 1. the export price to a third country, or 2. a constructed value Article 2.2

16. 16 If Domestic Price to Export Price Comparison not Possible 1.Export price to third country Use a comparable price of the like product when exported to an appropriate third country, provided that this price is representative. 2. Constructed Value Cost of production in country of origin and reasonable amount for administrative, selling and general costs and for profit.

17. 17 Alternatives for Normal Value under the AD Agreement Domestic prices in the exporting country Export price to a Third country NOTE: No hierarchy between these two Constructed value In the exporting country

18. 18 Sales Below Cost Sales in the domestic market that are below cost may be disregarded only if such sales are made: -within an extended period of time that normally is 1 year - in substantial quantities - at prices which do not provide for the recovery of all costs with a reasonable period of time Article 2.2.1

19. 19 Export Price Normally, export price is the invoice price of like goods purchased by an importer in the country of importation. However, in many cases it is necessary to construct an Export Price when: - sales are between related parties; or - where it appears that the export price is unreliable because of an association (or a compensatory arrangement) between the exporter and the importer. Article 2.3

20. 20 Constructed Export Price Constructed on basis of: –Price at which product is first sold to an independent buyer OR - If no such sales, or not sold in the condition as imported, on reasonable basis as the authorities may determine.

21. 21 Comparison of Normal Value (Domestic Price) to Export Price For price comparisons to be fair, a number of adjustments need to be made to the export prices and to the domestic prices. Article 2.4

22. 22 Fair Comparison between Normal Value and Export Price The comparison must be made at the same level of trade, normally at the ex-factory level, and in the respect of sales made at as nearly as possible the same time. Due allowance must be made for differences which affect price comparability, including differences in: –Conditions and terms of sale –Quantities –Physical characteristics –Levels of trade, and any other differences which are demonstrated to affect price comparability. Article 2.4

23. 23 Methodologies to Compare Normal Value with Export Price 1.Weighted average “normal value” compared to weighted average of all comparable export prices. 2.Individual transactions to individual transactions. 3.Weighted average “normal value” compared to individual export prices: Only if: (1) Pattern of “export prices” differing significantly among different purchasers, regions or time periods (“targeted dumping”) and (2) an explanation provided why 1 and 2 not suitable.

24. 24 General Principle for Computing the Margin of Dumping Adjusted Export Price Adjusted Export Price Adjusted Normal Value Margin of Dumping

25. 25 Types of Duties 1. Ad valorem duty - 25 % ad valorem 2. Specific duty - $10 per kilogram

26. 26 DETERMINATION OF INJURY

27. 27 Meaning of the Term “Injury” For the purposes of the Anti-dumping Agreement, the term “injury” has three meanings: - Material injury to a domestic industry (“current or present injury”) - Threat of material injury to a domestic industry (“future injury”) - Material retardation of the establishment of a domestic industry Article 3

28. 28 Definition of the Term “Domestic Industry” “Domestic industry” has two meanings: 1. the domestic producers as a whole of the like product OR 2. the producers whose collective output of the product constitutes a major proportion of the domestic production of the like products Domestic industry determination important for: - Who may file a petition - Whose data are considered in injury analysis Article 4.1

29. 29 Requirements for Injury Finding - Injury must be present - Must be established based on specified criteria as to volume and/or price effects of imports - Basis for injury determination: Objective examination of relevant criteria Positive evidence Article 3.1

30. 30 Basic Principles for the Determination of Injury Article 3.1 of the Agreement established the basic principles for determination of injury In particular, the determination of injury must be based on positive evidence and objective examination of: - the volume of the dumped imports - the effect of the dumped imports on prices in the domestic market of like products, and - the consequent impact of these imports on domestic producers of like products Article 3.1

31. 31 Rules for Analyzing the Impact of the Imports on Domestic Producers of the Like Product The examination of the injury impact must include evaluation of all relevant economic factors and indices having a bearing on the state of the industry involved in the investigation. Article 3.4

32. 32 Article 3.4 Injury Factors Actual and potential decline in: - Sales - Productivity - Profits - Return on investment - Output - Utilization of capacity - Market share Factors affecting domestic prices The magnitude of the margin of dumping Actual and potential negative effects on: - Cash flow - Growth - Inventories - Ability to raise capital - Employment - Ability to raise investment - Wages

33. 33 Cumulation Cumulative assessment by taking all the investigated imports jointly into account in determining injury Cumulation not mandatory Cumulation relates to imports from more than one country and not to different exporters in the same country

34. 34 Causal Relationship It must be demonstrated that the dumped imports cause injury through the effects of dumping

35. 35 Causality In the causal relationship analysis, factors other than the dumped imports which are injuring the domestic industry shall be examined * * Illustrative list of such “other factors”: - volume and price of imported goods - contraction in demand - restrictive trade practices of, and competition between foreign and domestic producers - developments in technology - export performance and productivity of domestic producers And shall not attribute the injuries caused by such other factors to the dumped imports Article 3.5

36. 36 Determination of Threat of Injury Threat of injury is “future injury” Must be based on facts and not on allegation, conjecture or mere possibility Application of anti-dumping measures shall be considered and decided with special care.

37. 37 Determination of Threat of Injury Authorities should consider such factors as: - significant rate of increase of dumped imports indicated the likelihood of substantially increased importations - sufficient freely disposable, or an imminent, substantial increase in capacity of the exporter - whether imports are entering at prices that will have a significant depressing/suppressing effect on domestic prices, and would likely increase demand for further imports - inventories of the importer/exporter Article 3.7

38. 38 Determination of Material Retardation The Agreement does not provide any guidance regarding the determination of material retardation.

39. 39 Imposition of Anti-Dumping Duties - Not mandatory - Amount of AD duty shall not exceed the margin of dumping - It is desirable that the duty be less than the margin of dumping if such lesser duty would be adequate to remove the injury to the domestic industry - Public interest

40. 40 PROCEDURAL ASPECTS OF AN ANTI-DUMPING INVESTIGATION

41. 41 Guiding Principle of Anti-dumping Agreement - To enhance or ensure procedural transparency, objectivity and fairness in anti-dumping cases.

42. 42 Format of Investigation - Initiation - Information gathering - Preliminary investigation * response to preliminary determination - Verification of information - Final determination

43. 43 Initiation of Investigation: Procedures -Written application by or on behalf of affected domestic industry -Special circumstances: Self-initiation by authorities of importing member * not defined in Agreement Articles 5.1, 5.6

44. 44 Requirements for Initiation Decision - Standing of domestic industry: * supporting producers account for 50% of production by those expressing opinion (either support for or opposition to the application) * no investigation shall be initiated when producers account for less than 25% of total production. Article 5.4

45. 45 Requirements for Initiation Decision Application must include evidence of: * dumping * injury * causal link between dumping and injury Simple assertion unsubstantiated by relevant evidence cannot be considered sufficient to meet these requirements The information contained in the application should be such as is reasonably available to the applicant. Article 5.2

46. 46 Requirements for Initiation Decision Application should contain the following information: * the identity of the applicant * a description of the volume and value of the domestic production of the like product * where the application is made on behalf of the domestic industry, it must identify that industry by a list of all known domestic producers of the like product

47. 47 Requirements for Initiation Decision (continued) * In this case (previous slide), a description of the volume and value of production accounted for by such product * A complete description of the allegedly dumped product * The names of the country or countries of origin or exportation

48. 48 Requirements for Initiation Decision (continued) The identity of each known exporter or foreign producer A list of known importers Information on the normal value (domestic prices in exporting country or, where appropriate, the prices for export to a third country or the constructed value)

49. 49 Requirements for Initiation Decision (continued) Information on the evolution of the volume of the allegedly dumped imports * Information on the effect of those imports on domestic prices of the like product Information on the consequent impact of the imports on the domestic industry, as demonstrated by relevant factors and indices having a bearing on the state of the domestic industry

50. 50 Pre-initiation Procedures -Examination of the evidence (Art. 5.3) * The accuracy and adequacy of the evidence in the application must be examined to determine whether there is sufficient evidence to justify the initiation of an investigation -Rejection of an application (Article 5.8) * The authorities must reject an application as soon as they are satisfied that there is not sufficient evidence of dumping or injury

51. 51 Pre-initiation Procedures (continued) -Avoidance of publicity before investigation (Article 5.5) * Unless a decision has been made to initiate an investigation, any publicity of the application must be avoided -Prior notification to the government of the exporting country (Article 5.5) * Before proceeding to initiate, the authorities must identify the government of the exporting country concerned

52. 52 Notice of Initiation Publish notice of initiation: -Name of exporting country, product involved - Date of initiation -Description of dumping methodology and margin -Summary of allegations regarding injury factors -Addresses/time-limits for interested parties to submit views AND -Full text of application to exporting Member known exporters/other interested parties (on request) Articles 12.1.1 & 6.1.3

53. 53 Time Limit for Concluding Investigations Except in special circumstances, investigations shall be concluded within one year, and in no case more than 18 months after initiation

54. 54 Interested Parties -Have right to participate in investigation -Must include * Exporters, foreign producers and importers of product subject to investigation * Producers of like product in importing member * Trade or business associations of above * Governments concerned * May include others

55. 55 Interested Parties (continued) In addition, industrial uses of products investigated and if products is sold at retail level, representatives consumer organizations must be given the opportunity to provide information Articles 6.11 and 6.12

56. 56 Exporters Questionnaire - All information relating to exports, domestic sales and cost build-up

57. 57 Importers Questionnaire All information relating to imports of dumped products and sales

58. 58 Domestic Industry All information relating to injury analysis

59. 59 Questionnaire A minimum of 30 days must be given to foreign exporters or producers to reply to questionnaires The period must be extended upon cause shown AD Agreement silent on time-period for importers/domestic industry to reply Article 6.1

60. 60 Hearings/Oral Arguments Upon request, authorities shall provide opportunity for confrontation meeting between interested parties to present and rebut arguments * Upon justification, interested parties have the right to present information orally * Oral information taken into account by authorities only to extent reproduced in writing and made available to other interested parties Article 6.2

61. 61 Confidentiality Rules -Confidential information * by nature confidential * provided on a confidential basis -If good cause is shown, such information cannot be disclosed without the specific permission of the party submitting it -Parties providing confidential information must supply non-confidential versions thereof (Article 6.5 and footnote to Art. 6.5)

62. 62 Application of Provisional Measures Provisional measures may be applied only if: * an investigation has been initiated, a public notice given to that effect, and the parties have been given opportunities to submit information and comments * a preliminary affirmative determination has been made of dumping and injury to a domestic industry * it is judged that such measures are necessary to prevent injury being caused during the investigation (Article 7.1)

63. 63 Form of Provisional Measures Provisional measures may take the form of a provisional duty duty or, preferably, a security (by cash deposit or bond) The amount of the duty may not be greater than the margin of dumping provisionally estimated The security should be equal to the amount of the provisional duty (Article 7.2)

64. 64 Duration of Provisional Measures General rule is that provisional measures should be applied for as short a period as possible Not more than 4 months or, by decision of the authorities upon request by exporters representing a significant percentage of the trade involved, for a maximum of 6 months. When the authorities examine whether a duty lower than the margin of dumping would be sufficient, these periods may be 6 and 9 months, respectively (Article 7.4)

65. 65 Preliminary Determination -Publish notice of perliminary determination (affirmative or negative) -To contain, in sufficient detail, findings and conclusions on all matters of law and fact * either in notice itself, or * separate report -To be forwarded to exporting Members and other interested parties (Article 12.2)

66. 66 Verification of Information Authorities must satisfy themselves as to the accuracy of the information Audit information at source Exporter Importer Domestic industry Preconditions: * Agreement of exporters involved * Government of Member country notified and does not object Reports verification: of * Party verified entitled to report * Other parties – may be made available to them (Articles 6.6 and 6.7)

67. 67 Price Undertakings: General Principles -Alternative to final duty -Agreements by which exporters undertake to aligh their export prices to their normal values. Once such an agreement has been concluded, the proceedings may be suspended or terminated (Articles 8.1 and 8.2)

68. 68 Price Undertakings: General Principles (continued) -Price increases under such undertakings should not be higher than the margin of dumping -Desirable that the price increase resulting from an undertaking be less than the margin of dumping if that is enough to remove the injury to the domestic industry -May not be sought or accepted unless a preliminary affirmative determination of dumping and injury caused by such dumping has been made (Articles 8.1 and 8.2)

69. 69 Price Undertakings Monitoring price undertakings * provide periodically relevant information * permit verification of pertinent data Action in case of violation * provisional measures may be immediately applied. Definite measures may not be adopted directly

70. 70 Investigation Leading to Final Measures -Comments on preliminary determination -Disclosure of comments -Opportunity to view present hearings -Verification of information -Sufficient time allowed for parties to defend interests -Essential elements of final decision made available to parties.